One of the most important questions about politics we must ask ourselves is: How should we live in a state we don’t approve of?
I’m a classical liberal, as I expect most of the Cobden Centre readership are. I have yet to hear of a classical liberal or libertarian who isn’t irritated by modern western states – particularly their petty regulations and high taxation – and I’m no exception. What should we do about that though? One thing we should do is to change opinion and that’s one of the things the Cobden Centre is about. But what about at a personal level? Should our political view affect how we do our jobs, for example, or our tax arrangements?
It could be argued that we should be more diligent in our own work for the sake of the generations after us. Since the state in it’s current size will cause many problems in the future, we can offset them by creating more capital now. The problem with this view is that it considers long-run economics without considering long-run politics. Suppose a government increases redistribution by taxing and spending more and a large proportion of citizens decide to work harder or just as hard as they were before. If that happened the case could be made that redistribution doesn’t affect economic output, or at least it doesn’t affect it as much as was thought. This sort of behaviour aids the political case for socialism. It’s also unsustainable, it’s likely that future generations will not understand the rationale behind it, or for various reasons won’t continue acting this way. That means the negative consequences of government policies will be delayed rather than prevented, and may be worse when they occur. During major wars governments have encouraged citizens through propaganda to work their hardest, and in some cases citizens have worked harder. Certainly this has been positive in justifiable wars. But for the more historically common unjustifiable wars it has been counter-productive and has only funnelled greater power to some of the worst states.
At the opposite extreme is the view that it’s legitimate to cheat the state or anybody else. From an ordinary moral point of view, it’s unacceptable to cheat the state and clearly unacceptable to cheat other citizens. But a large part of economic thought and libertarian thought is focused on challenging traditional ideas of morality (Walter Block’s “Defending the Undefendable” for example). Is this an indefensible idea that should be defended? I don’t think so. Firstly we must remember that laws protect us all and that society couldn’t exist without them. If others see us flouting laws because of our political ideas then they will be encouraged to do the same to aid their political ideas. In this case it’s worth remembering that we’re a minority. This point is made very well in Robert Bolt’s play “A Man for all Seasons”. Another good reason comes from Hayek and is easiest to explain with an example. Suppose a property developer bribes local politicians to grant him planning permission for new buildings. He reasons that the government is unfairly standing in his way with it’s labyrinthine planning laws and denying him profit. He may be correct about those planning laws, but he isn’t correct to think that he’s compensating himself for what the state have denied him. In the absence of planning laws it’s not clear that he would make more profit. Other property developers may out-compete him. What the developer is doing here isn’t to get compensation for his business being damaged, rather he is guessing what compensation he is entitled to and awarding it to himself (and enriching a politician to boot).
A further problem occurs when redistribution is involved. Suppose instead a businessman persuades the state to subsidise his industry. Can this just be compensation for the high taxation he must pay? No, because the state are providing the subsidy by taxing others. Notice this argument is also wrong for the first and second reasons above. If the subsidy is wide, to a whole industrial sector, that means the businessman in question must still compete against others in his industry, but the subsidy still betters the whole sector at the expense of other sectors.
It could be argued that all wealth today is irretrievably muddled. That is, in the past various groups benefited from redistribution by the government or from preferential treatment. Those groups then passed some of their ill-gotten wealth to their family and spent the rest. That wealth has been passed around to others, often unknowingly. So, all wealth is tainted and nothing that is earned can be certainly “honest”. This is true and also beside the point. If we were all to refrain from trading because all wealth is tainted in this way then mankind would be sent back into the state of primitive autarchy. That would clearly be a worse outcome than the world economy continuing to function and everyone receiving “unjust” incomes. The first error in this argument is requiring perfect retrospective justice, something that can never be achieved in practice. Like everything else, justice has diminishing returns: after some point the costs of it outweigh the benefits. Some critics accuse supporters of Capitalism of being the exclusive defenders of this idea. This is confused. All social theories and proposals to change society (whether in a small way or a radical way) don’t offer any of us a just recompense for how we have acted in the past. What they claim to offer is what their proponents believe is a better future. Even Marx was reluctant to ethically approve of his revolution of the proletariat. Instead he framed it as an inevitable development of the human race.
More importantly, the argument for free markets is that they provide incremental improvement for all classes of society. When markets first become more free that will unjustly impoverish some and enrich others. But, the long term growth that they generate serves the common good. In time, wealth generated in the market era comes to dominate that inherited from before. Of course during this time state actions will continue to unjustly redistribute wealth, I’m not denying that. We must compare free markets to other economic systems. Is there any other system that can justly apportion wealth and also ensure progress? I don’t think there is. So, we should limit our concern about long-run wealth redistribution. We should only be concerned in situations where the issue is direct and recent. For example, suppose a man takes gifts from someone he knows is benefiting from government privileges or someone who has in the recent past. In that case there’s a good case to criticise him.
In my opinion we have quite a lot of latitude to act against statism on a personal basis. If taxes are set high enough to discourage me from working as many hours as I would otherwise, then I accept that. I don’t plot violent revolution, but I do work less and enjoy more free time. I don’t see anything wrong with avoiding taxation by legal means. Modern states are currently taxing almost every working person much more than the cost of basic services. Today “tax planning” is mostly a matter of preventing income from being redistributed. There’s a lot we can do to oppose the current state of the world, but we should be careful not to go too far.