Ban Communism
Published by sauvik December 31st, 2005 in Economics, Stimulants, PhilosophyHere is the full, unedited text of a provocatively titled piece I wrote for The Times of India.
Communists despise private property and idealise commonly held property. But I’ll bet Brinda and Prakash Karat don’t share a toothbrush! So let us conduct a “reductio” thought experiment as to what would happen in a city or town if private property were abolished and all property declared to be held in common.
Well the first thing that would happen is that everyone would stop working. If someone needed something he would simply go to the house or shop where the object of his desire was located and demand it in the name of communist brotherhood. “How can you refuse me, comrade?” he would ask, “for we are all brothers now.” Within a few days of the establishment of the communist fraternity, all shops would be stripped bare, as would be all the mansions of the rich. All economic activity would come to a standstill. The redistribution of all property in the name of communism would lead to the “leveling down” of all the members of the commune. Further, instead of the polite civilization that existed previously, bound by the “natural law” of private property rights, the commies would soon descend to barbarianism – snatch, grab, loot, scoot.
Observing markets easily reveals the natural law of property at work. When a fisherman returns from the sea, no one forcibly takes fish away from him because the ocean has not furnished him with a title deed to his catch. No one snatches bananas from any of the millions of fruit vendors throughout India – except for cops and monkeys. Look at any big market and you will see thousands engaging in the great game of trade, respecting private property rights. If this natural law was overthrown, man would be reduced to the status of ape, snatching bananas instead of paying for them.
Indian commies do not practice what they preach to the level of the above reductio ad absurdum. They idealise some supposedly commonly held properties, especially the state-owned industrial sector. However, these are all really “private properties” in the control of individuals or groups claiming to represent the public. The minister’s official bungalow is his “private property”. Wee (sic) the people cannot enter it freely. The PSU is the minister’s fiefdom. Neither are “common property” in the sense that the term would be used for a public thoroughfare or a public park, which all can use. Thus, communism is so totally wrong, it should be banned.
47 Responses to “Ban Communism”
- 1 Pingback on Jan 1st, 2006 at 8:31 pm
- 2 Pingback on Jan 6th, 2006 at 12:40 am
Sorry are you sure you know what communism is acutally about??? It is about the collectivization of means of productions, nobody wants to take private property from anyone. if there is a “natural law of private property” for what does it apply? You want to privatize access to oxygen in your ountry also? Things like land, water or oxygen are probably not private property of anyone, because it is a quite stupid idea. Did you build the piece of earth when you claim the right to posses it? Stealing collective property was one of the severest things you could do in the former soviet union, the “plundering” started in 1991 and was called “privatization” because people started “selling” oil for a handful of dollars, this was only illegal and hardly any of these trades was fair. So what is so wrong when democratic countries set up democratic plans for their economy? Thats really all communism is about, no one wants to take anyones toothbrush, his pets or his car, this is simply ridicoulous
Any ideology that shuns the individual will fail miserably. So, let’s cut the rhetoric and stop finding warmth under the collective blanket, for it does not exist. Go get your own rug. Sir.
Communism is a based on a impractical, unnantural ideology of equality amonst all. But the truth is every human being is different from one another in ‘n’ numbers of ways like Birth, Education, Effort, Culture, and so on.
It doesn’t take into consideration of the extra effort put forward by a interprenure in setting up a business rather it is much more interested in going via a much more populist-way of fighting for worker’s right. The paragdism shift of China’s economy is just another example how faliure is the basic comunistic model. They are rather moving towards a capitalistic-dectatorship model slowly.
Comming into indian communist, they don’t know anything except crying whenever there is an effort of privatize old-rusted-public corporations. They only care for their vote banks i.e. industry workers. Yes there is yet another characteristic of indian commuinsts. They know how to take a day rest by organizing a strike. If anyone has a remote experience of WB (like me …) you can easily understand how dirty is communism here. Around 30-40 yr of rule and no developments.
India don’t need communism. We need intrepreneur who will take india to its rightfull place in 21st century. And obviously we can’t do it by organizing bandhs and gheraos … Can we ????????
I will not use the word moron to describe the author’s assuptions.
With opponents like this writer, no wonder communism is still alive :-).
Instead of creating and then felling straw men why dont you first figure out what exactly you are talking about.
This is in response to Hans Mittermaier:
The problem with communists and socialists and protectionists is that they are inconsistent. That is, they start with a wrong principle and them, seeing it is ridiculous if stretched to the limit, want to restrict the operation of the incorrect principle. Hans wants the “means of production” nationalized, and does not favour property rights in land, water and “oxygen”. Actually, oxygen is manufactured by private companies for hospitals. There are also “ozone bars” where people can breathe clean air. Land shows up a patchwork of ownership rights which only individual rights can secure: the partition of India, based on collective, religious identity, therefore saw millions losing their properties and lands. Water, if it is to be an abundant resource, requires private ownership rights, as do oil-fields. If both remain with the state, there will always be monopolistic exploitation and scarcity.
Note how Hans takes recourse to “democracy” to justify “planning”. Actually, living in free market Hong Kong, without democracy, is far preferable to living in “socialist democracies” like East Germany and India, at least as far as economic life is concerned. Illiberal democracy is the worst form of government ever invented. As far as the “means of production” are concerned: the purpose of the law is to secure individuals in the ownership of their properties. The law, when it takes property away, engages in “legal plunder”. Indira Gandhi nationalized Air-India, all the banks and all the coal mines – so what? Did it yield a workers’ Utopia or did favoured bureaucrats and sycophantic party workers get control of Air-India, the banks and the coal mines?
“Reductio ad absurdum” is a philosophical technique to show errors in thinking. If “common property” is such a ridiculous concept at the level of husband and wife, we can imagine what will happen if all the “means of production”, all the land, the water and everything else became “common property”. It would be a very horrible place to live in for anyone who is not a high-up in the Communist Party.
come on, thats too far fetched….though i am starkly against communism, this is too far fetched…and sets you think in all the wrong directions…
Dont be retarded Sauvik.
That is, they start with a wrong principle and them, seeing it is ridiculous if stretched to the limit, want to restrict the operation of the incorrect principle.
Don’t Libertarians suffer from the same problem? They do want regulatory bodies to enforce private property. Stop inventing your own definition of communism and attacking it. This is one of the most idiotic posts on AnarCapLib ever.
I must insist that libertarians do not want “regulatory bodies to ‘enforce’ (sic) private property”. Libertarians will all individually defend their own lives and properties, and when they combine to make a “common law” all that they will ask of the law is that it secures ownership: there should be no “legal plunder”.
Also, please leave snide reamrks out. If you call me “retarded” I could very well address you as the village idot.
I do not agree with a number of assertions you have implicitly made, including the following :
1) Communism is based on the idea that all properties should be held in common.
Both communism and Socialism is based on the idea that means of production should be collectively owned. A collective property is very different from a common property.
2) A property is held in common means it’s up for grabs.
Not true. You can use a common property as much as you wish without taking anyone’s permission, but you are not allowed to earn Ricardian rent from it. This restriction determines the user when the supply is scarce, not state. Only for super-abundant things like water and oxygen there is no rent, and being a common property is same as being freely available to everyone.
3) Saying that land is held in common is same as saying state owns the land, and this is essentially a communist idea.
These two things are completely different. Also, the idea that land should be held in common originated from classical liberals, not communists. Many classical liberals, including Adam Smith, Locke, Paine, Mill and Henry George advocated this view in various degrees of generality. This is one of the very few areas where minarchist libertarians strongly oppose classical liberal view.
I am calling you retarded, because you are being retarded and this is the worst post on AnarCapLib ever. Feel free to call me the village idiot.
Libertarians will all individually defend their own lives and properties, and when they combine to make a “common law” all that they will ask of the law is that it secures ownership
Gasp!! Did I hear the word government and law enforcement?! Or may be every 1$/day earning libertarian will “individually” defend their property from a 1B$/day earning non-libertarian. Nice and sweet.
Face it, libertarians live in the same kind of utopia that communists do. Neither of the two “philosophies” is getting anywhere.
resposne to sid:
communists started “collective farms” where workers lived in “communes”, sharing everything. this is what deng xiao ping first reversed in china in 1978.
the main point is that these “collective farms” and all other “collective enterprises” were the “private property” of the communist party. workers got cheated. they lost their private property and their liberty too.
private property offers every INDIVIDUAL a sanctuary against the world, including the state. any ideology that sacrifices the “I” to the “We” ends up making the “I” into the “wee”: the individual loses everything.
The Anal-Crap-Glib Cartel strikes again !
Who will save the poor commies from the
wrath of anal-crap-glib bloggers ?
Well one thing guys the only place you
Anal-Crap-Glib guys will experience any power
is in this make believe virtual world.
Enjoy it while it lasts.
Wow, Indiacorporatewatch - did you come up with “Anal-Crap-Glib” all by yourself? How original! Why, Yaz and the rest might as well surrender right now to your cutting wit and biting intellect.
Have been debating communism’s ideals myself for a long time!
Sauvik, you are absolutely right when you say that their ideals are too good to be practical. But you see, impracticality is itself the bais of communism - “Communists believe that everyone is an economic being i.e. a rational person”.
As Adam Scot of the Dilbert fame says that -”Most of the time in a day a person is an idiot”; we rarely act rationally and this is the basic reason for the failure of the ideolgy the world over. (Even Ayn’s writing talk about people as parasites, because that is what practically we are.)
Now, If you can see the other side, say, if everyone behaves rationally, isn’t communism the best thing which can happen.
I am really afraid that the ideology itself is in the hands of people whom Ayn has beautifully depicted in her writings. Propogating ideology itself is not going to do any good rather concentrating on its roots i.e. Rationality would actually make this world a far better place.
I really liked the way you pour yourself out. Your comments on this would be pretty helpful. Thanks for the wonderful article.
Manish
I am not a commie-sympathizer, I was only objecting to the AnCap idea that privatization of nature and individual freedom are closely related. One should not confuse a privilege with an individual right. Any individual right is universal, it is a right you get for just being an adult individual. If a right is enjoyed by a specific set of individuals, then it is called a privilege. The individual rights classical liberals proposed (self ownership, equality before law, right to keep fruits of your labour, right to be left alone, right to exchange goods with others etc.) have one property in common : if you get one of these rights you do not prevent others from having an identical right. A simple logical deduction will tell you that all individual rights must satisfy this condition. Private ownership of land is a completely different matter. A right to have an unequal share of nature’s gift is not an individual right, it is just a privilege. The morally bankrupt idea that we should defend such privileges has got nothing to do with individual liberty.
re: manish saini
we do not assume ‘rationality’. of course, we should not, since to err is human. however, we assume that people are ‘purposeful’ and ‘goal-oriented’ but because of imperfections in information - we don’t know so many things - we end up being constant ’speculators’ (or gamblers). this model of individual man as an economic actor is much closer to reality that assuming strict ‘rationality’.
re: sid
as john locke said, whoever ‘mixes his labour with the original soil creates property’. the nomad who cleared the first field did just that. property in land is never in common; rather, land shows up a patchwork of individual property rights. disturbing that is unthinkable.
anyway, in the modern, fast-urbanising world, land is no more an important ‘factor of production’. anyone would prefer a two-roomed flat in a city to 5 acres in a remote village. by 2050, it is forecasted that 85 per cent of the Earth’s population will be urban - occupying just 7 per cent of the land. the more important ‘factor of production’ for the future will be TIME. think about that!
further re: sid
if all the land was under “communal ownership” and there was no longer this “patchwork” of private property rights, there would no longer be any “economic price” for land and no central “knowledge commission” could substitute the real estate market. our habitats would disintegrate. this is exactly what has happened in india, with the state owning all the land, all the ribvers, all the oil, all the minerals etc.
under anarcho-capitalism, there woiuld be lots and lots of “unowned land” which any “first claimer” could appropriate and “mix with his labour” and claim as private property - all over the world. most of us would have two or three houses, and some cabins in the wildernesses. we would all have properties if the state didn’t have any. indeed, there is a strong case for restricting all state buildings to rented spaces, as the state wastes property, if the headquarters of the planning commission in delhi, yojana bhavan, was sold, it would make an excellent, well-located supermarket.
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Sauvik, Thanks for your response. However, I do not find it satisfactory. You said that as a factor of production, land or “nature’s gifts” are not so important. Instead of using land in the vernacular sense, just put “land = any resource which is not man-made and used in the production”, and “contribution of nature’s gifts to the economy = total rent earned by such capitals”. This contribution is considerable in any economy, and it tends to increase as people move to urban areas (aftr all, locations are not man-made). Since such rents are not payments to any form of productive effort, somebody’s right to earn an unequal share of it is still an unjustified privilege.
You seem to suggest that if we want to distribute such rents equally, we have to shift to command economies. That is not quite correct. The key point is that ownership is not a single right, but a bundle of rights. It includes
a) right to use
b) right to prevent others from using it
c) right to transfer
d) right to earn economic rent.
A resource is privately owned if an individual has all these rights. A free market economy does not require such a strong form of ownership for resources which are not man-made, individuals having a) to c) is good enough. Furthermore, equal distribution of rent from such resources will not have any negative effect on the production of goods and services.
So, contrary to what AnCap philosophy says, unequal distribution of “nature’s gift” can not be justified on moral or consequential grounds.
if you disallow rent, poor people who do not have homes or lands to cultivate will suffer the most. in britain, in the 14th century itself, the common law protected tenants during the term of tenancy, and did not allow tenanted fields to be usurped either by the owner or anyone else, so as not to disturb the tenant. this is the single reason why britain was the first country to move from feudalism to capitalism - it explains the ‘mystery of capital’. even tenants could raise capital from banks.
nature’s gifts are always unequally distributed. some are born in parched sus-saharan africa, aren’t they? some have great looks, some a powerful intellect, some a great voice. some lands are more fertile and they cost more. the only point to remember, which bastiat pointed out, is that trade and exchange ‘equalises’ nature’s inequalities. to quote his example: the proprietor of fertile fields pays more per acre of land than the proprietor of less fertile fields. thus, if i have 1 lakh to invest I could buy 2 acres of fertile land, or 5 acres of less fertile land, and so on.
Thus, it is completely just and moral to take into account ‘unequal distribution of nature’s gifts’. and to let private property tights rule absolutely over them.
I did not use the phrase “nature’s gift” in a loose way. Since most natural resources are capital goods, the actual nature’s gift is the wealth generated by them, i.e., the economic rent earned by these resources. “unequal share of nature’s gift” means unequal share of this rent, it has got nothing to do with the size, weight etc. of the resources. The fact that two plots of different size can be traded is completely irrelevant here. Also, things like talent and good looks are not natural resources, and your right to have them comes from the fact that nobody’s chance of being ugly increases if you have great looks.
Imagine a market economy where government tries to collect as much revenue as possible by imposing a heavy tax (say 90%) on rents obtained from natural resources (land, locations, oil fields, mines ), and then re-distributes that money among all citizens. This particular tax will not have any negative effect in the market, but the privilege of landholders will disappear. Since it is impossible to oppose this tax on economic grounds, the objection that any effort to achieve equal distribution of “nature’s gift” will reduce or destroy the efficiency of the economy, is completely baseless.
The “first claimer” theory of land ownership has some serious drawbacks. To begin with, individual rights can not be transfered by force (If you make somebody your slave by force, ownership of his labour does not become your individual right), and privileges do not become an individual right if it is sold (if you sell your slave to me, ownership of his labour does not become my individual right). Now consider the fact almost all land changed hand several hundred times after your nomad mixed his labour and claimed it, and many of these changes were made by force. So, even if we grant the original nomad’s right to his land, present landholders have absolutely no moral right to their property.
Now if can not justify private property rights on moral grounds, you can not differentiate a landlord from a micro-government. After all, a government is nothing but a group of people having some monopoly over initiation of force in a specific territory. The fact that micro-governments are frequently bought and sold in the market (and a large minority gets a chance to exploit fellow citizens through them) hardly matters. It is true that landlords use a different language (rent instead of tax, contract condition instead of law etc) but that does not change anything. Since in most countries top 5% of the population own more than 75% of the land, it logically follows that the de facto goal of the AnCap movement is to replace the existing big governments by millions of micro-governments, each under a complete dictatorship.
One interesting fact is that our good old commies had the same world vision. They used words like “communities” and “dictatorship of proletariat” instead of micro-government and dictatorship of the community leader, but it boils down to the same thing. The socialist big government was supposed to wither away after a short time, which never happened. Poor commies moan about it all the time. So the entire AnCap philosophy is nothing but the original communist fantasy, packaged in a completely different way. When two farms try to sell the same product, they often use very different packaging and aggressively attack each other. This is also quite common in the “government market”, where various political philosophies compete with each other to get more supporters, and people often fail to see through their own rhetoric.
Libertarians would never attempt to ‘equalise’ nature’s bounty by imposing a 90% tax on landlords. to libertarians all tax is theft, and commies who suggest using the law to plunder one class to benefit another are but rabble-rousers.
as I said, times have changed, and land is no longer an important factor of production. Today, time is the more important factor. poor peasants already prefer tenements in cities to acres in villages. If India urbanises aggressively, these poor peasants will not remain in rural india as cheap agricultural labour. then, landlords will have to pay higher market-determined wages to those who remain.
private property anarchism does mean private property and ‘private law’ (of the property owner) within that property. Thus a dance bar owner makes his own rules about how the ladies perform and who in the audience should be chucked out. but this does not become ‘micro-government’ in the sense that the commies, with their rural emphasis, say. commies want rural communities wherein the micro-governmental powers are exercised by community leaders. or else, by heavily taxed landlords.
to libertarians, the future is urban, and issues like exploitative landlordism are from the long-gone past. indeed, india’s refusal to urbanise for 60 years is the main reason why so many are tied to the farm. this has led to the ‘re-enserfment’ of rural peasants. commies achieved nothing but take them all along ‘the road to serfdom’.
i hope the reader now sees that we libertarians certainly do not share the same ‘world vision’ as the commies. if we say ‘micro-government’ then we apply the principle of ’subsidiarity’ and keep maximum powers at the lowest level - like the Mayor of a city or town. In no sense did communism anywhere achieve any kind of ‘micro-government’: since the Communist Party is centralised and heirarchical, the State set up by the commies was always also centralised and heirarchical. Libertarians despise big central states and aspire for a future like the “Hanseatic League” of free trading and self-governing cities and towns. Commerce, peace, no taxes, and very little ‘government’ other than Mayors, local courts and local police.
Sauvik: I don’t think your response addresses what Sid is saying. His analogy of microgovernments is spot on.
Sid: Excellent points.
Reg. microgovernments, the thing to note is that a free-market economist/AnCap does not have issue with absolute control per se.
The economic issue that is paramount is “incentive”. Is the microgovernment incentivized to use the resource optimally?
Here is one issue with distributing away the economic rent from natural resources: most of the economic rent comes from (skilled) labor of man and his efforts to improve the technology involved in extracting economic rent from the resource.
e.g. if you take mines, clearly in 2005 one is able to extract more ores more cheaply than in 1005. How do you incentivize this if you would distribute away all economic rent from the resource?
The most important resource is human capital; and prosperity arises when this human capital is unleashed on available natural resources. It is not clear whether you can decouple them the way you are attempting to do.
The essential libertarian point is that if you tax the mineowner at 90 per cent and redistribute the money among workers, it will hurt the long-term interests of the workers themselves. This is because, while the mine-owner would have saved a great deal of his income in order to invest even more capital in his mine, the workers will surely dissipate their windfalls on consumption, saving nothing and investing nothing.
Long-term wage increases sorely depend on investments in capital. The communist/socialist redistribution of wealth (call it ‘rent’ if you like) will only lead to the stagnation of real wages and continued worker impoverishment. Chasing the chimera of ‘equality’ is therefore counter-productive. The rich are good for the poor.
Savik, are you saying that concentration of ownership of capital is essential for investment?
I’d say the ownership part is irrelevant; it is only the concentration of capital that is required.
Thus we have the existence of banks and capital markets and bonds and other such financial instruments to aggregate distributed capital for investment.
Perhaps in the olden days, in the absence of such financial instruments, such ownership concentration might have been required, but not now.
i am just saying that inequalities are natural. commies hate that and want to equalise everything. but their utopia never happens. libertarians want to recognise ‘just’ property titles and leave it at that.
there may be banks and investment companies, but savings are private. with heavy taxes on the rich, the proceeds of which are distributed among the poor, savings dry up. therefore little is invested. workers find wages stagnating. productivity also stagnates. the nation sees low or no growth - no utopia at all. where private property and markets could have gradually ‘levelled up’ everyone, communism and socialism ‘levels down’ everyone.
To Sauvik :
1) It seems you are completely unaware of the difference between an income tax and a tax on economic rent. A 90% tax on the economic rent earned by a mine is different from a 90% tax on income of the owner of that mine. Taxes are not zero-sum wealth transfer games, different taxes affect the economy differently. If you fail to understand this, there is no hope of having an intelligent debate here.
2) You are putting words in my mouth. I said government should try to tax away something like 90% of the total Ricardian rent generated by the economy, and distribute it equally among citizens. I never said it should be done individually for each mine and the collected tax should be distributed among workers of that particular mine. Btw, this is not even possible if the labour market is competitive (do not trouble yourself too much if you can’t figure out what it means).
3) The idea that someone’s legitimate claim to a certain amount of wealth can be ignored if it does not lead to capital formation is a brilliant one. Both Stalin and Mao would have done more justice to it, but even now we can try our best. There are millions of poor people in India who earn a bit more than what is absolutely necessary for survival. Somebody should definitely snatch their extra income and distribute it among investors. This will put an end to their annoying habit of “dissipating wealth” by having a good meal once in a while. If people start saying things like individual rights, we can always shoot them. What do you say Comrade ?
To Seven_times_six
Thanks for your response. I have to go somewhere right now, but I will definitely get back to you.
Sid: your economic rent on natural resources as a moral imperative begs this related question,
what about economic rent on capital itself?
I ask this because capital is typically a placeholder for actual tangible “natural resource” assets, e.g. if I have 1 billion dollars I can buy one billion dollars worth of land.
But this association with natural resource typically occurs indirectly. Basically I would “invest” the one billion dollars in a company, and extract economic rent from the profits of the company (which would use natural resources etc.)
From what I can understand, your morality claim seems to strike at the root of investment itself.
That the profits from investment do not morally accrue completely to the investor.
There is more than a grain of truth in this; I’d be very interested in a discussion on this.
In the earlier comment, the first couple of sentences should read: “tax on economic rent from” instead of just “economic rent on”
I am afraid the Mr Ricardo took Classical Economics down a very wrong path and provided too much ammunition to Marxists. Thus, Piero Sraffa, the last surviving ‘planner’ is a Marxist-Ricardian.
What I would like Sid to clarify is this: How does a poor man have a “legitimate right” on the wealth of any rich man, such that The State and The Law must be used to “redistribute” this wealth?
Ricardian rent is as slippery a concept as Ricardo’s “Iron Law of Wages”.
Sauvik, reg. Sid’s morality claim; here is what I understand out of it:
Natural Resources/Capital yield a certain economic-rent/wealth to the person wielding it; in other words it enhances the capital and natural resources he wields (in an absolute as well as relative sense) WITHOUT ANY input of human resource.
While everybody can agree that all of the rent from input of human resources should morally accrue to the person, it is not clear why this COMPOUNDING effect of ownership priveleges should be considered moral.
To give an analogy: imagine a running-race event with the caveat that the lane of the guy in front has a forward conveyer belt (i.e. gives him a speed advantage compared to the guys behind him).
Do you think this is moral; do you think this gives just rewards to the action of running as fast as one can?
Simply put: Sid is saying that there is something wrong if all property is organised along the manner in which Nature has decreed it. There is something wrong with man owning property (or just land) and the Communist Party must step in to take some money from the rich and give to the poor. This is, their “plan’. Of course, these madcap plans don’t work. As Bastiat put it, “The plans differ; the planners are all alike.” Nehru too didn’t like Nature and Natural Law and proposed his own ‘plan’ of state-directed industrialization as a way to better Nature. Indira Gandhi socialised lots and lots of private property - she ’stole’ all this. Anyway, in India, the State is the biggest landlord: and operates a real estate monopoly. State-ownership of land has become an ugly racket, typified by Delhi’s DDA localities and their Communist architecture. Get real, Sid.
To Sauvik :
Your response is based on the following ridiculous assertion :
“An argument using a technical term named after somebody is completely false if that person had a few wrong ideas.”
In case you are confused, Ricardian rent simply means the economic rent generated by natural resources. It is just a definition, nothing more.
Btw, Ricardo never proposed any scheme of dividing this rent equally among all people.
To seven_times_six :
Underlying philosophy here is “keep what you make, give what you take”. So there is nothing wrong in having an unequal share of capital which is man-made. Such capitals come from savings, and the interest comes from what others are willing to pay for it’s temporary use. So your right to earn interest directly follows from your right to keep, save and exchange fruits of your labour.
Important thing to note is that wealth is produced by a combination of human effort (which includes labour, skill, knowledge, entrepreneurship) and material universe (which includes resources like land, locations, oil, minerals in their unimproved state). A free market distributes the wealth among various resources according to the law of supply and demand. Your salary, profit or interest is basically what others are willing to pay for your service. It can be unequally distributed, but it is completely justified as soon as you have the right to own yourself.
Part of the wealth that is generated by material universe is very different. Since you did not produce the material universe, why should you get an unequal share of the wealth generated by it ? If nobody has the right to get an unequal share, it logically follows that it should be equally distributed among everyone. Putting a heavy tax on this wealth, followed by an equal distribution is perhaps the best way to do it.
a farmer’s fields, a mining company’s mines, the fisherman’s ocean, the oil company’s oilfields, the timber company’s forests - all use ‘natural resources’. these people earn income from their natural resources. what exactly is the ‘rent’? how is it to be measured? how is it to be collected from all these diverse people?
i must add that sid’s definition of ‘ricardian rent’ is circular. He says: “Ricardian rent simply means the economic rent generated by natural resources. It is just a definition, nothing more.”
He uses the term ‘rent’ to define ‘rent’???
what kind of nonsense is that?
Sid:
Natural resources is equivalent to capital: what is money but an exchange instrument? If a natural resource; say a mine; is worth z dollars, that takes into consideration the rent obtainable from it, because that is the amount that is set by the demand for it.
So how can you say that rent from a natural resource can be taxed but not from investment? It is not logical.
Even if it was; as Sauvik pointed out, it is not practical.
One question that can be asked is the one I posed: can the compounding effect of capital be taxed away?
I should mention that I do not just mean interest from investments here. Investments involve risk and other human resources that should have a reward.
What I’m saying, if I should say it one sentence, is that the reward of sweat equity is not as much as the reward of capital equity. There seems to be a lack of moral validity in this.
One unstated assumption in all of this is that mineral resources can be treated as fixed. Historically, for the U.S. anyway, estimates of the amount of mineral resources in the country tended to increase: scarcity from mining increased the incentive to dig deeper into the earth, hire more mining engineers, and blast away more rock. Treating the profit on mining mineral resources as unproductive “rent” will dampen incentives for the discovery of more resources and ultimately, make all of us poorer. Mining is a risky activity that requires huge capital and research expenditures and is only viable when the possibility of earning large profits exists.
As far as taxing land rents is concerned, this has been proposed at various points in history but seems to me to be a side-show. As societies become increasingly more urbanized and non-agrarian, the revenues from such a tax won’t amount to much in economic terms. Additionally, they will have perverse incentives such as forcing otherwise profitable farms to close down and increasing food imports beyond what they would be otherwise (people who proposed land taxes in the past thought in terms of an economy without trade). For urban real estate, it is simply impossible to separate “rent” from land and rent from buildings.
To Sauvik :
Defining Ricardian rent as a particular type of economic rent does not lead to circularity because definition of economic rent does not involve Ricardian rent. Since definitions of various types of rent are irrelevant here, we do not need to go into them. Annual ricardian rent of a plot of land (or any natural resource) is the amount of money that can be earned by renting it for a year. It gets determined by the free market, there is no ambiguity here.
Collection part is a bit more difficult to understand since one has to think without the concept of private property. So first let us consider a toy model. Suppose we have a village with 10 farmers, and one very fertile plot of land, which can be used by only one farmer.
1) Private ownership : One farmer claims the land saying that he has mixed his labour with the land. He rents it to the best farmer, who is willing to pay the maximum. Everybody else starves. However, the maximum efficiency is attained here.
2) Collective ownership : Farmers form a committee to decide the user as well as the distribution of the output. This system will be highly corrupt as well as inefficient (The best farmer might not be the user, or he might not have enough incentive to use his full potential).
3) Land is held in common : Nobody owns the land in the usual sense. The village holds an auction annually, the winner gets exclusive right to the land for a year. The money collected from the auction gets equally distributed among everyone including the highest bidder. It is obvious that this system is efficient and everybody gets what they deserve, which is one-tenth of what he is ready to pay to the community. If you win the auction you are giving 10% to yourself, if somebody else outbids you then you are getting more than that.
If you look at the entire economy and the entire population, a heavy tax on ricardian rent is just a replacement for this auction. A couple of simplifying assumptions are hidden in this example, and the community is being able to get 100% of the ricardian rent. In the general case these two factors will come up but about 80%-90% of the total ricardian rent can still be collected.
so now sid’s ‘ricardian rent’ is just ordinary rent as we understand it!
in that case, the highest rents are earned on urban land. no one pays lakhs to rent a mustard field in some remote village.
i hope sid will agree that the state monopoly on real estate and roads has made urban landowners rich and impoverished the poor.
so once again we come back to the fact that roads should get top priority. and that property rights should be given due respect. this, with free trade, is the only way to better the lives of the poor. “Rural development” and “urbanisation” are two sides of the same coin. “Rural development” without roads and property rights, in a closed economy, all because of leftist thought, has been an unmitigated disaster.
sid’s die-hard defence of communism is so full of holes that there is nothing to gain by discussing his ideas further. i hope he will treat the chapter as closed and join us all in calling for a ban on socialism, communism, hindutva and all collectivist creeds. then we will have achieved the ‘liberalisation’ of politics, and various shades of liberals - and liberals only - can occupy the political space, all unitedly standing up for individual rights, individual liberty, private property and free trade. thereafter, they can have differences on welfare, warfare and other such ‘political’ issues.
sid’s die-hard defence of communism is so full of holes that there is nothing to gain by discussing his ideas further.
Is this just a copout?
Where’s the “die-hard defence”? Among other things, I recall Sid using this just a few lines above: “It gets determined by the free market…” Which die-hard defence of communism would include such a statement?
Where are the holes?
This was an interesting discussion. What a pity that it came to an end suddenly because you lost interest in further debate.
I do have a broader question, though. what does it mean to “ban” communism? (Or anything). How does that square with the pursuit of freedom that’s such a precious tenet? How do you “ban” an idea, however repulsive it is?
Good points about natural resources.
What about intellectual property? Software..eg?
How do the communists propose to collectivize intellectual resources?
And why is the ’state’ the best judge?
Is the collective decision of a group of people the ‘correct’ decision?
The Germans voted the Nazis into power based on their collective wisdom. Collective wisdom and the intellectual capabilities of a group is predicated on the belief that the majority is right -so let us stifle individualism. This is without basis. But it is what commuism or democracy is all about,nevertheless.
Personally I want to live in a real Republic,where the goverment is small and is a servant rather than the guardian of the electors.
Pravin
i will use the word “moron” to describe xx. xx is a moron.
separately, why do communists/socialists and islamists get along so well?
hello ur crazy u shouldnt want to hate something you dont know about my teacher just gave us an assignment on communizm and i thought it was crazy, but when i read more about it i was amazed. They share everything. Its a communitie that share EVERYTHING. From there food, fruniture, clothing, dwelli ng EVERYTHING. But nOt personal things LIKE A TOOTHBRUSH