Tuesday, January 15, 2008

George Reisman And Andrew Jackson On Inequality

George Reisman discusses in his latest mises.org article what I've discussed previously on this blog: namely that in addition to the many other problems monetary inflation creates, it also increases inequality.

This increase in inequality will increase in turn support for progressive taxation.To the extent these taxes hit incompetent people Wall Street who earn tens or hundreds of million dollars despite the fact that their actions have caused huge damage by participating in the bubbles created by the Fed, that is not really bad. It's not like Stan O'Neal deserved the $161.5 million in severance package in addition to the tens of millions of dollars received the previous years in bonuses, despite the fact that he caused Merril Lynch losses of tens of billions of dollars in the subprime mess. He of course didn't even deserve the bonuses since they were based on profits that have turned out to be phony.

The problem is that progressive taxes doesn't just hit undeserving and incompetent people like Stan O'Neal, it also hits genuine wealth creators.

Inflation thus implies redistribution from the deserving to the undeserving both directly and indirectly by increasing support for progressive taxation.

Today only one politician, Ron Paul, understands this. But he doesn't stand a chance of getting elected as president. But in the past, this insight was more widely spread. Read for example the words of President Andrew Jackson when he in 1832 vetoed a bill that would have made the Fed's predecessor, the Second Bank of the United States permanent:

"It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society -- the farmers, mechanics, and laborers -- who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles."

Andrew Jackson also famously called the Second Bank of the United States "a monster" and said that "I have it chained…I am ready with the screws to draw every tooth and then the stumps". And ultimately he did succeed in destroying the central bank he regarded as a monster. But now,ironically, the picture of the passionate central bank foe Andrew Jackson is on the 20 dollar bills issued by the resurrected monster known as the Federal Reserve.


Post a Comment

<< Home