Monday, November 3, 2014

Why are you supporting the "greedy capitalists"?

A fellow theological educator thought that in my writing, I was supporting the "greedy capitalist class." I agree that much of what he said were consistent with Austrian analysis such as his identification of the 1970 crisis with Keynesian capitalism, that the investment of common people suffered in 2008 crisis, and his suspicion about economic recovery at present. 

However, he was mistaken to think that deregulation exists. For Austrian economists, it is simply a camouflage or a statist political propaganda for more restriction. 

Concerning welfare, I do not know any Austrian economists that identify it as the cause of 2008 crisis. It is my personal belief that we are still about to see that in the approaching "economic tsunami." I just hope that mainstream economists are correct that US still has time to rectify the fiscal gap resulting from this program. 

As for taxation, I think since the time of Mises, nothing has been changed substantially. The US has been following progressive taxation for so long, and I think the statements of Mises in Economic Policy: Thoughts for Today and Tomorrow are appropriate. He describes it as "insane" and should not be followed by other countries. He called it double taxation and progressive: 

"The problem—as you know—is domestic capital accumulation. In all countries today there are very heavy taxes on corporations. In fact, there is double taxation on corporations. First, the profits of corporations are taxed very heavily, and the dividends which corporations pay to their shareholders are taxed again. And this is done in a progressive way" (p.84).
"Progressive taxation of income and profits means that precisely those parts of the income which people would have saved and invested are taxed away" (ibid.).  
"This policy of the United States is worse than bad—it is insane" (ibid.).

And finally, as to the charge of supporting the "greedy capitalists," personally, I distinguish between two types of capitalists. Just like my friend, I also detest the capitalists who use political means to grow their wealth. This kind of wealth accumulation may be "legal" but morally unjust and is the source of economic turmoil, the increase of income inequality, the phasing out of the middle class, and the huge gap between the rich and the poor. However, there are capitalists who gain their wealth through legitimate business activity, those who provide low cost or quality products through market competition. This way of achieving wealth is legitimate and just. The problem with the advocates of interventionism is that they fail to distinguish between these two types of capitalists. Instead, they claim that the market is being abused by the capitalist class as a whole to exploit the poor. And so to prevent such exploitation, the government has to interfere. The outcome of such interference will be more unsatisfactory than the previous condition. Such state of affairs justifies more and more of government intervention until the market is completely eliminated. Through interventionism, crony capitalism is winning the day. 

In 1953 debate between Rev. Opitz and Dr. Bennett, the former warned and emphasized that as long as politicians are interfering in the market, "injustice and the resulting economic dislocations" will never disappear. It is because the only action that politicians can do in economic sphere is to "grant privileges", which means once again that they can only "confer advantages on some at the expense of others." He challenged Dr. Bennett to scrutinize the real origin of what the professor mentioned as "the tyranny of private centers of economic power." Doing this, he would certainly discover that such private institutions rely on the favor of politicians either in the form of a "tariff" or a "subsidy."