I found the recent comments of Elizabeth Warren, Democratic Senate candidate in Massachusetts and former White House financial reform adviser, to be so ridiculous that I wasn't going to bother to blog on them, but none of the responses have fully captured the reasons why her comments are so ignorant and wrong so I thought I should set out the counter arguments here.
Just to recap, if you didn't see the video, Elizabeth Warren said:
“You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.
“Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
The gist of what she is saying is that everyone in society pays for everything that goes into the factory owner's goods and that therefore the factory owner owes society and should pay and pay and pay.
There are several problems with this argument:
1) The factory owner is the only one who pays all of the input costs to his goods. He not only pays for all the parts and raw materials that go into his goods, he pays for the transport of getting those parts and raw materials to his factory including road user charges. He pays for the education of his workers in the higher salaries he must pay qualified staff. He pays for the fire service in the insurance levies on his buildings and plant. Perhaps the only input that he does not pay the full cost of directly in most countries is the police force, but as we know the police these days do not have protection of private property as a priority and therefore the factory owner has to pay for a private police force in the form of security guards and electronic alarm systems.
2) The factory owner is the source of all revenue that provides the tax base. He not only pays tax on his company's income and on the goods he sells (through sales and value added taxes), he pays the gross salaries of employees from which payroll taxes are taken. He pays these in addition to all the input costs mentioned above and receives little or no direct value in return for all the taxes he pays. And because almost all of the Government-provided services that Elizabeth Warren mentioned have a user-pays element in their pricing, he is actually paying for these twice.
3) His goods and services provide added value to those who purchase them and to the wider community. After all, the books and materials that are used to educate our children, the medicines that are used to cure our diseases, the fire trucks and the hoses that are used to put out our fires, the uniforms, cars and police stations used by our police - all these things are provided by factory owners.
Elizabeth Warren and her ilk want the factory owner to pay more. Why? So that she can dole more out to those in society who don't provide all the goods and services, jobs and taxes? Already, in most Western countries the vast majority of all income taxes are paid by only 10% of the population (e.g. see this US article Guess Who Really Pays the Taxes). They even pay the salaries of ungrateful, left-wing fools of politicians like Elizabeth Warren.
And she think those few people should pay more?
Sooner or later the productive few in society are going to say, enough! I think we are at that point already. Atlas is about to shrug (to use an expression of philosopher Ayn Rand who predicted precisely this). Those who carry the whole world on their shoulders will throw off the burden. And why shouldn't they?
Elizabeth Warren wants slavery. She wants the productive in society to be slaves to the unproductive. Not content with the partial slavery we already have in most Western countries, where we are forced to work a significant proportion of our time to pay taxes to the government, she want us to accept that the society owns 100% of our bodies and our time. It is not surprising that she thinks we should be grateful to society for allowing us to keep any of our incomes, for that is the attitude of a slave owner. Of course, she sees herself as the slave owner rather than the slave.
The problem with her attitude (aside from the twisted morality of it) is that no slave ever produced an iPhone (or, if you want a more 'worthy' example, an MRI scanner). Elizabeth Warren's philosophy leads to a society where there are no factories, or at least only factories that produce Trabants rather than BMWs. If you want proof of this, you only need to look at the contrast between North and South Korean today. North Korea is built on Elizabeth Warren's philosophy and it is the inevitable result.
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