Kevin Carson’s new book Studies in Mutualist Political Economy (Fayettvile, Arkansas, 2004, 409 pp.) centers on the incredible claim, self-contradictory on its face, that capitalism, including laissez-faire capitalism, is a system based on state intervention, in violation of the free market: “It is state intervention that distinguishes capitalism from the free market,” declares the book’s preface.” Capitalism, writes Carson, is “a system of privilege in which the State enable[s] the owners of capital to draw monopoly returns on it, in the same sense that the feudal ruling class was able to draw monopoly returns on land; or, as the left-Rothbardian Samuel Konkin put it, `Capitalism is state rule by and for those who own large amounts of capital (p. 92).’” Perhaps not surprisingly, in view of his description of capitalism, Carson hopes his book will provide a foundation for “free market socialist economics (p. 10).”
Exposition and Critique of Carson’s Framework
For the most part Carson is a Marxist. But not entirely. He adds to Marxism a large dose of what he calls “individualist anarchism” and, beyond that, a significant dose of apparent syndicalism.
Carson is a Marxist insofar as he upholds both an essentially absolutist labor theory of value and the Marxian exploitation theory, which follows from such a version of the labor theory of value.[1] According to the exploitation theory, all exchange value and thus all income is produced by labor and therefore properly belongs to wage earners. Under capitalism, however, a more or less considerable part of the income that properly should go to workers as wages is instead unjustly appropriated as profit, interest, and land rent, i.e., as one or another of the various forms of “surplus value.”
Marx held that exploitation is inherent in the nature of commodity production, because the determination of the value of commodities by the quantity of labor expended in their production is a universal law, applicable to labor itself, no less than to its products (hence the expression/complaint that under capitalism, “labor is a commodity”). According to Marx, the labor expended in the production of labor itself, is the labor expended in the production of the wage earner’s minimum necessities. It is this quantity of labor, the so-called necessary labor time that allegedly determines the value of labor.[2]
Thus, for example, if 6 hours of labor are required to produce the necessities that enable a worker to work for 12 hours, all that the capitalist pays for the 12 hours of labor is a wage corresponding to those 6 hours. The capitalist is thereby enabled to obtain the benefit of the employment of 12 hours of labor, and thus the addition of 12 hours of labor value to the value of his materials and machinery consumed in the production process, for a wage corresponding only to the 6 hours. The 6 hours the worker works over and above the necessary labor time, Marx calls “surplus labor time.” It is the alleged basis of all surplus value. As illustration, if $1 of product value corresponds to each hour of labor expended in production, the worker’s 12 hour day adds $12 of value, while the capitalist pays him a wage of only $6, and thereby gains $6 of profit or surplus value.[3]
Carson accepts this analysis, but with one alleged significant difference. Namely, he claims that in what he conceives of as a free market, namely, a market without alleged state intervention on behalf of capitalists, the value of labor would not be determined by the so-called necessary labor time, as Marx claimed, but by the full value that the worker’s labor adds to the value of the materials and machinery used up in the production. In other words, the worker’s wage would correspond to the 12 hours of labor he worked, and not merely to the 6 hours required to produce his minimum necessities. It would be $12 and not $6. It is this that Carson describes as “individualist anarchism’s central insight (p. 10).” In Carson’s own words that insight is “that labor’s natural wage in a free market is its product, and that coercion is the only means of exploitation. It is state intervention that distinguishes capitalism from the free market.”
Carson does not realize it, but he has fallen into a veritable abyss of error. Not only is the entire Marxian analysis as utterly wrong as an economic theory can be,[4] but in his efforts to modify it, he adds to it still more major errors.
Carson describes numerous forms of state intervention in the course of his book, many of them actual, such as wars of conquest, taxation, tariffs, subsidies, conservation laws, and licensing legislation. All such intervention, of course, is opposed by all consistent advocates of capitalism. Carson, however, includes under the heading of government intervention what he calls, following the anarchist Benjamin Tucker, “the land monopoly” and “the money monopoly,” which he regards as the respective foundations of rent and profit/interest. It is in the absence of this alleged intervention that labor would be able to receive its alleged full product as wages.
What Carson means by the land monopoly, at least as far as it relates to his claim that laissez-faire capitalism is a system of state intervention, is nothing other than that legal protection of the rights of landowners to collect contractually agreed upon rents represents government intervention (Carson, pp. 197, 200). He declares that, according to “Mutualists,” of which he is one, “[t]he actual occupant is considered the owner of a tract of land, and any attempt to collect rent by a self-styled landlord is regarded as a violent invasion of the possessor’s absolute right of property” (p. 200).
Thus, for example, if I, a legitimate owner of a piece of property, legitimate even by Carson’s standards, decide to rent it out to a tenant who agrees to pay the rent, the property, according to Carson, becomes that of the tenant, and my attempt to collect the mutually-agreed-upon rent is regarded as a violent invasion of his [the tenant's] “absolute right of property.” In effect, Carson considers as government intervention the government’s upholding the rights of a landlord against a thief. He believes he has the right to prohibit me and the tenant from entering into an enforceable contract respecting the payment of rent and that such action is somehow not a violation of our freedom of contract and not government intervention.
What Carson means by the money monopoly is equally bizarre: namely, the inability of the banking system to engage in a permanent policy of radically easy money that would drive the rate of interest and rate of profit to “near zero” (Carson, pp. 219-24). He believes that this inability is the result merely of “the state’s licensing of banks, capitalization requirements, and other market entry barriers [which] enable banks to charge a monopoly price for loans in the form of usurious interest rates. Thus, labor’s access to capital is restricted, and labor is forced to pay tribute in the form of artificially high interest rates” (p. 200).
Although Carson quotes a few paragraphs from Mises, and even claims to agree to the correctness of the time preference theory of interest, he apparently never heard of Mises’s demonstration of why unlimited credit expansion can succeed only in destroying the value of money, not in permanently reducing the rate of interest. He also seems to be unaware that in a free market, competition, if not the laws against fraud, would severely limit or totally eliminate credit expansion and that it is only government intervention that has enabled it to become as great as it has and that the unlimited credit expansion he advocates would require massively more government intervention in money and credit.[5]
Carson also claims that capitalism has been subsidized by history, as though it could be guilty of practicing government intervention retroactively:
the single biggest subsidy to modern corporate capitalism is the subsidy of history, by which capital was originally accumulated in a few hands, and labor was deprived of access to the means of production and forced to sell itself on the buyer’s terms. The current system of concentrated capital ownership and large-scale corporate organization is the direct beneficiary of that original structure of power and property ownership, which has perpetuated itself over the centuries. (Carson, 2004, p. 144)
Some readers may be tempted to stop reading further, having reached the conclusion that Carson is nothing but a fool, ignorant of the nature of individual rights, of economics, and of logic, and, in claiming, on such a patently absurd basis, that capitalism rests on state intervention, dishonest to boot, seeking to hijack the concept of the free market into the service of its opposite, much as an earlier generation of socialists did with the word “liberalism.” Nevertheless, as Mises used to point out in his seminar, it is dangerous simply to dismiss people as cranks, or to attack their motives, without fully unmasking their errors. And, following that advice, this is what we must do with Carson [in the remaining 36 pages of this article].
* This article is excerpted from the author’s much larger article of the same title which appears in The Journal of Libertarian Studies, Vol. 20, No. 1, and is reprinted by permission of The Journal of Libertarian Studies. Almost the entire issue of the journal, which also contains articles by Walter Block, Roderick Long, and Robert Murphy, is devoted to an analysis of Carson’s book. A closely related article by Murray Rothbard is devoted to a critique of the wider doctrine of individualist anarchism.
George Reisman, Ph.D. is Pepperdine University Professor Emeritus of Economics and is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996). His web site is www.capitalism.net.
________________________________________________________________________________
[1] See Carson, 2004, p. 14, where he disingenuously quotes Ricardo along these lines, totally ignoring Ricardo’s recognition of the role both of the period of time that must elapse in production and of the rate of profit as determinants of the relative value of reproducible commodities, alongside the quantity of labor required to produce them. In contrast to Ricardo’s doctrine, the absolutist version of the labor theory of value, which was held by Marx, recognizes nothing but the quantity of labor expended in production as the source of exchange value.
[2] Cf. Marx, 1867, vol. 1, pt. 2, chap. 6.
[3] Cf. ibid., pt. 3, chap. 9, sec. 1.
[4] On this subject, see Reisman (1996, chaps. 11 and 14, passim). On the subject specifically of the exploitation theory and Marx’s treatment of interest, see also Böhm-Bawerk (1959, vol. 1, pp.263–271; and idem, 1962, pp. 201-302).
[5] This same point is made by Rothbard in the first essay of the present volume, in application to Carson’s predecessors in the Mutualist school. Despite frequent references to Rothbard, Carson seems totally unaware not only of that essay but also of Rothbard’s (1962, 2001) support of a one-hundred-percent-reserve gold standard as an essential feature of a fully free market and of the fact that in such a market credit expansion would necessarily be totally absent.
References
Böhm-Bawerk, Eugen. 1959 [1914]. Capital and Interest, South Holland, IL: Libertarian Press, George D. Hunke and Hans F. Sennholz, trans.
───. 1962 [1898]. “Karl Marx and the Close of His System,” reprinted as “Unresolved Contradiction in the Marxian Economic System” in Shorter Classics of Eugen von Böhm-Bawerk, South Holland, Ill.: Libertarian Press.
Carson, Kevin A. 2004. Studies in Mutualist Political Economy. Self-published: Fayetteville, AR.
Marx, Karl. 1867. Capital, vol. 1, London.
Reisman, George. 1996. Capitalism: A Treatise on Economics, Ottawa, Illinois: Jameson Books.
Rothbard, Murray N. 1962. Man, Economy, and State, 2 vols., Princeton, N. J.: D. Van Nostrand Company, Inc.
───. 2001. The Case for a 100 Percent Gold Dollar. Auburn, Alabama. The Ludwig von Mises Institute.
{ 20 comments }
I highly recommend reading the JLS issue that this was a part of. It was excellent to see the free market economists on the attack as well as Carson’s surprisingly solid rejoinders. Overall Murphy’s and Long’s articles are probably the best of the issue.
There is no such thing as laissez-faire capitalism and there never has been. All actually existing capitalism has been a complex network of benefits, subsidies, favourable taxation, land restrictions, etc. designed to benefit one class at the expense of another.
The term “capitalism” itself came into being among socialists not to describe a free market liberal order, but the actually existing order of benefits that characterized the post-enclosure economy (and which have reached their zenith in modern corporatism). “Laissez-faire capitalism” is like “jumbo shrimp”.
You have so completely mischaracterised Carson’s explanation of the labour theory of value that I wonder if you’ve even bothered to read the book. Carson’s formulation of the labour theory of value is subjectivist, incorporating Austrian insights. Rather than being proscriptive, it is descriptive, outlining a tendency that mass produced markets approximate. You may or may not agree that free mass markets show that approximation – I personally haven’t decided – but it’s not at all what you’re talking about. Moreover, Carson quotes Marx as basically laying out that this is what the labour theory of value has been all along.
As for your comments on capital, you’re quite right, except Carson’s question is “How did the majority capital holders come to acquire all that capital?” And he explains it by the same system of benefits, subsidies, restrictions, enclosures, etc. that characterise capitalism. Perhaps his explanation proves too much, but you can’t blithely dismiss this system by saying, “Oh, but capitalism isn’t like that!” It sure as shit is. Mises is talking about the economics, Carson is talking about the economics in context of the history.
The current system of concentrated capital ownership and large-scale corporate organization is the direct beneficiary of that original structure of power and property ownership, which has perpetuated itself over the centuries.
Some readers may be tempted to stop reading further, having reached the conclusion that Carson is nothing but a fool
“Your mom!”
- Josh
Wild_Pegasus: I’m not sure if you read Reisman’s review. He certainly does a lot more than claim “capitalism isn’t like that”. Reisman points out that, if I may paraphrase “Even when Carson’s right, he’s wrong.” That is, even where he finds deviations from the laissez-faire ideal, the results he attributes to those deviations are the opposite of what really resulted. According to Reisman, the effect of repeated expropriation of land and accumulated capital is a reversion to a lower degree of capitalism (less production roundaboutness, less interpersonal division of labor) than would have otherwise prevailed. (And also, in a very well-written passage, that everyone alive today is poorer than they would have been had government been capped much earlier.)
Carson’s response to all of that is to switch tracks and argue instead the topic about whether that expropriation was justified. Of course it wasn’t, but it has nothing to do with why workers work with other people’s tools.
Another way Carson misread Reisman was to take Reisman’s indigation about mutualism’s exclusion of land rental contracts to be nothing more than “You have a different property theory” Reisman was actually saying that even if a landowner was the just landowner by Carson’s standard, he would still treat such a person as if he didn’t really own it (through prohibiting one kind of contract involving “his” land).
This is not to say Reisman’s review was perfect; there were a number of flaws and otherwise unfair replies. For example, he should not have claimed that elimination of home cloth production resulted from “the free market”, but conceded that it was a significantly hampered market which was nevertheless free enough that such extreme inefficiencies were unsustainable.
I find it interesting that Carson labors so much and I don’t value it at all… maybe I should be required to value his labor (then his theory would stand up better).
Josh,
Thanks for the spirited defense. But I guess Reisman’s mom should be left out of it.
Person,
Reisman’s counter-historical argument concerning land expropriations implicitly treats the “degree of capitalism” as virtually indentical to the extent of wage labor, and assumes the accumulation of capital and capital-intensive forms of production are possible only through the wage system. As I pointed out in my rejoinder, he also confuses worker ownership with an artisan form of production and completely neglects the possible of cooperative ownership of large-scale production. The benefits of division of labor and roundaboutness, BTW, cannot be infinitely extrapolated. They have a levelling-off point that is affected by other factors. Beyond a certain point, depending on the size of the market area among other things, overspecialization of labor and capital goods can result in less efficiency than more general-purpose production technologies.
Re the argument that, even if a person were the legitimate owner of land by my standard, I would still treat him as not the owner: Reisman’s argument implicitly assumes Lockean rules for transfer of property in determining WHO THE OWNER IS. By the Ingalls-Tucker standard, a change of occupancy is what IDENTIFIES the owner. You and Reisman both seem to be treating the Ingalls-Tucker doctrine of ownership as a one-shot method of determining the legitimacy of ownership at some point in time, after which further transfers will be governed by Lockean rules.
I meant to add, Person, that in at least one case–enclosures–your characterization of Reisman’s position does not hold water. He treats the enclosures in his article as simply allowing land owners to fire unnecessary laborers on THEIR land, implicitly treating the landlords’ ownership as legitimate, and also arguing that the enclosures were necessary for the development of division of labor.
The division of labor is not an absolute good, on the pattern of “if some pepper is good, then more must be better.” The extent to which it is a good depends on the point at which the costs begin to exceed the benefits–and in a free market, the degree of division would be based on the assessment of private actors. When government promotes division of labor beyond pareto-optimal levels (like, say, the US military’s promotion of deskilling digital control technologies in the machine tools industry), the result is a net loss of efficiency.
How about that…a real debate within the locus of Austrian economics whose theme is a little more fundamantal than “who is the real Misesian [Rothbardian]?” It seems a moment to be proud of.
Mr. Carson;
Can you explain how time preference will be reflected in the market if the interest rate is supposed to be near zero?
Kevin,
Unlike Professor Reisman, I have no illusions about the current state of capitalism in the Empire.
But the fascism under which we strain is neither sufficient or necessary to a free-market capitalism. But the tax and regulatory burdens imposed by the structure of todays governments eat up individual’s surplus earnings, making their own accumulation of capital difficult or impossible.
You would deprive them then of the right and ability to employ such capital as they are able to save by expropriation and inflation. There is nothing moral about that.
As for the mutualist conception of land un-ownership – I find it untenable. Either land can be owned (with the costs of maintenance and protection borne by the owners, of course, not government) or it cannot.
If you make a rule that subjects land to expropriation, you will limit productive uses of land – look at the problems in Central and South America that spring from insecure ownership. Not that we should let utility guide our policies.
A possible problem in this debate, and many others, is the lack of a clear definition of capitalism and laissez-faire. In my own research, I have found hundreds of different definitions. The support in history that an author finds for his particular argument depends heavily on his definition of capitalism.
I argue that the Dutch Republic, which began in the late 16th century, created what most people think of as capitalism. In fact, Adam Smith referred to the Dutch as the best example of what he called the system of natural liberty that he promoted. So in defining capitalism, we should look at what the Dutch did.
The Dutch system didn’t enter England until the Glorious Revolution of 1688. In that case, you can’t blame the enclosure movement on capitalism. It was just the result of the collapse of feudalism and part of the age-old theft that the nobility had committed against the peasants for millennia.
Laissez-faire, on the other hand, was the cry of French businessmen who opposed the central planning of Corbert. Much of the criticism of capitalism and laissez-faire is based on theoretical straw men. But just as critics of socialism tend to defer to Marx for definitions of socialist terms and clarification of concepts, we should study the Dutch economy to understand true capitalism and the French system under Colbert to understand laissez-faire. Making up private definitions of either term in order to bolster your argument is just dishonest.
A quick comment about land ownership and mutualism. Maybe I don’t understand the arguments of mutualism, but if renting land is the same as giving it away, no one would ever rent out their land. People would just hire others to work on it for wages so as not to lose the ownership of it.
More to the point, Roger, who needs land anyway? Don’t most 21st century Americans (at least the Blue Saters, the Ones That Matter) live in cities?
I find utility arguments in favor of mutualism or syndicalism most irrelevant. Either it is moral to own land (and pay for its upkeep) with which you may do whatever you wish (farm, rent, build houses, hunt, fish, whatever) or it isn’t, in which case private property is a meaningless abstraction.
Good points, Vince. I think the mutualists get confused, too. The natural law philosophers, such as Locke, believed that useage of land got the property rights ball rolling in prehistory; in other words, it got people thinking about the need for property rights in order to solve conflicts and other things. They didn’t accept it as the justification for property rights today, as mutualists present. Once established, the right to property became a natural right.
RogerM,
It would seem to me that hiring, at wages, anyone to work any capital is anathema to mutualists, and they contend that only state intervention allows this to be done at any profit. This position seems to reduce to the point that any accumulation of capital is pointless for any individual beyond the point at which he works the capital himself. In other words, my car factory belongs to the workers who work inside of it the moment I open the door.
Yancey, I agree. Are mutualists really that simple minded?
This reminds me of something I read in Bastiat a while back but can’t remember the source. He was writing about the value of interest on loans and compared it to renting out any other form of capital, such as a wood plane. He concluded that, without interest, or rent, no one could save for their old age or leave anything to their children.
I’m wondering if the mutualist thinking applies to loans of money? If I happen to save some money and loan it to a businessman to use, do I lose ownership of it under mutualism?
Roger M, your Bastiat reference is wholly pertinent: It was made in correspondence with Pierre Joseph Proudhon.
Individualism is free market. Anyone arguing about laborers, or we the people, and villages are really talking about collectivism. You always have a few dingbat disciples that get it backwards (purposefully or otherwise), but I have to tell you when I read Adam Smith. It seemed pretty affirmative that free market (capitalism) was a synonym with an individual having rights (freedom) both materially and intellectually. If you are talking mob rights then you can be certain you are talking about collectivism, communism, fascism or whatever ill evil you can name it.
And it is with the intellectual property one gets a clearer picture of Rogers simple example. For unlike land, intellectual property (capital) cannot be so easily redistributed in entirety to the mob ( I mean collectivist laborers). For example, as an individual I come up with an idea. I decide to not publish or provide the idea for manufacturing. This would certainly be my freedom in a free market (capitalistic) sense. Or I might release it to be manufactured, also my individual free right. The only reasons I can think why I wouldn’t want to share it is if I thought I would not get the full return of my efforts (capital and time invested). So there is no need for mind police, unless of course it would be like throwing it out in front of swine and theives. Which it certainly would be with Marxist laborers (techncians, floor production) proclaiming they have a right to take all the value of my engineering/science because they make the widgets with their hands and are the true owners. Like Roger said this would be unnatural as forcing a land owner to give up his property if he rented. Naturally, he wouldn’t rent. How stupid is that? This wouldn’t be from a individual choice making. And since Adam Smith defined free market (capitalism) as an individual choice. Who could argue that laborers value added argument has anything to do with such? Sure capitalism may be an ideal of absolute efficiency like a Carnot Cycle in thermodynamics. It probably doesn’t exist in history of mankind, but who can argue one shouldn’t try to approach the best efficiency one can get?
History is re splendid on idiots that confuse our U.S. or the western systems with capitalism. Capitalism is an individualistic ideal of freedom in market under a covenant protection of a nation, which when followed results in individual freedom and fewer losses (I didn’t say riches). One thing I love about all the dopies is how they point out how capitalism is or isn’t a spontaneous wealth builder. Or it is or isn’t fair. I don’t know if its fairer that a group of people have rights over and individual, that is very subjective. There again, they confuse the issue. Capitalism (free market) as a concept never produces any wealth, it however minimizes the losses due to the extra inefficiencies caused by the immoral, ignorant, immature and just plain stupid re-distributors. I find it most amazing how alot of these economist who should know better talk about how capitalism creates wealth or destroys it. Silly! First in natural law there isn’t something for nothing (1st law of thermodynamics) and second there isn’t even that (second law of thermodynamics) forget safe conservative laws. For example, make a building. It doesn’t happen spontaneously it takes energy and work (1st law). Then nature wants to topple her through winds, rusting, etc. Sometimes she gets here wishes. These causing loss and inefficiency in any market economy. Capitalism tries to cap the loss with maximum return at this level of responsible reality. But along comes a bunch of thugs with spray cans, and chains knocking out windows and causing destruction, thinking this will spurn more wealth. The latter represents all other forms of economies. These extra losses are spurned by any system advocating group rights over individuals. Quite simply put the doctrine of individualism and property ownerships, goes something like when your grandpa talked about 1 boy= 1 boy, 2 boy = 1/2 boy, etc. Group mentality will always shift the blame and maturity of reality to minimize loss. Responsibility will never happen. Whereas individualism will make a person answerable to the real world of elements. You suceed you take home a profit, you fail well the langloiers are going to eat you. Wouldn’t it be just easier if we realized all this? Instead of conjecture of elitist about unreal worlds, silly euphemisms, big words, and vocabulary? As I said there is always a dingbat disciple and many will stand and applause because he sounds different. Nevertheless Capitalism and free market are what they were originally were stated to be, nothing more and nothing less.
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