Saturday, February 23, 2008

Lynch the Rich

There's nothing like an economic slowdown to put us all in touch with our inner socialist. Even the Financial Times has taken to advising the rich and wealthy on how best to avoid a lynching. As journalist John Thornhill puts it in today's FT:
What rankles are the “undeserving rich”: those who take risks with other people’s money but never suffer the consequences of their mistakes; those who receive massive pay-offs even when they have failed; those who evade taxes while benefiting from public goods. Here surely there is a case for more considered intervention.
Thornhill has in mind the finance and banking industry in general and the City of London in particular. As fellow journalist Martin Wolf put it recently, no other industry or sector has been as successful as banking at 'privatising gains and socialising losses'. UK taxpayers are presently learning the depth of this insight as they pay for the nationalisation of Northern Rock.

Should we therefore expect a resurgence of socialist politics and policies in Ireland and across Europe on the back of a populist backlash against capitalist excesses? I don't think so, for the curious reason that many socialists are losing their affection for state intervention. Here are socialists over at the excellent Red Pepper web site arguing that globalisation is good for you. They observe that:
In the end, the needs of the nation state override anything else. All the din of world politics, the babble of the ‘world community’, is about this hypocrisy – governments holding on greedily or trying to expand what power they have while conceding to markets only so much as is needed to maintain their revenues.
I can't see any of our local lefties adopting similar sentiments any time soon mind.

The key political issue is inequality. As I've written before, many on the left simply assume that poverty is caused by inequality and that reducing the latter will therefore alleviate the former. A more considered perspective, such as that set out by socialist Chris Dillow, recognises the limits to state interventionism whilst also challenging conservative assumptions that current class structures are somehow natural or inevitable.

I believe instead that the proper focus should be on poverty, not meaningless measures of inequality. But even in relation to poverty there are major definitional issues let alone difficult policy choices to be made. And at the end of the day, it is economic growth driven by private enterprise that will lift the majority of people out of poverty, not self-serving state intervention. It seems that (some) socialists and libertarians are now actually in agreement on that one.

1 comment:

  1. A true libertarian approach to government finance would tax net assets.

    Full stop.

    I meant that.

    I really did.

    Here's why:

    Government's primary purpose in libertarian philosophy is the protection of those property rights -- hence a use fee is properly charged for this service.

    But there is an exception: Homestead.

    Homesteads predate government property rights and are based on a head of household's ability to defend his animal territory: Modest house and what might, in modern terms, be thought of as 'the family business' -- which at the dawn of the neolithic was basically just a small dwelling, a few acres of arable land and the tools/weapons needed to work/defend that homestead.

    Get this straight and the entire "left vs right" political economy debate is exposed as the false dichotomy it is.


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