wealth creation

Confiscating wealth in the name of fairness

by Fran Smith on June 10, 2009 · 1 comment

in Economy, Features, Personal Liberty, Zeitgeist

An excellent article in the June issue of Commentary Magazine, taking to task President Obama’s broad attacks on the wealth-producers in American society in the name of fairness.  Author Francis Cianfrocca in “Wealth creation under attack”  points out the flaws in this reasoning:

The United States is organized on the principle of the consent of the governed. Power and legitimacy do not flow from the state to the people, but the other way around. In this respect, what individuals do is entirely their own business, just so long as they do not violate the law or the sovereignty of other citizens. Generating wealth is therefore no different from any other private human activity; it is and should remain private, outside the reach of government, until the point at which it impinges on others.

This is a philosophical understanding of American society with which Obama and his policymakers are not in immediate sympathy. They are not opposed to wealth generation; nothing they say indicates any such thing. But they do not see it as a private activity. Rather, they see it as a human endeavor that can and should be harnessed to aid in producing the social changes they believe are most beneficial for the greatest number of people. In the view of the Obamaites, private wealth is not a bad thing, but neither is it a good thing; it is only good if it can be used in furtherance of large-scale public goals.

But this understanding is deeply flawed, because it fails to take into account the factors that motivate the generation of wealth. Those who work to get rich are not doing so because they are seeking to provide enhanced tax receipts for the government, or to make it easier for government to do what elected officials and unelected bureaucrats think is best. They are, rather, fulfilling basic human desires—to excel, to succeed, to best the other person, to show the old man. Those desires provide the drive. The drive provides the wealth. The wealth provides the ancillary benefit for others. And the act of wealth creation itself creates opportunities for others. Americans pursue business and wealth for their own reasons, and we should be deeply hesitant to throw those out with the proverbial bathwater. The unintended consequences of such action could be catastrophic.

Cianfrocca concludes with an eloquent paen to freedom — and the ability to create wealth:

More generally, the United States under Barack Obama may be taking a hatchet to a pillar of the American social contract, which is that Americans should be free of encumbrance in their pursuit of private wealth. The pursuit of prosperity made America the most prosperous nation on earth. The excessive pursuit of fairness at the expense of wealth creation will not make America fairer. It will, however, make America poorer—and less free.

That G20 Communique

by Iain Murray on April 3, 2009 · 1 comment

in International, Regulation, Trade

Yesterday’s communiqué from the leaders of the G20 – a motley collection of democracies and dictatorships – has some good points, but in general it represents a new version of what economist Friedrich Hayek called “the fatal conceit.” It believes that government has all the answers, and demonstrates that the world’s leading governments recognize few boundaries. As such, not only does the communiqué promise far more than it can deliver – something the voters in G20 democracies should remember – but it may also impede global economic recovery.

The communiqué holds that, “We start from the belief that prosperity is indivisible; that growth, to be sustained, has to be shared” and to “do whatever is necessary.” In clause after clause, this pro-government rather than pro-prosperity declaration embraces new burdens on a limping financial sector in the form of expanded global regulation, and effectively requires that all look toward government before acting in the future. At no point does the communiqué recognize that government action can and does distort market action to the point of significant harm.

The only “growth” being sustained in today’s political environment – and further embraced here – is the open-ended stimulus culture that has already led to an orgy of “sharing” of citizens’ wealth; in a world increasingly at ease with the word “trillion,” we are not suffering from a lack of sharing. The “unprecedented fiscal expansion” is not, as British Prime Minister Gordon Brown said, an injection of new money (except for some sales of gold reserves) but mostly a redistribution of existing taxpayer money to politically-favored recipients.

An effective communiqué would have acknowledged that wealth is not automatic, that it must be created before it can grow and expand – or be shared. Individuals acting together in voluntary enterprise form the foundation of wealth creation and job growth, but that is nowhere articulated here. Leadership would require the G20 representatives to explain precisely how they plan to unravel tax and regulatory barriers to the creation of new wealth, infrastructure, jobs and new financial innovations. Instead, the document stands as yet another open-ended promise for redistribution of a shrinking pie, and aggressive new political dominance of economic life.

This is not to say that the communiqué is wholly bad. Even as they seek to increase the reach of government by a massive expansion of the International Monetary Fund (by its own figures, the IMF budget is now greater than the GDP of all but 16 countries), the G20 leaders had no choice but to recognize the harmful effects of protectionism. The sections lauding free trade are welcome, and stand as a rebuke to Congressional leaders who have introduced protectionist language in recent bills. If there is one glimmer of hope in the G20 communiqué, it is that the vitality of trade may counteract the dead hand of government control.

“Net Neutrality,” RIP? Well, One Can Hope

by Wayne Crews on December 15, 2008 · 4 comments

in Bailout Watch, Economy, Privacy, Regulation, Tech & Telecom

Net neutrality has long been a threat to Internet users. Despite the rhetoric and appeals to “openness,” it was always an anti-consumer enterprise, irretrievably and irrevocably set against the concept of infrastructure wealth creation (as if content and infrastructure companies in free markets were somehow sworn enemies). It smacked of “infrastructure socialism.”

Now Google, neutrality’s chief proponent in Washington, FCC and policy circles, wants to secure for itself its own “fast track” on the Web, in conjunction with telecom and cable companies.

It should do so as rapidly as possible; so should everyone else. Only Washington can screw up this new elevation of the Web’s capabilities.

Neutrality advocates always invoke the sanctity of “dumb pipes,” But it requires government force to keep pipes dumb. It’s more appropriate to embrace a competitive dimension upholding the possibility of the “genius” of pipes. Price and service differentiation, such as paying less for non-vital transmissions and more for critical ones, will become increasingly critical to tomorrow’s online experience. So will the fusion of content and infrastructure companies.

The handwringers worry: “For computer users, it could mean that Web sites by companies not able to strike fast-lane deals will respond more slowly than those by companies able to pay.”

But such “discrimination” is not only perfectly consistent with vastly greater openness and speed than we enjoy now, it’s probably a pre-requisite for it; nothing about fostering smart pipes is incompatible with retaining “dumb” ones as consumers desire.

Indeed, the “background hum” of the Net is always rising; few of us use dialup anymore, and we didn’t need neutrality to escape it. Special deals like Google’s, as well as future proprietary services that use Internet technology, but may or may not ride the same pipes as the “capital-I” Internet, increase the Net’s overall functionality. Policy should not discourage the possible emergence of such a “Splinternet” by catering to the old-school model of infrastructure socialism and sleepy-headed “openness.”

Fostering infrastructure wealth—of both the proprietary and open kinds—is the only valid public policy goal, the only avenue to a constant escalation in the basic capabilities of the Internet as a whole. Neutrality is the enemy of this challenge.

So far, Google and the infrastructure firms are scared of regulators and are “reluctant so far to strike a deal because of concern it might violate Federal Communications Commission guidelines on network neutrality…’If we did this, Washington would be on fire,’” one insider said.

But FCC’s own guidelines are anti-consumer and anti-infrastructure; later we’ll explore more reasons why.

Tories Retreat From Green Taxes

by Iain Murray on November 14, 2008 · 2 comments

in Economy, Energy, Environment, Global Warming, International, Sanctimony

A major part in the rebranding of the British Conservative Party following a traumatic election defeat (sound familiar?) in 2005 was a turn to environmentalism. Part of this was a plan to introduce “green taxes,” theoretically shifting the focus of taxation from labor (taxing a ‘good’) to carbon production (taxing a ‘bad.’) This morning, however, The Guardian confirms what many have been saying for some time; the Tories have decided

To downgrade green taxes in response to growing unease that these could be punitive in a recession.

Now how would green taxes be punitive when they are taxing bads rather than goods? Simple. Given the current strong correlation between the use of affordable energy and economic growth, taxing carbon use upstream (ie at source of carbon production) is a direct attack on desperately needed wealth-creation. Tax it downstream (ie apply the tax when consumers buy the goods associated with carbon production) and you are increasing household bills in a recession in a regressive fashion. Oh, and if Gordon Brown is advocating a Keynesian tax cut as response to the recession, it looks bad politically too.

Green taxes may have made sense if you thought that wealth could be created out of thin air by, oh for example, ever-rising house prices. In a less fantastic world, they are a luxury we literally cannot afford.