Tuesday, September 27, 2011

Response to letter about IMF report on income inequality

Dave, This may help you with your platform. A recently released document from the International Monetary Fund, one of the more private sector friendly organizations in world.

Try to read with an open mind----not blinkered by libertarian ideology.

I certainly appreciate the thought and the opportunity to comment from a rational point of view. In fact, my mind is wide open as I read everything you refer to me and think carefully about the philosophy, fundamental concepts and moral implications of it in my responses. Libertarian only describes me well in regards to economics. Typical libertarians do not have an integrated philosophy behind their beliefs, but libertarian economists such as Ludwig von Mises have done the best job describing the proper economic structure in a free society. They have thoroughly refuted every collectivist economic idea (about a century ago in von Mises "Socialism" is the best work) and all the evidence of history has shown their concepts to be valid. Most economists of the last century (Keynes in particular) have been busy undoing their work by pushing collectivism and altruism into economics.   Collectivism fuels state interference in citizen's lives and Keynes works creates an illusion and false validation of the need for government to do so.

Before addressing the subject of the report, I must preface my remarks by correcting an assumption in your second sentence. The IMF is neither a private sector institution nor a friend of individual rights (assuming that is what you mean by the private sector). In a free society there is no such thing as government monopoly on money, no such thing as government funding of monetary institutions and no such thing as government agreements to interfere in each others' economies. In a free society money is determined by free citizens making choices about how they will exchange values. Note that the institutions that collectivists currently accuse of being capitalism and instruments of oppression are all collectivist institutions created by governments who claimed it was in the best interests of society that government should control that aspect of the economy.  A free money system (non-monopoly) has been used successfully and results in an objective standard of money instead of today's money that is constantly debased by government.

There are several logical fallacies present in the IMF report, only a few of which I have time to tackle even lightly here.  Given that the IMF is a collectivism institution it should be no surprise that it is full of collectivist assumptions.

First, there is the presumption that differences in income are inherently wrong. This is entirely a collectivist perspective, held by people who view income as being distributed and not earned. If anyone thinks he should have more income, let him compete in a free market to provide values that his fellow citizens will judge and exchange value for in return. In a free society all trade is an uncoerced exchange that by definition benefits both parties, as they each see they are gaining from the transaction or else it could not occur, and no one is allowed to steal wealth.  All wealth is earned through free exchange.

Second, the very definition of inequality as used in the report is erroneous, since it only measures a static number at a point in time based on collective statistics and ignores individual experiences. As repeated studies such as one recently published here in Canda show, the vast majority of people who are in the lowest quintile of income level at one time have moved up the scale in just a modest number of years. This is a perfectly predictable phenomenon as individuals start out with low value skills and less experience and improve themselves over time.

Third, we can easily see that the overall quality of life in the relatively free countries has improved more since individual freedoms started to be protected a couple of centuries ago than in all of human history and in all other countries combined. A person in the bottom quintile of income today enjoys luxuries and life quality that a citizen could never have dreamed of just 100 years ago. Even today, the poor in a relatively free country are infinitely better off than all but the oppressors in the non-free countries.

Fourth, even if we were to ignore the fundamental errors above, what if there was an actual permanent difference in income levels between people? The final falsehood I will address here is that it would then be moral to steal part of the life, work and property of the individuals who produced more wealth and to give it to those who did not earn it. Who will presume to apply the force of government against innocent citizens to take their assets? How will it be enforced against those who do not wish to be robbed? What punishments will be meted out and on what moral basis? Which group will decide how much is to be taken and who gives them this power over the lives of others?

Please answer me this: what philosophical system holds that the value a man has produced through his own effort and according to his own rational self-interest to be taken forcefully and given to others, and what moral principles are in play to validate it?

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