lördag 14 april 2007

The Libertarian Fallacy

I have been following and participating in a thread in The Local, discussing the forthcoming abolition of Wealth Tax in Sweden. If you want to discourage something you should tax it. The predictable result of a window tax was bricked-up windows. So if you tax wealth you will end up with poverty. On the other hand, wealth taxes have a good intention - to prevent undue disparities of wealth. The question is how to ensure proper distribution in the first place?

The libertarian position is that free markets will ensure fair distribution. But this is flawed, though not fatally. Fair distribution will come about only if prior equity exists and neither buyers nor sellers of labour are in an advantaged position. But the market is almost always weighted in favour of the purchasers of labour.

The situation is essentially as follows. A ship lands on a fertile and uninhabited island. The passengers disembark and share out all the titles to the land between them. Then another shipload arrives, but these individuals have no option but to accept a labour contract on the terms dictated by the first group to land who now hold all the land titles. This is a situation of wage slavery.

If this isn't clear, consider a game of Monopoly. Four people sit down to play, and after a while, all the properties have been purchased by one player or another. A fifth player then joins. He is forced to play on unfair terms as wherever he lands, he is forced to pay rent.

This is how most economies today operate. They are based on land monopolisation. Capitalism gets blamed but the true problem is monopolisation of land.

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