Good Grief!

He\’s going to get shot for saying this, isn\’t he?

In a speech to the Labour organisation Progress, he will say: "Aspiration and ambition were natural human emotions – not the perverted side effect of primitive capitalism.

"Rather than questioning whether huge salaries are morally justified, we should celebrate the fact that people can be enormously successful in this country. Rather than placing a cap on that success, we should be questioning why it is not available to more people. Our overarching goal that no one should get left behind must not become translated into a stultifying sense that no one should be allowed to get ahead.

"I believe a key challenge for New Labour over the coming years is to recognise that, far from strengthening social justice, a version of equality that only gives you the opportunity to climb so far, actually subverts the values we should be representing.

"Instead, any progressive party worth its name must enthusiastically advocate empowering people to climb without limits, free from any barrier holding them back."

Which brings us to this excellent image.

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So, we have adjusted everything so that we can compare like with like. Instead of using market exchange rates, we use PPP, as we should do when comparing internationally. We\’re measuring the standard of living that is.

Further, this is after all of the tax and benefits: so it\’s the actual standard of living that people have. In the paper itself, Smeeding discusses things like health care and food prices (more expensive in the US for the former, in the EU for the latter) and so on. He calls those differences pretty much a wash.

Finally, we\’re comparing these living standards to one simple standard: median US income. So, the way to read this chart is that the poorest 10% in Sweden enjoy 38% of the US median income. The richest 10% of Swedes have 113% of the US median income. Finland it\’s 38% and 111%.

OK?

Now, look at the US system. 39% of US median income. So, the living standard of the poorest in the US is actually higher than the living standard of the poorest in either Sweden or Finland. All that horribly oppressive taxation, that huge redistribution of resources, leads to an improvement in the lives of the poor of precisely….umm,… nothing.

But look at the richest 10% in the US: 210% of median income. Climbing without limits, eh, free from barriers.

Clearly the US system, the provision of a minimal welfare state, a safety net, in Bill Clinton\’s phrase, a hand up not a hand out, creates greater freedom and liberty for said climbing that the Nordic system of insisting upon confiscating the majority of the economic product of the successful. And it does so while giving the poor exactly the same standard of living as that crushing of freedom.

So, anyone who believes in said freedom should be looking to move from the Nordic style confiscatory tax regime to the US lighter touch, yes? After all, the poor do just as well, while the others do better: it\’s a Pareto improvement, making some better off while making no one worse off.

This is otherwise known as a free lunch, something that we are always at pains to insist does not exist within economics….until we meet politicians that is, for their actions can indeed be so counter-productive as to leave us with said free lunch if we can only get them to stop committing the lunacies that they currently are.

3 thoughts on “Good Grief!”

  1. Everyone’s heard this one, right?

    “The 10 Cannots”
    You cannot strengthen the weak by weakening the strong.
    You cannot help small men by tearing down big men.
    You cannot help the poor by destroying the rich.
    You cannot lift the wage earner by pulling down the wage payer.
    You cannot keep out of trouble by spending more than your income.
    You cannot further the brotherhood of man by inciting class hatreds.
    You cannot establish security on borrowed money.
    You cannot build character and courage by taking away a man’s initiative and independence.
    You cannot help men permanently by doing for them what they could and should do for themselves.
    ~William J. H. Boetcker, 1916

  2. I’m in agreement with the thrust of the graph and the sentiments expressed above (by Eva’s reference).

    But what is truly amazing is how few people here in the U.S. seem to appreciate what such statistics illustrate. Far from being “the land of the free” in the economic sense, we’re a land of constant struggle against the unremitting forces of collectivization and redistribution, seemingly doomed to perpetual existence in the never-
    never land of Third Way compromise.

    And redistribution is neither a “hand up” nor a charitable contribution for those unable to make it on their own. Huge (and hugely profitable) corporations and wealthy and highly mechanized farmers are chief recipients not only of agricultural subsidies and price supports but of protection from lower-priced imports as well. “Buy locally” is nothing new. Many, if not most, U.S. states have “milk boards” which set minimum prices to protect their own dairy farmers against the “unfair” competition posed by farmers in states with better dairying conditions. Out of the thousands of colleges in the country, there exist only two not dependent, to one extent or another, on state or federal tax monies. And almost everyone gets one form or another of “financial assistance” to attend these schools, involving reams of paperwork, with interest rates subsidy-lowered, yet leaving graduates enormously burdened by debt. (In other words, education and its functionary teachers and administrators are, almost without exception, the beneficiaries of transfer payments not only directly to their incomes but by fattening of their clientele’s ability to pay.)

    The list isn’t endless but it’s long: health-care, defense contracting, bailouts of failed financial institutions, etc., etc. And never a moment’s reprieve from the onslaught of beseiging importunists, the few wanting to get their snouts into the feeding-trough and the many, already in their places, but wanting more, more, more.

    The rest of the world might find the charts suggestive and instructive. But the ones who ought to (but won’t–I guarantee) really pay attention are those right here in the U.S.

  3. I’m never sure whether you intend your stuff to be semi-serious economic points or simply right-wing shouting.

    This post seems to start off the former and end the latter. Some bits are just wrong about what Smeeding says – such as ‘All that horribly oppressive taxation, that huge redistribution of resources, leads to an improvement in the lives of the poor of precisely….umm,… nothing.’, when in fact he finds the opposite. To allow your claim you’d have to take the view that GDP per capita would be the same in Sweden as the US if it had the same levels of taxation, which is not supported bythe Smeeding paper.

    You also ignore one of your favourite points, that in the US there is more market (and such statistically measured work) than in other countries, but less non-market work. This clearly is going to bias the result in the US favour. It’s strange that you always mention this with respect to working hours, but not incomes.

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