On the Cynical Fantasy of Separating Economics
from State and Society
from State and Society
By William Crauss
The notion that economics can or should be entirely separate from the state and society is a fantasy—one that conveniently serves those who hold economic power. The market fundamentalists of the 20th century, from Milton Friedman to Ludwig von Mises and Ayn Rand, championed the idea that free markets function best when left alone, untouched by state intervention or social concerns. Friedman famously asserted, “The social responsibility of business is to increase its profits,” reinforcing the idea that economic activity should be governed solely by self-interest. Mises went even further, arguing that “the market is supreme and all attempts to interfere with its functioning lead to chaos.”
This ideology frames capitalism as a natural force, as intrinsic to human existence as greed and desire. Yet, by this logic, feudalism and the master-slave societies that preceded capitalism must also be considered “natural,” since history is filled with systems that enriched a few at the expense of the many. Power has always sought to perpetuate itself, and capitalism—far from being a pure system of competition and innovation—has consistently evolved to preserve economic hierarchies under new names.
From Industrial Capitalism to Financial Hegemony
The capitalist order has undergone a profound transformation. Classical economists such as Adam Smith and David Ricardo laid the intellectual foundation for free-market thought, but they also acknowledged the dangers of monopolies, rent-seeking, and economic inequality. Smith, in The Wealth of Nations, warned of the concentration of power among merchants and industrialists, while Ricardo analyzed the inherent tensions between labor, capital, and landowners. These early economic thinkers recognized capitalism’s contradictions and saw the need for regulation to ensure it did not devolve into oligarchy.
However, modern defenders of capitalism have chosen to ignore these contradictions. Instead of refining or reforming capitalism, they insist on preserving the appearance of free-market ideology while avoiding any engagement with its inherent flaws. They uphold Smith and Ricardo as intellectual authorities but disregard their warnings. Any critique of modern capitalism is dismissed as “utopian” or as contradicting “human nature,” ensuring that the system remains immune to serious scrutiny.
Ayn Rand's glorification of the industrialist as a “titan of civilization” was once framed as an endorsement of productive capitalism—the idea that those who create, innovate, and build are the rightful rulers of the economy. However, those who invoke Rand’s ideas today are not industrialists at all, but financial elites who derive their wealth from speculation rather than creation. The modern capitalist class is no longer composed of factory owners or inventors but of hedge fund managers, corporate monopolists, and international investors who manipulate markets to their advantage without contributing to productive enterprise.
One neoliberal economist, in discussing this shift, remarked that capitalism has “moved from production to international capital, from manufacturing to services, and the Third World is just ‘garbage’ for markets.” This statement, though cynical, reflects a reality in which capital is no longer tied to national economies or physical production. Instead, financial capital moves across borders in pursuit of short-term profits, while workers and communities bear the consequences. Developing nations are not seen as engines of growth but as dumping grounds for excess goods and speculative investment.
The Libertarian Contradiction: Selective Government Intervention
Despite their insistence on minimal government interference, capitalists who subscribe to libertarian ideology are quick to demand state intervention when their own interests are threatened. They advocate for deregulation, tax cuts, and the dismantling of social programs in the name of market efficiency. However, in times of economic crisis, these same capitalists rediscover the necessity of government support. The 2008 financial collapse exposed this contradiction with striking clarity: after years of championing free enterprise and self-reliance, major financial institutions turned to governments for massive bailouts, ensuring that their losses would be socialized while their profits remained privatized.
This pattern is not new. Throughout history, economic elites have relied on the state to secure their interests, whether through subsidies, military intervention, or legal frameworks that prioritize corporate power over worker protections. The idea of a truly “free” market is, therefore, a myth—capitalism has always functioned with state support, but that support is selectively deployed to benefit those at the top.
The Rise of a New Financial Aristocracy
While free-market fundamentalists claim to champion competition, the practical outcome of their policies is the consolidation of economic power in the hands of a few. The unchecked expansion of financial capitalism has led to the emergence of a new aristocracy—one no longer defined by land ownership or industrial enterprise, but by control over capital flows, corporate monopolies, and financial institutions.
Unlike the industrial capitalists of the past, who depended on labor and physical production, today’s financial elites extract wealth without engaging in productive enterprise. They do not need workers; they need algorithms, stock buybacks, and speculative investments. In a system where financial speculation outweighs real production, inequality deepens, social mobility declines, and entire economies become vulnerable to the whims of a few investment firms.
This financial aristocracy, like the feudal lords before them, has no interest in true market competition. Instead, it seeks to entrench its power by influencing government policy, suppressing labor movements, and maintaining structures that ensure wealth remains concentrated at the top. If true capitalism were about free competition, monopolistic corporations and too-big-to-fail banks would not exist. Yet, these institutions not only exist but thrive under the very system that claims to oppose economic centralization.
The Myth of Separating Economics from Society
The fundamental fallacy of libertarian-capitalist thought is the belief that economics can be separated from the state and from society itself. The market does not exist in a vacuum—it is shaped by laws, institutions, and social norms. To claim that capitalism can function without state intervention is to ignore history, in which every major capitalist economy has relied on government support to stabilize markets, enforce contracts, and protect property rights.
If economic power were truly independent of the state, then corporations would have no influence over public policy, no ability to lobby lawmakers, and no expectation of government intervention in times of crisis. But they do, because capitalists do not actually seek separation from the state—they seek dominance over it. The ultimate goal is not a free market, but a market in which corporate interests dictate the terms of economic engagement while the state serves as its enforcer.
Chen Yun’s Birdcage Economy: A Countermodel—Or an Inversion?
In stark contrast to Western free-market absolutism, Chinese economic policymaker Chen Yun proposed the “Birdcage Economy” as a model for balancing market forces with state control. He argued that the market was like a bird—it needed room to fly, but it also required the constraints of a cage to prevent it from flying into chaos. This metaphor encapsulated an economic vision where private enterprise could exist but remained within a controlled framework to ensure national stability and social welfare.
Chen Yun’s approach stands as a direct challenge to the libertarian-capitalist fantasy of an economy wholly independent of state oversight. Rather than assuming markets would self-regulate, his model recognized that unchecked capitalism could lead to exploitation, inequality, and instability. The “cage” in this system represented regulatory structures that ensured markets served the broader interests of society rather than the profit motives of a select few.
However, free-market absolutists could reinterpret Chen Yun’s idea in an entirely different manner: rather than the market being constrained by a cage, it is society itself that is bound within the constraints of market forces, supply and demand, and the supposed omnipotence of the invisible hand. In this inversion, the market ceases to be a tool for economic development and instead becomes a force that dictates the boundaries of political and social life.
Under this distorted view, governments do not guide economies—they are mere facilitators of market processes, ensuring that financial and corporate interests remain unimpeded. Public policy is determined not by the needs of people but by the expectations of investors. Social services are cut in the name of efficiency, labor protections are dismantled for the sake of competitiveness, and environmental regulations are weakened to attract foreign capital. Society, rather than the market, is locked within an iron cage, forced to conform to the dictates of profit maximization.
This interpretation reflects the neoliberal reality of the past several decades: public goods are privatized, wages are suppressed to meet corporate targets, and even democracy itself is subordinated to the interests of international finance. The market is no longer a bird needing guidance; it is an all-consuming force that shapes the conditions of human existence, regardless of the suffering it may cause.
Capitalism’s Evolution Toward a Marxian Scenario
Ironically, as time passes, the messages of Rand, Mises, and Friedman begin to resemble the very conditions that Karl Marx described—not in their intent, but in their consequences. Their idealistic visions of unregulated capitalism have facilitated the consolidation of economic power, the stagnation of wages, and the growing divide between capital and labor. Rather than producing a dynamic world of entrepreneurial innovation, deregulated capitalism has resulted in monopolization, financial crises, and wealth extraction at the expense of workers.
At the same time, the messages of Smith and Ricardo—who acknowledged capitalism’s flaws and contradictions—have been diluted by capitalists who insist on keeping their theories “as they are,” without adaptation or reform. Instead of addressing capitalism’s structural problems, modern defenders of the market dismiss critiques as “utopian” or contrary to “human nature.” The result is an economic ideology that refuses to evolve, even as its contradictions become impossible to ignore.
Capitalism, in its current form, is no longer a system of free enterprise but a mechanism of financial control that serves a new aristocracy. If the 21st century is, and tries to avoid falling into the same patterns of aristocracy and subjugation, it must recognize capitalism for what it has become: not a system of boundless opportunity, but a structure of entrenched financial power that demands accountability and reform- if not its dismantlement.