Real Life Capitalism Whack-A-Mole

A couple of years ago, I introduced the concept of Capitalism Whack-A-Mole. Capitalism Whack-A-Mole is an argumentative habit of libertarians where they shift between various mutually incompatible philosophical frameworks in order to deal with successful critiques of capitalism.

I taped a TV segment today with the Ayn Rand Institute’s Don Watkins about his book “Equal Is Unfair.” My sole goal going into the segment was to see if I could produce a Capitalism Whack-A-Mole in the wild. Initially, after he passed on my baiting about the authoritarianism of private property, it seemed like I wasn’t going to be able to make it happen. But, eventually, it did.

Being a Randian, Watkins advocates for the government to create economic institutions that distribute the national income solely to “producers.” This is a standard desert theory line about how distributive justice requires that each person be distributed that which they produce. At some point in my standard critique of desert theory, I got to the part where I explain that the existence of capital income — rents, interest, dividends, capital gains — violates desert theory because it provides capitalists income even though they did not produce it. Capital income is definitionally income from owning not income from producing.

From there, the glorious Whack-A-Mole began.

Watkins first rebuttal effort was to say that in fact capitalists do produce the income because they match capital with talented labor and such. So, at this point, he was endorsing the basic idea that income is only justified by production, but saying that capitalists do actually produce.

I then clarified that he has mistaken entrepreneurs for capitalists. It is entrepreneurs who match capital with labor, not capitalists. And entrepreneurs receive labor income for doing so. To illustrate the difference, I used my own retirement account as an example. Last quarter, I had $200 of capital gains in my retirement account, but I clearly did not produce anything to earn that income. It just came in passively from the index fund.

Confronted with the fact that desert theory cannot justify capital income, Watkins then shifted. His new argument was that capital income is a reward for abstaining from consumption. The experienced will understand this as the “wages of abstinence” argument. I called him on the shift, noting that abstaining from consumption is not producing and that he had said people are only owed what they produce.

At that point, he shifted again. His third argument was that capital income was necessary to incentivize savings and capital investment. Why would you save your money and put it up for capital investment if you did not get a return for doing so? I called him again on the shift, noting that he has now made a utilitarian argument for why paying rents to non-producing capitalists is good for general prosperity. But, once again, this does not show that the capitalist earns their rents through production.

From that point, the last word swung to him and he actually shifted yet again, focusing this time on the “voluntary” nature of the manner in which the capitalist secures his unearned, passive rents. I was not able to respond to this, but it’s obvious how one would do so. As with the other shifts, the voluntarism argument still fails to deal with the problem that capital income is unearned. Randians promise that they can show capitalism distributes out according to the principle “to each according to what they produce.” But they can’t show it because it isn’t true. Also, capital income is not derived through voluntary means, but instead extracted through coercive property relations.

So, by the end of the little back-and-forth, Watkins shifted from desert to “wages of abstinence,” from “wages of abstinence” to utilitarian incentives, and then from utilitarian incentives to voluntarism. As always, the erratic philosophical shifting on the matter of capital income is a solid indicator of the fact that libertarians have no way of justifying it coherently. Marxists have always been right on this. The best shot they have is the utilitarian framework, but that framework also supports the welfare states that they loathe.

The Meidner Plan for Socialism

Rudolf Meidner was the Swedish economist most responsible for Sweden’s economic model in the 1950s to 1970s. Near the end of his reign and the golden era of Swedish social democracy, he put forward a proposal that became known as the Meidner Plan. If followed, the Meidner Plan would have gradually transferred ownership of Swedish companies to workers by requiring the companies to issue shares to union-controlled wage-earner funds. Below is a simplified rundown of how it would have worked within the Rehn-Meidner model that the Swedish economy was already designed around.

Suppose that we start with a capitalist economy that has a specific wage differential. The wage differential refers to the difference in the hourly wage paid to different kinds of workers. In graphical terms, we can think of it like this, where the top of the bar is the highest wage received and the bottom of the bar the lowest wage received:


From this economy, we forcibly shrink the wage differential through a solidaristic wage policy. One way to do this is by using collective bargaining agreements to lift up the lowest wages and to bring down the highest wages. When you shrink the wage differential in this manner, the result is this (explained below):


Disemployment on the Bottom
Lifting the lowest wages causes low-productivity firms that rely heavily on low-wage labor to fail and shed workers, i.e. it causes disemployment. In US discussions, this is seen as a really terrible thing. Not so for Meidner. Because the Swedish economy so often ran at full employment, it had trouble fighting inflation. The constant disemployment caused by gradually shrinking the wage differential would actually help alleviate inflationary pressures. It would seem cruel of course to fight inflation by brutalizing low-wage workers, but disemployment was not a very brutalizing experience within the Swedish welfare state. Laid off workers would receive very generous unemployment benefits and have access to Sweden’s active labor market policies (training, education, job search assistance, in-work subsidies) to find a new job in a surviving (higher-productivity) firm.

Excess Profits on the Top
Wage restraint for the highest wages would cause high-productivity firms that rely heavily on high-wage labor to generate excess profits. This sounds like a problem, especially for socialists, but it is actually a huge opportunity. If you can capture the excess profits generated by wage restraint, you can use the resulting revenue to socialize ownership of the capital. And that’s what Meidner Plan aimed to do. Under the plan, firms would be required to issue new shares equal in value to a percentage of their profits each year. Those shares would then go into the wage-earner funds. Eventually, the shares held by the wage-earner funds would be equal to more than 50% of the outstanding shares of a company, at which point the wage-earner funds would have a controlling stake.

The mandatory share issuances function like a corporate income tax except that they do not drain anything from corporate cash flows. Instead, they simply dilute out the existing shareholders. There is some concern that announcing a plan to slowly dilute out existing shareholders would harm capital investment going forward because it would reduce the effective return on such investment. But recall that the wage restraint actually causes many firms to generate excess profits. So the drag on share value caused by the mandatory share issuances would be significantly counteracted by the boost in share value caused by the excess profits.

So, in total, the Meidner Plan would utilize solidaristic wage policy to shrink the wage differential. This would intentionally cause some disemployment at the bottom, which would help tamp down on inflation and would be met with generous unemployment benefits and assistance in being placed in new jobs in higher-productivity firms. This would also intentionally cause excess profits at the top, which would be captured through mandatory share issuances to wage-earner funds that would gradually socialize ownership of Swedish companies.

Liberalism Is a Philosophy of Rich White Male Domination

Because I am a masochist, I could not pass up this bit of nonsense from Chait, once more on the topic of liberalism’s greatness:

The problem with Marxism, I argue, lies in its class-based model of economic rights. Liberalism believes in political rights for everybody, regardless of the content of their ideas. Marxists believe political rights belong only to those arguing on behalf of the oppressed — i.e., people who agree with Marxists.

The bolded part simply is not true, at least not if by “liberalism” you intend to refer to the formations coming out of liberal enlightenment philosophy and the nations they birthed. It is cliche at this point to note that liberal societies have not believed in political rights for everybody. Look at nonwhites. Look at women. Look at the propertyless (i.e. the poor). Liberal societies have always treated these groups as second-class citizens, not as political equals.

When confronted with this fact, liberal apologists like Chait typically respond that the political inequality present in liberal societies is a departure from the liberal ideal. On this view, Marxism’s ideal explicitly endorses the political privileging of some groups over others while liberalism’s ideal does not. But anyone who has ever bothered to read the writings of the philosophical fathers of liberalism know that that this isn’t true either.

Liberals denied nonwhite people political equality by categorizing them as subhuman. Immanuel Kant was the most explicit in this regard. Consider the following choice quotes:

The race of the [Native] American cannot be educated. It has no motivating force, for it lacks affect and passion. They are not in love, thus they are also not afraid. They hardly speak, do not caress each other, care about nothing and are lazy.

The race of the Negroes, one could say, is completely the opposite of the [Native] Americans; they are full of affect and passion, very lively, talkative and vain. They can be educated but only as servants (slaves), that is they allow themselves to be trained. They have many motivating forces, are also sensitive, are afraid of blows and do much out of a sense of honor.

[“The Hindus, Persians, Chinese, Turks and actually all oriental peoples”] do have motivating forces but they have a strong degree of passivity and all look like philosophers. Nevertheless they incline greatly towards anger and love. They thus can be educated to the highest degree but only in the arts and not in the sciences. They can never achieve the level of abstract concepts. A great hindustani man is one who has gone far in the art of deception and has much money. The Hindus always stay the way they are, they can never advance, although they began their education much earlier.

When explaining how to properly train “Negroes,” Kant advises the use of a bamboo cane rather than a whip (from Emmanuel Eze’s paper):

“Training,” for Kant, seems to consist purely of physical coercion and corporeal punishment, for in his writings about how to flog the African servant or slave into submission, Kant “advises us to use a split bamboo cane instead of a whip, so that the ‘negro’ will suffer a great deal of pains (because of the ‘negro’s’ thick skin, he would not be racked with sufficient agonies through a whip) but without dying.” To beat “the Negro” efficiently requires “a split cane rather than a whip, because the blood needs to find a way out of the Negro’s thick skin to avoid festering.”

Kant’s remarks about nonwhites aren’t mere sidenotes either. As Charles Mills skillfully explains, given the way that the ability to reason functions in Kant’s moral philosophy, Kant’s denial of reason to nonwhites necessarily commits Kant to the view that nonwhites are not subjects of moral concern. This is why you can enslave and then beat a Black person to a bloody pulp with a bamboo cane without violating Kant’s categorical imperative not to use persons as means to an end. The lack of political and moral equality for nonwhites in Kant’s philosophy follows straightforwardly from his categorization of them as nonpersons.

And its not just Kant. Here is David Hume:

I am apt to suspect the negroes to be naturally inferior to the whites. There scarcely ever was a civilized nation of that complexion, nor even any individual eminent either in action or speculation. No ingenious manufactures amongst them, no arts, no sciences. On the other hand, the most rude and barbarous of the whites, such as the ancient Germanys, the present Tartars, have still something eminent about them, in their valour, form of government, or some other particular. Such a uniform and constant difference could not happen, in so many countries and ages, if nature had not made an original distinction between these breeds of men. Not to mention our colonies, there are negroe slaves dispersed all over Europe, of whom none ever discovered any symptoms of ingenuity; though low people, without education, will start up amongst us, and distinguish themselves in every profession. In Jamaica, indeed, they talk of one negroe as a man of parts and learning; but it is likely he is admired for slender accomplishments, like a parrot, who speaks a few words plainly.

I could go on with the quote parade, but it suffices to say that this was the prevailing belief about nonwhites among political liberals. It was not some fluke that all of the liberal societies espousing adherence to this formation denied political equality to nonwhites. It was baked into their entire understanding of the world. “All men are created equal” was not perversely at odds with American slavery, as American slaves were not considered fully man. You cannot divorce political liberalism from the anthropology that it operated within, an anthropology that specifically endorsed the political privileging of whites over nonwhites. This is especially true in historical debates of the sort Chait seems to be weighing in on.

There is a reason Mary Wollstonecraft had to write a philosophical treatise urging for the full inclusion of women in liberal society. Political liberals explicitly advocated that women be politically and socially subordinated.

Rousseau’s remarks in Emile are perhaps the most famous in this regard:

In the union of the sexes, each alike contributes to the common end, though in different ways. From this diversity springs the first difference that may be observed between man and woman in their moral relations. One should be strong and active, the other weak and passive; one must necessarily have both the power and the will, it is sufficient for the other to offer little resistance.

This principle being established, it follows that woman was specifically made to please man. If man ought to please her in turn, the necessity is less direct. His merit lies in his power; he pleases simply because he is strong. I grant you this is not the law of love; but it is the law of nature, which is older than love itself.

Thus the whole education of women ought to be relative to men. To please them, to be useful to them, to make themselves loved and honored by them, to educate them when young, to care for them when grown, to council them, to console them, and to make life agreeable and sweet to them—these are the duties of women at all times, and should be taught them from their infancy.

Ah liberalism. Of course, it’s not just Rousseau. As with the racial remarks highlighted above, this was the prevailing view among political liberals generally about the role of women. You can read more about it in Carol Pateman’s wonderful book The Sexual Contract. Liberalism’s denial of political equality to women was not a fluke, but integral to the worldview of philosophical liberals.

If Marxism is the philosophy of denying political equality to the bourgeois, it’s quite clear liberalism has been the philosophy of denying it to the proletariat. In Theory and Practice, our old friend Kant was quite clear about this when writing about why proles shouldn’t vote (note the shot at women too!):

In the question of actual legislation, all who are free and equal under existing public laws may be considered equal, but not as regards the right to make these laws.

Anyone who has the right to vote on this legislation is a citizen (citoyen, i.e. citizen of a state, not bourgeois or citizen of a town). The only qualification required by a citizen (apart, of course, from being an adult male) is that he must be his own master (sui iuris), and must have some property (which can include any skill, trade, fine art or science) to support himself. In cases where he must earn his living from others, he must earn it only by selling that which is his, and not by allowing others to make use of him; for he must in the true sense of the word serve no-one but the commonwealth. In this respect, artisans and large or small landowners are all equal, and each entitled to one vote only.

What’s so fun about this quote is that Kant has defined the disenfranchised proletariat in basically Marxist terms: a person who allows “others to make use of him” and who is thus not “his own master.” Class-based restrictions on voting were of course common until very recently in liberal societies that in Chait’s imagination “believe in political rights for everybody.”

From day one, political liberalism was a philosophical formation that only aimed to extend political rights to rich white men. Liberalism’s egalitarianism was an egalitarianism among rich white men who were thought to have the natural right to subordinate (socially and politically) everyone else. If Chait’s right, and Marxism is the theory that only the oppressed should have political rights, then it’s certainly at least as accurate to say Liberalism is the theory that only the oppressors should have political rights.

Liberalism Has Failed and Is Failing

Jonathan Chait had a funny post in New York Magazine that is mostly just a rehash of how he doesn’t like political correctness, except in this case he associates it with Marxism. Although he doesn’t end up calling political correctness and related phenomenon “cultural Marxism,” the point is indistinguishable from the right-wingers with anime avatars on Twitter who call it that.

There is a lot wrong with Chait’s piece. He claims liberalism is “working” and Marxism has “always failed” but he makes no effort to define any of those terms. For instance, when pressed on Twitter about how there have been a lot of very successful Marxist parties in Europe, he retreated to saying that they aren’t really Marxist if they didn’t advocate proletarian dictatorships. Yet in his article, he refers to Jacobin as a magazine that spreads Marxist ideas even though it has not published any pieces advocating a proletarian dictatorship.

Individual Rights
He claims Marxist governments are inherently antagonistic to individual rights, but fails to look inward towards liberal governments to see how they have fared in that realm. It was after all liberal America that so loved individual rights that it enslaved a huge swath of its population for 250 years, ran a brutal and explicit apartheid regime for another 100 years, and then carried on apartheid-lite until the present through de facto segregation, widespread discrimination, and mass incarceration. The latter point is even a source of long-standing Bernie Sanders’ dark humor, with him noting that we incarcerate more people than communist China.

Liberal America so loves individual rights that it put together a secret police in the mid-century to infiltrate and disrupt dissident political groups, resorting even to assassinating some of the dissidents. There was also McCarthy and the House Un-American Activities Committee, which aimed to intimidate and marginalize those with anti-capitalist views.

Hell just this week, one of Nixon’s top advisors, John Erlichman, made news with an old interview in which he had this to say about the Nixon administration’s intentional efforts to crush its political opponents through trumped up police action:

“The Nixon campaign in 1968, and the Nixon White House after that, had two enemies: the antiwar left and black people,” former Nixon domestic policy chief John Ehrlichman told Harper’s writer Dan Baum for the April cover story published Tuesday.

“You understand what I’m saying? We knew we couldn’t make it illegal to be either against the war or black, but by getting the public to associate the hippies with marijuana and blacks with heroin. And then criminalizing both heavily, we could disrupt those communities,” Ehrlichman said. “We could arrest their leaders. raid their homes, break up their meetings, and vilify them night after night on the evening news. Did we know we were lying about the drugs? Of course we did.”

It is in liberal America that the highest court recently gutted voter protection legislation, leading to what many believe to be widespread efforts to suppress the vote, including most recently the spectacle in the Arizona primary where voters were made to stand in line for five hours to cast a ballot. Who knows how many people simply went home without voting at all, in liberal America.

And this is just some of America’s greatest domestic hits. If we were to bring in America’s imperial adventures abroad, and especially its liberal love of knocking out popularly elected leaders, this post could go on forever.

Garbage Health Care
As a lover of all things welfare, what struck me most about the piece was not its blindness to the terrible track record of respecting individual rights in liberal America. It was the utterly strange triumphalism about liberal welfare.

Nor do realistic advocates of social and economic equality have any reason to share or accept the left’s desperation. The popular, sitting liberal president has enacted the most important egalitarian social reforms in half a century, including higher taxes on the rich, lower taxes on the poor, and significant new income transfers to poor and working-class Americans through health-care reform and other measures.

I was hunting for a mention of health care because the immense terribleness of the US health care system is matched only by Chait’s strange effusiveness about it. Even after the beloved Obamacare, 1 in 5 Americans are uninsured or underinsured. Despite the fact that we can’t figure out how to provide decent health care access for a fifth of our people, we also somehow spend 80% more of our GDP on health care than the OECD average.

Health care is a fun example to use in the Marxism/Socialism v. Liberalism game because it’s entirely clear at this point that the best way to have a killer health care system in 2016 is to have had a strong socialist movement in the early or mid 20th century. The best health care system in the world according to the widely-cited Commonwealth fund is the NHS in the United Kingdom. The NHS is the closest thing in the developed world to a full blown socialist health care system. The government not only pays for everyone’s health care, but it also runs the system and directly employs and manages the healthcare providers. The NHS was put in place after World War II by the avowedly socialist Labour Party.

When you aren’t going full blown NHS-style socialism, the best health care systems are those in which the central government has fully nationalized the health insurance sector, aka single-payer health care. The US doesn’t have that either and when it was proposed throughout the years, it was attacked specifically because of its socialist character. Proto-Chaits killed it.

Instead of adopting good socialist health care systems, the US took the liberal route, which is why we find ourselves where were are. Liberal health care has been so bad in fact that, in 2016, Chait and people like him can write articles in which they are downright giddy that the US is a bit closer to where countries with stronger socialist influences were 70 years ago.

Is Elias Isquith Literate?

Salon blogger Elias Isquith had a truly bizarre interpretation of a New Republic piece written by Elizabeth Bruenig.


The reason why Isquith described the piece this way is pretty obvious. He is absolutely desperate to find someone making that argument so that he can then condemn it. When you are on the hunt for an argument you want to cry about, you sometimes read it into pieces that don’t contain it. That’s what happened here.

The actual content of Elizabeth’s piece was pretty banal. The argument goes like this:

  1. The majority of young voters favor Bernie.
  2. Crucially, though the majority of young Black voters didn’t favor Bernie in South Carolina, a big chunk (43%) did, and this was a significant break from the overall Black voting trend.
  3. The majority of independent voters favor Bernie.
  4. Therefore, the future for Bernie-style social democracy lies in young voters and independents and Bernie should focus on them.

There is absolutely nothing in the piece about giving up on Black people and focusing on young whites. Rather, the piece says to focus on all young people, including young Black people, which Elizabeth specifically identified as breaking away from the overall Black voter trend and breaking towards Bernie (“Notably, though Sanders did not win a majority of young black voters, he won more of their support than that of their older counterparts.”). The idea here is that if Bernie can win over young people of all stripes to social democracy, then given that political attitudes are pretty sticky over time, that will mean social democrats have a real chance in the near future as old people die and young people replace them. The only people the piece (implicitly) says to ignore are older people who basically universally go for Hillary and are not the future.

The idea of winning over young voters of all stripes is completely sensible and is, in fact, what the Sanders campaign is already trying to do. This is why its Black outreach has focused so heavily on young Black people, e.g. through its HBCU college tour and selection of campaign surrogates. And this is presumably why his support among young people of all types has shot up the most over time. According to Reuters rolling poll, Blacks under the age of 35 have begun to break towards Sanders in the last couple of months nationally, with Sanders even pulling ahead (within the margin of error) in February:


Isquith’s read of this piece is about as mendacious as they come. I expect better from Salon bloggers.