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Real Life Capitalism Whack-A-Mole
A couple of years ago, I introduced the concept of Capitalism Whack-A-Mole. Capitalism Whack-A-Mole is an argumentative habit of libertarians where they shift between various mutually incompatible philosophical frameworks in order to deal with successful critiques of capitalism.
I taped a TV segment today with the Ayn Rand Institute’s Don Watkins about his book “Equal Is Unfair.” My sole goal going into the segment was to see if I could produce a Capitalism Whack-A-Mole in the wild. Initially, after he passed on my baiting about the authoritarianism of private property, it seemed like I wasn’t going to be able to make it happen. But, eventually, it did.
Being a Randian, Watkins advocates for the government to create economic institutions that distribute the national income solely to “producers.” This is a standard desert theory line about how distributive justice requires that each person be distributed that which they produce. At some point in my standard critique of desert theory, I got to the part where I explain that the existence of capital income — rents, interest, dividends, capital gains — violates desert theory because it provides capitalists income even though they did not produce it. Capital income is definitionally income from owning not income from producing.
From there, the glorious Whack-A-Mole began.
Watkins first rebuttal effort was to say that in fact capitalists do produce the income because they match capital with talented labor and such. So, at this point, he was endorsing the basic idea that income is only justified by production, but saying that capitalists do actually produce.
I then clarified that he has mistaken entrepreneurs for capitalists. It is entrepreneurs who match capital with labor, not capitalists. And entrepreneurs receive labor income for doing so. To illustrate the difference, I used my own retirement account as an example. Last quarter, I had $200 of capital gains in my retirement account, but I clearly did not produce anything to earn that income. It just came in passively from the index fund.
Confronted with the fact that desert theory cannot justify capital income, Watkins then shifted. His new argument was that capital income is a reward for abstaining from consumption. The experienced will understand this as the “wages of abstinence” argument. I called him on the shift, noting that abstaining from consumption is not producing and that he had said people are only owed what they produce.
At that point, he shifted again. His third argument was that capital income was necessary to incentivize savings and capital investment. Why would you save your money and put it up for capital investment if you did not get a return for doing so? I called him again on the shift, noting that he has now made a utilitarian argument for why paying rents to non-producing capitalists is good for general prosperity. But, once again, this does not show that the capitalist earns their rents through production.
From that point, the last word swung to him and he actually shifted yet again, focusing this time on the “voluntary” nature of the manner in which the capitalist secures his unearned, passive rents. I was not able to respond to this, but it’s obvious how one would do so. As with the other shifts, the voluntarism argument still fails to deal with the problem that capital income is unearned. Randians promise that they can show capitalism distributes out according to the principle “to each according to what they produce.” But they can’t show it because it isn’t true. Also, capital income is not derived through voluntary means, but instead extracted through coercive property relations.
So, by the end of the little back-and-forth, Watkins shifted from desert to “wages of abstinence,” from “wages of abstinence” to utilitarian incentives, and then from utilitarian incentives to voluntarism. As always, the erratic philosophical shifting on the matter of capital income is a solid indicator of the fact that libertarians have no way of justifying it coherently. Marxists have always been right on this. The best shot they have is the utilitarian framework, but that framework also supports the welfare states that they loathe.
Capitalism Whack-A-Mole
There is no general framework of morality or justice that supports laissez-faire capitalism. This is a problem of course for those who wish to argue on behalf of it. When you talk to such people, a familiar argumentative pattern emerges that I have come to call Capitalism Whack-A-Mole.
Someone playing Capitalism Whack-A-Mole moves seamlessly between three different — and mutually incompatible — frameworks of justification. Those frameworks are desert (each person should get what they produce with their labor), voluntarism (each person should get whatever they come about through voluntary, non-coercive means), and utility (the economic system should be created to maximize well-being). This Capitalism Whack-A-Mole does not need a starting point, but, in my experience, either desert or voluntarism comes first, with utility the back up when the argument turns really bad.
Here is a simulation of one such argument.
Them: Capitalism is right because people should get what they earn through their hard work.
Me: But this is not what happens under capitalism. Among other things, one-third of the national income goes to capital owners who have done no work at all for that income. If you really believe the economic system should distribute according to hard work, then you’ve got to at least tax capital income at 100%. That’s not to mention the value of nature, which nobody produces with their hard work, and which you must therefore also tax at 100%. There are other problems as well.
Them: Capital owners may not produce anything to get that one-third of national income, but they got it through voluntary transactions. I am just against force and for voluntarism.
Me: Transactions are not voluntary. They are coerced through systems of property ownership. You only trade with someone because there is a gun at your head to keep you from simply grabbing the thing that you trade for. There is nothing voluntary about that. The only system that respects voluntarism is the Grab What You Can World, in which people are free to act on any piece of the world as they wish, without restriction.
Them: Capitalist institutions may require violent coercion to enforce, but they make everyone very rich. We’d be much poorer, even at the bottom of society, if we got rid of them.
Me: OK. So you support using violent coercion in order to make sure people are well off. But people, especially the poor that you are now concerned with, are better off in Social Democratic systems than they are in laissez-faire capitalism. The diminishing marginal utility of money, by itself, justifies significant tax and transfer schemes under a “making everyone as well off as possible” analysis.
Them: But taxes are involuntary and use force.
Me: So are property institutions. We just went over this.
Them: Taxes are theft. People should be able to keep what they work for.
Me: Capital income, which comprises around one-third of the national income, is not worked for. We just went over this.
Them: Utility!
Me: That requires taxes and transfers.
Them: Voluntarism!
Me: That requires getting rid of capitalist ownership institutions.
Them: Desert!
Me: That requires getting rid of capital income.
And so on. Desert, voluntarism, utility. Desert, voluntarism, utility. Desert, voluntarism, utility. None of these frameworks support capitalism, but when utilized in Capitalist Whack-A-Mole, they are able to complement each other in a way that ensures the problems of one can be answered by another.
Desert cannot handle the fact that capital income is not earned through work. But voluntarism can chime in at that point to say capital income is gotten voluntarily at least. Voluntarism cannot handle the problem that all economic institutions are involuntary, most especially property laws. But utility can chime in at that point to say property laws are instrumentally useful for overall welfare. Utility cannot handle the fact that transfers are utility-boosting, both in aggregate and for their recipients. But voluntarism can help argue against those on “taxation is force” grounds and desert can help argue against those on “taxation is stealing people’s product” grounds.
The fact that proponents of laissez faire capitalism move between three radically different justificatory frameworks that are all incompatible with one another is not particularly surprising, of course. Most people come to their feverish support of capitalism through unreflective cultural mechanisms first, and their arguments are then filled in later. It is kind of funny to watch though.
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by Guest Mon Apr 04, 2016 10:27 pm
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