Mr. Larry Smith attempted to deconstruct the presentation made recently by Professor Steven Horwitz for The Nassau Institute in his weekly Tough Call column for The Tribune.
“…we should all be concerned about the unintended social consequences of widening income differences. They include more violence, falling educational performance, higher prison populations, rising teenage birth rates, higher child mortality and increased drug abuse, mental illness and obesity. We can see these consequences playing out before our eyes in the Bahamas…”
Tough Call recommends a higher tax rate to solve these issues.
Let’s look at them point by point.
- Does inequality cause violence? Evidence suggests the welfare state might be a factor.
- Does inequality cause falling educational performance. Government failure to improve results is obviously the issue.
- Does inequality cause higher prison populations? We just might find archaic drug laws could be the culprit.
- Does inequality cause rising teenage birth rates? Seems that single women in the professions have children out of wedlock as well these days. Is this just a function of morality or the fact that society no longer frowns on this practice?
- Does inequality cause higher child mortality? Government statistics say this is improving, unless this has changed recently?
- Does inequality cause drug abuse, mental illness and obesity? The jury is still out on the causes of mental illness but obesity suggests caloric intake might be too good doesn’t it? In other words people might be eating too much, or is it only a bad diet? As for drug abuse, this can also be attributed to archaic drug laws (the “war” on drugs).
Tough Call makes the point that taxation in The Bahamas is only 15% of GDP while an “ideal” tax rate is 20% and more revenue will solve these issues.
The 15% number refers to taxes collected, not the actual tax rate. The corruption that exists in Bahamas Customs coupled with fraud by importers are also important factors. In other words, the actual tax rate might already be 20% or higher. This also points to the fact that when society believes it is over taxed, it finds ways to reduce this burden.
But this is a divergence from the point that virtue can be coerced from citizens as Tough Call seems to be asserting.
There’s decades of evidence of the failed welfare state throughout Europe where entitlements are now considered a right. They have proven that simply giving money to the poor does not address inequality, because poverty is not just lack of wealth.
As professor Horwitz points out, relative prices have declined over the years and poor people today have washing machines, cars, cell phones and choices of conveniences never even dreamt of just 25 years ago. Surely this accounts for improving the quality of life, thereby reducing inequality? (You can watch Dr. Horwitz lecture at The Nassau Institute’s You Tube site to make your own judgement at this URL http://bit.ly/ivMz7a )
And whether your ideology is one that thinks government should tax and spend and continue to fail society or one where there is more personal responsibility Tough Call is right in one respect when he says:
“But the best way to address poverty and fairness in our society is through a radical overhaul of our failing education system. We may disagree on economic policy, but there is a wide consensus out there that education and job training are the keys to attacking our social ills by creating a more equal and just society.”
Unfortunately education is another area of society dominated by failed government policy. Privatisation might be the only recourse here as well.
How does one acknowledge the governments failure at running hospitals, the educational system, the national airline, the electricity company, ZNS Radio and TV and more, yet believes that government can improve the lot of the poor?
A quote from Daniel Hannan in his recent book, The New Road to Serfdom is appropriate:
“The idea that poverty is a breeding ground for violence and terrorism derives, ultimately, from Karl Marx and, like most of his teachings, it sounds plausible enough until you analyze it. Revolutionary violence, historically has tended to occur, not at times of deprivation but at times of rising wealth and aspiration. Put bluntly, people who are worried about where their next meal is coming from have little time for protest marches, let alone bomb-making.”
Equality of outcomes have never materialised throughout history. Equality of opportunity is a more reasonable, logical and attainable goal.