No Way Out

Greed and Covetousness Spawn a Giant Kleptocracy

We were driving home yesterday listening to the brouhaha on Larry Williams over John Key's roadmap speech on tax changes and other things. It appears that the speech satisfied no-one, and virtually every sectional interest was buzzing like a nest of angry wasps. Now this on its own is a possible indicator of it being a "steady as she goes", middle of the road, minor inconvenience rather than a substantial reform. One suspects that Roger Douglas was right when he called it an exercise in rearranging the deck chair on the Titanic.

But, in any event, it provoked us to ruminate once again on the trap in which we now find ourselves. An effective trap design has critters entering through a funnel that progressively narrows down to a much smaller mouth. Once fully in the trap, the animal or fish cannot squeeze itself back out. As we look back on the past one hundred years of Western democratic government its course has been to squeeze itself into an ever narrowing funnel, that has now become an inescapable trap.

In an excellent article recently published in City Journal entitled, The Grasping Hand Peter Sloterdijk argues that pillage of productive citizens has become the essence of Western democratic nations. And like the progressively narrowing funnel, it gets harder and harder to sustain. But, like the trapped animals, very little can be done to escape the trap. There is no politically sustainable way to back out.

The modern democratic state that emerged in the nineteenth century throughout Europe was either classically liberal or anarchistic. Both, Sloterdijk contends, looked to a minimal, withering state.

But the political history of the twentieth century, and not just in its totalitarian extremes, proved unkind to both classical liberalism and anarchism. The modern democratic state gradually transformed into the debtor state, within the space of a century metastasizing into a colossal monster—one that breathes and spits out money.

These words have been written as rising national debt levels and fiscal deficits are reaching unprecedented levels throughout the West.

This metamorphosis has resulted, above all, from a prodigious enlargement of the tax base—most notably, with the introduction of the progressive income tax. This tax is the functional equivalent of socialist expropriation. It offers the remarkable advantage of being annually renewable—at least, in the case of those it has not bled dry the previous year. (To appreciate the current tolerance of well-off citizens, recall that when the very first income tax was levied in England, at the rate of 5 percent, Queen Victoria worried that it might have exceeded acceptable limits. Since that day, we have become accustomed to the fact that a handful of productive citizens provide more than half of national income-tax revenues.)

When this levy is combined with a long list of other fees and taxes, which target consumers most of all, this is the surprising result: each year, modern states claim half the economic proceeds of their productive classes and pass them on to tax collectors, and yet these productive classes do not attempt to remedy their situation with the most obvious reaction: an antitax civil rebellion. This submissiveness is a political tour de force that would have made a king’s finance minister swoon.

If the colonists revolted in the American colonies over tax, why don't the now grossly overtaxed productive citizens revolt in Western democracies? After all, the fiscal imposition upon the modern productive citizen is far, far greater than what the American colonists were asked to pay. The reason lies in the justification for modern taxation--which is a claim that the modern taxation rort is actually just. In the case of the American colonies, taxes went to King George. The poor(er) being taxed to sustain the very rich. Clearly unjust. In modern democracies, taxes go (ostensibly) to the "poor". Clearly just--or so the productive classes are told. The argument fallaciously appeals to guilt and pity, but is effective nonetheless. The appeal to guilt rests on an argument which asserts that the productive classes are making money at the expense of the poor. The poor remain poor because the productive classes are exploiting them and making money of them and thereby keeping them poor. The appeal to pity powerfully resonates in people predisposed toward compassion. For these reasons, modern democrats willingly accept the no-way-out trap in which Western democracies find themselves.

With these considerations in mind, we can see that the question that many European observers are asking during the current economic crisis—“Does capitalism have a future?”—is the wrong one. In fact, we do not live in a capitalist system but under a form of semi-socialism that Europeans tactfully refer to as a “social market economy.” The grasping hand of government releases its takings mainly for the ostensible public interest, funding Sisyphean tasks in the name of “social justice.”

Government in modern Western democracies has evolved into a giant kleptocracy. The State steals from (the productive) few to bestow upon (non-producing) others. The numbers of beneficiaries are now larger than those actually producing the wealth. Politically, it has become virtually impossible to reverse this. Whilst politicians can get elected on a platform of tax reduction no politician will now be electable if he or she runs on a platform of "benefit" reduction. Some politicians have attempted to do this by stealth--running on something else, but then attempting to reduce benefits when in office. They have kept their powder dry on the hustings, but once elected, have attempted to do the unthinkable. In all almost all cases it has been political suicide. Rule number one for survival in government is "never, ever reduce a benefit".

Can this situtation continue? No, clearly not. Sloterdijk suggests that massive social unrest could well lie ahead.

In an earlier day, the rich lived at the expense of the poor, directly and unequivocally; in a modern economy, unproductive citizens increasingly live at the expense of productive ones—though in an equivocal way, since they are told, and believe, that they are disadvantaged and deserve more still. Today, in fact, a good half of the population of every modern nation is made up of people with little or no income, who are exempt from taxes and live, to a large extent, off the other half of the population, which pays taxes. If such a situation were to be radicalized, it could give rise to massive social conflict. The eminently plausible free-market thesis of exploitation by the unproductive would then have prevailed over the much less promising socialist thesis of the exploitation of labor by capital. This reversal would imply the coming of a post-democratic age.

It is impossible to back out of the trap. The Left believes (when pressed) that dependants will voluntarily take themselves off welfare lists and entitlements, preferring in the long run to work and join the productive classes. Such naivety is breathtaking, rather than charming. How many more centuries of contrary empirical evidence does the Left need?

Voluntary rejecting of welfarism will be manifest in places only where people come to have a deep conviction that theft and covetousness is immoral and wicked, in the first place. Secondly, a society will not voluntarily reject welfarism until believes that the present redistributive taxation system is nothing other than institutionalised covetousness and theft and, therefore, intrinsically unjust, regardless of the "legality" of the edifice. A majority of citizens in the West believing thus will not emerge without another Great Awakening. Lacking that, the situation can only get progressively worse.

At present, the main danger to the future of the system involves the growing indebtedness of states intoxicated by Keynesianism. Discreetly and ineluctably, we are heading toward a situation in which debtors will once again dispossess their creditors—as has so often happened in the history of taxation, from the era of the pharaohs to the monetary reforms of the twentieth century. What is new is the gargantuan scale of public debt. Mortgaging, insolvency, monetary reform, or inflation—no matter, the next great expropriations are under way. Today, the state’s grasping hand even reaches into the pockets of generations unborn. We have already written the title of the next chapter of our history: “The pillage of the future by the present.”