Friday, April 30, 2010

Opportunity costs of taxation and slavery

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Many people persist with the belief that government offers them a benefit in terms of access to public goods, ensures we have a nice quality of life, etc. I would however make the point that whilst governments provide services, they do it an extraordinarily high cost which is not fully appreciated by taxpayers. I would further assert that taxpayers would rather repress this fact than acknowledge it, because they would rather evade the fact that place themselves in a position where they feel they can do nothing about it.
So just how bad is government. Let me count the ways in order of priority:
  1. Government is highly inefficient because it is very centralised, bureaucratic, exclusive of external stakeholder interests, self-serving (in a bad way because they are not accountable). If decision-making was dispersed so many more decisions could be made, but instead on many issues we have to wait years for bad decisions, then revisions, etc. We are lucky if we get sound legislation. Government accounts for 25-35% of any country's GDP. For it to be inefficient is a major drag on the economy. Also consider that in bad times they drag even more because they ramp up spending. Look at the poor quality of that spending as well. Huge waste on routs and inefficiencies. I would suggest to you that if the average rate of economic growth is 3% for a country, its 16% for a company, then we could probably be growing 12-15% a year without government. China is growing 10% a year and its a statist economy, but it actually has less intervention that Western governments. Yes, it has cheap labour, but then we could too if we had no minimum wage, and less admin cost.
  2. Statutory law created by government is arbitrary. It cannot be based on principles because how would they explain the common law limits on extortion, yet the tax office has the power to extort money from you. i.e. Not allowing you to leave the country before you 'legally' pay the tax you owe. i.e. Rescinding your drivers license until you pay your $60 fee which would cost you $5000 to contest through the court system, and you would not even get your points back. A moral victory? Hardly, morality ought to be practical. There is no dichotomy in a just society. So statutory law is arbitrary, which means that it is free to impose any law divorced from context, so it gives rise to loopholing, which requires more laws. The implication is that 'the spirit of the law' cannot be used because it has no fundamental principles, or rather it compromises two sets of contradictory principles. i.e. Contemporary 'textbook' accounting vs tax accounting laws, Common law and statutory law, common sense vs government government intimidation, facts vs appearances.
  3. There is very little accountability for government. The problem is that there is very little accountability for government. There are a number of reasons. Because the decision to establish an agency to monitor government would need to be established by government. Should they ever do so, don't expect it to have any budget. The standard argument when you attempt to use these services is that they have no resources, they are under-funded, or no powers to investigate. Don't expect any of them to speak out either. Once a public servant speaks out they are unlikely ever to get a job. No one wants to employ a public servant, and the government is a monopoly employer. Then of course there is the endless blame game. A lot of smoke and mirrors. There is also the fact that the public have such low standards for both parties in a two-party duopoly (i.e. effective monopoly).
  4. There is very little justice. The justice system in the West is a symbol only. It has never been terribly effective at delivering justice. In fact I would suggest it fumbles more than it resolves. i.e. Going to the justice system exposes one to a new set of stresses. First of all it costs a lot because it has these old-fashion procedures, so no productivity gains there. It has arbitrary rules of evidence which are not always logical. It is very slow. The govt appoints the High Court judges so its probably not a great forum for repudiating government transgressions. Its truly interesting that we have calls for free health care, free education. You never here any offer for free justice. If there were, its probable there would be no breach of laws...that's if the law was logical. The opposite is true for health. Provide free health care, and you will be bombarded with patients.
  5. Poor prioritisation of issues. Don't be surprised in the midst of a national economic crisis if your government is focused on issues which don't matter. i.e. It might be more concerned with changing the flag or trivial changes to the constitution, i.e. Having a presidential dictator as opposed to a party-affiliated prime minister. Some issues like greenhouse or whale hunting in the grand scheme of things are just not important. Sad to lose a few whales, but lets just save their DNA and move on to bigger issues.
  6. Government is expensive. The cost of servicing or administering government is mind-boggling. In Australia there must be 500-odd parliamentarians jet-setting around the country, going from home to Canberra. Big spending allowances for homes in Canberra, flight costs, government cars, food allowances. There is wasted time. All to no avail because they represent no one by themselves and the affiliated party. Too cynical you think? I have seen too few politicians drop a party out of principle. It strikes me as rather pragmatic when they do it. Not a policy issue, but a strategic one. i.e. Solid local support among rural voters.
  7. Government ministers are unethical: One of the sad realities is that politicians are not very good. The reason is that they have no respect for facts. Perceptions are more important than reality. Why is this important? Well, its a kind of discipline. If you have a respect for facts you tend to adopt policies which are consonant with the facts of reality. When you think perceptions are more important, then you think appearances are important, that people don't know what they want, but you have to make them think you will give them what you want. Voters accept the mythology that decision-making is hard because you have to reconcile all these stakeholders interests. Actually they don't, they simply need to defend the policy. I don't think too many people will defend politicians on this score; and its equally difficult for them to get a job in the private sector.
  8. Government causes problems. Many people tend to believe that governments alleviate problems. They don't - they cause problems. Any improvement is at huge cost. The world is full of examples. Where to start? Well if there was no problem, there would be no need for government. So creating problems is a great way of keeping your job. The arbitrary rules great problems for people. The public education system causes problems for students who don't know how to think, have diminished self-esteem. Government stimulus results in a boom-bust economy. Welfare leads to expectations without responsibility, discrimination by employers. Why expect to be reasonable? you don't learn to be reasonable in school. The government is not reasonable. Not even the courts. Arbitrary procedures, then punitive measures because your parents did not love you, the teacher didn't teach you, your employer didn't understand you.
I trust this conveys the cost of government. There are many more examples. Consider the way it wastes you money.
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Andrew Sheldon www.sheldonthinks.com
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