Understanding Anti-Capitalist Fallacies

Authored by Roberto Ledezma via The Mises Institute,

Capitalism, defined as a form of social organization in which there are means of production such as private property and wage labor, is not the moral principle upon which liberalism is based.

The reason for this is that there are nonliberal scenarios that capitalism, as a moral principle, allows for – for example: slavery, sexism, racism, and various forms of violence.

However, semantic compatibility does not imply a causal relationship between such variables.

In this brief text, I will explain why certain anticapitalist arguments have fallacious inferences, showing the semantic relationships between different concepts that constitute the political economy and other similar disciplines.

Fallacious Inferences and False Statements

Sound arguments are those that contain only true statements and valid inferences. On the other hand, fallacious arguments are those that, regardless of the truth value of their statements, have invalid inferences. An example of such a scenario is as follows:

Premise 1: All married people are not single.

Premise 2: No single person is married.

Conclusion: Socialism is a form of social organization.

In this example, all the statements are analytical and, therefore, true. However, the conclusion is an invalid inference since its meaning is not contained in the meaning of the premises. Although both its premises and its conclusion are true statements, it is not a sound argument as it contains an invalid inference.

The definitions previously used do not indicate the impossibility of valid arguments about causal relationships. Valid arguments about causal relationships can exist if their premises indicate the existence of a certain causal relationship and if their conclusions are inferences whose meaning is contained within the meaning of their premises. An example of this would be:

Premise 1: All types of A are a necessary cause of B.

Premise 2: X is a type of A.

Conclusion: X is a necessary cause of B.

Therefore, it is indeed possible for valid arguments to exist concerning causal relationships. Some arguments with invalid inferences can become valid when one or more premises are added to them. As will be demonstrated in the following sections, many fallacious arguments exhibit structures in which conclusions are erroneously regarded as necessary or sufficient causes, even if their premises and conclusions are contradictory.

Some Fallacious Arguments against Capitalism

As explained in the previous section, fallacious arguments can contain true premises or conclusions.

The use of certain technical terms or complex mathematical operations does not mean that a certain argument is sound or, at the very least, valid.

Here are some examples of fallacious arguments:

From its inception, capitalism was riddled with racism, sexism, and slavery. Therefore, as long as there is capitalism, racism, sexism, and slavery will always exist.

The socially necessary labor time required for the production of a particular commodity determines its exchange value. Capitalists appropriate a portion of the value created by their workers. Therefore, capitalists are stealing from their workers.

There are poor countries that are capitalist. Therefore, free markets do not serve to alleviate poverty.

Is Capitalism a Form of Theft?

As mentioned at the outset, the definition of capitalism used here is compatible with slavery and violence. However, this does not mean that it is the only possible scenario. Semantically, there can be situations in which different individuals, in the absence of coercion and violence, enter into agreements for specific services at predetermined prices within defined timeframes.

Only if such an agreement is breached would the employer be stealing from the employee through such an employment relationship. An example of this scenario would be if there is a labor contract between individual A and individual B that establishes the payment of $200 per day for the provision of a specific service for five hours. Then, individual A does not provide that amount of money to individual B because he wants individual A to work another two hours despite individual A fulfilling all the agreed conditions. Otherwise, given the definitions used here, if the agreed-upon conditions of such a labor relationship are not violated, it is fallacious to infer that the employer is stealing from the worker.

If a state imposes limits on the contractual freedom of the individuals it governs, noncompliance with such limits does not mean that the employer is stealing from the employee. If a set of labor regulations is imposed, such as a minimum wage for hourly wage labor or mandatory severance pay, and such regulations are not part of the labor agreement, the noncompliance with these regulations does not mean employer theft from the employee.

Furthermore, even if it is assumed that the exchange value of a commodity is determined by the socially necessary labor time for its production, the existence of profits in a business activity does not mean that the employer is stealing from their employees. In a labor relationship where the agreement was to pay the employee thirty dollars and the employer pays the employee that amount, the profit margin does not determine whether such a social interaction was theft or not. Even in the absence of risk and opportunity costs, the accrual of profits would not constitute theft by the employer from the employees.

Free Market Capitalism and Business Freedom

Capitalism and free markets are two different concepts. There can be a region where, in the absence of state coercion or violence, only cooperatives exist. On the other hand, there can be a region where only capitalist enterprises exist, and due to the presence of certain interventionist economic policies, it may not be possible to buy or sell certain goods/services, set certain prices, or establish penalties for noncompliance with commercial contract terms.

Furthermore, a free market does not necessarily mean business freedom. This is because the free market refers to the absence of state restrictions on the exchange of property rights over monetary and nonmonetary assets, whereas business freedom refers to the absence of state restrictions on production, consumption, or property exchange activities carried out by a business. Therefore, a broader category than business freedom would be economic freedom, which encompasses not only businesses but also other types of individual behavior—for example, the freedom to cultivate a specific plant, regardless of whether it is for personal consumption or commercial purposes. In the presence of economic freedom, there are no price controls, monopolies through state coercion, or import quotas.

Lastly, the fact that country A has undergone a greater economic liberalization process than country B does not mean that country A possesses greater economic freedom. A country may eliminate more price controls than another during a specific period of time and still have a greater number of price controls, not to mention the existence of other interventionist economic policies.

Capitalism and Social Problems

Even if capitalism were to result in poverty, violence, sexism, racism, and environmental problems, this does not mean that this mode of social organization is the sole cause of such phenomena. Moreover, the fact that a certain form of capitalism generates certain outcomes does not imply that all semantically possible forms of capitalism will have the same consequences.