Topic: Government's Responsibilities
A Taxless Economy Knows Not a Rich Man 'Taxation of success towards Public Purpose' and 'Private Enjoyment of Wealth' are two contrasting phenomenon joined at the hip. A tipping of balance in either direction augurs the breakdown of a modern Economic Order.by Ohm
(centrist)
Monday, March 2, 2009
A study of primitive economies shows that they have no concept of producing a surplus. When they do, the surplus is communally owned. There is no distinction in individual status and no concept of privately controlled possessions. There is neither individual accumulation nor inheritance.
Such an economy is marked with poor standards of living for there is no economic motivation to excel in one's work. As there is no private gain, there is no concept of taxation either. The big leap for a society is when it begins to recognize an individual's rights over the fruits of his labor. It unleashes the creative and work energies of the people in their individual capacities, brings forth specialization of trades, often some form of money, and the possibility to accumulate and defer the consumption of the rights earned.
Accumulation of wealth in a modern economy requires many institutional arrangements to protect it. The legal system to enforce contracts and inheritance, the local authorities to recognize the ownership of property, the police to prevent another from taking away one's earned or inherited wealth. It is often stated that Capitalist economies work on "survival of the fittest" and allow the better person to achieve more for himself. Whereas this is true for the first few generations of people as a societal economy turns Capitalist, it is not fully true thereafter. A few generations down the line, many factors skew this "self evident 'truth'".
Left to itself, in this "system", different people, by virtue of being born in different economic strata, start from different start lines, receive vastly different education, and by and large, get equipped for vastly different career paths. For one born in the middle or working class, exercising "free choice" in education and career requires you to be either born a genius of Einstein proportions (to receive a full scholarship) or have willingness to start your adult life slapped with a heavy dose of debt.
The vibrancy and longevity of a Capitalist system lies in the continuous effort of the State machinery to level the playing field between the members of the various strata of society, in terms of opportunity to contribute to economic activity and profit from it. In a sustainable Capitalist order, the people that do succeed forego a significant part of their accumulations to maintain the infrastructure and paraphernalia - physical, intellectual and moral - that enables them to make, and hold on to, their private gains, and to bequeath the same to their children. Their tax pay-in also works to inject fair competition for their own progeny from the progeny of those that didn't make it in this generation.
Anything less makes the system inherently unstable and susceptible to rejection by the "remaining 95%" - when they see hope neither for themselves nor their children; when they are confronted by an "order" that perpetuates and inflates inequality from one generation to the next as a systemic feature. A vibrant Capitalist system needs to be like a spring, always attempting to bring you towards the 'mean position', more strongly the farther away you are from it - requiring of you to continually innovate and persevere to stay on top. THAT is the creative paradigm a well conceived Capitalist system needs to have, to take society to the pinnacle of achievement.
"Once Successful, Forever Entrenched" Banking on "Trickle Down" is actually quite a recipe for "crumble down" - like a 100 story building that has 80% of its weight in the 20 stories right at the top.
The views expressed in this
article are those of Ohm only and do not represent
the views of Nolan Chart, LLC or its affiliates. Ohm is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
Posted By: Jahfre Fire Eater
Date: 2009-03-02 20:54:27
Hi Ohm,
Good article. I had to read it several times because I was having a negative reaction and the cause was hard to pinpoint. I agree with much of what you said. You did a nice job simplifying the equation without losing the essence...and you didn't try to interpret too many grand results from you simplified view. That is a trick I wish I was better at. When you drink your own kool-aid it is sometimes hard not to make great leaps because they seem so obvious. However just because it appears obvious doesn't mean others can see it at all. From their perspective it appears as reasonable as pure, blind faith.
Where my reaction went negative was when you seemed to blur the distinction between free choice and unrestricted options. The difference is enormous, yet many liberals can't grasp it.
The other was in the same sentence when you implied that one must be remarkable enough to be elevated from the lower class by the right reasonable actions of the superior class. That Marxist nonsense just ain't so no matter how good it makes people feel to spout it. In your view, you either hit it big in the genetics lottery or you go into enormous debt. Liberals would like the ignorant masses to agree that those are the only choices and they perpetuate that falsehood shamelessly.
There are many other choices and not all paths to prosperity and a comfortable lifestyle are good for everyone. The key is choice. When someone is dissatisfied with their apparent choices, they are free to make less apparent choices or even invent a whole new choice that no one ever thought of before. Always constrained by their available options. They are free to choose how to play the hand they are dealt but not free to take new cards at will. Life doesn't work that way. You pays your money and you takes yer chances...and sometimes suffer the consequences. Liberals think that if someone has better cards the right thing to do is to diminish their hand. Eventually no one has a winning hand, a condition that requires constant oppression in the name of keeping the same (lack of) options available to everyone. Ingenuity is suppressed, risk taking is taxed, creativeness is shunned over homogeneity.
This whole destructive liberal paradigm relies on the purposeful misconception that free choice means unrestricted options.
In hindsight, I don't know why it took me 3 reads to realize how that one sentence was an anathema to everything right and good in this world....oh but I'm a tad melodramatic. You get my point.
For me the path to my current lifestyle started with cleaning horse stalls, unloading boxcars full of doors and windows and working night-shift machine shop jobs to pay my way through college. In 1984 my wife and I bought a shack for $10,000 and lived there while I was in school. It doubled in price in the 3 years we owned it. I paid off my college debt in my first year of work and never looked back. The liberal myth that one needs a brand name degree and that those are unattainable for most folks is used as a basis for the typical class/privilege claptrap. Neither are true.
I'm a contrarian in that I went to a no-name school and competed for my jobs and steered my career based on my own competence, not based on the brand name on my degree. If a brand name degree had been my goal, I'd have one by now.
As a practical man, they hardly seem worth the price. The opportunity cost is too high. Economics 101 pretty much defines why some choices are right for some people. Opportunity cost. In a fantasy world where opportunity is unconstrained, one can blithely ignore opportunity cost. Doing so in the real world is a common practice for folks who look for irrational "reasons" to experience outrage.
Success, does not depend on luck or privilege. There seems to be a self-limiting mechanism where the extra lucky and the extra privileged eventually lose the luck or privilege because they took it for granted and made bad choices. The world is full of lucky, privilege losers. Despite their luck and privilege, they made too many bad choices. Whether we're talking about income, lifestyle, political influence or parenting, depends on having a realistic goal and a plan of actions that truly result in progress towards that goal. Far too many people have set their goal to demand government eliminate the need for them to compete with others in order to life the same lifestyle as others.
Making all the cards available to every player isn't a game anyone is going to want to play for long. Not without a gun to their head.
Posted By: Walt Thiessen
Date: 2009-03-03 05:41:59
I've been working on a novel staged within the current financial crisis. Among other things, the novel focuses on the money supply and the financial system while telling a suspenseful story about a family caught up within the whirlwind.
As I've worked on the novel (which is currently about 80% done) I've become more and more aware that there isn't a single political issue facing the country today that is not twisted and distorted out of all proportion by the fiat money financial system. It's not that I was unaware before writing this novel. To the contrary, I've been very aware for more than 30 years now. Rather, the current financial crisis has made my understanding more pointed and crystal clear to me.
The nature of the fiat monetary system is missing from your discussion, yet it heavily colors most of your conclusions even in its absence. Until you start grappling with it in all its nuances, I believe that your analysis will be sorely lacking.
Want a starting place? Try this. The entire economy is 100% dependent upon the country going deeper into debt in order to try to achieve some degree of "prosperity" (which is wrongly named). How can there be a free market in such an atmosphere? I say that there can't be, that what we have bears almost no resemblance to an actual free market.
The wrongs you attribute to capitalism are actually wrongs due to an imbalanced, centralized, government regulated financial system.
I agree Walt, but I think Ohm did a good job describing "Capitalism" as it exists today. In a sense you are both saying the same thing, although your point on the Fed is very true and should have been included.
Capitalism is simply the production and collection of capital. The free market is an ideal that has never been attained. In a sense, the Fed and our government are being great Capitalists! They are collecting and fabricating capital, real and phony, like never before.
Maybe it is time for a new term to be associated with the idea of a free market? I think we really have no clue what a truly free market would provide us with. I believe it would certainly be a huge immeasureable improvement, but it may even be unrecognizable. I think the concept of Capital as we know it is misleading and maybe it is time to dissconnect it.
Hi All,
Thanks for your comments.
I agree with Jahfre that it would be perverse to take opportunity away from someone in the zeal of creating equality - that would be an overkill.
My base point in this article is that Taxation is a societal WiiFM - an integral by-product when a society allows individual achievement and its enjoyment to the exclusion of others. As society protects the individual's accumulations from those that achieved less, it also ensures that the individual success contributes to the progress of the system in which the successful man did succeed. Else, the system would be unstable, for it would be rejected by the rest: There is no King unless the rest accept the king as their King.
I do await Walt's book, as also articles from all you folks explaining how True Free Markets with a Fed-less Financial System can herald a 'sustainably taxless' society.
Best Regards,
Ohm
Want to comment on this
article? Leave your comment here. Your email address is
required to track your comment. However, we will neither
publish your email address nor distribute it to other
organizations or persons. The only reason we might use
it would be if we needed to contact you regarding your
comment. All comments are subject to our
terms of use policy.
