Government intervention; How Champions of the Poor Become Tyrants

I wanted to pass along an article I read earlier today titled, How Champions of the Poor Become Tyrants.

I thought the author’s conclusions about socialism and government market intervention were congruent with what we discussed previously. The author, a professor of Economics, discusses the problems (e.g. restricted supply and economic loss) caused by government intervention.  I was particularly intrigued with his conclusion that the very programs, designed to help the poor, actually work to drive a further divide between the classes.

Since the charismatic champion of the poor is not going to raise taxes on the poor… he or she must raise taxes on the rich or inflate. If taxes are raised on moguls and magnates, they will flee the country. Understanding this, the charismatic champion of the poor opts for inflation. To do this, the money supply is increased, which occurs when the champion of the poor directs the nation’s central bank to print new money to buy new Treasury bonds. With each period’s economic losses being pyramided on top of previous periods’, the money supply expands at a geometric pace. This causes the nation’s currency to devalue at an increasing rate.

The moguls and magnates that own commercial, rental, and personal property benefit from the inflation. As the rents they collect grow geometrically in inflation, the real value of their loan principle falls. In a few periods of sufficiently high inflation, inflated rents can be used to pay off loan principle or the equity inflation created can be leveraged to acquire more property.

The policies that are intended to help the poor — rent control, price ceilings, and the minimum wage — harms the poor, destroys the middle class, widens wealth and income gaps, extinguishes innovation and entrepreneurship, and turns champions of the poor into tyrants.

How Champions of the Poor Become Tyrants – Hal W. Snarr (Mises.org)

What’s the future of socialism? How can we benefit?

There are many who observe the markets of a socialist economy (The US is socialist now) and wonder how it can last. Many may even think it will collapse under its own weight sooner rather than later. But this is the type of logic I conjure up when I fly on a commercial jet plane and wonder how it can stay aloft in flight. I always get to my destination.

An amoral people choose to have an amoral economy.  They may pretend to scoff and excoriate the monetary printing press, but they were begging for it during the last crisis. Increasingly, they are becoming reliant on it for their daily needs. As long as the people are content with inflationary printing things can continue for a while. They will hope the authorities can continue to manage interest rates and manipulate the markets. College graduates under 40 have been taught to embrace the concepts of government intervention and social programs.

The author’s observation; those who buy inflation-resistant, income-generating assets do the best over time. While there are some who think that doing well at the expense of others may be cruel, we need to understand that the social programs are supported by the vast majority of the population and that when we buy income-generating assets and build businesses we are just trying to survive. It’s nearly impossible to expand our minds and grow spiritually when we worry continually about paying the bills. In a socialist economy, those who are dependent on a job and government benefits will always end up on the losing end. This premise works, by definition, but this well-known secret seems to elude the unwashed masses.

One more thought; so what if socialism collapsed? What type of economy would replace it? The only answer to this problem when an unprincipled populace is affected; more and more government control. The end result of socialism is complete government control over every aspect of our lives. This is why I am so adamant about hitting this one point home; those who acquire income-generating assets and develop ways to make money through ingenuity will always end up doing much better than the rest of the sheep who believe the propaganda of socialism.

You and I cannot change these societal and government trends, so we need to move forward and do the best we can with what we have.