“Freedom is never more than one generation away from extinction.” – President Reagan
More than a quarter century has passed since the Berlin Wall fell. The average American college student was born years after the subsequent reunification of Germany. How many Americans under 30 have a living memory of the “Soviet Union”?
The Soviet empire was a force of evil – its leaders suppressed the most basic rights of its people, namely the rights to life, liberty and property. The only silver lining in the existence of the Communist empire was that it served as a constant, daily update on the reasons why socialism is an all-out economic and moral failure. It was, in other words, relatively easy to stave off onslaughts of socialism in the free world. A finger pointed at the monumental economic failure and the human disaster on the other side of the Iron Curtain could silence most critics of free-market Capitalism.
When the Soviet empire was dissolved many people believed that an era of perennial freedom, peace and prosperity had emerged. Francis Fukuyama was one of the most fervent advocates of the theory of some sort of post-ideological world under the harmony of individual freedom.
That, sadly, turned out to be a historic miscalculation. Socialism did not die in the rubble of the Berlin Wall. It staggered and struggled for a while, bruised by the undeniable defeat in the Cold War, but it slowly found its footing again. Perhaps the most notorious post-Soviet socialist leader was now-defunct Hugo Chavez, whose years as president of Venezuela marked a shocking decline of that country. Having been a well-working, prosperous nation with free markets and relative economic harmony, Venezuela was thrown into a long period of decline, erosion of prosperity, shattered property rights, rampant inflation, corruption, crime and general economic chaos.
All in the name of the new, post-Soviet socialist battle cry: social justice.
Chavez inspired left-leaning political movements in both North America and Europe. Among his most passionate European followers we find rising-star German socialist politician Sahra Wagenknecht, who is on a straight path to be chancellor in the not-so-distant future, and Greek prime minister Alexis Tsipras.
Using the political achievements of Hugo Chavez as their springboard, Europe’s Chavistas have been able to whitewash socialism and remarket it as being all about “social justice”. It is now, together with borderline fascist nationalism, the fastest growing political movement in Europe. Its goal is to transform all of the European Union into one gigantic machine of state control, unrelenting redistribution, entitlements, and an assortment of hate-the-rich measures such as punitive taxation (even worse than today) and property confiscation.
There is a lot to be worried about with this new social-justice driven version of socialism. For one, it makes ignorance a virtue: young college-educated men and women join it without questioning the economic, political, moral and historic credentials of the movement. In a Europe where one in five young men and women are unemployed, and most of the rest live off tax-paid entitlements, the cheap rhetoric of social justice sounds like an opportunity for revenge and resurrection of one’s self esteem.
Another worrisome element is that the notion of social justice is spreading to North America. It is not just president Obama who talks about the need for more economic redistribution – the socialist gospel is preached by a plethora of organizations, blogs and media outlets. Unlike Europe, however, the United States is relatively immune to this ethical virus, especially after six years under the Obama presidency.
But that does not mean we are entirely protected against the lure of “social justice”. The number of authoritative figures broadcasting socialist rhetoric seems to be growing. Pope Francis has added himself to the socialist choir. Consider this excerpt from his Apostolic Exhortation of November 24, 2013:
Just as the commandment “Thou shalt not kill” sets a clear limit in order to safeguard the value of human life, today we also have to say “thou shalt not” to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.
This could just as well have been written by a secular advocate of socialism. In a blind test of who said these words, the leader of the rapidly surging, social-justice promoting new movement in Spain – modeled after Tsipras’ Syriza in Greece – would have been a more logical guess than Pope Francis.
The very concept of “inequality” is antithetical to the foundations of a free society. It presumes that all men as not created equal, but created identical. Equality in creation, so to speak, means that we are all individuals with the same right to create, pursue and capitalize on the opportunities that lie before us, or we create for ourselves. We all have the right to live, to be free and to the proceeds of our work – property.
However, the concept of “inequality” that Pope Francis uses has a different meaning. In his view, men are equal only if they achieve the same end results in life. If one man ends up living in a beautiful house in Santa Barbara, enjoying every day the gorgeous views of the Pacific Ocean, and another man lives in a shack in a favela in Sao Paulo, then the Papal principle of “equality” dictates that the man in Santa Barbara has unfairly gained something at the expense of the man in Sao Paulo.
The Pope and other merchants of the same rhetoric propose that “social justice” is the cure for these differences between individuals. But even disregarding the well-documented economic consequences of redistribution of income, consumption and property, the theory behind “inequality” and social justice exercises considerable violence on reality.
Any two human beings compared to one another will always exhibit differences. These are differences in ability, interest, physical and mental strength, endurance, curiosity… A man’s personality has so many dimensions it is almost impossible to find two individuals who come close to being identical. For this reason, every human being will perform differently under given circumstances. There are general trends in human behavior, trends which allow social scientists to explain and with reasonable accuracy make some predictions about how a random person will respond to given conditions. But no two persons will perform identically.
For this reason, we the individuals will always achieve differently. Some will become wealthier than others. Some will reach farther than others in pursuit of wealth, career accomplishment or political influence. Therefore, in order to eliminate “inequality” as defined by the social-justice demagogues, one has to begin by eradicating differences between human individuals.
Herein lies a major problem for anyone who proposes social justice from a theological foundation. Our individual differences are the result of God’s creation. We are all created in God’s image, but we are clones of God. We are imperfect by design – and we are also individually unique by design.
If God meant for us all to accomplish equally, He would have made sure to eradicate any individual differences between us.
When Pope Francis urges the elimination of “inequality” he adopts a secular view of society. That view, riding on the growing global popularity of social justice, may allow the Catholic church to harvest some short-term gains in a worldwide popularity contest, but it will not benefit the future of either the church or our society. Social justice requires an authoritarian government, at least of the caliber known as the “welfare state”, and therefore is directly antithetical to the individual’s right to life, liberty and property.
Put bluntly: by joining the social-justice choir, Pope Francis is giving his nod to continued eradication of the principles and institutions that built our free, prosperous Western Civilization. More frighteningly, the farther one walks out on the limb of social justice, the more authoritarian society has to become. As social justice takes precedence over individual freedom, the expansion of social justice comes at the expense of individual freedom.
With President Reagan’s warning ringing in the background, one is inclined to ask the Pope if he knows any boundary, any limitation, of the pursuit of social justice.
Or, in more modern terms: when is government big enough?
Two years ago Caritas, the charity arm of the Catholic church, published a study of the socio-economic effects of the European crisis. They reported:
The prioritisation by the EU and its Member States of economic policies at the expense of social policies during the current crisis is having a devastating impact on people – especially in the five countries worst affected – according to a new study published today by Caritas Europa. The … failure of the EU and its Member States to provide concrete support on the scale required to assist those experiencing difficulties, to protect essential public services and create employment is likely to prolong the crisis.
Their report presented…
a picture of a Europe in which social risks are increasing, social systems are being tested and individuals and families are under stress. The report strongly challenges current official attempts to suggest that the worst of the economic crisis is over. It highlights the extremely negative impact of austerity policies on the lives of vulnerable people, and reveals that many others are being driven into poverty for the first time.
This was, again, two years ago. Since then, things have gotten worse, which Caritas reflects in its 2015 study of the European crisis. Sadly, the report not only accurately presents the socio-economic disaster in southern Europe, but it also makes requests for a bigger welfare state.
Starting with the effects of the crisis, Caritas points to widespread cuts in income-security entitlements and health care, especially in the worst-off countries like Greece, Italy, Rumania, Portugal and Cyprus:
[From] 2011, social expenditure declined … and social challenges have grown further during the second dip of the recession … for example, in a number of countries the number of long-term unemployed losing their entitlements has increased, the level or duration of benefits has been reduced, eligibility rules have been tightened to increase incentives to take up work and this has also led to excluding beneficiaries from some [entitlement programs].
The study also criticizes the hand of austerity that has been particularly heavy on southern Europe:
[The] policy of requiring countries with the weakest social protection systems to impose fiscal consolidation and successive rounds of austerity measures within very short timetables is placing the burden of adjustments on the shoulders of those who did not create the crisis in Europe and are least able to bear the burden.
[Austerity] policies pursued during the crisis in Europe and the structural reforms aimed at economic and budgetary stabilisation have had negative effects with regard to social justice in most countries
This is the problem facing Europe in the next few years. An economic crisis hit; governments responded by slashing welfare-state entitlements and raising taxes; people respond by getting angry – not over the crisis, but over lost entitlements. As a result, socialist parties are gaining strength from Paris to Lisbon, from Athens to Madrid, pushing an agenda of restored entitlements. Caritas reinforces this movement by suggesting that “social justice” – a politically undefinable concept – should be the guideline for post-austerity policy.
A battle cry for more social justice is a battle cry for higher taxes and more income redistribution. Or, as Caritas puts it, “the impacts [of austerity] have not been shouldered equally”. If by “equally” they mean “spread out evenly across the citizenry”, then yes, they are entirely correct. But the reason for this is – obviously – that only a select segment of the population receives entitlements from the welfare state. That is the very reason for the welfare state’s existence.
Caritas and other advocates of social justice would respond that this is a moot point: those who earn the least cannot afford lose the entitlements they have. Others have money, they contend.
If the argument about the frugality of welfare-state entitlements were applied to the United States, it would not stand up to scrutiny. Michael Tanner and Charles Hughes have proven this beyond the shadow of a doubt. Things are a bit different in Europe, though, as Caritas actually show in their study. However, this does not mean that austerity could have been executed differently. More burden on those who do not receive entitlements automatically means higher taxes; as I show in my book Industrial Poverty austerity based on tax increases has even worse macroeconomic effects than austerity biased toward spending cuts. This means, in a nutshell, that if austerity had been profiled according to some “social justice” scale, it would have deprived even more Europeans of jobs and entrepreneurial opportunities.
Plain and simple: Europe must not fall for the temptation of “social justice”. It must charter a course away from collectivism and government “solutions”. The way to the future goes through fundamental, structural reforms toward a permanently smaller government.
Only a couple of days after the European Central Bank raised white flag and finally gave up its attempts at defending the euro as a strong, global currency, Greek voters drove their own dagger through the heart of the euro. Reports The Telegraph:
Greece set itself on a collision course with the rest of Europe on Sunday night after handing a stunning general election victory to a far-Left party that has pledged to reject austerity and cancel the country’s billions of pounds in debt. In a resounding rebuff to the country’s loss of financial sovereignty, With 92 per cent of the vote counted, Greeks gave Syriza 36.3 percent of the vote – 8.5 points more than conservative New Democracy party of Prime Minister Antonis Samaras.
That is about six percent more than most polls predicted. But even worse than their voter share is how the parliamentary system distributes mandates. The Telegraph again:
It means they will be able to send between 149 and 151 MPs to the 300-seat parliament, putting them tantalisingly close to an outright majority. The final result was too close to call – if they win 150 seats or fewer, they will have to form a coalition with one of several minor parties. … Syriza is now likely to become the first anti-austerity party in Europe to form a government. … The election victory threatens renewed turmoil in global markets and throws Greece’s continued membership of the euro zone into question. All eyes will be on the opening of world financial markets on Monday, although fears of a “Grexit” – Greece having to leave the euro – and a potential collapse of the currency has been less fraught than during Greece’s last general election in 2012.
It does not quite work that way. The euro is under compounded pressure from many different elements, one being the Greek economic crisis. The actions by the ECB themselves have done at least as much to undermine the euro: its pledge last year to buy all treasury bonds from euro-zone governments that the market wanted to sell was a de facto promise to monetize euro-denominated government debt. The EU constitution, in particular its Stability and Growth Pact, explicitly forbids debt and deficit monetization. By so blatantly violating the constitution, the ECB undermined its own credibility.
Now the ECB has announced that in addition to debt monetization, it will monetize new deficit. That was the essence of the message this past Thursday. The anti-constitutionality of its own policies was thereby solidified; when the Federal Reserve ran its multi-year Quantitative Easing program it never violated anything other than sound economic principles. If the ECB so readily violates the Stability and Growth Pact, then who is to say it won’t violate any other of its firmly declared policy goals? When euro-zone inflation eventually climbs back to two percent – the ECB’s target value – how can global investors trust the ECB to then turn on anti-inflationary policies?
Part of the reason for the Stability and Growth Pact was that the architects of the European Union wanted to avoid runaway monetary policy, a phenomenon Europeans were all too familiar with from the 1960s and ’70s. Debt and deficit monetization is a safe way to such runaway money printing. What reasons do we have, now, to believe that the ECB will stick to its anti-inflationary pledge when the two-percent inflation day comes?
This long-winded explanation is needed as a background to the effects that the Syriza victory may have on the euro. I am the first to conclude that those effects will be clearly and unequivocally negative, but as a stand-alone problem for the ECB the Greek hard-left turn is not enough. In a manner of speaking, the ECB is jeopardizing the future of the euro by having weakened the currency with reckless monetary expansionism to the point where a single member-state election can throw the future of the entire currency union into doubt.
Exactly how the end of the euro will play out remains to be seen. What we do know, though, is that Thursday’s deficit-monetization announcement and the Greek election victory together put the euro under lethal pressure. The deficit-monetization pledge is effectively a blank check to countries like Greece to go back to the spend-to-the-end heydays. Since the ECB now believes that more deficit spending is good for the economy, it has handed Syriza an outstanding argument for abandoning the so-deeply hated austerity policies that the ECB, the EU and the IMF have imposed on the country. The Telegraph again:
[Syriza], a motley collection of communists, Maoists and socialists, wants to roll back five years of austerity policies and cancel a large part of Greece’s 320 billion euro debt, which at more than 175 per cent of GDP is the world’s second highest proportional to the size of the economy after Japan. … If they fulfil the threats, Greece’s membership of the euro zone could be in peril. Mr Tsipras has toned down the anti-euro rhetoric he used during Greece’s last election in 2012 and now insists he wants Greece to stay in the euro zone. Austerity policies imposed by the EU and International Monetary Fund have produced deep suffering, with the economy contracting by a quarter, youth unemployment rising to 50 per cent and 200,000 Greeks leaving the country.
Youth unemployment was up to 60 percent at the very depth of the depression. Just a detail. The Telegraph concludes by noting that:
Mr Tsipras has pledged to reverse many of the reforms that the hated “troika” of the EU, IMF and European Central Bank have imposed, including privatisations of state assets, cuts to pensions and a reduction of the minimum wage. But the creditors have insisted they will hold Greece to account and expect it to stick to its austerity programmes, heralding a potentially explosive showdown.
Again, with the ECB’s own Quantitative Easing program it becomes politically and logically impossible for the Bank and its two “troika” partners to maintain that Greece should continue with austerity. You cannot laud government deficit spending with one side of your mouth while criticizing it with the other.
As a strictly macroeconomic event, the ECB’s capitulation on austerity is not bad for Greece. The policies were not designed to lift the economy out of the ditch. They were designed to make big government more affordable to a shrinking private-sector economy. However, a return to government spending on credit is probably the only policy strategy that could possibly have even worse long-term effects than statist austerity.
Unfortunately, it looks like that is exactly where Greece is heading. Syriza’s “vision” of reversing years of welfare-state spending cuts is getting a lot of support from various corners of Europe’s punditry scene. For example, in an opinion piece at Euractiv.com, Marianna Fotaki, professor of business ethics at University of Warwick, England, claims that the Syriza victory gives Europe a chance to “rediscover its social responsibility”:
Greece’s entire economy accounts for three per cent of the eurozone’s output, but its national debt totals €360 billion or 175 per cent of the country’s GDP and poses a continuous threat to its survival. While the crippling debt cannot realistically be paid back in full, the troika of the EU, European Central Bank, and IMF insist that the drastic cuts in public spending must continue. But if Syriza is successful – as the polls suggest – it promises to renegotiate the terms of the bailout and ask for substantial debt forgiveness, which could change the terms of the debate about the future of the European project.
As I explained recently, so called “debt forgiveness” means that private-sector investors lose the same amount of money. The banks that received such generous bailouts earlier in the Great Recession had made substantial investments in Greek government debt. Would Professor Fotaki like to see those same banks lose even more money? With the new bank-rescue feature introduced as the Cyprus Bank Heist, such losses would lead to confiscation of the savings that regular families have deposited in their savings accounts.
Would professor Fotaki consider that that to be an ethically acceptable consequence of her desired Greek debt “forgiveness”?
Professor Fotaki then goes on a long tirade to make the case for more income redistribution within the euro zone:
The immense social cost of the austerity policies demanded by the troika has put in question the political and social objectives of an ‘ever closer union’ proclaimed in the EU founding documents. … Since the economic crisis of 2007 … GDP per capita and gross disposable household incomes have declined across the EU and have not yet returned to their pre-crisis levels in many countries. Unemployment is at record high levels, with Greece and Spain topping the numbers of long-term unemployed youth. There are also deep inequalities within the eurozone. Strong economies that are major exporters have benefitted from free trade, and the fixed exchange rate mechanism protecting their goods from price fluctuations. But the euro has hurt the least competitive economies by depriving them of a currency flexibility that could have been used to respond to the crisis. Without substantial transfers between weaker and stronger economies, which accounts for only 1.13 per cent of the EU’s budget at present, there is no effective mechanism for risk sharing among the member states and for addressing the consequences of the crisis in the eurozone.
In other words, Europe’s welfare statists will continue to blame the common currency for the consequences of statist austerity. But while professor Fotaki does have a point that the euro zone is not nearly an optimal currency area, the problems that she blames on the euro zone are not the fault of the common currency. Big government is a problem wherever it exists; in the case of the euro zone, big government has caused substantial deficits that, in turn, the European political leadership did not want to accept – and the European constitution did not allow. To battle those deficits the EU, the ECB and the IMF imposed harsh austerity policies on Greece among several other countries. But countries can subject themselves to those policies without being part of a currency union: Denmark in the 1980s is one example, Sweden in the ’90s another. (I have an entire chapter on the Swedish ’90s crisis in my book Industrial Poverty.) The problem is the structurally unaffordable welfare state, not the currency union.
Professor Fotaki again:
The member states that benefitted from the common currency should lead in offering meaningful support, rather than decimating their weaker members in a time of crisis by forcing austerity measures upon them. This is not denying the responsibility for reckless borrowing resting with the successive Greek governments and their supporters. However, the logic of a collective punishment of the most vulnerable groups of the population, must be rejected.
What seems to be so difficult to understand here is that austerity, as designed for Greece, was not aimed at terminating the programs that those vulnerable groups life off. It was designed to make those programs fit a smaller tax base. If Europe’s political leaders had wanted to terminate those programs and leave the poor out to dry, they would simply have terminated the programs. But their goal was instead to make the welfare state more affordable.
It is an undeniable fact that the politicians and economists who imposed statist austerity on Greece did so without being aware of the vastly negative consequences that those policies would have for the Greek economy. For example, the IMF grossly miscalculated the contractionary effects of austerity on the Greek economy, a miscalculation their chief economist Olivier Blanchard – the honorable man and scholar he is – has since explained and taken responsibility for.
Nevertheless, the macroeconomic miscalculations and misunderstandings that have surrounded statist austerity since 2010 (when it was first imposed on Greece) do not change the fact that the goal of said austerity policies was to reduce the size of government to fit a smaller economy. That was a disastrous intention, as shown by experience from the Great Recession – but it was nevertheless their goal. However, as professor Fotaki demonstrates with her own rhetoric, this point is lost on the welfare statists whose only intention now is to restore the welfare state to its pre-crisis glory:
The old poor and the rapidly growing new poor comprise significant sections of Greek society: 20 per cent of children live in poverty, while Greece’s unemployment rate has topped 20 per cent for four consecutive years now and reached almost 27 per cent in 2013. With youth unemployment above 50 per cent, many well-educated people have left the country. There is no access to free health care and the weak social safety net from before the crisis has all but disappeared. The dramatic welfare retrenchment combined with unemployment has led to austerity induced suicides and people searching for food in garbage cans in cities.
There is nothing wrong factually in this. The Greek people have suffered enormously under the heavy hand of austerity, simply because the policies that aim to save the welfare state for them also move the goal post: higher taxes and spending cuts drain the private sector of money, shrinking the very tax base that statist austerity tries to match the welfare state with.
The problem is in what the welfare statists want to do about the present situation. What will be accomplished by increasing entitlement spending again? Greek taxpayers certainly cannot afford it. Is Greece going to get back to deficit-funded spending again? Professor Fotaki gives us a clue to her answer in the opening of her article: debt forgiveness. She wants Greece to unilaterally write down its debt and for creditors to accept the write-down without protest.
The meaning of this is clear. Greece should be able to restore its welfare state to even more unaffordable levels without the constraints and restrictions imposed by economic reality. This is a passioned plea for a new debt crisis: who will lend money to a government that will unilaterally write down its debt whenever it feels it cannot pay back what it owes?
This kind of rhetoric from the emboldened European left rings of the same contempt for free-market Capitalism that once led to the creation of the modern welfare state. The welfare state, in turn, brought about debt crises in many European countries during the 1980s and ’90s, in response to which the EU created its Stability and Growth Pact. But the welfare states remained and gradually eroded the solidity of the Pact. When the 2008 financial crisis hit, the European economy would have absorbed it and shrugged it off as yet another recession – just as it did in the early ’90s – had not the welfare state been there. Welfare-state created debt and deficits had already stretched the euro-zone economy thin; all it took to sink Europe into industrial poverty and permanent stagnation was a quickly unfolding recession.
Ironically, the state of stagnation has been reinforced by austerity policies that were designed in compliance with the Stability and Growth Pact; by complying with the Pact, those policies, it was said, would secure the macroeconomic future of the euro zone and keep the euro strong. Now those policies have led the ECB to a point where it has destroyed the future of its own currency.
Let us make one thing clear right now: there is no such thing as income “inequality”. There are income differences, but no income “inequalities”.
The very term “inequality” has been constructed to imply a moral content in differences between people’s incomes (or wealth). Every time we use the term we imply – deliberately or inadvertently – that income differences are problematic and need to go away. But if the premise of any discussion of income differences is that the differences are somehow immoral, then there really is not going to be a dispassionate conversation about those differences.
There is a crucial distinction distinction between “income inequality” and “income difference”. The former term, again with its moral content, implies that there is a role for economic policy – in other words government – to play in how people earn their money. This involvement, in turn, would come in the form of measures correcting differences between people’s incomes.
Once proponents of government intervention in people’s incomes have won the conceptual debate they move on to the policy goals for such intervention. We know all too well what those goals are: even though government expansionists do not spell it out on a daily basis, their goal with income interventionism is to eradicate differences between what people have to spend each month. A colossal government apparatus has been created for this very purpose – we know it as the welfare state – which is capable of redistributing astounding amounts of money between citizens. The Tax Foundation provides a good overview in a compilation of data on income redistribution, with the following main conclusions:
- The federal income tax code has been more progressive, i.e., more punitive of higher incomes, in the past five years than during any five-year period since 1979;
- Since at least 2004 and the enactment of the Bush tax cuts, the top one percent income earners have been paying more in federal income taxes than the bottom 90 percent;
- At the top of the last business cycle, in 2006, the top-40 percent of U.S. income earners redistributed $1.2 trillion to the bottom-60 percent income earners.
The first conclusion indicates that both the Reagan and the Bush tax cuts vastly benefited income earners in lower brackets. The second conclusion shows that while Congress has cut federal income taxes, they have also distributed the tax burden upward in income layers. If any “inequality” exists in the U.S. economy, it would be the tax code that asks less than 1.4 million people to pay more in taxes – in actual dollars – than more than 120 million of their fellow citizens together.
The third conclusion drawn by the Tax Foundation illustrates well the redistributive power of the American welfare state. Splitting the $1.2 trillion redistributed to those in the receiving three quintiles gives each employed person in those quintiles an average of $14,692 per year.
What have those people done to receive that money? Nothing, other than not make enough money to disqualify.
Herein lies the core of the problem with the concept of “income inequality”. The income earners who constitute the three lowest-income quintiles in the data quoted by the Tax Foundation are in those quintiles for a reason. They have chosen a career path that does not pay well; they have chosen to not pursue a college degree or trade diploma that opens high-income tracks for them; or they have made other personal choices that affect their ability to earn more money than they actually do.
By contrast, the members of the two highest quintiles have made career, education and other personal choices that have allowed them to climb the income ladder.
These are common-sense points that should raise no eyebrows. But the government expansionist proposing legislative action against income “inequality” will have more to say. He will suggest that it does not matter what choices people make; each one of us has the right to a certain standard of living simply because of our existence as fellow humans.
At the heart of this moral pitch for government action against income “inequality” is a suggestion that all human beings have the right to the same satisfaction of needs. A government expansionist would claim that Jack’s need for a three-bedroom house for his family is as important as Joe’s family’s need for the same-sized house. When these “equalists” can set the public policy agenda they create redistribution programs that elevate the ability of low-income Jack to buy that three-bedroom house to the same level as Joe’s ability.
The problem for the redistribution activists is that they can only help Jack by depriving Joe of his ability to buy a nicer four-bedroom house. The ethical principle behind redistribution is, namely, that humans have a right to have their needs satisfied. But when government confiscates – in other words taxes away – parts of Joe’s income it actually deprives him of his ability to fully satisfy his needs. As a result, the ethical underpinnings of policies against income “inequality” lack consistency: eventually it becomes impossible for the redistributionist to provide a logically consistent, universally applicable distinction between what needs people have the right to, and what needs they can be deprived of.
When public policy is based on ethical principles that lack logical consistency they ultimately become arbitrary. When the principles validating policy initiatives are arbitrary, they give legislators uncheckable, unbalanced powers to legislate and interpret that same legislation as they see fit. Arbitrariness effectively means endless powers in the hands of government. Endless power is an express route to tyranny.
A redistributionist would disagree, pointing to Europe’s parliamentary democracies as a sign that you can combine the welfare state and democracy. But that argument reduces the concept of “tyranny” to a technical issue of who gets to decide who should govern a country. It omits a person’s economic actions, preferences and desires from the picture. But a person’s right to the proceeds of his work is as unabridgable as his right to speak his mind, write down and publish his thoughts, to travel and live wherever he wants to.
The redistributionists have lost the moral argument based merely on the logical inconsistency of their case. But as is well known to avid students of economics, they have also lost the argument based on the economic outcomes of their own policy initiatives. Europe, the continent where redistributionists have had the strongest public policy influence outside the Soviet Empire, is sinking into a hole of industrial poverty, pulled down by its increasingly unbearable welfare state.
It is time that their losses translate into practical policy. It is time for economic freedom to set the legislative course, in Europe’s parliaments, in U.S. Congress as well as in our state legislatures.
The European crisis is economic in nature, and brought to its current levels by a fiscally unsustainable welfare state. However, behind the big, redistributive government is an ideology that paved the way for the welfare state. Often referred to as “socialism” or, more precisely, “social democracy”, this ideology claims that the free world is inherently unjust and needs vast “correction mechanisms” to function in what they would deem a “better” way.
The yardstick used by social democrats is “social justice”. This concept has made its way deeply into the vocabularies of every European language and shaped the mindset of three generations of post-World War 2 taxpayers into believing that they have to surrender half, sometimes more, of what they earn to government. The idea of social justice has also made the same taxpayers tolerate that large segments of the population receive various forms of entitlements – money and services from government – that they don’t have to work for.
By shaping the minds of generations of Europeans into accepting social justice as some kind of “natural” part of society, the social democrats have accomplished almost universal acceptance for the welfare state. You don’t make it in European politics without one way or the other pledging allegiance to the welfare state; so called “conservatives” such as Britain’s prime minister David Cameron, Germany’s chancellor Angela Merkel and France’s former president Nicolas Sarkozy all embraced the welfare state as a natural part of the social and economic order.
So long as the economies of Europe seemed to be doing well people in general saw little reason to question the welfare state. But since the crisis began voters have started expressing deep dissatisfaction with how it works. They are not ready to turn to libertarians to ask for alternative solutions, which in part is because there is practically no libertarian presence on the European political scene. Another explanation is that the idea of social justice still has exceptionally deep roots in the European mindset, so deep that this crisis has not yet made a notable dent in those roots. Therefore, when people see that the welfare state is beginning to crumble they look for alternative ways to save it, too often ending up voting for extremist parties like Greece’s Golden Dawn or radicals like Portugal’s communists or France’s Front National.
The deep roots of social justice are now about to bring down Europe as a first-world industrialized economy. It is questionable if even the macroeconomic equivalent of a nuclear disaster would wake up Europe’s voters enough to make them abandon social justice. A story from Der Spiegel illustrates just how cemented social justice has become in the European mindset. It starts with the story of a young German man in Munich trying to find a way to get his life started:
Who knows whether he will ever return to this office building. Who knows whether he will ever be allowed to set foot in such a building again — a place where employees sip their espressos on designer couches and gaze at the sky through a glass ceiling. Can, the 20-year-old son of Turkish immigrants, doesn’t know either, so he pulls out his smartphone and takes a few snapshots.
Let’s make one little observation here before we continue to listen to the Spiegel story. The set-up here is that Can is a first-generation German, and that he comes from a poor, “disadvantaged” background and therefore somehow is locked out of the latte-sipping, “privileged” designer-couch social settings where people make (by European standards) good money.
At the same time, Can has “large” – meaning fairly expensive – headphones and a smartphone. How disadvantaged are you if you can buy and maintain the account of a smartphone?
He photographs the shiny coffeemaker, the plants in concrete planters and the paternoster carrying men and women in business dress. At this point, Can is merely a guest. With his plaid shirt and large headphones dangling around his neck, he still looks noticeably out of place in the Munich offices of the Boston Consulting Group (BCG). He is there because one of the management consultants is his personal coach.
After this set-up, aimed to present Can as a victim of some kind of injustice, the story introduces a government-run program that requests of “privileged” people that they take even more of their time to spend on the “disadvantaged” – more time, that is, than they already plunk down through Germany’s vast, intrusive tax system:
The employment office has brought them together, and now they are collaborating on a project: Can’s future. It had looked pretty grim until now. Can had what advisors at the employment office call “difficult starting conditions.” He grew up in a neighborhood with many high-rise buildings and very few music schools. He repeated the 5th, 7th and 10th grades and left school with close to a failing grade in math and German. He didn’t even bother to send out job applications.
So here is a question that Der Spiegel carefully avoids. Can’s parents were Turkish immigrants. They came to Germany to do what? If they came there to build a better future for their kids, then why did they not make sure they did well in school? A kid who has to repeat three grades out of ten is either mentally incapable of going to school and needs serious help, or he is growing up in a home where the Western norm system is a notable absentee.
Clearly, Can does not belong to the former category, so the only conclusion we can draw is that he comes from a home where his parents did not make hard work, individual responsibility and commitment to one’s own future were the prevailing values.
Does lack of parental responsibility give children the right to other people’s time and money? No. Voluntary help is a different matter, though.
Now a consultant is trying to help him, a man “from another world,” as Can says, from a world in which people print their Ph.D. titles on their business cards and send their children on foreign exchange programs. From Mondays to Thursdays, BCG consultant Fabian Barthel works on plans for roads and dams in Africa. He spends his Friday afternoons on pro bono work, helping Can find an apprenticeship — as a sort of personal aid worker. “Can’s starting conditions were definitely worse than mine. But it can’t be that this shapes the rest of our lives,” says Barthel. Or at least this doesn’t agree with his notion of justice, he adds.
If Mr. Barthel wants to use his time to provide help for children and young men and women from poor backgrounds, then that is only something we should respect him for. But there is a side to this story that Der Spiegel does not provide: Germany has one of the most elaborate welfare states in the world, with generous assistance to families like Can’s. All this is paid for with high taxes taken predominantly out of the paychecks, and added on top of the consumption, of people like Mr. Barthel. He has already paid for all the assistance that Can could ever ask for, and yet the government asks him to chip in more, as a pro bono case worker for a government-run employment program.
At some point, even a German taxpayer should ask himself: when is government big enough?
Posters and flyers distributed around Germany provide people like Can and Barthel with an idea of how the political parties define justice. Politicians with the center-right Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), praise child care subsidies for parents who stay home with their children. The center-left Social Democratic Party (SPD) promises more stable pensions. Lawmakers say that everything that’s good about the German system should remain as it is.
In other words, re-arrange the deck chairs on the M/S Welfare State:
The parties have discovered the benefits using social justice as a campaign tool. The J-word is a common theme in many election platforms. The Greens invoke justice about 60 times while the SPD mentions the word almost 40 times in its program. The Left Party follows close behind. The SPD says it wants to contain what its chancellor candidate Peer Steinbrück, calls “the centrifugal forces in society,” by raising taxes on higher-earners. The Greens want to impose a levy on the assets of the wealthy. Their voters support “an equitable distribution of taxes,” even if it means reaching into their own pockets, says Katrin Göring-Eckardt, the Green Party’s top candidate.
And where are the conservatives, you ask?
Conservatives, meanwhile, aren’t tying the promise of social justice to higher taxes, but to government benefits. They want to increase pensions for older mothers and boost small retirement pensions by turning them into a “life achievement pension.” Chancellor Angela Merkel’s party also wants to increase the childcare subsidy next year. “Every family is different — and each family is especially important to us,” the conservatives have printed on their campaign posters. The message is clear: We are throwing money at you.
With this commitment to social justice, how can anything possibly go wrong in Germany? After all, the same concept has worked so brilliantly in Greece, Italy, Spain, Portugal, France…
In fairness, the Spiegel article does report that Germans in general are expressing weariness when it comes to taxes:
About two-thirds of Germans believe that social conditions have become more inequitable in the last legislative period. At the same time, the share of Germans who view the tax system as unfair has increased sharply. Only 21 percent of those polled consider income distribution to be the most important problem.
German taxpayers are bankrolling good parts of the Greek welfare state on top of their own. As a result, the German economy has come to a standstill and it is becoming increasingly difficult for German families to improve their lives through hard work, career commitment and good management of personal finances. When economic realities bite and don’t let go, eventually the pain sets in.
This does not mean that Germans in general are on their way to abandoning the concept of social justice. But it means that they are at least grumbling about ancillary aspects of their welfare state. This raises the big question whether or not they will change their minds about the welfare state’s general principles fast enough to save the European continent from becoming a full-scale economic wasteland.