The Economics of a Compulsory Government - Part 2

We have seen how individual interests in the private sector work to a mutual benefit. The more a business satisfies consumer demands, the better off everyone is, the consumer as well as the entrepreneur. It would then be useful to see how these interests apply to the government sector. How can a person utilize their individual interest of being better off within the government? If  government's revenues don't come from and therefore are not effected by the satisfaction of the needs of  those who use its "services", a government employee will be indifferent towards efficiency. Also, if hard work and efficiency don't result in higher income, they will strive less at what they do and look for alternative ways to increase their income. Although it must be pointed out, knowing that governments do not know if they are producing the results desired by the people or not (existing outside the profit/loss system), that it can also happen that they are not. In this case we would not even wish for them to be very efficient. If the government hires a firing squad to get rid of unemployment by shooting the unemployed, we would not call for efficiency.

There is also a moral question at hand. Since all taxation is coercive, there is no conceptual difference between stealing and taxing. Some people might argue that there is a consensus among the governed to be taxed so that the government can perform its "services", whatever they might be. But this consensus is a myth. If a consensus really existed there would be no need for compulsion. The very fact that taxes are compulsory means that there are at least a few people who would rather not pay them, your author included. So at the very least, it is not a consensus. In turn, the myth goes on, we would keep the government in check by voting them out of the office if they failed to meet our expectations. Although what on earth you stand to gain by throwing out the old thugs and installing new masters with exactly the same powers is not within my array of perception. This creates a majority rule where politicians compete for votes, which in most cases they can get by taking or promising to take wealth from »haves« and redistributing it to »have-nots«, since there are at any given time more »have-nots« than »haves« of anything worth having. This system installs a legal plunder of the rich and productive individuals and redistribution of their wealth to the less productive. It is, in effect, a punishment of productiveness and a subsidy and encouragement of the less productive or, in the case of unemployment benefits, the non-productive. Apart from the moral problem of this arrangement, there is also the pure economic aspect. If entrepreneurs and producers are not allowed to keep their incomes and profits, they will stop working and turn to capital consumption and thus, as wrote Mises, »the accumulation of new capital is slowed down. The realization of technological improvement is impaired; the quota of capital invested per worker employed is reduced; a check is placed upon the rise in the marginal productivity of labor and upon the concomitant rise in real wage rates. It is obvious that the popular belief that this mode of confiscatory taxation harms only the immediate victims, the rich, is false«. So then if we punish productive and encourage and support unproductive people, how can we expect to flourish? The answer is, of course, we cannot.
 

There is also the standard argument that the government should get into big-scale projects that the private sector would otherwise not get involved with. But the reason the private sector would and does not get involved with these projects is because it could only undertake them at a loss. This is a signal that the capital structure and the knowledge is not yet aligned to make such a project possible and that there would be insufficient demand, i.e. productivity on the part of the potential consumers, to justify the project. We should also not forget that private sector businesses could afford to invest in many more big-scale investments absent government taxation which robs them of the profits necessary for precisely such investments. To give just a few examples, it might be a desirable and noble idea for everyone to have a helicopter. Or to build roads with such sophisticated equipment that no accidents could occur. It would also have been a noble idea to provide electricity to every home in 1905. The technology for the former certainly exists and existed in 1905 for the latter. The problem is not that the greedy private sector is not and was not providing them in 1905 for selfish reasons. The problem is that there is not and was not enough physical resources to build these things profitably and that wherever the government seeks to interfere, it is only able to do so by collecting taxes and funneling capital away from industries which are producing consumer goods that are currently more urgently demanded by the public, while throwing them in the black hole of government bureaucracy where no measure of value creation, or better yet, destruction is ever possible. Whereas today, owing to decades of capital accumulation (and not just accumulation, also the development and alignment of complementary tools and resources developed by the free market) our labor is so much more productive, when one man or woman can achieve results with the capital that we have that used to require the work of perhaps tens or hundreds of people, that we can now finally afford this and produce, distribute and enjoy the benefits of electricity in every single household. And this is something one single bureaucracy, namely the government, can never ever achieve. It can only be brought about by free people discovering new ways of doing things and being able to keep the incomes from the resources they have invested. What the government can indeed do is temper with this process and/or destroy it.