Is democracy too hard on the rich?

The authors of the American constitution had good reason to fear what popular governments and voters could do to unpopular individuals, ideas, and minorities. Accordingly, they created constitutional safeguards to tie the hands of democratic government.

When the ballot was extended to include women and labor, should nation-builders also have introduced fiscal safeguards for the rich?

Underlying the vehement opposition of American conservatives today toward any measure to enhance federal tax revenues — and their support for a constitutional amendment to make new taxes and federal deficits next to impossible — surely beats a profound fear that democracy is rigged against the affluent. The reckless demos will depreciate the value of their savings, tax away what they have protected for their children, and tax their “excessive” incomes along the way.

These conservatives, of course, do not believe that government can’t do anything right; most say American government will never accidently hang an innocent man, spill nuclear fuel, or conduct an incompetent war. They fear, however, that as soon as the people start thinking again that activist government can help solve their problems, they will start using government to hurt those with means. (On the left, they are increasingly called “billionaires and millionaires.” Conservatives rally to the defense of anyone with a taxable income of over $200,000 as a “job creator.”)  

This vision of the masses lined up on Election Day to cut their betters’ throats was starkly outlined in a piece by George Bragues, assistant vice-provost and program head of business at the University of Guelph-Humber in Toronto. He asserts:

“Consequently, the state’s fiscal operations necessarily divide society into two classes — that is, between those who, on balance, receive more from the government than they are required to give it, as opposed to those who must pay more to it than they are entitled to receive from it. Following John ­Calhoun, the 19th-century American politician and writer who developed this analysis, we can refer to the first class as tax consumers and the second as tax payers.

“Amid the struggle that occurs between these two, democracy favours the tax consumers. In every society that has developed beyond the hunter-gatherer stage, wealth has been distributed unequally, that is, concentrated in a group making up less than 50% of the population, indeed often a good deal less than that. At the same time, democracy in principle empowers whoever can garner 50% plus one of the votes. To an ambitious democratic politician, the optimal strategy to win elections is obvious: Promise the not-so-wealthy majority a wide assortment of government-supplied benefits in the hopes of passing on the costs to the wealthier minority. In other words, forge a coalition of tax consumers that outnumbers the tax payers.”

Click on: http://opinion.financialpost.com/2011/08/31/voters-and-debt/

Where have these ambitious politicians been for the last hundred years?

Certainly, wealthy tyrannies like Saudi Arabia bribe their subjects with ridiculously cheap public services in order to keep them servile politically. Certainly, some anti-democratic capitalist regimes like China’s have been able to create an impressive number of billionaires — for at least a generation. Certainly, democratic governments can be corrupt, bribing groups of voters as well as rich patrons. Nevertheless, the masses have hardly forced governments to systematically exploit the wealthy.

It’s a pure pandering by an academic, and paranoia by the well off, to imagine that a majority of voters turn out in elections to soak the rich. America has the most competitive mass democracy in the world — regularly shunning tax measures that would clip the wings of the rich. America’s business class is the most affluent in the world — and the safest. Also, America’s most affluent families are the biggest beneficiaries of public spending on the arts, health research, and advanced education.

Clearly, a shared idea of fair treatment and mutual gain — of a just society — disciplines our politics and permits our economies to grow. That idea, not a predatory game theory, has allowed for fantastically different economic outcomes for individuals and a decent level of social solidarity.

The challenge now is not to shrink our democratic rights, but to design tax policies that will strike people as fair.

Gasoline prices and political stability

“The price of gasoline in Iran rose four-fold on Sunday while a heavy police presence ensured there was no repeat of rioting seen the last time the government restricted access to heavily subsidized fuel. Motorists had been expecting the rise for the past three months as part of President Mahmoud Ahmadinejad's policy to phase out subsidies on essentials such as energy, food and water, so the midnight price hike was accepted with grim resignation.

Up until Sunday, subsidies had allowed Iranians -- who see cheap fuel in the oil-rich country as a birthright -- to pay just 1,000 rials (about US10¢) per litre for the first 60 litres they buy per month.”

http://www.nationalpost.com/Iran+prices+skyrocket+police+alert/4002117/story.html

The long economic boycott of Iran may be starting to bite. The regime must be in dire financial circumstances because about the last thing tyrannies surrender is subsidized gasoline prices.

Due primarily to China’s rise, it is now widely held that authoritarian states can successfully host world-class capitalist economies. Certainly, for a long time, many such states have allowed the few to make extraordinary profits. However, the gasoline market still demonstrates a strong positive correlation between stable democratic governments and free market pricing.

This is important if emerging economies are to generating wider prosperity through the most efficient allocation of resources. Of course, governments that are unsure of their legitimacy are also less likely to stop subsidizing the wasteful use of polluting sources of energy.

In Western democracies, citizens shoulder adult political responsibilities and, as consumers, their governments generally feel they can treat them as adults as well. If they can afford it, tyrannies prefer to treat their subjects like children. For instance, the governments of  Iran and Saudi Arabia, which are financed almost entirely by export revenues from depleting oil reserves, have for decades asked their consumers to pay as little as 25 % of the market price of fossil fuels.