Wednesday, June 14, 2006

Freedom Is Slavery: Laissez-Faire Capitalism Is Government Intervention, A Critique of Kevin Carson’s Studies in Mutualist Political Economy

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].

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

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. 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.


[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.


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.