Time to fight for economic freedom

 
Allister Heath
IT was Frederic Bastiat, the French nineteenth century economist, who famously described the state as “that great fictitious entity by which everyone seeks to live at the expense of everyone else”. It is a shame that Bastiat’s work, cult reading in some circles, has yet to penetrate the public consciousness in Britain. Those who campaign obsessively against “cuts” should take note – what they are really arguing is for others – their contemporaries, as well as future generations saddled with the national debt – to pay for their pet projects.

It is high time for a proper debate about the relationship between the individual and the state. In a classically liberal society, people’s incomes are seen as theirs, to be spent, invested or donated as they see fit, with taxation kept to the minimum necessary to provide certain services and help the poor (the size of these activities are, of course, subject to debate). The present, collectivist mood in the UK sees it differently: earnings are implicitly treated as public property, to be divided up according to what politicians see fit; tax cuts are even seen as a “cost” to the Exchequer, as if it were automatically entitled to everybody’s wealth.

There is a fundamental philosophical distinction between these two positions. This is not merely an abstract debate: shifting views on what we mean by “justice” have economic consequences. The UK’s relative prosperity – during its industrial heyday and then again during the 1980s and 1990s – was based on policies that assumed that individuals had a natural right to their earnings and property. By contrast, the post-war period, when envy and confiscatory taxation were rationalised on moral grounds, culminating with a 98 per cent tax rate in the 1970s, was a disaster.

The situation is obviously no way as bad today as it was in those days. But Britain is now a very high tax society by international standards. So it was great to see Boris Johnson call for the 50p tax to be scrapped yesterday. The real top rate of tax is even higher when national insurance is included; earnings are taxed again when consumed (VAT, petrol tax); and anything left is taxed again at death. Crippling rates of double and triple taxation are the order of the day.

Such a state of affairs would have outraged Bastiat. To him, high rates of taxation were unacceptable, morally as well as in terms of the damage inflicted on the incentive to work, save and invest. “No legal plunder: This is the principle of justice, peace, order, stability, harmony, and logic,” he argued in his inimitable style.

There are plenty of voices around today fighting for free speech, civil liberties and “social” freedoms. It is a shame there is no equal enthusiasm when it comes to defending individuals’ economic freedom.

GLOBAL GROWTH CHEER

More good news on the economic front: the US ADP private employment survey was remarkably strong yesterday, while the US services index rose for the fourth month in a row. It is hard to tell how sustainable the American rebound will turn out to be but it is nevertheless a welcome development. The next challenge is tackling the budget deficit: the Republicans have now formally seized control of the House and have pledged to tackle out-of-control spending and prevent the US from going the way of Greece. We shall soon see whether they mean what they say.

allister.heath@cityam.com
Follow me on twitter: @allisterheath