I recently watched a video titled, “Top Ten Capitalist Arguments“, created by a youtuber named Libertarian Socialist Rants. In the video the creator lists what he thinks are the top ten arguments in favor of capitalism and then proceeds to “debunk” them. I’m going to address each of his points here and then explain the reasons why I personally am in favor of the market economy.

‘Libertarian socialist rants’, known as LSR from here on, starts his video by claiming that proponents of capitalism are immune scientific evidence and that the evidence is not on their side. Pretty ironic considering the guy is a socialist. But putting leave that aside, let’s move on to his top ten arguments.

10. Capitalism promotes Innovation

LSR claims that it is a myth that capitalism promotes innovation. According LHR, a recent poll by gallup shows that only 13% of the 180 million employees in 142 countries studied felt that they were engaged with the work they were doing. Laughably, this is provided as evidence of LSR’s assertion that capitalism doesn’t promote innovation. This is nonsensical because not all, and probably not even the majority, of the 142 countries studied were market economies. LSR neglects to mention that the United States, Canada, New Zealand, and Australia are found to have the highest rates of employee engagement in the world, as shown below. Unfortunately for LHR, all the aforementioned countries are among the top 20 most capitalist countries in the world (as measured by the Fraser Institute’s Economic Freedom of the World 2013 index). LSR’s “evidence” that most workers in most countries, capitalist or not, tend to be disengaged from there work really isn’t evidence at all.

gaf

 

LSR goes on to state that giving more autonomy to workers helps to foster creativity. And I would agree with that. He also cites research which finds that performance based pay actually have detrimental effects on performance. I find this very agreeable since a considerable amount of research comes to similar conclusions. However, this is a critique of a system of compensation which applies to only a minority of the working population, this isn’t a critique of capitalism.

LSR proceeds with the statement, “we are more than capable of providing basic education for everybody, but due to global economic inequality this just doesn’t happen.” This is a prime example of a non-sequitur. LSR’s logic literally doesn’t make sense. He doesn’t explain how inequality would cause a lack of universal education nor does he provide any sort of evidence that this is the case. It should be noted that although LSR thinks global inequality is a problem, and that capitalism is causing this problem, in fact, the world as a whole has been becoming more economically free over the last few decades. Coinciding with the expansion of capitalism, research has found that, “various measures of global inequality have declined substantially and measures of global welfare increased by somewhere between 128% and 145%” and that the percentage of the global population living in absolute poverty fell 80% during the same time period (1970-2006). This alone is not proof capitalist caused this rapid reduction in poverty and inequality, but more academic work suggests this is the case. 

LSR goes on to ask that if capitalism caused innovation, than why are people being needlessly deprived of the means to innovate? Uh… once again, this makes no sense. I fail to see how capitalism is depriving anyone of anything, and LSR doesn’t explain his reasoning or provide evidence in favor of it. He goes on to state, “education under capitalism typically involves destroying creative and critical thought and training people for the mindless obedience of the workplace.” That’s an odd statement considering the vast majority (90%) of children enrolled in K-12 education go to school run by the government (in the US). For the United Kingdom the percent of children enrolled in public schools is even higher. Apparently LSR just doesn’t understand what capitalism is, nor is he aware that research finds that private schools consistently outperform public schools.

9. Free markets increase economic development

LSR states that the belief that free markets increase economic development is false. He cites the fact that Latin America and Sub-Saharan Africa had slower per capita income growth before some countries adapted capitalist reforms (economic liberalization), than after. Here’s the thing, many countries in these regions did not engage in reforms, others did, and not all countries reformed to the same extent. Also, numerous other factors affect economic growth, for example, richer countries almost always have more slowly growing economies than poorer countries. Without accounting for the influence of phenomenon like this, and other variables which affect growth, any correlation is absolutely meaningless.

LSR also goes on to say that countries that are currently developed, like the United States and United Kingdom, utilized protectionist policies (which restricted international trade) and because of them got extremely wealthy. It really seems as though LSR is adamant on cherry-picking examples in favor of his worldview and relying solely on simple correlations as evidence. Anyone can cherry pick evidence, for example, research from the International Monetary Fund shows that China’s economic liberalization lead to unprecedented economic growth, but that doesn’t mean this is generally the case.

So what does the broad statistical evidence actually say? Well, it says that LSR is wrong. (Note that economic liberalization refers to policies which expand the scope of the market, such as privatization, lowering tariffs, etc.)

Using data from 140 countries over the time period 1960-2000, economists from Bocconi University compared countries which underwent economic liberalization to those that didn’t, and accounted for other relevant variables and found that, “Economic liberalization is good along all dimensions: it is accompanied by better structural policies and better macroeconomic policies, and it is followed by improved economic performance. This timing suggests a causal interpretation, at least with regard to economic outcomes.”

In regards to trade liberalization, which is reform which lowers barriers to international trade, the evidence consistently shows that such reforms improve economic performance. According to one study which examined 141 trade liberalizations and compared economic performance before and after liberalization (after accounting for relevant variables) , “Per capita growth of countries liberalization was some 1.5 percentage points higher than before liberalization, and investment rates were 1.5- 2.0 percentage points higher.” Subsequent research from A. Estevadeordal and A. M. Taylor took the analysis further by comparing growth rates before and after 190 when a wave of trade liberalizations occurred. The economists divided countries into an experimental group, the countries which liberalized trade regimes, and a control group, those that did not. According to a summary of their research, “[the authors] find strong evidence that liberalization of tarrifs on imported capital and intermediate gods raised growth rates by about one percentage point annualy in the liberalizing countries.” Research has also shown that trade liberalization has caused greater economic performance in Sub-Saharan Africa, contrary to LSR’s assertion that it lead to lower growth rates.

Reviews of the economic research on the relationship between economic freedom (capitalism) and economic growth consistently demonstrate that freer markets are associated with greater economic performance. LSR literally doesn’t know what he’s talking about. He further goes on to state that a lot of innovation occurs in the state sector of the economy, not the free market. Well, this is just idiotic. Of course the state innovates, and of course state funding for research leads to innovation, but to imply that all innovation comes from the state is absolutely stupid. Though I can’t find an estimate on the matter, I would imagine the vast majority of innovation is derived from the private sector. Entire books have been written solely about how the free market and the private sector promotes innovation, to suggest that it doesn’t is as nonsensical as saying that NASA doesn’t.

feminism BS

 

8. But aren’t markets a rational means of organizing economic life?

LSR notes that 30-50% of the food that is produced is wasted and that for this reason markets are inefficient. In other words, we produce too much food. However, it’s worth examining why this is the case. According to a summary of the report that statistic is derived from:

In less-developed countries, such as those of sub-Saharan Africa and South-East Asia, wastage tends to occur primarily at the farmer-producer end of the supply chain. Inefficient harvesting, inadequate local transportation and poor infrastructure mean that produce is frequently handled inappropriately and stored under unsuitable farm site conditions.

In mature, fully developed countries such as the UK, more-efficient farming practices and better transport, storage and processing facilities ensure that a larger proportion of the food produced reaches markets and consumers. However, characteristics associated with modern consumer culture mean produce is often wasted through retail and customer behaviour.

Major supermarkets, in meeting consumer expectations, will often reject entire crops of perfectly edible fruit and vegetables at the farm because they do not meet exacting marketing standards for their physical characteristics, such as size and appearance. For example, up to 30% of the UK’s vegetable crop is never harvested as a result of such practices. Globally, retailers generate 1.6 million tonnes of food waste annually in this way.

Of the produce that does appear in the supermarket, commonly used sales promotions frequently encourage customers to purchase excessive quantities which, in the case of perishable foodstuffs, inevitably generate wastage in the home. Overall between 30% and 50% of what has been bought in developed countries is thrown away by the purchaser.

Basically consumers tend to buy more food than they care to eat, in developed countries at least. They also don’t buy certain foods based on their appearance, in developed countries at least. Unless LSR thinks that people should not be free to choose what foods they can buy and what they can do with it I find this a very odd criticism. The most compelling argument one could make from this information is that there should be limitations on how much a producer can advertise their food product, but that’s incredibly un-libertarian. But hey, I’d rather have a market economy in which people voluntarily buy food and waste it than a socialist economy, such as those of Maoist China and Soviet Russia, which couldn’t even feed themselves, resulting in mass starvation,  because collectivized farming was so inefficient. It should be noted that empirical research finds that “countries can increase the utility of their national resources by approximately 45% simply by converting to market-based economies” and also consistently finds that the private sector is almost always more efficient than the public sector. Despite what LSR sees as inefficiency in the food industry, markets as a whole tend to be more efficient than the state. The evidence as a whole suggests that markets are a better way of allocating resources than through central planning. 

LSR goes on to say  that companies frequently produce products which break down quickly so that people will buy more of them. He asks, “how stupid is that?”. This is comical considering he doesn’t provide any evidence in favor of his assertion. Literally none. But seriously, there are reasons why we wouldn’t expect this to be the case. For one, not many people would be stupid enough to buy from the same producer who sold them a bad product in the past. Furthermore, we already have things like warranties and product quality assurance to ensure that goods are insured against the risk that they might break. LSR’s logic doesn’t make sense under scrutiny and he provides no evidence that his assertion is true.

LSR goes on to note that Keynes believed that automation would enable people someday to have only 15 hour work weeks. LSR claims that the reason we don’t work 15 hours a week is because “markets don’t let us”. This is an odd assertion considering that, in the United States at least, people are working less and making more over time, just as Keynes predicted (but not to the same extent). This fact refutes the unfounded assertion that markets prohibit people from working less and earning more.

lol

LSR then states that people do “bullshit jobs” so they can spend their money on “bullshit products” that they had to be made to want. The idea that markets are forcing people to work specific jobs or to buy specific products is ludicrous. Honestly I think he’s confusing markets with government. Nonetheless, what is a “bullshit job” or “bullshit product” is entirely subjective. I don’t think this guy should call himself a libertarian if he doesn’t believe that people should be free to do the jobs they want or buy whichever product they please, and judging by his rhetoric this is what appears to be the case.

7. But surely we can prevent bad business practices through ethical consumerism!

Let’s take a second to remind ourselves that this is what LSR thinks on of the top ten arguments in favor of capitalism is, despite the fact that this isn’t actually an argument in favor of capitalism. LSR goes on to make the assertion that news channels are economically structured to adhere to the will of big business since business funds them via advertisements. This makes about as much sense as saying that a music and video streaming application (like Spotify or Youtube) can get away with providing their users with music and videos they don’t enjoy solely for the reason that they are funded by advertisements. This is not a real argument. If consumers didn’t like mainstream news channels, they wouldn’t watch them, and there would be no reason for anyone to advertise on those channels. According to LSR, popular media won’t provide information which exposes bad business practices. In his usual manner, he provides no evidence this is actually the case. And we can certainly doubt this is the case considering the fact that the media commonly reports on things such as product recalls.

6. Don’t government regulations address the question of bad practices?

Holy hell, how does LSR believe this is an argument in favor of capitalism? It’s a question for goodness sake. LSR makes a number of assertions and provides no evidence whatsoever for them, including the assertion that having workers control the means of production is the best way to stop bad business practices. This is an odd assertion considering that the collectivized economies of Maoist China and Soviet Russia absolutely trashed their environments, which most people would consider a bad practice.

5. But don’t you by things from corporations? Doesn’t that make you a hypocrite?

Again, this is not an argument in favor of capitalism. Rather it is another stupid question manufactured by LSR which probably no pro-market person has ever asked him. He compares this question to being asked if driving a Volkswagon makes you a Nazi. He doesn’t actually explain his logic, but who cares? The original question is almost entirely irrelevant. It’s not an assertion in favor of capitalism.

4. Capitalists put risk into their businesses! Surely they should own them!

LSR responds to his own manufactured assertion by comparing capitalists to slave owners and Nazis. He says that authoritarians who put risk into gaining control over others doesn’t mean they are entitled to ruling over others. You know, because the person who opens a business is exploiting the people who voluntarily work for him simply because he owns the business and not the workers as a whole.

3. But living standards improve overall, even for the poor!

LSR actually doesn’t dispute the fact that capitalism has made the poor better off, rather he compares capitalism to slavery and argues that slaves may have been better off under slavery, but that’s not an argument in favor of slavery. He says that living standards improved under facism in Germany and Stalinism in Russia (very debatable), but again, these are not arguments in favor of these systems.

I, however, would point out that capitalism is vastly superior to all of these systems. Research finds that the more capitalist a country is, the wealthier and happier their citizens are. I would argue that’s a strong case in favor of capitalism. However, the point LSR seems to be making is that the ends don’t always justify the means. And I agree, I just think he’s an imbecile for comparing capitalism to slavery and facism. Capitalism is about voluntary exchange and freedom of association, and people like myself tend to think that it is the most moral economic system in existence. Under capitalism, LSR and his socialists friends are free to start a worker co-operative where the workers own the means of production and distribute profits in a democratic manner. Under socialism however, capitalist ownership of the means of production is forbidden.

2. But capitalism is a result of human nature!

I’ve made many cases in favor of the market economy and “it’s human nature” isn’t one of them. I don’t think I’ve ever seen this as an assertion in favor of capitalism. Regardless, LSR notes that capitalism has only existed for a few hundred years while humans have existed for tens of thousands. Apparently unaware of his hypocrisy, LSR makes the assertion that communism is natural in humans. He paints a cute picture in which communism is a system of social co-operation in which people support one another. He states, “it’s not as if we’re forced to do these things, we do them because they are natural and enjoyable.” I find this comical because one could just as easily use his own argument against him by pointing out that communism’s existence is fairly recent in human history and throughout human history there hasn’t been a tendency for societies to have social ownership of the means of production or be absent of social classes, money, and the state (as communists assert they should be).

LSR then goes on to make a number of unfounded assertions, including the claim that schools (which are run by the government by the way) teach children to be competitive and hate each other. He ends up calling schools “institutions of sadism”. He also says there is no biological justification for goods and services to be allocated by means of the market. Comically enough, LSR endorses voluntary social co-operation but is apparently unaware of the fact that market allocation is driven by this very mechanism of human interaction.

1. Capitalism is the only system that’s possible. There is no alternative!

I’ve literally NEVER heard any proponent of capitalism say this. Advocates of the market economy usually proclaim the it is more moral and more efficient than the alternatives, not that it is the only system possible. This is literally a shameless straw man argument made by LSR.

Parting thoughts: 

LSR’s video really is nothing more than a bunch of non-arguments arguments which he then attempts to, and fails to, debunk. The empirical evidence I’ve cited above is clear. Capitalism works more efficiently than the alternatives. Furthermore, it’s the most moral economic system imaginable, one based on the concept of freedom of association and voluntary exchange. LSR went out of his way to try to make capitalism look bad, but inadvertently showed how ignorant and illogical he is. Nice job LSR, nice job.