Your response to Eiuol that there is no such thing as “earned” because you can't “earn a person if you kill them” is not an example of the use of logic, because the concept of “earn” has nothing to do with the standard of “that which one kills” but “that which one acquires through one's own merit.” You simply dropped the context, ignored his response, and smuggled your own false definition in, then pronounced it disproved without any logical tie between anything.
Now to show how your theory of “there is no such thing as the earned” is impossible, self-contradictory, and divorced from a rational morality. Then I will add a word about the trader principle.
The concept(s) “earned” (and “unearned”) have to be understood as concepts derived from morality. Only in the context of morality do these terms have any meaning, specifically, they are corollaries of the concept of “justice.” Locke explained justice as a system of consequences which naturally derive from actions and choices in accordance with the law of identity. Rand understood justice in terms of evaluation in regards to volitional matters. Justice re: volitional matters specifically pertains to relations and interactions between choosing and acting men. In isolated self-sufficiency, man encounters justice in as far as he encounters identity and causality. If he doesn't work, he goes hungry. If he increases his production sufficiently above his consumption, he has savings. If he is irrational, he suffers. If he is rational, he achieves. Crusoe on his island does not ask “Who decides who earns what, and how much, and by what standard?” any more than he asks “Who decides how reality is reality?” For Crusoe on his island, the exercise of justice is a practical necessity for survival, and even more so for him interacting with other humans.
So critical to understanding justice is to understand that because of identity and causality, certain actions have consequences, and that one deserves the consequences one has chosen (because reality exist independently of consciousness.) To “deserve” a condition of affairs is an effect one achieves by enacting its cause. This is where the concept “to earn” comes in, because it denotes what consequences one has to acquire through merit, i.e. deservedly. To “earn” names a process of enacting a cause. There is no intrinsic “earn” out there in the earth or in animals, plants, or in anything else. “Earn” pertains specifically to human beings in choosing rightly or wrongly, to go in harmony with reality, or to wage war against reality and the consequences of engaging in certain behavior.
The idea that there is nothing deserved or earned is the idea that there is no justice. The idea that there is no justice is the idea that there is no morality, since justice is central to evaluating the relation of some person's character to myself. The idea that there is no morality is the idea that there is no causality and identity, since morality arises from the fact man exists in a reality in which he needs a code of values and principles of action in which to enable his survival and well-being. The idea that there is no causality and no identity is the idea that there is no reality, since existence is identity, and identity forms the basis causality. Thus the idea that nothing is ever earned or deserved is impossible, that is a full-on rejection of justice, morality, and the nature of man and reality itself.
Now as I have how why the theory is impossible, we proceed to why it is self-contradictory. First, you claim that one earns nothing (referring to material goods here I presume), which as we can see, would mean that one deserves nothing. Yet, your theorizing simultaneously holds that everyone deserves everything. This is clearly a self-contradiction. If I utilize my reason to work a field, harvest wheat, bake a loaf of bread, and put it in my stomach, why is it that I don't deserve this, but at the same time, a parasitical bum does deserve it? (A wheat farmer in Nebraska doesn't own his farm and his wheat, which he created through his mind and productive effort, but some crippled Pakistani child who doesn't even know he exists does.) If you are saying he ought to have it, then you are making a normative claim, a claim that he deserves it, a claim about justice, i.e. a moral assertion. You can hardly say “no one earns anything” or “there is no such thing as the earned and the unearned” and then turn around and smuggle it into your own egalitarian nightmare world without self-contradiction. We can even see this if we analyze the terms themselves: there can be no such thing as an “unearned desert.” You are simply doing what egalitarians do: attempt to annihilate and blank out justice by means of a stolen concept fallacy.
Now to show why this is not defensible in any rational morality. Your moral theory can't be moral or just by any rational standard, because since the concept life is the root of morality, then holding anything other than man's life qua man as the standard of value is a logical contradiction. No theory of justice that holds “he who doesn't deserve it ought to get it exactly because he doesn't deserve it” can be even called justice, but simply an exercise in logical absurdity.
Now, regarding the trader principle. You asked your question in reference to the trader principle, because that's what “there is no conflict of interests unless one party seeks the unearned at the expense of another party” refers to. The trader principle is implied in the concept of justice. Since reason is mankind's survival instrument, and life is his standard of morality, this logically implies that no one has a right to demand a value from a creator of values unless he has earned it by offering the appropriate payment. Therefore this in turn implies that no egoist ethics (i.e. no rational morality) can justify violating the survival instrument of an innocent and seizing his values by force. The trader principle forms the very basis of all just human interaction because it is the only form of interpersonal relations that does not require the sacrifice of one man to another, and therefore is the only form of interpersonal relations congruent with the moral standard of man's survival and well-being.
The trader principle and justice, therefore imply the principle of individual rights as the only morally proper (i.e. consistent with man's life as an end in itself) answer to the question of what am I here and now justified in doing, given that the world is not transformed into the Garden of Eden, and that I cannot not act so long as I am alive, and must use scarce means to do so. Your theroy is egalitarianism, which implies total collective ownership of everything, including one's own physical body. Yet if all goods were the collective property of everyone, then no one, at any time and in any place, could ever do anything with anything unless he had every other co-owner's prior permission to do what he wanted to do. And how can one give such a permission if one is not even the sole owner of one's very own body (and vocal chords)? If one were to follow the rule of total collective ownership, mankind would die out instantly. Whatever this is, it is not a human ethic. Maybe an "ethic" for ants, bees, etc. (if they could have ethics), but not for rational beings with volitional consciousness (which is the only type of thing to have need of morality.)
Next shall we discuss your concept stealing with regards to social cooperation and competition?
Liberal contradicts this bizarre claim below: "Cooperative sharing of resources is only the sharing of extra resources among a group by a member who does not require those resources to maintain an average degree of comfort." So in fact cooperative sharing requires that someone else have what is shared.
Note the sleight of hand in this phrase: "felt as a 'dependence'". There's no effort on liberal's part to explain why this is actually dependence, or even to define "dependence" at all; instead, liberal assumes somehow that there is no need even to justify his claim that the animal feels a certain way, never mind equating this feeling with reality.
Again liberal gleefully ignores productive activity and the use of the human mind and labor, which are precisely what underlie the distinction between the earned and the unearned. Even gathering resources available and ready for use in nature requires the labor of gathering it, and most resources only become ready for use after human processing--labor, time, and the use of the human mind to discover how to do so in the first place. So contrary to liberal's last sentence, the dependency in cooperative sharing is precisely dependence on the labor and minds of those others who gathered or processed the things of nature in the first place, not on the Earth. It's a revealing argument though--by ruling labor and mind out of consideration from the get-go, this allows him to pretend that the cooperative group is itself a part of nature on the same level as the Earth, which liberal seems to consider a desirable state of affairs. Ayn Rand pointed out that leftists seek freedom on the intellectual level, conservatives on the material level, since both sides want to control the realm it considers metaphysically important. Our poster liberal exemplifies this perfectly.
Of course what you are saying is true. Where you are going wrong is that the OP, or at least as I understood, is that we are talking about a hypothetical already-existing Objectivist/capitalist government (thus you should pay attention to the following words after the part you bolded in my quote) being changed by socialist revolutionaries. Inded this formulates the basis of my critique.
Now I feel like we have answered to the “letter” of the OP's objections, but perhaps not the “spirit.” It seems like the central concern is that, ultimately, under laissez-faire capitalism, if the legal code is thorough enough to prohibit almost every possible initiation of physical force known, then those who oppose the government will arbitrarily be declared traitors and the police power of the state brought down upon them, until no one will dare object to the government's actions, and tyranny will become possible. But this is a misguided objection. (If all initiations of force are banned, then this would presumably include initiations of force by the government against dissenters as well.) Under the Objectivist politics, dissent and disagreement with the government is not banned. Criticism of the government is not presumed to disappear with the implementation of laissez-faire. Indeed for the government to be maintained as limited, dissent from the government is absolutely necessary.
Socialists, democrats, interventionists, etc. are not, however, without hope for their preferred political goals. Their only way to achieve them, however, is by
1. convincing and persuading enough people that it will work or
2. by making war against the government, winning, and having the majority of the people passively accept the socialist victory.
Even privately, of course, you may be as socialistic as you desire, as there is absolutely nothing preventing socialism from being maintained by voluntary associations of free men (except maybe the laws of economics, but that has to do with the nature of man and the world, not government.) They simply have the right to take what belongs to them, and leave the arrangement.
But politically, they can still implement a totalitarian government, if enough of the population is deceived to this goal. This is not unique to Objectivism or a capitalist government. Ultimately, every political system remains subject to public opinion. If the mass of the people become convinced to socialism, then no police power in the world can stop it. Even totalitarian dictatorships are subject to this, e.g. the fall of the USSR, monarchist Iran, etc. Then, the capitalist government will fall and be relegated to history, until such a time that enough people become convinced for a second (or I guess in this case, third) American Revolution.
The only difference then, will be that if a hypothetical Objectivist government is put into place, it will be that much harder to convince the public of the merits of statism. Most socialists will likely (and rightfully) be ostracized out of the communities as sociopaths, much like the Ku Klux Klan and neo-Nazi organizations today are regarded. The idea that socialists are just well-intentioned people of good-will intending to help the proletariat is what is responsible for most of the horrors wrought on its victims. Socialists are dangerous people, and should be regarded as potential criminals, and their leaders as potential terrorists and mass murderers.
Another reason why it would be more difficult is that after the first American Revolution, the foot, so to speak, of interventionism was already in the door. (This is what you are referencing, Grames.) But in this hypothetical Objectivist society, there is nothing but private property and the rule of law. There are no public parliaments and popular government, which fortunately makes depredation against person and property that much harder by any would-be socialist revolutionaries. A socialist take-over would then almost require an open war, e.g. Chile's Allende. My point is, the response to protect freedom, in this hypothetical case, would look different than the first American Revolution, insofar as that government (the current one in real life) was corrupted in the beginning from the inside by contradictions in the legal code and moral code in society.
But this hypothetical Objectivist/capitalist government would be besieged from without by socialist conspirators. Therefore, in this case of open warfare, they will have to be shot down without mercy, and justly so. In this case, calling the resulting spectacle (government soldiers and militia putting down guerrilla fighters claiming the mantle of “the people,” instead of the other way around) “totalitarian” is a mistaken view based on the aforementioned context-dropping. Once it is understood who is killing in the name of totalitarianism and who is resisting totalitarianism, then it is clear that the government is obligated to resist with retaliatory force. And you should support that.