Dylan Lawrence Moore Posted January 21, 2013 Posted January 21, 2013 I was in a conversation with a friend of mine over the internet last night over various topics (it's hard to keep him nailed down to one) and we drifted into the topic of how a state can acquire money. He's Austrian and a member of the Austrian red/socialist party and thus tends to espouse standard statist rhetoric. So we got into this discussion over how a state gets money, my argument being that a state has only ONE fundamental way of getting money, and that is to collect taxes. This fundamental method has two faces: direct taxation and bonds. Direct taxation being taking the money now and bonds a promise that the country will take the money later. He countered that there were more methods than that. A government also had resources at its disposal, as well as government-owned businesses, which can make money via "normal" business transactions. The two examples he gave were Austria selling salt from its government-owned salt mines to Germany, or cutting trees in government-owned woods. I said that's still taxation. The fact that it's not money being taken doesn't magically not make it tax--the salt mines and forests still had to be taken from somebody at some point, even if it was by Lord or King Bumfuck 800 years ago. He responded to that saying that these resources were never owned privately (they had ALWAYS been owned by Austria--something I scratched my head at), thus they had never been taken/stolen/taxed from anyone. After this another subject was jumped to and I had a similar discussion with it until another subject was jumped to. Eventually I became irritated and stopped the conversation. So my question to everyone is, what other way can a state acquire wealth other than through taxation (direct or in bond form)? If a government owns a business (and actually makes more money than it costs. har har.), does this somehow fall outside the realm of taxation? Do government-owned resources, which somehow were never stolen, constitute as wealth generation outside the realm of taxation? I feel like there's a very important point I'm missing here that's required to make more sense of this. -Dylan
ribuck Posted January 21, 2013 Posted January 21, 2013 A government gets money from: taxation license fees borrowing inflation donations e.g. TreasuryDirect It's also possible for a government to get money from a business that it runs. If it did this non-coercively this would not count as taxation. In practise, governments are rarely able to run businesses efficiently, so they legislate barriers to entry to provide the illusion of success. There was, however, an interesting experiment in Australia in the 1960s and 1970s. The government ran an airline (TAA) and a bank (the Commonwealth Bank). These were in direct competition with the equivalent private businesses. The private and government businesses made roughly equal profits. This was spun by the government like this: "We allow private banks and a private airline. However, to keep them honest, we operate a government bank and a government airline. This forces them to provide as good a service as the government does." In reality, it was competition from the private businesses that kept the government businesses honest. Having said that, both industries were heavily regulated and heavily protected from competition. The airlines were required by law to charge the same as each other, and to operate equivalent schedules, supposedly in the name of approximating perfect competition, but actually having the effect of minimising competition. Only one private airline was allowed to compete with the government airline. Multiple banks competed with the government, but of course it was nearly impossible to get government permission to start a new bank.
endostate Posted January 21, 2013 Posted January 21, 2013 How To Be a Crook (8:24)[View:http://www.youtube.com/watch?v=2oHbwdNcHbc:400:350]
endostate Posted January 21, 2013 Posted January 21, 2013 Money as Debt (47:08)[View:http://www.youtube.com/watch?v=0K5_JE_gOys:400:350]
Dylan Lawrence Moore Posted January 21, 2013 Author Posted January 21, 2013 A government gets money from: taxation license fees borrowing inflation donations e.g. TreasuryDirect I would lump taxation and license fees into the same category, as they've both been spun as "paying for services". Borrowing is equivalent to selling bonds, which I mentioned before is simply the promise of the country to collect taxes later. Inflation I would still see as taxation, as a government can use its powers of money creation (or as we all know better, borrow the powers from its central bank), they can "buy up" things from the private sector before the effects of the inflation hit everyone else. Thus they can move wealth and resources from the private sector (using the magic money-printer dance) without having produced anything of value themselves, which still sums up to me as taxation, albeit quite a bit more sneaky. As for donations I... can't really take that seriously. I wonder if the U.S. Treasury actually publishes the amount of donations they receive? It's also possible for a government to get money from a business that it runs. If it did this non-coercively this would not count as taxation. In practise, governments are rarely able to run businesses efficiently, so they legislate barriers to entry to provide the illusion of success. Can you go into that a little bit more? Why would a efficiently-run government business not be taxation whereas a poorly-run government business (excuse my redundancy) would be taxation? Wouldn't an effeciently-run government business still remove competitors from the market, even if didn't need the normal methods of taxation mentioned above as a crutch to keep it up and running? More specifically, considering the arguments my friend was making about the salt mines and lumber, how is it suddenly not taxation when the "government already owned it in the first place"? -Dylan
Magnus Posted January 21, 2013 Posted January 21, 2013 The monarchical rulers of Europe were a private form of government. They owned land and other resources, and used that income to pay the cost of their government out of their own pockets. They also taxed people lower down the food chain, ostensibly to pay for extraordinary expenses (wars), but in practice these levies were also used for routine expenses (bureaucrats). These households were replaced by corporately-organized facsimiles of aristocratic families, and thus became states. So, you are 100% correct -- the current states either nationalized existing industries, or inherited property that was once owned by someone.
ribuck Posted January 21, 2013 Posted January 21, 2013 As for donations I... can't really take that seriously. I wonder if the U.S. Treasury actually publishes the amount of donations they receive? Sure, here's the page:http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm Last year the US Treasury got given $7.7 million! Why would a efficiently-run government business not be taxation whereas a poorly-run government business (excuse my redundancy) would be taxation? Wouldn't an effeciently-run government business still remove competitors from the market, even if didn't need the normal methods of taxation mentioned above as a crutch to keep it up and running? I'm assuming that the efficiently-run government business is making a profit and therefore consumes no tax money. The inefficient government business is running at a loss, and needs to be continually fed tax dollars to keep operating. It's all a bit hypothetical, because I'm assuming that the government business receives no capital from the taxpayer, receives no monopolistic privileges from the government, etc. If that's the case, and it drives a competitor out of the market, then it must have been doing something better than the competitor. An inefficient competitor is not owed a market share by anyone. But I've never seen a government-run business that is more successful than its private competitor in a free market.
Recommended Posts