2010s >> 2019 >> no-1378-june-2019

Cooking the Books I: The Libertarian Myth

There is a school of thought, calling itself ‘Libertarian’, that asserts that individuals have a right to the whole money income earned by their labour and that taxation is, therefore ‘the government staking a claim to the income the individual has worked to secure’ and that this undermines ‘the right of private individuals to their property, i.e. their wealth.’

This is the defence of private property put forward by John Locke in the seventeenth century (in opposition to the then dominant Christian doctrine that God had given the Earth to everyone to enjoy in common). He argued that what a person mixed their labour with was by right theirs, their private property that could be exchanged for money. This assumes a society and an economic system made up of independent, self-employed artisans and farmers each producing a particular commodity for sale on a market, i.e. for exchange, via money, for the products of other independent producers. Such an economic system has never existed. It certainly didn’t in the England of Locke’s day.

Such a system implies that there are no hired labourers, no wage workers; but there were. Far from saying that they were entitled to the product of their labour, Locke explicitly argued that employers were entitled to the product of the labour of their employees (‘the turfs my servant has cut… become my property’ (Second Treatise of Civil Government, ch. 5). This was a fatal flaw in his defence of private ownership, which became even more glaring as the capitalist mode of production for profit developed, expanding the number of wage workers (many from the ranks of the self-employed artisans and farmers), so that today the income of most people who work is derived from a wage paid by an employer.

At the same time, employers have ceased to be private individuals with servants and have become ‘limited companies’ as government-created fictitious individuals with employees. Today, we are living in a society made up of companies, large and small, employing wage workers to produce wealth and aiming to make a profit by selling what these employees produce. It makes nonsense of the theory Libertarians have taken over from Locke.

It is still the case today, as Libertarians argue, that as governments produce nothing, whatever they spend must first have been taken from those with wealth. But the property-owners of today are no longer those of Locke’s theory. They are the fictitious individuals that companies are, whose wealth is derived from the labour of those they employ. Those whose actual labour has produced wealth have already been deprived of a part of it by their employer, as profit. In fact, as far as they are concerned, there is not much the government can take from them, as to recreate their ability to work they need to maintain a given standard of living. If taxes, whether direct or indirect, increase the cost of this, then this increase will tend to be passed on to their employers as higher money wages.

There is another implication of Locke’s theory. In the changed conditions since his day, it makes a case for socialism. Given that production today is the collective effort of all those who work, if work is the entitlement to wealth, then the entire workforce are collectively entitled to what it produces. If that happened, there would be no question of money incomes. The socialist principle of ‘from each according to their abilities, to each according to their needs’ comes into its own.