Money, Greed, and Five Favorite Fallacies

As you may have noticed, my passion against Schneider has burned out a bit, since I finished reading him almost two weeks ago, though I will still do my best to blog through the rest of the book.  I read John Medaille’s Toward a Truly Free Market and it was a fantastic breath of fresh air–I reiterate the recommendation I made before I read it: everyone should go read it.  More about it in due course.  For now, though, I’m afraid I have another very unhappy review to share, Jay Richards’ Money, Greed, and God.  (I will admit up front that I did not finish this book.  I made it to the halfway point, and then determined that to continue, with no promise that I would ever be offered a coherent argument, was merely an act of self-flagellation.  I should also point out, lest I seem to be unfairly singling out really lame books to critique, like a scrawny third-grader beating up on kindergarteners in order to feel important, that the back cover of this book is bedecked with laurels like “the definitive case for capitalism,” bestowed by none other than George Gilder, and is rated very highly on both Amazon and Goodreads.  If this is the definitive case for capitalism, then I’m afraid capitalism had better give up and pack its bags.)

This book is laced with unflattering ironies.  The author repeatedly adopts the stance, so attractive to American audiences, as the champion of common-sense over against the obfuscations of intellectuals, who spin webs of fantasy and idealism out of touch with reality.  But he does this while remaining consistently at the realm of abstraction, hypotheticals, and straw men, never deigning to come down and engage economic realities.  Sometimes this equals blatant falsehood, like where Richards asserts that “government spending as a portion of GNP has grown exponentially in recent decades.”  The actual growth?  12% (from 18.4% to 20.6%) over fifty years, and actually a decline in the last twenty.  (You can see all the details here.)

On a larger scale, it means that Richards never actually touches down to earth and tells us what he is talking about.  What is “capitalism”?  Since he never tells us, he can simply duck and hide from opponents as needed–whenever their attacks hit home, he can conveniently claim that as “not-capitalism,” and whenever there is something good that the modern world has given us, he can claim it for capitalism.  This is common enough in books of this genre, as is the tendency to camp out in abstractions and hypotheticals.  We find here almost no real grappling with modern economic realities, but rather platitudes about how an ideal free market functions in principle, and how wealth need not be a zero-sum game.  

Throughout, though, he writes in homely and down-to-earth style, in order to strengthen the impression of common sense over against the distorting sophistications of the academics.  If he used such rhetoric as an aid to clear and cogent logic, it might work, but when it is used to mask the absence of logic, it just makes him look like a demagogue.  Here’s a case in point: “The Ten Commandments–a sort of summary of all God’s laws–take private property for granted.  For instance, the eighth commandment, the one against stealing, implies that we may have property.  Otherwise, there would be nothing to steal, and the commandment would make no more sense than an order not to fraternize with four-headed Jube Jube monsters.  (No, I don’t know what they are, either.  I just know they don’t exist.)”  As I’ve pointed out before, the eighth commandment taken alone merely implies the existence of fixed property relations of some kind–it says nothing about what form those should take–capitalist, distributist, communitarian, or even socialist!  Perhaps Richards hopes that his readers will be so distracted by Jube Jube monsters that they won’t notice the logical lacuna.  

The same complaint can be made against Richards’s extensive use, early on, of a first-person narrative.  He was once an idealistic socialist, he confides in us, back when he was a teenager and it was cool to be radical.  He used to be convinced of all this rubbish, but then when he started looking at real facts, he learned better, and grew to embrace capitalism.  This, presumably, is to help his case, by conveying to the reader that this is not some ideologue, but someone who knows the other side inside and out, and has rejected it for sound intellectual reasons.  However, given that he never deigns to share any of these sound intellectual reasons with us, but resorts to all kinds of straw men and logical loop-de-loops to make his case, this personal testimony just makes him look naive and impressionable.  

Despite the promises of the title and the back cover, Richards does not really attempt in this book to argue positively for capitalism, and certainly not to offer a theological argument for it (inasmuch as Scripture appears, it is generally only as something that Richards defends himself against).  All he really attempts to do is to show that capitalism “is not the problem,” by means of refuting eight “myths” about why capitalism is bad. Rather than deal with Richards’s responses to these as such, I wanted to respond by pointing out five fallacies that pervade his argument through the first few chapter.  The first three are primarily methodological, the latter two primarily substantial.  I will call them The Dystopia Fallacy, The Tweaking Fallacy, The Not-Necessarily Fallacy, The Coercion Fallacy, and The Theft Fallacy.  In a later post, I will discuss the issue of Private Property and Inequality (non-)Problem, which relates closely to the reasons I researched the book in the first place.

 

1) The Dystopia Fallacy

In this fallacy, Richards picks the worst possible example of an alternative to capitalism, and uses it as a bogeyman to scare people away from imagining that there could be alternatives.  The first chapter does this on a grand scale, and in the most fantastically cliched fashion: Look at the massive evils done by countries that were professedly Marxist!  Ergo, capitalism is better than all the alternatives.

For this argument to work, it would require at least these four assumptions:

1) Marxism is the only alternative to capitalism.

2) The countries in question practiced Marxism effectively.

3) The evils that these countries wrought were directly due to their Marxism.

4) Similar evils have not been wrought by countries trying to impose capitalism on unwilling populations.

In fact, I think, all four of these assumptions are invalid.  The first is so baseless that it bewilders me how otherwise intelligent people manage to persist in repeating it.  Richards’ book takes no account of phenomena like European democratic socialism, not to mention of course alternative economic visions like distributism.  The second is eminently disputable.  Leninism, Maoism, etc., have their roots in Marxism, but differ in profound ways from what Marx argued for and envisioned.  One massive and crucial difference is the fact, which Richards notes in passing but pays little attention to, that communism took root in agrarian and Third World countries, rather than in developed Western industrial nations, the context in which Marx developed his ideas.  Unsurprising, then, that it failed so abysmally.  The third fails also, for related reasons.  Again, Richards notes that “revolutions never sprang up in advanced industrial societies where there was a strong rule of law, but rather in poor agrarian cultures with career tracks for despots.”  So Cambodia to the United States should not be an apples-to-apples comparison in determining the relative merit of an economic system.  Many of these evils have been due to despotism in general, and communism is just the particular form it has taken for some countries in this century.  Brutal despotisms on a massive scale have been pretty common historically in places like Russia, China, and Cambodia.  The technology of the twentieth century has merely made it far easier for this brutality to occur efficiently on a massive scale.  This then relates to the fourth assumption.  It would be fair to ask whether, in “agrarian cultures with career tracks for despots,” capitalist regimes of some form or another have practiced terrible brutality and tyranny in the twentieth century.  The recent history of Latin America, unfortunately, answers that question in a resounding affirmative.  

 This sort of fallacy continues throughout the book so far as I have read, using, for instance, examples of a really poorly-conceived and poorly-executed government policy to “prove” that government intervention in the “free market” is always bad; or quoting out-of-context and poorly-worded complaints against capitalism to prove that all forms of opposition to capitalism result from fuzzy thinking.  Meanwhile, he routinely chalks up all the marvels of modern life to free-market capitalism without any argument. This is nothing but post hoc, ergo propter hoc–we had capitalism, now we have the microwave; clearly the latter must come only from the former.  

He is correct, in short, to claim that modern capitalism need not be perfect, only that it needs to be better than any viable alternatives.  But to demonstrate that it, at its best, is better than one particular alternative at its worst, doesn’t get him very far to proving it better than the alternatives.  To be fair, he either needs to compare really bad examples of anti-capitalism with really bad examples of capitalism, or really good examples of anti-capitalism with really good examples of capitalism.  Otherwise, it’s nothing but propaganda.

 

2) The Tweaking Fallacy

This is a common approach among free-marketeers.  What they do is they set up some idealized scenario of a well-functioning market, and then hypothesize one particular change in policy that is intended to make things work better.  Unsurprisingly, the change upsets the system, and ends up doing more harm than good.  But most intelligent people agitating for change don’t just want to make one little change in the system; they want to make a lot of changes, building on one another.  Or they want to change the assumptions inherent in the system.  

An example of Richards’ use of this fallacy (again, quite cliched) is with respect to minimum wage.  If you raise the minimum wage in a well-functioning market, argues Richards, you will increase unemployment, and thus make things worse off on the whole.  Fair enough.  But any responsible initiative to raise the minimum wage would gauge the possible impact of a wage hike on employment (which, depending on the current wage level, might not actually be much at all), and would take steps to avert ill effects.  Or a distributist might propose ways to remodel the entire system so as to both raise wages and employment levels (as quite persuasively argued by John Medaille in Toward a Truly Free Market).

The tweaking fallacy can be conveniently combined with the dystopian fallacy, as Richards illustrates with the minimum wage issue.  He imagines a scenario in which the minimum wage was raised to $1,000 an hour and shows us how bad the effects would be.  Presumably, then, we are to assume that the effects of a smaller raise would be bad too, in the same way, only to a lesser extent.  But logic does not support such an assumption, and the “argument” thus serves only the purpose of alarmist rhetoric.

 

3) The Not-Necessarily Fallacy

In this, another favorite tactic of Richards’s, the logic of the argument runs like this: Opponents of capitalism say that capitalism makes the rich richer at the poor’s expense.  This complaint assumes a zero-sum game–that wealth is never created, only transferred.  But this is not always the case.  Let me show you some examples of how free exchange can make both parties wealthier.  

Ergo, capitalism is not a zero-sum game, ergo, the rich do not get rich at the poor’s expense.  The problem here of course is that almost no critic of capitalism is so daft as to complain that it is always a zero-sum game.  Everyone recognizes that of course it is quite possible for business to actually add net value to everyone concerned, and that this happens all the time, and is much of the reason for the prosperity of the world today.  But do all resources work that way?  Well, no.  Some resources, like land, are fixed and cannot be created.  Some markets–many financial markets, for instance–are essentially zero-sum markets.  

Now, if some significant parts of the system are zero-sum, then it is quite possible, indeed likely, that many people do get wealthy at the expense of others.  It is not always win-win.  And in general, those already most powerful will succeed in entrenching their position at the expense of those less powerful.  The only way Richards could refute the zero-sum complaint would be by demonstrating that all transactions in a capitalist system end up benefiting both parties, and that is manifestly false.  Instead, he confines himself to showing that it is not necessarily true that someone gets rich at another’s expense, and therefore concludes that it is necessarily untrue, which is about as straightforward an inversion of logic as you can get. 

 

4) The Coercion Fallacy

I have written on this before at great length, so hopefully I can be brief.  Richards frequently makes his case by indulging in a sense of moral outrage at the coercion of government coercing people to do stuff, even for good ends, and of course he repeatedly defends the free market by insisting that it is, of course, free.  Whatever you don’t like about it, at least it doesn’t force people to do stuff, but lets everyone meet on an equal level, and exchange what they want less of for what they want more of.  Everything is completely voluntary.  

In a modern world that has exalted freedom as the highest virtue, this sort of argument is taken to settle the question–better for people to do bad things freely than good things under compulsion, seems to be the idea.  Of course, once closely examined, this popular moral presupposition breaks down, but we’ll leave that issue aside.  The more immediate objection is of course that it is not really accurate to speak of all government policies as “coercion” unless one presumes radical individualism.  There is a such thing as corporate decision-making, the public will, and all that.  Or there used to be, at any rate; perhaps there isn’t anymore in the United States.  A corporate decision is only coercive to the extent that the recalcitrant make it so.  But let’s even leave that issue aside.  

The most immediate objection, one that is so obvious that only the most propagandist ideology can ignore it, is that it is absurd to talk about perfectly “free” contracts and agreements in a marketplace constrained by inequality and scarcity.  In a contract between an employer who lives in a mansion with security guards, and is making a 20% profit margin, and 1,000 job applicants who are facing starvation if they can’t find some kind of employment, it would be absurd to speak of the two parties as being equally “free,” or even to speak of the job applicants as free at all in any meaningful sense of the word.

Rather than face up to such real-world realities, Richards insists on making his argument in terms of idealized test scenarios and hypotheses–like the “trading game” that his sixth-grade teacher made his class play once upon a time, swapping toys until everyone ended up with something better than they started with.  “An exchange that is free on both sides, in which no one is forced or tricked into participating, is a win-win game.  It’s a positive-sum game.” But this hypothetical marketplace is one without exploitation (preying on someone’s physical needs to get them to do something you want), manipulation (preying on someone’s emotional needs to get them to do something you want), or deception (ensuring that the other party does not know the relevant facts of the transaction), all of which are institutionalized in many modern capitalist markets.  

In short, I continue to insist that if the defenders of capitalism are to rest the vast majority of their case for the goodness of the market and the wickedness of state intervention on the “freedom” in the former and the “coercion” in the latter, they must provide some meaningful definition of these terms that actually fits the real world.  Otherwise, why should we listen to them?

 

5) The Theft Fallacy

Related to the “Coercion” fallacy is of course the “Theft” fallacy–the repeated rhetorical assertion that any redistribution or contro of private resources by the government is “confiscation” or “theft.”  I’m sure you know the sort of thing I am talking about, but here’s a sample quote:

“Every government has to collect taxes to fund services beneficial to all–to maintain courts, protect citizens from domestic and foreign predators, enforce traffic law and contracts, and so forth.  We have a right to protect ourselves from aggressors, for instance, so we can delegate that right to government. We don’t have the right to take the property of one person and give it to another.  Therefore, we can’t rightfully delegate that function to the state.  Delegated theft is still theft.”  

As I’ve argued before, this argument collapses on its own terms.  Almost any “legitimate” government function breaks down when pressed.  Some citizens have enough mobile capital that if an enemy should attack the US, they could easily pack up and move to London with few adverse consequences, so why is it worth their while to pay tax dollars to defend less affluent citizens.  Maybe they are staunchly pacifist or at least feel that America’s enemies have been stirred up by acts of aggression that such citizens have bitterly opposed.  They didn’t support the actions that created the enemies, so why should they have to pay for the cost of restraining those enemies.  Or what about those of us who live in inner cities and walk everywhere.  Why should we have to pay for the maintenance of the roads and traffic laws?  If societies cannot enact policies that benefit some people more directly than others, then they can’t enact any policies.  Such a reductio ad absurdum suggests that there is a fundamental philosophical flaw in the assumptions behind this “theft” accusation.  

 And sure enough, there is.  The assumption is that private property somehow exists in a vacuum–it is sacrosanct, unconditioned, absolute, timeless.  It pre-exists any society and therefore society has no claims on it.  This assumption turns out to be utterly incoherent once held up to the light of day (and Richards himself discards it in a later chapter when it suits his argument to articulate property differently).  On the contrary, property is, if not a product of society (which I would suggest it ultimately must be from an ethical standpoint), at the very least always conditioned by society.  To say that society has no claims on private property is about as coherent as saying that parents have no claims upon their children.  

Now one can argue that there are limits upon these claims–limits of justice and limits of prudence.  If there were no rules restraining society’s claims on private property, private property would be meaningless.  But conversely, if there were no rules at all regarding society’s claims on private property, then private property would be meaningless.  The relationship is a subtle and dynamic one, not one that is easily defined by throwing around terms like “theft” whenever it is rhetorically convenient.

 

And that last criticism could sum up my critique of the whole book.  Richards acts as if this is a debate between ignorant idealists and people who take economic realities seriously.  But in saying this, it feels like he is critiquing himself.  Economies are subtle and dynamic, and the real world that we operate in is quite different than the fantasy one that Richards has constructed for us with the aid of fuzzy logic and empty rhetoric.