July 1, 2010

Ben Franklin to Max Weber to Today

Max Weber, quoting in parts Benjamin Franklin, wrote;
Remember, that time is money. He that can earn ten shillings a day by his labor, and goes abroad, or sits idle, one half of that day, though he spends but sixpence during his diversion or idleness, ought not to reckon that the only expense; he has really spent, or rather thrown away, five shillings besides. ... Remember, that money is the prolific, generating nature. Money can beget money, and its offspring can beget more, and so on. Five shillings turned is six, turned again is seven and threepence, and so on, till it becomes a hundred pounds. The more there is of it, the more it produces every turning, so that the profits rise quicker and quicker. He that kills a breeding sow, destroys all her offspring to the thousandth generation. He that murders a crown, destroys all that it might have produced, even scores of pounds.

This indirectly says a lot about taxation and the use of it.  While taxation technically does not 'murder a crown' (coin) it does do two things:

(1) It diverts it from it's likely original intent to the the intent for which the government wishes to use it.  Therefore a dollar intended to be spent on a pair of Levi's and then say invested in product development by the Levi Strauss corporation has been re-directed to say Medicare, or a more sinister purpose  such as "helping redirect Florida politics in a more progressive, Democratic direction".  In a capitalist democracy, can such a diversion be the best use of generations of spending?  Given the multiplier effect of money, how many generations of spending of that dollar are now moved from a capitalist cycle that enhances national competitiveness and drives the economy, to a different sub-economy with it's own cycles of spending embedded in socialist activity?

(2) It does murder that crown for its original owner.  The person who originally had the money has had it taken away from them by the power of the government.  While some level of taxation is needed the question really becomes how many dollars can an individual have 'murdered' and reasonably be able to still provide not only productive labor but also productive spend within an economy?  Does the money that is being diverted National Council of La Raza (no really) actually do anything to foster productivity within the national economy?  Does it even do anything to "promote the general welfare" as opposed to a special interest group?  Not always.

As Joseph Schumpeter an anti-Keynesian economist of the early 20th century pointed out,
...the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism, especially among intellectuals. The intellectual and social climate needed to allow entrepreneurship to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another. He argued that capitalism's collapse from within will come about as democratic majorities vote for restrictions upon entrepreneurship that will burden and destroy the capitalist structure, but also emphasizes non-political, evolutionary processes in society where "liberal capitalism" was evolving into democratic socialism because of the growth of workers' self-management, industrial democracy and regulatory institutions. Schumpeter emphasizes throughout this book that he is analyzing trends, not engaging in political advocacy. In his vision, the intellectual class will play an important role in capitalism's demise. The term "intellectuals" denotes a class of persons in a position to develop critiques of societal matters for which they are not directly responsible and able to stand up for the interests of strata to which they themselves do not belong. One of the great advantages of capitalism, he argues, is that as compared with pre-capitalist periods, when education was a privilege of the few, more and more people acquire (higher) education. The availability of fulfilling work is however limited and this, coupled with the experience of unemployment, produces discontent. The intellectual class is then able to organize protest and develop critical ideas.
This is why conservatism is so important today.  There is a concerted effort to replace capitalism - the very core of America's engine of success - with a soft socialism that will ultimately lead to the demise of American greatness.  What Schumpeter as an inevitability need not be.  In a world where connectivity to issues is becoming increasingly possible for the average American as is evidenced by town halls and Tea Party efforts, the process of voting can indeed circumvent the not aptly named intellectual class from doing what they believe is best for America by inadvertently destroying it.  Engagement at all times is the key.

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