A Reply to Common [Catholic] Objections Against the Free Market. 2

8:26 PM Marcellino DAmbrosio 1 Comments


    Objection #2
     Without the state helping to redistribute resources, a wealthy class will hold on to the means of production and will keep the poor from being able to climb out of poverty.
    "A society in which the ownership of the means of production is confined to a body of free citizens, not large enough to make up properly a general character of that society, while the rest are dispossessed of the means of production, and are therefore proletarian, we call Capitalist. Note the several points of such a state of affairs. You have private ownership ; but it is not private ownership distributed in many hands and thus familiar as an institution to society as a whole. Again, you have the great majority dispossessed but at the same time citizens, that is, men politically free to act, though economically impotent... It is a necessary inference that there will be under Capitalism a conscious, direct, and planned exploitation of the majority, the free citizens who do not own by the minority who are owners.” (The Servile State by Hillare Belloc)
        Hillare Belloc is basically saying that in a capitalist society, without state intervention, class disparity cannot be solved. The wealthy will hold on to the means of production, and the poor will remain “economically impotent.” GK Chesterton and many other Catholic thinkers have argued this and advocated for the means of production to be distributed more evenly around the economy. Belloc, Chesterton, and all others who think this way are incorrect in their assumption that the rich will always hold capital tight. Yes, wealthy people will seek to do this at times. However, this sort of class warfare sort of argument only works if the means of production are limited. Underlying Belloc's argument is a flawed concept of wealth that smacks of Mercantilism. Capital is as limited as there are problems in the world to be solved – that is to say wealth is unlimited. As long as people want a better life style and have desires for comforts, new experiences, and more effective methods of producing, there will always be more money to be made.
The only real way to limit the hands that wealth belongs to is by state intervention. In the free market, for instance, if a bank makes mal-investments and goes bottom up, it's assets are sold at low prices, and competitors can enter the market more easily. Those that don't have the buying power they would normally need to enter into the competition, now are more able to. However, when there is a state in place that has the power to intervene, those banks/companies that failed to utilize their resources effectively go to that state begging and pleading saying “we are too big to fail!” And then the state uses the money it stole from us via taxation to buoy up these firms. In the free market, no such safety mechanism for the rich would exist. A rich man can fail just as easily and just as spectacularly as a poor man. Only the state provides a method for limiting the distribution of resources. This is what happened in 2008, when republicans and democrats both voted to bail out the banks and car companies. All of those resources should have been sold off to new competing firms (good for poor people) for a fraction of the price.
        The rich, however, are not the only ones who use the state to discourage innovation and limit wealth. The poor of America have learned that they can use the state to punish the success of some by taxing the rich more and by suing those with resources. By definition the state does not support itself. It only relies on what it takes from others. Anyone, then, can lobby the state to steal from one group and give to another. That is what a state does. So when literally everything is an opportunity to sue, the people of a nation live in absolute fear of one another. We get used to it here, but just think of how much the fear of a lawsuit has on American life. The fact that a McDonalds as to put “careful, cup may be hot,” on their cups is a prime example of the poor doing the opposite of what Belloc argues will happen in a free market. The gun of the state is the weapon by which man steals his brother's assets. As Murrey Rothbard puts it, when one uses the state to steal from producers, that act subtracts from production instead of adding to it. “The "political means" siphons production off to a parasitic and destructive individual or group; and this siphoning not only subtracts from the number producing, but also lowers the producer's incentive to produce beyond his own subsistence. In the long run, the robber destroys his own subsistence by dwindling or eliminating the source of his own supply. But not only that; even in the short run, the predator is acting contrary to his own true nature as a man.” As I have already shown in the above paragraph, the free market is perfectly capable of regulating itself. Bad ethics is bad business and is never actually sustainable. Without help from the state, such businessmen as those who caused this past recession always fail, and their resources are divided amongst the less affluent, competitive man. What then does the state do? Only turn man against himself by providing an easy means of piracy.
         So how does the standard of living rise, then, if not by the force of a gun? It rises when Dave the Peasant decides that he is going to save his resources and pool them together, to say, buy a plow and a pair of oxen. When he does this, he no longer needs to dig with a hoe. He gets more work done with the plow than he ever could have with a hoe. Dave's standard of living has just been raised. He now produces way more food, and maybe another man in the community, lets call him Jeff, no longer needs to farm in order for every one to get fed. Jeff figures that the other farmers need plows and that he is just the man to build them. He now builds plows, which makes plows easier to get. Now other farmers can afford them.         You see, a lot more work can get done by a man with a forklift than a man with a horse cart. Of course you had to work 13+ hours a day back in the industrial revolution, everything was still being done by hand! It wasn't government restrictions that changed the situation, it was the desires of generations of men to provide a better life for their families. It takes time for the standard of living in a community to rise up, but there are no shortcuts. It is supreme ingratitude to steal the thanks from these men women and children, from whom we've inherited the standard of living which we now enjoy, and give it to self important politicians. Economic calculation is always open for the poor man. we ought not penalize him for succeeding. Every state law and regulatory burden is an obstacle to the poor man's emancipation. No, Belloc, and the Church, misunderstands economics when they claim that resources will always be distributed only to the rich in a free market system.
        Moreover, it is not possible to force employers to pay employees higher wages by government inflation. Such measures are unsustainable. If you owned a factory in 1920 and the state came and said to you, you must provide your employees an air conditioned working environment, you would have shut down. Well, now this is something that we all take for granted. If the government stopped telling companies to air condition their work places, would all companies immediately stop air conditioning their buildings to save money? No, of course not. Why? Because they are competing for employees. If one company has air conditioning, and another does not, which job is more preferable? A company that does not have an air conditioned work place must pay employees more in order to work there. A man might decide that he wants higher wages more than he wants air conditioning, and that is his business. Far be it from us to tell that man that he must take lower wages and force his employer to air condition.
       No, free association and free exchange of resources is the answer to poverty, not the cause of it. 

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A Reply to Common Objections Against the Free Market. I

4:37 PM Marcellino DAmbrosio 1 Comments
         This post is intended as a reply to a friend and I concerning the Church's Social teaching, specifically as stated in the encyclical Caritas en Veritate. I will post three more replies later to counter all four critiques of the free market as raised during our previous dialogue. 

Again, I agree wholeheartedly with the church that the individual needs to be protected from exploitation and that the poor ought to be taken care of. I just disagree as to how practically this ought to happen.
  1. The free market has no rules! You need contract enforcement, a medium of exchange, an independent judiciary for a market to function. Without the state these things are impossible.
Pope Benedict writes:
         “It is in the interests of the market to promote emancipation, but in order to do so effectively, it cannot rely only on itself, because it is not able to produce by itself something that lies outside its competence. It must draw its moral energies from other subjects that are capable of generating them.” Chapter III. Caritas en Veritate.
         This is one of those statements which seems to say that the the market cannot regulate itself because such regulation “lies outside its competence.” I don't think this is an easy stance to take when you look at how human beings function on a daily basis. I believe the market is able to rely on itself for regulation. It is able to do so because it is not an it. That is to say the free market is comprised of people who, as it happens, are brilliant problem solvers.
         So as to your statement about the definition of capitalism, You’re correct. Laissez Faire Capitalism is a market free of any rules imposed by elected officials. It is not, however, free of any rules. As you commented, “You can’t have a free market unless you have things such as contract enforcement, prosecution of fraud, fair weights and measures, a medium of exchange, secure property you can use as an asset to borrow against, or an independent judiciary,” you are absolutely right.” However, when you say “These are things the market cannot produce by itself,” I believe human action proves the opposite. The free market is perfectly capable of providing for these needs on its own, and the Austrian school of economics shows how these things arise in a depth of detail that would put a crackhead to sleep of boredom.
         The rules that govern a free market are not forced from without, but instead arise from people, who encountering an obstacle, will find a way over, around, under, or through it. To be sure, not having a way to enforce contract is a problem. Problem solving also happens to be very economically lucrative. I think here, it is important to instead of thinking about an economy as a whole, think about human action on a more individual level. 
         So let’s say it’s Europe in the renaissance. You are a Florentine cloth merchant, and someone in Munich wants to buy a very large order of cloth. Knowing that you aren’t protected by any rule of law, as a border is crossed, what do you do? You might ask the other merchants around for references. Has anyone else heard of this guy? Is he reputable? Does he have any record of previous business transactions? Finding out that this man has no record, you might have a limit for how much cloth you are willing to sell him. If he is reputable, then you wouldn’t be afraid of trading with him. This is the market providing governance from within, and it is actually how commerce worked during much of the renaissance. Merchants kept a record between them of who had traded with whom. If someone was not on the list, you would not be unable to trade with them, but you might, for instance, require payment in advance, or a deposit of some sort, or you might limit the amount you are willing to trade until he has gain more repute. Because people do want to engage in commerce, they naturally and organically find ways of managing risk. Look at the internet, for instance. For the most part, no country has been governing internet commerce. If you get taken by someone on Ebay, it’s pretty hard to track them down and prosecute them. But when you look at their reputation, for instance, you can see if people have been unhappy with the service provided to them or if they were pleased. So you give someone reputable your credit card information, trusting that this person would rather not ruin their reputation by stealing from you. This protection naturally rises from within.
         Ebay itself has a natural desire to keep business, so it works to ensure that sellers cannot simply give themselves reputation points. Ebay knows that if people don’t trust that system, then they won’t shop there. So Ebay has entire departments constantly working on trying to safeguard the public from conmen. They are always figuring it out. Why? Because they have financial incentive to do so. The state, on the other hand, has no monetary intensive to be excellent. There are no alternative states from which you may chose your allegiance. The state has no economic incentive to be effective as it has no competition. It simply says, “if you do not think we did a good job, too bad.” So the state does not need to be effective to remain in power. Moreover, the state can only make laws, which are cumbersome, bludgeoning things that cannot keep up with the speed at which the markets change. For instance, with the example of the merchants, a state might say, depending on the political mood of the time: “You must trade with anyone who wants you to.” In which case, trade would shut down completely. Or “You cannot trade with anyone unless you have a license.” Why shouldn't I be able to trade with an unlicensed person if I want to? I'm the one assuming the risk here! Such a policy would put barriers on trade as opposed to encouraging it. The free market's solutions to this issue, by which I mean, people's own problem solving prowess, does, in fact, produce organic safeguards. Not only does regulation arise from within the market, but these regulations are far more effective protections for the individual than state laws. 

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