Saturday, December 27, 2014

the city's still breathing but barely it's true, through buildings gone missing like teeth

Ah Winnipeg, birth place of The Weakerthans, murder capital of Canada, consistently voted #1 place you don't want to get caught outdoors in after midnight. A new report from Statistics Canada shows that over 1 in 4 Manitobans are employed by the state (the remainder of the population, presumably, are unemployed natives) and that the wages of these bureaucrats are neatly outstripping inflation. With the NDP in charge the bureaucracy expands, verily. The Selinger government with a lowly 17% approval rating seems destined to fall in the next election, which may coincide with the federal voting day (October 2015 although both dates are tenuous) and already a palace coup has been launched with both Steve Ashton and Theresa Oswald vying for the dubious honour of head of the Manitoba NDP. Both Ashton and Oswald are now emphatically against the extremely unpopular sales tax hike which they previously trumpeted.

But what's wrong with all this government hiring anyway? Doesn't government spending stimulate the economy, doesn't the wealth paid to bureaucrats trickle down to the rest of the economy? The problem is first of all, every dollar which is paid out in salary must be raised in taxes, or borrowed or inflated. Let's deal with taxation first. First there is the issue of justice. If someone creates wealth, how can it be just for anyone else to take that wealth from him and spend it? And what is the means by which the state raises taxes? The money is not requested voluntarily; it is taken through force! The punishment for declining to pay taxes is incarceration, and if you have never had the misfortune of being locked away in one of our dungeons I can assure you the experience is savage indeed. Surely we can all concede that it is wrong to use force to get what you want? But putting aside justice for a moment, how about social efficiency? When people have money they will necessarily spend it on the things they value most. They will satisfy their most urgent ends, then move on to their second most urgent, and so on and so on until they or their wife have spent all the cash. Or they could save some of it, although how anyone saves anything with the confiscatory tax rates and high inflation of our economy is beyond me. So by choosing for themselves they necessarily obtain the highest utility. But what happens when that wealth is taken by the state and then spent on their behalf? Necessarily the spending decisions of the government reflect not the values of the person who's behalf the spending is being done, the taxpayer, but rather the consumptive decisions of the bureaucrat in charge of spending. So there will be a great loss in utility.

But doesn't government spending stimulate the economy, especially in times of recession? This is nothing more than Bastiat's broken window fallacy. And like Bastiat we must consider ce qu'on voit et ce qu'on ne voit pas. We must consider not only the hiring of the bureaucrat and the spending that bureaucrat makes in the private sector, buying clothes, housing, an auto perhaps but also the taxes which finance his salary, and the spending which the taxpayer can no longer do, the clothes, television sets and automobiles they can no longer buy. When you consider not only the immediate effect of a government policy but also the secondary and tertiary ripples of state action then you realize that it is not necessarily the rosy picture depicted by would be planners.

We must finally consider another aspect of this spending. If the government spent money only on roads, police and courts, for example, it wouldn't really be all that bad. We must drive on roads and surely someone must tackle the murders and evil doers out there. These are the most productive areas of government spending. These things are vital to the future of our society. But what of all the other things that government does? Take the regulatory state for example. A lot of their work is actually counterproductive. Forcing business owners to jump through pointless hoops and retarding our economy with layer after layer of red tape and bureaucrats to ensure it is all observed scrupulously. From the pointless dictates of the competition bureau (like the latest crackdown on price gouging), to needless war in the middle east, to the pointless war on drugs here at home, there are no shortages of foolish government policy. Here there is a double loss, first in the money which is taken out of the public sector through taxes, but then secondly in the harm that is inflicted through these types of harmful government spending.

But then, the etatist might argue, what if we don't tax the money, but instead inflate or borrow? These methods of financing government spending come with their own attendant costs. Inflation is a tax on those who save and it's also a disincentive towards saving money. But without savings how will our economy grow? Where will the supply of funds for much needed capital come from? And the new money does not enter the economy evenly, instead those who get it first benefit by spending it at old pre-inflation levels whereas those who get it last suffer the the bulk of the effects. It is also no coincidence that war coincides with inflation. War is extremely expensive and requires both the ability to collect taxes coercively and to debase the money supply in order to afford it. So by enabling the state to inflate we also enable it to finance it's monstrous wars of aggression.

As for borrowing? Government borrowing crowds out the private sector demand for funds. There is only so much money which can be lent out. Further, the money will eventually be repaid, at which point taxes must be raised to do so and you have simply delayed the problem for a few years but it has grown worse in the meantime.

So perhaps when Pallister gets in next year things will be different. Perhaps taxes will be reduced, the bureaucracy cut, the system reformed... but I won't be holding my breath. Hope lies outside the political spectrum, beyond the decisions of the governments of the day, in the minds and beliefs of Canadians across the country. It is the power of ideas that shape history; instead of waiting for the good king to arrive at last we should focus on what we can improve, in our own lives and our interactions with others.

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