Is Laissez-faire Capitalism Utopic?

[Inspector]

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.

Since when? Care to back that up?

[Groovenstein]

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

I suggest a great deal of caution when trying to get out of paying taxes, ladies and gents. Talk to a professional, like a lawyer or something. Even if the law doesn't make sense and you think you've found a way out, get a pro to make sure. The IRS can slam you. As I said in a post some time ago:

"By the way all, the IRS has some legal discussion with case law on anti-tax evasion schemes on this page. . . . Odds are, what you're thinking has been tried before."

Regarding my post about the federal government not laying taxes on income, that was a horrible editing job on my part. I meant that to refer to the Articles of Confederation, which as I recall left the taxing power solely in the hands of the States. I meant to leave that part out and address only amendment procedure. Sorry.

[softwareNerd]

There have been threads before about how one can avoid taxes. The people I've seen selling such "services" and books are scammers much like the guys who play on people's ideological views to try selling them $500/ounce gold at $600/ounce!

As for income tax, my understanding is that the (pre- XVI amendment) restriction was not about income tax as such. It was about "fairness" across the states. It did not have the intent of stopping an income-tax; however, it did have the effect of making a federal income-tax difficult and perhaps pointless. The pre-amendment objection to income tax was that if one viewed such a tax on a state by state basis, then some states would be taxed more (on a per capita basis) than others. This is what the amendment sought to change, thus enabling the Feds (in effect) to get more taxes from states where the citizens were richer.

[DavidOdden]

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?

Clause 4 says "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken". The Uniformity Clause (Art. 1 Sect. 8 Clause 1) says, emphasis added "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States". The controlling case here is Pollock v. Farmers' Loan & Trust Company where a tax on income deriving from real estate was held unconstitutional, as being a direct tax. The tax is not in proportion to the census or representation (i.e. a few people in Rhode Island could be subject to much more of the tax than a vast number of people in Illinois, if more people in Rhode Island derive income from rent than do in Illinois). Such a tax also violates the requirement of uniformity. A senator from Nebaska, now dead (the senator, not Nebraska), proposed to remedy this leading to the 16th amendment which gave us our beloved IRS.

[hunterrose]

Since when? Care to back that up?

Which part?

IMO saying that everyone will be "better off" under laissez faire would generally be considered a utopic statement, if for no other reason than that an Objectivist's definition of "better off" might be far different from a non-Objectivist's.

Likewise, claims that laissez faire will result in, say, a decrease in crime or greater charity would also be utopic. Not saying that these claims wouldn't be empirically true, just that they don't automatically follow from laissez faire theory.

Nor IMO do they need to. I don't think there is anything utopic in saying that laissez-faire provides the most freedom/opportunity of any governmental system. With this maximal opportunity/freedom comes greater chances for utopic (and some distopic) scenarios.

But these utopic predictions aren't a necessary part of laissez theory (though the maximal opportunity/freedom likely is) AFAIK. If I'm wrong, feel free to correct me

[Inspector]

Which part?

Um… the part I highlighted in bold.

IMO saying that everyone will be "better off" under laissez faire would generally be considered a utopic statement,

What is a “utopic statement?” From context, it seems to mean “a statement which projects an idealized fantasy, rather than an accurate model of what the resulting reality would be.” Is that right?

if for no other reason than that an Objectivist's definition of "better off" might be far different from a non-Objectivist's.

In this context, a political/economic one, the Objectivist definition of “better off” is “more able to function and live as a man qua man.” Anyone with a different definition of “better off” would be attempting to live as a man qua something else.

My point? The Objectivist definition of “better off” is correct and other definitions are incorrect. Thus, other definitions of “better off” don’t merit consideration unless they can be objectively proven to be superior to man’s survival qua man.

Likewise, claims that laissez faire will result in, say, a decrease in crime or greater charity would also be utopic. Not saying that these claims wouldn't be empirically true, just that they don't automatically follow from laissez faire theory.

I don’t understand what the distinction you’re drawing is. The fact that crime will decrease and that people will have more money to spend on charity and less psychological factors which discourage them from spending on charity are most certainly part of Objectivist Laissez-Faire theory. (maybe you haven’t read these parts?)

But these utopic predictions aren't a necessary part of laissez theory (though the maximal opportunity/freedom likely is) AFAIK. If I'm wrong, feel free to correct me

That depends on what you mean by “included in the theory.” If you mean, will there automatically be less crime and more charity? No, of course not. It is by no means automatic. Marxists, for example, believe that economics are primary in driving human behavior. Objectivism certainly does not take this position.

Rather, it acknowledges that a non-laissez-faire society does provide incentives for crime and disincentives for charity and that removing these will tend to result in less crime and more charity. That’s not “utopic,” that’s a fact.

[hunterrose]

My point? The Objectivist definition of “better off” is correct and other definitions are incorrect. Thus, other definitions of “better off” don’t merit consideration unless they can be objectively proven to be superior to man’s survival qua man.

Granted, but my point remains that using such terms as "better off" is, if not utopic, pointless and proned to misinterpretation while two parties are using different definitions. *enter Need to establish LF on proper philosophical basis*

I don’t understand what the distinction you’re drawing is. The fact that crime will decrease and that people will have more money to spend on charity and less psychological factors which discourage them from spending on charity are most certainly part of Objectivist Laissez-Faire theory. (maybe you haven’t read these parts?)

The distinction I'm drawing is

1) that such statements are not fundamental to laissez-faire theory i.e. if all subsequent laissez-faire societies had more crime, or less charity, it would not affect either the value or the theory of laissez faire

2) that it would be utopic to say that any or all laissez-faire societies will have less crime, more charity, more wealth, etc. Utopic and unnecessary, as LF doesn't need such empirical statistics to validate itself.

Rather, it acknowledges that a non-laissez-faire society does provide incentives for crime and disincentives for charity and that removing these will tend to result in less crime and more charity. That’s not “utopic,” that’s a fact.

Well, duh There is obviously a difference in saying "LF has incentives for people to do X" and "LF will result in more X." The first type could indeed be a fact and potentially a part of the theory. The second would not be a fact, but a utopic idea, and not a (significant?) part of the theory.

[Inspector]

Granted, but my point remains that using such terms as "better off" is, if not utopic, pointless and proned to misinterpretation while two parties are using different definitions. *enter Need to establish LF on proper philosophical basis*

What are you saying? It is always important when talking to anyone to establish that your definitions and theirs match up. This is what makes communication possible. To say that someone else may have a flawed idea is not a justification for saying that I should not advocate my correct idea. Thus, I don't agree with you that those things shouldn't be a part of LFC theory, simply because some people might not value that which is objectively of value to man.

In other words, don't pen your theories around wankers.

Now, as to the rest:

But it is accurate to say that, all other things being equal, a LFC society will have less crime and more charity than any other society. That is, if the only variable changed is LFC vs statism of whatever variety, then the LFC society will have less crime and more charity because it removes the incentives/disincentives for those things.

This is not to say that there aren't other, more potent things which will change the level of crime or charity. The big one being the IDEAS of a society.

And what do you mean by "utopic?" What is the definition of that term?

Also, to make a point about crime and social systems:

Take Communism, for instance. It outlaws many vital and necessary economic activities. It makes the necessities of life crimes. This encourages the development of a mafia or black market so that these activities can take place. The existence of a black market or mafia will in turn increase actual, initiation-of-force, crimes. This is just one of the many ways in which Communism encourages crime. (there are many, many other ways, I assure you)

Thus, by comparison, a LFC society will have less crime. Thus, the idea that LFC has less crime is in fact a viable part of LFC theory.

[Scott_Connery]

Does anyone else think a proper definition of Utopian or Utopic should have been included around the begining of the thread?

[Felix]

No problem. Here's mine: an idea is utopic, if it has two basic characteristics:

1. It sounds good at first sight.

2. When you think about it, you understand that it can't be realized in an ideal manner, that means that problems arise that you didn't think of in the beginning.

Hope that helps.

[softwareNerd]

I think it was pretty clear what you meant by 'Utopian': moral but impractical (a.k.a. sounds cool, but it won't work).

Could you concretize this? Could you give a couple of hypothetical examples of the types of corruption that can creep into a Capitalist system. For each example, I would suggest the following material:

1. The example
   
2. Your thoughts on why this crept in. (i.e. what are the incentives to the actors)
   
3. Your thoughts on why this type of corruption is less likely in a mixed-economy or socialist system
   

[colin]

I'm not sure what the point of the thread is. Are you suggesting that, since a LFC society is likely to become corrupt eventually, we should simply skip the middle-man and work for a corrupt society to begin with?

Given that corruption springs from the ability to use pull in order to achieve one's ends and that a LFC society, is the one in which pull is least likely to achieve results, it seems that a LFC society is the one least likely to become corrupt as has been repeated above.

[Felix]

@softwareNerd:

I wondered whether it is possible for LFC to persist.

My example was that a rich fellow buys one or more government officials to be granted special rights. They then change the legal system so that LFC is dead. The government official does this because he gets money. The rich fellow because he wants to protect his profits with non-market ways. (For example a railway company in the face of emerging airway travel)

@colin:

This is less likely in LFC, sure. But is it unlikely enough? That is my question. It has to be tried, sure. But I am not so sure whether this is going to persist.

[Aureus]

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.

Sounds like you're recounting the history of the United States at the beginning of the twentieth century.

What many Objectivists still do not understand is that "America's persecuted minority, big business," actually led the charge of the progressive movement, a movement which was profoundly conservative. (See Gabriel Kolko's groundbreaking work, "The Triumph of Conservatism".) The laissez-faire philosophy of noninterventionism and free markets is a product of the (classical) liberal tradition. Laissez-faire liberalism is still rejected out of hand and aggressively opposed by the interventionist right, i.e., conservatives and socialists.

In a laissez-faire society, the aim of government regulation would be the opposite of its aim today, viz., instead of shielding the established monopoly interests of large corporations from the "destructive" market forces of free competition, government regulation would shield free competition from the destructive monopoly interests of large corporations.

The "have’s" do not have any more reason to support the institution of private ownership of the means of production than do the "have-not’s." The notion that, if only capitalism is preserved, the propertied classes could remain forever in possession of their wealth stems from a misunderstanding of the nature of the capitalist economy, in which property is continually being shifted from the less efficient to the more efficient businessman. In a capitalist society one can hold on to one's fortune only if one perpetually acquires it anew by investing it wisely. The rich, who are already in possession of wealth, have no special reason to desire the preservation of a system of unhampered competition open to all; particularly if they did not themselves earn their fortune, but inherited it, they have more to fear than to hope from competition. They do have a special interest in interventionism, which always has a tendency to preserve the existing division of wealth among those in possession of it.

~ Ludwig von Mises, Liberalism

[Felix]

Thanks for the link to the book. And thanks for explaining my point better than I did.

[Inspector]

What many Objectivists still do not understand is that "America's persecuted minority, big business," actually led the charge of the progressive movement

I doubt that it is true that the majority of Objectivists do not understand that truth, but if they don't, then that is a shame. This is a prominent point in Objectivist non-fiction literature, as well as a major theme of Atlas Shrugged.

Out of curiosity, what makes you think that the majority of Objectivists do not understand that fact?

My example was that a rich fellow buys one or more government officials to be granted special rights. They then change the legal system so that LFC is dead. The government official does this because he gets money. The rich fellow because he wants to protect his profits with non-market ways. (For example a railway company in the face of emerging airway travel)

Felix, it appears that you missed the most important question that SoftwareNerd was asking:

Your thoughts on why this type of corruption is less likely in a mixed-economy or socialist system

Edited December 7, 2005 by Inspector

[gags]

My example was that a rich fellow buys one or more government officials to be granted special rights. They then change the legal system so that LFC is dead. The government official does this because he gets money. The rich fellow because he wants to protect his profits with non-market ways. (For example a railway company in the face of emerging airway travel)

We know that this kind of corruption is standard operating procedure in a mixed economy. In fact, it happens so frequently that we hardly notice it any more. Under LFC, these types of crimes would be much more difficult to commit. How does the government grant special economic rights when it is excluded from involvement with the economy?

[JMeganSnow]

*groan*

"Utopian" has an actual, valid definition you know.

The term "Utopia" comes from a book of the same name written by Thomas Moore about a socialist paradise where no one has to do much work. The term now refers to any vision of an "ideal" society that is so disconnected from reality as to be ridiculous. (Books like 1984 that project some horrible society are often called "distopian".) Socialist equalling not functional should hardly be a surprise to anyone here.

Under a strict definition LFC could not possibly be considered Utopian because it's fully expected that you'll be best off working like a dog! I'm assuming, however, that the more general "disconnected from reality and hence ridiculous" definition is being used here. So to demonstrate that LFC is not Utopian, you just need to show that it's not disconnected from reality.

[FeatherFall]

Thanks for the reference, Ms. Snow. My previous definition was something like, "the perfect society through technology." It's good to finally know where the word comes from.

LFC currently best safeguards to protect individual rights. This type of society will not come about in the absence of the right philosophical climate. Its failure after introduction would involve people first abandoning the right principles, then developing the cajones to disobey the body of law. Like the founding of an LFC society, this process will most likely take generations.

[Aureus]

I doubt that it is true that the majority of Objectivists do not understand that truth, but if they don't, then that is a shame. This is a prominent point in Objectivist non-fiction literature, as well as a major theme of Atlas Shrugged. Out of curiosity, what makes you think that the majority of Objectivists do not understand that fact?

Firstly, I did not write the word "majority," meaning a numerical preponderance: I wrote the word "many," meaning a large number. Perhaps someone could conduct a poll among Objectivists on the matter. I would be happy to be proven wrong, just as I'm glad this point is being raised and clarified. I do, however, believe that big business and established wealth tend to favor economic interventionism or government protectionism over laissez-faire capitalism. Freedom of association, free trade, and free competition are as much a threat to status quo conservatism as they are to egalitarian socialism.

[Inspector]

Firstly, I did not write the word "majority," meaning a numerical preponderance: I wrote the word "many," meaning a large number.

Ah, my mistake. Sorry. Still, I haven't seen this as a misunderstanding among many Objectivists.

[Felix]

Are you paying attention? I have already explained that under laissez-faire capitalism, there can be no corruption. Miss Rand wrote, "under [laissez faire capitalism] no groups could acquire economic privileges or special pull, so that everyone would have to stand on his own."

No groups = no groups.

Your example of "a rich fellow [who] buys one or more government officials to be granted special rights," is not descriptive of the political economy that Ayn Rand advocated.

What make you think that it has to stay that way just by means of definition? I understand that the definition of laissez-faire capitalism doesn't allow this and I also see it as the most moral system. My doubt was, however, raised by the idea that this political ideal may not last. The era of laissez-faire could end. Simply because the law is open for correction. And laissez-faire is always under attack. Everyone who wrongly assumes to be done wrong will blame it on laissez-faire, same as today. And then the law makes a small correction, and then another one ... and all of a sudden, oh wonder, it's obviously no longer laissez-faire.

This could happen by a mass of "poor people" or a small group of "rich people". The one has votes, the other money. Both are very tempting to politicians.

Felix, it appears that you missed the most important question that SoftwareNerd was asking.

I answered it right in my post. This is less likely to happen in LFC than in any other system. But that doesn't mean that it can't happen there at all. Currently I think that LFC needs a strong legal self-protection mechanism. With that one given, everything will be fine, I guess. But only if it is impossible to change the law in a way that politics is allowed to interfere with economics. Given that clause, I think, it will turn out fine.

I was just some doubt I hoped to lose. And I did. Thanks to all of you for your help.

[Inspector]

Felix, I think perhaps the definition you meant by "Utopic" was "a system which guarantees unending happiness and prosperity, no matter how evil or corrupt the members of it are."

Of course, LFC does not guarantee unending happiness and prosperity. It is not impervious to evil or corruption. An LFC system can break and fall if enough of its members choose to simply ignore its laws. (although, as others have pointed out, it would technically cease to be LFC at that point)

There is in fact no such thing as a system which will guarantee unending happiness and prosperity, regardless of the actions and ideas of the members which make it up. To say that LFC does not meet this impossible qualification is not a point against it.

I'd like to add one more thing: LFC is not a sufficient condition for the unending happiness and prosperity of its members... it is, however, a necessary one. It is the only social system in which the "good life" is fully possible for man. Thus, it is a great, wonderful, beautiful thing!

Edited December 7, 2005 by Inspector

[Felix]

Now what! Either LFC has a built-in defense or it hasn't!

Inspector says no, Fear No Evil says yes.

Inspector, I have never said that LFC should make everyone happy. I just said that it could end if given no right protection and wondered what that protection could look like. But now the issue is settled for me.

Edited December 8, 2005 by Felix

[Inspector]

Felix,

I fear something was lost in the translation of your last post to English. I don't understand you. Could you rephrase it, please?

[Edit: Looks like you fixed it a bit... I still don't know what you mean by "could end if given no right protection." Also I don't know what you mean by the question of whether LFC has a "built in defense?" I don't know if I'm saying LFC doesn't have that if I don't know what you mean by it...

I could rightly say that all non-LFC systems have "built-in instabilities that will push them toward totalitarianism." That is, the ones that aren't totalitarian to begin with. LFC does not have these "bult-in instabilities."]

Edited December 8, 2005 by Inspector