Libertarians : Communists or complete bastards?

I was talking to a friend at work yesterday who mentioned that he’d met an extreme libertarian while visiting America. This person believed that there should be absolutely no government at all. What made this person’s argument a little weak was that they were extremely wealthy, most of which had been inherited.

I don’t claim to understand libertarians particularly well, but I assume that they feel that there should be no government and that we should simply pay directly for everything we need. Essentially I’m using the word “libertarian” to refer to those who would like to pay very little – if any – tax. My problem with this general view is quite how it is expected to work. The figure below is one I’ve taken from the Office for National Statistics and more information can be found here . What the figure shows is the original income (pink bars) and final income (yellow bars) for all households in the UK, divided into 5 groups (poorest 20%, next 20%, …, richest 20%) for the 2008/2009 tax year. The final income is essentially what a typical household in each division would have after tax and benefits.

What the figure shows quite clearly is that the poorest 40% of households gain quite a lot due to benefits and the richest 20% lose quite a lot. The figure shows some interesting things straight away. The median household income is between £20000 and £30000 per year. I still find it amazing that 50% of households in the UK have annual incomes below £25000. This is also roughly the break even point. Household income needs to be about £25000 in order for the amount lost through tax to be recovered through benefits. This isn’t true for all households with incomes of £25000 as it will depend on various factors (no. of children for example) but is presumably reasonably typical. Why is this relevant? Well if we wanted low taxation and small government then none of this redistribution would occur. The income distribution would be represented by the pink bars in the figures. Households with incomes above £25000 pa would be better off and those with incomes below £25000 would be worse off.

One could argue that the money that was paid as taxes could end up going to the lowest earners, but this would require that employers explicitly decided to take this away from the highest earners. It could happen, but it’s not obvious that it would. Furthermore even if the income distribution did tend towards that represented by the yellow bars in the figures, there are still things, such as education and healthcare, that people don’t pay for directly. Annual education costs are about £3000 per pupil and healthcare is about £1500 per person. A typical family would therefore need an additional £12000 per year to cover these costs. Admittedly they would no longer be paying VAT and other indirect taxes, but it is still hard to see how a household with an annual income of £20000 could suddenly find £12000 for healthcare and education costs. The only way that I can see this working is if the income distrbution were narrower still than that represented by the yellow bars in the figure.

Essentially what I’m arguing is that a libertarian society in which everyone has access to the basics (healthcare, education, accomodation, food, transport, etc) is one in which the income distribution must be very narrow – most people must earn almost the same as each other. Hence my reference to being “communist” in the title. Alternatively, maybe libertarians really don’t care about society and just don’t see why they should have to pay taxes that ultimately benefit someone else. If others haven’t worked hard enough or aren’t skilled enough to get a salary that allows them to afford the basics, tough. It’s their problem. Hence my use of the term “complete bastards”.

The title of this post is deliberately provocative and I don’t really believe that those with very libertarian views are either communists or complete bastards but I do wonder if they’ve thought about the implications of this world view. My gut feeling is that they haven’t and don’t actually realise how income is distributed in a country like the UK and what the implications are for those on the lowest incomes. I’m also not suggesting that some of their views don’t have merit. Big governement is also bad, but it seems – to me at least – that the more unequal the income distribution the bigger the government has to be in order to provide for the poorest in society (there are also arguments – such as those in The Spirit Level by Kate Pickett and Richard Wilkinson – that there are additional problems and costs associated with unequal societies). Those who genuinely want small government should therefore be fighting for a more equal distribution of income so that they can justifiably argue that government doesn’t need to provide for people, because they are able to afford to provide for themselves.

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8 thoughts on “Libertarians : Communists or complete bastards?

  1. It is the case that many libertarians see the state as the primary mode of economic and social domination of the poor, which takes place through various laws intended to create artificial scarcities of goods and job opportunities.

    • If I understand the above link, it is suggesting that there are many left-wing libertarians who believe that governments are acting to promote inequality (although maybe not intentionally). It may well be true that there are many left-wing libertarians but what I was trying to suggest in the above post is that if one wanted a libertarian society in which everyone could afford the basics (healthcare, education, food, …) then it would require a narrower income distribution than currently exists in either the UK or the US. Quite what would lead to a narrower income distribution in a truly libertarian society is unclear to me. It seems more likely that without any outside influence, the income distribution would become more skewed with the wealthiest taking more and more of the income. This isn’t suggesting that governments currently do a good job of narrowing the income distribution. If anything, I’m suggesting that they should do more to narrow the income distribution as this could allow for less taxation and possibly better economic growth (or at least sustainable economic growth).

      • Quite what would lead to a narrower income distribution in a truly libertarian society is unclear to me. It seems more likely that without any outside influence, the income distribution would become more skewed with the wealthiest taking more and more of the income.

        I think I understand where you are coming from. I think there is analytical and empirical evidence to suggest that wealth would become less hierarchical in a society with less government power.

  2. The idea that government subsidies may have unfairly helped corporations and promoted inequality seems quite reasonable. However, to suggests that this implies that the absence of government would promote equality is not obvious. To me it suggests better government. If anything I would argue that you need some form of external influence that acts to damp out perturbations (thinking somewhat mathematically). Of course, this implies that government should be willing to do very little when everything is reasonably stable (which may be consistent with a libertarian view) but act when things start to become unstable (income distribution becomes very skewed for example).

    • However, to suggests that this implies that the absence of government would promote equality is not obvious.

      If I understand what you are saying, then you would probably agree that government power on net is used to bolster corporate power, but we should remove those privileges granted to corporations (limited liability, for example) but keep the restrictions placed on corporations. Historically, that has never happened. Even the Progressive Era, according to historians like Gabriel Kolko, were periods in which one class of capitalists used the state to cartelize the market under the guise of consumer protection. That should come as no surprise though. While we are busy raising a family and making end’s meat, the tiny group of political insiders will always be the ones with more time, money, information, and self-interest to influence the state.

      “When Buying and Selling are Controlled by Legislation, the First Things to be Bought and Sold are Legislators.” P. J. O'Rourke

      • I agree that in many cases government action has ultimately benefited corporations in a way that has effectively disadvantaged the consumer (or – I guess – the average person). As you say, the ideal would be to remove the priviledges granted to corporations but keep some of the restricitions and it may be true that this has never actually happened (although some governments are better at this than others). If I’m being optimistic I would argue that this is because our politicians (legislators) have been conned by the wealthy into believing that what they are doing ultimately benefits everyone. Showing them that this is generally not the case, may help. It is possible, however, that our leaders don’t really care and are happy to see corporations benefit at the consumer’s expense. Either way, it’s not clear to me that removing government would be better. Why would we have more influence over the wealthy and the corporate leaders in the absence of government than we do now?

      • Why would we have more influence over the wealthy and the corporate leaders in the absence of government than we do now?

        A substantial portion (about two-thirds) of Fortune 500 profits are accrued as a result of direct taxpayer subsidizes, tax breaks, government-granted monopolies and protections from competition, meaning most large corporations would be bankrupt but for government intervention. So big business is as much a part of the state as the police, and cutting the legs out from under corporations would bring them to their knees.

        I don’t think that reducing governmental authority, in and of itself, would necessarily bring about greater equality. I think the shrinking of government would come about as a side-effect of building social solidarity against all forms of authoritarianism. Although economic hierarchy in the marketplace is substantially elevated by the state, it would still take a conscious effort reform the mentality that it is acceptable to sacrifice others for the well-being of the state or the collective. Without intervention by government, I also think mutual aid and grassroots cooperatives would gain in significance. Worker-managed enterprises would become more prominent as well, since they would operate more efficiently in most cases on a genuinely free market than a corporate bureaucracy.

  3. It doesn’t surprise me that many big companies make a lot of money from the public sector. It is the big irony – in my view – of the typical right-wing, free-market philosophy.

    I think what you’ve said in the latter part of your comment is at least qualitatively consistent with what I was trying to argue at the end of my post. If the income distribution were narrower (people were more equal than they typically are now in the UK or US) the role of government could be reduced since the requirement to provide services for people would be less necessary than it is now. My sense, however, is that government needs to be convinced to work towards this because it won’t happen easily by itself. Of course, this might be a bit like asking Turkeys to vote for Christmas, but I can’t see a viable alternative.

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