Thursday, February 2, 2012

Governments Going the Wrong Way

There probably always has been and likely always will be a battle of wills between those on the left and right of the political spectrum. Each side has its points though I am not very tolerant of the extremes of either position. I am a big fan of working hard and personal responsibility, yet I am as big a fan of a society that provides for those that are truly underpriveleged or in need of help.

Traditionally most Western countries have been relatively progressive. Western Europe and Canada have had a strong social safety net that provides for the ill, the aged, and gives decent free or low-cost education. The United States is generally the exception in the Western world, in that there is a very limited social safety net at the benefit of lower personal taxes than most Western countries. The mantras of "cut taxes" or "no new taxes" is almost a requisite for election in the United States, and talking about how taxes might lead to overall benefits for the majority of the population is basically a non-starter. Taxes are viewed as a necessary evil in the U.S., but I percieve that most Americans pride themselves on the fact that they pay lower taxes and that the country is one in which the American Dream of the self-made entrepeneur is possible. Here lies the paradox and the fallacy. The paradox of this position is that the very people who would most benefit from raised taxes are those most likely to vote against such a move. The undereducated, the uninsured (in terms of health coverage), those without a hope in hell of ever becoming rich through their own hard work, are always against raising taxes as they see it as some sort of government conspiracy to take what little they already have.

Taxes are about redistribution of wealth. That generally means a movement of wealth from those who have money to those who have less, often in the form of basic social services such as health care, pensions, and education. The irony of the situation in the U.S. is that most dirt-poor voters would vote against the Warren Buffet approach of taxing the rich because they perceive that it might kill their shot at the American Dream. If the government taxed the rich more, then one day when they are a billionaire they would be taxed too much. The fallacy of the situation that arises is one in which politicians are able to convince voters that tax cuts are in their benefit. Those without access to good health care, education and other social services are likely to vote in favour of tax cuts despite the fact that the very purpose of taxes is to provide them with more wealth and access to such services.This approach is pushed much more heavily by conservative politicians than by liberal ones.

Canada has recently become more conservative in governance. Canada's prime minister, Mr. Harper, is pushing an agenda of corporate tax cuts, spending on the military, and cuts to social services such as health care and pensions, in an attempt to balance the budget (a budget which was in surplus when he first came to power). Ironically, many Canadians support his agenda, despite the fact that they are likely to suffer more for it. Even in Canada there are a semmingly growing number of people who insist on protecting the American Dream from higher taxes. They don't want the rich taxed  more because it might hurt their chances of one day being very wealthy. And, most important of all to politicians, the economy can endlessly be touted as the trump card in any election because people care about keeping their job. "It's all about the economy" trumps almost any other position in any election in North America, whether in good or poor economic times.

Unfortunately, however, the effects of taxing the wealthy is almost negligible on the economy and even less important on the creation of jobs. The argument used by most conservative governments is that if the rich are taxed more then they will be less entrepeneurial and less jobs will be created. But, here is the key problem with that approach: the vast majority of the very rich are not entrepenuers. Over 85% of the very wealthy in Canada (the so-called 1%), are not entrepeneurs who create jobs with their business. Most of them are involved in making money from money through investments - the trading of commodities on a market, or the handling of other people's money. There is some job creation through this sort of financial economy, but nothing in comparison to an entrepeneur who owns a factory or a large shop.

I've never considered myself to be a conspiracy theorist by any means, but as I slowly wake up to the financial and economic realities of the world, I find myself more and more favouring the notion that governments aren't really in control of anything, but rather are controlled by relatively few people who have massive amounts of wealth.

I am not some sort of communist. I do not favour a grand equalization of wealth in society. I think that has been shown to be very counter-productuve indeed. What I am in favour of is a free market economy that is actually fairly regulated. One in which very large corporations and banks don't have any more sway than small businesses. One in which Chrysler and General Motors are not bailed out of their exceedinly poor management with billions of tax dollars. If I owned a small business and employed five people, and if I mismanaged this business to the point that I was no longer competitive in the open market and found myself not making profits for years and years, and if that forced me into bankruptcy, I should not expect the government to bail me out with a massive stimulus of tax dollars. I should go out of business.

Governments in the West often seem to be going about tackling economic issues in exactly the wrong direction. The examples above of Chrysler and GM bailouts are just the sort of thing that follow along the old trickle down economic theory. Don't even get me started on bank and financial institution bailouts. 

In Canada, there is a particularly unsavory Canadian "business" man (I put the word business in quotes because I'm don't think he is in any business at all) called Kevin O'Leary. He appears on the TV show Dragon's Den and some other tasteless and talentless entertainment shows. He passes himself off as a successful business man. He is known for being ruthless with contestents on the show who are fledgling businesspeople themselves. Yet, he makes nothing. As far as I can tell he contributes nothing of value to the economy (let alone society as a whole) other than making himself richer. He is in the "business" of making money. He's not an entrepeneur at all. He invests money in business ideas developed by other people, and he's quick to criticize their ideas without ever taking the risk of developing his own business idea. I'm amazed that more people don't see through him. O'Leary has publicly stated that any opportunity to make money should be taken, no matter what. Presumably that means that if you can make money on an environmentally dirty project in India or China that eventually increases leukemia rates in children, O'Leary would be right on board so long as he can increase his personal fortune slightly. "Go to bed each night with more money than you woke up with" is his life's guiding principle. I feel sorry for the man, but more importantly, I feel surprised and saddened that so many people aspire to be like him. People presumably think he is a success story because he has made a lot of money. But he represents the segment of society that contributes nothing of value to the economy. There's an interesting clip on You Tube of Chris Hedges patiently navigating through O'Leary's personal insults and explaining this basic concept of capitalism:

The only reason I've introducted Kevin O'Leary into this post is because he represents a great example of one of the problems with capitalism in our societies. Capitalism is a great system when it is properly regulated and controlled. But left alone with few checks and balances, it inevitably destroys the environment, ironically the economy itself, and ultimately will destroy humanity.

No comments:

Post a Comment