Daniel Hannan, a Conservative MEP for the south of England and regular columnist for the UK’s Daily Telegraph, has written a column in which he purports to tell the Occupy protestors “ten things that evil capitalists really think”.
It’s been a while since I came across such a delusional piece in a major newspaper (then again, I haven’t dipped into the well of nonsense from by Bolt, Divine, or Sheridan). Some of his ten points are classic No True Scotsman stuff, others are just plain crazy.
Anyway, for those of you with a strong stomach for nonsense, here we go:
Free-marketeers resent the bank bailouts.
That may well be the case – for some vanishingly small and uninfluential collection of libertarians. But when push has come to shove, every single government around the world – nominally left or right-wing – has decided that bank bailouts have been preferable to the alternative of mass bank runs and money under the mattress. And – as best I understand it – what pisses off the Occupy movement is not that depositors have been protected, it’s that bank shareholders and management have been protected from the consequences of their decisions.
What has happened since 2008 is not capitalism. In a capitalist system, bad banks would have been allowed to fail, their profitable operations bought by more efficient competitors. Shareholders, bondholders and some depositors would have lost money, but taxpayers would not have contributed a penny (see here).
True, but see previous response. “Some depositors” losing money would have resulted in a) a good deal of financial hardship in its own right, and b) bank runs. Bank runs are kinda bad.
If you want the rich to pay more, create a flatter and simpler tax system. This is partly a question of closing loopholes (mansions put in company names to avoid stamp duty, capital gains tax exemption for non-doms etc). Mainly, though, it is a question of bringing the tax rate down to a level where evasion becomes pointless. As Art Laffer keeps telling anyone who’ll listen, it works every time. Between 1980 and 2007, the US cut taxes at all income levels. Result? The top one per cent went from paying 19.5 per cent of all taxes to 40 per cent. In Britain, since the top rate of income tax was lowered to 40 per cent in 1988, the share of income tax collected from the wealthiest percentile has risen from 14 to 27 per cent.
Simplistic nonsense. There’s a very simple reason why the top-earning 1% are paying roughly double the share of tax they used to – their share of national income in the United States has doubled over the same period.
In any case, it’s not about getting the rich to pay more tax in absolute terms for its own sake, it’s about creating a more egalitarian sharing of income. Changes to tax laws have made a difference, but it is not the only reason why the top 1% are taking a bigger share of the pie than they used to.
Oh, and the Laffer Curve appears to be bunk Or, more precisely, as Quiggin put it in Zombie Economics, the existence of the curve is correct but trivially obvious, but the notion that 1980s tax rates were on the high side of the optimum point of the curve is, from the evidence available, wrong.
Those of us who believe in small government are not motivated by the desire to make the rich richer. We’re really not.
I’m prepared to accept that Daniel Hannan is not really motivated by the desire to make the rich richer. But plenty of those who support people like him clearly are. And all that really matters here is that he and his fellow travelers continue to advocate policies that have been demonstrated to increase the share of the pie going to the rich, without much evidence that it also increases the size of the pie.
We are not against equality. We generally recognise the benefits in Scandinavian-style homogeneity: crime tends to be lower, people are less stressed etc. Our objection is not that egalitarianism is undesirable in itself, but that the policies required to enforce in involve a disproportionate loss of liberty and prosperity.
I’m not against economic liberty, either. It’s just that the policies required to enforce it involve a disproportionate loss of equality and prosperity (for the vast majority of the population).
Nor, by the way, does state intervention seem to be an effective way to promote equality. On the most elemental indicators – height, calorie intake, infant mortality, literacy, longevity – Britain has been becoming a steadily more equal society since the calamity of 1066. It’s true that, around half a century ago, this approximation halted and, on some measures, went into reverse. There are competing theories as to why, but one thing is undeniable: the recent widening of the wealth gap has taken place at a time when the state controls a far greater share of national wealth than ever before.
Hmmm. What fuedal Europe has to do with contemporary debates on inequality I’m not entirely sure. On to more relevant matters, Mr Hannan might want to have a look at this neat graph of the Gini Coefficients for a number of countries around the world in the post-WWII era. Funnily enough, the Gini index for the United Kingdom and the United States (and, to a lesser extent, Australia) start increasing around 1980. Hmmm. Interesting time that. Around the time that a certain Margaret Thatcher came to power in the UK? Ronald Reagan in the US?
It’s not just about how much of GDP is in the government sector. It matters what the government does with it.
Let’s tackle the idea that being on the Left means being on the side of ordinary people, while being on the Right means defending privileged elites. It’s hard to think of a single tax, or a single regulation, that doesn’t end up privileging some vested interest at the expense of the general population. The reason governments keep growing is because of what economists call ‘dispersed costs and concentrated gains’: people are generally more aware the benefits they receive than of the taxes they pay.
Oh, FFS, this is silly. Yes, there are regulations out there where the benefits outweigh the costs – and it is true that the political left can ignore the costs of regulation. But this extremist nonsense is just ludicrous. Just for Mr. Hannan’s benefit, I’ll name a UK example – the Clean Air Act 1956.
Capitalism, with all its imperfections, is the fairest scheme yet tried. In a system based on property rights and free contract, people succeed by providing an honest service to others. Bill Gates became rich by enriching hundreds of millions of us: I am typing these words using one of his programmes. He gained from the exchange (adding fractionally to his net worth), and so did I (adding to my convenience). In a state-run system, by contrast, third parties get to hand out the goodies.
Oh, please. Bill Gates is a multibillionaire in large part to luck. If history had turned out ever so slightly differently, Microsoft (if it still existed) would be an obscure programming tool vendor, under constant threat of being squashed by tech behemoth Digital Research.
He was (and is) also helped by the quirks of our system of “intellectual property”, that provide draconian protections to some forms of intellectual effort, and none at all to others.
Talking of fairness, let’s remember that the word doesn’t belong to any faction. How about parity between public and private sector pay? How about being fair to our children, whom we have freighted with a debt unprecedented in peacetime? How about being fair to the boy who leaves school at 16 and starts paying taxes to subsidise the one who goes to university? How about being fair to the unemployed, whom firms cannot afford to hire because of the social protection enjoyed by existing employees?
Yes, let’s be fair to the unemployed by not tanking the economy with stupid austerity measures.
Let’s not forget ethics, either. There is virtue in deciding to do the right thing, but there is no virtue in being compelled. Choosing to give your money to charity is meritorious; paying tax is morally neutral (see here). Evidence suggests that, as taxes rise, and the state squeezes out civic society, people give less to good causes.
And explain to me why I should care one way or the other about virtue? Outcomes are what matters.
OK. There’s an hour of my life I won’t get back. Hope you found it amusing…