Thesis Number: #2 (Page 7 of 8)
Learn, or Lament
Those who cheat taxpayers with fraudulent claims bring disrepute to a humane system of welfare. But if there is to be a critical re-examination of entitlements, every instance of rent-seeking should be interrogated for its impact on society.
The state of dependency
Social psychology is tainted by the something-for-nothing culture. People bias their choices in favour of the quick buck instead of the total satisfaction from creative activity. New generations are schooled into believing that the private appropriation of rent is “normal”. Politicians accept the advice of post-classical economists, that rent must not be treated as a unique flow of income in the nation’s accounts.
Thus, individuals behave rationally when conform to the incentives provided by the law of the land. So: I may withhold my parcel of land from use, to constrict the supply and raise its price. This may have grievous effects on others (unemployment, unaffordable housing, waste of capital invested in urban sprawl), but my behaviour is driven by incentives sanctioned by the law of the land. We are all consequently trapped in a state of dependency: dependent either on rents from land, or income transfers from the Welfare State.
The State is weakened
Public institutions are weakened as governance is compromised by biased fiscal policies. Because the public’s pricing mechanism prevents governments from balancing their books, indebtedness is endemic. Sovereignty is compromised by the need to appease creditors, and the public is alienated by the ensuing tax burden: witness the débâcle in Washington DC in October 2013, when government was shut down over disputes related to tax and debt policies.
Politics is brought into disrepute as politicians seek refuge in language that deceives. Take the case of unemployment. Politicians prescribe the need to create jobs to stimulate the production of wealth, but investors know that the name of the game is not value-adding, but value-grabbing. The world’s largest property fund spelt out the reality in these terms: “Investors are more and more accepting real estate as a long-term home because it is hard to get yield elsewhere” (Hammond 2013).
The economy is compromised
In the West, value-adding enterprises are becoming survivals from a bygone age. The quest for profits is now largely focused on land-based activities that maximise yield from the rents extracted from nature and society. Distortions arising from fiscal incentives reduce the returns to labour and capital and render the economy vulnerable to foreign competition. But foreigners are not to blame: the enemy is within. Take the case of Germany, riding high as Top Dog in the EU. Following the financial crisis of 2008, it endured a residential property price boom that threatens to infect it with the Anglo-American virus: real estate speculation. In some cities, apartment prices rose by more than 25% between 2010 and 2013 (Steen and Ross 2013). Germany’s value-for-money ethos is now at the mercy of the get-rich-quick mentality.
Culture and morality are subverted
As people grow desperate, the safeguards against cheating are weakened and social solidarity is degraded. People abandon their responsibilities: now, we all want something for nothing (Box 3). One result: short of revenue needed to fulfil obligations, agents of the State strenuously seek to conceal failures. Scapegoats are sought. In Europe, foreigners (because of colour, creed or ethnicity) are targeted in response to despair at the general state of the economy and society.
Petty cheats are now pursued for bilking the public purse. They are publicly vilified as “scroungers”. In Britain, Chancellor of the Exchequer George Osborne markets his cuts in welfare benefits as “sound public finance”. He announced a freeze of the tax on residential properties (which helps to raise the price of land) while berating “the something-for-nothing culture in our welfare system” (speech in Parliament, June 26, 2013).
The cumulative effect: families, their communities and culture are weakened, while the seriously rich cheats who extract income transfers under the cover of the law of the land continue to adorn themselves in the modern metaphors for garments lined with ermine.