A complaint you will often hear from the commons is that the “rich don’t pay their fair share”, but what does this actually mean? These people, generally speaking, are advocating for a world where less capital is allocated towards successful entrepreneurs for satisfying market demand, and instead allocated to a central authority who can dole that capital out to others according to their needs.
On paper and at a cursory glance, this mindset can be very appealing. “Certainly” says he who does not know the unseen, “if we were to start sharing everything now we would have more than enough for everyone”.
I would like to direct your attention to a single chart.
If this logic were true…that allocating more and more of what we produce every year to the collective social benefit were effective economic policy…then a massive increase in public social spending as a percentage of GDP should mean everyone’s life is that much better for it right?
We can recall from our series covering the widespread social and fiscal policy changes of the New Deal era, that the 1930s was a turning point in public spending for social welfare. Assuredly, if we extrapolate out the logic that life can only improve if more of our resources are allocated towards social welfare spending, life must have been pretty dismal prior to the 1930s. It follows that each year a higher percentage of our output is allocated towards social spending, things must be better than the years before…
But is that really true? There is no doubt that the developed world has seen exponential improvements in their quality of life over the last century, but this can always be attributed to technological improvements to production which bring down costs and make life easier. These technological improvements are provided by the market, not by government redistribution of wealth.
Government redistribution of wealth aids those who are not making anyone’s life better by satisfying market demand. Hence why they need assistance in the first place. Certainly that is not to say there is no place for choosing to help those in need.
The correct question should be “Why must we continue to spend more each year on social welfare in order to keep pace with goods and services which continually get more expensive?”
Notice that, although technological improvements continue to bring the costs of production down, and new technology continues to make life easier, things continue to get more expensive.
I’ve seen people blame a whole manner of things besides the elephant in the room on this issue. Greed, republicans, democrats, hippies, drugs, sex, rock and roll, Russia, China, global warming. But only the astute, or perhaps the well read, take the time to examine the root causes of our concerns rather than symptoms or second order effects.
Spending on social welfare must continue to go up year after year because cost of living continues to go up year after year. Are we simply getting worse at producing shoes and houses and milk and gasoline? Do governments really have that many more problems to solve today than they did a century ago? Surely because of how much more they spend today life must be that much better and constantly improving? I believe an intellectually honest examination of these questions should be all you need to understand.
It is the continual diminishing of our purchasing power through the debasement of our money which drives the populist narrative that we must give governments more power to tax and more power to spend, for our own sake. Inviting more government intervention into the free market processes which make our life better, is only inviting more problems.
If you want to fix the world, first you need to fix the money.
Book of the Month:
The Road to Serfdom by F A Hayek
-“Few people ever have an abundance of choice of occupation. But what matters is that we have some choice, that we are not absolutely tied to a job which has been chosen for us, and that if one position becomes intolerable, or if we set our heart on another, there is always a way for the able, at some sacrifice, to achieve his goal. Nothing makes conditions more unbearable than the knowledge that no effort of ours can change them; and even if we should never have the strength of mind to make the necessary sacrifice, the knowledge that we could escape if we only strove hard enough makes many otherwise intolerable positions bearable.”
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