The Free Market 9, no. 1 (January 1991)
Certain ways of talking take on a life of their own. In the rituals of habitual speech we sometimes literally forget what we are talking about. We use words in socially plausible patterns but lose the faculty of connecting them with experience. This failing may come from simple mental indolence or from the fear of appearing naive.
I have always been vaguely bothered by an expression we hear all the time in political discussions: “The Economy.” For a long time I wasn’t sure why this phrase puzzled and annoyed me so much, and I didn’t quite dare to object to it, but puzzle and annoy me it did.
I vaguely gathered that “The Economy” was something “the government” was expected to superintend and take responsibility for. But what was this thing—the economy—that also seemed to include and engulf me? Did it mean that the government also controlled my economic fate? It seemed to go without saying that it did.
The workings of The Economy were also assumed to be an arcane mystery, penetrable only by specialists. These specialists were known, appropriately enough, as “economists.” They often clashed over just what the government should do, but that the answer resided somewhere among them was apparently beyond doubt.
Eventually, with no real study on my part, common sense told me that an “economy” is nothing more than shorthand for a system of producing and exchanging wealth. Economists might or might not understand and predict its general features, but neither they nor the government (with which a suspicious number of them were associated) could claim any particular authority in the basic facts of what earlier generations used to call mine and thine. In fact a goodly number of modem economists seemed unfamiliar with these quaint pronouns. They tended to think of The Economy as a whole as simply “ours.” And when the government tinkered with’ the flow and distribution of wealth, it was acting on “our” behalf.
Lately I’ve come to take a different view of the matter. As I see it now, there are really two economies—two distinct systems of producing and exchanging wealth. Or rather, two systems that purport to do these things, though only one of them really produces anything, and the other is organized by a peculiar form of exchange.
The first is what is called the trade economy—the one summed up in the phrase “the free market.” The other might be called “the tax economy.”
The trade economy is so familiar there is no need to say much about it, beyond pointing out that its operative principle is consent. Its mechanism is the price system.
The tax economy is something fairly new—to America anyway. A few generations ago the amount of wealth taken in taxes was only a sliver of the country’s aggregate wealth. But the government’s share has increased to such an extent that it has become a whole separate economy.
I don’t mean merely that the federal government, for example, spends 28% or so of the “gross national product.” To my mind, such terms and figures are half fictitious approximations anyway. I mean that the country and its political order now embrace two rival, incompatible, and inimical ways of gaining wealth. As consent is the operative principle of the trade economy, force (however disguised or displaced) is the operative principle of the tax economy.
Nor am I merely complaining that taxes are too high. I am saying that tens of millions of Americans depend for their income, livelihood, or at least partial sustenance on the use of the taxing power against their fellow citizens in the trade economy. The tax economy, after all, is completely parasitic on the trade economy and produces nothing itself.
The taxing power is no longer used for the modest purpose of exacting enough money to pay for the services government provides impartially for all: defense, police, and so forth. It now constitutes a whole way of life in which some live at the expense of others. Others may approve of this as heartily as I disparage it. But for clarity’s sake, we all ought to recognize that the dedication of the taxing power to the special benefit of a large segment of the population does amount to a separate economy, different in principle from the system in which people earn a living by persuading others, without coercion, to buy their goods and services.
It has become clear to most people that the tax economy has a natural limit. Being parasitic, it may eventually destroy its productive host. The argument of supply-side economics a few years ago was essentially that the tax economy was claiming too much for its own good. The supply-side approach was, in a sense, an attempt to reconcile the tax and trade economies by locating a community of interest in lower 3 tax rates. But this approach didn’t challenge the right of those who exercised the tax power to take as much as they wanted.
The tax economy is an economy the modem state has created for its own sake. More and more people are implicated in the tax economy and in tum use their votes to ensure that they will continue to live off what is produced by the primary economy of trade. Jobs, pensions, subsidies, grants, and other benefits keep flowing via the taxing power.
And the tax economy keeps adding new categories of recipients. The recent controversy over whether the National Endowment for the Arts should subsidize putatively obscene and sacrilegious art was conducted in moralistic terms; but seen from another angle, it was part of the process of including self-designated artists in the tax economy, rather than requiring them to make their living by the consent of those who might or might not pay for their work. What was established was that the taxpayers could not withhold their consent, no matter how strongly they objected to the works they were paying for.
Some early critics of democracy warned that popular self government would invite citizens to vote themselves money from the public treasury. For this reason, John Stuart Mill and others argued that anyone who received public money should be barred from voting. After all, a voter is, in a real sense, a public official, and a voter who awards’ himself others’ money is no different in principle from any officeholder who embezzles public funds. The availability of tax money for personal gain creates a potential conflict of interest for voters in general.
Far from seeking a safeguard against this abuse, we have come to accept it as normal. What responsible architects of republican government saw as a danger, modern demagogues have exploited as an opportunity. Franklin Roosevelt is said to have gloated privately that “no damn politician” would ever be able to dismantle what he called “my Social Security system.” It must be admitted that he seems to have been right: Social Security, the cornerstone of the tax economy, is widely regarded as politically “untouchable,” even though many or most Americans now regard it with some cynicism.
The beneficiaries of· the tax economy are everything the critics apprehended. Both major political parties cater to them; neither dares to challenge them, and there is no sign that either wants to.
The power of the tax economy has distorted our political system. But it has done more. It has also distorted the way we talk and think about politics. “Greed” is now spoken of exclusively as a vice of the trade economy, of investors, merchants, or even people who want their taxes cut.
But the state is never accused of greed. There is no limit to what it may take from us. And those who live on what is taken in taxes are never accused of greed either. Greed is virtually identified with the “profit motive.” We have no invidious term for the parasitic motive. The state and its clients are all but immune from moral criticism.
The structure of the prevailing prejudices revealed itself in the recent indignation against such Wall Street operators as Michael Milken and Ivan Boesky. To the extent that these men may have enriched themselves by fraud and sharp practices (a matter I can’t judge) they are, of course, indefensible. But the glee many pundits took in their downfall had nothing to do with illegal or unethical conduct as such: the real sin of the new tycoons was simply to have gotten fabulously rich. Their immense fortunes called forth a torrent of old-fashioned moralism about capitalist rapacity. Such is the mystique of the modern state that after a century of enormous wars, and of mass murder even in peacetime, we are still being warned about the dangers posed by Wall Street “robber barons.” Whatever the sins and sharp dealings of the less scrupulous capitalists, any sane man ought to see that the homicide rate among them is fairly low.
In fact our political system is guilty many times over of the sins imputed to business. Not only is the state’s greed boundless; its ethics are constantly being exposed as corrupt and ruthless. The two-party system is spoken of with reverence, as if two parties, like two sexes, covered all the whole range of desirable possibilities; when nothing could be more obvious than that a two party system is the next thing to a one-party system, rather than, as we are encouraged to believe, its opposite.
If any two corporations shared virtually the entire market for a product, colluding to set prices and shut out competition, liberal opinion would scream in outrage for state intervention. But when the state itself is in effect divided between two giant corporations, liberal opinion doesn’t demuras long as both parties accept the tax economy as a sacred feature of our way of life.
The two parties have gone far toward eliminating political competition even between themselves. In Congress the prerogatives of incumbency all but guarantee its invincibility: nearly every congressional district is now a miniature one-party system. Elections, notoriously, are becoming empty formalities. Fewer than one congressman in 20 loses a bid for reelection. The low voter turnout deplored by all right-thinking commentators is a perfectly rational reaction to a game heavily rigged in favor of the House.
And all this is appropriate to a political order in which power is increasingly held and exercised by the unelected: judges, administrators, appointees, bureaucrats of various descriptions. The salient feature of the trade economy is the utter and instant accountability of every seller. The salient feature of the tax economy is the unaccountability of every officeholder.
The ideological justification of the tax economy is its claim that the market is unequal and unfair. But if men in the trade economy are unequal in wealth, they are equal in a far more basic respect: they are equal in power, in that no man can force another· to be a party to a transaction if he doesn’t want to be. Put simply, they are equally free.
In the tax economy, men become unfree, and it is nonsense to dispute whether they are “equal” in their unfreedom. They are alt-forced to be parties to transac“ tions of the state’s choosing. It is also nonsense to say that they lose only “economic” freedom, since what they lose is the freedom to make concrete decisions as to their own future.
The tax economy, insofar as it undermines the trade economy, reduces all of us from citizenship to subjection; the state has power over all of us. Nobody is freer. You are either on the side of the state or you aren’t. But in either case, the power is beyond your control.
The tax economy makes us either dependents or defendants: we are dependents ifwe accept its booty, and .defendants, under constant suspicion of “cheating” the state, if we continue to earn our way in the trade economy.
Either relation puts us at the mercy of the state. And this is not a merely “economic” matter any more than slavery is a merely economic status.
