10 Anti-Capitalist Arguments Debunked 

Today I will be debunking 10 argument’s against capitalism. They will not be in a specific order or include them all.

1. Labor Exploitation

To exploit someone is to force someone and that goes directly against the capitalists system.

2. Inequality

From “Being Classically Liberal” Harvard economist Robert Barro found that “higher inequality tends to retard growth in poor countries and encourage growth in richer places.” The studies the left often cites almost always focus on developing countries, and thus aren’t relevant to developed nations like the United States. And that’s not just my opinion, according to the Center For American Progress, a progressive think tank:

There is, of course, a rich literature on the relationship between inequality and growth….Although there are many conflicting views, there is ample evidence that inequality can, in fact, hurt growth under many circumstances. But this literature focuses mostly on the experience of developing countries, and its applicability to the challenges currently facing the United States is not entirely clear… Ultimately, data and methodological issues mean that analyses are too imprecise to deliver definitive answers to this old and central question in economics research.

Indeed, left wing media outlets are so obsessed, and yes obsession is an applicable term to describe their behavior, that they never mention that the studies they cite focus on developing countries, nor do they admit that there is plenty of evidence to the contrary, that income inequality actually increases economic growth, as noted by Barro. Indeed, when we examine the studies which have tested the relationship between income inequality and economic growth in developed nations, the majority confirm Barro’s observation. Consider the following:

Economist Patrizio Pagano examined the direction of causation in the relationship between income inequality and economic growth using a method known as a Granger Causality test, which establishes “predictive causality”. According to the causality tests he ran, income inequality causes slower economic growth in poor countries, but it increases growth in rich countries (OECD countries).
Economist Semih Baris examined how inequality affected growth in developing and developed countries and concludes by stating: “Our findings are consistent with the researches of Barro, who also argues that inequality is
enhancing economic performance in developed countries, while reverse situation exists in developing economies.”
Economists from the OECD, Harvard, and Australian National University examined 12 developed nations over several decades and conclude: “After 1960, a one percentage point rise in the top decile’s income share is associated with a statistically significant 0.12 point rise in GDP growth during the following year. “
According to research from a Spanish economist: “[My] results suggest that income inequality and economic growth are positively related when country specific effects are taken into account.”
I could list several more studies, but I think I’ve made my point. Contrary to what leftists would have the public at large believe, there is rather convincing evidence that income inequality is good for economic growth. Furthermore, the ways in which leftists believe income inequality harms growth aren’t supported by evidence. Moreover, the go-to left wing prescription for reducing income inequality, is, who would have guessed it, taxing the wealthy. But how would this affect the economy? Economist Karel Mertens examined how taxes on the wealthy have affected growth in the United States over the 20th century. According to Mertens, “A top marginal rate cut raises real GDP by up to 0.3 percent after two years and also has a positive effect on incomes outside of the top 1%.” Recently published research from Victoria Business School examines how income taxes affected growth in OECD (developed) countries and concluded by stating, “[There is] robust evidence that increases in the marginal rate of personal income tax, as measured by the top rate, and (less robustly) the average labor tax rate, are associated with adverse long-run growth outcomes [in OECD countries].”

Another claim that is often cited by the inequality crowd is that ever increasing wealth inequality is inherent in the market economy. In his book, Capital in the 21st century, Thomas Piketty’s central thesis is that R > G, which essentially means that the rate of return to capital (which is owned mainly by the wealthy) is always greater than average income growth. According to this thesis, the wealthy will garner a larger share of wealth over time, exacerbating inequality. Leftists have called this thesis a devastating critique of the market economy, but to be honest, I hope Piketty is right. The reason being is that if Piketty is right, his theory makes hands down the best case for privatizing social security. After all, if the return to capital is so great, and that inequalities in capital ownership leads to wealth inequality, than the most simple solution is to make everyone an owner of capital (by privatizing social security). I’m not sure leftists thought this whole thing through.

And what about the stupid claim that inequality causes financial crashes? Well, researchers from the National Bureau of Economic Research decided to empirically examine this belief. Using data from 14 developed countries between 1920 and 2000, they found that, “Credit booms heighten the probability of a banking crisis, but we find no evidence that a rise in top income shares leads to credit booms.” On a separate note, the claim that inequality decreases socioeconomic mobility is supported by little evidence.

For another post from BCL see this.

3. Unsafe food and Medicine

It’s not profitable to get sued…

4. Pollution

Joel Wood and Ian Herzog, of the Fraser Institute, found  that an increase in economic freedom by 1% translates to a reduction by 7.15% in particle matter (PM10) air pollution. The 20 highest and lowest ranking countries had a 40% difference in the PM10 levels in 2010. As the study states “Our results suggest that after controlling for the effects of many important factors including economic growth and political institutions, economic freedom has a significant direct effect on concentrations of fine particulate matter but not on emissions of carbon dioxide”. The Heritage foundation found that environmental performance steadily improved by quintile, with the exception of the fifth to forth, of economic freedom as seen by the chart below to the left. As the chart below to the right shows there is a significant correlation between economic freedom and the environmental performance of a nation.

5. Monopolies

Most monopolies are because of government and rarely happen in a free market but even if they were to maintain the monopoly you have to maintain cheap and high quality goods.

6. Discrimination

A study by Berggren and Nilsson found that “regression analysis of up to 65 countries reveals that economic freedom is positively related to tolerance towards homosexuals, especially in the longer run, while tolerance towards people of a different race and a willingness to teach kids tolerance are not strongly affected by how free markets are. Stable monetary policy and outcomes is the area of economic freedom most consistently associated with greater tolerance, but the quality of the legal system seems to matter as well. We furthermore find indications of a causal relationship and of social trust playing a role as a mechanism in the relationship between economic freedom and tolerance and as an important catalyst: the more trust in society, the more positive the effect of economic freedom on tolerance.” Another study by Zweimüller, Winter-Ebmer, and Weichselbaumer found that “by comparing these two very different methods of data collection we get a robust result relating higher levels of market orientation as proxied by the Economic Freedom Index with lower gender wage gaps.”

7. The Poor

The poor are better off under capitalism. Poverty declines and wages rise and enemy’s become more free.

8. The Countryside

If you live in the countryside that’s your choice…

9. Irresponsible Behavior

People should make decisions for themselves.

10. Instability.

Research done by University of Central Arkansas economists find a relationship between economic freedom and economic volatility in which as a “nation’s economic freedom increase, macroeconomic volatility decreases”

2 thoughts on “10 Anti-Capitalist Arguments Debunked 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s