A socialist friend (on the European side of the Atlantic) has challenged me to give my views on taxes. Presumably he wants to put me on the spot since I call myself a conservative. The background, of course, is what among US conservatives passes for the plight of American taxpayers, fleeced year after year, while they see people in Europe happily paying their taxes without demur. In 2011 the US is in crisis over taxes, while Europe is in crisis over debt (at about the same level as the present US “non-crisis” over debt, public and private, but don't let anyone know). The circus atmosphere and lack of perspective in much of US public debate on the conservative side causes the Atlantic to seem wider than ever since steam replaced sails. Not that we can claim to be much better. On our side, we have the voters of Greece who expect the government to provide for them even without their paying taxes. We have the bankers of Spain who think the money in the vault is theirs to spend as long as the politicians agree (and get their share).
In short, though a conservative, I venture the possibly dangerous view that government is inevitable and so are the taxes required to pay for it. I even believe that view is fairly mainstream among European conservatives. Still, taxes and government are never swallowed without suspicion among our voters of the center-right.
A key problem for most conservatives is that bureaucratic growth is a self-propelled phenomenon and one very hard to restrain. Usually brushed off by the left as a minor issue or even myth, the phenomenon is a fact. It is widespread, and it is costly, especially in countries where civil servants are reasonably well-paid and taxes are already high. (For a good overview and synthesis see Marshall W. Meyer: “The Growth of Public and Private Bureaucracies”, Theory and Society
Volume 16, Number 2 (1987), 215-235.)
There is also a strong tendency among governmental representatives – civil servants – to see themselves as holders of a higher kind of knowledge (or “truth”) about what is best for ordinary citizens. Conservatives reject this. Both of these kinds of scepticism are at the core of conservative thinking, even across the Atlantic. Hence a restricted reading of Ronald Reagan's statement “government is not the solution to our problem; government is the problem” can find support even in Europe. But that support does not extend to the loud-mouthed US crusades against government as such, which is the normal reading of Reagan's intention.
Bureaucratization and knowing what's best for you go together in the third scourge of social-democratic policies, namely reform policies. Nothing to me raises warning flags as surely as a government that announces the coming of some broad-scale reform. They are usually untested and usually require an expansion of government jobs. In this kind of reaction conservatives on the two sides of the Atlantic are pretty much in agreement.
Fortunately there are even conservative American commentators who are not altogether oblivious to the need for government and taxes. Recently, the Wall Street Journal's Daniel Henninger wrote, “To ensure American well-being, the pre-eminent purpose of a modern tax system should be to achieve the highest possible level of growth in the private economy with a competent, efficient state in a supporting role.” (Daniel Henninger, “What Are Taxes For?” WSJ, Dec 16, 2010, http://online.wsj.com/article/SB10001424052748704828104576021672925440698.html). His blog leaves unclear, however, how a competent, efficient state can be built without an expensive civil service paid for by taxes, presumably at the expense of his desire for growth. Finding the trade-off point is the hard part.
The bottom line must be that countries without government are anarchies, and that taxes are required to govern with some degree of stability. The curious idea that government is not needed was tested in the Iberian peninsula in the late Middle Ages. When Isabella and Ferdinand took over their reigns of Castile and Aragon in the 1470s, Castile especially had been living with weak government for more than a century and was in dire need of some semblance of order. Each town had been left to its own devices and many had created voluntary “brotherhoods” to protect their citizens. Isabella instituted la Santa Hermandad (the Holy Brotherhood), a national levy for Castile as a whole and soon changed the situation to the better. Resources were taken from (guess who?) the citizens, i.e., a form of direct taxation.
Taxation is much older, of course. The historian Charles Tilly wrote about early European state-building as a form of protection racket. The King's men would arrive in the villages during the day to declare that “We'll protect you from bandits if you pay your taxes.” The same people came back at night as bandits to visit those who didn't pay. Medieval common folk in Europe often had the scourge of competing tax collectors confiscating their harvest on behalf of rival claimants to the throne. Centuries later we hear about the need for a government to have a monopoly over the means of violence for political stability to exist. Even conservatives understand (except of course in the US).
At the other end of the scale of governmental ambition, however, is where the political battles of the 21st century will be fought – how big an administration is needed to cater to the demands of rapidly growing, progressively more undereducated populations – and what tasks are better left to non-governmental organizations. This may sound like the US discourse, but it isn't. It is an open question whether reality will ever catch up with the US situation of massive untapped resources and unmet needs. My bet is it will.
Fair taxes will be recognized as such. Taxes are fair if they are paid by all, in the same proportion, and according to ability to pay. But I dissent on the principle of progressive taxation. Whether I make a million or just a hundred, I should pay the same percentage of my income.
While my American conservative friends assure me that I am not worthy of the name of a conservative, I hope I have shown that conservatism doesn't need to smell as much of sulphur as theirs. As for my socialist friend, I am sure he'll tell me I'm as deep in trouble as he thought before.
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4 comments:
Olav,
Thanks a lot for your insight-full blog that I really enjoyed reading. It is always nice to hear a Conservative realizing that government sometimes is needed…
To me, as a kind of social liberal (in European terminology), two things are pretty clear. First, the issue is not so much about the size of the bureaucracy as of the quality of it. After all, who would like to have even a very small and tiny cadre of bureaucrats with low pay, if they didn’t deliver anything at all? On the other hand, at least in Sweden (which is a lot less socialist nowadays than most people in other countries seem to believe) many probably would be quite prepared to pay even higher taxes if it was certain that they were well used. In fact, just the other day a group of senior well-respected members of the Swedish political party the Liberals (member of the four party conservative government) suggested to the party members that it should be a strategic ambition to reduce the over-all tax level to 41%. The reaction, however, was not would they had expected. The party delegates crushed this suggestion, asking for more of solidarity and that the slogan should continue to be “leave half”, that is, 50% over-all taxes. Yes, this was the Liberal party in the Conservative coalition government of Sweden. The 41% guys simply have to conclude that “their time had not come yet”.
The dogmatic position adopted by many US conservatives where it doesn’t matter what and how taxes are used (except for the military, of course), as taxes per se according to them always are wrong is, if you ask me, quite stupid (as other kinds of dogmatism are). Second, I might be wrong here, but I do think that there is a strong correlation between tax levels and level of socioeconomic equality. Of course, this correlation is to considerable extents – as the Conservative would have it – caused by transfers of resources (to put it mildly) from the rich to the poor. If it is actually so that it is not possible to have a liberal low-tax modern society without blatant differences not only in income, but in education, health, drug use, violence etc., I am not so sure I would like to live in such a low tax society. And I sincerely think that quite many Swedes would agree with me on that. However, and back to the issue on high quality public administration, I think it is exactly this – the quality of the service we get for our taxes, not only ourselves but others fellow co-inhabitants as well – that is the key. Does anyone really think that the fundamental problem in Greece is that people don’t want to pay taxes per se? Isn’t rather the case the people don’t want to pay taxes that goes directly into the pockets if corrupt bureaucrats or others, and never pay off in terms of services to society? I wouldn’t either…
Björn, you have to realize that you live in an exceptional country where even non-Socialists ask for higher taxes. There must be some intervening variable at work here, for instance a strong and widespread belief in quality governance, a belief verging on ideology. And I agree, of course with your point about quality, that's why the blog by Henninger also had me surprised when he made the same point. Indeed, who wants shoddy government?
Dear Olav,
Your well-written analysis about sense and nonsense of taxes touches on rather a lot of subjects. On the whole I have no problem with your conservatism in relation to taxes – as you write: it depends on where you use them for. Many people in the USA do not realise how they are fleeced by the insurance and pharmaceutical companies, which are completely deregulated in their price calculation.
Some experts on the topic of bureaucracy are rather leftist, and they agree with you that bureaucracy is notoriously hard to reign in – not so much because it is self-propelled in the sense of getting bigger and bigger, but because of the internal structure.
The USA has as opposed to Europe, what you call, a “bad-bureaucracy”. Too many office holders are dependent for their appointment and tenure on the electoral success of one political party, and not on their competence. Too much regulatory “capture” of the bureaucracy by private interest groups has detrimental effect upon the costs of public services. So one cannot really blame the conservatives in the USA for crying foul about their too big government, for a lot of money in the public sector gets wasted and ends up in the wrong pockets, but they are barking up the wrong tree! They should call for an end to “bad-bureaucracy” and for democratization of the bureaucracy.
In a recent article in the NYT “America’s ‘Primal Scream’”, of Oktober 16, 2011 Nicholas D. Kristof makes a convincing case for progressive taxation: inequality on its own “damages economies (…) slows down growth on average (and) is linked to financial distress and financial crises”. Equality on the other side “appears to be an important ingredient in promoting sustaining growth”. Therefore the most logical way to address and redress this imbalance seems to point at a reintroduction of a system of progressive taxation.
To round things off, your remark about the “third scourge of social-democratic policies, namely reform policies” is a bit too harsh. Why suggesting that “reform on a broad scale” is an exclusive social-democratic hobby? What about Thatcher’s grand-scale privatization? How well tested was her neocon-liberal intervention and what about her selling off state-owned facilities against fire sale prices, in consequence robbing the state-treasury (tax-money) blind? And what good did it to the public?
Social-democracy is a relative young phenomenon – consequently there was not so much time beforehand to test their ideas. Much has gone wrong, sometimes catastrophically, but at the other end: free market economy has brought the whole financial world down to its knees. The answer, to my opinion, is a more strictly regulated capitalism, if we want to survive the neo-liberal scourge.
I rest my case. Charles Rodijk
Charles, I am pleased to see that you agree with me on several of my key points.
However, as for bureaucracy, I believe your faith in “good bureaucracy” in Europe is misplaced. You say in the US too many office holders are dependent for their appointment and tenure on the electoral success of one political party, and not on their competence. Well, this has long been a problem in Europe as well, only many of the appointees don't have to leave when their party is voted out of power, unlike the US. Moreover, captured bureaucracies are old hat in Europe, being the subject of classical case studies in political science (found especially in the sectors of agriculture, fisheries and development aid). In recent years we can also point to the unruly czars of the EU Commission's bureaucracy who run their shops as they please in disregard of the subsidiarity principle. They are especially hard cases to deal with. So I say YES to putting an end to bad bureaucracy, NO to the myth that it is purely an American problem.
Your other points are more off topic, it seems to me. As for “democratization of bureaucracy”, I don't know what that is. Bureaucracies are needed in order to implement the policies decided by the parliament, whatever its name. The people who work in those bureaucracies have to be held on a short rein by strict regulation and be closely supervised. Unfortunately that also costs money, which means bureaucratic oversight / control is never likely to be up to the requirements. But to “democratize” the functions of bureaucracy would steal the authority of the parliament or other democratically elected body in whose name the bureaucracy works. Obviously, I would oppose that.
Maggie Thatcher did one good thing for Britain – she relieved its economy of the choking grip the unions had on it and restored British industrial ability to compete in the international markets. Otherwise, she was not my favorite conservative.
Progressive taxation is not what Kristoff is writing about in his Oct 16 blog. He writes about extreme economic inequality, and I find his views sensible. What produced those results of extreme inequality was hardly a lack of progressive taxation, but rather huge loopholes in tax legislation and in the systems of tax collection that benefit people in a position to make a lot of money without having it taxed. In short, we are talking about different issues here.
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