Free Market Whack-A-Mole

Whack-A-MoleMatt Bruenig wrote a funny article over at his blog, Capitalism Whack-A-Mole. It is about the shifting justifications for laissez-faire capitalism. When you whack one conservative apologia for capitalism down, up pops another: it is an endless game of whack-a-mole. This is nothing knew, of course. As Bruenig noted in his conclusion, “Most people come to their feverish support of capitalism through unreflective cultural mechanisms first, and their arguments are then filled in later.” In other words, they support the “free” market because they perceive it to be in their own personal interests. This is why libertarianism is almost exclusively the ideology of young guys with good prospects and old guys with piles of cash.

In the article, Bruenig noted that the different justifications are incompatible with each other. Supporters start with the “desert” argument, which says that people should have a right to rewards of their work. When they are countered with the fact that one-third of the economy is based upon rents (people charging for things they own), the supporters shift to the “voluntarism” argument. This holds that this ownership came about through voluntary transactions. When they are countered with the fact that private property itself is coercive because it requires laws to stop people from, for example, just farming fallow lands that someone else owns, the supporters shift to the “utility” argument. This is the old Milton Friedman argument that capitalism makes everyone richer. And when this is shown to be completely false (see, for example: the last four decades), they go back to the first argument: people have a right to rewards of their work.

I suspect I hang out with less sophisticated group of libertarians than Bruenig does. Just the same, the ones I talk to seem to be much more common. They normally start their arguments with the utility claim: in the libertarian utopia, everyone will be rich! Well, it is usually more along the lines of, “The minimum wage kills jobs.” Or, “Raising taxes hurts economic growth.” Such claims are easy to dispatch. So our libertarian warrior runs for cover in some form of first principle argument that the government has no right to interfere with private contracts. (Note: I am making the best case for the libertarians here; most don’t even get this sophisticated.)

The critical problem that they never manage to deal with is the arbitrary nature of capitalism. It simply isn’t the case that everyone starts life with an equal chance of success. And this is true even if you don’t consider that some people are born with innate characteristics that will help or harm them in our society. So even if hundreds of years ago, some white guys bough Manhattan for $26 in a voluntary deal, what does that mean to a poor child born today? Or a rich child? We know that a smart and hard working poor child will generally do worse economically than a stupid and lazy rich child. So this isn’t a question of people getting to keep what they worked for. At best it is people getting to keep what other people who are now dead worked for.

So the political question is always about utility: does the system work for everyone? And we know that it doesn’t. This isn’t an argument for socialism or even an argument against capitalism. Any society is a combination of the two. But what we’ve seen over the last four decades is that productivity growth has become uncoupled from worker wages:

This is why conservative economic rhetoric always comes back to vague notions like “freedom.” Over the last forty years, starting in a small way with conservative southern Democrat Jimmy Carter and really taking off with “freedom” loving Ronald Reagan, our government has pushed more and more conservative economic policy. This has not increased economic growth — just look at the graph. But it has increased profits of those at the very top of the economic system. Clearly, this is not a debate we should even be having. Our government has moved far too much toward capitalism and we need a correction back toward socialism.

The problem we face is that the Democratic Party — the “liberal” party — is largely dominated by New Democrats who think that the best thing is to continue to enrich the rich at the expense of the rest. But I’m hopeful that Democratic voters are finally waking up and that our long national dark age is ending. Because the truth is that it has gotten bad enough that everyone can see the problem. And the happy conservative rhetoric of “freedom” sounds mighty thin today. It doesn’t matter how they massage their rhetoric. The moles are all dying.

H/T: Noah Smith

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