Wednesday, July 14, 2010

Capital Consumption, Part II

“An economy living on capital rather than income resembles a body deprived of nourishment, living off its own tissues and wasting away. But this is not an organism that is starving because of external factors beyond its control. It is, rather, suffering from an infantile inability to discipline itself and provide for its future. The irresponsibility of a government that behaves as ours does reflects the irresponsibility of its electorate. “There is a bias,” concludes Edward Tufte, “toward policies with immediate, highly visible benefits and deferred, hidden costs—myopic policies for myopic voters.” This is the mentality that refuses to plant a tree, that consumes the seed corn. The point of the proverb that warns against killing the goose that lays the golden eggs is that capital must be preserved in order to provide income. If you enjoy raost goose today, you cannot have golden eggs tomorrow. The present consumption of capital—often capital accumulated by previous generations—bears ominous tidings for the future, when people will seek income from capital that is no longer there. That is why the outcome of greed is poverty.” (Herbert Schlossberg, Idols for Destruction, p. 131-132).
“Taxes reduce the production of what is taxed: industry, profitability, thrift, and investment. Subsidies increase the production of what is subsidized, and in the redistributive society that means idleness and parasitism. It also means cynicism, because redistribution is invariably done in the name of justice. It is not an ideological preference to say that a state-directed economy tends to reduce wealth and a free one to increase it. It is, rather, a matter of observation. That was also the experience of the Roman Empire. The first two centuries were prosperous ones, buoyed by the unfettered opportunities for private initiative. After that the heavy hand of the state brought both poverty and oppression. People that choose wealth over freedom can have neither.” (Herbert Schlossberg, Idols for Destruction, p. 132-133).

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