• On the Skepticism of Free Market Economics (part 2): No True Capitalism

    I will start you off with this comment:

    However let’s move onto your left-wing economic degenerate lies where you say You then hit out with this garbage in response to me stating that free markets have never failed; “That’s because you use the No True Scotsman fallacy to invalidate any which fail.” No, I haven’t used a No True Scotsman fallacy, because that’s not some fallacy, it’s an historical fact. There has never been a free market in recorded history that has failed, not one. I’d love to see you attempt to point out one, because you can’t. This is hilarious, you call yourself a centrist? Fantastic, you believe in the mixed economy, despite historical evidence having proved already clearly that there has never been one mixed economy in world recorded history to ever sustain itself in the long term. An idiot that thinks Socialism can benefit their economy, just proves your head is filled with air.

    Perhaps I should call this article the No True Capitalism Apart From When It Suits ME. As I shall explain.

    I have written a previous and lengthy piece to this debunking certain myths and pointing out certain problems with free market economics in its most fundamental ideal. This is all a result of a thread on a You Tube video (from which that comment above, directed at me, was taken) which involved a somewhat hysterical libertarian who, aside from rude and immature snide remarks or open insults, and who invoked Danth’s Law at every possible moment, made myriad claims about capitalism, free market economics, corporatism and socialism. It started out (and I am only posting the meatier relevant comments, not the tirades of naive name-calling and drivel) with these such comments:

    The GOVERNMENT destroys more jobs than what it creates, the government creates jobs out of YOUR tax payers money; but in order to fund those jobs, you are hit with high taxation to pay…

    It is the PRIVATE SECTOR that is the job creator, NOT the government ;)

    Which set me up as some kind of communist socialist who apparently thought the private sector played no part in successful economics. Well, I advocate a middle ground of healthy mixed economies, which actually represent all of the world’s developed economies, as I will talk about later. As for job creation and whether it is good or better for the government to try their stimulating hand at it, it is a confused battlefield. First of all, governments do indeed create a massive amount of jobs. Whether this makes good return on investment is actually pretty hard to accurately gauge, as this article sets out very well: “Government jobs vs. private jobs: Which help the economy more?”

    Essentially, though, the commenter is claiming a false dichotomy, as both seem to play a vital role in job creation. Trying to determine which does better is difficult to ascertain:

    “Is a teacher or a firefighter working in any less of a job than I am?” asked Heidi Shierholz, an economist with the liberal Economic Policy Institute. “Fiorina is wrong in implying that public-sector jobs don’t create other jobs. They have huge ripple effects into the private sector.”

    Taking Fiorina’s perspective to its logical conclusion would suggest that “anarchy maximizes growth, which is ridiculous,” said Bruce Bartlett, a columnist for Tax Notes, Fiscal Times and the New York Times’ Economix blog who served under presidents Ronald Reagan and George H.W. Bush. “Obviously, teachers, police and many others contribute significantly to growth. The question is simply an empirical one—do we spend too much or too little on such jobs?”

    So the jury is still out, which is interesting given the extremely dogmatic ideology of the commenter in question. (for information on the myth of efficiency in the private sector vs the public, see here).

    When I use the USA as an example of a capitalist economy striving, in many quarters, for free market economic ideals, the commenter states things like:

    That’s right, NEOCONSERVATIVES are Socialists, so when he attempts to target you with the RIGHT-WING garbage, force him onto INDIVIDUALISM vs COLLECTIVISM, that’ll corner him.


    the United States of America is not a Capitalist economy, it’s Corporatist.

    This is where he starts moving into the No true Capitalist fallacy, which he later fully embraces. There is a conflict within many quarters between corporatism and capitalism. Capitalism is defined normally as An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state. Now the problem here is that the definition of capitalism favoured by the commenter is far more particular and detailed, deferring to the philosophy of Ayn Rand. It goes something like this (excuse the long quote but this is important):

    Defining our terms is the first step we must take in order to prove capitalism/corporatism unionists wrong. Capitalism is a social system based upon the recognition of individual rights, including private property rights where all goods, both intermediate goods and final goods, are owned privately. The “rights” referred to above are ethical-legal principles that identify and sanction man’s freedom of action strictly within a social context.

    Under capitalism, each individual possesses the legally unalterable authority to support and sustain himself, to conduct himself in accordance with his own independent judgment, to control the material product of his mental and/or physical labour, and, in connection with these rights, each and every individual has the legal authority to be free from the initiation of physical force. The initiation of physical force, also known as aggression, refers to any act that disturbs or upsets the soundness or cohesion of a non-aggressor’s body, his property, or ownership of his property. A man must think and act in order to survive; his survival requires both mental and physical activity. Rights recognize and sanction man’s freedom to proceed with thinking and acting in his self-interest. Only the initiation of physical force can frustrate another’s attempt to take those actions condoned by his rights. A man is prevented from exercising his rights only from the coercion of another. Murder, assault, vandalism, and theft are apt examples. Such actions and all other examples of aggression are illegal under capitalism, period. Accordingly, all relationships under capitalism must be formed voluntarily between consenting adults.Furthermore, this absence of aggression that exists under capitalism allows for the formation of thefree market, the vast network of voluntary exchanges of property titles to intermediate and final goods.

    Government intervention is yet another exemplar of initiated force since it is the use of aggression to fulfill certain socio-economic objectives. As such, it contradicts the essential nature of a capitalist economy as a non-aggressive economy. An economy remains capitalist so long as the government, or any other agency for that matter, refrains from intervening coercively in the peaceful private lives of citizens. The implications of this fact are substantial: under pure capitalism there are no taxes, no price ceilings, no price floors, no product controls, no subsidies to either the rich or the poor, no public streets, no public schools, no public parks, no central banks, no wars of aggression, no immigration restrictions, etc. Government neither resorts to aggression under capitalism nor does it sanction its use by others, end of story. [source]

    As you can see, this is far more than the Average Joe understanding of the word. But the crucial point to make here is that this understanding of capitalism does not realistically exist. In the world. Anywhere. Nor has it. Ever.

    Pure capitalism and fre market ideology would require, at its extreme and true form, no borders, since there would effectively be no government intervention, since there would be no taxes or regulation. It  reminds me of this meme:


    Back to the point in hand: so if the commenter, or anyone else, makes a claim at the success of capitalism, they are using the fallacy of equivocation or some kind of bait and switch technique.  There never has been pure capitalism, and yet people like this commenter extol its virtues, and claim its successes. There has been no pure capitalist nation, so how can there be such successes, and how would the commenter know how good such a pipe dream of a scenario would be?

    Corporatism, on the other hand, can be seen as:

    It is a social system where the government intervenes aggressively into the economy, typically with political instruments that benefit large corporations and enterprises to the detriment of smaller businesses and private citizens. Such instruments include subsidies, tariffs, import quotas, exclusive production privileges such as licenses, anti-trust laws, and compulsory cartelization designs. All involve the initiation of physical force: subsidies come from taxes, tariffs are taxes, import quotas restrict trade, license schemes prohibit non-licensed producers from producing certain goods, anti-trust laws allow competitors to gain or retain market share through legal competition in court, and compulsory cartelization speaks for itself.

    Similar to socialist governments, corporatist authorities seize control of land and capital goods when they feel it is necessary to do so without regard for private property rights. However, unlike socialist governments, corporatist states usually do not formally nationalize private sector firms, choosing instead to assume de facto control over them rather than de jure control. This difference however is procedural, one of style, not of essence, making it superficial – ancillary at best – and therefore fundamentally useless as an argumentative tool of fascists and socialists to distance themselves from each other. Corporatism is a system of institutionalized aggression. Between the complementary terms “capitalist” and “non-capitalist,” corporatism finds itself comfortably within the latter. [source]

    And the differentiation is utterly valid. This is more accurately what anti-capitalists rail against; it is what most economies in the world are. But I cannot see a way that any economy would or ever could be fully capitalist in the way described in detail above, for the reasons mentioned in the previous post and hinted above. The free market cannot arbitrate morally, and every time we move to eradicate borders (say, the EU, in some sense), so-called libertarian parties react against immigration and free movement of people. We would have to rely on entire populations to operate individualistically and morally. Without wanting to get on to evolution and evolutionary psychology, there is a reason that we have evolved morality as a social species, working as collectives.

    The commenter continued in the thread:

    Point to me a mixed economy that ever sustained itself in the long term? You can’t, there’s never been a mixed economy in world recorded history that has ever worked; none. The hilarity is, the most successful economic time period in Sweden’s history was under their free market years between 1870 to 1960, yet there they are, a country that for years had the same style of mixed economy as that of Norway, yet was lacking innovation and production and could not rival its growth rate of the previous free market it had. I mean you wrote out about free market Capitalism but pointed out the United States who hasn’t had a free market since between 1896, that to me just summed it up to a tee.

    Of course, this then becomes a claim that no economy has ever succeeded. Ever. Because economies all sit on a continuum of governmental interference and existence, and, as discussed in the previous post, we have the Sorites Paradox which reveals the difficulty in assigning a definitive label (such as free market economy or even capitalist) to any economy in existence and for that to be objectively or scientifically the case. One person’s capitalist economy is another person’s mixed economy. It seems that the commenter extols the virtues of capitalism when he can allow himself to ascribe capitalism to an economy when it suits him and his conclusions, but cries foul and failure, and ascribes corporatist or mixed, when that best suits him.

    This really is the No True Scotsman (Capitalism) fallacy which is made even worse when he names particular economies, to be discussed later. As wiki defines:

    No true Scotsman is an informal fallacy, an ad hoc attempt to retain an unreasoned assertion.[1] When faced with a counterexample to a universal claim, rather than denying the counterexample or rejecting the original universal claim, this fallacy modifies the subject of the assertion to exclude the specific case or others like it by rhetoric, without reference to any specific objective rule…

    The use of the term was advanced by British philosopher Antony Flew:

    Imagine Hamish McDonald, a Scotsman, sitting down with his Glasgow Morning Herald and seeing an article about how the “Brighton Sex Maniac Strikes Again”. Hamish is shocked and declares that “No Scotsman would do such a thing”. The next day he sits down to read his Glasgow Morning Herald again; and, this time, finds an article about anAberdeen man whose brutal actions make the Brighton sex maniac seem almost gentlemanly. This fact shows that Hamish was wrong in his opinion but is he going to admit this? Not likely. This time he says, “No true Scotsman would do such a thing”.[2]

    When the statement “all A are B” is qualified like this to exclude those A which are not B, this is a form of begging the question; the conclusion is assumed by the definition of “true A“.

    All the commenter really does is say “That is not capitalism, that is corporatism, which is equally as socialist, though in a different way. However, THIS is somehow capitalist.” Except that that which he refers to is no more capitalist (or is nominally so) than that which he claimed was corporatist.

    What is particularly poignant is that the commenter was responding to criticism I was making against the UK Independence Party (UKIP) which has come to political prominence in the UK (very similar to the Tea Party in the States). The party stands for anti-EU, anti-immigration, pro-libertarian politics; small government and taxes, big backing from, you guessed it, corporates. I pointed out to the commenter what is, to me, a massively obvious contradiction within this party: they claim to be anti-immigration at the same time as being libertarian. Libertarianism is all about the individual being their own personal god, as Ayn Rand saw it. Ayn Rand was the godmother of libertarian philosophical and political thought (though she was no fan of corporatist free market economics) which entails freedom of the individual in striving towards individualism away from oppressive socialism and collectivism.  However, one of the core ideals of personal freedom is freedom of movement, right? In fact, Ayn Rand was herself an illegal immigrant who was no fan of borders, advocating open borders, indeed. In fact, the US Libertarian Party platform states:

    We support the removal of governmental impediments to free trade. Political freedom and escape from tyranny demand that individuals not be unreasonably constrained by government in the crossing of political boundaries. Economic freedom demands the unrestricted movement of human as well as financial capital across national borders. However, we support control over the entry into our country of foreign nationals who pose a credible threat to security, health or property.

    So any proper libertarian politic should include a movement to open borders and lack of regulatory constraint. Precisely what UKIP oppose. In other words, the commenter is cherry picking his policies based on social identity theory-laden in-group and out-group psychology. The us and them of nationalism plays a trump card over the true ideals of libertarian politics. Which is to say, he appears to be a rather fair-weather libertarian. He post hoc rationalises such an approach in this way:

    I mean for a start, I would be all for open borders on immigration IF we had a free market economy, but what you completely ignore is, we don’t, we have a population brainwashed by Marxism and a country over £1.4 trillion in debt.


    First of all, things would be wonderful if we could move directly straight towards a free market economy where immigration would not be a problem, unfortunately however, you seem to be ignorant towards the fact that it will take time for people to adjust towards a free market, therefore can’t move directly towards one; secondly that we are sitting over £1.4 trillion in debt and the more you let into the country, the more housing you need, which do we have the money for that with £1.4 trillion debt? No; thirdly, you are very ignorant to the fact that the term free market is not as black and white as you paint it to be, so yes, it is still possible to have a very strong free market economy with controlled immigration. In fact one of the reasons for housing and rent costs being so high in Hong Kong is the direct fault of overpopulation. Oh but you seem to think British people today sitting £1.4 trillion in debt can afford those higher housing costs.

    I love it when people I argue against post things like this as it completely unravels their arguments to be nothing more than psychological presuppositions. Suddenly, when it suits him, capitalism can sit much further up that regulatory continuum than he was earlier arguing for. Suddenly, capitalism doesn’t have that clear definition, but has a muddier definition dependent on who you are and how you want it defined. He seems to want to be able to drop things that he deems are not important or necessary, and still allow it to be capitalism, but when it includes other things he is less comfortable with, it becomes not-capitalism.

    No True Capitalism.

    In fact, he tries to argue it both ways to cover his backside: 1) free movement supervenes on debt elimination; 2) free movement is not actually necessary for free market libertarianism.

    How convenient!

    Such having your cake and eating it antics can equally be picked apart from such little exasperated comments as:

    giving MORE power to a state with gay marriage was some how libertarian[!]

    which is in response to, I think, me pointing out that there is a weird disconnect in the left-right political paradigm since right wing politics seems to argue for small government in economics, but big government in social aspects like family and what you do in your bedroom. The left appear to want to give people more personal freedoms (e.g. gay marriage) but regulate business more. However, he sees allowing gay marriage within an existing legal framework as somehow nanny statism. So he would prefer the status quo of governments retaining its illegality (regulation) rather than stepping in to allow for that individual freedom. Just incredible mental gerrymandering to fit to his idea of how things should be seen in his individualist paradigm.

     Where I will leave this second post is with this next claim:

    No one has said that a truly laissez-faire economy has ever existed, but to flat out claim that one would never work? Complete and utter garbage, never mind that however, what matters is, free markets have existed and not once has any free market failed, never. Not once in history, they’ve always been a success. We saw that success in the United States in the late 19th Century, same again with the British Industrial Revolution, Hong Kong, Singapore, South Korea, Chile, but of course, we’ll ignore that fact now, won’t we?

    Which is entirely relevant to what I was saying before. He claims all over the place that x or y is not capitalist, and then admits that there is indeed no example of a truly laissez-faire economy as I have pointed out. We could be getting somewhere. The problem here is he never sets out what “work” means. Would a totally laissez-faire economy work? What does that mean? Succeed economically? Morally? Socially? Wellbeing? I can’t see that it would work as a social, political and legal framework due to human nature. Leaving society to self-organise successfully, knowing our human nature, would surely self-destruct, allowing freeriders run of the place. In fact, it wouldn’t, it would form itself into structural organisations and rule-based frameworks, you know, like society is now. There is a reason we have society like we do!

    What is funny is that he claims that I think such libertarianism wouldn’t work is ridiculous because we have never had it, so how would I know, whilst at the same time claiming it would work, creating his entire politic upon it, and striving towards that end, without himself knowing whether it would work or be that case! Wow. Now that is hypocrisy!

    In the next post, I will look in some depth at the key claim:

    what matters is, free markets have existed and not once has any free market failed, never. Not once in history, they’ve always been a success. We saw that success in the United States in the late 19th Century, same again with the British Industrial Revolution, Hong Kong, Singapore, South Korea, Chile, but of course, we’ll ignore that fact now, won’t we?

    The skeptical tools need to come out, methinks.


    Category: EconomicsFeaturedMoralityPhilosophyPolitics


    Article by: Jonathan MS Pearce