On Socialism

As most economists and political scientists agree, capitalism is “the private ownership of the means of production” and socialism is “the public/state ownership of the means of production.” Where they disagree is on which is preferable to achieving their ideal socio-economic outcomes, fair enough, but that aside, what cannot be denied is the fact that each and every person is themselves a means of production. Which begs the question, who owns you? Under capitalism, you own yourself (self-ownership). Under socialism (and it’s variants communism and fascism), you guessed it, the public/state. I don’t know about you, but I reject slavery in all its forms, including socialism. Do you? And that’s today’s two cents.

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On Capitalism IV

It’s vogue these days to claim that capitalism is responsible for the suffering and deaths of more lives than has been communism or socialism. The argument goes that when capitalistically produced food, drugs, medical care, et cetera, are withheld from those who can’t afford it, the resulting suffering and death (which numbers in the billions, orders of magnitude greater than communism or socialism) was thereby caused by capitalism. Interestingly, the same “greed” which produced the aforementioned goods and services supposedly keeps entrepreneurs and capitalists from simply giving it all away. Remove capitalistic “greed” from the world, and not only are those who can’t afford these goods and service no better or worse off, but those who can must now join them in their suffering and death. Gee, if only the world ran on wishes and dreams. And that’s today’s two cents.

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Well Done, Billionaires

I ran into a neighbor on the street the other day and we chatted about life at home during COVID-19 and how we are all coping with social distancing. I mentioned how grateful I am that our nearby Whole Foods market seems well-stocked (except for toilet paper).

She made a comment about how billionaires like Jeff Bezos, founder and CEO of Amazon, which also owns Whole Foods, should really be less greedy and share their wealth. (She didn’t know that Bezos has donated $100 million to US food banks during the pandemic, but charity is beside the point.)

The dominant narrative that billionaires are greedy and big companies like Amazon are monopolistic, exploitative tyrants is not only misguided but deeply troubling for the future of prosperity and human progress. This rhetoric is nothing new. Successful businesspeople have long been smeared as robber barons who take and take, detracting from the “common good.” But this rhetoric and these smear campaigns fail to recognize just how much these billionaires give. And I don’t mean give in terms of charity.

They give by doing, by building, by creating, by inventing. They give by making products or offering services that people want to buy at a price they want to pay in pursuit of things they want to do, and employing thousands of people who choose to work for a wage they choose to accept.

They give by creating value for people, free of force and in an open marketplace of voluntary exchange. In the case of Amazon and Bezos, it got big and he got wealthy by building a superior product that millions of people freely choose to use because they can get goods they want at lower prices and faster speeds, freeing up their precious time and resources to devote to their own personal pursuits.

Amazon is a marvel of modern enterprise, and is one of the few companies keeping our emaciated economy from completely collapsing during this public health shutdown. Instead of disdain, the people who built these companies deserve our respect and appreciation. They are the builders and the creators, the thinkers and the doers. Former Google CEO Eric Schmidt reinforced this point recently in a virtual presentation to the Economic Club of New York. He said:

Think about what your life would be like in America without Amazon, for example. The benefit of these corporations — which we love to malign — in terms of the ability to communicate … the ability to get information, is profound — and I hope people will remember that when this thing is finally over. So let’s be a little bit grateful that these companies got the capital, did the investment, built the tools that we’re using now and have really helped us out. Imagine having the same reality of this pandemic without these tools.

Yes, imagine. In her classic book, Atlas Shrugged, Ayn Rand did just that, showing what life would be like if we mistake success for greed, achievement for exploitation, and progress for oppression. Billionaires, like Bezos, who have built great companies contribute daily to the “common good”—not only through charity, but through human ingenuity and the progress and prosperity that produces for all of us. During this pandemic, Audible, an Amazon company, is offering hundreds of its children’s audiobooks, and many of its adult books as well, for free. Atlas Shrugged is one of them.

We can, and should, balk at attempts to corrupt the process of voluntary exchange when business and government become entangled. That isn’t capitalism, it’s cronyism and it poisons the promise of free markets.

Economist Dan Mitchell describes the difference as being pro-market or pro-business, with the former acting as a champion of free enterprise and trade while the latter relies on government handouts and business buffers in the form of subsidies and bailouts.

Government officials trying to woo Amazon with subsidies and preferential treatment to build additional headquarters in a particular city is an obvious example of being pro-business at the expense of a dynamic free market.

Entrepreneurs like Jeff Bezos assume enormous risk and invest significant time, energy, and resources into inventing products and services that people want and need. They spot an opportunity to create value for others, and build a business around that idea using their own originality and will. If they succeed in creating something that others value, they will be rewarded financially; but even Jeff Bezos isn’t as rich as you think. Most billionaire wealth is inextricably linked to the companies they built, continuing to generate value for others, continuing to give.

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Edward Stringham: Private Governance (25m)

This episode features an interview of economics professor Edward Stringham from 2015 by Jeff Diest, host of the Human Action podcast (formerly Mises Weekends). Edward is the author of a book called Private Governance: Creating Order in Economic and Social Life, where he looks back at the history of private legal systems, and in so doing demolishes the idea that only the state can manage and adjudicate human conflicts. Today, Edward gives some concrete, real-world examples of how private governance operates in our statist world. If you’re interested in Rothbardian and Hoppean anarcho-capitalism, you’ll find Edward’s book a great addition to your library, and you’ll enjoy hearing this interview. Purchase books by Edward Stringham on Amazon here.

Listen To This Episode (25m, mp3, 64kbps)

Subscribe via RSS here, or in any podcast app by searching for “voluntaryist voices”. Support the podcast at Patreon.com/evc or PayPal.me/everythingvoluntary.

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Reflections on the Leiter-Caplan Debate

It was a pleasure debating Brian Leiter last week.  The resolution, to repeat:

“Social democracy is preferable to market capitalism, but ultimately America will need to move towards a socialist system.”

Here are some thoughts I failed to fully articulate at the live event.  As always, I’m happy to publish any reply my opponent wishes to compose.

1. To his credit, Leiter expressed zero sympathy for any actual socialist regime.  He even condemned Cuba; good for him.  But Leiter still insisted that the totality of these awful experiences show next to nothing about the desirability of socialism, which frankly seems crazy.  As far as I could tell, Leiter hews to the classic Marxist position that we should transition to socialism only after capitalism creates incredible abundance.  Unlike most historical Marxists, however, he doesn’t think that even the richest countries are ready yet.  My question: If we finally got rich enough for socialism, why think that a socialist regime would be able to maintain the prior level of prosperity, much less provide continued progress?

2. When I discussed the actual performance of social democracy, Leiter was surprisingly apologetic.  He conceded that we have wasteful universal redistribution, instead of well-targeted means-tested redistribution.  His only defense was to repeat the flimsy argument that it’s too hard to sustain popular support for means-tested programs.

3. On regulation, Leiter appeared to endorse open borders; good for him.  He also professed agnosticism on housing regulation.  Since these are by far the two biggest forms of regulation in modern social democracies (measured by how much regulation changes the likely market outcome), it’s hard to see why he would believe that increased regulation has, on balance, been good for humanity or the poor.

4. According to Leiter, “ultimately America will need to move towards a socialist system” because automation will one day cause mass unemployment.  This position baffled me on multiple levels.  Most obviously, why not respond to automation with redistribution rather than nationalization, and thereby avoid killing the capitalist goose that has hitherto laid a mountain of golden eggs?

My fundamental objection, however, is that history teaches us that technological unemployment is only a morbid fantasy.  When firms figure out ways to get more output out of fewer workers, this may cause unemployment in the short-run.  Soon enough, however, business has repeatedly figured out new jobs for workers to perform.  Business has already accomplished the miraculous task of creating new roles for the enormous number of workers disemployed by the mechanization of agriculture.  Every future economic transformation pales by comparison.  Remember: Almost everyone was a farmer for almost all of recorded human history.  Then industrialization eliminated almost all farm jobs.  Yet today, we don’t miss these jobs.  Instead, we get fat on all the cheap food, and do jobs our agrarian ancestors would have struggled to understand.

Leiter had two responses to my reaction.  One was “maybe this time it will be different”; Leiter even appealed to David Hume’s problem of induction to downplay all prior economic history!  If you take this line, however, it would only entitle you to say “it is logically possible that America will need to move towards a socialist system” – a vacuous claim indeed.  Frankly, if you take Hume seriously, even the best empirical evidence shows nothing about the future, so why bother debating at all?

Leiter’s better argument was that capitalists are perennially trying to cut costs – and that in the long-run capitalism works.  So eventually capitalists will figure out a way to run the economy without workers – an outcome that is individually rational for a capitalist, but socially disastrous for capitalism.  My response: Yes, capitalists want to figure out how to produce a given level of output with fewer workers.  Their deeper goal, however, is to figure out the most profitable way to employ all available inputs.  As long as there are able-bodied people who want to work, there will be a capitalist brainstorming how to make money off the situation.  And to echo Leiter, in the long-run this works.

5. Leiter bizarrely insisted that “the” goal of socialism was to allow human freedom – legions of vocally authoritarian self-identified socialists notwithstanding.  He followed up with the classic socialist argument that saying “If you don’t do what I say, I won’t give you the job you need to avoid starvation” is just as much an abridgment of freedom as “If you don’t do what I say, I will shoot you.”

The standard reply, of course, is that there is a vast moral difference between getting you to do what I want by threatening to take away something to which you are morally entitled (e.g., your life) and getting you to do what I want by threatening to take away something to which you are not morally entitled (e.g. my assistance).  Thus, imagine you will be suicidally depressed unless I marry you.  Is my refusal to marry you morally equivalent to making you suicidally depressed by threatening to shoot you unless you break off your engagement to your willing fiance?  Of course not.  You aren’t entitled to marry me if I don’t approve, but you and your fiance are entitled to marry each other even if I don’t approve.

6. Moral entitlement aside, “If you don’t do what I say, I won’t give you the job you need to avoid starvation” is rarely relevant in modern labor markets.  Why not?  First, there are competing employers, so if you don’t like an offer, you can shop around for another.  (Smarter yet, take what you can get, but keep searching for a better offer).  Second, if you live frugally, even a relatively low-wage worker can save up a nest egg, making it easy to turn down unappealing offers in the future.  Naturally, you can object, “I still face the choice to either live frugally, work for some employer, or starve.”  If so, we’re back to my original reply: Complaining about being “free to starve” is the flip side of demanding that strangers support you whether they like it or not.

7. Leither took umbrage at my authoritarian interpretation of Marx.  I freely grant that Leiter’s invested more time reading Marx than I have.  However, I too have devoted long hours to Marx’s oeuvre (though I’ve spent far more reading about the actual history of socialist regimes), and I stand by my bleak assessment.

Did Marx explicitly say, “We should round up priests and execute them”?  To the best of my knowledge, no.  Yet that is the most reasonable interpretation of what Marx had planned.  What are we supposed to think when Marx makes Orwellian statements like,  “[B]ourgeois ‘freedom of conscience’ is nothing but the toleration of all possible kinds of religious freedom of conscience, and that for its part [socialism] endeavors rather to liberate the conscience from the witchery of religion” (Critique of the Gotha Program)?  It doesn’t sound like Marx plans to respect the rights of people who don’t wish to be so “liberated.”  If Leiter is right, why did so few Marxists protest Lenin’s religious persecution?  I say it’s because Marx provided the Orwellian language they needed to insist that Freedom is Slavery.  As I wrote two decades ago:

Innumerable social thinkers disagree with much of Marx’s thought, but praise his reflections upon human freedom, the depth of his insight in contrast to the shallowness of liberalism. Yet it is difficult to understand how Marx’s concept of freedom is anything more than a defense of tyranny and oppression. No dissident or non-conformist can see society as the “realization of his own liberty.” And what can the attack on “the right to do everything which does not harm others” amount to in practice, except a justification for coercing people who are not harming others? The problem with “broad” notions of freedom is that they necessarily wind up condoning the violation of “narrow” notions of freedom. Under “bourgeois” notions of religious liberty, people may practice any religion they wish (“a private whim or caprice” as Marx calls it); how could this liberty be broadened, without sanctioning the persecution of some religious views?

Listening to Leiter, a law professor at the University of Chicago, I couldn’t help but think, “Leiter is talking like Marx’s lawyer.”  When a Mafia enforcer says, “Sweet kids you got there; be a shame if anything happened to them,” a Mafia lawyer will vigorously deny that his client threatened to murder children.  Any neutral adult, however, knows that the Mafioso did exactly that.  I say the same about Marx’s writings.  “I’m going to bring you real freedom” is a classic Offer You Can’t Refuse – as Marxist revolutionaries have shown us time and again.  A skilled lawyer can obfuscate this scary truth, but a learned philosopher should not.

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The Leiter-Caplan Socialism Debate

Last night, I debated the University of Chicago’s Brian Leiter on “Capitalism, Social Democracy, and Socialism” at the University of Wisconsin. Leiter wrote the precise resolution:

“Social democracy is preferable to market capitalism, but ultimately America will need to move towards a socialist system.”

Here’s my opening statement; I’ve debated Elizabeth Bruenig and John Marsh this general topic before.

All First World countries are already social democracies.  Their governments continue to allow markets to provide most goods and services, but they heavily regulate these markets, heavily subsidize favored sectors like education and health, and heavily redistribute income.  The U.S. is moderately less social democratic than France or Sweden, but the idea that we have “market capitalism” while they have “social democracy” is hyperbole.  If you favor social democracy, you should be happy because your side won long ago: free-market rhetoric notwithstanding, the U.S. has Social Security, Medicare, Medicare, and public education, and strict regulation of labor markets, construction, and other major industry.  My view, however, is that social democracy is a awful mistake.  Despite its bad press, market capitalism would be much better than what we have now.

Advocates of social democracy typically claim credit for three major improvements over market capitalism.  First, they’ve used redistribution to greatly reduce poverty.  Second, they’ve used regulation to make markets work better.  Third, they’ve used government funding to provide wonderful services that markets neglect.  I say they’ve greatly overstated their success on all three counts – while conveniently neglecting heavy collateral damage.

Let’s start with redistribution.  The rhetoric of redistribution revolves around “helping the poor.”  When you look at redistribution in the real world, however, this is grossly misleading.  The U.S. government spends far more on the elderly – most of whom aren’t poor – than it spends on actual poverty programs.  Programs like Social Security and Medicare are popular because they “help everyone.”  But “helping everyone” is extremely wasteful because most of the people government helps would have been quite able to take care of themselves.  Instead, we absurdly tax everyone to help everyone.

This humanitarian rhetoric rings even more hollow when you examine the most important forms of government regulation.  Domestically, nothing does more harm than our draconian regulation of the construction industry.  This regulation, primarily state and local, makes it very hard to build new housing, especially in high-wage places like New York City and the Bay Area.  It’s hard to build tall buildings.  It’s hard to build multi-family housing.  You have to waste a lot of valuable land; builders put houses on an acre of land because zoning laws force them to do so.  The connection between this regulation and exorbitant housing prices is almost undeniable.  In lightly-regulated areas of the country like Texas, business supplies ample cheap housing.  Anytime someone tells you regulation makes markets work better, just look at San Francisco’s housing market for a reality check.  And this hardly one tiny failure of regulation; housing absorbs about 40% of the average Americans’ budget.

Immigration regulation is an even more egregious failure.  The single best way for people around the world to escape poverty is to move to high-productivity countries like the U.S. and get a job.  This benefits not only immigrants, but us, because we’re their customers; the more they sell us, the better-off we are.  A hundred years ago, immigration to the U.S. was almost unregulated, giving people all over the world a viable way to work their way out of poverty.  Now, in contrast, immigration is very tightly regulated – especially for those most in need.  Economists’ estimates of the global harm of these regulations sum to tens of trillions of dollars a year, because each immigrant worker vastly enriches the world, and hundreds of millions of workers wish to come.  Again, this is the opposite of one tiny failure of regulation.

Finally, what about education, health care, and other sectors that government subsidizes?  I say these policies are crowd-pleasing but terribly wasteful.  Yes, more educated workers make more money, but the main reason is not that you’re learning useful skills.  Most of what you study in school is irrelevant in the real world.  Degrees mostly pay by convincing employers that you’re smarter, harder-working, and more conformist than the competition.  That’s why there’s been severe credential inflation since World War II: the more degrees workers have, the more degrees you need to convince employers not to throw your application in the trash.  Pouring money on education is an exercise in futility.

The same goes for health care.  Almost every researcher who measures the effect of health care on health agrees that this effect is much smaller than the public imagines.  Diet, exercise, substance abuse, and other lifestyle choices are much more important for health than access to medicine.  But these facts notwithstanding, the government lavishes funding on health care that barely improves our health.  If this seems implausible, just compare American life expectancy to Mexico’s.  Medicare plus Medicaid cost well over a trillion dollars a year, let we only live a year-and-a-half longer.

A reasonable social democrat could object: Fine, actual social democracies cause great harm and waste insane amounts of money.  But we can imagine a social democracy that limits itself to helping hungry kids and refugees, fighting infectious disease, and other well-targeted programs for the betterment of humanity.  Frankly, abolishing everything except these few programs sounds really close to market capitalism to me… and it also sounds like wishful thinking.  In the real world, governments with lots of power and a vague mandate to “help people” reliably do great harm.  This is true in the U.S., and it’s true in Sweden.  Yes, the Swedes strangle their housing industry too.

Given all this, I predictably deny that “ultimately America will need to move towards a socialist system.”  Full-blown socialist systems make social democracy look great by comparison.  Indeed, once you draw the distinction between social democracy and socialism, it’s very hard to find to find any socialist regime that isn’t a tragic, despotic disaster.  If Sweden is the jewel of social democracy, what’s the jewel of socialism?  Cuba?  Nor is there any sign that socialism somehow becomes “more necessary” as countries progress.  The main reason governments have gotten bigger over the last thirty years is just the aging of the population.

Finally, let me underscore what I’m not saying.  I’m not saying that life in the U.S. or Sweden is terrible.  In fact, human beings in both countries enjoy close to the highest quality of life than human beings have ever achieved.  My claim, rather, is that even the most successful countries in history could do far better.  I know that social democratic policies are emotionally appealing.  That’s why they’ve won.  Yet objectively speaking, market capitalism should have won because market capitalism offers much better results.

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