Clearing out my voluminous library of papers (I like to think of it as my 2013 Spring cleaning, done on the same, “well-in-advance” lines as Julia Gillard’s election announcement!), I came across an interesting piece written by Wolfgang Kasper, published in the CIS Policy journal back in 1999, which translated an earlier piece written by libertarian philosopher Gerard Radnitzky. The key messages of the piece are as follows:
If one applies the institutions of the democratic game to social policy and assumes that individuals, interest groups, politicians and the electorate behave rationally, one can formulate a list of rules of rational political conduct:
1. Compete above all for the undecided median voter, i.e. ‘redistribute’ to them although they are not in need.
2. Redistribute in favour of well organised voters, because these can lend you electoral support or become dangerous to you through strikes, blockades or even the threat of violence – and you can count on a publicity multiplier through the tax-subsidised media. The preferable mode of redistribution depends on what interests are involved: discriminatory taxes or transfers, provision of public goods or administrative interventions.
3. Redistribute also within the majority on which you and your party count for support, and do so to ensure that transfers are handed out to small groups of marginal voters and that the costs are spread amongst as many citizens as possible because ordinary citizens are ‘rationally ignorant.’
4. Make the redistribution system – which is the essence of the welfare state – as untransparent as possible. In practice, this means that one has to intervene in many technically complex and untransparent ways, so that the citizen-taxpayers can marshall neither the time nor the resources to keep themselves informed about the plethora of interventions.
5. Time your redistributional hand-outs so that they occur shortly before elections and then target them. If the expenditure is made shortly before an election, there is a good chance that the financing problem will be devolved onto the next legislature.
It is clear that the Gillard government is desperately attempting to shore up its somewhat emaciated electoral base, in accordance with the afore-mentioned precepts of Machiavellian redistributionist politics, through various manifestations of largesse ranging from the school kids’ bonus right through to the NDIS (by the way, yes, I do oppose the NDIS as explained here). As for the Coalition, one of their main expenditure-growth ticket items is a lavish parental leave scheme which crowds out voluntaristic efforts by firms to provide their own leave arrangements to attract workers and which adds a semblance of fiscal discrimination within the corporate income tax regime.
For anyone concerned about protecting what economic freedoms we have left, the fear is that electoral promises to extend the welfare state doesn’t end with what has already been announced. Over the next several months, expect to see more promises that force more from the private incomes of person or group A to dole out to person or group B.
So, how should a classical liberal respond to the expected next tidal-waves of redistributional spending eroding the shores of freedom?
First, point out that seemingly altruistic promises to give person or group B a “helping hand” is nothing more than cynical base politics to shore up votes. The political identification of beneficiary person or group B is also typically made on an arbitrary basis, with little reference to the authenticity of perceived “need.” Second, ingeniously apply the principle stated by Frederic Bastiat that “taking away five, and giving back four, is not giving” to the contemporary redistributionist policy proposals raised. This would not only include reference to the adverse impact of redistribution upon taxpaying person or group A, but remind all and sundry that proposals for redistribution primarily benefit well-to-do welfare bureaucrats who automatically receive their cut from the extended welfare state. One could also mention the potential complexities of proposals, including with regard to how they may interact with the existing redistributionist machinery, as providing another political rationale for keeping the prevailing army of welfare bureaucrats intact.
I suspect that classical liberals will have a lot to say along these lines over the next few months!
Further, point out that dismantling the welfare bureaucracy and winding back entitlements to affordable and just levels commmensurate with the prevailing economic circumstances will mean tax cuts for all workers. Most people would rather keep more of their hard earned than have their incomes supplemented by the government. This will also encourage the work-shy to seek employment and reduce the welfare rolls.
Good point, Anthony. The reduction in the scale and scope of the redistributionist state will lead to economic growth, providing greater incentives for those presently receiving government subsidies to enter the financially lucrative and socially engaging world of work, and the tax cuts you envisage would only further fuel incentives to supply labour.
Unfortunately, many politicians don’t seem to recognize the economic and social virtues of radically smaller government, and don’t want to practically engender radically smaller government because doing so would diminish their relevance.
Voters could demand politicians recognize radically smaller government and then get tax cuts. What has larger government achieved except higher taxes?
stackja, Kasper wrote about this
If citizens could go to court to seek damages for a new tariff or foreign-investment control, the cause for openness would be greatly strengthened and political leaders would have a better chance to realise the most useful principle of non-discrimination against foreigners. Tort legislation would give teeth to action against ‘rent-seekers’ and would incline government agencies to be less biased towards powerful lobbies.
WK provides this story
Yes. I was in small places in Indonesia where a father who had a good business said, ‘Now I am very poor. I have five children and my life’s work is done because I’ve bought the local school teacher’s job for the daughter, two of my sons are in the police force and they are earning nice extra incomes from traffic fines so they are doing nicely and they can repay me a bit…’ et cetera. which reflects much of remote Australia.
Would be interesting to hear his thoughts on the north’s state of play. Politically and industrially that is.
Thanks for post Julie, great Saturday afternoon reading.
Jessie elsewhere:
Currency machine counting the cost of bribery
I accept the argument, I just don’t see how it fits the Gillard government.
This is not a liberal/free market government. But it has cut taxes in most budgets and tried to introduce means testing for a lot of middle class welfare. of course the Carbon Tax proceeds are retributive & there will be an NDIS in some form, but this isn’t the only thing they’ve done.
I too wish the government were much more free market oriented. It’s not and that’s a problem. But I simply can’t recognise the picture presented by this kind of criticism when compared to the actual record of the government.
The reason people dislike comparisons with Hitler is because such a comparison of any modern government with the National Socialists of Germany obscures and simplifies more than it helps understand or explain. Lately, I increasingly feel the standard critique that Gillard/Obama are just ‘high spending redistributive/high taxers’ also obscures more than it helps explain.
I’m not defending Gillard or Obama, just wondering the utility of this one-size fits all criticism.
The size of government tends to grow to the extent that the costs of government can be obscured and the benefits can be targeted towards influential interest groups. The main methods used to help finance the growth of government include income taxes, other business taxes, consumption taxes, resource taxes, payroll taxes, budget deficits and currency devaluation.
Progressive income taxes and corporate taxes are politically saleable because the costs are disproportionately skewed towards a minority of higher-income earners while a larger number of people pay relative less of these taxes and are net recipients of the revenue proceeds. Consumption taxes, payroll taxes, gambling taxes, resource taxes etc. are politically saleable as they are largely hidden taxes, in that most people are not really aware of how much they are effectively costing them. Budget deficits are politically saleable as they defer the cost of having to fund expenditure from the current taxpayers, often to those who may not be old enough to vote yet. Currency devaluation also works because it is largely a hidden impost. To the extent that the costs of funding government can either be hidden, deferred, or shifted to a minority of the population or to unpopular groups, it is easy to reduce political resistance to the growth of government.
So long as those who are net recipients of government are more organised and easy to mobilise than net contributors to government, one can expect the size of government to grow. In practice, what tends to put a ceiling on the growth of government is the economic reality that you can only extract so much revenue from the productive economy without effectively cooking the goose that lays the golden eggs, rather than a shift in the influence of net contributors versus net recipients. That is largely what is happening in Europe at the moment with the much-lamented ‘austerity’.
Fantastic stackja, thanks.
As good a story as this.
“The drug was packed into 14,700 individual deal bags.”
Lucky the Feds stopped the legal trade back in 2007 eh? I recall it was on the premise that the excessive use of kava stopped people from working. And perhaps spending their welfare $ on the substance. I’m sure someone in Vanuatu or elsewhere might get a bright idea to resurrect sales.
Maybe a 150g goes for $50-80, can’t remember at the moment.
Money’s Uncle – thanks for the interesting comments.
The distinction between tax-providers and tax-consumers is, in my view, a major fault line which compromises the integrity of modern majoritarian democratic politics. As the welfare state continues to grow in scale and scope, the makers v takers fault line will continue to grow.
Europe is the “canary in the mine” with regard to this matter, and I agree with Steve Kates that the recent US Presidential election was epochal for similar reasons.
As for Australia, the rise in governmental dependency over the past thirty years (mainly prosperous years, I might add) is an ominous sign that the makers v takers distinctions will, regrettably, increasingly colour policy discourse and policy implementation.