The Grasping Hand

Originally posted on the City Journal

The modern democratic state pillages its productive citizens.

To assess the unprecedented scale that the modern democratic state has attained in Europe, it is useful to recall the historical kinship between two movements that emerged at its birth: classical liberalism and anarchism. Both were motivated by the mistaken hypothesis that the world was heading toward an era of the weakening of the state. While liberalism wanted a minimal state that would guide citizens almost imperceptibly, leaving them to go about their business in peace, anarchism called for the total death of the state. Behind these two movements was a hope typical of the European nineteenth century: that man’s plunder of man would soon come to an end. In the first case, this would result from the elimination of exploitation by unproductive classes, that is, the nobility and the clergy. In the second case, the key was to reorganize traditional social classes into little groups that would consume what they produced. But the political history of the twentieth century, and not just in its totalitarian extremes, proved unkind to both classical liberalism and anarchism. The modern democratic state gradually transformed into the debtor state, within the space of a century metastasizing into a colossal monster—one that breathes and spits out money.

This metamorphosis has resulted, above all, from a prodigious enlargement of the tax base—most notably, with the introduction of the progressive income tax. This tax is the functional equivalent of socialist expropriation. It offers the remarkable advantage of being annually renewable—at least, in the case of those it has not bled dry the previous year. (To appreciate the current tolerance of well-off citizens, recall that when the very first income tax was levied in England, at the rate of 5 percent, Queen Victoria worried that it might have exceeded acceptable limits. Since that day, we have become accustomed to the fact that a handful of productive citizens provide more than half of national income-tax revenues.)

When this levy is combined with a long list of other fees and taxes, which target consumers most of all, this is the surprising result: each year, modern states claim half the economic proceeds of their productive classes and pass them on to tax collectors, and yet these productive classes do not attempt to remedy their situation with the most obvious reaction: an antitax civil rebellion. This submissiveness is a political tour de force that would have made a king’s finance minister swoon.

With these considerations in mind, we can see that the question that many European observers are asking during the current economic crisis—“Does capitalism have a future?”—is the wrong one. In fact, we do not live in a capitalist system but under a form of semi-socialism that Europeans tactfully refer to as a “social market economy.” The grasping hand of government releases its takings mainly for the ostensible public interest, funding Sisyphean tasks in the name of “social justice.”

Thus, the direct and selfish exploitation of a feudal era has been transformed in the modern age into a juridically constrained and almost disinterested state kleptocracy. Today, a finance minister is a Robin Hood who has sworn a constitutional oath. The capacity that characterizes the Treasury, to seize with a perfectly clear conscience, is justified in theory as well as in practice by the state’s undeniable utility in maintaining social peace—not to mention all the other benefits it hands out. (In all this, corruption remains a limited factor. To test this statement, it suffices to think of the situation in post-Communist Russia, where an ordinary party man like Vladimir Putin has been able, in just a few years as head of state, to amass a personal fortune of more than $20 billion.) Free-market observers of this kleptocratic monster do well to call attention to its dangers: overregulation, which impedes entrepreneurial energy; overtaxation, which punishes success; and excessive debt, the result of budgetary rigor giving way to speculative frivolity.

Free-market authors have also shown how the current situation turns the traditional meaning of exploitation upside down. In an earlier day, the rich lived at the expense of the poor, directly and unequivocally; in a modern economy, unproductive citizens increasingly live at the expense of productive ones—though in an equivocal way, since they are told, and believe, that they are disadvantaged and deserve more still. Today, in fact, a good half of the population of every modern nation is made up of people with little or no income, who are exempt from taxes and live, to a large extent, off the other half of the population, which pays taxes. If such a situation were to be radicalized, it could give rise to massive social conflict. The eminently plausible free-market thesis of exploitation by the unproductive would then have prevailed over the much less promising socialist thesis of the exploitation of labor by capital. This reversal would imply the coming of a post-democratic age.

At present, the main danger to the future of the system involves the growing indebtedness of states intoxicated by Keynesianism. Discreetly and ineluctably, we are heading toward a situation in which debtors will once again dispossess their creditors—as has so often happened in the history of taxation, from the era of the pharaohs to the monetary reforms of the twentieth century. What is new is the gargantuan scale of public debt. Mortgaging, insolvency, monetary reform, or inflation—no matter, the next great expropriations are under way. Today, the state’s grasping hand even reaches into the pockets of generations unborn. We have already written the title of the next chapter of our history: “The pillage of the future by the present.”

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3 Responses to “The Grasping Hand”

  1. rodolfo marcelo kohn says:

    there is NO perfect state in the whole world.Humans are not perfect,therefore countries are not perfect and ipsofacto GOVERNMENTS are NOT perfect….the human being has to be perfected, but (for religious people) even GOD could not stop Cain and Abel to be perfect…

  2. Ohhh Henry says:

    The capacity that characterizes the Treasury, to seize with a perfectly clear conscience, is justified in theory as well as in practice by the state’s undeniable utility in maintaining social peace—not to mention all the other benefits it hands out.

    I deny the state's utility in maintaining social peace. A "state" (the monopoly of force in a geographical area which is controlled by a small number of people) and "social peace" are contradictions.

    Historically it can be seen that there are no almost no states which have been created spontaneously and democratically in order to maintain social peace. Nearly every state in existence has its roots in a plundering conqueror who came to rob once, then established a dynasty. Democratic states are actually less socially peaceful than monarchies founded by brigands, because they extract far more money from the populace and they wage far more murderous wars. How could Canada be called a peaceful state for example, when despite never having been attacked it sent 65,000 men to their deaths in WW1 and killed 45,000 men in WW2? I doubt if more than 5,000 people had been murdered by private individuals in Canada in its entire existence since the founding of Port Royal until 1913.

    In other words, the more state there is, the less peace. The 20th century was the beginning of the era of massive states and its most outstanding events were the most murderous wars, genocides and artificial famines in history (and the highest taxes).

    The reason why states are less peaceful than non-states is that in a state, force is concentrated exclusively in the hands of a few people. It may look like a peaceful society for a while, but sooner or later states always go on a rampage of one kind or another. As a state gets larger and larger the mayhem it creates gets worse and worse.

    In an earlier day, the rich lived at the expense of the poor, directly and unequivocally

    This is only true in cases where the rich had privileged positions which were protected by the state. In antebellum southern USA for example, the rich could exploit the slaves because the state provided a police force and army to hunt down captured slaves and suppress slave rebellions. In 19th century Britain the rich did not exploit the poor, but all classes gained in wealth more or less proportionately, because the rich did not have any means of compelling people to work for them. They could not stop them from changing jobs or emigrating because they did not have a police force or army to do the dirty work for them. "Exploitation" is only possible with state intervention, because in the absence of state violence the poor are capable of changing jobs, moving to another place, starting their own businesses, etc.

    • mstob says:

      "In 19th century Britain the rich did not exploit the poor, but all classes gained in wealth more or less proportionately, because the rich did not have any means of compelling people to work for them. They could not stop them from changing jobs or emigrating because they did not have a police force or army to do the dirty work for them. "Exploitation" is only possible with state intervention, because in the absence of state violence the poor are capable of changing jobs, moving to another place, starting their own businesses, etc."

      The second statement would imply that Britain had something close to a free market in the 19th century, which is false. There was a powerful, exploitative political class throughout British history that used the political means to gain at the expense of peasants and later industrial workers. The conditions you describe did not exist.

      Since the Tudors there were various laws targeting vagabonds, wanderers and the homeless. People could be executed for vagabonding if they were caught doing so on too many occasions. There were also laws targeting squatters and those building cottages on common land (that is, legitimate homesteaders). Various laws existed from preventing workers from voting with their feet, leaving their parishes, seeking better working conditions, changing employers, seeking self employment, etc.

      Here is a good summary history, if you are interested in reading more on this.
      http://www.mutualist.org/id63.html

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