Debunking Libertarian-Socialist Nonsense

It takes a concerted effort and a persistent willingness to suspend disbelief to be a life-long libertarian-socialist (and its closely-related Marxist variants). Most people outgrow it by their late 20′s upon learning that Marxism is far more violent, ruthless, and just all-around awful than the capitalism it is supposed to replace.

Libertarian-socialism is predicated on imagined oppression of workers by a so-called ‘capitalist elite’, and that workers should ‘free’ themselves from this oppression to control the production and spread the fruits of labor more equally. ‘Libertarian’ is not used in the American sense of the word, but refers to the lesser-known European definition. That’s pretty much the entire 3,000+ word Wikipedia summary, condensed into a few sentences. But anyway, libertarian-socialist arguments are easy to refute through simple common sense and empirical evidence.

Here is one such, easily refuted argument alleging ‘worker exploitation’:

This implies profit margins of over 900%! But then why are so many companies unprofitable, or why retail companies have profits margins between 3-5%? Or why the average S&P 500 company has profit margins between 10-20%. Public companies have to report their operations through public disclosures (forms 10-Q, 10-K), and there is no evidence any public companies are producing 900% profits…even the most profitable handful of public companies only have operating margins around 30-40%. If exploiting workers is so profitable, why were so many jobs lost in 2008? Why do so many companies fail every year and have to terminate all their employees? Hmmmm? When a company fails, employees always get paid first and the common shareholders, upon liquidation, last. Maybe workers have a better deal than commonly believed. The reality is, although a company may generate $200/hour in value from an employee it pays $20/hour, most of the remaining $180 goes back into the company to keep the entire operation running. If the operation fails, the employee loses his job and thus gets $0/hour. Some of that $180 goes into – gasp! – profit, but without profit there is no incentive to create or invest in businesses.

As I explain in Is Going to Work Really So Bad? Jobbers vs. Self-Actualizers in response to a similar argument by James Altucher, in giving up the $180/hour you gain access to the company’s resources: clients, infrastructure, network, and office. An entrepreneur has to provide all of those things himself, but all an employee has to do is show up and perform his assigned job. Entrepreneurship has a very high rate of failure, and most solo-endeavors make very little money (much less than minimum wage), an example being self-publishing, as I describe in Pencil Pushers and The Miracle of Capitalism. Most people, if left to their own devices to make money, would starve to death…which is what happened China and Russia during communism, if history serves me correct. And then there are the empty food shelves of Venezuela, another country that decided it was ‘too good’ for capitalism. With the workers liberated, they can enjoy their non-existent provisions and control of the means of the non-existent production.

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