Monday, December 15, 2014

The Capitalists, the State, and Justice

Hans-Hermann Hoppe clarifies in the The Ethics of Entrepreneurship and Property the role of both the capitalists and the State in relation to justice. In Hoppe's article, we can see four basic facts:

Fact # 1 - A capitalist's profit and loss are indication of the extent of his contribution to social welfare. 

Notice how Hoppe describes the capitalist's contribution to society: 
"What can be unambiguously stated about a capitalist’s profit or loss is this: His profit or loss are the quantitative expression of the size of his contribution to the well-being of his fellow men, . . . . The capitalist’s profit indicates that he has successfully transformed socially less highly valued and appraised means of action into socially more highly valued and appraised ones and thus increased and enhanced social welfare. Mutatis mutandis, the capitalist’s loss indicates that he has used some more valuable inputs for the production of a less valuable output and so wasted scarce physical means and impoverished society."

"Money profits are not just good for the capitalist, then, they are also good for his fellow men. The higher a capitalist’s profit, the greater has been his contribution to social welfare. Likewise, money losses are bad not only for the capitalist, but they are bad also for his fellow men, whose welfare has been impaired by his error."

Fact # 2 - A capitalist's actions and profits are considered just if there is "mutual beneficial exchange," "mutually agreeable terms," and respect for the property of others. Violating these conditions would make the actions and profits of a capitalist unjust. 

Again, observe how Hoppe explains this situation:

'The capitalist’s actions and profits are just, if he has originally appropriated or produced his production factors or has acquired them – either bought or rented them – in a mutually beneficial exchange from a previous owner, if all his employees are hired freely at mutually agreeable terms, and if he does not physically damage the property of others in the production process. Otherwise, if some or all of the capitalist’s production factors are neither appropriated or produced by him, nor bought or rented by him from a previous owner (but derived instead from the expropriation of another person’s previous property), if he employs non-consensual, “forced” labor in his production, or if he causes physical damage to others’ property during production, his actions and resulting profits are unjust."

Fact # 3 - The State makes the social justice question elusive and complicated. 

At this point, Hoppe identifies two implications from the very nature of the State itself. 

"Complications in this fundamentally clear ethical landscape arise only from the presence of a State. . . . Logically, the institution of a state has a twofold implication. First, with a state in existence all private property becomes essentially fiat property, i.e., property granted by the state and, by the same token, also property to be taken away by it via legislation or taxation. Ultimately, all private property becomes state property. Second, none of the state’s “own” land and property – misleadingly called public property – and none of its money income is derived from original appropriation, production, or voluntary exchange. Rather, all of the state’s property and income is the result of prior expropriations of owners of private property."
"The state, then, contrary to its own self-serving pronouncements, is not the originator or guarantor of private property. Rather, it is the conqueror of private property. Nor is the state the originator or guarantor of justice. To the contrary, it is the destroyer of justice and the embodiment of injustice."

Fact # 4 - The capitalist's response to an unjust and Statist society can be considered just or unjust depending on his participation in the expropriatory acts of the State, in the regulation and redistribution of private property of other capitalists. 

Under a Statist environment, a capitalist is torn between two responses, to be "a champion of justice" by legitimately depending his property against the State's expropriation or to be "a promoter of injustice" by participating in the expropriation of the property of those he considers as competitors. 

See how Hoppe elaborates these two responses:

1. A capitalist as "a champion of justice" by defending his property:

"The capitalist is ethically entitled to use all means at his disposal to defend himself against any attack on and expropriation of his property by the state, exactly as he is entitled to do against any common criminal."
"More specifically: For the capitalist (or anyone) in the defense and for the sake of his property, it may not be prudent or even dangerous to do so, but it is certainly just for him to avoid or evade any and all restrictions imposed on his property by the state as best he can. Thus, it is just for the capitalist to deceive and lie to state agents about his properties and income. It is just for him, to evade tax-payments on his property and income, and to ignore or circumvent all legislative or regulatory restrictions imposed on the uses he may make of his factors of production (land, labor, and capital). Correspondingly, a capitalist also acts justly, if he bribes or otherwise lobbies state agents to help him ignore, remove or evade the taxes and regulations imposed on him. He acts justly and above that becomes a promoter of justice, if he uses his means to lobby or bribe state agents to reduce taxes and property regulations generally, not only for him. And he acts justly and becomes indeed a champion of justice, if he actively lobbies to outlaw, as unjust, any and all expropriation, and hence all property and income taxes and all legislative restrictions on the use of property (beyond the requirement of not causing physical damage to others’ property during production)."
2. A capitalist as promoter of injustice:
"On the other hand, and again exactly as in the case of any common criminal, the capitalist’s defensive actions are unjust, if they involve an attack on the property of any third party, i.e., as soon as the capitalist uses his means to play a participatory role in the state’s expropriations."
". . . . a capitalist acts unjustly and becomes a promoter of injustice, if and to the extent he employs his means for the purpose of maintaining or further increasing any current level of confiscation or legislative expropriation of others’ property or income by the state."
"Thus, for instance, the purchase of state-government bonds and the monetary profit derived from it is unjust, because such purchase represents a lobbying effort on behalf of the continuation of the state and of on-going injustice, as interest payments and final repayment of the bond require future taxes. Likewise and more importantly, any means expended by a capitalist on lobbying efforts to maintain or increase the current level of taxes – and hence of state-income and spending – or of regulatory property restrictions, are unjust, and any profits derived from such efforts are corrupted."
"Confronted with an unjust institution, the temptation for a capitalist to act unjustly as well is systematically increased. If he becomes an accomplice in the state’s business of taxing, redistributing and legislating, new profit opportunities open up. Corruption becomes attractive, because it can offer great financial rewards."
"By expending money and other means on political parties, politicians, or other state agents, a capitalist may lobby the state to subsidize his losing enterprise, or to rescue it from insolvency or bankruptcy – and so enrich or save himself at the expense of others. Through lobbying activities and expenses, a capitalist may be granted a legal privilege or monopoly concerning the production, the sale, or the purchase of certain products or services – and so gain monopoly profits at the expense of other money-profit seeking capitalists. Or he may get the state to pass legislation that raises his competitors’ production costs relative to his own – and so grants him a competitive advantage at others’ expense."
"Yet however tempting, all such lobbying activities and resulting profits are unjust. They all involve that a capitalist pays state agents for the expropriation of other, third parties, in the expectation of higher personal profit. The capitalist does not employ his means of production exclusively for the production of goods, to be sold to voluntarily paying consumers. Rather, the capitalist employs a portion of his means for the production of bads: the involuntary expropriation of others. And accordingly, the profit earned from his enterprise, whatever it may be, is no longer a correct measure of the size of his contribution to social welfare. His profits are corrupted and morally tainted. Some third parties would have a just claim against his enterprise and his profit – a claim that may not be enforceable against the state, but that would be a just claim nonetheless."


To distinguish between the justice and injustice of the acts of capitalists, it's good to read this transcript, while listening to this audio. By doing this, comprehension and memory retention are higher I think.

Source: The Ethics of Entrepreneurship and Property by Hans-Hermann Hoppe