Political-Economic Philosophy

I’ve thought for some time that I cannot accept some of the main premises of Libertarianism.  That’s in other posts, and a summation can wait for another day.

Obviously (I think?), there are also some parts of the Republican platform that I can’t get behind, either.  And I especially dislike some non-official-policy positions taken by some Republicans, like corruption and pork and moderate social positions.

I’m into inherited and demonstrated wisdom for those types of things.

But here’s the point that may end up causing a split between me and other Republicans and conservatives.  I don’t know how it will turn out.

I am growing to dislike Capitalism.

Now, to clarify, that doesn’t mean I like Communism or Socialism.  Mercantilism doesn’t float my boat, either, not even in a rising tide. (heh)

I am, however, a great proponent of mostly-free markets.  And despite what people may tell you, that’s not the same thing at all.  At least, from my perspective.

Just like government is there and should be restricted to those things we cannot do ourselves (like national defense and resolving disputes between states), our economic system is there and should be restricted to doing the things that can’t be done on an individual basis.  For instance, in Communism, everybody works together, the profits are pooled, and everyone unselfishly takes just what they need.  The leftover goes to maintain infrastructure, buy new cows, etc.  In Socialism, everyone works their own job in their own place, but taxes take most of what you earn, leaving you just a tiny bit of discretionary income (5%? 10%?), and the taxes go to pay to maintain infrastructure, cover health care costs, etc.  In Capitalism, everyone works and freely chooses which things to purchase with their high discretionary income left after taxes.  And due to the nature of financial pyramids, individuals at the top of the pyramids accumulate capital that can be used for various projects, like opening a hospital, starting a sports team or league, making a toll road, starting a computer business.  The fact that these ventures will (hopefully) garner even more cash for the top guy is immaterial.  He’ll spend it on other things, or invest in other companies which will help grow the economy, and provide cheap goods to people.  It really is a win-win situation, for the most part.  He who risks, dares, and has ability can establish a new pyramid for themselves, or rise to the top of an existing pyramid, and be financially secure while increasing the standard of living for all who purchase his products or services.

From that point of view, the government is just another, less efficient Capitalist.  I think that is accurate.

But I don’t think it is the best economic system.  Too often, the guy at the top didn’t risk anything.  Too often, they only risk other people’s money.  Too often, someone near the bottom of the pyramids can’t start on, or even find, the beginning of the path to rise to the top, despite intelligence, ability, drive, and daring.  Too often, getting in first is enough to get rich…building a better mousetrap will eventually result in wealth, but sometimes it takes too long, or sometimes a large corporation steals the idea before you can benefit from it.  Sometimes socialist tendencies by governments at various levels betray the Capitalist principles, and then blame Capitalism for the problems that result.

Like I said, I don’t think Capitalism is the best economic system.  It works well most of the time because it utilizes the free market, not because it is the best in and of itself.

The most important part of any economic system is the number of transactions.  The more transactions, the more wealth.  The more transactions, the more wealth, the better everyone’s standard of living is.

Think of it this way.  You have a person, living alone on the slopes of a mountain.  He has to do everything for himself.  He has to make shelter, make clothes and shoes, make hunting weapons, hunt, gather wood for warmth, clean the dead game, cook, and maintain his dwelling.  Oh, and create his own art and recreation.  That’s too much for one person to do.  He’ll have a poor quality life just from trying to do too much, much less because he can’t be good at everything and must accept sub-par results in many areas.

Now put two people together.  One can do all the hunting, farming, and construction.  The other can do all the cooking, cleaning, and home maintenance.  The first doesn’t have to take time out from hunting to clean up the house.  The second doesn’t have to stop maintaining the house and making clothes/shoes to find food to cook and eat.  They are immediately wealthier by sharing effort and concentrating somewhat on talents.  Now add 10 people to the little community.  Now one can make great shoes, one can make warm clothing, one can get all the firewood, two or three can cook, two or three can hunt, one can make all the tools…they are all now much more wealthy than any 2 or 3 could be, and far more wealthy than one alone.  They benefit from economies of scale.  I’m not sure where the upper boundary of cost/benefit lies…more people means crime and free riders, along with better division of effort and better economies of scale.

And here’s another example: Go drive for 3-4 hours on an interstate.  Count how many convenience stores, fast food restaurants, full service restaurants, and hotels you see.

They didn’t have convenience stores 30 years ago.

Towns and cities could only support 2-3 fast food restaurants per major exit.  And you could go 200 miles between seeing fast food restaurants.  Heck, not every exit even had a gas station…you don’t see that nowadays in most of the US (outside of Montana, Wyoming, and maybe North Dakota).

The small city of 90k people I live in has an inestimable amount of restaurants.  I could take a stab at guessing there are 100, but that is probably a low number.  I don’t think we have 200, but I wouldn’t be surprised if we did.  That doesn’t include fast-food restaurants.  I would be willing to bet money that there is at least one full-service restaurant for every 900 people in my town.  A decade ago, it was probably more like one restaurant for every 1200 people.  30 years ago, I’d bet it was one for every 2000 or more people.

What happened?  Are we that much richer than before?

Well, yes.  And, no.

We aren’t richer because people are spending more money eating out due to convenience.  And people run up their credit cards, to include for eating out.

But we are richer, too.  People can spend more money eating out without diminishing their quality of life.  And a town that once could support less than 50 restaurants now has more than 100, without an equal growth in population.  Because there are more restaurants, there are more jobs, from cooks and waiters to a higher demand for produce and meat that keeps more farms and ranches profitable.

A recession and/or depression occurs when people stop spending money as much.  When people stop spending money, there’s less to go around.  A $20 bill circulates through a town, through mutual transactions.  It pays for a meal, and the restaurant owner uses it to buy shoes, and the shoe store owner uses it to pay a salesman’s salary, and the salesman uses it to buy a CD, and music store owner uses it to buy beer, and the liquore store owner uses it to buy flute lessons for his kid, and the music teacher uses it to put gas in his car, and the convenience store owner uses it to see the dentist…

…but if the first person doesn’t eat out, everyone in the chain is $20 poorer, no?

That’s why they do stimulus spending.  It’s an ineffective and bass-ackwards way to do it, of course.  Talking down the economy like President Obama and his subordinates are doing does far more damage than stimulus spending can help.  And stimulus spending has to be paid for by taxes, which mean you really aren’t stimulating anything.

I thought up all this on my own, so it is sloppy.  Since I thought up all this, I’ve seen articles about this. They refer to it as “money velocity”.  Now, I know no one stole the idea from me.  I know that professional economic theorists are way ahead of me, and I just thought in a similar manner…just far less rigorously.  Thus, there are probably significant problems with what I wrote.

But the point is, I am beginning to think that Capitalism is just the most effective (so far) way we’ve found to encourage money velocity to stay high.  I just think re-arranging the economy to encourage more transactions is a better way to go.

On your 3-4 hour trip, drive through the city center of a town that has been around for 100 years.  Notice the City Hall square?  They couldn’t afford that 150 years ago.  And we couldn’t afford to build those sorts of grand buildings now.  So why could a small town afford to do that in the 1900s?

Part of the answer is Works Projects.  But not all of it.

I’m convinced it was due to transactional effects.  The more money that was in circulation, the more small towns and society could afford to do things like that.

Like I’ve said, on the one had, we are richer in the US than we were 30 years ago.  But in other ways, we are poorer.  And I think that we are richer due to more transactions per capita, but poorer because the government takes too much in taxes to do its thing, and then because people have to forgo savings and often drive up personal debt to maintain the transactional mass (money velocity).

The federal government wants to raise taxes to re-build our infrastructure.  I put it to you that we can’t afford to re-build our infrastructure because our taxes are already too high.  I don’t think anyone in the US should pay more than 20% of their income in taxes at all levels combined.  If we did that, we’d see an economic boom like you wouldn’t believe.

I think I just made a case for a 17% flat tax or (perhaps even better), transitioning away from income and payroll taxes to a national sales tax.

Okay, I’ve run out of steam.  You can critique this now.  I don’t pretend it is anything close to perfection, but it does encapsulate the direction of my thinking right now.  Just don’t assume that I will automatically accept criticism just because you say I’m wrong.  Make a case, and we can discuss.

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Filed under Badly-Thought Out Rants, economics, Me, philosophy, Politics

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