The Redistribution Problem
If you’re an Ayn Rand type and don’t think redistribution is necessary, read my series on Hong Kong, a city being torn apart because it redistributes miserly and badly, resulting in five family conglomerates owning everything and killing innovation.
Marx is terrible prescription for the flaws of capitalism.
If only there were some kind of proof Marxism doesn’t work …
But it is a wonderful diagnosis of its biggest problem: left unchecked, the capital will end up in the hands of the very few.
A society where most people are working class rather than middle class is a stunted society that will not reach its full growth potential. Healthy economies need a middle class with purchasing power.
Healthy economies also need genuinely competitive markets. Competitive markets drive down prices. This frees up resources for consumers to spend on other goods and services. That doesn’t happen when a handful of conglomerates control all the key markets.
So, we must get the capital out of the hands of the few by redistributing.
The problem is how to do it without making the cure worse than the disease. Not killing the goose that lays the golden eggs. More on that here.
But I want readers to also understand the hurricane policy makers face, even when they have good intentions (and many do not to begin with).
Imagine you’re at home with all your family’s money in front of you. You’re trying to figure out the right investments to help it grow — stocks, bonds, a house, a car (you can take a better paying job on the other side of town), and so on.
Now imagine your parents, in-laws, wife and children are all standing around you, and screaming at the top of their lungs about what they want. Is that an environment conducive to making good decisions?
Having been in government, that’s exactly what making investment decisions is like. And then keep in mind, in government, your job depends on pleasing enough of the screamers. That applies to democracies and dictatorships.
In a dictatorship you don’t need the votes. But you do need the muscle of those who put you in power to keep you there. And they expect a lot for that muscle.
Government is a giant pot of other people’s money. Like flies to honey, it attracts those who want some for free. The more honey you have, the more flies you will attract. If you don’t kill the flies, they will take over.
Look at the United States. There are 500 lobbyists for every Congressman. The flies run the United States.
They run Thailand, too. Look at the fetid court swarming around the king.
Whether dictatorship or democracy, governments are prone to distribute that money in ways that are politically expedient; by rewarding friends and punishing enemies rather than making the best investments to grow the economy. The more money the government has, the greater the danger.
The other huge danger is getting money into the hands of the people without creating massive bureaucracies that invest in themselves rather than the problems they were created to solve.
This is why I’m a big proponent of vouchers. They get money quickly into the hands of people and let them buy services from the private sector without putting bureaucrats in “the business” of providing it.
Bureaucracies don’t start out bad. Clean land, water and air are obvious social goods. So are safe food and drugs. But the devil is in the detail. As Milton Friedman warned, “There is nothing so permanent as a temporary government program.”
The bureaucrat’s job depends on never solving the problem. Or finding new ways to define the problem so there’s more work.
By most standards, air the in the United States is “safe.”
The US government’s own chart shows rates of all the major pollutants have plummeted.
Lung cancer rates have also plunged and smoking, a self-induced disease, is the greatest cause of it. Has the agency in charge declared victory and disbanded?
No.
In fact, before President Trump, its annual budget kept growing. (And Trump is “very evil” for cutting it.)
Take food standards. What genuinely affects consumer health?
Let’s say 1 part chlorine per million in chicken will kill no one. But 10 parts chlorine per million will kill one person. Let’s call that person Joe. And getting to one part chlorine per million will raise the price of an average pack of chicken by $5.
Is Joe’s death acceptable? Not if you’re Joe.
But what does it mean for productivity in the economy if we all pay an extra $5 for chicken. That’s $5 we don’t have to spend on other things. You see the dilemma. Where and how you draw the line and who draws the line matters very much.
Now imagine you have to make that decision with:
Joe screaming he doesn’t want to die
His family and friends screaming that you’re murdering Joe
Half the chicken producers in the room screaming they will go out of business because they can’t afford that standard on chlorine
Their employees shrieking about losing their jobs
More than half of the other people quietly saying they don’t want to pay an extra $5 a pack on chicken to save Joe because they’d rather spend that money to send their kids to a better school
Your political opponents trying to convince everyone not affected they’re a Joe
You have to be laser focused on what’s best for everyone to get to the right decision. I worked in the bureaucracy for 3 years. I assure you, most bureaucrats are not focused on that in any way.
You also need to be bloodless, since the real question is, “What’s an acceptable number of dead Joe’s?”
Remember: the media will write endless stories about Joe and his death. And not provide the perspective that his situation is very rare or tell the reader what it costs them to save Joe. Or point out Joe could eat pork.
What to do about a “free press” is another part of the Redistribution Problem. I was a journalist. I’m an absolutist when it comes to free speech. Theoretically, the media informs citizens about public affairs and holds government and business accountable.
In reality, our advertising dollar driven and pathetically partisan press do nothing of the sort. They distort public policy debates by venerating NIMBYs, treating every rare personal disaster like a national calamity, focusing on conflict, creating false crises, and inserting their ill-informed political biases.
Ask any journalist what he or she thinks ought to be done about an area of public policy and you’ll most like get a sob story about someone they covered once and not one single actionable idea.
This is why this site exists: to help us redistribute with the right actionable ideas that best invest in our societies.