Investor’s Business Daily has an editorial noting polls showing an opposition to free trade and an increasing desire to increase taxes on the wealthy:
A Financial Times-Harris poll of more than a thousand people found that those in the U.S., Britain and France were three times more likely to think globalization hurts their country than helps it.
And “in response to fears of globalization and rising inequality,” wrote Financial Times reporter Chris Giles, “the public in all the rich countries surveyed . . . want their governments to increase taxation on those with the highest incomes.”
That is, people want to tax the rich — an age-old urge — believing it will somehow help feed the poor. Unfortunately for those who believe this, it doesn’t work that way.
“Taxing the rich” might be satisfying on some level, given the general level of envy people have for those who are more successful. But carried out as a matter of national policy, such ideas will have disastrous consequences for the world economy, leading to less growth, less investment, fewer jobs and lower standards of living.
It’s a well-established fact that globalization — simply another word for free trade — has been, overall, a major boon, raising both incomes and standards of living worldwide. And that includes rich countries as well as poor ones.
The problem is that most people don’t base their opinions on economic evidence, but on a combination of what the media tells them and unscientific feelings. Despite the fact that globalization has been one of the most important factors towards making the late-20th to early-21st Centuries a golden age of prosperity worldwide, people still use it as a convenient boogeyman. It plays on xenophobia in a time of uncertainty, which is virtually always a sure bet. Blaming globalization for the failure of socialism in places like France has been a staple of the left for some time — but even the socialistic French are embracing a more competitive worldview.
Likewise, the drive for higher taxes has a very simple explanation: jealousy. People want to take the successful down a peg in the futile hope that it will make themselves feel better. History and common sense makes it clear that such schemes never work, but that hasn’t stopped people from justifying tax policy on envy.
Yet there’s also a darker side to all this. Ilya Somin has a fascinating post at The Volokh Conspiracy on the economics of the Third Reich and how it matters in terms of policy debates today:
Two recent books further explain the socialist elements of Nazi economic policy, and will hopefully put the final nails in the coffin of the myth that the Nazis were “capitalists” or free marketeers. In The Wages of Destruction: The Making and Breaking of the Nazi Economy, historian Adam Tooze describes the statist nature of Nazi economic policy in great detail, and concludes that the Nazis imposed greater government control over the economy than any other noncommunist regime in modern history. (pp. 658-60). Tooze notes that, even before the outbreak of World War II, government military spending accounted for some 20% of the GDP, while much of the rest of the economy came under government control as a result of the Four Year Plan and other similar measures.
In Hitler’s Beneficiaries: : Plunder, Racial War, and the Nazi Welfare State, Gotz Aly argues on the basis of extensive evidence, that German support for Nazi rule was maintained by the creation of a massive welfare state funded in large part by plunder captured in Hitler’s foreign conquests, but also partly by means of “soak the rich” taxation within Germany itself…
These two new books are useful complements to Avraham Barkai’s 1990 work Nazi Economics, which explored the ideological origins of Nazi economic policy and showed how Nazi economic theorists explicitly advocated statism, while rejecting free markets. Like some modern opponents of globalization and free trade, the Nazis viewed economics as a zero-sum game between nations, where increasing wealth for one country could, in the long run, only be achieved by impoverishing or conquering others.
The same attitude seems to be popular today — which certainly doesn’t make anti-globalization advocates the same as Nazis — but allows for the kind of atmosphere in which totalitarian governments can flourish. Somin explains why this 60-year-old history is still relevant to today’s policy discussions:
Why does any of this matter today? The fact that the Nazis pursued socialist policies does not in and of itself discredit socialism, any more than Hitler’s apparent commitment to vegetarianism discredits the case against eating meat.
Nonetheless, the socialist element of National Socialism matters for three reasons. First, as noted above, some still claim that Nazism was a form of “capitalism” and try to use this association to discredit free markets. Second, and far more important, Tooze and Aly show that far-reaching state control over the economy was an essential element in Nazi policy, without which Hitler could not have carried out his plans for conquest and mass murder. It also helped quiesce potential German opposition to Nazi policies; both by imposing state control on economic resources that any opposition movement would need to support itself, and by “buying off” potential opponents through welfare state handouts (as Aly emphasizes).
The concentration of economic power in the hands of the state does not always lead to atrocities as extreme as Hitler’s. But it does significantly increase the risk that these types of abuses will occur – not to mention numerous lesser (though still severe) atrocities. In the twentieth century, both left-wing (communist) and right-wing (Nazi) forms of state domination of the ecoomy paved the way for war, repression, and mass murder. There is little reason to expect better results from similar policies in the future. This is an important point, given the recent renewed popularity of socialist ideas in some parts of the Third World, such as parts of Latin American.
While it’s unfair and inaccurate to say that anti-globalization forces are innately totalitarian, what can one say about the way in which many on the left are embracing the dictator Hugo Chávez at the same time he moves the country closer to one-party rule?
Ideas have consequences, and the consequences of a system in which states restrict free trade and engage in punitive taxation on the rich is that the state suddenly has a great deal more economic power. Whenever the state gains in economic power at the expense of the people, a measure of republican rule is lost and it becomes easier for the state to consolidate power. The state already has a virtual monopoly on violence (except in times of revolution) — giving them both the guns and the butter only makes it that much easier to take total control.
The problem with this globalization backlash is that it’s inevitably tied with increasing the power of the state — to control imports and exports, to manage the economy, and to regulate “fairness.” None of those things are acts which the state should be doing — a group of government bureaucrats are hardly the best people to be deciding what’s “fair” and what is not. By doing so, it expands the scope of government power and diminishes the power of the people. Not only is that economically unsound — there’s a direct correlation between high tax rates and economic under-performance — but it’s the sort of thing that makes it much easier for governments to become oppressive.
The lessons of the 20th Century make it clear that the keys to success are not in isolationism, but in an open society and a strong entrepreneurial ethic. The story of the 21st may be of how the increasingly decadent and self-absorbed West faded as the entrepreneurial Far East became the world’s superpowers — or it could be how in the face of economic problems, the same factors that led to the two most devastating wars in world history once again turned the world apart. As the great saying by Satayana goes, those who forget history are doomed to repeat it. The question is whether people are choosing to learn from history or make the same fatal mistakes once more.
UPDATE: Mitch Berg has more on the topic of what Hitler learned from the left. The mistake most people make is thinking that Hitler despised Communism because he disagreed with their economic theories — state control of production suited Hitler just fine. He wanted to exterminate the Communists (and the German labor unions who were heavily influenced by the Communists) because they posed a threat to his power.
It’s also important to note that the welfare state was a German invention — Otto von Bismarck is the intellectual heir to the welfare state as we know it now, and for Bismarck, the welfare state was ultimately a method of social control. By paying off the various groups in German society, the central government could rule freely. The Democratic Party in many ways tries to uphold the same general model — economic redistributionism as a way of centralizing society. Even if the Democrats don’t directly support the Bismarckian model, what they propose is virtually indistinguishable from it, and the results would likely be the same. Once the state seizes mass economic power, it’s much easier for that state to succumb to the autocratic and totalitarian temptations that every government has — which is why the Founders wisely restricted the scope and power of the central government to avoid that temptation. We undo that at our own peril.
UPDATE: And here’s another example of the “progressive” left shilling for Hugo Chávez.