So far, we’ve discussed how the pro-capitalist story ignores history (which contains mind-boggling amounts of injustice) and various forms of discrimination that make people who should be treated equally into social unequals. We’ve talked about the ways that force, fraud, and injustice are baked into market transactions from the get-go (and that was without even discussing one of the original acts of force that founded modern capitalism: the forcible enclosure of the commons in England, which helped convert peasants who might have otherwise been able to rely on nature, and thereby avoid the market, into a ready source of labor with no other option but to work for capitalists).
If you agree with the points I’ve made so far, it’s pretty obvious that market outcomes (distributions of income and wealth) under capitalism are therefore very much NOT fair. They are tainted by all of the injustice that went and goes into them, even in the unlikely scenario that every person and corporation on the market obeys the rules of the market when they engage in transactions. And as we’ve already discussed, fraud is a live option for the profit-maximizing capitalist as long as they can get away with it.
At the risk of sounding like a broken record, I want to underscore once more that we can’t ignore how injustice contaminates every aspect of capitalist economic competition. People start off with different amounts of wealth and social capital (endowments, to use an econ term), countries have different levels of physical infrastructure and levels of economic development, and corporations have different market shares, and all of this is because of the past. There is no time zero to capitalist competition; it’s impossible to wipe the slate clean and start fresh. If the past was unjust, the present is too.
And this is purely as a matter of logic and reasoning, which is why I’m not trotting out enormous heaps of data. The current statistics for income and wealth distribution in the US, and around the world, are certainly “grotesque,” to use one of Bernie’s favorite words, and you’re welcome to look them up (Piketty and Saez have good data). But even if they weren’t, even if they were quite reasonable, they would still be unjust because the system itself is based on unjust principles and rules.
The “fairness” of market outcomes, then, is purely formal. It’s about whether or not a person or corporation followed the rules of the market. It doesn’t ask whether the market itself is just. It doesn’t consider the level of inequality that the market produces. It doesn’t ask whether it’s right that a baseball player gets paid thousands of times what a schoolteacher makes, or whether it’s right that the twenty-five highest-earning hedge fund managers in the world (that’s 25 people) make around $25 billion a year, or whether it’s fair that the top 20% of Americans hold around 85% of all wealth in the US (and growing). It doesn’t ask whether wage labor, which is essentially renting another human being’s time, mind, and body, is just. It doesn’t ask whether it’s just that, even as some people have billions, others have nothing and go hungry and sleep on the streets, in the cold. I’ll hold off on fully discussing the morality of capitalism until later. For now, it’s enough to say that market “fairness” relies on a very impoverished definition of what “fairness” actually means.
Inequality is a necessary outcome of capitalism. Because people differ in natural endowments (intelligence, beauty, athleticism, aptitude for various professions) and social endowments (education, family upbringing, social/cultural capital, family wealth) and are treated unequally because of their race, gender, sexuality, religion/ethnicity, abled status, and other identity categories, the market will always produce different outcomes. Because different professions are assigned different economic values, the market produces different outcomes. A professor, no matter how brilliant, isn’t paid the same as the CEO of a reasonably prosperous private corporation. Particularly ideological pro-capitalists welcome poverty and inequality as spurs to goad people into working or working harder; the fear of falling behind is one of the things, they believe, that pushes people to excel. At any rate, it’s a sure thing that capitalist markets create major inequality. That’s just how the system works.
It’s rare to come across fire-breathing libertarians so soulless as to deny that there should be any cushion at all to protect people from unfavorable market outcomes. Pro-capitalists (especially moderate liberals or neoliberals) are often in favor of the social welfare state, which tries to soften capitalism by redistributing income to the poor. That’s fine. In fact, that’s great – it shows that members of this subset of pro-capitalists have hearts and care to some degree about economic inequality. But, for a pro-capitalist, to support the social welfare state is to concede two key points: that the market isn’t God and that capitalism doesn’t work without help from the government. This is something that we already knew: we’ve discussed how the government writes the rules and laws that govern market competition, and we’ll talk later about corporate subsidies and the government-provided public goods which every market needs.
But it’s a disastrous thing for a pro-capitalist to admit, because their whole story starts falling apart as soon as they do. If the market doesn’t actually produce the best outcomes, then why should we trust that the common good is best promoted when everyone pursues their own self-interest? Maybe the “invisible hand” doesn’t work as advertised (typical: nothing seems to work as it’s been advertised…). If the economy needs the state to function properly, perhaps the hard division between “the government” on the one hand and “the economy” on the other is false. Economic activity taken by the government is then no longer “interference” or “intrusion,” but simply regular economic activity. In other words, once a pro-capitalist accepts the need for the social welfare state, the burden of proof is now on them to explain why markets should be given such huge scope if they can’t even generate good results.