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Source link: http://archive.mises.org/14616/the-fantasy-of-wealth-redistribution/

The Fantasy of Wealth Redistribution

November 12, 2010 by

By their nature, capital goods cannot be redistributed among the people in any sense that results in equality and wealth. The redistribution of wealth, if taken seriously, necessarily means the complete and utter destruction of wealth. FULL ARTICLE by Lorenz Kraus

{ 66 comments }

Hilary the artist November 12, 2010 at 10:58 am

Thank you, Lorenz, for an insightful article with a powerful finish. I gets weary and sick of tryin’ to explain the moral superiority of liberty over constantly begging for government force, government re-trainingand freebies.
Right on…the strident socialist yuppies of Canada don’t believe in sharing the wealth…they want their minstrels, portrait painters and nannies to pay more for food to support their opera houses, massages, vineyards and ski injury clinics. The Sicko-fans don’t want to look after their own children or sickly parents without a paycheck earned by the people collecting taxes at McDonald’s. What gives?

Stephen Grossman November 12, 2010 at 12:55 pm

>Everyone has access to running water, telephones, potato chips, and television. That’s what counts in a standard of living.

Do the super-wealthy eat potato chips?!

Walt D. November 12, 2010 at 1:12 pm

Redistribution of wealth is just a euphemism for theft. The government takes on the same role as the ghetto punk who breaks into peoples homes and steals TV’s.
Redistribution of wealth is doomed to failure. To paraphraser Margaret Thatcher -”The problem with socialism is that, sooner or later, you run out of other peoples money (to redistribute).”

MdB November 12, 2010 at 1:44 pm

Good article! Interesting points that I will keep in mind.

Barry Loberfeld November 12, 2010 at 2:01 pm

“They don’t believe the fantasy that redistributing wealth brings equality of results. They want you to believe it!”

From here:

The goal of complete economic equality logically enjoins the means of complete state control, yet this means has never practically achieved that end. Yes, Smith and Jones, once “socialized,” are equally poor and equally oppressed, but now above them looms an oligarchy of not-to-be-equalized equalizers. The inescapable rise of this “new class” — privileged economically as well as politically, never quite ready to “wither away” — forever destroys the possibility of a “classless” society. Here the lesson of socialism teaches what should have been learned from the lesson of pre-liberal despotism — that state coercion is a means to no end but its own. Far from expanding equality from the political to the economic realm, the pursuit of “social justice” serves only to contract it within both. There will never be any kind of equality — or real justice — as long as a socialist elite stands behind the trigger while the rest of us kneel before the barrel.

Abhinandan Mallick November 12, 2010 at 2:16 pm

Excellent article Lorenz.

greg November 12, 2010 at 5:21 pm

What Obama is missing is the fact that capital creation leds to increased productivity and lower prices for finished goods. This general reduction in prices allows the government to increase the money supply without inflation which can redistribute the wealth better than taxes and government spending. I know the economy would be better off without an increase in money supply, but at this point I would be satisfied with baby steps.

Another point is that productivity increases are bringing jobs back to the US. As capital equipment increase productivity, labor cost decrease per unit. With labor cost rising in China and transportation cost rising, we are seeing production lines returning to the US. So if Obama was really concerned about increasing exports, he would not be wasting tax payer’s money traveling to India, he would be cutting taxes on capital formation.

A Liberal In Lakeview November 12, 2010 at 5:50 pm

Mises was “The Last Knight of Liberalism”? That’s a good one. Keep on daydreamin’, Lorenz.

Now, how do we know that Mises was no liberal but a collectivist of the most insidious kind? Do we speculate from that mustache on the dustjacket of the Hülsmann book?

Well, no. Instead, we quote Mises.

This permits us to hope that from these extremely inadequate beginnings [i.e. the League of Nations] a world superstate really deserving of the name may some day be able to develop that would be capable of assuring the nations the peace that they require.

-Liberalism, Chapter 3, Liberal Foreign Policy, 10. The League of Nations

Das würde uns erlauben, zu hoffen, daß aus den höchst unzulänglichen Anfängen einmal etwas werden könnte, was wirklich den Namen Weltüberstaat verdient und den Völkern den Frieden gibt, dessen sie bedürfen.

-Liberalismus, III. Liberale Außenpolitik, 10. Der Völkerbund

In fact, the passage quoted is not the first clue in Liberalismus that Mises was a peacenik with a polluted heart. Earlier he anathematized anarchism, as Rothbard was likely aware. Now, where Misean superstatism goes, the taxgatherer is certain to be employed. So also will be police officers, to menace and threaten dissidents into submission, and soldiers, to subjugate recalcitrant states or anarchistic tribes or even the citizenry of the Weltüberstaat, itself.

Since there is no way for Misean collectivism to work without taxation, we should remind ourselves of the fundamental assumption of every taxgatherer: The taxgatherer 100% of the wealth of those to be taxed and thus may set the tax rate as the taxgatherer sees fit.

Anthony November 12, 2010 at 7:05 pm

Liberal in Lakeview,

Quit your whining… Mises did for more for Liberalism than you ever will, so either do better then him or don’t complain.

Scott D November 12, 2010 at 7:43 pm

Liberal in Lakeview,

Is there a Troll Handbook out there? Cause I swear I’ve seen this play at least a dozen times before. Please google “Mises” and “League of Nations”. Then actually do some reading.

Craig November 12, 2010 at 8:06 pm

Mises was a peacenik with a polluted heart. Earlier he anathematized anarchism, as Rothbard was likely aware.

Yet another example which illustrates my hope that Mises.org remain an economics website and not a free-for-all Libertarian political forum. Once the motivations of the Austrians become comment-fodder, their message is too easily lost.

J. Murray November 13, 2010 at 6:22 pm

It’s not our fault that these individuals lack the intellectual capacity to distinguish the difference between non-interventionism and pacifism. You can’t cure stupid.

Inquisitor November 13, 2010 at 8:56 am

I’m sorry, are you seriously going to argue that because he was a minarchist (i.e. an inconsistent exponent of classical liberalism but one nonetheless), that he was a collectivist? He also argued that where feasible, right down to the individual level, that total and complete secession ought to be allowed. He had witnessed first-hand the evils of war and the collectivism attending upon it, so can you blame him for the error?

J. Russell November 12, 2010 at 7:10 pm

Weath redistribution by the state is nothing more than criminality organized at the state level.

Steve November 13, 2010 at 5:13 am

Nice article. I totally disagree with many of the interpretations, but it is nicely outlines why socialism did not work. Only today we are way past the good old days of capitalism vs. socialism. What we see today is a clash of systems that has no precedent. It is authoritarian vs. democratic. It is China and Singapore vs. the western systems. And make no mistake, we, the west, are on the loosing side. While on this website people still squabble about the sense or nonsense of a national healthcare system (and being a German, I know it is something of eternal dissent) we fail to see the loss of importance our opinion plays on the globe. In Europe we already feel our growing insignificance. But also in the US people need to face reality. We are slipping. Wealth cumulates to an extent that is unhealthy – even for the most wealthy. People like Gates or Buffet have understood this already. But even they do not have an answer to the real problem. The fair distribution of wealth works only, if the acquisition of wealth generates jobs. Until recently almost 70% of the GDP of the US (the UK was even worse) was based on financial services. Since the crisis we know, most of these services were little more than mere gambles with unimaginable numbers. There were no resources bought, no products built, no REAL value created. Lofty numbers – nothing more. The people who run and run in this system can benefit form it quite easily. Only the losses get distributed to the general public. To those who consume products they can’t afford financed by gains they will never have from property they never owned. This formula still exists, and it creates a lot of wealth for people who actually do not need more and it drains those who still haven’t learnt that the American Dream today is little more than a marketing ruse.

james b. longacre November 13, 2010 at 3:22 pm

did socialism not work?? public schools, govt owned railways, the bailouts if they are true??

gun control?? price fixing legislation. maybe its patient.

guard November 15, 2010 at 6:43 am

Wha…??

F. Beard November 13, 2010 at 10:50 am

Only in a capitalist economy, where rights can be subdivided into shares and freely traded, can a wider ownership of capital goods sustain their character as wealth. Here, people voluntarily sell ownership; the new owner earns ownership to capital goods. There is an actual capitalist mechanism for this to happen. Almost anyone can buy a share in the means of production under capitalism. No one has to die. No blood is shed. Lorenz Kraus

True. However if the common stock of every US corporation was seized by the government and distributed by random lot to the entire population, then where would the destruction of wealth be? Would not the corporations continue as usual? And since the corporations were built to a large extent with loans from the government backed counterfeiting cartel which steals purchasing from the entire population, then might it not also be just?

Now I don’t actually advocate this (yet) but it does demonstrate that previous economic injustice can be reversed without wealth destruction. In fact, a roughly equal ownership of the wealth of this country could easily increase total wealth by giving the entire population a stake in capitalism. Where would labor disputes be, for instance? Or the disputes about free trade?

But how to achieve this one-time redistribution of ownership without giving sanction to theft by government? Well, the moral implications of the government backed fractional reserve banking cartel using the government enforced monopoly money supply should be explained to the population and particularly to moral leaders such as preachers, rabbis and teachers. It should be explained that the US has not had a genuine free market but has instead had banker fascism and that a one-time reset is necessary followed by genuine capitalism which must include genuine liberty in private money creation.

F. Beard November 13, 2010 at 1:19 pm

So consumer wealth distribution is far tighter than academics imagine. Everyone has access to running water, telephones, potato chips, and television. Lorenz Kraus

I think some recently unemployed folks in tents cities or living in the sewers of Las Vegas would disagree with you strongly.

That’s what counts in a standard of living. Lorenz Kraus

What about financial security? And isn’t that only secured via ownership of wealth, not consumer goods? What we have in the US is a vast and unjust mal-distribution of ownership. The Austrians should be the first to acknowledge this since they claim (correctly) that government backed fractional reserve banking is unjust.

If we would address the injustice of fascism in the US, then we would not have to worry about socialism.

MuDPhD November 13, 2010 at 6:23 pm

Is this supposed to be a scholarly blog??
“Obama’s redistribution of wealth brought economic destruction.”
I’m sorry but this is the most ridiculous thing I’ve ever read!
The recent economic failure PRECEDED President Obama’s ELECTION, let alone the activation of his policies, policies which many economists credit with greatly reducing the extent of the disaster. Please let’s not forget that the economic disaster occurred during the 8 year tenure of President G.W.Bush, and the government bailouts of the financial institutions and auto manufacturers were signed by GW, not Obama. Read GWs new book if this isn’t clear to you. He spells it out himself fairly clearly.
Also your straw man of “wealth redistribution” which you so righteously ascribe to Obama is also ridiculous. Obama’s policies as described during his campaigning (where the “wealth redistribution” quote originally came from) involve adjusting the relative tax rates. Everyone in the US (except the super-super rich) pays taxes, its just a matter of how much is collected at various income levels. I can’t disagree that a flat rate without loopholes might be better, but the current US tax structure clearly favors the wealthy over the poor, as evidenced by the “redistribution” of wealth which has occurred here since the 1980s when Reagan’s tax policies were instituted. Since then the distance between the poor and the wealthy has grown progressively wider. I’m sure your going to try to tell me its because the wealthy work harder, but then you probably haven’t tried to work 3 concurrent low wage jobs just to pay the rent!
In summary, I find your article short on facts, and long on hyperbole and logical fallacies.

Tim November 13, 2010 at 7:42 pm

In the first place, the fact that the collapse occurred before Obama’s election doesn’t mean the policies he specifically enacted aren’t to blame for the fact that the economy hasn’t recovered. Beyond which, let’s not forget that Obama and his party were in Washington in power since 2006. People with no understanding of American civics have this strange idea that the president has some omnipotent power to shape US economic policy without the consent of the legislature.

In the second, this is an Austrian blog, meaning its raison d’être is to argue that “most economists” are wrong. Appealing to some bloc of economists in defense of a critique of the same group’s economics is circular.

In the third, Obama may “explain” his policies however he chooses, but they’ll be judged by their consequences, not their intentions.

In the fourth, disagreements with wealth redistribution stem not from the belief that wealth is currently properly distributed, but rather, the belief that talk about distribution of wealth is meaningless. To speak of it as such one would need to aggregate wealth. Aggregation mixes apples and oranges, leading to statistics of not much use. As the article pointed out, to criticize the distribution of wealth in this country you’d have to ignore the foundational difference between capital and consumer goods, and to try to equalize wealth one would have to redistribute capital goods, which can’t be done.

In summary, you either didn’t carefully read the article, or you aren’t familiar enough with the Austrian School to give an informed opinion.

F. Beard November 13, 2010 at 10:32 pm

In the fourth, disagreements with wealth redistribution stem not from the belief that wealth is currently properly distributed, but rather, the belief that talk about distribution of wealth is meaningless. To speak of it as such one would need to aggregate wealth. Aggregation mixes apples and oranges, leading to statistics of not much use. Tim

OK, so far.

As the article pointed out, to criticize the distribution of wealth in this country you’d have to ignore the foundational difference between capital and consumer goods, and to try to equalize wealth one would have to redistribute capital goods, which can’t be done. Tim

Yes, dividing the wealth would destroy it but dividing the ownership of that wealth should not. For example, it would not necessarily matter to the productivity of General Electric if it was owned by 30 people with 10,000,000 shares each OR 300,000,000 people with 1 share each. In fact, in the case of 30, 16 (51%) could easily be rich spoiled idiots who would ruin the productivity of General Electric so the risk of damage to wealth is GREATER in that case.

F. Beard November 13, 2010 at 10:39 pm

Or let’s take the case of the mythical Hank Rearden in Atlas Shrugged. Obviously, Hank should retain full control of his corporation (he’s a genius) but that only requires 51% of the common stock. The other 49% could be split between 30 people or 300,000,000 with no difference in the control of the company.

Anthony November 13, 2010 at 11:57 pm

It would make a big difference if you were one of the 30 people who gave up money to buy stock in a company only to have the benefits of their investment split over 300000000 freeloaders… would you buy 1/30th of a company if you knew you would reap almost no benefit from doing so?

F. Beard November 14, 2010 at 11:15 am

The point of this article was the practical one that wealth cannot be divided without destroying it. But if one’s aim instead is to redistribute OWNERSHIP, then wealth destruction need not occur, as I think I’ve demonstrated.

As to the ethics, restitution is ETHICAL. Government backed fractional reserve banking in the government enforced monopoly money supply is a form of institutionalized THEFT. We do not have true free market capitalism in the US; we have banker fascism. Do any of you deny we need reform? Then don’t be surprised if restitution is called for too.

nate-m November 14, 2010 at 12:04 pm

The point of this article was the practical one that wealth cannot be divided without destroying it.

No it’s pointing that peoples fundamental view on the subject of ‘wealth’ is distorted by the fact that it’s being defined by government based on the amount of cash money people control. That the majority of the ‘value’ that the ‘wealthiest Americans’ control is actually capital goods… that is money that has been reinvested in businesses. You know they invest in ‘jobs’, small/medium/large businesses, etc etc. If people like BG actually decided to try to actually _spend_ the billions they control then they would quickly cease to be billionaires. They only get richer by reinvesting.

That if you actually used a sane definition for ‘wealth’.. that is the actual goods and services that people have access to and control.. that is the ‘quality of life’ stuff, then you’d find that it’s much more leveled then previously imagined. That in a modern capitalistic system the majority of the wealth and the majority of economic power is controlled by average individuals.

Not that this matters that much.

But if one’s aim instead is to redistribute OWNERSHIP, then wealth destruction need not occur, as I think I’ve demonstrated.

It sure as hell gets destroyed for the person you taking the wealth away from. If I have a washing machine and you divide it up between 10 people it destroys it’s value to me because now I can’t enjoy the benefits of using it. If you take it away from me completely then that still fucks me over completely.

It would be nice if I had your logic. That way I could randomly break into stores and steal food and video games and say to myself: ‘hey as long as somebody owns this stuff then it’s ok because it’s value is not destroyed. I mean somebody has to own it so me owning this stuff is the same as the store owner owning it. After all he has so much food and so many video games, he could never eat it all or play them all!’.

Tim November 14, 2010 at 12:18 am

When specific companies go under, their capital isn’t destroyed, but is liquidated and absorbed by other companies which weren’t administrated by idiots. There is no risk to wealth if G.E. were to hypothetically go under – it just means new competition can buy liquidated capital goods on the cheap.

And if you did redistribute shares of companies, it wouldn’t last regardless. Various people would become rich and poor again based on how the companies whose stock they happened to receive fared.

Seattle November 14, 2010 at 12:19 am

Dividing wealth and dividing ownership are the same thing.

Walt D. November 14, 2010 at 2:08 pm

Just to play Devil’s Advocate.
President Obama was Senator Obama before he became President. He voted for the bailout and the stimulus package.
Obama does not understand the difference between wealth (Assets) and income. What he is advocating is redistribution of income.
A millionaire is a person who has assets of $1 million dollars, not two people who have a joint income over $250,000. (Take two doctors just out of school – income $140,000 each. However, they each have hundreds of thousands of dollars in student loans to repay – their net worth is negative.)
$250,000 goes a lot further in Gulfport, Mississippi than it does in New York.
The Federal Government is spending $10 billion a day. They would go through the net worth of both Bill Gates And Warren Buffett in about a week.
When Obama talks about extending the tax cuts to the upper income earners costing $70 billion a year, he assumes that if this section of the Bush tax cuts is allowed to expire, the government will collect $70 billion. However, this does not take into account the unemployment payments to the workers who lose there jobs as a result of the tax hike, or the loss in revenue from from the small businesses that shut down. (Recall what happened to the workers in the boat yards after the “boat tax” in the Bush I tax hikes.)
The Obama “Redistribution of Wealth Plan” is essentially an economic hate crime.

Troy Doering November 18, 2010 at 11:59 am

250k seems like entry level middle class to me, Any Amount below that should be Poverty. if you make 5 million a year that would qualify for well off, but not rich. I’m judging this by how much less your dollar buys today. then 20 years ago.

STEPHEN RAMBAU November 14, 2010 at 1:59 am

THE THEORY OF WEALTH DISTRIBUTION WAS SIMPLY TESTED IN PRISON.WHEN YOU PRACTICALY DISTRIBUTE FOOD, CLOTHES EQUALY YOU LIKELY FOUND OTHERS HAVING MORE THAN OTHERS WITHOUT EVEN TAKING ANITHING BY FORCE THAT IS NATURAL. EVEN IF YOU CAN GIVE A SALARY OF $10 000 TO EACH OF THE WORKERS EQUALY AT THE LONG RUN WHEN YOU CHECK THE VALUE OF THEIR ASSETS YOU WILL FOUND OTHERS HAVING MORE WEALTH “ASSETS’ THAN OVER THOUGH THEY EARN THE SAME INCOME. IT IS BECAUSE OTHERS PREFERES TO DRINK THEIR MONEY AND OTHERS INVEST THIS INCOME INTO CAPITAL GOODS, AND CONSUMER GOODS SUCH AS FURNITURE. OTHERS SAVES AND ACQUIRES CARS AND BUILD HOMES OVER A LONG TIME. LIKE B WHO BUILDS ONE ROOM AND INCREASES WITH TWO ROOMS EVERY SIX MONTHS IN THREE YEARS TIME HE HAVE A SEVEN ROOM HOUSE WITHOUT ANY BOND WHICH CAN SIMPLY LIQUIDATE HIS HOME LIKE OF THOSE AMERICAN BOND HOUSES LIQUIDATED. THOSE WHO EARN SAME INCOME AND SPEND IT BY DEPOSITING CARS AND HOMES ARE LIKELY TO LOOSE THEM IN A LONG RUN. THIS TEACHES US THAT EQUALITY IS ONLY A PHRASE USE BY SOCIALIST TO HAVE PEOPLES VOTES AND POWER TO ROB ALL THE WORLD WEALTH BY FEW VANGUARDS WHO RUNS THE INTERNATIONAL GOVERNMENT. THE CENARIO WHERE FIVE FAMILIES ALLEGELY OWN ALMOST WEALTH OF ALL GOVERNMENT IN THE NAME OF THE POEPLES WEALTH AND LATELY PRIVATISED INTO THEMSELVES. THEY FIRSTLY NATIONALISE THEN LATELY PRIVATISED INTO THEMSELVES. THAT IS WHAT I UNDERSTAND BY NATIONALISING “STILLING ALL WEALTH IN TO ONE POCKET AND DISTRIBUTING’ TO THE SAME KOMISSARS WHO MIGHT BE FIVE OR TEN.THIS IS A WELL PLANED ORGANISED INTERNATIONAL THEFT.

BY STEPHEN RAMBAU

F. Beard November 14, 2010 at 1:21 pm

“That in a modern capitalistic system the majority of the wealth and the majority of economic power is controlled by average individuals.” nate-m

That would indeed be the probable outcome in a true capitalist system. But we don’t have true capitalism in the US, we have instead a government backed fractional reserve banking cartel using the government enforced monopoly money supply. Our system is, in fact, fascism.

“Not that this matters that much.” nate-m

I would agree. Extreme wealth disparity is not necessarily a sign of an unjust economic system but an unjust economic system invariably leads to extreme wealth disparity, I would hazard.

“That way I could randomly break into stores and steal food and video games and say to myself: ‘hey as long as somebody owns this stuff then it’s ok because it’s value is not destroyed. I mean somebody has to own it so me owning this stuff is the same as the store owner owning it. After all he has so much food and so many video games, he could never eat it all or play them all!’”. nate-m

Untrue and Irrelevant besides. I merely point out that redistribution of ownership does not necessarily destroy wealth. Now the ethics of ownership redistribution are an altogether different matter. Certainly violations of justice and the rule of law are HIGHLY destructive to wealth. However, restitution of stolen property is JUST and in principle should increase overall wealth, not decrease it.

I suggest that if the Austrians will not find ethical and principled means to reverse ownership injustice, then less principled folks very well may with an attendant destruction of wealth and loss of personal and economic freedom.

gene November 14, 2010 at 5:20 pm

“Take out private-property rights and wealth vanishes”

What?
Wealth does not just “vanish” for any reason. Wealth cannot “vanish”, its not some kind of magic trick, it is a physical reality.
Whether wealth is “owned” by one person, a small group, a corporation, a state or no one does not in any way change the nature of wealth, only who claims it. Wealth either exists or doesn’t exist and it certainly doesn’t “vanish”.

Even if you “steal” wealth from someone else, the wealth does not vanish, it changes ownership {that is, if the theif is actually recognized as an owner} by coercive or fraudulent means. If it vanished, who would steal?

The article also makes the ridiculous assumption that somehow there was no wealth until private property came along. Those poor non capitalized savages, groping in the woods.

Logic, or actually lack of, like this does nothing for Austrian economics.

Tim November 14, 2010 at 5:54 pm

If you can’t buy or sell capital, capital has no value, and calculation of which uses of capital are worthwhile or wasteful become impossible. Capital directed to wasteful purposes due to lack of coordination results in destroyed wealth. Did you read the article?

Your response also made the absurd statement that somehow there existed a time “before private property.” As the state was only invented perhaps circa 3500 B.C., all wealth before that period was private, as there existed no public to lay claim to it.

F. Beard November 14, 2010 at 9:55 pm

Actually, wealth can disappear. Take a human body for instance. Its “wealth” is a dynamic process. If the heart should stop beating for a few minutes then there will be a great destruction of wealth even though the body will statically be very much the same.

Not that I agree with the Austrians in this case. In their perpetual battle against the socialists they would justify fascism, it often seems, if that would “preserve wealth”.

Russ the Apostate November 14, 2010 at 10:19 pm

“Actually, wealth can disappear. Take a human body for instance.”

Or for more normal instances of what people mean by wealth, take into consideration automobiles and houses. Cars can crash, after which point they are worth much less than they were before. Houses can burn to the ground, after which they are worth nothing except for the land they sit on. If wealth could not be destroyed, then wars would not be so harmful. There is no conservation of wealth theory, like there is a conservation of enery theory in physics; wealth can be destroyed.

Inquisitor November 15, 2010 at 6:45 am

“In their perpetual battle against the socialists they would justify fascism, it often seems, if that would “preserve wealth”.”

…What?

Mushindo November 15, 2010 at 3:22 am

I have no argument with the article, but I do take issue with the illustration , which seems to be using Robin Hood ( albeit a caricature) as an icon of redistribution. This maligns and distorts the mythical figure.

Anyone with more than a nodding acquaintance with the story (in any of its many incarnations) will know that the robin Hood of legend made it his business to restore the property of the taxed by stealing it back from the taxers. He was an icon of the thirst for liberty, a hero of resistance to coercive oppression, That makes him th every antithesis of a proto-socialist. That illustration is misplaced.

guard November 15, 2010 at 6:58 am

For some reason, the prevalent idea on this site is that if you manage to get any of your money back from the government, you are stealing it from somebody else. The view is that you are not allowed to retrieve your property from a thief, suggesting in the case of government that once they steal it from you it belongs to them. Even more bizarre, if you take advantage of any government giveaway program – which has been put in place by a majority and which the government itself says you should take advantage of – this is viewed as a “demand” by YOU, not the will of everybody else. You get to whine when the thief takes it from you, but you are a “hypocrite” and socialist if you try to get it back.
If someone has addressed this issue somewhere, I would like to read about it.

F. Beard November 15, 2010 at 7:42 am

My problem with the Austrians is that preach the evils of the government backed counterfeiting cartel (the banking system) but offer no remedy other than a Depression to purge “malinvestments” (may the purge start with their jobs if they insist!) and cutting government social programs when they are needed the most!

The issue should be how to reverse the looting that has occurred. If they wish to fend off the socialist, the Austrians had better add justice and restitution to their vocabulary.

Fallon November 15, 2010 at 8:10 am

Austrian value-free economic analysis is separate from the moral issue. That’s its power. And of course there are Austrians who engage in theories of ethics and restitution. I do believe Walter Block has made recommendations on how to go about getting justice for the harm done post-government.

F. Beard November 15, 2010 at 12:05 pm

Austrian value-free economic analysis is separate from the moral issue. Fallon

Which is why you guys are stuck. Rothbard was the best of you and was highly moral.

I do believe Walter Block has made recommendations on how to go about getting justice for the harm done post-government. Fallon

Ah yes. Let’s dismantle the government to preclude any possibility of government administered restitution. And let’s start with welfare for the poor rather than welfare for the rich. Ad let’s force the government to favor a private money form (gold) and usury via tax policy.

I suggest you read a believing Jew, Moses, rather than a non-believing one, Mises, to cure your lack.

Fallon November 15, 2010 at 12:12 pm

If you don’t have a credible method of understanding what is then how do you even know where to apply moral judgements?

Mushindo November 15, 2010 at 8:20 am

F Beard said ‘The issue should be how to reverse the looting that has occurred. If they wish to fend off the socialist, the Austrians had better add justice and restitution to their vocabulary.’.

You might want to ask th eSouth Africans how well that’s been going lately.

Yopu cant even begin to restore what has been lost to those disadvantaged by past ‘injustices’ at an aggregated population group level. To properly identify who is rightfully due recompensem and how much, and from whom, requires a complete analysis of that individual’s life history, and interrogating his every choice , and comparing that with the impact of actions taken by others to constrain his choices, in order to tease out that portion of his past misfortune that was not the result of his own choices , from that portion that was under his control. Any attempt to achieve this by aggregating society into definitive ghettoes and deeming one group to be responsible for recompensing another by fiat, can only ever add more injustice, for there will be many in the beneficiary group who dont deserve to be there, and there will be many in the taxed group who came by their wealth honestly and who do not deserve to be penalised. Its just not possible to do this without compounding the harm already wrought.

F. Beard November 15, 2010 at 12:06 pm

The solution is not socialism. The solution is restitution followed by genuine capitalism. That is all the hint you should need.

Anthony November 16, 2010 at 12:13 am

F. Beard,

The depression is inevitable!!! Any effort to postpone it will only make it worse, and it is simply wishful thinking to believe otherwise. Austrians do not prescribe depression as a “remedy”, they merely have accepted the truth that past practices have made it unavoidable.

If a car is heading for a cliff and someone tells you to buckle your seatbelt, do you criticize them for suggesting that you will fall, or do you thank them for warning you so you can prepare for the crash?

F. Beard November 16, 2010 at 12:53 am

The depression is inevitable!!! Anthony

According to who, the Prophet Mises, an agnostic Jew? The city of Nineveh was only 40 days away from destruction yet heeded Jonah (he’d rather that they hadn’t, BTW) and was spared for another 120 years.

The city of Jerusalem could have been spared destruction if it had not reneged on its emancipation of its Hebrew debt slaves (Jeremiah 34:8-22).

But go ahead and wait for pointless destruction (“purging of malinvestments”); may it start (and end?) with your jobs seems eminently fair.

Anthony November 16, 2010 at 11:43 pm

F. Beard,

Most people don’t rely on prophets for their economic information, so perhaps that is where we seem to be missing each other. If you won’t accept logical statements simply because they come from someone with a different religion from you, how can you possibly expect people to heed your illogical diatribes?

When you start using factual information to inform your debates instead of fictional accounts from the ancient past you might become worth listening to.

Until then, let me reiterate: don’t scorn the messenger just because he brings bad news… saying “we’re going to crash” is not the same as saying “I want us to crash”.

Anthony November 16, 2010 at 12:07 am

guard,

When does it stop? The government takes your money, so you do your best to get it back, but to give it back it has to be taken from someone else, and so on. There is no shame in using government resources to benefit yourself, but when you advocate more benefits, or when you take more than you’ve paid, you are damaging others. In the end, being the victim of a crime does not entitle you to perpetrate the same crimes on others in order to “get your money back”… that just creates more victims.

guard November 16, 2010 at 2:52 am

Great example of what I was talking about. Thanks.

Anthony November 16, 2010 at 11:47 pm

Guard,

So where does it stop? How many generations should have to pay for your short term consumption? You asked a question and I answered it… that makes it your turn to answer.

Walt D. November 15, 2010 at 11:58 am

From a libertarian point of view, “redistribution of wealth (actually income)” is a form of slavery. People are forced to work for nothing, under threat of violence (by the IRS), for the benefit of others who are not working. The welfare recipients and unemployed become slave owners!

Troy Doering November 18, 2010 at 11:36 am

Great point, Walt D,

F. Beard November 15, 2010 at 12:19 pm

If you don’t have a credible method of understanding what is then how do you even know where to apply moral judgements? FALLON

Proverbs 8

Fallon November 15, 2010 at 1:07 pm

Make it even simpler: the Golden Rule. It exists in almost all known ethical/religious structures. But what good is it if people have no idea that cartelized fractional reserve banking is a violation?

F. Beard November 15, 2010 at 1:55 pm

But what good is it if people have no idea that cartelized fractional reserve banking is a violation? FALLON

The Austrians are not just any people; they claim to understand the evil of the government backed banking cartel but have no solution other than to let it crash and burn, harming many innocents in the process and then justify it in the name of economic necessity! That shows either a lack of concern for people or a severe lack of imagination when it comes to justice.

Fallon November 15, 2010 at 2:12 pm

That blanket charge is odd. There are Austrians that count themselves as Catholic, Protestant, Jewish and of other religious/spiritual stripes. You might want to say who you mean and then back it up with evidence. Otherwise, you make no case at all.

F. Beard November 15, 2010 at 3:21 pm

Otherwise, you make no case at all. Fallon

It is the Austrians who are falling to make the case. Which one of them has advocated debt forgiveness (Deuteronomy 15)? Which one of them has taken the commandment against usury between fellow countrymen (Deuteronomy 23:19-20) seriously? Why are many of them advocating balancing the budget on the backs of the poor and the old when it is almost a dead certainty that the uber-rich achieved much of their wealth unjustly?

Anthony November 15, 2010 at 11:53 pm

F. Beard,

Austrians make arguments based on logic and reason. You are making arguments based on an appeal to authority.

Since there is no way to objectively determine which authority is the correct one (i.e. which bible to use, which “prophet” to follow, which section of the bible to use, whether to use a bible at all) any argument from authority is completely worthless when deciding on a course of action that affects diverse people (who believe in different authorities).

The only way for people who accept different authorities to interact in a meaningful manner is to use logic. Your claim that we should back debt forgiveness because it is in a book you choose to believe in is no different from me saying that you should not be allowed to kill insects because is is against Buddhism, or that you should not eat pork or beef, or work on Sundays… you can do what you want but your book`s prohibitions have nothing whatsoever to do with anyone who is not Christian.

Please either stick to logical arguments or stick to Catholic discussion boards.

Iain November 16, 2010 at 12:28 am

Lol “which Bible to use”…how ignorant can you be. That is directed at Anthony.

Anthony November 16, 2010 at 11:51 pm

Iain,

Perhaps you are unaware that there are different translations of the bible? And that the interpretations you would derive from using differently written translations will differ? Or maybe you think that there is only one holy book in the world, and it is thus obvious which one to use?

Are you really sure that I am the ignorant one?

kyoki November 15, 2010 at 10:33 pm

from what understand…put VERY simply taxing/punishing the wealthy who are in control of capital goods and provide the goods & services which give us & improve our quality of life we only slow down the improvement in a quality of life as the cost is passed on or progress in making better or the same quality goods cheaper is slowed.
But the financial services sector is the main/primary culprit in the corrupt system that defrauds the general populace and they make no goods and provide the simplest of services. Wouldn’t exacting recompense from that sector (or the wealth[most] of those involved) have the least downside to everyday life?

just a (not deeply thought ) idea. Any ideas on this?

F. Beard November 17, 2010 at 10:42 am

Until then, let me reiterate: don’t scorn the messenger just because he brings bad news… saying “we’re going to crash” is not the same as saying “I want us to crash”. Anthony

Really? Then how about this solution:

1) Set bank reserve requirements to 100% to put them out of the counterfeiting business. This would be hugely deflationary by itself but please continue.

2) Send (give) every American adult, borrowers and savers alike, an equal check of new, debt and interest free full legal tender fiat (United States Notes) which in total equals M1 TIMES from 2-7 since that is the Biblical penalty for theft.

So, we end up with full reserve banking yet without deflation and with a (on average) debt free population without serious price inflation. The banks also get fixed in nominal terms. Losers? Only the uber-rich who would be less so in relative terms. Foreigners should not complain since the US could go back to consuming.

Afterwards? Full monetary reform including separate government and private money supplies. Government money would be pure fiat but only good for government debts (taxes and fees), not private ones. Private monies would be good for only private debt, not government ones.

Anthony November 17, 2010 at 9:35 pm

A few issues remain with your solution:

1. Banks would go out of business since they have already loaned out money far in excess of their reserves… if the reserve requirement were set to 100% all banks would be immediately insolvent.

There may or may not be enough money in circulation for all the bankers to recall 90% of their loans, but even if there were enough money in total many of the companies and individuals relying on those loans would go bankrupt since they would be unable to continue their
activities without them. Therefore either the banks would go bankrupt or the people relying on them would.

2. In the immediate aftermath of your redistribution there would be immense shortages of many goods and surplus of others as all of the predictions made by businesses would become obsolete. Consumption patterns would change immensely along with any major change in distribution of wealth, and while businesses were adjusting to the new reality there would be a DEPRESSION, much longer and more prolonged than the one we are facing now.

I am sure you can find an article easily enough on this site that will explain to you why it would take years for capital and intermediate goods to be produced and converted to match the revised customer preferences. Furthermore, since there it is extremely unlikely that the distribution of money will remain even (since people with high time preference will blow their new-found money on consumption goods) demand would remain more volatile for decades, prolonging the readjustment.

A depression is necessary because it takes time for factories to be built, resources to be extracted, and people to be trained. No amount of wishful thinking will cause production to magically align itself to consumer preferences, only time and a free market can do that… the freer the market the faster the change, and the shorter the depression.

(Notice that I did not even mention the arrogance involved in thinking that you should be able to force your solution on everyone else… Austrians oppose aggressive interventions in the economy because they recognize that no one has the right to make those sorts of choices for other people.)

F. Beard November 18, 2010 at 11:00 am

A few issues remain with your solution:

1. Banks would go out of business since they have already loaned out money far in excess of their reserves… if the reserve requirement were set to 100% all banks would be immediately insolvent. Anthony

The 100% reserve requirement would only be for new loans; any new loans would have to be made with money expressly deposited with the banks for that purpose and with matching maturities to the deposits or else covered by the bank’s capital.

There may or may not be enough money in circulation for all the bankers to recall 90% of their loans, but even if there were enough money in total many of the companies and individuals relying on those loans would go bankrupt since they would be unable to continue their activities without them. Therefore either the banks would go bankrupt or the people relying on them would. Anthony

I said nothing about a loan recall. Essentially, the plan is to replace M1 which consists of temporary money, credit, with real legal tender TIMES a penalty factor to compensate the population for previous theft by the bankers. Existing loans would be paid off with the new legal tender either immediately or over time.

2. In the immediate aftermath of your redistribution there would be immense shortages of many goods and surplus of others as all of the predictions made by businesses would become obsolete. Anthony

Mere assertion. There would be a boom, I would expect, out of sheer joy of being debt free but I expect people would continue to live pretty much as they always have.

Consumption patterns would change immensely along with any major change in distribution of wealth, and while businesses were adjusting to the new reality there would be a DEPRESSION, much longer and more prolonged than the one we are facing now. Anthony

More mere assertion. I advocate the abolition of the crooked money system and restitution for its victims and you claim justice would make things WORSE?

Woe to those who call evil good, and good evil;
who substitute darkness for light and light for darkness;
who substitute bitter for sweet and sweet for bitter!
Isaiah 5:20

I am sure you can find an article easily enough on this site that will explain to you why it would take years for capital and intermediate goods to be produced and converted to match the revised customer preferences. Anthony

Currently, manufacturing capacity is greatly underutilized. The problem is lack of purchasing power due to excessive and unjust debt. Ocram’s Razor dictates that we need look no further.

Furthermore, since there it is extremely unlikely that the distribution of money will remain even (since people with high time preference will blow their new-found money on consumption goods) demand would remain more volatile for decades, prolonging the readjustment. Anthony

People have high time preferences because of negative real interest rates. With 100% reserve banking that should change.

A depression is necessary because it takes time for factories to be built, resources to be extracted, and people to be trained. No amount of wishful thinking will cause production to magically align itself to consumer preferences, only time and a free market can do that… the freer the market the faster the change, and the shorter the depression. Anthony

Nope. This is called a “balance sheet recession” by many economists. The solution then is to fix the balance sheets of American families with a massive bailout and abolish the system that damaged them.

(Notice that I did not even mention the arrogance involved in thinking that you should be able to force your solution on everyone else… Austrians oppose aggressive interventions in the economy because they recognize that no one has the right to make those sorts of choices for other people.) Anthony

It is the current system that forces people via fractional reserve banking into speculation and consumption. I propose restitution of the victims (which is just) and a true free market in private money creation. The Austrians have no solutions other than pitiless liquidation which HARMS INNOCENT PEOPLE.

Anthony November 18, 2010 at 1:33 pm

In answer to your revised position:

First of all, limiting your 100% reserve requirement to future loans might eliminate the need for loan recalls… you were not clear on that earlier which is why I assumed your solution required them.

As for the rest of your objections, you have the audacity to call me out on making “mere assertions” when I am only stating obvious and necessary consequences of your changes. You make the counter assertion that you “expect people would continue to live pretty much as they always have.”

Are you really saying that the demand for specific products and services would not change if you drastically changed the distribution of wealth in a society? That the indebted people who would now be debt free would not make different consumption choices than they do now? Am I really stretching credulity when I say that changing the distribution of wealth would change consumption patterns?

“This is called a balance sheet depression by many economists”

First of all, “many economists” are wrong. Did you miss the fact that Austrian economists disagree with many economists and that these differences are the reason for the Mises Institute? There are many accounts of depressions on this site that will be far better able to explain these things than I am… read some of them before you make a decision.

“Nope”

I say that it takes time for factories to be built (or re-tooled for different purposes) and you say “nope”?

I say that it takes time for people to retrain for different careers and again you say “nope”?

If you have a magic machine that will retrain people, build factories, make intermediate goods and produce specific production infrastructure instantly then out with it… if not then you have not addressed the substance of my post or the substance of the Austrian description of the causes of depressions/recessions.

The fact that capital goods are not homogeneous underlies the Austrian business cycle theory and explains both past recessions and why a recession is coming now regardless of your preferences.

If you want to explain the merits of your position than please try to consider the arguments on the other side… simply saying “no” to them does not make them any less valid.

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