The Coming Economic Dictatorship

by Bill Sardi

Recently by Bill Sardi: Free Markets and Blindness

Ho, ho, Janet Daly, writing in the UK's Telegraph, predicts the acceleration of what is already underway — the plunge towards an economic dictatorship. And her biting article provoked over 250 British readers to respond.

Daly gets right to the point. She says: "No government in what used to be called u2018the free world' seems prepared to take the steps that can stop this inexorable decline. They are all busily telling their electorates that austerity is for other people (France), or that the piddling attempts they have made at it will solve the problem (Britain), or that taxing "the rich" will make it unnecessary for government to cut back its own spending (America).

Then Daly takes a bite out of the leg of liberals by saying: "Many on the Left will finally have got the economy of their dreams — or, rather, the one they have always believed in. At last, we will be living with that fixed, unchanging pie which must be divided up u2018fairly' if social justice is to be achieved."

Daly goes on to say: "Judgments will, of course, have to be made by the state since there will be no dynamic economic force outside of government to enter the equation. Wealth distribution will be the principal — virtually the only — significant function of political life. Is this Left-wing heaven," she asks?

Daly answers her own question, saying: "Well, not quite. The total absence of economic growth would mean that the limitations on that distribution would be so severe as to require draconian legal enforcement: rationing, limits on the amount of currency that can be taken abroad, import restrictions and the kinds of penalties for economic crimes (undercutting, or u2018black market' selling practices) which have been unknown in the West since the end of the Second World War."

Daly proceeds to say that austerity programs will not just be confined to limits on government spending but "genuine falls in the standard of living of most working people, caused not just by frozen wages and the collapse in the value of savings (due to repeated bouts of money-printing), but also by the shortages of goods that will result from lack of investment and business expansion, not to mention the absence of cheaper goods from abroad due to import controls." If true, Americans had better start stocking up on wine, coffee, bullets, vitamins, etc.

Daly bites again, saying: "It is just the logical conclusion of what will seem like enlightened social policy in a zero-growth society where hardship will need to be minimized by rigorously enforced equality. Then what? …. Uniform levels of poverty that are made necessary by dead economies — will spread throughout the West, and have to be contained by hard-fisted governments with or without democratic mandates."

Recall it was Winston Churchill who said: "Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy. Its inherent virtue is the equal sharing of misery."

Daly says there is one last hope. "But reduced government spending accompanied by tax cuts (particularly on employment — what the Americans call "payroll taxes") could stimulate the growth of new wealth and begin a recovery. Most politicians on the Right understand this. They have about five minutes left to make the argument for it."

What is both enlightening and alarming are the responses to Daly's article by British readers of her column. Some are avowed socialists who are all too ready to belittle her message. Here are a couple of those comments, pointed at Daly:

Economics never was your strong point as this hopelessly inadequate piece suggests. Greece has spent the last five years proving austerity does not work. So what does Janet call for? Errrr, austerity everywhere.

Janet, as ever, offers us two choices both of which are barking mad. We are supposed to plump for the slightly less mad idea. Cutting government spending in a perma-slump is stupidity beyond belief. It is time the neo liberal dinosaurs got out of the way to let the new ideas in. Modern Money Theory leads the way. Austerity is not necessary and more and more people know this.

I've never quite understood those who oppose efforts to bring government spending under control. The only alternative to a balanced budget (spending limited by tax revenues) is the raising of taxes which represents wealth transfer not wealth creation, or the printing of money, which does not create wealth – it dilutes the value of money for all. It creates debt that can never be repaid.

While top-tier tax rates in the US have varied from ~35% to 91% in the past few decades, government revenue as a portion of the economy has remained relatively constant — about 7% to 9%. Tax increases do not lead to higher total income tax receipts.

Another camp that responded to Daly's article was against free-market capitalism. Here is a typical comment:

Janet, you have identified the crime, but not the culprit. It is free market capitalism that has led us to where we are, specifically the economic policies of Friedman and Hayek gradually introduced following the upheaval caused by the oil crisis in the 1970s….. The free market has failed.

But does one call free market capitalism banks and businesses that are mismanaged and not allowed to fail? Is free-market capitalism exemplified by government-guaranteed loans to ventures like Solyndra? Is free market capitalism represented by Congress, which shuns cheaper alternative energy sources like natural gas, in favor of petroleum? All the US need do is pass proposed legislation that would offer tax breaks for those who would create natural gas filling stations and this would represent a trillion-dollar fix to the American economy. No, America is not a free market country. It is dominated by special interests that have bought off Congress in what has morphed into crony capitalism to outright fascism.

Another blogger rails against capitalism, but correctly fingers corrupt capitalism:

How can the west thrive, when its corrupt political elite (and their friends in big business), across these past 30 years, have handed all our manufacturing jobs to Asia. Western companies make far more profit, by making their plasma and LED televisions in Korea, for peanuts, and then selling them for big bucks in the west. It’s totally immoral, on every level….. and to make matters worse, our big businesses will often avoid paying British taxes, by basing their headquarters in some tax haven. Janet Daley needs to address corrupt capitalism, and stop pretending that socialism is to blame.

Again, I've never quite understood the criticism of globalization, as if it could have been avoided. Some economy in the world was going to outsource its labor to Asia and it might as well have been America and Great Britain before it was some other country. Buying cheaper goods has spawned the US consumer economy. Buying an item for $1 from China and selling it at $10 retail in the US is $9 value added.

While Ralph Nader is urging the President to put a stop to "corporate welfare," if the US raises tax on corporate profits it will simply doom American business to failure. Countries that tax less corporate profits less than the US will prevail. Why do you think Google, Apple, Microsoft, Amazon were all spawned in America? (Answer: because of a more favorable business environment.) If the US doesn't provide ta breaks for its farms and industries, other countries will. America has to remain competitive.

Some bloggers got it right, like this one:

state capitalist system that we’ve been laboring under for the past 80 to 90
years has caused nothing but misery for many. It has destroyed our economy and
monetary system; it has destroyed the real entrepreneurial small business that
provided real jobs, and as a consequence has led to a collapse in social
mobility and jeopardized the chance of the individual improving their situation.

Of course, there would be those who advocate more taxes, like a value-added tax (VAT) that this blogger proposes.

Of course all tax raised by VAT IS the way to go… we the consumers pay all the tax income, corporation, value added, it would solve the problem of companies paying tax abroad.

The VAT would be like what Japan unofficially had for decades. All retail products were distributed through layers of vendors who marked up goods at each level. You couldn't afford to buy clothing, kitchen utensils, everyday things. Japan had full employment under this system but a very poor consumer economy. When they allowed consumer goods to be sold without having to go through layers of distributor markups, consumer spending rose but with it came a modicum of unemployment.

Another Daly critic chimes in:

De-regulated capitalism implodes because of the greed of bankers and suddenly it’s all the fault of socialism (where, let me see)?

There is some truth spoken here, but "de-regulated" simply means allowed to break laws. There are existing laws that could have jailed every banker at the too-big-to-fail banks, and money-laundering and imprudent lending practices would be examples.

That the masses have been lured by welfare to gain votes, at the cost of freedom and liberty, is the wealth re-distribution game that is currently being practiced. There is little incentive to work when unemployment benefits are extended for 2 years and welfare in the form of rent subsidy, food stamps and Medicaid is handed out willy-nilly.

According to Judicial Watch, the government spent enough on welfare last year to cut a check for nearly $60,000 for each impoverished household it provided with benefits. The problem is that this welfare money is not coming from the rich. One blogger correctly explained where the welfare money is coming from:

Janet, someone told the masses that they could get rich people’s money. That someone lied. They are TAKING the money from the MIDDLE class. Always.

Or as another blogger said it:

Left and right politics has supported the two pillars of state capitalism; big business and big government. They’re not going to change (at least not without a fight). The system they have created has stripped us of our liberty, our wealth, and our right to determine our own lives. It’s time the system was put out of our misery!

Yep, we have the elites who can buy off government to protect their wealth, and the poor who receive what amounts to government bribes for votes, leaving middle-class working family in between. After the results of the last election, I think middle-class Americans are beginning to realize they have been left holding the empty bag. We have a President who protects those at the top and the bottom. God help you if you are in between.

The Best of Bill Sardi