Common Cents for February 1, 2019

February 1, 2019, by John Norris

In response to last week’s Common Cents about recent proposals to tax ‘the rich,’ a buddy of mine wrote what was basically a ‘yeah but’ email, positing higher taxes can be offset in the economy by an artificial increase in the supply of money, namely printing it. In so doing, the government can maintain a steady flow of dollars into its coffers while ensuring financial liquidity and a lid on inflation. Intellectually, and in theory, this would, could, or should work. Just follow the bouncing ball or, more accurately, the flow of money, right? In theory.

I suppose, but I pointed out Venezuela has seemingly been doing just that without much success. In fact, it is hard to find an example when the monetary authorities resorted to the printing press, and it turned out well for the economy. I freely admit I have not exhausted my research on finding a success story, but I can think of more than a few with disastrous results.

When I later saw him in person, he said: “yeah, you are probably right on that Venezuela thing; I just hope our officials would be better versed in economic thought than the Chavistas.” We both laughed, and he admitted he had just been trying to gig me a little and didn’t really care.

Still, his inference struck me: “yeah, but those guys don’t know what they are doing. We do.” This seems to be a somewhat common thread, or theme, whenever I read or hear apologists explain why an economic theory didn’t work in practice: “they didn’t do it right, but we will.” That sort of thing.

Obviously, that is a bold statement, if not foolhardy: “…but we will.” First and foremost, we have to define what success is. To that end, the Bolshevik Revolution was an enormous success for the Bolsheviks and the redistribution of wealth in the former Russian Empire. The same could be said for the Maoists and even the Khmer Rouge. Seriously; I am not trying to be humorous here.

If the definition of success is the usurpation of the means of production and capital from one group of people to give to another, every Communist or Socialist revolution has been a resounding triumph. Again, if THAT is the definition of success. Obviously, in all these revolutions, vast stores of people lost their property and possessions without the due process of law, let alone compensation. Further, many of them lost their lives as well, should they dare to have had the temerity to go against the so-called will of the people. Want a good read? Google the term ‘dekulakization,’ and enjoy. If you need more, please watch ‘The Killing Fields’ on Netflix.

The people executing the programs, or should I say pogroms, can change. The next group might be the brightest bulbs in the box and the sharpest tools in the shed. However, human nature is human nature. There will never be a government who will be able to expropriate the wealth of the presumed rich to give to the poor without massive societal upheaval and dire economic consequences for an extended period of time.

To be sure, these will eventually dissipate, and it might even appear the ‘new way’ is actually working to a degree. However, make no mistake about it: the means of production and capital are still in the hands of the few, not the many. To that end, from what I can tell, there doesn’t seem to be an economic system which doesn’t ultimately result in the concentration of wealth in some form or fashion. In communism or socialism, the people with the guns and the jails control it. In capitalism, the aristocracy, or whatever term the local entity might use for it, does. The difference is: over time, the government gets more centralized while the aristocracy gets weaker due to the generational dissipation of wealth. Doing what I do for a living, I have seen that first hand, trust me.

As such, the controlling hands of production turn over more rapidly under capitalism than they do in the other two primary economic models.

Why then and how is it the government is a ‘more fair’ redistributor of wealth than the private sector? These are trick questions because it isn’t, and no one can sensibly argue it is ‘fair’ to take away one person’s wealth to give to another without commensurate consideration. That is theft, as a rose by any other name smells just as sweet. However, the government is, by far, the most efficient and brutal redistributor of wealth. Millions of dead bodies can’t be wrong.

To be sure, I am not arguing any proposal on the table to increase taxation on the nebulous ‘rich’ is the same as the Khmer Rouge or dekulakization or the Great Leap Forward or anything along those lines. I am not, they aren’t, and all that good stuff. However, they do have one thing in common: the use of the power of government to redistribute wealth in society.

Interestingly, Lenin didn’t think Marx got it completely right. Mao certainly didn’t think Lenin had all the answers. Pol Pot and the lot in Kampuchea didn’t think Mao went far enough. Basically, “they didn’t do it right, but we will.” While extreme examples, they demonstrate, in glaring proof, the difference between theory in the abstract and theory in reality.

Taking this full circle, in theory you can offset the printing press by increasing the tax burden. Essentially, a sharp increase in taxes will counterbalance a sharp increase in the money supply. In theory. In practice, this doesn’t really seem to work anywhere they have tried it, wittingly or not. So, is it the application of the theory or the theory itself?

In the end, the only way I can glean to increase government tax receipts, absent at the point of a gun, is to increase the economy. The best way I can determine to do that is to allow the private sector to determine the means of production and capital. Essentially, the best way to grow the size and scope of government is to grow the size and scope of the economy.

As a result, the best thing the government can do to increase public services is to, well, butt out of the economy.

Laughingly…in theory.

 

Have a great weekend

John Norris