Inequality and leftist objections to capitalism

Economics Economics Questions
1

I have at times wondered whether it is the inequality prevalent in the world and necessarily as a result of the workings of a capitalist system is the main objection of leftists and socialists to capitalism, rather than an alleged concern for the standards of living of those at the bottom of society. What do you make of this hypothesis.

I remember once arguing with my housemate (who since has seemed to have steered far more in a libertarian direction) about these matters and asked him what he would prefer: A system where the inequality gap increases but everyone gets richer, or one where everyone gets poorer but the gap decreases. He answered with the latter which dismayed me.

If this is the crux of the issue, could it be the case that no matter what sound arguments we can put forward demonstrating how the free enterprise system can increase wealth, we are bound to be defeated by the unceasing blind envy afflicting our fellow man? How do you think this could be tackled?

2

http://mises.org/humanaction/chap35sec3.asp

3

I think it’s more of a matter of themes that have been drilled into our head since birth. That inequality is bad and we should stop at nothing until it is removed. Even if we are that much poorer because of it. After all if we’re all equally miserable that’s fine isn’t it?

Just look at some of the American “Classics”.

4

People aren’t too good at economics so he probably imagined a scenario where he got to be as almost as rich as bill gates but with less money need to fund that wealth. Little did he know that was actually deflation not socialism.

Firstly envy is a bad thing so if you convince people that envy is wrong, then they will not support a system which exists to fuel it. Secondly, there is nothing about capitalism that makes people inherently unequal in terms of wealth. If anything the ever shrinking supply of money would tend to equalize living standards and income. Plus money is just a trinket for getting real goods, if you value it even when you have real goods, you would be wrong.

5

Dear lord. Why did he think that was good… simply because he knew he would lose the argument if he chose the latter?

I knew a guy once who read this big science (fictiony) book about how the universe will eventually all come to be unified as a giant supercomputer and we’ll all be one and no one will have any individuality. He really wanted this to happen. It was like he hated life and everyone in it and wanted it to crumble and reform as its opposite (in many ways).

But income inequality is reduced by capitalism… imagine a distant future where capital investment has increased worker productivity so much that practically anyone can afford anything.

6

“Equality, like freedom and justice, is conceived in entirely different terms by those with the constrained vision and those with the unconstrained vision. Like freedom and justice, equality is a process characteristic in the constrained vision and a result characteristic in the unconstrained vision.” - Thomas Sowell, A Conflict of Visions

“Those with the unconstrained vision see no need to neglect at least trying efforts toward equalizing chances for particular results. But to those with the constrained vision, attempting to single out special individuals or group beneficiaries is opening the floodgates to a dangerous principle whose ramifications go beyond the intentions or control of those initiating such a process.” - Sowell, Conflict of Visions

Constrained Vision:

“All men have equal rights; but not to equal things.” - Edmund Burke

“A society that puts equality- in the sense of equality of outcome- ahead of freedom will end up with neither equality nor freedom. The use of force to achieve equality will destroy freedom, and the force, introduced for good purposes, will end up in the hands of people who use it to promote their own interests.” - Milton Friedman

Unconstrained Vision:

“Landlords have become fabulously rich, some of them taking every day- for doing nothing- more than many of woman of sixty years drudgery.” George Bernard Shaw

“Human beings are capable of enduring with chearfulness considerable hardships, when those hardships are impartially shared with the rest of society, and they are not insulted with the spectacle of indolence and ease in others, no way deserving of better advantages than themselves. But it is bitter aggravation of their own calamity, to have the privileges of others forced on their own observation, and, while they are perpetually and vainly endeavoring to secure for themselves and their families the poorest conveniences, to find others revelling in the fruits of their labors.” - William Godwin

“Hitherto, every form of society has been based, as we have seen, on the antagonism of oppressing and oppressed classes. But in order to oppress a class, certain conditions must be assured to it under which it can, at least, continue its slavish existence. The serf, in the period of serfdom, raised himself to membership in the commune, just as the petty bourgeois, under the yoke of feudal absolutism, managed to develop into a bourgeois. The modern laborer, on the contrary, instead of rising with the progress of industry, sinks deeper and deeper below the conditions of existence of his own class. He becomes a pauper and pauperism develops more rapidly than population and wealth” - Karl Marx, The Communist Manifesto

So yes, I think what you’re talking about is a big part of it, but it is a vision that is very very old.

7

I think your on to something. I think many on the left are unhappy of the fact that people are born differently, with different qualities, skills and attributes. They would rather rebuke reality. I however love the fact that we are all different. <3

I have heard some argue that the gap from rich and poor may actually be smaller in a truly free society. They argued that it’s various forms of government protection and fascistic mechanisms which balloon the rich from the poor on extremes.

If this is indeed the crux of the issue I’d stand the issue on its head and point out the obvious. We are not all born equally.

8

If you believe that hierarchies can beat egalitarians at the production of wealth, then clearly they can also defeat egalitarians in war. They just have to be willing to wage war on them.

9

Can’t remember exactly where but I’ve seen studies that analyze how people’s perceived happiness (satisfaction) is related not only to the absolute level of their wellbeing (wealth) but to a great extent also to where that level is relative to the wellbeing of the people around them. Something like wealth X being valued more (in the sense of producing greater satisfaction) when surrounded by people of X/3 wealth as opposed to an environment with average wealth larger than X (2X, 3X, etc.). Or: “Better to be a big fish in a small pond than an average (or small) fish in a big pond.” If correct, this could place a premium on “wealth X + being at the top” vs just “wealth X + being equal or below the rest”.

Societal awareness of such hierarchical top-premium (and, inversely, bottom-discount) could be the main cause for the envy of the people “below”, even when their wealth/wellbeing in absolute terms may be much higher than millions poorer (but happier) people thousands of miles away. The evolutionary explanation for such propensity is also not hard to discern, as occupying the upper realms of any hierarchy would consistently yield better chances for procreation. Could there actually be a “Theory of Wealth Relativity”?

Z.

10

I just remembered something. I think a lot of the despair over inequality is also largely from a result of the widespread ignorance of the law of comparitive advantage or Ricardian law of association as Mises callse it. I remember what a revelation it was for me when I first encountered it! it really destroys the fallacy of capitalism as some sort of dog eat dog survival game, realising that our very inequalities and differences are precisely the characteristics that allow our voluntary trade and cooperation to be so fruitful.

11

Bingo!!!1!! [Y][Y][Y][Y][Y][Y]

12

Real change comes from social evolution. I just finished watching all of the videos from the 2009 seasteading conference, and there was a lot of interesting ideas and information about law, costs etc related to microsecession. It’s almost universally understood that there are cheaper and more effective ways to microsecede than to engage in any sort of armed confrontation.

You might want to check the conference presentations out. It is a much more intelligent, and consistent (with free markets) approach to secession than many of the things I have read discussed here. Most of the forum discussions revolve around engaging in conflict or isolationism.

I think there is a lot more to be said for the power of entrepreneurship in creating a freer society than the power of violence.

13

The cornerstone of security is the ability to produce violence. There is no escaping it, and no serious thinker would attempt to.

14

This thinking is exactly why I recommend checking out the presentations. There is thinking on security that is much more feasible, affordable and perhaps scalable than what is normally discussed here.

15

On the contrary, security is concerned with the ability to discourage violence, sometimes by show of force but often through other means. For example, the pirate captain who takes his booty to a remote island only he knows how to sail and buries it in a location on the island only he knows is producing security through secrecy rather than violence. In other words, secrecy can be used to produce security at much lower cost than hiring armed personnel. For the ordinary citizen, subterfuge and secrecy is the only viable means of securing property against pilfering national governments… the phalanxes of government taxmen are armed to the teeth so armed confrontation is not a realistic alternative.

Clayton -

16

Folks goin’ about trying to impose a fair world where everyone is forced to be equal, are folks that don’t understand “a perfect world wouldn’t be worth livin’ in”. I find it’s rather cruel to have the ideal of using force to gain equality. Maybe the folks believing in heavy regulation, are crassly indolent? Perhaps they wish to gain an unearned advantage over all folks by lowering them to their level?

Asking for laws is like pointing a gun at someones head.

17

David Friedman has some interesting comments on this subject here. Note that “wealth” in relation to “relative wealth” and perceived social status is obfuscatory since it implies that something which is scarce (magnitude of bank account balance) is equivalent to something which is not scarce (positive perceptions from peers, i.e. high social status).

Where status really matters, in my opinion, is sex and reproduction. But, while reproductive opportunities are scarce, social status is not. Social status is an important component of reproductive success but I think it is much less important in modern humans than it is in other primate species or likely was in our now-extinct evolutionary ancestors. Likely, part of the reason it is less important is the emergence of monogamy as the dominant reproductive arrangement. In a polygamous society, the male’s ability to feed the many children that can be produced (resources) is more important than his social status. In a monogamous society, the male’s ability to secure the most physically excellent female (social status) is more important than his resources since he only needs to secure enough resources to feed the children that one female can produce (with pre-industrial medicine, this was not a large number on average).

Of course, resources (bank account balance) and social status are positively correlated but they are not one-to-one, as Friedman notes in his blog post linked above.

Also note that reproductive opportunity is far more scarce than sexual opportunity and this is all the more true with better birth control methods available today. A person can have sex with a different partner every day so that it is theoretically possible that even a person with low status and limited means could have a multitude of sexual partners.

Unless you want to claim that people can’t be happy unless they can have more kids than anyone else on their block, I think the relative wealth argument falls completely on its face. Relative wealth is important to people because it confers higher social status. Higher social status is important because evolution has programmed us to want it to capture the attention of the most physically excellent reproductive partner we can get (so our children are more likely to survive). We are not the children of the social outcasts who couldn’t get laid. But since social status is not scarce, there is no strict 1,2,3,… ranking of individuals in society so that it is possible for there to be an arbitrarily large amount of high social status. Also, since sexual opportunity is much less scarce than reproductive opportunity, the primary satisfaction that evolution has programmed us to seek with our social status, sex*, is relatively abundant. I just fail to see what all the relative-wealth brouhaha is all about.

Clayton -

*our genes want us to have sex for the purpose of producing children but we don’t have to let our genes know we used a condom :wink:

18

How do I think this could be tackled? Why should I worry about converting or convincing people?

Do you like it when the local Baptist Church keeps coming to your doorstep with pamphlets that ask you to join and thus be saved? Here’s a trick - don’t put your efforts in convincing people of anything. There is plenty of material on economics and plenty of material on Lockean ideas of natural rights for people to read up on their own and educate themselves in, if they wish to make the effort.

Understanding capitalism required people to give up normative ideas and to stop looking at matters in terms of what values are right and what are wrong. It forced them to develop a positive perspective, and simply see the relation between why or how things happen, given constraints and incentives. Thus, you must also adopt a positive, value-free approach to understanding people. Instead of worrying about how to bend people to your thinking (like the typical social reformer or legislator), you must instead put your efforts in understanding why people see everything in terms of class divisions and inequalities, instead of economic costs and benefits. Once you understand why people think the way do about something or the other, then I am sure you will feel at peace with only preaching between those interested and only those who understand.

Benefits to and standards of living of those at the bottom of the ladder are not the concern of the socialist. Socialism is not about making the poor better off.

Socialism is about destroying class in society completely. Not about making everybody richer and better off. Just to destroy class. True Socialists (and that is full fledged socialists with a capital S) have never supported a welfare system or a redistributionist system. Welfare and redistribution keep the system of class working by giving the upper class their existing support in society in return for them giving up a little money to keep the lower classes a little more satisfied. Since Socialists perceive wealth as the means of having political power, and thus the tools of having power over the lower classes, they perceive welfare and redistribution as the results of “bourgeouisie democracy”, where an upper class controls the hopes and aspirations of poor to win their votes. A welfare system has never truly existed in notoriously socialist countries like India; it instead had a massive public sector with full control over banking corporations, and the complete diversion of most of the capital to public sector enterprises than private ones. The glorious Indian Left used to be proud that the losses made by these public sector enterprises were “socially beneficial”, because they were a small cost to be borne in return for removing an enterprising elite completely.

Distinguished economist Joseph Schumpeter once pointed out how capitalism gave silk stockings to the poor, when they were once worn by only aristocrats. Socialists have never claimed to be interested or concerned with these gains to the standard of living of all people; indeed, their agenda is completely different.

19

Not part of this thread, but out of interest, that sounds like a short story by Isaac Asimov called “The Last Question”. It’s interesting from an existentialist point of view, but, at the end of the story, humans are all dead and only the supercomputer remains. [:P]

20

I read the article. Thx for the link. The “zero-sum” vs “non-zero” sum dichotomy (made by Friedman and you) is a false one. The zero-sum assumption is not necessary for establishing a correlation between relative status (wealth) and satisfaction (happiness) – a correlation whose existence both you and Friedman can’t avoid acknowledging.

Moreover, the fact that humans regularly create differing rating structures (value systems, hierarchies) as coping mechanisms (“I’m not smart but I can hit a baseball > Sports is more important and fun than mental masturbation.”) in no way diminishes the importance of such hierarchies in human society. It actually reinforces it.

On evolution and procreation, I think you’re missing the point. Scarcity (or not) of sex opportunities today (and their correlation, or not, with perceived status today) has little to do with our genetic material that we’ve accumulated through millions of years of evolution. Status only needs to have been important for partner selection in our past in order for it to still drive our behavior today.

Finally, my main purpose for writing this was as an attempt to explain envy (or awareness of social hierarchies and the propensity to climb them) as an evolutionary remnant, an appendix, a genetic baggage we’re carrying from our past. It was not my intention to justify it.

Z.