Collectivist Notions So Easily Distort Thinking

by Don Boudreaux on March 14, 2011

in Budget Issues, Myths and Fallacies, Other People's Money

Here’s a letter to the Washington Post:

E.J. Dionne’s case for why governments in the U.S. aren’t financially strapped is that America has lots of wealthy people who could be more heavily taxed (“What if we’re not broke?” March 14).  The existence of yet-to-be collectivized wealth prompts Mr. Dionne to conclude that “we’re not broke.”

While the word “broke” is an overstatement (given governments’ abilities to reduce their spending), Mr. Dionne’s collectivism shines through in his use of the pronoun “we.”  If I can’t pay my bills, I’m properly described as being “broke.”  This fact changes not one bit if I discover that my neighbors have more than enough money in their bank accounts to cover my net liabilities.  “We” are not broke, but I am.

So, too, with government.  Just because it’s a creature of popular sovereignty and has the muscle to confiscate assets doesn’t mean that every cent of every citizen’s property belongs to a collective pool of assets owned by “us,” or that more private property is game to be confiscated simply because government’s books are in the red.  They – many politicians over the decades – ran up huge debts and unfunded liabilities as they overspent and overpromised.  Their doing so reflects a politically convenient discounting of the ill long-run consequences of their actions – convenient because those ill consequences were left to be dealt with in the future by others.

Well, the future is arriving.  And the agency that allowed some people to irresponsibly accrue huge liabilities in the name of “us” is urged by Mr. Dionne to confiscate more of the wealth of persons who, by and large, accumulated net wealth by taking longer-run, more responsible views than did those persons who created this fiscal mess by spending and promising to spend other people’s money.

Sincerely,
Donald J. Boudreaux

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{ 39 comments }

Bruce March 14, 2011 at 11:22 am

I used to work in public accounting doing corporate turnarounds as an outsourced CFO. The most difficult conversations I had were with clients who didn’t believe drastic changes needed to be made to save their businesses. I finally perfected my approach by beginning the dialogue with the following line: “You’re currently insolvent, you’re just not illiquid yet. Given time and absent major cuts in expenses illiquidity will come.” I think this is the concept that Mr. Dionne can’t grasp, much like the man who says “my account can’t be overdrawn, I still have checks left.”

Ike March 14, 2011 at 11:56 am

Bruce, it’s worse than that.

When you have a checking account, that means that at some point you had a balance.

This is really more akin to “I can’t be out of money, because I have a gun and live next door to a bank.”

Justin P March 14, 2011 at 12:22 pm

I think it’s more like, “I don’t need to worry, the guy next door is loaded and he’ll never do anything to stop me from taking his money.”

JohnK March 14, 2011 at 12:16 pm

I suppose that if you consider the accumulation of wealth through voluntary exchange to be theft, then you would consider taxation of that wealth to be recovery of stolen goods.

I just can’t get past the part where they equate voluntary exchange to theft.

Justin P March 14, 2011 at 12:23 pm

Zero-sum thinking probably.

Jonathan M. F. Catalán March 14, 2011 at 12:47 pm

Some people don’t consider taxation immoral, even if they do recognize that it does consist of forcibly taking other people’s wealth without their permission. Most people don’t recognize the naturally beneficial role of the entrepreneur and the dis-equilibrating force government actually is.

Harold Cockerill March 15, 2011 at 6:23 pm

Your first four words covered the problem.

Krishnan March 14, 2011 at 1:07 pm

There are many who believe that wealth is not acquired through innovation or hard work – but by stealing. They make exceptions to those “rich” people that “give back” – even though after they “give bacK’ they still have HUGE amounts … Anytime I hear “tax rich people more” I hear “let’s take from them because they have it”

vikingvista March 15, 2011 at 2:41 am

You never hear them advocating due process–a trial to first prove that the rich person’s gains are ill-gotten. Instead they simply advocate forceful confiscations based solely on how much the victims have to loot. This completely destroys any phony moral argument they make about unjust wealth accumulation. Their morality, but not their sincerity, is identical to Willie Sutton’s.

Seth March 14, 2011 at 12:18 pm

We haven’t run out of other peoples’ money, yet.

local position March 14, 2011 at 12:23 pm

The most difficult conversations I had were with clients who didn’t believe drastic changes needed to be made to save their businesses.

Bob March 14, 2011 at 12:42 pm

It’s like saying that we won’t run out of possible organ transplants donors when there are prisoners or newly deceased people whose body parts can be harvested with or without their consent! Although I feel sorry for the person who gets Dionne’s brain because he is truly one logically challenged person.

Jonathan M. F. Catalán March 14, 2011 at 12:45 pm

I think the question of whether or not the United States is “broke” misses the point, and I think that this letter misses the point too. The analogy between yourself and the individual politician is misleading. The individual politician is not spending his money, and so how much redistributed wealth the individual politician spends has no influence on whether or not he’s broke. If you were able to spend your neighbors’s money, then you wouldn’t be broke until you ran out of your neighbors’s money.

However, the real question is: so what? What if we’re not broke? Does that mean we should spend more? Does government spending only have negative consequences if the country were suddenly to go bankrupt? More importantly, is government spending even a legitimate way of stimulating economic activity?

The topic of bankruptcy has been a political shift that has muddled the academic debate. The notion of bankruptcy is politically powerful, because it’s an easy concept voters can understand, so it’s a concept that anti-fiscal policy economists and politicians sell the voter in order to persuade him against further fiscal stimulus. It has lured the academic debate away from the real framework of discussion: government spending within the context of the economization of scarce resources.

jjoxman March 14, 2011 at 3:00 pm

Very good reply. As Friedman pointed out, it is not the government debt that’s the problem – it’s the spending.

Sam Grove March 14, 2011 at 1:14 pm

What Dionne misses (and so many miss) is that what will be taken from the wealthy is not wealth, but entitlements to wealth that has yet to be created.

In taking these entitlements, government will withdraw resources from investments in future production and direct them to more immediate consumption.

The net result is that we’d all be the poorer for it in the future and the wealthy would jet off to sunnier climes.

Collectivists/redistributionists lack the fundamental comprehension of the difference between wealth and money.

Krishnan March 14, 2011 at 1:41 pm

Some/many perhaps do not understand the difference between wealth and money … What worries me are the rest – they understand, yet do not give a d&^% – since they believe that they can take from those that have – just because they can. It is that entitlement mentality that is more dangerous – We can always educate those that do not understand – we cannot do much about those that are h&^% bent on destruction – as some seem to be.

Methinks1776 March 14, 2011 at 2:36 pm

My aunt describing the Soviet regime to her students:

I am an owner of a factory. The factory is worth $1MM. There are one million people in the country. The factory is confiscated and sold. Each person gets $1. My former employees are unemployed and I will never produce anything that can be confiscated again. So, hopefully, each person really enjoys that $1 because they will never see another one.

I’m sure Dionne will deny that he wishes for a brutal Soviet regime here because people like Dionne are completely out of touch with reality.

JohnK March 14, 2011 at 3:05 pm

Your story has a loose thread.

You say the factory was sold. What happened to it after that?
Was it destroyed? Was it put on a barge and shipped out of the country? Did just it remain idle?
Considering we’re talking communism here I’m thinking the State took over management and produced worthless goods because they were guided by pleasing politicians (glorious policy) instead of pleasing customers (evil profits).

Methinks1776 March 14, 2011 at 3:32 pm

My aunt has never had an economics class and she was not teaching one. She was trying to convey the disincentive effect and dispel the myth that confiscated wealth serves to make the less wealthy wealthier.

In the Soviet Union, factories (confiscated and otherwise) manufactured wealth destruction at an astonishing rate.

Ike March 14, 2011 at 4:45 pm

In Soviet Union, factory own YOU.

vidyohs March 14, 2011 at 1:52 pm

I’ll say again, there is no more vicious a fight than what is waged by the looney left to get its hand in your pocket and keep it there. The looney left is much more vicious and tenacious in that than you are in trying to get their hand out of your pocket.

That is why we are in the shape we’re in.

Amowat March 14, 2011 at 2:51 pm

I was having this very conversation with a female friend of mine.

I put it to her this way: Between the two of us, “we” have a vagina. Allow me to tell you what “we” should do with “our” vagina.

Of course, she said, “That’s different.”

What she has in mind, of course, is modeling a nation as though it was just a really large family. In many families, brothers and sisters would be expected to pull in their belts and chip in to pay for Junior’s car payment or bail. No matter what happens, we are not going to let Junior’s car get repossessed, or to spend the night in jail.

“OK. Junior got arrested again. And of course, he’s broke again. I got $40. What do you have, Steve? Anne, do you think you could sell that old washing machine?” Etc. etc. (Cue scene from “It’s A Wonderful Life”)

I think people who view a nation as a really large family imagine it would be kinder and gentler than a more distant and market-based one. “From each according to their abilities, from each according to their needs.” To this way of thinking, we judge a nation by the same standards we would judge a family. And a family in which Dad ate steak and the kids ate Top Ramen would be judged an ethical failure.

But I think this misses a couple of key points. One is, “If the nation is just a large family, whose family is it?” A gay couple in San Francisco, or a Baptist minister’s family in Arkansas? There are a lot of different kinds of families out there, with vastly different notions about how far we are expected to tighten our belts to bail Junior out of his latest screw up.

But more importantly, I don’t think a nation can be reasonably mapped onto a family. In the first place, scale gets in the way. A family of 300 million members would be a very strange institution. (Christmas morning would make D-Day look like a simple meeting of some friends for lunch, and the result probably wouldn’t have that warm homey feeling we get from Hallmark cards.)

Secondly, a family is a more personal enterprise, in both the good and bad senses of that term. Ask anyone who grew up in a large family about problems with privacy, or what it was like competing with older siblings. Families, like small towns, can be wonderful places if you are loved and popular, but they can be nightmares if you are little bit different.

Large cities are comparatively anonymous. But they also allow you to *choose* your community rather than having it forced on you by chance. The computer nerd from a small town of potato farmers in Idaho can stop being the town weirdo. She can move to a big city, and find others just like her. She is not forced to rely on people who aren’t like her, and don’t like her.

A lot of people in this country have some oddly romantic notions about small towns. And families. They look at them fondly, perhaps through rose-coloured glasses. And then forget that they moved away from that small town, and moved out of the house to start a family of their own. A family is a wonderful place to be *from* but it is also a place you are probably expected to leave at some point.

A nation run as though it was a family might feel safe and secure, at least initially. It might return people to that feeling they had as children. But it also probably stifles growth.

Amowat March 14, 2011 at 3:03 pm

Clarification: Obviously people don’t really leave a family. But they can, and often do, leave the financial model of a family, where their needs are taken care of without question. You may never leave your parents, but at some point you stop expecting them to bail you out of your screw ups.

Methinks1776 March 14, 2011 at 4:50 pm

Oh, I beg to differ. It may not be enormously common, but it is not rare to divorce your family.

Gary March 14, 2011 at 4:05 pm

I think Steve Sailer’s reminder that races are simply “extended families of inbreeders” expains why ethnic diversity, such as in the US, may cause a decrease in the tendency to think of others as “family.”
Collectivism works better with homogenous groups. The cluelessness of the Left in this regard is obvious, as they push both diversity and collectivism. .

Methinks1776 March 14, 2011 at 4:49 pm

One big happy family is exactly the way Marx viewed society. Trouble is, I love my family. I’d sacrifice for the people that I love. I don’t feel that love for strangers and I’m not willing to sacrifice for them. We cannot create emotional familial ties where there are none.

Worse, the whole idea is immoral. If I bring a child into this world, my first obligation is to that child that did not ask to be born and is born only because I decided for him that he will be. It is immoral for me to sacrifice for your child over mine – which is what Communism demands.

Speaking of children, I didn’t have any because I was busy making the money that your friend would like to claim she needs and I must give her. I’ve never regretted the choice. I’m quite attached to my wealth and what I can do with it – if I weren’t I wouldn’t have sacrificed to acquire it. However, since your friend is so fond of “from each according to her ability to each according to her need” that she is willing to rob me to fill her “need”, then I suppose I have rights to her uterus. I mean, I’m assuming she’s still young enough to have children and I’m not (well, at least not ones that will not turn out as retarded as Muirdiot) so she is obligated to start squirting out younguns for me. What with her ability and my need and all. I will, of course, take only the ones I like. What a lovely society Communism breeds. So kind and gentle.

/sarcasm (for the back benchers)

Eric Hammer March 15, 2011 at 10:47 am

Fantastic post. I lived the “strange one in a small town” growing up, and it did a great deal to make me appreciate the ability to choose my community when I got older. I still don’t like cities much (still a country boy) but living near them is terribly important, as the larger market for personality and goods means I can find just the people and things I want out of life much more easily.

Well said, and I will remember the “between us, we have a vagina” bit next time I talk to my leftist friend from college :D

W.E. Heasley March 14, 2011 at 2:55 pm

Googled “Dionne”.

Dionne: one who de-owns one from his/her money for the greater Dionne (collective goodies). One who moves deck chairs on the Titanic. See shirk. See Struthio camelus.

Properal March 14, 2011 at 3:04 pm

It reminds me of a drug addict searching for anything of value to feed his habbit.

Gene March 14, 2011 at 3:51 pm

One thing that might help this debate would be for an economist (who would presumably know how and where to look for this info) to total up the total net worth of individuals (or households) in the US and then break it out by class/quartiles/percentiles/whatever. Then compare that net worth to the nation’s overall debt and its yearly deficits. I’d be curious to know: If the collectivist impulse came to full fruition, what portion of that net worth would have to be expropriated (from the top 20%, for instance) to pay off the debt? Obviously figuring the “net worth” might be difficult to do to any level of precision, but it would be a valuable exercise and put this argument into a new light.

E.G. March 14, 2011 at 4:30 pm

This is the first step to communism. I’m not being dramatic…This is how communists actually think.

E.G. March 14, 2011 at 4:45 pm
muirgeo March 15, 2011 at 2:50 am

“…confiscate more of the wealth of persons who, by and large, accumulated net wealth by taking longer-run, more responsible views than did those persons who created this fiscal mess…”

Who were the more responsible accumulators of wealth? The CEO’s of Boeing…. those defense contractors like Kellogg Brown & Root, the Wall Street Bankers with their bailout money and their people in high places in the Fed. Maybe you mean ADM, Monsanto …. the people on K-street… I really wonder who you could mean…. who are the real accumulators? Because I am not convinced the real accumulators and the government spenders aren’t one and the same while the real producers are getting screwed by the corporate government. One of the most wealthy places in the world is the circle of greed that surrounds the DC area… I don’t think most of that wealth is independent from the government spending that supports it.

brotio March 15, 2011 at 7:35 pm

One of the most wealthy places in the world is the circle of greed that surrounds the DC area… I don’t think most of that wealth is independent from the government spending that supports it.

If you actually understood what you cut-and-pasted, it would be the most brilliant post you’ve ever published at this Cafe. But, you supported government subsidies for ADM, until His Holiness: The Divine Prophet Algore I decreed that ethanol was no longer essential to the survival of Mother Gaia.

Your solution to the circle of greed that surrounds DC is to further empower DC to give favors to corporations who have discovered that it’s easier to make money by bribing politicians than it is to satisfy customers.

Ike March 16, 2011 at 8:01 am

Bingo.

If you want to break the cycle of Greed and Influence Peddling, you reduce the power of the government. Then it’s less of a target.

http://ike4.me/ocp

N. Joseph Potts March 15, 2011 at 12:49 pm

When the confiscations begin in earnest, then WE – yes, WE, ALL of us – will be in big trouble. Rich and poor alike, though the poor more-so, as before, but worse.

Harold Cockerill March 15, 2011 at 6:37 pm

The confiscation began in 1913.

DrX March 17, 2011 at 12:50 pm

I agree with Jonathan M. F. Catalán the analogy between an individual and the politician is misleading. “The individual politician is not spending his money”, he is spending collected taxes and accumulated debt, and so as long as he has the power and authority to spend the citizens money (and this money can cover the accumulated collective debt), the collective he represents (cause the politian is not the one in question of being broke or not) will not be “broke”. The issue always is who pays the debt–who gets taxed higher, who gets paid less that previous contracts, who sees his/her money loose its purchasing power. If you have no problem with a retiree having 30% of his pension reduced or government employee having 30% of his pay dropped (agree apon a voluntary negotiation in the past), u should have no issues with an increase on taxes for the wealthy. If the debt is paid the revenue will come from somewhere regardless the source in society…

Gripper Clippers March 22, 2011 at 6:58 am

The highest tax payers try to save tax by manipulating their assets. The govt. need to pay heed towards it.

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