What is the right size of government?

In response to a newsletter from a thinker I respect, I was moved to reply and it turned into a mini-essay that I felt had some valuable insights. 

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One of your comments struck me as almost accurate and I thought it worthy of a response.

o Also, note that government doesn’t produce anything but simply redistributes capital from producers of capital to consumers of capital.

o   And while government has an important role to play in a thriving economy, it is one of facilitating the production of wealth, not creating it.

o  Therefore, the larger the government, the greater a drag it is on the productive capacity of the economy.

One of the obvious differentiators between Objectivism (which is a full philosophical system) and the economics-focused Libertarianism we commonly see is the role of government in a proper society. 

Libertarians fall into a range of camps that include Anarchy, Anarcho-capitalism, Minarchy, and related ideas. According to Rand, these are all anti-concepts that attempt to fuse a negative into a positive, thus destroying people’s ability to properly conceive and consider the positive. Anarchy is the absence of a central government. Anarcho-capitalism is the worst because it names the positive and then destroys it. Minarchy generally means the smallest government necessary and might be the closest to a proper formulation, but unnecessarily clouds the issue by creating a new term for what is simply capitalism. 

The positive is capitalism, the political and economic system where all property is privately owned and government is created to protect the rights of every individual citizen to life, liberty, and property. So long as the individual does not violate the rights of others, the government has no role, no policy, and takes no action. 

In a free society, government is an unalloyed good, an absolute necessity. Such a government is generally very small, but it may expand sometimes if needed to protect the country from external threats. Such a government is not good because it is small – size is not the standard of value – but because of what is does: protect rights from internal and external threats.

The first bullet could be improved by stating that through economic policy and the resultant use of force against innocent citizens, the government seizes the capital of producers and gives it to those people and groups favored by government policymakers. Some of those receiving the favours are also producers.

Your second bullet is almost perfect but can be improved by reformulating it as “A free society requires Government to play an essential role in the economy by protecting the rights of producers and consumers, creating the optimal conditions for production and trade.”

The third bullet is the weakest because it implies a negative correlation between government size and economic productivity. This is contradicted by Objectivism. A better formulation would be that since government is essential, there is a Kuznets curve something like this:

 At the origin point, there is essentially no economic production due to the condition of anarchy. This was the state of humanity for most of its history, with almost no production other than that needed for subsistence, and even then, subsistence was miserable. This is the fixed-pie view of wealth where anything can be stolen or destroyed with relative impunity.

The introduction of a government that starts to protect rights enables a sharp increase in production such as seen in the transition from the Enlightenment re-discovery of the power of reason and the consequent introduction of rights through the Industrial Revolution. In the U.S. and other relatively capitalist countries this persisted into the late 19th century and economic growth was 6% or even higher for long periods. 

Once the government started to adopt and enforce policies that did not protect rights, but violate them, the rate of economic growth started to decline. Controls, regulation, tariffs, taxes and other types of non-objective law are all forms of rights violations. The decline side of the curve is much more gradual than the increase side because it still contains significant rights protection, and these are usually gradually eroded. Because all the infrastructure created during a period of rights protection is difficult to destroy, both physically and intellectually, it is possible for a fascist government to commandeer production yet not rapidly destroy it. I think a good case in point is Argentina, in the news these days due to the election of a relatively free-market figure, which was once among the wealthiest of nations but then suffered a slow decline as collectivism became entrenched. 

A proper formulation of the third bullet point would thus be: “Once a proper, rights-protecting government has been instituted, any further growth of government will of necessity be rights-violating and thus lead to lower economic production.”

All this started with just the idea that the third bullet point was weak, but I am very happy with the thoughts that emerged, particularly the shape of the graphic, the form of which I have not seen before. 

Should there be a tax credit for financial planning?

 FP Canada has launched an effort to get a Federal tax credit for financial planning. 

I disagree with this initiative of FP Canada for several reasons, even though I am a financial advisor and a big proponent of financial literacy and the value of my life's work - financial advice. Here is a short version of my first reactions to this idea.

1. It injects even more government interference into the economy.

2. Government, via regulations, has driven up the cost of advice and reduced its access. This distorted the economy. The solution to one distortion cannot be further distortion.

3, It introduces yet another aspect of private life that ends up being reported to our taxation authority.

4. This is like the children's sports activity and arts activity credits, which thankfully were axed.

5. All these reporting requirements add costs for providers, add non-productive work for taxpayers, add compliance costs to the taxman.

6. I think it is discriminatory, taking money from one class of taxpayers and favoring those who have had lobbyists work on their behalf. Essentially, political pressure is used to extract money from the group being punished to reward the favoured group, a regressive tax - one among many. This is a violation of individual rights, never mind being inequitable.

7. Most fundamentally, it is not a proper function of government to redistribute wealth according to anyone's preferences. Government is created to protect rights and not to violate them. Government representatives might choose to speak favorably about the value of financial advice but should never take my money to help others pay for the advice they seek.

8. Only plans covering advice “across multiple areas” would be eligible. This begs for jerry-rigged gaming of the credit: who is to judge when enough areas have been covered? What if multiple areas are not wanted or needed by the client? What if plans are "gamed" so as to qualify under whatever arbitrary rules are set?

9. Almost zero Canadians pay for the type of financial planning fee that would be rewarded by this credit. The overwhelming preference of Canadians, as clearly expressed in their market choices, is to pay for advice bundled with their investment and insurance products and management. The article itself says only 4% use the type of advice this credit would promote. If you want to promote this type of advisor compensation, go into the marketplace and make your case - don't use the coercive power of government to do it against the wishes of Canadians. In summary, there is so much wrong with this idea that it should be stopped in its tracks or rejected outright by politicians.

The cancer stories you never hear

This story makes me think of the heroes among us who work, mostly quietly, to overcome the bureaucracies of government and the endlessly tangled health care outcomes created by the thousands of controls imposed by government and their regulators, and then by the companies and professionals subject to those regulations. It seems that no matter where you live these days, the remnants of individual rights and freedoms are being eroded and the barriers between patient and medical professionals are growing.

Who among us has not witnessed a family member or friend do battle with health care bureaucracies to figure out what is wrong and how to fix it? Time is money. Time is life. Precious individual lifetimes and lives are being sacrificed to the idea that collectivist/altruist fantasies of health care are better than a system where the people with the power are the patient and the medical professional. A system that protects individual rights and never violates them. A system known as freedom and which has been branded as capitalism.

https://www.commonsense.news/p/the-cancer-stories-you-never-hear

A commentary on the Sandy Hill election debate, May 2018

In response to "Do we call that a debate?" in the June-July print edition of Image, and as the Ottawa-Vanier riding candidate for the Freedom Party of Ontario I have several comments.

The article starts off by applauding the technical organization of the debate but incorrectly says that only three candidates showed up. In fact, only four candidates were invited - the Freedom Party was not. I registered as a candidate about a week after the election campaign started and then immediately contacted the debate organizers. They had already determined who would be invited and did not wish to have other participants. While I expressed my reasons why I thought my participation would provide positions very different from all the others, they politely declined and since I totally respect their rights to hold a peaceful event, invite whoever they wish and their freedom to exclude any people or opinions from their event, I attended the event as a spectator only. I found the discussion uniform and a sad comment on the state of our culture.

I was invited and did participate in a debate in Beacon Hill and at Samuel Genest High School (in French and for students only). In these I consciously avoided attacking the individual representatives of the other parties (who I believe to be mostly good but misguided) and the often awful platforms they held and instead made statements demonstrating the correct principles of a civil society, pointed out the moral and economic flaws of several existing widely adopted and even popular policies and explained why all my answers to questions were unified and consistent with those correct principles. 

The PC, Liberal, NDP and Green parties do not share my respect for individual rights, as demonstrated clearly by their long standing actions in government and their election platforms that restrict many freedoms and infringe many rights of Ontario citizens. Ontario has been sliding into greater government power, more central command of our economic activity and a progressive violation of our human rights for many decades, accelerating in recent years. This is a predictable pattern as the errors and damages caused by central planning and the elimination of millions of minds from decisions compounds on itself. When a government makes a rule, one relating to wage controls for example, it deliberately prevents people from rational consideration of all options, blocks freedom to negotiate and find agreement and replaces it by the opinions, wishes and whims of whatever group holds the reins of political power. It says "obey me or face the wrath of the people with guns I have in my control."  It is precisely this type of power that inevitably must corrupt those who hold it, even relatively benignly.

The article refers to the three speakers as inhabiting the same part of the political spectrum. In fact, even the absent PC party (which sometimes makes statements sounding like it values true freedom) has more ideas in common with the other three than it does with the Freedom Party. Whereas all four of them agree on fundamental socialist principles and differ only in degree or style of implementation, the Freedom Party holds completely to the principles required for a sustainable, peaceful and stable society of rational and free people - one where the purpose of government is to clearly define and strongly protect your rights to life, liberty and property and takes no action except for these purposes. We believe government is essential for a civil society but in contrast to the four parties mentioned we believe it violates its most sacred trust when it uses force to override the will of a citizen acting in the peaceful pursuit of his or her goals in life. In start contrast to the others, we believe that all economic and other exchange of values is properly done only by the consent of both parties.

I see the big three as the parties of Kathleen Horvath, Doug Wynne and Andrea Ford. I dare you to find an area where they differ on a matter of fundamental principle. I particularly note that the explicit policy of the other parties is to use physical force and the threat of it to sacrifice the rights, reasoning, choice and thus important parts of the lives of some citizens in order to supposedly benefit others. Of the three speakers present, the NDP candidate was the most strident and explicit about this - speaking eloquently with the passion of a consistent follower of Marx and Kant. The world is already full of examples of the human and  societal terminus of these ideas and it has always been destruction. Unfortunately, these are the dominant ideas in our culture today and unless radical changes are made, we will see a continuation of cultural decline.

David McGruer

Sandy Hill

Ottawa-Vanier Freedom Party of Ontario Candidate

A tragedy of the commons

In discussion with a Facebook friend we ventured into talking about communities where restrictive covenants are used to define specific property rights. My friend posted a link to a definition of the "tragedy of the commons" and my response follows.

So.. tragedy of the commons. I know the concept. I see this as a serious problem only for societies that do not have clear property rights. When there is property that "no one owns but everyone owns", i.e. state-owned property, there is no way to allocate resources, to determine priorities, to objectively resolve disputes, to coordinate economic activities.

The reference you provided refers to demand overwhelming supply. In a free market this is impossible except in the very short term because free people can expand the supply of any given resource. To many people this is counter-intuitive because they see resources as finite, as mere physical objects, when in fact resources are everything in reality that man's mind can conceive. Every single thing we see as a resource today has existed for millions of years - the difference is that humanity did not have the reasoning ability, the knowledge and the social structures of freedom and capitalism to realize the potential of these resources. Let me provide a few examples.

Until the minds of men were able to discover and exploit the principles of chemistry, that dark, gunky, toxic soil that was a blight for farming was worse than useless but today has become the most abundant, most economical, most life-supporting energy source yet discovered - oil and other fossil fuels.

Until the minds of men discovered certain principles of chemistry and physics, there was no such thing as steel, aluminum and a multitude of alloys that today support the structure of our homes, our offices, our factories, our bridges, cars, trains and planes.

Until the minds of men discovered and exploited certain principles of biology, the perpetual state of almost all mankind was starvation and malnutrition but today our supply of food has expanded so far obesity has become a problem in many advanced nations and risks becoming so for even poorer nations in just a few decades. I think most people would rather have the challenges of obesity than starvation.

Thanks to enlightenment thinkers, industrialists in relatively free countries discovered ways to mass produce goods and services in such vast quantities that supply not only exceeded what their contemporary populations could use, but can now provide supply for a vastly increased population with little difficulty.

Supply is not a function of a limited view of resources but rather one of human imagination and freedom. If one specific physical resource appears to be in short supply, a free economy sees its price rise, which then attracts additional attention from producers, who then work to discover new ways of producing or alternatives that may even make the earlier ways entirely obsolete. The energy field is a classic example. In the early part of this century there was a hue and cry about "peak oil" and forecasts of doom. Oil prices rose rapidly. Alternatives were sought and so quickly discovered and implemented that the USA, which was previously a huge oil importer, now is an exporter. If government and anti-human activists had seen this coming they would have had a decent shot at preventing such progress and this is evidenced by their strident opposition to shale oil, horizontal drilling, hydraulic fracturing, oil pipelines, oil tankers, oil trains, and even the production of oil and other fossil fuel sources - they oppose every single economic source of energy. This advance happened so fast they were caught flat-footed. Today, the supply of oil and other fossil fuel energy is greater than at any time in human history, not because the raw material was not available, but because human minds had not yet identified it and found ways to make it a resource.

And what's next after fossil fuels? Likely fusion, which requires raw materials that are incredibly abundant and is a process that produces nothing humanity considers a pollutant. The potential supply of energy from fusion is so vast it is easily a thousand times more than that of fossil fuels, and we have centuries of supply of fossil fuels remaining. From a time less than two hundred years ago when whales were being killed for their oil to today when we can see unlimited energy resources in front of our noses, the raw materials found in nature did not change one iota. What changed was that men were largely left free to make the best use of the resources they had currently discovered and this enabled them to discover even more resources. it was not environmental activists who saved the whales but the geologists and engineers and venture capitalists who launched the age of oil that did so.

Now back to the tragedy of the commons. Imagine what would have happened if all property was owned by the state instead of by individual people and the voluntary relationship groups they form such as partnerships and corporations. Do you think we would have ever advanced to the stage of having industrial scale steel, aluminum, oil or anything else? Not a chance.These great leaps forward always occur in the more free society, where there is a degree of respect for the individual human being, where citizens have property rights and a government protects these rights, including intellectual property rights. While a country founded upon enlightenment principles leaped further forward than any country in all of history in just a hundred years from its founding, a multitude of other countries that remained collectivist, tribalist, fascist and otherwise did not protect the individual and his mind remained mired in primitive squalor.

The same is true today. What country, when it was relatively free for a while was formerly one of the wealthiest but now has in just a couple of decades fallen so low that all of the pets, all of the animals in the cities and even the zoo animals have been eaten by its people while formerly middle class citizens forage through garbage in search of food? Which country has the world's greatest known supply of oil, yet thanks to a true tragedy of the commons is pathologically unable to produce enough energy even for its own citizens to live as rational human beings and has gas prices at about $10 Cdn per liter? Which country once exported food all around its area and just a short time later depends on international aid to delay mass starvation? What country has an inflation rate of about thirteen thousand percent (80% per month) and and has seen GDP shrink by about 16% in the last year? What triggered this horrendous change? Was it the adoption of freedom, the protection of individual rights, the implementation of free trade, free markets, the limiting of the role of government to rights protection and the removal of rights-violating regulation - that is to say was it capitalism?

Or was it the antithesis of capitalism, meaning collectivism: the elevation of so-called group rights above the individual; the destruction of free association including the right to form corporations and seek economic production; the attack on objective law that protected citizens from those who would violate their rights, especially the state; the attempt to equalize all people's situations in defiance of their individual differences; the reversal of the proper role of the state from the protector of the right of citizens to pursue their own reasoned decisions to the agency that dictates how citizens must behave, organize their productive activities and even think? Did this country suffer from an excess of freedom and capitalism or the near total destruction of these?

Did socialism ride to the rescue of this formerly partially capitalist and wealthy country and make all its citizens happy, healthy and equally wealthy? Well, on the side of wealth they are in the process of becoming equal all right - equally poor, equally starving, equally desperate to escape the death-trap of socialism. And yet, do you think these same people, once they have thrown off the first layer of socialist shackles will advocate for ma truly free country, for pure freedom and capitalism, for a state that has as its sole duty the protection of individual rights? Not unless they have the intellectual and moral tools to do so - meaning they almost certainly will not. Rather, they will swing back towards enough freedom to improve their lives for a while and then again will lean towards statism and the cycle will continue.

Oh, and in case it wasn't evident, the country in question is Venezuela and it is currently in the grasp of a true tragedy of the commons.

Corporations, Inequality and Amazon

I wrote this as a comment on an Ontario Liberal Party discussion platform leading to the 2018 Ontario election. I don't know how long the link will survive, so I am pasting the text of the posted idea and earlier comments below my text.

My long comment, responding to Jenny and to the main idea:
It is a mistake to think corporate tax is not paid by individuals - only individuals pay tax. Sometimes they pay directly and sometimes through their legal entities such as corporations, partnerships and trusts. The government taxes corporations as a way to hide the tax from immediate view by citizens and is totally counterproductive. All the assets and all the profits of a corporation are engaged 100% of the time in creating value for citizens and when you tax something you get less of it.  By taxing business production you get less production and society has a lower standard of living.

The fact that 10% of Canadian already pay 55% of the taxes is not irrelevant to this issue. In many and likely most cases, the most productive people are shareholders of a corporation and thus pay both personal and corporate income taxes already.

The idea's assertion that income inequality is bad and that corporations are totally about greed is a travesty. To better understand this, consider how you become one of the rich people in society. Let's say you come up with an idea to make life better for others - to keep things super simple, say you invent a better vegetable peeler. You must invest your brain power in creating the initial idea, building prototypes, testing them, researching manufacturing and distribution. You must make sure you are not running afoul of the thousands of regulations the province has that restrict trade. You must search for and hire staff to help you get things rolling. You must learn how to deal with the intricacies of trade barriers between countries and also their internal trade barriers such as those between provinces. You must finance the equipment, marketing and inventory of the business and pay staff while the product is being brought to market; you take significant financial risks and might lose it all. 

Now assume you start to have sales, but it may take many months or even years to recover what you have invested, with no guarantees at all that you will do so. All along the way your staff have been paid and have been happy to work for that level of pay, or else they would rationally work elsewhere. No one forced them to work for you and they took no risks except those inherent in working for a small business. Every day in the early life of the company the staff worked, they were making a profit for themselves while the business founder was not. They decided they were better off, that their lives were being improved, that they received more value through their pay than the time they dedicated to the work.

Now let's say the business starts to become profitable. How? Only because enough customers have decided that their lives will be better off for buying your veggie peeler than by holding onto the few dollars it costs them. Their lives are improved in a small measure, and the business owner and all employees are also better off. Trade is a win-win transaction when it is freely chosen - it must be, by definition. If only a modest number of people agree that their lives are improved by buying your peeler.

Now to the meat: how do you become rich? A really large number of people must agree that their lives are improved by trading their dollars for your peeler. Millions of people must agree that you are creating value for them. Not only that, you are competing against all other peelers made by all other companies, plus once your peeler hits the market it will give other people ideas about how to compete with you. To build a successful business you must not only achieve excellence, you must maintain it indefinitely or else another will earn the market share you once had.

Consider Jeff Bezos, founder of Amazon, apparently the wealthiest man in the world today. His business idea has become so loved by his customers and the company has so many millions of customers that his net worth (mostly Amazon shares that could lose 100% of their value if the company fails to maintain excellence) is over $100 billion dollars. Did his wealth come at the expense of others? Did he take their piece of the so-called "income pie"? Did he achieve this by forcing people to work for him at pay lower than they chose? No. No. NO! Amazon employees all work there because they have identified Amazon as a place they want to work and have accepted the pay offered. Many employees have likely become millionaires through ownership of shares in the business. Amazon customers are better off - why else would they shop through Amazon? Thousands of other businesses sell through the Amazon platform. Many other businesses sell services to Amazon. Jeff Bezos is fabulously wealthy because he has revolutionized a portion of the marketplace and created value for hundreds of millions of people and growing. All those people have chosen to trade a small amount of their value for that provided by Bezos and his company - and they can take away everything Amazon has and all its employees and all its share value, just by changing their minds about whether Amazon is creating value in their lives. 

The fact that income inequality rises when Jeff Bezos creates incredible value for millions of people all over the world is an outcome to be celebrated, lauded and recognized as a great moral achievement, not just an economic one.  Morality is our guidelines for surviving and thriving, and the creation of a new mountain of wealth in society is the pinnacle of morality successfully applied to improve human lives. Bezos is not Bernie Madoff - he has not stolen or defrauded anyone - that is the mindset of those who see wealth as a pie to be divided. Bezos has designed, tested, baked and continues to bake new and undreamed of pies that are beloved by hordes of his fellow men. To frame it another way, Bezos' wealth has been voted to him and bestowed upon him through consumer choices as recognition by his fellow men of the value he creates.

Yes, Bezos disrupts the economy, but to improve it, not to denigrate it.

Yes, this is a right and left issue. On the right stand people who wish to be free to choose their own path in life, to be free of coercion by others or their government. On the left stand those who are against individual rights, against human freedom, against reason and the human mind, against win-win trade and for the use of force to make others do their bidding. On the left stand people with guns pointed at citizens. On the right stand people who defend the right of citizens to choose. Which side acts as a bully?

My first, short comment:
This idea is so full of errors and contradictions entire books would be needed to fully address it. A basic course in economics and finance would be a start.

Who creates, operates, finances and owns the businesses, the corporations excoriated above? Who pays the corporate taxes? Who pays individual taxes? Who earns the profits of businesses and uses them to invest in greater future production or to improve their lives? Canadians, Ontarians, taxpayers - they are synonymous. With the most productive 10% among us already paying 55% of income taxes, is that enough? Not for everyone, apparently.

Comment from Jenny:
Hi, David, the 10% paying 55% of income taxes is irrelevant. The idea was the low corporate tax; it is not that the head of the corporate is paying low personal income tax.

The Canadian government attacks the values of its own citizens

I wrote this to an Ottawa area MP when I learned of an upcoming "consultation" phone call.

I am writing to you as a financial advisor who lived in Orleans for a number of years when I first built my business and who has many clients living in Orleans to this day.  I urge and implore you to push the government to stop all action towards implementing the published proposed tax increases as they could be the most damaging tax increases in our lifetime so far.

When I learned of the proposed changes, my jaw dropped and I felt very angry too.  As a financial advisor for the last 24 years I have gained a very good knowledge of many parts of the Canadian income tax system, particularly individual income tax, as I am a registered eFiler and prepare about 130 returns per year for my clients. Over the years I have done over 2,000 tax returns. In addition, a crucial part of financial advice is understanding how income tax reduces the value of investments made by clients, thus reducing the wealth of Canada forever, and helping clients understand and plan to keep their tax burden to a legal minimum through proper planning.

I think it is crucial for you to clearly understand what it means when a person earns income. It means he has created something of value that another person is willing to exchange his own values for. Money is simply the medium of exchange – the underlying value represent a piece of each person’s life, their energy, their intellect, their physical effort, their personal property, their values. In a country that truly protects the rights of individuals, productive ability is celebrated, not punished. Individuals with prodigious ability to create value must be free to do so and the value they create should not be attacked by their own government. If a man can build a business and create value of $200,000 more than the cost inputs, then this is only possible because the people he trades with agreed that he had created this value – that is to say they willingly traded their own values in exchange and only because they thought they were better off for having traded.  If a man can produce excess value of $2 million then he has created much more benefit to his fellow members of society than the man who created $200,000 of value. Should the man who creates greater value be punished for it? Should his productive ability be stifled? Should his ability to allocate capital that is used to create even more value be impaired? Is it moral for him to have a greater portion of his production stripped from him by force the harder he works? This is exactly the regressive tax system we have today.

For many years I taught a financial planning seminar series for adults through the Ottawa Catholic School Board and in the class focused on income tax I listed thirteen different examples of situations where the tax system claws back income, over and above the basic income tax, leading to sometimes severe punishment for earning more income. I used an example drawn from my real life experience doing a client tax return, where a single parent earning $30,000 faced a 70% effective tax and clawback rate. This is not the only example, the system is riddled with complicated buttons and levers pulled by a series of governments over time.  I’m sad to say this has only become worse since the last Federal election and the punishment for daring to produce more value for fellow citizens has risen.

Consider the possible things a business can do with its earnings. Remember that dollar are simply place-holders for actual economic values such as tools, equipment, buildings, vehicles, clothing and all the other goods and services produced by people to improve their lives. First, it can hold them in a bank account and in this case the cash then is available for the bank to lend to others who may need capital to pursue their own goals in life. Second, the business may spend it on maintaining operations or invest in growing its productive capacity and in this case it also produces value. It may pay salaries or dividends to owners of the business, enabling them to pursue their personal values and improve their lives. The business may hold retained earnings and invest in other businesses, either small private businesses or larger, more liquid and secure businesses; again in both cases serving to maintain and increase the production of human values. All the actions a business may take with its earnings are positive, unless the business is not run well enough to be competitive and profitable and thus closes.

This is economics 101, but it is not well understood by many people, including Canadian elected officials of the last century. When production is taxed, the whole chain of wealth creation in society is slowed down, retarded, held back. Don’t forget, wealth is simply the values chosen by people, values such as homes, cars, communications, schools, hospitals, scientific discoveries, etc. Forcibly taking greater amounts away from those who are better at producing values - no matter what is done with it, no matter how well intentioned the takers may say they are, no matter their justifications - can only impair human progress. Taking ever-higher percentages from people as their productive abilities increase is an even greater harm to the producers and to society. Below is a table from my class slides, showing that a dollar doubled ten times is worth $1,024 but when taxed at 46% is only worth $75. In one case, society has $1,024 of homes, schools, hospitals, etc. and in the other it has only $75 of these. Which society has the greater health of citizens, greater education, greater communications, safer houses and cars, more ability to care for the small fraction of truly incapable individuals?

Note that when I referred to helping clients pay a minimum of tax, “minimum” does not by any means mean low or nil, as many of my clients pay far more than a fair share of tax already. The fact is that the people who are the most productive already pay taxes at a rate far greater than their fair share. As the table below shows, just 10% of our population pays 41% of taxes, four times their fair share. Even worse, the most productive 1% of our people are already forced to pay, despite spending vast amounts on tax and legal and financial advice, 24 times their per capita share of taxes. Twenty four times! Each of them carries on their backs twenty four fellow citizens, weighing down their ability to produce values, to improve civilization, to advance human knowledge, to improve the lives of those they trade with, to innovate, to hire people to help them in their productive efforts. Just imagine the progress that would be unleashed if the greatest producers among us were truly freed to use all their abilities to their fullest!

Actually, you don’t need to imagine it. Until the recognition of individual rights along with proper governments to protect them in the late 1700’s, the natural state of humanity through all history was poverty. Suddenly, an explosion of knowledge and production raised the quality of human life by more in 200 years than in the thousands of years prior.  Countries that adopted the principles of freedom have uniformly flourished beyond the imagination of 18^th century Kings. Canada was one of these.  Even today, wherever and to the degree the right to life, liberty and property are cherished in law and in the culture, progress and flourishing occur. To the degree a country violates these three great rights by the force of central controls, regulations and taxation, human life suffers – witness Venezuela in recent years. 

Alas, Canadians have forgotten the philosophical roots of the enlightenment and are unaware of the causes of the industrial revolution and the great advances they see around them. They are moving away from expanding freedom and towards, and even accelerating towards, collectivism, socialism, statism and fascism, which are all essentially the same. The current proposals to raise taxes on private corporations represent a significant slide towards Venezuela and misery and suffering. Notice how there has been NO discussion of the possibility that some people are being taxed too much and their burden should be lowered to create a more level playing field. The only discussion by the Government is to increase taxes on some people to a level paid by some other people - people the government thinks it can persuade to vote for them to continue punishing high producers. The tall flowers are being cut down again. The logical progression of this is to cut a level lower and lower until all are equal in their suffering and the Marxist ideal is achieved, a la Venezuela, where you cannot find a dog, cat or bird in the city because the people have killed them all for food – even zoo animals.

The consequences of implementing this tax proposal will not be unintended, but fully intended. The government has been told, warned, notified of the pending damage to society. The assumptions behind the proposal are severely flawed in both moral and economic terms, so to seek ideas in a “consultation” on how to minimize unintended consequences is to entirely and deliberately miss the point. The proposal represents a willful and wanton destruction of real, tangible and deeply moral values like homes, food, education and health so cherished by so many Canadians. Instead of attacking our most productive people, isn’t it time Canada started to encourage them to ever greater heights and encouraged all others to emulate their success and help them in building an even wealthier society? Our entrepreneurs, business people and high producers should be our greatest role models, not the object of scorn, derision, insults and attacks via the force of taxation. While there is so, so much more than could be said on this, I will close with a quote from one of the great thinkers in the field of human freedom and progress.

You cannot bring about prosperity by discouraging thrift.  You cannot help the wage earner by pulling down the wage payer.  You cannot help the poor by destroying the rich. - Abraham Lincoln

I look forward to your thoughtful response to my letter.

Democratic socialism is simply socialism via voting instead of revolution

Me, commenting on a Facebook post by Democratic Socialist, attempting to define socialism as benign and beneficial:

This fellow declares that people trading through voluntary cooperation and for mutual benefit (the free market) is not the right form of economic exchange, that some other form of economy is better.

He declares that socialism implemented through revolution (communism) is extreme, but that socialism imposed through voting is okay. Note that he does not examine the moral correctness of the end except through through the means. By that standard, slavery by military conflict is not okay, but slavery through the ballot box is just hunky dory.

He says the foundations of society must be provided through government force, ignoring that the very foundations he identifies did not simply pop into existence but were produced by the free minds he proposes to enslave.

He states he does not want to do away with free markets while he is bust advocating for an end to freedom. The system he is describing, where the pretense of freedom is maintained while the state dictates a million rules, is the form of collectivism known as fascism. In this he, clearly does not know how such democratic socialists as Hitler, Chavez and others came to power and what was the end result for citizens.

He asserts that people engaged in voluntary trade for mutual benefit are not working for the good of their community. He implies that working to further their own lives is not good for the community. What is? Sacrificing their lives for anyone except themselves and those they love.

He asserts that such services as firefighters, parks, medical care and the military would not exists without socialism, as if citizens left alone are not those who conceived of all these and would never think to value them and find ways to maintain them if left free to choose.

He thinks education is good and free if provided through the force of government but not good if people are allowed to choose and earn an education for their children; that it is somehow better if others are forced to pay for your children's education and if you are forced to pay for your own children's education through a state monopoly instead of having the freedom of choice.

In short, he is in favor of nothing less that a total dictatorship of the majority, which is simply pure democracy. This is not what the founding fathers envisioned. They saw a country of free individuals, with a constitution protecting them from exactly the kind of statist government he espouses, with police and objective laws protecting them from criminals and a military protecting them from aggressive countries. The country has lost the knowledge of the enlightenment-based founding fathers and has been in social decline almost from the start, as various forms of collectivism have eaten away at the principle of freedom from the state on which the country was founded. Very sad.

Commenter: Government programs come into existence when there is a lack or hole created by private endeavors or when privatization would be unethical, such as with law enforcement. In other words, every social program we have today came into existence because the free market was failing in that area.
My reply: Disagree. Aside from law enforcement, all other activities are better, more economically, and, most important of all, justly provided by free people acting without coercion. Socialization of services is most often justified on the basis of some people's wishes to get a better service without having to pay for it.

For example, so-called public transit is fantastically expensive and only survives on massive payments taken from some taxpayers and given to other taxpayers. No wealth is created in the process, only removed forcibly and given away, while extracting a high cost of operation to do so. A free market sees all the transportation options enough people want and can pay for springing forward as rational, profit-seeking entrepreneurs try to fill market demand.

If an activity is not profitable, that is to say it cannot be exchanged between a producer and consumer who both think it will improve their life and matches with their priorities, then it does not happen. Someone may look at the resulting situation and wish for a low priced bus to appear on the street, but wishes are not reality and coercing people's activities to accomplish the wishers' ends is not moral.

Further, once free choice is removed from the equation, then ever more coercion is required to maintain the illusion. Thus, in transit we have the creation of government monopoly, the prevention of competition, the political cronyism of contracts, the featherbedding by unions, the favoritism of routes, the lobbying for preferred price categories, the posturing for control of the system, the abrogation of negotiating rights through the declaration of essential services and it goes on and on, around and around. Never is the basic premise challenged, the premise that it is right for government to coerce citizens instead of protecting them from coercion.

Just because someone claims to need something cannot create a moral obligation on anyone else to produce it for them. For most of history, humanity needed to discover reason and the principles of a rational society but did not do so. Men needed food, clothes, shelter, health and security and no one gave it to them. They had to first discover the principles that make such a society possible an then tear their freedom from collectivists at a great price. Then they had to institute a society based on those principles and try to protect them. A great failure they made was to omit the moral case for freedom, recognize that human freedom and economic freedom are inseparable, and to separate government from economic actions. This is why the US has been in moral and political decline since its founding. Only a rediscovery of founding principles can save the country.

How to end political cronyism?

A recent Facebook exchange I had that started with a posting about the US Democratic Party and candidate Bernie Sanders holding opposing positions about a campaign finance law.

Dave: 

Politics has been corrupting money for too long. A separation of state and economy is way overdue.

Commenter: 

The Constitution of the US specifically grants Congress the right and responsibility to regulate commerce, so a complete separation would go against the Constitutional intention.

Dave: 

What did the founders mean when they included this? Did the same men who so valiantly cherished individual freedom and fought to establish a country based on individual rights intend that the state would control and restrict citizens' productive activity in pursuit of their own happiness? Did they intend to deny citizens the very freedoms the declaration of independence so proudly identified? Or was their intent to empower the federal government to act to ensure interstate commerce was not restricted and citizens of the country were allowed to trade freely? Did they mean regulate in the sense of modern regulators, who seek only the political power to control and restrict others, or did they mean it in the older sense of ensuring a free flow of trade and removal of obstacles from the path of citizens pursuing happiness through productive activity? Which position is consistent with all we know of the founder's explicit and implicit philosophy?

Think of the process of evolution of cronyism. First, government makes a rule that favors some citizens at the expense of others who have violated no rights of others and are thus by definition innocent. The rule may have been prompted by lobbying or not, but it is clearly improper in a free society for government to violate rights when its sole purpose should be their protection.

Now that such a rule exists, it pays for people to lobby either to become part of the favored group or to change the law to instead favor them. If corruption has not already been introduced into the equation, it certainly is now. And so various groups band together to lobby for their interests, specifically for the privilege of being the group to whom the interest of others are sacrificed, the privilege of benefiting from the pain of others. Groups raise money, fund campaigns, try to shape public opinion, advertise and in many other ways increase the corruption. Before long, lobbying is an essential requirement to protect your business from lawmakers who can be swayed by competitors or those who simply want to stop you from producing, the nihilists.

Ask yourself if it is the money, the agreed upon medium of exchange of produced values, that is the essential here? If a man is phenomenally successful at creating things greatly valued by fellow citizens, who exchanges such values in a trade of mutual benefit and has not spent the produced wealth, but rather reinvested to produce ever greater value for fellow citizens, if such a man is wealthy, is the money he may spend corrupt? This money is a result of the exercise of the highest virtues a man may exercise: reason, purpose, self-esteem, productivity being primary among them. It is not the money but the purpose that may be corrupt. If he spends it on a vacation for himself and his family, he is acting most morally. If he spends it lobbying for political favors it is corrupt.

Now how does a society fully engaged in such activity correct the problem? Do they change laws on lobbying? Do they adjust campaign finance rules? Do they punish honest and productive businessmen who are trying to protect themselves from attacks by political powers? What is the correct response to a society constructed and fueled by political pull?

I submit that the only rational, and thus the only successful method of combating cronyism is to end the possibility of there being rewards of cronyism. To do so means the government must not have any levers of political power and favoritism to pull. It means the disempowerment of the cronies and an end to the potential for their very existence. It means a populace living under a system of political freedom where government exists to protect their rights to life, liberty and the pursuit of happiness and has a legal system of objective laws and courts to deal with cases where citizens believe their rights have been violated. It means there is criminal law to deal with those who initiate physical force and civil law to deal with contract disputes. It means the implementation of the political-econonomic system known as laissez-faire capitalism, the system suited for homo sapiens, for man the rational being.

The injustices of March for Jobs, Justice and the Climate

A friend just made me aware of a political rally planned in Toronto that can be seen at the web site called March for Jobs, Justice and the Climate.  Having looked over the site it seems a good opportunity to explore some of the concepts used by the authors of the site and their misuse and even abuse of reason.

The notion of uniting the concepts of jobs, justice and global warming must surely rank as one of the greatest leaps of illogic of recent times.  Let's look at each of the three concepts briefly to see if there are rational links between them.

A job is something one earns by offering to exchange value for value with a willing trader - the employer.  A job is created only when both parties agree the contract will be mutually beneficial.  If one cannot find an employer willing to pay what you ask as compensation, the logical step is to lower your demand for wages until you are able to make a trade.  Of course, this is how things work in a free market, but we do not have that.  By dictating thousands of rules regarding employment, competing for wages and making it illegal for wage contracts below a fixed price, government massively distorts the market and creates unemployment.  Since there is an unlimited amount of work to be done to maintain and improve the human condition, only government intervention or an unwillingness to improve skills or be flexible on wage demands can create anything more than temporary unemployment.

Justice is the recognition of the facts of reality when it comes to judging the character and actions of men.  Justice means that a man receives what he is due and nothing more or less.  If a man earns a billion dollars through free exchange of values with millions of others, it is justice.  If a man takes one dollar from others through the initiation of force then it is an injustice.  The Naomi Klein's of the world invert the meaning of justice, often under the cover of package deals such as "social justice", which is really a demand for the massive initiation of force against producers for the benefit of non-producers.  As philosopher Leonard Peikoff states:

"Every man, they argue, is morally the property of others—of those others it is his lifelong duty to serve; as such, he has no moral right to invest the major part of his time and energy in his own private concerns. If he attempts it, if he refuses voluntarily to make the requisite sacrifices, he is by that fact harming others, i.e., depriving them of what is morally theirs—he is violating men’s rights, i.e., the right of others to his service—he is a moral delinquent, and it is an assertion of morality if others forcibly intervene to extract from him the fulfillment of his altruist obligations, on which he is attempting to default. Justice, they conclude, “social justice,” demands the initiation of force against the non-sacrificial individual; it demands that others put a stop to his evil. Thus has moral fervor been joined to the rule of physical force, raising it from a criminal tactic to a governing principle of human relationships."

With regard to jobs and justice, a proper relationship between these two concepts would be to recognize that an employment contract formed of free will by both parties is a just one and one that is formed when one or both parties is acting under force, especially the force of government, in an injust one.

Now to the connection between jobs and global warming, now euphemistically hidden under the package deal of climate change.  Economically, every person in the world could have a job instantly if we fulfilled the highest wishes of the carbon dioxide fear-mongers and banned all use of fossil fuels tomorrow, because every living person would be forced into immediate starvation, survival and protection mode.  Their supply of food, health care, transportation, education, communication, shelter and every other economic benefit of capitalism would cease within hours.  They would have a job (but no pay), one that requires 15 hour a day of effort and vigilance, yet still billions would die within months and civilization as we know it would end.  Philosophically, this would represent perfect justice - justice for having abandoned the great advances brought to us and the great virtues enabled by the discovery and construction of industrial scale energy systems.  Such devastation would be justice for having abandoned the highest virtue, the one that literally defines us as humans - rationality.

The link between justice and global warming the alarmists wish to draw is that they wish to use the excuse of planetary salvation to justify the massive use of force against innocents.  In their view, the people who have created wealth are the ones guilty of encouraging energy production and thus of, in the carbon dioxide zealot`s view, of destroying future life on Earth.  The fact that these people almost certainly created their wealth by producing goods and services highly valued by many fellow humans and that they are innocent of any action to violate the rights of others is immaterial to these people.  Under their view of justice, the producers should be shackled and forced to comply with the wishes of anyone who claims the right to do so on the basis of their not producing wealth.  This is the system brought to its fullest expression in the former Soviet Union and China, which we know resulted in the suppression and devastation of human life on an unprecedented scale.

The proper way, the just way to unite the concepts of jobs, justice and climate as they are distorted by the Naomi Kleins of the world would be to set aside a large piece of un-populated but fertile land and invite everyone on Earth who wishes to participate in a new society to move there without bringing any of the fruits of our fossil-fueled industrial civilization with them.  Justice would demand that we ask these people to put up or shut up - to demonstrate they can develop an advanced civilization and persuade the rest of the world to join them, or to cease their bleating about capitalism, industrialization and the associated marvels of modern energy systems.  That would be true justice.

A discussion about energy and climate

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• The discussion below occurred after a friend posted a facebook meme contrasting the current climate march in New York with Obama "birthers". 
• Dave: “Any time world leaders are gathering, their number one focus needs to be what will promote human progress,” Alex Epstein, founder of the Center for Industrial Progress, told FoxNews.com. “The whole focus of this so-called ‘climate summit’ is to only look at the alleged negatives of using fossils fuels – it’s like an antibiotics summit where you only look at the negative effects of antibiotics.”
  
  Epstein, author of the forthcoming book The Moral Case for Fossil Fuels, also highlighted the inherent volatility of the global climate. “Nature doesn’t give us a safe climate that we make dangerous," he said. "It gives us a dangerous climate that we make safe, above all, by using energy from fossil fuels.'
  
  Citing data from the EM-DAT International Disaster Database, Epstein explained that climate-related deaths have actually declined 98 percent over the last 80 years.
  
  “My conclusion is that, if we look at the big picture, not only are the economic benefits [of fossil fuels] overwhelmingly positive, but the environmental benefits are overwhelmingly positive,” he said.

  
  
• Friend:  I'm sorry, Dave, but you lost me at "Fox News".
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• Please consider the quote, not who is doing the quoting. It is the primary principles that matter, not the secondary source relaying them. When evidence shows that climate related deaths are down 98% while energy production rose, it means a great human value has been created.

  Yet how can I trust the content if it appears on a "news" channel that has been caught in many fabrications and falsehoods and yet has never made a retraction?
• Friend of friend: Sounds very fair & balanced.  Please read up on Alex Epstein. He's funded by the Koch brothers to shill for oil companies. http://www.desmogblog.com/alex-epstein
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  Alex Epstein

  Alex Epstein  Credentials B.A., Philosophy, Duke University (2002). [1], [2]  Background Alex Epstein is the...

  DESMOGBLOG.COM
• David McGruer Let's deal with facts not media, facts not funding, facts not hype, facts not fear-mongering, facts not logical fallacies, facts not statistical manipulation. 
  
  The fact is that human life quality has flourished as our ability to produce life-promoting energy has increased and at the same time climate related deaths have massively decreased. This is a wonderful and uniquely human accomplishment that should be celebrated!
• Friend: I agree. It should be celebrated. We should also pursue safer forms of energy.

  
  
• David McGruer In that case, let me point out that nuclear has the best safety record of the energy sectors. Energy safety is at an all time high and rising rapidly, as is the quality of human life. The point is that there is a direct, nay causal relationship between energy and human life quality. To ignore or try to destroy this as many in the environmentalist movement do is profoundly immoral.

  
  
• Friend: I suppose it depends on one's definition of moral. To many environmentalists, the overuse of the ecosystem by a single species is profoundly immoral.
• Friend: I agree that there is a causal relationship between the discovery and use of fossil fuels and the rapid rise of a technological civilization. Technology has greatly decreased the level of toil humans must endure in order to meet the basic needs. In highly developed countries it has decreased so much that we can spend most of our time in non-essential pursuits. Energy consumption has everything to do with this.

  
  
• Friend: I would not throw out the baby with the bathwater. Technology has played an enormous role in decreasing human misery, predicting and preventing disasters, etc. Which leads me to ask you this: if you are a proponent of technology and science, if you trust science to deliver the technology that has eased human existence, why don't you trust it when science says that our current use of fossil fuels will cause harm to the environment we depend on?

  
  
• Friend of friend:  I'm not sure where you get your impression of people in the "environmentalist movement," but what I most often hear from environmentalists is the desire for sustainability. This means that we USE science and technology and engineering to figure out how to make our energy use cleaner and (even) safer than its ever been. We learn how to stop creating so much waste (a major problem with nuclear energy). We learn how to use the incredible amounts of energy freely available to us, via the sun, the wind, the oceans, the heat of the earth, etc., etc., so that we never need to run out of any resources. 
  
  If you are truly excited about science and energy, I'm not sure why these goals wouldn't get you fired up.

  
  
• David McGruer Easy one. Because it is simply not true and advocates of that point of view wish to stop science and knowledge in their pursuit of controlling the lives and minds of others. The entire "the debate is settled" is clear evidence of this. As I've said and shown before, there is massive multidisciplinary evidence to the contrary, showing that the climate always changes, that the present cycle is not unusual, that the effect of CO2 is minimal, that even if it was it is far more human to further adapt our environment than to cut off our lifeblood. Even the IPCC, fraud-filled though it is, recognizes that all their projections of temperature rise have proven wrong. I believe there about 50 reasons the true believers have offered for why the darn temperature refuses to rise despite rising C02, so clearly even they have no consensus.

  
  I'd ask you to show me a single indisputable fact of reality showing that dangerous man-made global warming is occurring. With that, we could the rationally dissect the question.
  
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  David McGruer Besides, science is not a thing to be trusted, it is a process of rational thinking applied to the physical facts of reality. Discoveries lead to more discoveries. Scientific method demands that we challenge everything constantly, always check our premises, repeat and validate findings, believe only what reason supports and assume the null hypothesis at the outset. I may trust a particular scientist, but that has limits determined by my own reasoning. When a statement by even the most reputable scientist disagrees with the facts of reality I observe, I go with reality over the scientist.
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  David McGruer To answer the question about not liking solar tech etc - the striving to make energy production ever more efficient and to make the use of energy ever more efficient is exactly what free thinking and the freedom to trade are all about. Through the competition among great scientific and productive minds, we have gone from the invention of the steam engine to nanotechnology in only a couple of hundred years. Of course I am in favour of continuing to discover how to efficiently capture and use energy from sun, wind, waves, geothermal etc. All methods of energy production must remain on the table and none of them must be subsidized or blocked in any way, unless there is a violation of individual rights. 
  
  The thing is, no one has yet discovered a way to make solar or wind energy (for example) efficiently enough to compete with the more efficient existing energy sources. I have had my own photovoltaic system at my cottage for 22 years and I am very familiar with its degree of inefficiency, the amount of poisonous metals that need to be mined to create and sustain it and the problem that arises when there is no sun shining - a full backup by a more reliable source is needed.
  
  I am terribly excited about what appears to be the discoveries associated with a 100MW compact fusion reactor that runs on plentiful and cheap deuterium and tritium (isotopes of hydrogen). This energy source has the potential to displace vast amounts of other energy. Its developers have the right to pursue it, no matter how much disruption it may cause for existing energy producers. Similarly, if people can invent solar, wind or other systems that free consumers decide is their preference, I welcome them with open arms. 
  
  A great problem is that the environmental movement is not just against fossil fuels of the future, but of the present. They demand that civilization be dismantled, that total socialism be instituted, that free thinkers be jailed, that the free market be stopped, that your choices be dictated by mythical omniscient economic planners. They go so far as to desire the death of a large fraction of the human race, or even the complete elimination of humanity from the planet. They (implicitly or even explicitly, just read the signs at the Climate March) claim to have higher knowledge that trumps the right of others to think and act, assert that nature in the absence of mankind is the highest value, arrogate the authority to take any action to control or end human lives. 
  
  In contrast, my ideology is one that places human life as the highest value, reason as man's means of knowledge, freedom and individual rights as the proper basis for the organization of society. Such a society embraces thinking and ideas, allows citizens, through their producing and buying decisions in the free market to determine the success or failure of every company and product, and produces the best possible outcomes since every transaction is voluntary and thus a win-win.