The problem with the
narrative about all the unpaid tax and all the ways the government is not
getting the funds it needs to pay for these ever-expanding services is that the
real issue is not being addressed - and that is that the State is far too large
with far too much economic liability for public services for which it is
struggling to pay now, and has no chance of paying in the future.
Unfortunately this short
falling perpetuates because the majority of the people are exacerbating the
problem by failing to address the size of the State and how it can give itself
over to the more efficient and less burdensome private sector.
To make it clear with an
analogy, imagine a mother who started feeding her son cheeseburgers at a young
age. After a while she started to feed him too many, and eventually he became
morbidly obese as he was eating 24 cheeseburgers a day. Her son's eating habits
had got out of control, and had become a burden on the household because she
could no longer afford to keep him in that many cheeseburgers.
In order to generate the
burger funds she tries everything; getting a second job, doing car boot sales
at weekends, even begging her friends for a loan whenever she saw them. Alas,
the solution in this situation is obvious: far from trying to locate the funds to
feed this horrid cheeseburger habit, what the boy's mother needs to do is get
her son on a more balanced diet so he can lose weight and live more healthily.
It's by helping her son live more healthily that she will at the same time free
herself from the economic burden of having to fork out for 24 cheeseburgers per
day.
Similarly, by way of
analogy regarding its excessive size, in order to save the public sector from
its economic obesity we need to stop feeding it cheeseburgers and give it a
more balanced private sector diet of market principles, lighter regulation,
lower tax burdens and a greatly reduced bureaucracy that's small enough to put our
hands around its throat the moment it becomes too aggressive. Consider this
every time you want to see more tax paid, heavier regulation, further price
controls, quantitative easing and renationalisation - they are like
cheeseburgers being fed to an already morbidly obese boy.
This blog post and analogy
comes at a time when earlier in the week I read the latest report from the
McKinsey Global Institute, which says that total world debt may well have
exceeded $200 trillion by now - the majority of which is not generated by free
trade between willing agents, but by politicians hamstringing the financial
economy with excessive regulation, price controls, tax legislation, tariffs,
and the tens of billions of dollars in employing the bureaucrats that
underwrite it all.
Even if there is a slight
exaggeration in that figure - and there may well be - it's still a damning
indictment, because to understand why so much of this is counterproductive for the
economy, you have to understand that when left to its own devices with only
very light regulation, the global economy tends towards the principle of
parsimony - that is, the law of least effort.
Just as nature's laws find
themselves running according to the principle of maximum efficiency, so too
would economics if it were left to the principles of economic laws based on
prices, supply and demand. You may object that unlike chemical elements,
economics involves that complex and erratic phenomenon known as human
behaviour, but that's not a valid objection, for as Adam Smith reminds us, the
invisible hand acts as a social mechanism that channels collective objectives
toward meeting the needs of the people that make up that society, by ensuring
competition between buyers and suppliers, which channels the profit motive of
individuals into providing products that society desires at prices which are
rarely above cost.
Note: What
I'm going to finish with is only a rough approximation from my own sparse and
scattered data studies in life in general - it is just something for you to
ponder - but in terms of the entire global economy, based on what I've been
reading in the past ten years or so, the global imbalance between trading in
the supply and demand market is probably somewhere between 65% and 75% of the
total size of financial transactions in the world. Just to be clear, that 35%
to 25% excess doesn't include public sector industry, that is purely the excess
created from all the extraneous credits and debits from things like increasing
money supplies, price controls, debt interest, and so forth. On the global
balance sheet, that amounts to literally trillions of pounds of an imbalance -
the vast majority of which is caused by interference in a market that primarily
need only rely on the price signals of supply and demand.
