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Is Laissez-faire Capitalism Utopic?

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Felix

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This is something I just wondered about. Say we had the glorious day when laissez-faire capitalism was established. Now, about 10 years later we see that the system once envisioned as granting everyone the same rights now offers special rights to certain companies due to corruption. That's the problem I see. That the legal system will be corrupted and bought and we end up having real exploitation.

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Well, corruption is much more prevalent in socialist-leaning & fascist-leaning countries than in free-economy-leaning countries.

However, I think there's a more important issue here. It is something that comes up all the time: whether one is discussing how to privatize roads, how voluntary taxation will work, how environmental laws will be enforced, whether government should be allowed to own property, and so on. The issue is: can we figure out the nitty-gritty details of how a completely laisses-faire economy will work?

My answer to that is: no.

Our starting point is the political principle of Capitalism, which is something that we can figure out is right by looking at a lot of historical evidence. However, beyond a point, Capitalism is untried. As an example, take the idea of voluntary funding of government. We come to this idea from a moral perspective: people should not be forced to fund government. So, we say that funding should be voluntary. A common attack on this is that it is not practical. Now, what if it weren't practical? What if it really ended up being corrupt? What if it really ended up being a mechanism for the abuse of rights? Well, the simple answer is: such a system would not be moral.

Stick with the voluntary funding example. It has never been done before. However, we do see that people voluntarily fund other things. We also see that people act in their long term interests. On the other hand, we also see people sometimes act in their short-term interest to the detriment of their long-term interest. We also see people who want to cheat. We don't theorize about how people will act, we observe and conclude that most people want to do the right thing most of the time (by their own definition of what that is). Yet, we realize that some checks and balances are required to ensure that the long-term is not sacrificed for some expedient purpose, to keep temptation to corruption in check, and to ensure that punishment for illegality is a deterrent.

While it is interesting to speculate on what types of rules and checks one would have, I think that beyond a point it is just that: speculation. A lot of the territory is uncharted. We are clear about the direction in which we wish to head. When we get to uncharted territory, we will try things that have not been tried before, guided by our principles. There will probably be failures and successes. We will learn from these, design laws, checks, balances, and move on. As long as we're using the right moral principles at each step, we'll be fine.

At every step of the way, we should never accept the impractical just because it is moral. Not because we want to be practical; but, because that seeming contradiction points to an error on our part, not on the part of reality. When we hit such a point, we have to question our premises.

I know this is an uncomfortable feeling: not to know the details of the final grand scheme of things. However, I will counter with the way I think about this: we know more than enough today to design more than a decade of transition -- perhaps more. We know enough today to act, knowing that we are doing so in our long-term interests. Let's just get moving!

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This is something I just wondered about. Say we had the glorious day when laissez-faire capitalism was established. Now, about 10 years later we see that the system once envisioned as granting everyone the same rights now offers special rights to certain companies due to corruption. That's the problem I see. That the legal system will be corrupted and bought and we end up having real exploitation.
Your post is premised on the notion that a government-economic system can protect a society from its own moral deterioration. The truth is that neither constitution nor government can save a society that has relinquished the use of reason in the realm of ethics and politics.

Consider this. Do you think that if, in the time of this nation's founding, there had existed the kind of intellectuals that preserve a society's moral character, and that if they in turn had left the moral defense of a culture to other competent hands to preserve the tradition of reason and the lessons of history (and to fight off Kant and his minions), that we'd see what we're seeing today in the U.S.?

Nothing, in the immediate, can save a people from its own demise if it has already relinquished the use of reason. However, a gang of hard-nosed intellectuals within a culture of reason-based people can most assuredly establish and maintain a tradition of guardianship of the glory of man.

Today, not only are people suffering from a massive case of bad epistemology, but they are utterly ignorant of history and the lessons it can teach us. Anyway, to address your point of inquiry, constitutional government is a consequence of the character of a people, not the other way around. Meaning, constitutional government isn’t and can’t be a people’s life preserver, only its intellectuals can be.

Edited by Felipe
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The truth is that neither constitution nor government can save a society that has relinquished the use of reason in the realm of ethics and politics.

If this is the case, then I guess I have made my point. It will result in corruption. It doesn't matter what intellectuals tell you. If those with money want power, they can get it. And then, we're screwed.

It just seems to me that , like communism, this could turn out like a nice sounding idea that ends up horribly when put to practice because it's wrong. What if rich people lust for power? I just doubt that every rich person then would be a Hank Rearden. Scientology's founder is a billionnaire, too. So are many founders of (other) pyramid schemes.

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No, you haven't. You make it seem like a society that establishes laissez-faire can, on a whim, be susceptible to a few mega-rich immoral men (completely blanking out exactly what kind of culture is required for establishing such a system). Societies don't rise and fall in a vacuum, erected and destroyed by the money of a few rich men. Think about it, do you think, that if you transported the Founders and all their money (they were rich men, mostly) to Iran of today, that they'd be able to errect a republic? Similarly, do you think that if you transported Saddam and all his money, the Saudis and all their money, to the time of our founding, that they'd be able to establish a dictatorship?

Edited by Felipe
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If those with money want power, they can get it. And then, we're screwed.

It just seems to me that , like communism, this could turn out

You're ignoring the fact that communism and all forms of statism are inherantly corrupt as they put gigantic political powers into the hands of the state. Such a system is just asking for bribes.

L-F Capitalism on the other hand is inherantly resistant to corruption. The formula is simple: no political powers, nobody to bribe. What are you going to bribe a L-F senator to do? There's nothing he CAN do as he has no economic powers. An L-F system would have to have broken most of its principles before bribes are even possible.

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Laissez-faire capitalism is a legal system. It's not Objectivism. It's just that you give everyone a right to his life and property and leave people alone. The problem is that this system has to be enforced to prevent crime. This enforcement system, then, can be taken over by corruption.

What I wanted to say was that the legal system alone won't make it work. Laissez-faire capitalism, standing alone, is powerless. If the people who are supposed to defend it, don't, the system will end pretty quick. What would be needed would be a wide acceptance of the morality of rational self-interest to make it work. And I pretty much doubt that this is going to happen.

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Such optimism! How did it ever happen in Rome and in America at the time of its founding? Sheesh, I don't know, but it sure as hell won't happen again? This is what I mean by ignorance of history. Moral societies have existed in the past, there's no reason to believe they can't rise again.

Edited by Felipe
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Felix, Let me put a question to you: related but different.

There is so much scope for corruption today, in every country in the world. Also, there actually is corruption, in every country in the world. Would you say it is less in some and more in others? If so, and if you focus on the ones where it is less, what keeps it in check?

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No, capitalism is a social system, which encompasses both politics and economics.

Laissez-faire capitalism is the only social system based on the recognition of individual rights and, therefore, the only system that bans force from social relationships. By the nature of its basic principles and interest, it is the only system fundamentally opposed to war.

If it were as you say, it'd make no sense to talk about rights and war and other such political issues as seen by capitalism, the political-economic system. Social encompasses both political and economic issues.

Edited by Felipe
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Laissez-faire Capitalism is an economic system, not a political one. A political system essentially boils down to either a statist or non-statist system.

I disagree. LF Capitalism is a political system in which the only function of government is to protect individual rights. Objectivism has a great deal to say about capitalism, but very little to say about economics. This isn't surprising, considering economics is an area of scientific, rather than philosophic study.

No, capitalism is a social system, which encompasses both politics and economics...If it were as you say, it'd make no sense to talk about rights and war and other such political issues as seen by capitalism, the political-economic system. Social encompasses both political and economic issues.

There are economic issues involved, but on a fundamental level, capitalism is political in nature. The economic aspects are a consequence of the political aspects.

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The problem is that this system has to be enforced to prevent crime. This enforcement system, then, can be taken over by corruption.

How do you enforce Capitalism? What specific crimes or corruption are you concerned being prevalent in a LF Capitalist society?

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Such optimism! How did it ever happen in Rome and in America at the time of its founding? Sheesh, I don't know, but it sure as hell won't happen again? This is what I mean by ignorance of history. Moral societies have existed in the past, there's no reason to believe they can't rise again.

Why, then, did they collapse?

I agree that in laissez-faire capitalism there is no way for corruption because the system doesn't allow it. What I mean is that the principle (of laissez-faire) will be abandoned due to monetary inducements. I say that a laissez-faire system can end. That it can give up its principles. I don't know if this is correct, but I read it on this forum somewhere, but wasn't income tax once illegal in the United States? Why do you have it now?

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. . . wasn't income tax once illegal in the United States? Why do you have it now?

Yes, there was a time when at least the federal government could not levy taxes on income. Why do we have it now? Because some people in the early 1900s availed themselves of the legal procedures for amending the Constitution. As far as I know, there was no usurpation, no bribery. The correct process was used. They just made a big philosophical mistake.

[Edit: And if it is asserted that the potential for these mistakes is what dooms the system, I ask what the alternative is. The only alternative that I see is a system that has no possibility for change. I'm not sure this is a good idea.]

Edited by Groovenstein
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What I wanted to say was that the legal system alone won't make it work.
To work, you need a few specific things. First, you do need "the law". It isn't sufficient to temporarily have a capitalist-type government -- it needs to be the law of the land. Such laws would by their nature prevent corruption, e.g. purchasing of special rights. Second, you need respect for the law, meaning that the laws actually written down need to be observed, so the law that says "no taxation" actually prevents taxation, and you don't have courts deciding that a "mandatory user fee levied against all citizens because of the fact of being a citizen" is not a tax. Third, and this is the hardest part, you need an element of irrevocability in laws. For example, it might not be a bad idea to construct a constitution and include the provision that it cannot be amended. It's standard political wisdom that governments need to be flexible. I certainly see that in cases where new means of violating rights are discovered, and there may need to be a new law against some action which constitutes a violation of a person's rights. But such a law is sanctioned -- demanded, even -- given a good constitution and would not require a constitutional change.

I'm also not sure that immutability at the constitutional level is a good idea, but it isn't clear to me that it's a bad idea, at least if you have a good constitution to start with. But if you start with a document with things like the Commerce Clause or the Takings Clause (which implicitly sanctions takings), you would like to mute those clauses right quick.

BTW this isn't a criticism of the US Constitution, since at the time there was no idea of what a rights-respecting government was. Since we're speaking hypothetically, we get to start from scratch with an ideal constitution. Now if we were to try to convert the current US legal system into a capitalist one, without performing a risky regal reformat-and-reboot, I would suggest first installing a "Purpose Clause" and making it irrevocable -- to wit, "The purpose of government is to protect its citizens from the initiation of force; all government actions are to be judged valid or invalid by reference to this purpose".

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I disagree. LF Capitalism is a political system in which the only function of government is to protect individual rights. Objectivism has a great deal to say about capitalism, but very little to say about economics. This isn't surprising, considering economics is an area of scientific, rather than philosophic study.

...

There are economic issues involved, but on a fundamental level, capitalism is political in nature. The economic aspects are a consequence of the political aspects.

You're going backwards. LFC is a method addressing economics that results from a rights-respecting political system, it is the secondary part of a political system that addresses economics, just as socialism does so. You can have a socialist republic just as you can have a capitalist one . . . in theory (although it's unlikely to stay that way for very long) you could have a LFC monarchy. LFC only describes economic policy. You can call it a social system because in order to be roughly self-maintaining LFC has to be backed up by a whole ideological foundation, including a particular kind of government. If you had a monarch who favored LFC, for instance, the whole thing would disintegrate the moment a new king came along because the proper political foundation didn't exist.

A political system involves a lot more than just who has charge of the economy and the principles that encompass LFC don't dictate any of them. It includes things like who has franchise (oligarchy? monarch?), how that franchise is applied (directly, as in a democracy, or indirectly as in a republic?), how the military functions, how the courts function, etc. etc. etc.

A rights-respecting government/social system is usually called something like a "free society" (well . . . usually people refer to it under the deplorable package-deal of "democracy", but I think most people here know better); there's no one word or phrase to describe the phenomenon in English.

Isn't there some kind of forum rule about not posting simply to express agreement/disagreement? :)

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Felix, I see in your messages what appears to be a pretty strong assumption that capitalism is indeed utopian, despite your question to that effect.

What if rich people lust for power? I just doubt that every rich person then would be a Hank Rearden.
Does every rich person need to be like Hank? That sounds to me like the stirrings of an all-or-nothing, utopian point of view.

The problem is that this system has to be enforced to prevent crime. This enforcement system, then, can be taken over by corruption....Laissez-faire capitalism, standing alone, is powerless. If the people who are supposed to defend it, don't, the system will end pretty quick.
A little corruption automatically means no more system? Even in a constitutional system of government? No more checks and balances whatsoever? Totally powerless? Wow. Once again, sounds like an all-or-none utopian point of view to me.

What would be needed would be a wide acceptance of the morality of rational self-interest to make it work. And I pretty much doubt that this is going to happen.
So nearly everyone must be (pretty fully?) on the morality of rational self-interest? The culture can absorb absolutely no ups or downs over the course of time? Is that really what's needed to keep such a nation ticking, as if things could never get better once there's something bad in it? Wow. Once again, sounds like an all-or-none utopian point of view to me.

I agree that in laissez-faire capitalism there is no way for corruption because the system doesn't allow it. What I mean is that the principle (of laissez-faire) will be abandoned due to monetary inducements. I say that a laissez-faire system can end. That it can give up its principles. I don't know if this is correct, but I read it on this forum somewhere, but wasn't income tax once illegal in the United States? Why do you have it now?
No way for corruption ? My goodness, that statement alone is a full-on utopian, all-or-nothing premise. One of the key purposes of the system is to deal with violations. Why would this be necessary if violations "weren't possible"?

Of course a laissez-faire system can end. But what does that have to do with its beginning or with its many, many hundreds or even thousands of years of relatively good service to its citizens—unless, of course, you're on the all-or-nothing utopian premise?

Your own message contains the seeds of contradiction. Sure we have an income tax. That's why we call this a mixed economy. But we still have many (if not most) of our rights intact, and it's been that way more or less for a couple hundred years. Besides, even taxation is not a wholesale divestiture of all property rights. Thanks to our culture, we Americans—and those in the West generally—have it better than most people have ever had.

Let's keep moving forward. Our ideals show us a path to a better way of life, and we constantly recognize the impediments along the way and strive to overcome them. Only someone firmly convinced of the need for utopianism would abandon the better ideals just because we may never see them fully realized without exception.

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You can have a socialist republic just as you can have a capitalist one . . . in theory (although it's unlikely to stay that way for very long) you could have a LFC monarchy. LFC only describes economic policy.

Well, one could have a socialist republic, but a monarchy, by its very nature is non-rights-respecting, so a LFC monarchy is a contradiction in terms.

You're right that it describes economic policy, but the economic policy of what? Of a government, which means that capitalism is fundamentally political.

If you had a monarch who favored LFC, for instance, the whole thing would disintegrate the moment a new king came along because the proper political foundation didn't exist.

And this is one of the reasons no monarchy could ever be called an LFC capitalism.

A political system involves a lot more than just who has charge of the economy and the principles that encompass LFC don't dictate any of them. It includes things like who has franchise (oligarchy? monarch?), how that franchise is applied (directly, as in a democracy, or indirectly as in a republic?), how the military functions, how the courts function, etc. etc. etc.

Well, yeah. LFC isn't all-inclusive. It doesn't provide answers to every political question, and Ayn Rand acknowledges such. Most of those questions are to be answered by Philosophers of Law.

It's important to realize though, that the principles of LF Capitalism extend beyond the realm of economics. Just ask yourself what the three functions of government are. Only one can be directly applied to an economic entity (qua economic entity), and even then, its function is not fundamentally economic.

It's no accident that Ayn Rand says the politics of Objectivism is LFC. It's also no accident that she is very clear that her politics is derived from ethics, not economics.

No branch of philosophy can be based on a special science. Philosophy is the fundamental science. To derive politics from economics is going backwards.

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I too like David Opdden's ( :P ) Purpose Clause, but I wonder how this would interact with other tools of statutory interpretation. Any ideas David Opdden?

(Fixed minor typo of member's name - sNerd)

Parius, you're killing me here. Now no one will get my joke.

[Edit: :):lol::lol: Wouldn't it be "Pdarius"?]

Edited by Groovenstein
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I too like David Opdden's ( :) ) Purpose Clause, but I wonder how this would interact with other tools of statutory interpretation. Any ideas David Opdden?
As the paramount principle of the (new) US Constitution, it would prevail over all other considerations. I don't have a clear sense that we would need a lot of rules of construction if laws are restricted to protection from initiation of force (IOF). If a statute is intended to specify a particular prohibition of IOF but could interpreted (because of the wording) as applying to Jones' non-IOF act, the Purpose Clause functions as an interpretive principle to say whether Jones' act was criminal. Within the mix there ought to be a nod in Fuller's direction that citizens ought to be able to figure out what the law requires, but clumsy wording should not be a license to kill. I welcome challenging cases. The examples that I've seen which are supposed to constitute challenges for plain-meaning interpretation would be unconstitutional laws given the Purpose Clause; maybe someone can come up with a clear example of how it would be good to retain some of the interpretive baggage.
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I don't know if this is correct, but I read it on this forum somewhere, but wasn't income tax once illegal in the United States? Why do you have it now?

Groovenstein Today, 03:41 PM Post #17

Yes, there was a time when at least the federal government could not levy taxes on income. Why do we have it now? Because some people in the early 1900s availed themselves of the legal procedures for amending the Constitution. As far as I know, there was no usurpation, no bribery. The correct process was used. They just made a big philosophical mistake.

The income tax has always been Constitutional (legal) since the Founding Fathers set it up. The 16th amendment to the Constitution (whether actually ratified or not, I don't believe it was) according to the Supreme Court did not afford any new taxing powers, but was to clarify things. Not that it did. The problem actually lies in the fact that people (the ones that actually try to find out) are not reading the tax laws properly because they are purposely being obscured. Most just go with the flow out of ignorance and /or apathy. Believe it or not, not every American worker or business is a federal taxpayer, but it is up to each individual to study thoroughly and find out. I have a link that will help each person with finding out what the LAW says http://www.losthorizons.com

Sorry for that diversion off the topic. :)

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It just seems to me that , like communism, this could turn out like a nice sounding idea that ends up horribly when put to practice because it's wrong.
The difference as I see it is that communism is fundamentally flawed, whereas laissez is not. I don't think an argument that laissez is utopic will hold... at least on this forum :)

OTOH some people do make outrageous/misleading claims and represent them as facts (i.e. everyone will be "better off" under laissez faire, laissez faire will definitely result in a decrease in crime.) Such claims could be considered utopic, but they aren't a part of actual laissez theory.

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Yes, there was a time when at least the federal government could not levy taxes on income.

Where was this legally prohibited? You're certainly more knowledgeable in this arena than me, but I was under the impression that Article 1, Section 8, Clause 1 of the constitution allowed an income tax. Well, it doesn't specify an income tax specifically, it just says "taxation." Was an income tax specifically outlawed somewhere else? I'll admit that I haven't the faintest idea what Section 9, Clause 4 even means, other than that it deals with taxation. Is that it?

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