Taxes and Economic Breakdown

Monday, April 16, 2012
By Paul Martin


If a nation wishes to become prosperous, it must be free. America is the prime example of a free country becoming the richest country in the world. Toward the beginning of the modern era the Netherlands freed itself from Spain, and became prosperous. But as Spain languished under the Inquisition, all the plundered gold of the Americas could not save her from decline. In ancient times the Roman Empire suffered economic decline because freedom was curtailed under the later emperors. We see examples in history, again and again: if freedom is compromised, prosperity will also be compromised.

But how do we understand the term freedom?

Freedom which brings prosperity to a nation is distinctive, and relates to concepts of individual rights – especially property rights. That is to say, the individual has the right to his own person and his own property. In the private sphere, he may enjoy the fruits of his own labor. It is unlawful, under a system of political freedom, for anyone to deprive a man of his property without due process of law. “In this sense,” wrote the economist Friedrich Hayek, “’freedom’ refers solely to a relation of men to other men, and the only infringement on it is coercion by men.”

Hayek also wrote that freedom stems from political policy. Such a policy, he wrote, “must … be to minimize coercion or its harmful effects, even if it cannot eliminate it completely.” It should be added that a nation’s political policy may depend on its circumstances. Countries suffering from despotism, corruption, or mass poverty are unlikely to develop a policy of freedom. Also, nations at war may dispense with liberty. More recently, the welfare state has become an excuse for annulling freedom.

In his book, The Constitution of Liberty, Friedrich Hayek wrote: “The difficulties which social insurance systems are facing everywhere … are the consequence of the fact that an apparatus designed for the relief of poverty has been turned into an instrument for the redistribution of income….” In other words, government takes money from people who are targeted as “wealthy,” and gives this money to people the government designates as “poor.” The problem with this arrangement, says Hayek, is that it “brings us nearer and nearer to a system under which people will have to be told by authority what to do.” Such systems inevitably grow, becoming increasingly coercive, eventually “controlling economic activity generally.”

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