Capitalism vs. Free Markets

Anyone who has seen any of my YAL posts on capitalism or economics probably knows that I’m a big fan of the left-libertarian/mutualist school of thought.  We of this mindset always try to ask the question:   Are capitalism and a free market necessarily the same thing?

While I greatly appreciate the Austrian School of Economics, in particular its views on business cycle theory, monetary policy, and government, I break from Austrian theory on the historical development and current nature of capitalism.  For example, I take issue with Ludwig von Mises’s claims that the industrial revolution was such a wonderful thing for the common people.  He writes in Economic Policy:

All the talk about the so-called unspeakable horror of early capitalism can be refuted by a single statistic: precisely in these years in which British capitalism developed, precisely in the age called the Industrial Revolution in England, in the years from 1760 to 1830, precisely in those years the population of England doubled.

Well, China’s population has increased at a faster rate over the past 50 years than the United States,’ so I suppose that this “single statistic” must mean that China has been a better place to live during this time.  I think we all know this is not the case.  Hence the falsity of the idea held by many capitalists that “growth” is always an ultimate good.

Not only this, but such views seem to assume that the Industrial Revolution was a result of the market, when in fact this also is highly questionable.  The capital necessary to spark the Industrial Revolution was largely accumulated via the trans-Atlantic slave trade, when the product of the labor of millions of slaves was accumulated with no wage compensation.  Also, this trade brought huge amounts of sugar to Europe, an extremely low quality food that could fuel a massive working class population unlike any other food native to the continent.

Even during the Industrial Revolution itself, the working class had both their bargaining power in the wage market and their traditional property rights stripped from them through state action, like the Combination Laws which prohibited laborers from bargaining collectively and the Settlement Act which gave control of housing and rent to any who already controlled large estates.

With this history in mind, the advocate of “capitalism” often finds himself on the defensive, and this is exactly what happened to the Classical Liberal school of thought after the advent of socialism, and in particular Marxism.  Murray Rothbard takes note of this in For a New Liberty:

If the laissez-faire liberals were confused by the new recrudescence of statism and mercantilism as “progressive” corporate statism, another reason for the decay of classical liberalism by the end of the nineteenth century was the growth of a peculiar new movement: socialism. Socialism began in the 1830s and expanded greatly after the 188os. The peculiar thing about socialism was that it was a confused, hybrid movement, influenced by both the two great preexisting polar ideologies, liberalism and conservatism.

And now, finally, I get to the reason for even making this post in the first place.  Libertarians are people who truly are looking to make changes in the current system.  However, by claiming to promote “capitalism,” libertarians put themselves on the defensive, as the majority of society, correctly or incorrectly, views “capitalism” as the source of our current woes.  Even though the libertarian sees the state as the source of these problems, it still can be difficult to sort out what aspects of our modern economy are a result of government, and what aspects are a result of markets.

I do not want to see the libertarian movement share the fate of the classical liberals, becoming a defensive movement fighting against a “progressive” leftist ideology.  Thus, it is with great care that we must employ the word “capitalism,” for the only real meaning that our words have are those that they are given by our audience.  Just because you think capitalism = free market does not make this the universal case.

Libertarians need to be ideologically on the offensive, and show that it is state actions dating back to the trans-Atlantic slave trade that have led us to the massive statist system that we have today.  It is for this reason that I have been so impressed with the work of Kevin Carson, a little-known political theorist who essentially works out of his own house and puts pdf’s of his books online for free.

Unfortunately, many libertarians do not take Kevin Carson seriously simply because he advocates a revival of Labor Theory of Value, a major tenet of Karl Marx.  I again see this as somewhere where Mises went wrong, as he seemed to constantly want to critique every aspect of socialism without ever paying regard to any of its benefits.  In his book Studies in Mutualist Political Economy, Carson incorporates the Austrian ideas of time preference and subjective value into this labor theory, and shows that this theory is very useful as a descriptive, though not prescriptive (as Marx wanted), value theory.  In this book, he also discusses the role of the state in capitalism’s formative years.

I unfortunately have watched as many libertarians and anarcho-capitalists have attacked Carson with what have been little more than ad hominem attacks, saying that he is a “socialist” and “Marxist.”  Walter Block wrote of Kevin Carson:

For someone in this day and age to even take (labor theory of value) seriously, let alone actually try to defend it, is equivalent to making a similarly widely and properly rejected position vis à vis the flat earth, or the phlogiston theory. It is, in a word, medieval.

After reading Block’s article, it seemed obvious to me that he not only was misrepresenting Carson’s views, but probably had never actually read Carson’s books, simply noting that he embraced labor theory of value and branding him a “Marxist.”

I hope that the libertarian movement soon wakes up and realizes that if we are to truly make the changes that we wish to see, we have to be ideologically offensive in our thinking, and not simply defend a “pro-capitalism” status quo for which the working public has little respect.  In the words of Carson himself:

Vulgar libertarian apologists for capitalism use the term “free market” in an equivocal sense: they seem to have trouble remembering, from one moment to the next, whether they’re defending actually existing capitalism or free market principles. So we get the standard boilerplate article in The Freeman arguing that the rich can’t get rich at the expense of the poor, because “that’s not how the free market works” — implicitly assuming that this is a free market. When prodded, they’ll grudgingly admit that the present system is not a free market, and that it includes a lot of state intervention on behalf of the rich. But as soon as they think they can get away with it, they go right back to defending the wealth of existing corporations on the basis of “free market principles.”

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