Recommended reading!

I came across this article by Walter Williams and thought that it is a perfect description of the benefits of capitalism.

"There are some arguments so illogical that only an intellectual or politician can believe them. One of those arguments is: capitalism benefits the rich more than it benefits the 'common man.'

Let's look at it.

The rich have always had access to entertainment, and some times in the comfort of their palaces and mansions. The rich have never had to experience the drudgery of having to beat out carpets, iron their clothing or slave over a hot stove all day in order to have a decent dinner; they could afford to hire people. Today, the common man has the power to enjoy much of what only the rich could yesteryear. Capitalism's mass production have made radios and televisions, vacuum cleaners, wash-and-wear clothing and microwave ovens available and well within the reach of the common man; thus, sparing him of the drudgery of the past."

The whole article from Capitalism magazine is here.

Flat tax

This is probably a subject that I will come back to several times, but I want to state my support for a flat tax in the UK. As a capitalist I do see tax as immoral, however, as a practical person I can see the potentially drastic level of harm that would come from a sudden withdrawl of government spending. Instead what we need is a steady withdrawl of government spending to a reasonable level and increased freedom for enterprise. How we do that is the question, one way would be just to lower the rates of tax steadily as spending is introduced, however, this still leaves the inequality in the present system of bands which would hurt the middle classes the most all the way down (well, most of the way down) and still leave the tax loopholes for the more well off. The proposal of a flat tax allows government spending to be reduced on a much more even level without these inequalities, and it also allows immediate tax relief to minimum wage earners, who are unfairly taxed at the moment*. The case for a flat tax is so easy to see when one looks at the countries which have already adopted it. Instead of plagiarizing the work of others, I will instead direct you to here at the adam smith institute. You will also find the flat tax article by Andrei Grecu here and by Richard Teather here. These articles are just a small selection of the convincing arguements for a flat tax, so why don't the government implement it?
That's an easy one! With a flat tax there are no loopholes for the rich to hide behind, but also there are no barriers for the government to hide tax increases behind. It is common knowlege that the Labor party said that they would not raise tax before the 2001 general election, what did they do right after? They raised national insurance, under a flat tax they would have had no chice but to have risen the basic rate of tax or not raise it at all. The two things have the same effect, but at least with the flat tax it's completely transparent.

* The minimum wage will no doubt be a topic of a future posts on this site, but I wish to say here that the present tax regime is proof of the lack of concern for the less well off by our government. The minimum wage is supposed to be the minimum wage that someone can be expeced to live on, therefore, in order for that to be true it must be the case that the whole of that wage is taken home, however, under the present system a significant part of that wage is taxed, taxed to help whom? If these are the people who need protecting, then why are we taxing them?

NHS

I had to go to the doctor today. As I live in England and don't have medical insurance (why have it when I am being taxed more for the NHS than medical insurnace would cost me, as we will see later) the doctor was proided by that wondeful institution we call the NHS. Now I'm sure that that last statement was read as sarcastic, and that you realise that the NHS is not a capitalist institution, so you probably expect me to berate the experience and say that the NHS should be scrapped in favor of private medicine. Well, I'm not.

I enjoyed my visit, the doctor saw me on time, he gave me very good advice. In fact, I have had to use the NHS numerous times in my short life, for several operations, some emergencies, some not, and all I can say is that the service I have recieved has been exemplary, no problems. Appart from those six years it took them to dicover that I had an alergy rather than the many other things they tried to blame. So do I think that the NHS is the example which can prove that centralisation creates a bad system? No, I don't, however, I do think that taxation is the wrong way to fund this system. As I had already mentioned I pay for my part of the NHS as al other UK tax payers do through national insurance payments on income. I also mentioned that the payments I make are more than that needed to buy personal health insurance. Why is this? Well, the answer is simple surely. I am not only paying for myself, but also for those others who are unfortunate enough not to be able to pay for themselves. How many of those people are there I wonder... Well there are approximately 1.5m people unemployed in the UK, so for arguements sake, let us say that those are these people, after all, children can be covered by their parents insurnace and the elderly should have savings with which to pay these costs. So that's 1.5m out of 60m people (59.6) or more correctly, 4.7% of economically active people. So that means that for every 21 economically active (working) people there is about one unemployed person. So the burden for those unable to pay medical insurance for themselves falls across 21 people. From a range of insurnace quotes online the average cost works out at £97.07 per month for fully comprehensive insurance with no excess covering the individual and up to 3 children as well, that works out at £4.62 for each of those 21 people in work.

The average pay (only data I could find) was £24,603 or £465 weekly. The national insurance contributions for this wage account for £41.14 a week in national insurance contributions, or £164.56 per month. That's £67.49 surplus above the individual requirement for insurance, that means that for every 21 people in work (using averages) 14 other people can be supported, at the current level of employment. Does this mean that savings are possible if we only taxed for those who are unable to pay for themselves?

Clearly this is a back of the envelope calculation, and the issue isn't quite so simple. The principle still holds though, taxation does not invite efficiency. Why create a cost efficient service if the revenue is guaranteed? A mostly private system would have a direct incentive to improve efficiency, that would surely benefit us all.

Kanye West

Kanye West is one of my favorite artists at the moment. One of his songs, Jesus walks, is one of my favorites. One of the lyrics in the song caught my attention today though,

" To the victims of Welfare for we living in hell here hell yeah"

What does Kanye mean by 'the victims of welfare'. I can't imagine he means the tax payers whose liberty is eroded to fund the welfare, it is quite obvious that he means those Americans who are in the unfortunate situation of relying on welfare payments. But hang on a minute, what does he mean by victim? Surely this redistribution of wealth is a benefit to those people on the recieving end?
The basis of economic benefits from capitalism are often attributed to Adam Smiths' 'invisible hand'. This invisible hand is the process by which individual profit seeking creates an economic order which is beneficial due to the economic benefits from those things from which a profit can be derived. i.e. a factory owner only owns the factory to obtain a profit from the products which it sells, a profit which he wouldn't get without the factory, in return this creates jobs, both in the factory and to other people employed by other profit seekers supplying the factory. The world is also better off because it also now has the products which the factory produces, i.e. wealth is created, not just for the original owner of the capital (the factory owner) but also to those people who recieved the jobs etc. The one arguement against this is when the capital is used to seek a profit from which no wealth is also created, this doesn't often happen, but welfare is one of those things.
In the welfare system the capital owners (the part of the population are taxed) are forced to provide capital to help the unfortunate people in the society. This 'altruistic' act is all well and good until we examine it a bit more closely. That capital which has been forcefully placed into the welfare system is now unavailable to the economy, therefore less jobs can be created through investment. Also it benefits people not to produce, as the lack of a job can create entitlement to benefit payments. Therefore at one end of the scale we have less capital to create jobs, and on the other end of the scale we have less incentive to seek a job. So who are the victims of welfare? We all are, every single one of us.

Day one

What is capitalism?

I hope by reading this blog the average reader will be able to answer this question. I am not going to provide a dictionary definition. I will say this, however. Capitalism is the economic and political ideology which holds a its forefront individual freedom and liberty. At least that's what it means to me.

In this blog I am going to comment on news reports and events in my own life which invite discussion from a capitalist versus socialist perspective. Hopefully this will allow us all to gain a greater understanding of capitalisms' true meaning. I am not a student of economics let alone an actual economist, so my views are very uneducated. I do read, however, and I believe that I have been able to gain an understanding of capitalism and economics. Because I have not been educated on this subject I may occasionally get things wrong. If you do notice an error, please either post a comment or email me, I can't promise I will cange a post, but I will do everything I can to acknowlege the mistake on this blog.