I am in a class this semester studying justice in re: to economics. That is, How do we know a given system (or aspects of capitalism, for example) are just? Meaning, right and justifiable. Libertarian capitalism has really been cooking since about 1980 in the United States. What is it all about? As Murray Rothbard put it: “The central thrust of the libertarian thought is to oppose any and all aggression against the property rights of individuals in their own persons and in the material objects they have voluntarily acquired.” Sounds pretty attractive. Even more inarguable is Richard Epstein’s characterization: “All people are not equally driven, but when it comes to the use of power, those who have excessive amounts of self-interest are apt to be the most influential – and the most dangerous.” So, is libertarian capitalism (free-market or laissez-faire capitalism) above reproach? Let me first try to at least lobby for it.
Capitalism is obviously a system of great power and reach and potential, and as we can easily see, has created some difficult problems. Some would even say that it is destroying the planet. Thus, in my opinion, capitalism is not good as-is, but needs reformation in order to be so. It is too raw, amoral, and heartless. Many, many lives are at stake, as we can see from the amount of poverty and sickness and other symptoms of social disease in America. Let us make needed changes! Below are three arguments in favor of capitalism (perhaps more specifically, a libertarian version of capitalism) and some quotations for your consideration.
Below are the three arguments. P stands for premise; C stands for conclusion. Nozick is libertarian Robert Nozick, and Friedman is libertarian Milton Friedman. It is worth pointing out that one thing libertarians and liberals can probably agree on is that the modern system is more like crony capitalism than free market capitalism. Thus, I might be a bit too hard on libertarianism because perhaps the system we have created is akin to a Frankenstein: a selfish automaton that politicians have created that is neither man nor beast.
A case can be made that, as The United States Magazine and Democratic Review (magazine) wrote in 1837, “The government which governs best, governs least.” Here is Richard Epstein’s modern recapitulation of that sentiment: “The Constitution was drafted by individuals who tried to find a Lockean response to the Hobbesian problem. It has been interpreted by courts and academics who too often forget that big government is the problem, not the solution.”
I will mention up front that I do not think the following syllogisms are true in the deepest sense of the word. They are valid, I suppose, but we can see capitalism breaking down right before our eyes. It does have a lot to do with the confluence of politics and economics. I know that Friedman, for example, would note that the government has way too much influence in the American economic system to be a fair test of true, free-market ideals put into practice. Here is what my classmate says, with which I agree:
“A laissez-faire state is open to abuse by monopolies and cartels. I really doubt that early proponents of the free market system like Smith would have approved of modern capitalism. The problem here is the system is rigged from the top, down. You cannot talk about consent if the only options are to live or to die. The modern capitalist economy is full of market failures like the existence of monopolies and oligopolies, asymmetric information, and externalities. A government is required to protect people from these market failures that benefit the most affluent. So, I don’t think an extensive government violates people’s rights. On the contrary, it protects peoples rights.” ~ Hadi Emre Haydaroglu
The Case for Capitalism – Three Syllogisms Featuring Libertarian Arguments
P1: (Premise #1) A person has a natural right to be free of unwarranted interference from any other individual or conglomeration of individuals (e.g., government), especially property (Locke)
P2: One should be personally responsible for their own well-being
P3: Freedom is special and primary (Friedman; Nozick)
P4: Politically, freedom is optimal; economically, freedom is optimal. These are reciprocally related and very significant (Friedman)
P5: Government has a moral responsibility to avoid interference in markets and in the economic lives of citizens and ought to refrain from attempting to redistribute income based on patterns (Nozick). To do so would be paternalistic (Friedman2, 187, 182), violate liberty, and be impractical and never-ending (Nozick) because of the difficulties of determining the true, relevant history.
P6: Justice is simply based on whether goods were acquired legally and transferred legally (Nozick)
C: (Conclusion): Therefore, free-market capitalism (or a libertarian-inspired approach to economics) is more just than any other method of economic management of society
P1: Liberty of the individual is the highest good (Nozick)
P2: Theoretically, the government’s choices are to: a.1) interfere with, a.2) control, a.3) regulate, or a.4) own the means of production (business and industry) or b) keep its hands off and allow the markets to be unimpeded and self-correcting
P3: Some curtailment of liberty will be necessary for a government to function with the end goal being collection of tax revenue, the provision of needed services not best left to individuals or private enterprise, etc. (Nozick)
P4: In any practical application of theory, the results will be more or less as envisioned – the consequences will range from fully intended to fully unintended (Friedman)
P5: In the history of American economics, unintended consequences have often resulted from attempts to successfully regulate, control, manage, or own business and industry (Friedman)
C: Practically speaking, then, government ought to refrain from as many interventions in the free market as possible because doing so not only entails infringements on liberty, but will bring up a whole host of unintended consequences which are negative (Friedman)
The laws of supply and demand are sufficient to bring about a well-functioning market and tax revenue can then be gleaned from the results, so there is no need to run the risk of introducing unintended consequences, anyway
For these reasons, capitalism distributes societal goods more justly than alternatives.
P1: Freedom is the most important right or value (Friedman); therefore justice cannot violate or diminish freedom.
P2: Government infringements upon freedom (coercion) are unjust if they go beyond a certain minimum required for society to function (Nozick)
P3: Government ought not to be doing injustices to persons
P4: The greatest threat to freedom is the concentration of power (Friedman); “Power tends to corrupt,” it has been said
C: Therefore, “the government which governs least, governs best.” That is, less government equals more justice.
I welcome you to listen to the two podcasts I recorded with experts on progressive economics (and to some degree, on capitalism) on this page
Here are the quotations relevant to capitalism:
“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.”
“…on the one hand this is a country of egalitarian promise, a land of opportunity for millions of immigrants of modest background; on the other hand, it is a land of extremely brutal inequality, especially in relation to race.
“When ‘the common good’ of a society is regarded as something apart from and superior to the individual good of its members, it means that the good of some men takes precedence over the good of others, with those others consigned to the status of sacrificial animals.”
“In selectively culling out bits and pieces of market theory to argue that the public interest is best served by giving globe-spanning megacorporations a license to maximize their profits without public restraint, capitalism has distorted market theory beyond recognition to legitimate an ideology in the service of a narrow class interest.”
“Because libertarians are skeptical about the effects of concentrated power, they support institutions that limit and divide power, such as federalism, separation of powers, private property, and free markets. Capitalism, democracy, and the Western intellectual system are all competitive systems that give no one final authority.”
“In the United States, to argue that economic justice is achievable is to brand oneself either naïve and unrealistic or, until very recently, a [Communist]. Nevertheless, a committed minority of U.S. leaders, poor people, and people of conscience have risked articulating a vision of a nation without poverty.”
“A society that does not recognize that each individual has values of his own which he is entitled to follow can have no respect for the dignity of the individual and cannot really know freedom.”
“…massive poverty in the modern sense appeared only when the spread of the market economy broke down community ties and deprived millions of people access to land, water, and other resources. With the consolidation of capitalism, systemic pauperization became inevitable.”
“When you look at the world perched on heights of arrogant, blind power, separated and disconnected from those who have lost their livelihoods, lifestyles, and lives – farmers and workers everywhere – it is easy to be blind both to the valleys of poverty and the mountains of affluence.”
“For more than two decades, we have been deluged by the libertarian mantra: that government is evil, that regulations and taxation have stifled the free market, that welfare is abused and needs to be drastically reduced, and that the amassing of wealth is the basic American virtue.”
“To some people, especially those who worship at the altar of the free market, the collapse of communism in the 1980s and 1990s conclusively demonstrated the wonders of capitalism. That assumption is akin to the notion that the moral bankruptcy of the Republican Party implies proof of the greatness of the Democratic Party.”
“Our minds tell us, and history confirms, that the great threat to freedom is the concentration of power. Government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power in political hands, it is also a threat to freedom. Even though the men who wield this power initially be of good will and even though they be not corrupted by the power they exercise, the power will both attract and form men of a different stamp.”
~ Milton Friedman
“If we assume that the purpose of the economy is to serve and improve the welfare of the entire body of citizens, the U.S. model has clearly been a major failure. It has served a minority, and the majority have not only failed to share in the income gains yielded by the model, they have suffered from reduced benefits, greater job instability and stress, and a diminution of expectations and sense of hope for the future.”
“If one wishes to advocate a free society – that is, capitalism – one must realize that its indispensable foundation is the principle of individual rights.”
“Americans love the free market, but again and again they have risen in revolt when market forces become too powerful.”
“In my view, there is absolutely no doubt that the increase in inequality in the United States contributed to the nation’s financial instability. The reason is simple: one consequence of increasing inequality was virtual stagnation of the purchasing power of the lower and middle classes in the United States, which inevitably made it more likely that modest households would take on debt, especially since unscrupulous banks and financial intermediaries, freed from regulation and eager to earn good yields on the enormous savings injected into the system by the well-to-do, offered credit on increasingly generous terms.”
“The free market should not include the right to pollute our environment.”
Here is a podcast I recorded on income and wealth inequality.