The Carrot or the Stick?

Proponents of laissez-faire capitalism often claim that theirs is superior to other systems because it maximizes freedom - everyone is free to do as they please so long as they respect the rights of others, yadda, yadda, yadda.

But invariably, the critic of free-market capitalism responds, "laissez faire capitalism doesn't really maximize freedom - workers are forced to either sell their labor or starve to death."

And the critic is correct. People's choices are limited. We can either sell our labor, depend upon charity and gifts, or starve.

This looks like a pretty devastating critique of capitalism. But only if you don't bother examining the alternatives.

The claim that workers are forced to either sell their labor or starve applies not only to capitalism, but to socialism, and for that matter, to any conceivable social system in a world of scarce resources, rational self-interest, and unlimited wants.

Suppose I am living under a socialist system and I decide, for whatever reason, that I don?t feel like working.

What happens? One of two things. Either I will be forced to work, (directly through violence or threat of violence, or through withholding of my wages/rations) or I will be given subsistence wages for doing no work at all. But if I get subsistence wages for doing no work, my friends and neighbors will see this and realize that they don?t need to do any work either. And others will become angry at the free-riders and refuse to work as well. Soon the entire system will collapse.

In a state of nature (i.e. no society) individuals must work or starve. There is nothing unjust about this, unless your definition of justice applies not only to human action, but to mother nature as well. When people join together to form a society, this fact of nature still faces them: they must work or starve. But now they have a choice. They can either work together, voluntarily, each person trading his labor and the fruits of his labor in exchange for other people?s labor and property, or, some people can join together, declare the formation of a socialist state, and threaten to do horrible things to those people who are not willing to produce ?for the common good.?

In both situations, people must work or die. We can use either positive or negative reinforcement to achieve these ends. Capitalism is the carrot. Socialism is the stick.

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I've been having a

I've been having a back-and-forth with several acquaintances about the "exploitation" of Third World workers by American companies. It's just provoked this essay, which seems to be in line with this topic.

All my best to my colleagues and compatriots at Cattalarchy, one of my favorite stops on the Web!

The proposition ?in any

The proposition ?in any system, you have to work or starve? is false, and so transparently so that no-one has even attempted to argue in favour of it, given the presence of people who do not work but live thanks to the work of others either others in the past or the present day. Children, to state the obvious.

Again, if we take the example of a mixed economy, or what one might call a partially socialised system, there are many people who eat but do not work, given a benefits system. If the benefits system is adjusted to the economy as a whole, the system does not break apart irreparably, despite the existence of these people. Anyone who believed that ?you must work or starve? has to retreat to the position of saying that such a system is theft by the state. Maybe it is, but it is a system in which some eat but do not work.

We have the argument that a communist-type system that gives out rations without requiring work will be unstable to people desiring to get a free ride. It is somewhat flawed, because totalitarianism does not absolutely rule out giving more rations to people who work more, and the ?subsistence rations? given to the shirker might be bad enough to convince the general population that punishment has been served. But let us use the argument as a framework.

Imagine a reversed argument based on the existence of those who are unable to work. Suppose that it is a general feeling among the population that we do not want children, or the chronically ill or disabled, to starve, or in general become wretched. (Compare the general feeling that we do not want to see our neighbor rewarded for idleness.) And we recognise that it is no-one?s unique responsibility that a certain destitute orphan exists, or that a certain person is incurably ill, but the responsibility for the starvation, wretchedness or death of such people falls equally on everyone, if it falls anywhere. Suppose there is a majority opinion that such people should be made a common responsibility.

Now imagine that someone should call for people to contribute a certain fraction of their income, or even a certain fixed amount, towards subsistence benefits, and that this should apply equally to all who are in the same situation, since otherwise the destitute would be competing between each other for charity, and either some would perish for no good reason, or the total amount spent would be greater than required to just enable all to subsist. And there is a majority in favour.

What will society have to say to the person who refuses to submit a fraction of income (or a fixed amount) in this way, but says it is his exclusive privilege to donate to whichever orphans or invalids he chooses, or to none of them? Surely, people will become angry at such a person, since in order to satisfy the majority desire that no-one should starve, a fixed sum is required at any given time, and in order to make up this sum, the fewer people who pay, the larger the tax required. Given a general agreement to fund some kind of welfare system by taxes, if there is a minority who refuse to pay in this way, they will be seen as just as culpable as the shirker in a communist system.

Hence, in short, (with many omissions) the IRS and the modern ?mixed economy?.

If egalitarian communism is unstable towards totalitarian control or complete breakdown, pure capitalism is unstable (albeit in a rather milder way) towards the formation of some kind of welfare system and the implementation of some kind of universal tax base. Given the thousand natural shocks that man is heir to, the lure of a reliable safety net is too strong; once the majority has taken a decision to construct such a thing, the only way to ensure its existence is to enforce taxes.

Now you may say the majority is wrong to want to subvert the iron principle of ?work or starve?, but this is what the majority wanted at some point, and still want in most countries. (At least, the existence of a nonzero welfare safety net and its funding through universal taxes - the size and shape of the net is a highly debatable point.) Even Milton Friedman wanted it, in the shape of a minimum income.

TomD, It is true that there

TomD,

It is true that there are some people who do not work and still live. Notice that I said, "We can either sell our labor, depend upon charity and gifts, or starve."

Society does not solve the problem of having to choose between work and starvation. Some people must work, and those who do not, like children, must rely on the beneficence of others.

But notice that the society must have some way of giving an incentive to people to work, else they will simply do as they please and the system will fail. Notice also that unless the beneficence is voluntary, some people are being forced to work above and beyond what they would otherwise be willing to do in order to support themselves so that we can redistribute a portion of the fruits of their labor to those who do not work. But this portion taken from their labor is, under Marxists terminology, nothing more than exploitation.

It is somewhat flawed, because totalitarianism does not absolutely rule out giving more rations to people who work more, and the ?subsistence rations? given to the shirker might be bad enough to convince the general population that punishment has been served.

Notice that this violates the principle of egalitarianism - some are receiving more wealth than others, exactly like some receive unequal amounts of wealth under capitalism.

Suppose that it is a general feeling among the population that we do not want children, or the chronically ill or disabled, to starve, or in general become wretched.

Granted there are many people who feel this way. But why do they need to impose their values on those who do not? What if I feel like being compassionate in my own way? Why should I be forced to contribute to the social welfare benefits when I would rather choose to help (or not help) poor people through some other method?

Further, when this choice is taken from the individual, there is no longer anything praiseworthy with helping the poor. People do it because they are forced to do it, not because they choose to do it. A state cannot be compassionate. Only individual people can.

Surely, people will become angry at such a person, since in order to satisfy the majority desire that no-one should starve, a fixed sum is required at any given time, and in order to make up this sum, the fewer people who pay, the larger the tax required. Given a general agreement to fund some kind of welfare system by taxes, if there is a minority who refuse to pay in this way, they will be seen as just as culpable as the shirker in a communist system.

The analogy does not work. While the group who supports collective charity may be angry at those who don't support it, there is no free-rider problem. They still have the desire to contrbute to collective charity, even if some people do not contribute. Whereas, with the shirker in a communist system, there is no general desire to work. If people realize that working and not working results in the same outcome for them, they will free-ride. Not so with regard to charity.

Given the thousand natural shocks that man is heir to, the lure of a reliable safety net is too strong; once the majority has taken a decision to construct such a thing, the only way to ensure its existence is to enforce taxes.

That may be true, but why do they need to force the minority to adhere to their wishes? Why doesn't the majority simply sign a contract with each other which stipulates that those who agree to contribute and follow the rules of their private organization may reap the benefits, and those who refuse are excluded?

Francis, Thanks for the kind

Francis,

Thanks for the kind words. I'm in the process of reading your essay.

I don't think the majority

I don't think the majority are voting for the same thing at all. The poor are voting for whoever promises to give them stuff. The middle class are voting for whoever promises a bunch of stuff and says the rich will pay for it all. The rich vote for... well it hardly matter who the rich vote for, does it?

What they're really saying,

What they're really saying, in other words, is that in a free market society, the only means of livelihood would be production and the voluntary exchange of one's own labor-product (along with voluntary gifts, charity, etc.).

What this means, to stand it on its head, is that it would be impossible to use force to live off another person's labor. Being "forced" to work is just another way of saying you CAN'T force someone else to work to support you.

So what they mean, when they speak of a "human right" to healthcare, food, shelter, education, or whatever, is that one person is born with a right to the product of another person's labor.

P.S. As a mutualist, of course, I'd add the caveat that under actually existing capitalism people are often forced to sell their labor on unfavorable terms, because the state intervenes in the market and stacks the rules in favor of landlord and capitalist. Under a genuine free market, labor would be sold on much more favorable terms, self-employed and cooperative labor would be much more common, and the threshold of work necessary for subsistence would be a lot lower.

While I don't entirely

While I don't entirely disagree with you, Kevin, I'm curious what you think the rules the state implements unjustly in favour of capitalist and landlord.

My own opinion is that certain landlords and certain capitalists (the politically-connected) get most of the perks of the state while other capitalists and landlords have to pay for it.

- Josh