Capitalism Versus Free Enterprise: A Review of Kevin Carson’s "The Iron Fist Behind the Invisible Hand" 2

by Keith Preston

Every so often in the history of liberty a book or pamphlet has come along that has revolutionized libertarian thought and practice. One of these is Thomas Paine’s “Common Sense” which was largely responsible for popularizing the ideals of the Enlightenment and the American Revolution. Another is Lysander Spooner’s “No Treason” which utterly demolishes the absurd “social contract” theory on which constitutionalist states are ostensibly based. Hans Hermann Hoppe’s recent work “Democracy: The God That Failed” thoroughly refutes the notion that modern democratic statism can be reconciled with liberty or even represents an improvement upon earlier monarchical states. Now comes Kevin Carson’s “The Iron Fist Behind the Invisible Hand”.(1) Just as Hoppe has revolutionized modern political philosophy by drawing and expanding upon the work of the late Murray N. Rothbard and his teacher, Ludwig von Mises, Carson has, in the space of twenty-four pages, revolutionized political economy by expounding upon the work of Rothbard and another of his influences, the nineteenth century individualist-anarchist Benjamin R. Tucker.

Historically, anarchists have been divided on the question of markets. Traditional anarcho-socialists have typically rejected the market seeing it as nothing more than a source of predatory competition, concentration of economic power and exploitation. Most classical continental European anarchists, particularly the Kropotkinists, sought to abolish the market altogether in favor of a decentralized collection of autarchist communes based on production for subsistence, although some traditional anarcho-communists accepted the idea of free exchange or barter between independent communal units. Some American and British anarchists, such as Tucker or John Henry MacKay, preferred a lassez faire variation of anarchism consisting of small property owners operating on a stateless free market. Some of the differences between communist and individualist anarchists seem to be more of a cultural than economic nature. Anarcho-communists tended to be concentrated in nations, such as Russia or Spain, where industrial capitalism was far less advanced and the old feudal order remained largely intact. The anarcho-communist ideal was largely based on the concept of the peasant village community collectively operating its own agricultural economy minus the external exploitation of the feudal landlords. In nations where the Industrial Revolution had really taken root and the market economy had really begun to expand, such as England or America, anarchists were more likely to idealize the small merchant, craftsman or farmer, hence the individualist character of Anglo-American anarchism.

This dichotomy between communist and individualist anarchists continues to the present day. If anything, the differences have become even more pronounced. While the anarchists of old often argued fervently over ideological differences (Tucker and Johann Most refused to recognize one another as “true” anarchists), a mutual admiration frequently existed between the communist and individualist camps. Tucker was an admirer of the European anarchists Proudhon and Bakunin and translated their works into English and his anarchist journal, Liberty, published the writings not only of anarcho-socialists but also of outright Fabians or Marxists, such as George Bernard Shaw. Today, the two camps largely disavow one another. Most contemporary free market anarchists think of themselves as “anarcho-capitalists”, whereas Tucker regarded himself as a socialist, and most anarcho-socialists of today reject free market anarchists as mere apologists for corporate power.

Carson ably demonstrates that the division between contemporary anarchists on economic matters need not be as wide as it seems. Like the anarcho-capitalists, Carson favors a genuinely stateless free market. However, he argues effectively that the economic arrangements that an authentic free market economy would likely produce are remarkably similar to those typically advocated by anarcho-socialists. Serious free market economists, such as Rothbard, have long recognized that the corporatist structure of modern “Big Business” rests on state intervention rather than lassez faire. The state creates the fictitious legal infrastructure of corporate “personhood”. The state protects and assists corporations by means of limited liability laws, subsidies, government contracts, loans, guarantees, bailouts, purchases of goods, price controls, regulatory privilege, grants of monopolies, protectionist tariffs and trade policies, bankruptcy laws, military intervention to gain access to international markets and protect foreign investments, regulating or prohibiting organized labor activity, eminent domain, discriminatory taxation, ignoring corporate crimes and countless other forms of state-imposed favors and privileges.

Carson traces the development of modern corporate states all the way back to the late medieval period. In those days, the feudal structure, which originated from the military conquest of traditional agricultural communities and the imposition of an artificial aristocracy of external state-privileged exploiters, was in the process of breaking down. The free cities of the era began to appear as points of light on the broader feudal map. The market economy was growing, innovative technologies were coming into existence and the common people were obtaining more opportunities to claim their rightful status as free individuals. The ruling class was put on the defensive and sought to reestablish itself by fully expropriating traditional peasant lands and militarily conquering the free cities. The dispossessed peasants, no longer having any means of autonomy or self-sufficiency, were forced to migrate towards industrial centers and into the slave-like factory system. The state intervened to make sure that labor discipline was maintained by such methods as severly restricting the freedom of migration and suppressing efforts at self-organization by the laborers. The old feudal elites reinvented themselves as a new industrial capitalist ruling class by means of mercantilist economic policies which tended to concentrate wealth. In early America, for example, it was the northeastern mercantilists consisting of banking, shipping and land magnates led by Alexander Hamilton who initiated the Federalist coup against the libertarian Articles of Confederation and established the centralist presidential state for the purpose of advancing mercantilist commercial interests.

Carson’s central thesis is that “capitalism”, defined in the traditional Marxist/socialist/left-anarchist sense of separation of labor from ownership and the subordination of labor to capital, would largely be impossible under genuine free market arrangements. Most Americans are accustomed to thinking of capitalism and free enterprise as being one and the same. This is certainly the perspective taught in the state’s educational institutions and promoted by the corporate media. Carson lambasts fake populism of the type promulgated by corporate-sponsored afternoon talk radio which ignores the role of corporations, banks and other elite economic interests in fostering statism and instead works to channel the hostility of the working and middle classes away from the elites for whom most state intervention is actually done and towards the lower classes and the urban poor in a type of “divide and conquer” strategy. According to this ideology, the real enemies of free enterprise and proponents of statism are welfare recipients and the residents of homeless shelters and public housing projects. But it is the ruling class that is the primary beneficiary of state intervention. The primary role of such intervention is to redistribute wealth upward and centralize economic power. The tools used to obtain these objectives are as old as modern corporate states themselves. These tools include the state-imposed money monopoly, patents and subsidies.

Under the present system of federal government monopoly on the issuance of legal tender and central banking via the Federal Reserve, interest rates are kept artificially high, an artificial shortage of credit is maintained and access to finance capital is constricted. These arrangements centralize wealth and concentrate economic power in a myriad of ways. Carson argues that under a system of free banking, cooperative banks would be able to form and issue private bank notes as credit against the output of future production. Genuine competition among free banks would dramatically reduce interest rates, perhaps to the cost of administrative overhead. Access to cheap credit would make self-employment possible for nearly any industrious person with marketable skills or services. As the price of capital diminished, interest upon bonds, dividends upon stock and rents upon land and buildings would also fall. The proliferation of new businesses and the increased viability of self-employment would greatly enhance the bargaining power of workers, both individually and collectively. Workers would have a wider variety of potential employers to choose from in addition to greater opportunities to work for themselves. Employers would be forced by market pressures to make their workplaces more attractive to prospective employees. Workers would gain the collective power to demand the right of self-management in the workplace and could pool their credit to buy out their employers if they wished. This greatly enhanced bargaining power would essentially allow workers to control industries, even industries that remained nominally stockholder-owned. The virtual elimination of interest through market competition would also significantly lower mortage payments and credit card debt. The cost of housing would drop and overall workers’ savings would increase. Part-time employment would become a more viable option for many workers as would earlier retirement. Involuntary unemployment would also shrink.

Echoing Rothbard, Carson demonstrates how patents are nothing more than government grants of monopoly privilege. The function of patent law is to create monopolies on the marketing of particular products thereby establishing an artificial pricing system where such products are marked up dozens of times beyond their actual market value. This has been particularly true of pharmaceuticals where prices are often marked up 40 times or more. The effect of this arrangement is to eliminate competition and innovation by others seeking to improve upon an original product. Patent privilege pertaining to drugs and medical technologies sharply increase the cost of health care to the average consumer, effectively pricing many of forms of health care out of the range of many consumers. The restrictions on competition involved in patent privileges also constrict economic growth and increase unemployment. International patent privileges established by global trade agreements also tend to concentrate wealth in the advanced nations and stifle growth, competition and innovation in the Third World. Patents serve as a mercantilist tool utilized to maintain lesser developed nations as economic colonies.

Subsidies are probably the most egregious form of state favors to economic elites. Virtually all major U.S. industries are heavily dependent in some way on direct or indirect government financing. Throughout U.S. history, federal subsidies to transportation from the railway system to interstate highways to civil aviation have served to centralize wealth and control over a wide assortment of industries ranging from electrical utilities to petroleum to finance to retail sales. Much is made in some circles about the way large corporate retail chains such as Wal-Mart undercut local small businesses and run them out of the market. But this would be impossible without the massive government subsidies to shipping and transportation that benefit large national chains. So-called “defense spending” frequently amounts to a corporate welfare program. Most defense analysts estimate that a defense budget of approximately $100 billion would be required to effectively defend the territory of the United States. Yet overall military spending is nearly three and a half times that amount and increasing. The primary beneficiaries of such spending are arms manufacturers, the telecommunications industry, defense contractors and petrochemicals industries whose profits are guaranteed via the Pentagon system. This arrangement creates a tremendous concentration of wealth in the hands of de facto state protected monopolies. Tax breaks to corporations that subsidize R&D centralize wealth even further. Carson notes that some free market economists, including Rothbard, object to the characterization of tax breaks as subsidies, an understandable argument, but the problem here is that the burden of making up for this lost revenue is shifted onto the small businessman and rank and file worker.

Carson also engages in a rather thorough analysis of how the state creates an ideological superstructure to conceal its true nature and intentions. Outrageous amounts of “defense” spending are justified by demonizing one local tinpot dictator in the Third World after another, most of whom are the direct creation of U.S. imperialism, subversion, interventionism and aggression. Poor nations with no history of imperial ambition outside of their immediate borders, such as China, are held up as grave threats to world security. Currently, the beleagured nation of Iraq, which has never acted aggressively against a single American, is attacked as the Second Coming of Nazi Germany and the American public is bombarded with exaggerations and outright lies regarding Iraq’s weapons capabilities. Those who criticize and speak out against these lies are denounced as “un-American” under the cover of a pseudo-patriotic ideology while the state controlled media and educational system seeks to remove the authentic patriotism of Jefferson, Madison and Henry from public consciousness. Domestically, corporate sponsored think tanks and other propaganda outlets attack the urban poor as the source of the nation’s extensive fiscal problems and pretend that state aid to corporate and financial interests is non-existent. Elite class interests play to public hysteria over crime and scapegoat immigrants, drug users, the homeless and other marginal groups in order to justify the creation of a massive police state apparatus for the purpose of social control.

The implications of Carson’s analysis are broad and profound. I have long believed that the development of an entirely new ideological paradigm is necessary if the state is to be effectively combatted. Carson effectively debunks not only the ideology of the ruling class in all its various manifestations-traditional conservatism, neoconservatism, social democracy, welfare liberalism-but also demolishes the positions of various opposition movements as well. His skillful analysis of the impossibility of the centralization of wealth into a class hierarchy without state intervention completely debunks Marxism, which maintains that the market rather than the state is to blame for such centralization. Carson points out that this critique simultaneously debunks the “anarcho-social democracy” of Noam Chomsky to which most contemporary left-anarchists subscribe. “Mainstream” libertarianism is also demonstrated to be grossly inadequate. Carson says of this element:

Although a few intellectually honest ones like Rothbard and Hess were willing to look into the role of coercion in creating capitalism, the Chicago School and Randoids take existing property relations and class power as a given. Their ideal “free market” is merely the current system minus the progressive regulatory and welfare state-i.e., nineteenth century robber baron capitalism.

Indeed, Carson debunks the U.S. Constitution itself. Among the powers delegated to the federal government by the Constitution are the issuance of patents, subsidy of infrastructure and maintenance of a monopoly on legal tender-precisely the means by which wealth is concentrated and a state-protected ruling class emerges. This demonstrates once and for all that the anti-federalist critics of the creation of the federal government, such as Jefferson and Henry, were correct and that Hamilton and his cronies were traitors to the Revolution just as Lenin and Trotsky betrayed the anti-czarist revolution is Russia.

Carson’s analysis is consistent with the work of Rothbard but requires a more thorough application of Rothbardian principles that even Mr. Libertarian himself adhered to. Rothbard recognized the role of the state in creating feudalism and slavery and therefore understood the justice of the compensation of slaves and serfs through the expropriation of the masters and landlords. But Carson has shown that modern corporate states rest on the original expropriation of four centuries ago and the maintenance of this artificial class structure through state intervention ever since. Recognition of this fact necessitates incorporating these factors into modern theories of property rights. Forms of “private” ownership dependent on state intervention are illegitimate according to authentic free market principles. The remaining issue involves the means by which the present unjust order is to be dismantled and replaced with a just one.

It might be useful at this point to consider Hans Hermann Hoppe’s application of the traditional anarcho-syndicalist principle to the overtly state socialist regimes of Eastern Europe. (2) Hoppe argued that natural property relations had been so diluted by decades of state socialism that it would be impossible to return Communist state property to its rightful owners according to any objective criteria. Therefore, the syndicalist principle of property rights defined according to usufructuary principles (i.e., use and occupation) was applicable. Interestingly, Hoppe denied that such principles were applicable to the corporate states of the West. However, if such states rest on massive state intervention and expropriation, as Carson ably demonstrates, then such states and their distortions of normal market-based property relations are no more legitimate than those imposed by the Communist mafias of the East. When the present U.S. regime eventually collapses under the weight of its own corruption and mismanagement, most of the corporate and financial infrastructure will likely collapse simultaneously. At that time it will be vital that leaders and popular organizations emerge with constructive plans for the restoration of economic order and normalcy. The alternative will be the chaos that has plagued the former Communist nations and has led to the popular re-election of the old Communist parties, having reinvented themselves as “social democrats”, in some instances.

Elsewhere, Carson has written of the need for the development of a popular movement for the dismantling of the state according to a specific hierarchy of priorities. (3) In the interim, those aspects of the state most in need of being attacked are those state practices designed to create an artificially privileged ruling class such as patents, subsidies, the military-industrial complex, the federal money monopoly and the apparatus of the police state. Unlike the so-called “libertarians” of the statist variety (for example, the Cato Institute and the Reason Foundation) who equate liberty with the pseudo-privatization of social security and the state funding of private schools via the voucher system all the while ignoring corporate welfare, military pork and the prison industry, a true anti-state movement must be a populist people’s movement against the super-state and its corporate and media allies. This would involve the creation of economic organizations not connected to the state including independent labor unions, credit unions, mutual banks, mutual aid societies, cooperatives and associations of small businessmen, farmers, workers and ordinary taxpayers unified for the purpose of carrying out a formal tax strike. Such institutions would form the basis for economic reconstruction once the statist system disintegrates.

Upon the event of such a systemic collapse, the syndicalist principle will have to be applied far and wide. Collapsed industries would go to the workers with small investors retaining the rights to their shares but no compensation for those who have made millions or billions from state intervention. Agribusiness cartels supported by the state are responsible for the destruction of traditional family farms and the loss of family lands in the process. Consequently, the land holdings of these cartels would be open to homesteading. The federal government owns more than a third of the land in the continental U.S. and this land should be open to homesteaders as well. Public universities would go to the professors, schools to the teachers, streets to the neighborhoods or street repair workers, military bases to the soldiers, public buildings to the bureaucrats, recreational facilities to management agencies and so on. From there each new set of proprietors would be responsible for organizing their own domain according to their own economic needs. Bureaucrats, for example, may sell their buildings or convert their facilities to self-sustaining businesses. Federal courthouses may become the property of the judges and lawyers who then proceed to sell their services as mediators and arbiters, assuming anyone would wish to purchase their services. (4)

The resulting set of economic arrangements would likely be quite diverse. Workers may elect to convert their industries to employee-run cooperatives with individual non-marketable shares being the basis of ownership or, if they wished, they could sell shares to outsiders as well. Productive institutions might well span the whole spectrum from private contractual business corporations to worker owned cooperatives to stockholder owned businesses managed by the workers to collective institutions of the Israeli kibbutzim variety. Intentional communities might be formed that held certain industrial or manufacturing or utility services in common. Small scale entrepreneurship would likely expand dramatically and the number of independent craftsmen would increase. Anti-statists need not argue over the details of what a stateless economy would look like. The ideals of free-market libertarians, syndicalists, anarcho-primitivists, municipalists, guild socialists, councilists, mutualists, Georgists, distributists and many other tendencies could be realized in stateless economy. The only requirement is that such arrangements be voluntary and freely chosen. A synthesis of Rothbardian radical free market economics, traditional class struggle anarchism and historic American revolutionary populism provides the ideological vehicle for the achievement of these goals.

Notes:

(1) Read the full text of Carson’s pamphlet at http://flag.blackened.net./daver/anarchism/iron_fist.html

(2) Hoppe discusses this question in “Democracy: The God That Failed”.

(3) See Carson’s “Political Program for Anarchists” at www.attackthesystem.com/ppa.html

(4) Carson has pointed out to me that an alternative would be to mutualize judicial and social services and give the buildings to their former clients.

2 comments

  1. Yah…in the soviet union, I had many arguments w students…thy thought of our system a la dickens..starving kids, Cruel bosses , etc.
    Re bozak

  2. The people who are free from the birth sometimes doesn`t understand the horrors of the totalitarian state.The oppositions often unites and anarchisms usually turnes totalitarian as in the Latin America.As the Soviet former slave I see utopian anarchism ridiculouse.

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