Spending Other People's Money
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SPENDING OTHER PEOPLE’S MONEY A CRITIQUE OF RAWLS, PIKETTY AND OTHER REDISTRIBUTIONISTS HANNES H. GISSURARSON www.europeanreform.org @europeanreform Established by Margaret Thatcher, New Direction is Europe’s leading free market political foundation & publisher with offices in Brussels, London, Rome & Warsaw. New Direction is registered in Belgium as a not-for-profit organisation and is partly funded by the European Parliament. REGISTERED OFFICE: Rue du Trône, 4, 1000 Brussels, Belgium. EXECUTIVE DIRECTOR: Naweed Khan. www.europeanreform.org @europeanreform The European Parliament and New Direction assume no responsibility for the opinions expressed in this publication. Sole liability rests with the author. AUTHOR TABLE OF CONTENTS 1 INTRODUCTION 6 2 IT IS OTHER PEOPLE’S MONEY 8 3 A STORY AND A PARABLE FROM THE BIBLE 18 4 THE PHILOSOPHICAL AND POLITICAL FOUNDATIONS OF THE WELFARE STATE 25 5 THREE SWEDISH MODELS 33 6 RAWLS: FOCUSING ON THE WORST-OFF 43 Hannes Holmsteinn Gissurarson 7 APPLYING THE RAWLSIAN TEST 54 8 PIKETTY: PRIVATE WEALTH AS A SOCIAL EVIL 62 Born in 1953, he holds a D.Phil. in Politics from Oxford University and is Professor of Politics at the University 9 A DIGRESSION ON BALZAC AND AUSTEN 75 of Iceland. The author of more than a dozen books on 10 SOCIALISM IN ONE COUNTRY 84 political philosophy, history and current affairs, he is the research director of RNH, the Icelandic Research Centre for 11 CONCLUSIONS 101 Innovation and Economic Growth. New Direction - The Foundation for European Reform www.europeanreform.org @europeanreform Spending Other People’s Money - A Critique of Rawls, Piketty and Other Redistributionists Hannes H. Gissurarson existence of a collective fund ready to be distributed After digressing on two nineteenth century novelists, unpersuasive and impractical. His theory was really Honoré de Balzac and Jane Austen, demonstrating 1 of prudence rather than justice: it was a strategy that their message is quite the opposite of what adopted by risk-averse individuals against potential Piketty believes, I point out that both he and Rawls adversity. For the sake of argument, I try to apply have to insist on their redistributive programmes Rawls’ maximin rule—aiming at the best possible being implemented in a closed society because INTRODUCTION standard of living for the worst off—to the modern otherwise they could be made unsustainable, world, concluding that even on his premises for example by the exodus of the rich. The two capitalism seems acceptable. Then I turn to the redistributionists have, in other words, to outlaw tax recent call by French economist Thomas Piketty for competition and stipulate ‘Socialism in One Country’. he Ten Commandments which Moses themselves and who have nobody on whom to rely worldwide redistribution of income, not so much in I also submit that the most serious inequality in brought down from Mount Sinai thousands except the community. order to lift up the poor as to bring down the rich. For the world today is between those who are born in of years ago are mostly in the form of Piketty, unlike Hegel and Rawls, wealth seems to be free and prosperous societies and those who live T explicit, narrow prohibitions rather than I begin this study by trying to establish that there is the social evil, not poverty. I point out that poverty elsewhere and face limited opportunities to escape direct orders. We are told not to kill, or steal, or give indeed such a thing as other people’s money: that has been greatly reduced in the last few decades poverty. In writing this report I have benefitted much false evidence against our neighbours, or set our heart most people in most countries are entitled to what and that new money has largely replaced old money from lively discussions at meetings of the Mont Pelerin on their property.1 This leaves us at liberty to do other is registered as their property. In order to do so, I amongst the rich so that Piketty’s narrative of a Society, an international academy of liberal and things not prohibited in the Commandments, such as give a short account of the discussions by Locke and runaway accumulation of inherited capital becomes conservative scholars, of which I have been a member choosing what we say to, or about, our neighbours other philosophers about justice in initial acquisition. implausible. I argue that the much maligned rich since 1984, and from many colloquia held by Liberty (provided we do not give false evidence against My contention is that land and other resources can perform some useful functions without necessarily Fund, an institution devoted to the calm and reasoned them) and such as exchanging our property, house, be justly appropriated if and when others are not intending to do so. Some of Piketty’s data on discussion of fundamental social problems. land, livestock or whatever else we may possess for made worse off by it. I then turn to some passages increased inequality of income and wealth may also something we want from our neighbours (where on wealth and poverty in the Holy Book and argue be flawed. Reykjavik, 1 December 2018. of course they have the same right to accept or that they are often misunderstood: they provide no Hannes H. Gissurarson reject the proposed transaction as we). But Chicago justification for coveting and seizing your neighbours’ economist and Nobel Laureate Milton Friedman property if the purpose is redistribution in one way sometimes remarked that an eleventh commandment or another, for example from the rich to the poor. The should be added and that it ought to be: “Thou shalt Good Samaritan was spending his own money. not do good with other people’s money.”2 I move on to the philosophical foundations of the There seems indeed to be little limit to people’s modern welfare state found in Hegel whose ideas goodness when it does not cost themselves were first implemented in Bismarck’s Germany and anything. Even if they may not covet their then perhaps most comprehensively in Sweden. I note neighbours’ property for themselves, they want to that the social integration and inclusion desired by apply government power to seize it from them in Hegel sometimes may be achieved by spontaneous order to use it for all kinds of purposes or pursuits cooperation. Whereas the Nordic countries are often they consider noble and worthy, not least for invoked by redistributionists, in particular Sweden, I redistribution from the rich to the poor, but also for argue that their prosperity is despite, and not because subsidising various activities, such as opera houses of redistribution and that it can be attributed mainly in big cities or quaint lifestyles in remote areas. In to the rule of law, free trade and social cohesion this report, commissioned by the Brussels think coupled with a high level of trust, brought about by tank New Direction, I argue, however, that for most the relative homogeniety of Nordic societies, with purposes it is immoral and unjust to spend other their long, shared history. people’s money, even if a case can certainly be made for taxation to finance widely accepted functions I briefly analyse what is perhaps the most of government, such as upholding law and order, sophisticated attempt in our time to justify the maintaining a strong and effective defence force redistributive state, John Rawls’ theory, finding and taking care of those who cannot look after his rejection of self-ownership and belief in the 1 Exodus, 20:1–17. 2 Another formulation, somewhat less biblical in style, is: “Everyone shall be free to do good at his own expense.” 6 New Direction - The Foundation for European Reform www.europeanreform.org @europeanreform 7 Spending Other People’s Money - A Critique of Rawls, Piketty and Other Redistributionists Hannes H. Gissurarson labour with them, they become his property. Locke adds an important proviso, “at least where there is 2 enough, and as good, left in common for others.”5 Locke says that since things are unowned, but intended by God to be used, man does not need the express consent of all the commoners to appropriate things, IT IS OTHER PEOPLE’S MONEY only the proviso. Nozick plausibly argues that Locke’s proviso should be revised: People can appropriate things out of the commons if others are not made worse off by the appropriation, in other words if they oney is the medium we use when we We badly need a conception of liberty and are fully compensated for the things that have been exchange goods or services in the market. individual rights which will provide protection removed by others out of the commons.6 Locke adds What matters is of course what can be against the proclivities of a temporary majority another proviso that nobody can remove so much bought for money, not money itself. It is for trampling over the rights and liberties of the out of the commons that it would become spoiled or M Portrait of John Locke by Michael Dahl. Locke easy to demonstrate, even if not always well understood, rest of us in the name of a debased kind of act destroyed by not being used. He notes, though, that explained how individuals could acquire that proper market exchanges, excluding fraud and utilitarianism. Unfortunately all the well known this proviso becomes irrelevant with the invention of property from the commons without making others worse off. coercion, work for the benefit of everybody concerned. variations of libertarianism and limited state money, as things can be exchanged for money. (It is For simplicity’s sake, assume that Robinson Crusoe and conservatism—Nozick, Hayek, Oakeshott et also not clear whether he really needs the latter proviso Man Friday are the only inhabitants on an island and that al.—lack a theory of legitimate property rights, to begin with; the former proviso would seem to cover equal richness lying waste in common.”8 Locke adds they only need two kinds of goods to have a decent life, without which they are powerless to provide the eventuality he mentions.) that of the total income of a society most is anyway fish and coconut, and that the units of these goods are a comprehensive theoretical defence against created by labour, not by titles to parcels of land.