When trying to understand conservative arguments, I keep in mind the three major philosophical frameworks they rely upon. Although I have written previously about these frameworks and rely upon my understanding of them frequently in my posts, I have never specifically explained where I think they go wrong. With any of the frameworks, one could just reject the underlying assumptions. So you could simply say economic justice has nothing to do with desert, utility, or process. But that is not the only move available. I argue here that all three frameworks — when actually understood and applied — force you to reject laissez-faire capitalism as unjust and immoral.
Conservative desert theory rests upon the idea that individuals ought to receive compensation equal to what they deserve. What do they deserve? According to conservatives, people deserve the product of their labor. Those who are more productive deserve more pay. Those who are less productive deserve less. Under this theory, we ought to reward harder and more valuable work with proportionally higher levels of compensation. In economic lingo, conservative desert theory endorses the principle: to each according to their marginal productivity.
This kind of desert theory — and any desert theory that focuses on compensating hard work — falls prey to the Marxist objection. That is, capitalist economies are fundamentally premised upon compensating owners of enterprises even when they do no work at all. Profits, interest, and capital gains are all forms of compensation that are not based upon work.
Consider the case of Mitt Romney in 2010. According to his tax returns, Romney made $21 million dollars in capital gains from a blind trust run by Goldman Sachs. In laymen’s terms, Romney handed over his huge fortune to Goldman, they invested it for him without letting him know exactly how (that’s what makes it a blind trust), and at the end of the year $21 million in gains had been realized. Ask yourself: did Romney do any work for that $21 million? Clearly he did not. He did not even know where his money was invested.
So on a desert theory view that emphasizes paying people according to how hard they work and how much value their work creates, Romney’s $21 million income in 2010 was completely unjust. But it is not just Romney. All returns on investments are unjustified under a desert theory view. They are all forms of compensation that come from owning, not from working. On the desert theory view, we are forced to understand investment returns as a sort of theft from those who work in the businesses that are generating those returns. After all, it was their work that made the products that generated the revenue that the owners are taking a percentage of.
When taken to its logical end, the desert theory view actually leads to a fundamental critique of capitalism itself. In capitalism, owners of investments receive some of the fruits of economic production without doing any of the work that generates them. If morality and justice requires paying each what they deserve — as conservative desert theory argues — then capitalism is fundamentally immoral and unjust.
Once you point out that desert theory leads to the anti-capitalist conclusion that all profit is theft, conservatives will generally turn to their second framework: utilitarianism. Put briefly, utilitarianism is the idea that morality demands the pursuit of the greatest good for the greatest amount of people. In economic debates, utilitarianism generally refers to the maximization of social welfare. Even though interest and profits are not compensation for work, conservatives will point out that they are necessary to incentivize capital investment and ultimately maximize social welfare.
In addition to incentivizing capital investment, utilitarian conservatives argue that free markets are more efficient, best reflect societal preferences, and generate economic growth, which increases overall social welfare. All of this may very well be true. In fact, the majority of economists and philosophers probably endorse at least the basic view that markets are very beneficial for social welfare.
But that is only one part of the conservative economic view. In addition to reliance on markets, conservatives oppose income redistribution in society. That opposition cannot be supported within a utilitarian framework. As the left-neoliberals are so quick to point out, free markets coupled with extensive redistributive cash transfers maximize social welfare far better than free markets alone.
Why is this the case? The diminishing marginal utility of money. In simple terms, the diminishing marginal utility of money refers to the generally true fact that every additional dollar one spends delivers less welfare than the dollar before it. Even more simply: $1000 delivers a much higher welfare boost to someone with a $12,000 income than someone with a $2 million income. Logically then, efficiently redistributing money from those with high-incomes to those with low-incomes increases overall social welfare (at least to a point), and someone who supports utilitarianism must be in favor of such a policy.
Beyond that more technical discussion, a basic survey of industrialized nations shows that in general, social democratic countries — those with robust welfare states — tend to deliver better welfare outcomes for their citizenry. These populations experience lower poverty, better education, better health, and so on. What system best coheres with utilitarianism is of course a matter for empirical debate. Left-neoliberals argue that free market systems coupled with mainly cash redistribution is the best, while left-liberals argue in favor of a more regulated and interventionist form of economic production. Wherever you fall on that debate however, it is quite clear that if you think morality and justice requires maximizing social welfare, then laissez-faire capitalism cannot possibly be your favored economic form.
After working through the problem of profit for desert theory and the need for redistribution within utilitarianism, the conservatives have one more card up their sleeve: procedural justice. The procedural justice approach to economic philosophy locates justice purely in the processes an economy follows. For conservatives (generally libertarians), just processes are those which are non-aggressive, non-coercive, and voluntary.
Under this view, the fact that capitalism delivers income to investors even though they did not do any work is non-problematic. Nobody was forced to enter into such an economic arrangement, and the workers, management, and owners have all voluntarily agreed to that system. Additionally, the procedural justice view is unconcerned with overall social welfare. Social welfare is an outcome of an economy, but justice resides in an economy’s processes. So long as those processes are just, even widespread poverty and starvation is of no relevance to the question of justice.
Even if one accepts the procedural justice account of what qualifies as voluntary and non-coercive — as implausible as it is — the theory ultimately falls apart when trying to justify initial property appropriation. I wrote about this once before, but the basic problem with the procedural justice approach is that it cannot ever justify turning unowned natural resources into private property in the first place.
The procedural justice advocate will emphasize that voluntary transactions are at the root of the laissez-faire capitalist economy, and justify present ownership arrangements by appealing to that voluntariness. But if ownership is justified only through voluntary transaction, then no ownership can ever come about in the first place: the first owner necessarily transacted with nobody. The procedural justice conservatives will try to weasel out of this in a variety of ways, putting enormous efforts into articulating some special case logic for justifying the first ownership. Locke, Nozick, and Rothbard all do this.
But ultimately, these justifications fall prey to what I will call the Access Problem. Under procedural justice theories, when land is unowned, anyone may access it. Then at some later point, an individual is permitted to unilaterally (without the consent of anyone) grab up this unowned property and violently exclude it from everyone else for the rest of history. But there is no non-aggressive, non-coercive, and voluntary process that would ever allow this. If I do not consent to having my access taken away from me, the only way to do so is through coercion and aggression. All unilateral property grabs involuntarily and aggressively steal away the access everyone else previously had to the property.
This may seem like a trivial point, but it is not. The initial property appropriation sets the stage for every other bargain that occurs subsequently. Permitting involuntary, aggressive, and coercive grabs of property at an initial stage renders complaints about the coercion of taxation and redistribution contradictory. If coercion and aggression are universally impermissible, then no private property can exist because all private property requires such behavior initially. If they are not universally impermissible, then there is no consistent way to permit it for initial appropriation while forbidding it later.
Finally, historically speaking, existing property arrangements are simply not the result of voluntary transactions. Histories of colonialism make procedural justice libertarianism a practical impossibility. If involuntariness, coercion and aggression make holdings unjust, then we have to declare all present holdings unjust because they all, in fact, resulted from such processes. Thus, laissez-faire capitalism of the sort conservatives support cannot be justified by this procedural justice approach, both because of its theoretical contradictions and the way it interacts with the history of ownership in the world.
In short then, desert theory forces us to conclude that laissez-faire capitalism is unjust because it does not in fact pay people according to their marginal productivity; utilitarianism forces us to at least accept some forms of left-neoliberal cash redistribution as poor people get more welfare from any given redistributed dollar than the rich person it is taken from; and, procedural justice libertarians cannot even manage to get private property ownership off the ground because all initial property ownership results from processes that are involuntary, coercive, and aggressive. So even if you accept these moral frameworks as legitimate, they do not yield the conclusions conservatives think they do.