Little Mattie Yglesias:
As there’s some considerable conservative interest in my views on so-called “income redistribution” (and conversely always a lively chorus of leftwingers upset about “neoliberalism”) so I thought perhaps a little random Saturday political theory.
Obviously there’s lots of other stuff people disagree about—health care and education, importantly—but this is the banal core. Unfettered markets are fine except for activities that might involve the transportation or production of goods, the production or transmission of electricity or scientific knowledge, or access to the financial system. So actually when you think about it, that’s basically everything. The basic economic foundations of industrial capitalism as we’ve known them for the past 150 years or so have an activist state at their core. Building political institutions capable of doing these things properly is really difficult, and one of the main things that separates more prosperous places from less prosperous ones is that the more prosperous places have done a better job of building said institutions. There’s also the minor matter of creating effective and non-corrupt law enforcement and judicial agencies that can protect people’s property rights and enforce contracts.
The point is, it takes an awful lot of politics to get an advanced capitalist economy up and running and generating wealth. A lot of active political decisions need to be made to grow that pie. So why would you want to do all that? Presumably because pie is delicious. But if you build a bunch of political institutions with the intention of creating large quantities of pie, it’s obviously important that people actually get their hands on some pie. In other words, you go through the trouble of creating advanced industrial capitalism because that’s a good way to create a lot of goods and services. But the creation of goods and services would be pointless unless it served the larger cause of human welfare. Collecting taxes and giving stuff to people is every bit as much a part of advancing that cause as creating the set of institutions that allows for the wealth-creation in the first place.
The specifics of how best to do this all are (to say the least) contentious and not amenable to resolution by blog-length noodling. But the intuition that there’s some coherent account of what the “market distribution” would be absent public policy is mistaken. You have policy choices all the way down.
A couple problems here. In one sense Mattie is correct – without the existence of some kind of government legal concepts like property rights and ownership cannot exist. But people have been asserting dominance and control over real and personal property since long before the existence of government. As a matter of fact, real estate existed before humans came along, and other animals fought over it. Some animals (like squirrels) build nests and store food in them. If other squirrels try to invade the nest or steal the stored food they will fight to defend “their property”.
Mattie uses a cute little strawman argument regarding the need for government. With the exception of a few radical libertarians and anarchists there is no one arguing that we don’t need government. The issue is what is the proper size, shape and scope of government.
Modern industrial capitalism requires certain prerequisites to function. It needs a political/legal system that is conducive to free trade. It also needs a stable monetary system, as well as a banking system.
But government did not create capitalism. When capitalism first started the political/legal system was geared towards feudalism. It was because of the success of capitalism at creating prosperity that the political/legal system changed to its current form. Capitalism and democracy are symbiotes – they exist together in a mutually beneficial arrangement.
Too little government is bad for capitalism. But so is too much. Reasonable people can disagree about how much government is just right. On the other hand government does not exist solely to support capitalism. It has other necessary functions like promoting the general welfare and providing for the common defense.
This raises another issue – how to pay for the necessary functions of government; specifically who should pay and how much. Once again, this is an issue upon which reasonable people can disagree.
Mattie’s basic premise is that since capitalism cannot function without government then government is justified in extracting a larger share of the profits. You could call this the “Teeter-Totter Fallacy”. You need two people to make a teeter-totter work. Neither one can function without the other. They are both indispensable.
But if one of them is too heavy the teeter-totter still won’t work.