The economic means and the political means


Neil Lock

(Neil:s note: Another short section from a larger essay on bottom up and top down thinking.)

Next, I’ll look at the economic effects, which flow from bottom up and top down approaches. Why are these so important? Because almost everyone – even those with no interest in politics – feels, very directly, the effects of problems in the economy.

I’ll begin with a longish quote from the book The State (first published 1908, English edition 1922) by the German philosopher Franz Oppenheimer:

“There are two fundamentally opposed means whereby man, requiring sustenance, is impelled to obtain the necessary means for satisfying his desires. These are work and robbery, one’s own labor and the forcible appropriation of the labor of others…

I propose in the following discussion to call one’s own labor and the equivalent exchange of one’s own labor for the labor of others, the ‘economic means’ for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the ‘political means.’

What Oppenheimer is telling us is that using the economic means is very different from using the political means. For, think what happens when we buy shoddy goods or services in a free market. If we don’t like what we get, we can look for, and at need switch to, another supplier next time. Better, even if we don’t ourselves go so far as changing supplier, other people switching will give our supplier a strong incentive to clean up its act.

But when the state provides shoddy tax funded services – like justice or education – then often it’s impossible to switch. And even when the state doesn’t actually prohibit competitors from providing a similar service, it’s still hard to change to non-state suppliers. For example, those who can’t afford private schools for their children, and don’t have the time or resources to homeschool, are in effect locked into the state indoctrination system.

And when the state uses tax money to do truly criminal acts – like favouring its cronies, making aggressive wars, promoting “CO2 causes catastrophic climate change” lies, or intercepting our e-mails – we have no come-back at all. We have no way to say “No!” or “bugger off.” (The commonly touted idea that we can fix such problems by voting differently at the next election is, to use an understatement, laughable.)

To put all this another way. Users of the economic means have to do a decent job. For if they don’t, they will lose customers. So, the economic means is a bottom up approach. You have to give something in order to get something back. It’s a self-correcting approach, too: for the discipline of market competition will eventually weed out the lazy and the dishonest. And thus, the bottom up approach encourages economic progress and increasing prosperity.

But for users of the political means, there is no such discipline. Nothing beyond social pressure – and even this is frequently lacking – obliges them to be diligent or honest. Having reduced or eliminated competition, they can get away with delivering services wastefully, at low quality and often in a dishonest, politicized way. Theirs is a top down approach. The customers have no come-back, so they’ll just have to be happy with what they get.

I think this explains why so many politicians and state functionaries show such a visceral hatred for the idea of competition. And why they show such a loathing for the honest, productive people, who earn success through their own efforts.

But I don’t believe that all state employees, and those whose jobs are funded by taxes, are necessarily bad people. Nor, indeed, are they all top down thinkers. There do exist fine individuals – such as honest, non-politicized judges – who have no other potential employer than government. And in many other professions, like doctors, teachers and academics, opportunities to work in a free market are often limited through no fault of the individuals concerned.

Nor, it must be said, do all those in “private” jobs honestly earn their keep. Indeed, in recent decades there has been a huge rise in “crony capitalism.” That is, the use of political contacts, lobbying and the like to seek favours for companies. There has also been a huge rise in its mirror image, “corporatism,” the use of financial power in attempts to gain political power. And in gambling with other people’s money, in the expectation that the gamblers will receive a bail-out from the state if things go wrong.

All this notwithstanding, bottom up thinkers tend to be attracted more to free market jobs, and top down thinkers more to tax funded ones. Thus, bottom up thinkers tend to become users of the economic means. And top down thinkers tend to become users of the political means.

One more important point. We are incessantly told, from politically correct quarters, that we mustn’t be “selfish,” and that we must “do our bit for others.” But using the economic means is quite the opposite of selfish. Indeed, by putting their energies into being productive and trading honestly, users of the economic means have already done their bit for others.

No; in reality, the boot fits the other foot. It’s the users of the political means that are selfish. They’re the ones that do nothing but take, take, take. And they’re the ones that must reform themselves, cure their selfishness, earn an honest living, and start doing their bit for others.

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2 comments

  • Herbert Spencer put it better (not obsession with “labour” – which confuses the issue and might, unintentionally, lead people in the direction of the Labour Theory of Value fallacy), but rather “commercial versus military”.

    Even if the government project is a art gallery or a hospital the principle is military – “hand over the money or we will take it by force”.

    This is Franz Oppenheimer’s point – and he was correct.

    The military means (force and fear) should be used as little was possible – in a totally good world force and fear would not be used at all.

    As for “corporate welfare” – it was said that under the Orleans monarchy (1830 to 1848) half the French Parliament was made up of people out to get contracts or other benefits for business enterprises.

    It is true that today such Corporate Welfare generally makes up a tiny percentage of government budgets, which are mostly on the Welfare States – which were NOT created to deal with the “victims of capitalism” or other such cant, for example when the American “War on Poverty” was launched in 1964 poverty had never been LOWER and was FALLING (Welfare States are created for IDEOLOGICAL reasons not in response to a “crises of capitalism” or other such lies).

    However, there is one massive exception – the financial sector (banking and allied trades).

    The banking system (and so on) really is dependent on the ultra low interest rates of the government Central Banks (the Bank of England, the European Central Bank, the Bank of Japan – and, of course, the Federal Reserve system).

    There would still be money lending (banking – of a sort) and allied financial trades without all this government subsidy (for that is what it is), but they would be very different.

    Money lending (and allied financial services) would depend on attracting REAL SAVINGS – and that would mean proper real interest rates.

    It would also mean that people had to be very careful in who they trusted with their money – as there would be no bailouts if banks (or other such) went bankrupt.

    It would be a very different industry – very different indeed.

    And so would the stock market and the property market – they would be very different also.

    For example the stock market would be like the private company that ran the London Stock Market from 1801 to 1986.

    With all its “restrictive practices” – i.e. traditions that evolved to protect private investors (and, thereby, the reputation of the market itself) – not perfect, certainly not (my own father was massively cheated by the “Slater-Walker” fraud, many decades ago), but generally sound. Certainly better than the vast tidal wave of government regulations that came in after the “Big Bang” – and remember there was no law against setting up another Stock Exchange (for example there was one in Liverpool) or trading “off exchange” – the idea that the city companies or clubs and partnerships had a “monopoly” is simply not true (if anything monopolistic practices, exploiting private investors, are a modern feature of “The City” – not a feature of the old, pre 1986, City, with its supposedly evil “guild practices”).

    By the way there is nothing wrong with the principle of a “corporation” – certainly modern regulations and tax law (high personal income taxes, inheritance taxes, and Capital Gains Tax) have undermined individual share owners (not dominant since the early 1960s in Britain) and handed ownership to institutions (pension funds and the like) and I think this is a bad thing – hired managers responsible to other hired managers (no OWNERS in sight in some enterprises), But there is nothing wrong with the principle of corporations (companies) as such.

    After all the basic legal principles were worked out by private Law Merchant and Canon Law (Church Law was often used in some commercial matters) as long ago as the Middle Ages – and, yes, this included Limited Liability (as long as someone knew in advance he was dealing with a limited liability enterprise).

    Churches, foundations, collages, trading companies (and so on) are all “bodies corporate”.

    However, there is one major Western country where taxes and regulations are radically hostile to “corporations”.

    It may come as a shock to some people (Kevin, Thomas and so on), but this “anti Corporate” country is the United States of America.

    The United States has some of the highest levels of company taxation in the Western world – and some of the most insane regulations.

    People with a Hollywood view of the world (“the Corporations – they control everything, they are going to KILL US ALL…….”) will not believe me – but I do not care what they believe (because I despise them).

    Anyway what is the result of all this anti Corporate stuff?

    The rise of partnerships (of various sorts) of course.

    A handful of rich people (as opposed to lots of shareholders) owning the new enterprises.

    The movement to disperse the ownership of capital – actually concentrates it. Which is quite amusing.

    “Then we should increase personal income tax and Capital Gains Tax”.

    You mean like California – where taxation (State and Federal combined) is at French levels, Or New York City (ditto)?

    Oh yes – those two strongholds of equality, California and New York (laughter).

    Carry on leftists – carry on bashing “big business” and “the rich”. Carry on and you will end up creating a Latin American country – such as Brazil, which has been practicing this form of politics for a long time.

    Want lots of credit money? Want lots of denouncing of “the capitalists” and “big business”?

    Then Latin America is for you my dears.

    Brazil, Argentina, Bolivia, Ecuador, Venezuela………. and (in the last five years – but also under Duarte) El Salvador (and Nicaragua or Cuba…..)

    Sadly in the view of the left Latin America is controlled by the United Fruit Company (and the Klingons are real). “General Butler said” – yes the same General Butler who said (before Congress) that “big business” had approached him to launch a “Fascist Coup” against the noble Franklin Roosevelt (General Medals seemed to miss the little detail that the basis of Franklin Roosevelt’s policy was the National Industrial Recovery Act [struck down by the Supreme Court in 1935] was based on Fascist Italy – why organise a Fascist coup against someone whose economic policy is Fascist?).

    The point is a simple one.

    Lots of bashing of “big business”, “the rich” and “usury” (i.e. the source of loans being REAL SAVINGS at real interest rates) does not produce equality, quite the contrary.

    Most of Latin America has been doing this stuff for many decades (even in the 19th century there was of credit money – and lots of Revolutions “re distributing” land, what is the point of long term investment in an estate that you likely to lose – just loot the place and then bugger off before the next coup or Revolution in country X).

    It is all “military means”.

    Because “commercial means” are despised. Herbert Spencer the political philosopher of the “greedy” British and Americans.

    There is, according to the ideas taught in most of Latin America, nothing lower than “the rich” or “big business”.

    The Church (in Latin America) teaches this lie just as much as the Marxists in the universities do.

    And what does all this bashing of “the rich”, “the capitalists”, “the employers”, “big business” produce?

    Radically unequal societies, massive (incredible) inequality.

    “Because they are insincere – they are secretly puppets of the rich, of capitalist big business”.

    No they are not.

    Anyone who believes that the rulers of such countries as Argentina, Brazil, Venezuela, Bolivia,……… or Mr Obama in the United States, are puppets of “the capitalists” is away with the elves and pixies.

    Statism does not work because it does not work (it violates economic law) – not because it is insincere.

    Nehru in India was incredibly sincere.

    And his “Permit Raj” in India produced the same horrible results of massive poverty and so on.

    Nor does it really benefit (even un intentionally) “the rich” and “big business”.

    Sure they are vastly better off than the people starving to death.

    But they (the rich and the big business) are actually worse off than they would be if a less statist economic policy is followed.

    That is the “long term harmony of economic interests”.

    The basis of Classical Liberalism and libertarianism.

    Thinking in terms of different policies benefitting “the rich” and “the poor” is wrong headed – correct policy benefits BOTH (that is what Mises and every Classical Liberal economist spent their lives proving).

    There is no “economic class conflict” – just a conflict between tax payers and tax eaters.

    Between commercial means and military means.

  • For those who do not know – the United States (which now has some of the highest company taxation and some of the most extreme company regulation in the Western world) used to have little or no company taxation and very little regulation.

    “Ah but that was when we were becoming the richest country in the world – now we are the richest the government can do what it likes” – seems to be the attitude.

    It will not last, it can not last.

    The wealth of the United States is consistent with its past policies, not its present policies.

    There will be a “correction”.

    Especially in areas of the United States where statism is most extreme – such as California and New York City.

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