Saturday, April 15, 2006

Capitalism versus Capitalism, continued

In my previous post about the Journal of Libertarian Studies symposium on Kevin Carson's Studies in Mutualist Political Economy, I said that the harsh reaction to Carson's use of the word "capitalism" was striking. I did not intend to take up every point made against Carson in the critiques. As I said before, valid criticisms can be and have been made of his 400-page book covering political-economic theory and history. Nevertheless, I have learned much from the book. Overall it is a valuable contribution to political economy and a timely reminder (if that is the right word) to libertarians of how radical their creed actually is. In my view, one cannot overstate the importance of Carson's asking libertarians: what are you defending, the free market or the political-economic system we currently live in? He is right that many libertarians are ambivalent, one day criticizing the pervasive state intervention and privilege, the next day defending particular companies and individuals as though their gains were purely the outcome of effort in a laissez-faire environment. It is fair to ask, as Carson does, which is it?

This challenge need not imply that everything that goes on in the economy is illegitimate. That would be nonsense. Even a government as powerful as the U.S. government would find it impossible to fully squelch independent market activity -- although it can make it costly. At the same time, we must not forget that all economic activity is against a neomercantilist backdrop.

George Reisman's critical review of Carson's book is worth close reading. He stimulates thought and debate on several points, such as: does the long record of state intervention and theft (what Carson calls the "subsidy of history") have important consequences in the present, and would the separation of wage labor and ownership have occurred to the extent it did in the absence of state intervention? Reisman's "no" to the first and "yes" to the second are unpersuasive to me. I have much reading and thinking to do on these matters, but it's hard to believe that there is no lasting legacy of mercantilism, which has never been fully dislodged. As Roderick Long suggests (see below), pro-business intervention and its consequences are largely invisible to defenders of "capitalism." Moreover, Carson seems correct in faulting Reisman for thinking that the only alternative to humongous hierarchical corporate production is single-proprietor home-bound enterprises. Carson suggests there is something in between -- larger worker-owned enterprises -- and I can find no reason to dispute that. My hunch is that we'd see a variety of organizations under free, unprivileged competition. To think we can foresee the future is to forget the serendipity produced by entrepreneurship. This is a matter to be decided empirically. Let's get rid of all taxation, regulation, subsidy, patents, licensing, and other legal barriers to entry and find out.

As promised, I will concentrate on issues surrounding Carson's use of the word "capitalism." This is not just semantics. As Roderick Long said in his recent Rothbard Memorial Lecture,
[Murray Rothbard] contends that the new [postwar] left-right spectrum persistently misleads libertarian-minded thinkers into viewing governmental regulation as anti-big-business; and if our opponents are anti-business, what must we libertarians be but pro-big-business. . . . The result is that governmental intervention on behalf of big business tends to become invisible, or at least unimportant, because our ideological blinders make it hard to take seriously. Who would want to restrict the free market on behalf of business interests? Not those left-wingers, because they're anti-business; and not us right-wingers, because we're pro-free-market. It's hard to recognize the significance of pro-business legislation even when one officially sees and acknowledges it, if one has internalized a worldview that excludes such legislation from the list of major dangers.
Dr. Reisman invites examination along these lines by the very title of his paper: "Freedom is Slavery: Laissez-Faire Capitalism is Government Intervention." His opening paragraph begins, "Kevin Carson's new book . . . 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." Yet Reisman immediately follows this with quotations to the contrary from Carson himself: "It is state intervention that distinguishes capitalism from the free market." Capitalism is "a system of privilege in which the State enable[s] the owners of capital to draw monopoly returns on it . . . ." (Here he is summarizing the definition of Thomas Hodgskin, the radical liberal and mentor of Herbert Spencer.)

Reading Carson's words, one might have expected Dr. Reisman not to have launched his paper this way. Clearly, Carson is not saying that laissez faire equals government intervention. He equates laissez faire with the free market, and capitalism with intervention on behalf of capital owners. That being the case, he would reject as incoherent the phrase "laissez-faire capitalism." As I said in my earlier post, given his definitions, the phrase would be as contradictory as free-market Bolshevism (before the NEP, at least).

Indeed, I can do no better than quote Carson here. Recall Reisman's words: "Kevin Carson's new book . . . 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." To which Carson replies with impeccable logic: "[I]f Reisman's subordinate clause, 'including laissez-faire capitalism,' has any meaning at all, it implies that Reisman regards claims of state intervention even in non-laissez-faire capitalism as incredible and self-contradictory." He does seem committed to that position.

Considering that Carson uses "laissez faire" and "the free market," which he favors, to mean the absence of government intervention, Reisman's title and thesis must be wrong. He must also be wrong -- unfairly so -- in repeatedly calling Carson a Marxist. Carson does accept Marx's description of the mechanism by which workers are exploited, but he makes clear that this can only occur with state assistance. Obviously, he rejects Marx's solution. Even Carson's labor theory of value can't be used against him here. He uses that theory to predict what would happen under free competition. He does not call for interference in any voluntary association between employers and employees. If Carson is wrong about the precise mechanism of exploitation under state intervention, that hardly qualifies him as a Marxist. I don't see how one can be both a (Benjamin) Tuckerite and a Marxist, seeing as how Tucker was anti-Marx.

As Long notes in his Rothbard lecture, the word "capitalism" today contains implicit contradictory market and interventionist elements. Much of the world, and perhaps most Americans, think of it as something other than laissez faire. Quoting Long:
Now I think the word "capitalism," if used with the meaning most people give it, is a package-deal term. By "capitalism" most people mean neither the free market simpliciter nor the prevailing neomercantilist system simpliciter. Rather, what most people mean by "capitalism" is this free-market system that currently prevails in the western world. In short, the term "capitalism" as generally used conceals an assumption that the prevailing system is a free market. And since the prevailing system is in fact one of government favoritism toward business, the ordinary use of the term carries with it the assumption that the free market is government favoritism toward business.
Carson doesn't object to the use of the word in the libertarian sense, as long as it is clearly defined. But he is not wrong to use it in the neomercantilist sense. "Hodgskin was one of the earliest writers to use the term 'capitalism,' and may indeed have been the first to coin it," he writes in his book. We saw above how Hodgskin used it. In his rejoinder Carson adds, "Like Benjamin Tucker in 'State Socialism and Anarchism,' I advocate an end to capitalism by means of laissez-faire and free markets." There is a long history behind the use of "capitalism" in an non-free-market sense.

Language and definitions surely evolve. But it is just as surely not the case that "capitalism" has come to mean laissez faire, no matter how hard Ayn Rand and we libertarians have tried to make that happen. The fact is, "capitalism" means, at best, the privilege-laden mixed economy we see all around us. We will fail to communicate if we ignore that fact.


  1. Good point. It's not the case that we lost the word "capitalism" and now have to get it back. (That is the case with "liberal.") We never had the word to begin with.

    You also make a good point about "free market." Reagan and Thatcher came close to ruining it, but I don't think it's quite lost yet. We may salvage that one. Long has some thoughts about the term "anarchism" in his Rothbard lecture.

    Nevertheless, I still like voluntarism.

  2. For the record, when I typed Carson's statement about Hodgskin's use of "capitalism," I typed "earlier" rather than "earliest." It's fixed now.