Tolls or Taxes?

One of the things we are going to have to figure out in order to achieve a just and flourishing society is what the human enterprise at large is properly selling, how to price its product properly, how to charge those prices properly, and to whom. Taxes on property or income won’t work, because they are unilateral: there is no way the payer of such a tax can decline to participate in the transaction of taxation, other than by impoverishing himself. The only way a man may decline to pay such taxes is so to arrange things that he has no wealth to be taxed, no stored power or capacity. Taxes on property and income, then, put all his wealth, all his personal assets – his adequacy to the world, including, ultimately, his very person – at the disposal of the tax collector, so that none of it remains simply his, to dispose of as he sees fit.

But this is to insult his inherent dignity as a man – as, that is to say, a rational creature beholden first and foremost to his own apprehensions of the Good, such as they are: to God, and to his duties under God, that derive from his privilege – the logos that is privy to him, and to him uniquely, as an individual creature ordered to the peculiar ends ordained for him by his Creator. A man can have either rights or duties only insofar as there really and practically pertains to him some logos ordered to the telos of his own individual nature, that both forms and binds him. If he be prevented from the power and capacity to express that logos, neither can he be morally obliged, nor can he be either right or wrong, as either succeeding or failing to fulfill that telos. The worthiness or dignity of a man subsists in that fulfillment: in the capacity or power to achieve it, and in the righteous exercise of that power.

Our rights subsist in performing our peculiar duties to the Good; and our duties are to do right by the Good.

7. The law of the LORD is perfect, converting the soul: the testimony of the LORD is sure, making wise the simple.

8. The statutes of the LORD are right, rejoicing the heart: the commandment of the LORD is pure, enlightening the eyes.

9. The fear of the LORD is clean, enduring forever: the judgments of the LORD are true and righteous altogether.

Psalm 19:7-9

Deprive a man of his power to exercise his privilege then, and you deprive him of his manhood, preventing human goodness.

As levied on that goodness, taxes on income and property devour it even while they hinder its production. They make men into cattle, into chattel slaves, and their overlords the tax farmers into slave masters. They make of society a system of exploitation; when, as the origin of the word testifies, society ought properly to be a company of companions, a companionship – literally, a fellowship that breaks bread together.

The Eucharist goes deep, no?

What, then, if not taxes on property or income?

As it happens, the medieval world did not rely so much on taxes levied on income or wealth. Instead, sovereigns – abbeys, lords, towns – got their revenues from the theloneum, as it was called in Latin, or in Frankish the tonlieu. The tonlieu was what we would these days call a sales tax, a toll, or a license fee. It was a general tax on merchandise, or on the right of passage through the domain of the sovereign:

In the centuries from the ninth to the fourteenth the theloneum continues to exist, perpetuated by the feudal system and by the theory of the complete monopoly exercised over the domain by the dominus or seigneur. The latter demands his share of the proceeds of all commercial transactions – often not in the form of a percentage of the profits but as a certain proportion of the value of the transaction, from both buyer and seller. Merchandise must pay for the privilege of passing through the domain, and often the mere passage by wheeled vehicle becomes a source of revenue. In this age the terms Theloneum and Tonlieu are loosely applied to all taxes on merchandise, but the distinction is usual between pedagium or péage, levied as a kind of customs duty on the passage of goods, and the tonlieu, which is collected in the place where the goods are exposed for sale.

It might appear that these payments affect rather the merchants and the inhabitants of urban centres than the peasants, but the tonlieu is levied on the humblest transactions carried out in the villages, and is always included in the list of domanial rights. Further, the tonlieu is levied, in the market at Arras, Boulogne, or St. Omer, on the produce which the farmer brings in for sale. …

[Under the] tonlieu of the great Abbey of St. Vedast, at Arras …Theloneum is to be paid by all those living outside certain limits. The inhabitants of Arras pay, if they are not men of St. Vedast. Proof of origin may be demanded by the thelonarius, in case of dispute. On transactions begun elsewhere, and completed in the city, the dues must be paid. The priest who trades owes theloneum, except for the horse he buys for his own use, and for his own food and clothing. … The sums due periodically from the stalls in the market are included as theloneum. …

The market is free to all, without exception, who are willing to pay the dues. … In the later centuries of the Middle Ages, the theloneum changes in character, and resembles the modern octroi. It is paid at the entrance to the territory where the goods are to be sold. The payment for étalage, or for displaying goods for sale in the market, becomes a payment of the nature of modern market dues. …

Pedagium … was levied as a return for the privilege of passage with goods, as is indicated by its alternative title of traversum. … The péage was not levied, however, only at seaports, but, more particularly as traversum, it was demanded at various inland villages of this region. Often it appears confused with the payment for the right of passage of vehicles, a tax more in the nature of a modern toll. …

The control of the roads running through the domain is closely connected with the commercial monopoly. We are to imagine the travelling merchant in these times often arriving at a domain through which there is no ‘right of way’, at least for his vehicle or pack-horse. The public road does not yet exist.

– Oxford Studies in Social and Legal History, Volume 4, pp. 50 ff.

The theloneum compensates the sovereign for the costs of maintaining an orderly market. Those who wish to transact in the market must pay dues in the form of a theloneum. Notice first that the payment of theloneum is in exchange for a valuable good, the security of person, property and contract provided by the sovereign to those who transact business in the market he maintains. Note then that entry into the transaction of paying such dues, and buying those services, is entirely voluntary. There is nothing that forces any subject of a sovereign to transact business in a public market; he may barter goods and services freely, with any counterparties whom he trusts enough to forego the enforcement of private contracts and adjudicatory services that the sovereign provides.

We have lots of tonlieux today. Indeed, they are everywhere, as sales taxes, value-added taxes, tariffs, tolls, business license fees, vehicle license fees, road taxes, market fees and dues (such as are imposed by private markets like the New York Stock Exchange), and so forth.

What would happen if we were to abandon income and property taxes in favor of the theloneum? The bewildering array of tonlieux imposed by every petty domain in France, together with their many exemptions (such as those that, e.g., neighbouring abbeys provided to each other) and permutations (e.g., in St. Vedast, local residents otherwise exempt from the theloneum had to pay it if they transacted in gold, slaves or goats) is generally cited as one of the great economic evils of the ancien régime, in that it imposed great friction on trade. We today suffer from just as much bewilderment over our many modern tonlieux, but we suffer also on account of heavy taxes on our labor and thrift.

There is no reason why the latter could not be abandoned altogether, and the revenues replaced – or, even, increased – by means of increases in the tonlieux. The transaction costs associated with the imposition and collection of local tonlieux may as automated be made almost frictionless; and that automation can enable market participants to seek out the least expensive, most efficient markets for their transactions. The local monopoly power of sovereigns would thus be eliminated, at the margin, forcing sovereigns to offer competitive rates of tonlieu for those who do business in their domains. A market of high quality, such as the United States, could charge considerably higher prices than a competitor whose market is smaller, less efficient, less liquid, poorer, or where trade is less secure – think Zimbabwe. California and New York likewise could charge considerably more than Idaho or Montana, and San Francisco more than Fresno.

Reliance on tonlieux would be, not only more just, but more efficient than our current system of mixed tonlieux and taxes on property and wealth. They are not the only sort of just revenues: use taxes and taxes on externalities also result from the free elections of their payers, and do not therefore prevent their proper flourishing. Such other sources of revenue could supplement tonlieux. But tonlieux should perhaps be the basic and predominant source of sovereign revenues.

About these ads

89 thoughts on “Tolls or Taxes?

  1. A major problem with this proposal is the Internet. Consider: Right now, many states are losing revenues because of Internet sales. Quite a few states, e.g., Michigan, attempt to recoup this by forcing every citizen who files an income tax return to answer a question as to whether he has paid sales tax on all his out-of-state (usually Internet) purchases. Residents who don’t want to bother to save records of all their purchases have the option to calculate it as a proportion of income instead, but there is fine print (this part always really annoys me) that says that if you are audited and it is discovered that paying the proportion of income was underpaying (presumably the auditor could demand to see all of your credit card records for the period, for example), you would owe penalties and back taxes. Suffice it to say that this makes a great many residents of the state, except for a few people with obsessive-compulsive disorder (like me) or those who buy very little out of state and who are therefore _overpaying_ if they take the proportion of income option into law-breakers, because of the burdensomeness of keeping records of every itsy-bitsy item you buy on Amazon.

    If, on the other hand, the federal Internet tax is passed, the worry about breaking a use tax law by out of state purchases will be removed from the individual purchaser, but this will just shift a pretty severe burden onto sellers. Suppose that a widow decides to sell her husband’s valuable book collection by signing up as an Amazon merchant. She could then become liable to collect and remit a bewildering array of state and local sales taxes for every book she sells.

    Even in local terms, there is something problematic: If a lady does work as a seamstress in her own home and sells the dresses she makes to friends and people who have heard of her by word of mouth, she is technically supposed to collect state sales tax. I rather doubt that all the small-time home dressmakers _do_ that, and I wouldn’t report them if I knew they weren’t, but it seems to me that there is something unseemly about the requirement in any event.

    It isn’t clear to me that it is more just to tax every transaction that happens to involve money (or nearly every one) than to tax income. The very itemized nature of the former has an extremely intrusive effect. Charging actual tolls for entering some physical space or operating an identifiable store could be better, because it would be a lump sum paid at a particular time, over and done with. But _any_ type of tax that is so confusing and detailed and concerns so many of the actions of one’s life that pretty much everyone is guaranteed to forget or miss something by accident and be breaking the law and liable to punishment is unjust. Unfortunately, both our income and our sales taxes have that character now.

    • Well, yes. There is for any system of revenue collection a threshold of materiality, beyond which marginal costs exceed marginal benefits, and the whole thing begins to frustrate transactions and injure revenues. The Laffer curve expresses an inescapable law of information theory.

      This is where you need competition among sovereigns, to see which of them can implement the most reasonable system. An unreasonable sovereign will see his revenues migrate to other markets as trade in his own domain languishes. As unreasonable this may not matter to him. But at least he will find himself relatively poor, as sovereigns go; and less secure in his office.

      There is never any guarantee against foolishness, but fortunately there is a remedy provided always by the nature of things, if sometimes rather later than we could wish.

      +++++++

      I should mention that the writing of this post was prompted by Lydia’s worthy recent post, Criticisms of “capitalism”–in search of a contrast class. It is not so much a response to anything said there, either by Lydia or by her commenters, as just a train of thought that has long been waiting for a push to get it moving out of the station, which her post administered.

      • I have come to this very interesting blog recently and go through the basic readings now. Much of what I have been reading makes sense to me but I also have doubts and questions. One of them is economics. To put it simply capitalism as economic system probably works the best of all other imaginable systems so it seems to be one of the few real achievements of liberalism. I am aware of more or less conservative propositions regarding economy like corporativism, distributism or other thoughts based on catholic social teachings. For sure I do not know much about that (I am not economist though I find it interesting). Still, all of that seems to be not very well founded in comparison with mainstream or austrian economics. Surely I am going to read the above mentioned article and welcome more information about this topic in the future – if possible.

        Regarding taxes, I live in a country with heavy taxation. Most of the government funds comes from VAT, smaller portion from income tax. VAT seems to be more fair and practical. It is more directly under my control than income tax – the same way as my spending – and it is administred by companies with duty to pay VAT sales level i.e. individual buyers and small companies do not have to care. Income taxation is burden for individuals because financial planning more difficult and employers that do the administration wich more complicated and costly.
        So I believe any spending or market taxation is better than income taxes.

      • Thanks for visiting, RT. I hope you find the site useful. Two questions regarding your interesting comment. First, what country do you live in? Second, you mention that small companies in your country are not required to pay VAT. What is the threshold that separates a small company not required to cope with VAT and a company that is required to cope with VAT?

        As for capitalism being an achievement of liberalism, it seems to me that capitalism is just a description of the basic, default economic order of human society. It is an achievement of the Enlightenment qua theory, rather than qua system of social order. As a social order, it goes all the way back to the beginning; “capitalism” is just another word for specialization. Even as a theory, much of it predates the Enlightenment, having been pretty thoroughly worked out from a Catholic moral perspective by medieval Franciscans.

        The work of Ricardo and Smith, then, was just the latest wrinkle in a long discussion. The same goes for the work of Newton and Laplace, for that matter (viz., Grosseteste). The philosophes liked to think that they had reinvented everything, and seen all the way down to the bottom of the truth. So did the Cathars. So did the hippies. So did the Babelonians. Gnostics, all of them. “For Man walketh in a vain shadow, and disquieteth himself in vain; he heapeth up riches, and cannot tell who shall gather them.” (Psalm 39:6)

      • Kristor, I live in Czech Republic. The threshold is total sales over 1 million CZK (about 50 000 USD) for last 12 months or voluntary decision. Sales means provided goods or services, not money received.

        Ad capitalism. I agree with your definition of capitalism as default economic order. It could be called economic definition. Specialization is known as division of labour among economists. I would say the main feature is private property and price system but it’s not that important now. Perhaps you would agree at least that “default” means based on real economic principles – principles that lead to most efficient dealing with scarcity in the world.

        However, some traditionalists tend to understand capitalism as historical period that expanded with Industrial revolution (more or less) and led to dissolution of social bonds, abandoning agrarian lifestyle, huge difference between rich and poor, class struggle etc. just to name favourite negative impacts.

        In a way, they are right. We can rarely find capitalism as an default economic order in its pure form, if ever. And I would say that mediaval economic order was more distant from “default” than economic order of 19th century (for example). Guild system was quite rigid. It limited competition, innovation and did not allow for mass production. Although serfdom wasn’t as bad as taught in schools today it was designed to limit labour force movement. Perhaps more examples could be found. Loosening these things historically came with Enlightment era.

        Of course, the story is more complicated as post-mediaval society was far from being perfectly christian. Then the Enlightenment era could be a reaction to previous development and I am inclined to think that not all of its fruits were bad.

        Question is: did the rise of capitalism in its more pure form that went hand in hand with political liberalism (limits for economic order are set politically) inevitably lead to loosening or dissolution of other important relationships (family, nation state etc.) as we see it today? Some traditionalists think so and there is a logic to their thinking. If that’s true other questions follow – what room do we have for economic freedom? How to reconcile economic freedom and growth with moral society or more basically freedom and authority? Should we abandon wealth in order to live more christian life? On the other hand, less wealth means less safety etc. If it’s not true then what went wrong in the past? Can we analyze it to get a lesson for future?

        I believe the golden age of my country was at the end of 19th century when it was part of Habsburg Empire. There were morals, freedom and prosperity but also all seeds of the future 20th century disaster. I mention this just to give practical example of questions above.

        Last thing, I am aware of mediaval and late scholastics thoughts on economics from the work of A. Chafuen. Their work probably influenced Menger and Austrians. Nonetheless, they aproached economic questions strictly from moral point of view and never developed complete economic theory. Of course, ethics comes first but economics tells us consequences of ethics applied.

      • That’s very interesting. $50K/1Mczk seems like just the right threshold. It’s high enough to cover almost any home-based manufacturing or service business outside of finance, law, or consulting. Or internet sales, or just old-fashioned sales.

        I’m not so sure that capitalism was less pure in the Mediaeval era than it was in the 19th century Anglosphere. My bet is that it was impure in different ways, is all. The 19th century had the big Trusts, after all; and government subsidized railroads and canals, government grants of land (as with the Homestead Act and the Oklahoma Land Rush); and in the British Empire you had such things as the East India Company. It’s very difficult to untangle.

        Then there is the prior question: is the Mediaeval order, with guilds, estates, landed gentry, nobility, Church enterprises, serfdom, and so forth, a social order that is more natural and proper to man than what we find later on? I don’t see how one can argue that the answer is “no.” We at the Orthosphere would urge that the answer might well be “yes.” If that is right, then the capitalist order of the high Mediaeval would be *more* pure than what we find circa 1850.

        The reality I think is that there is nothing inherently anti-capitalist in any social order. What I mean by that is, that in any social order there are going to be oligarchs, who are going to “tilt” trade in their own favor, and who exert disproportionate control over the allocation of resources. They are the fat cat capitalists, whether or not they understand themselves as such; for they control the lion’s share of the capital. Meanwhile all the economic agents of society are going to be busily engaged in maximizing their utility, given the opportunity set presented to them by the economic system vis-á-vis its circumstances.

        The question then is, not whether a society is or is not capitalist, but whether it is doing capitalism well.

        Both the high Mediaeval and 19th Century Anglosphere strike me as having done capitalism extraordinarily well, each in their own way. The high Mediaeval financed Europe’s oceanic expansion; the earlier Mediaeval financed the Crusades and the Cathedrals. These were all endeavours that could only have been undertaken under conditions of tremendous material prosperity.

        You ask whether the rise of capitalism of the 19th century sort is inevitably linked with political and social liberalism. No; I doubt it. I see no reason why laissez-faire cannot go hand in hand with Mediaeval systems of authority and hierarchy, or a fortiori with strict moral codes.

      • @Kristor

        This is very interesting to me, as I have held a very similar view myself for some time.

        From my reply to a post on Dr. Charlton’s blog entitled What do libertarians think they are?

        … But what on earth do these pure libertarians expect to keep society libertarian? How will it not collapse into a monarchy, oligarchy, kleptocracy? And what, I ask of them, could prevent it from becoming simply the exact same way it is right now? Wouldn’t there need to be some form of organized pressure and stable transcendent laws and a great deal of physical force involved in enforcing the libertarian standards of this society?

        From a purely secular view, at the heart of the matter, I think life in general is libertarian, no matter where you live: you can always choose to do whatever you wish, the only laws you must truly obey are those of physics. But of course, others can do the same. And -does it need to be said?- these freedoms flaunted by you and the others are bound to come into conflict sometime; if neither side yields, the conflict will be violent.

        @RT

        As to how to maintain a Christian life within a capitalistic society, I don’t think you’ll find any quick and easy “one-size-fits-all” answer to that question.

        But all societies will provide temptations for sin as well as opportunities for good.

        On one hand, we know wealth isn’t bad, rather, it is a good thing… but on the other hand, “it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.”

        So this will be tricky. Or perhaps not so tricky, depending on much grace God grants you. (I believe Kristor has also written about these issues in some depth, so you may want to look back in the archives)

        I think a possible way that you could safeguard yourself against possible moral slippings as well as your virtue being chipped away could be keeping watch of any and all lies you tell. If you find yourself lying constantly to people, or lying on a daily basis, or always having to lie concerning a certain part of your job, then it is possible that you are in a spiritually and morally dangerous position.

        I think you would still have to watch yourself, but supplemented with prayer and a Church, I think God’s grace empowering an honest Christian will do just fine in a variety of economic situations. Christianity and temptation are always daily struggles, so I don’t think there is going to be a one time answer that will solve your problems and let us rest easy.

        I always get nervous whenever I see Churches or bishops attempt to interfere with the politics and laws too much, always fearing that they will get entangled in them somehow, and that we won’t be able to separate the two, they’ve gotten themselves so tangled.

      • Thanks for reply, Kristor. The threshold may be fine, unfortunately the rate is high and increasing :-)
        The interesting phenomenon is that some companies under the threshold become voluntary VAT payers. Their business partners – VAT payers – demand that because they can subtract VAT included in the goods they buy from VAT included in goods they sell and that they are obliged to pay to the state. So to be VAT payer is sometimes advantage in competition.

        I think there are economic indicators like GDP, interest rate, population growth, inovations etc. to compare Mediaeval Age with 19th century. I bet 19th century would be more advanced. This is not to underestimate Mediaeval achievements. Certainly, Church made great efforts to civilize former pagan nations and tribes. She layed down foundation of unique western culture in many ways. Crusades were wars and as such they brought reduction of wealth. I’d call it military success and not economic. For sure they saved us from expansion of Islam but even relatively poor countries can have military success if the war culture is particularly strong. While Spain was ruined by its oceanic expansion (after short period of prosperity), more liberal Britain was more succesful in their colonization efforts.

        You ask whether mediaeval social order was more natural and proper to man. I think there are more layers to that question and so more answers. To make it simple – yes in the realm of politics and social life. No in the realm of economy. So for me the original question of reconciliation of political and economic order remains open.

        Perhaps we should make the term “capitalism” more clear. You say that human society in general is inherently capitalist. Therefore, there can’t be anything inherently anti-capitalist. I understand it as that there are sound universal economic principles or laws. Society that sticks to them prosper, society that departs from them doesn’t proper but we can’t have them unmade. You call it “to do capitalism right”. But how to digress from economic principles? If there is inherently nothing wrong with “fat cat capitalists” where does departure from sound principles come from?

        It’s maybe too simple but I think the answer is politics, power to make rules because wrong rules can ruin economy. Oligarchs are ok until they get involved in politics. Then they become a threat to economic and social order. Unfortunately as public choice school clearly shows political and economic life can’t be separated (rent-seeking and other stuff). Still I think that healthy society keeps them separate as much as possible.

        Did Mediaeval Order reflect on that? It seems that political order did. Power was divided and privately owned, system of privileges and feudal bonds was stable. It took centuries to centralize the state power to extent of 17th century absolutism. The economic order wasn’t that great perhaps because it copied the political system. Althought based on the same principles economic life is different, more horizontal and less vertical (hierarchical) and requires more freedom. Political life copied family structure and that was just fine but the same structure is not suitable for economic life. That could be a reason why it is at least difficult for laissez-faire to go hand in hand with hierarchy and authority.

        This is basically how I see the problem. I welcome any corrections and other thoughts. I will certainly go through Othosphere archives to get more on your viewpoint. And please, apologise any errors in my writings. This is due to my poor knowledge of your language.

    • Forgive my ignorance, as I know very little about what I speak. If I am correct every nation must spend money laying down the wiring that allows its citizens to use the internet and that the amount of information these wires can hold at any given time is limited and called bandwidth. It seems to me that a government could take Kristor’s concept of taxing the use of a their market place while avoiding the hassle to buyers and people who sell through amazon, if they put the taxes on the individual website’s use of the nation’s bandwidth. They may already do so, this idea may be irrelevant to the issue at hand, or my information may just be wrong. If so I apologize for wasting your time.

  2. As I recall, the US got along quite well without an income tax for over a century and a half. Increasing the intake of the Federal government is partly responsible for the creation of the Leviathan we have today, so eliminating various taxes sounds good to me. Of course, the Federal government also granted itself the power of deficit spending, so it seems to me that any just form of taxation would need, on the government end, a requirement for balanced budgets.

    John T. Reed has proposed that we institute a capitation tax, which, unlike the income tax, was authorized by the original Constitution. There would also need to be a restriction of the franchise; at the very least, to taxpayers, which Reed called “no representation without taxation.” Regardless, any talk of restricting the franchise is opening a different can of worms, so let’s not go there now.

      • Under Reed’s proposal, only adults over the age of 25 would be taxed (as I recall). This allows young adults to go to college and start a career before being liable. It also allows for those who do not go to college to move up in their careers to higher-paying positions before being liable.

      • In fact, he says over the age of 21. The 25 might be better, though there is an incentive not to go to college and make some money first. It wouldn’t support jobs like teachers requiring higher education and being rather poorly paid.
        And what about housewives? It would be incentive for women to go to work as soon as possible which I think is the opposite to policy of family support.
        Perhaps housewives and students could be removed from the obligation. Well, such a one-for-all simple solution, though on the right track, is not entirely feasible. At least not without further elaboration.

      • Agreed. Further elaboration is necessary. Perhaps there should be some sort marriage incentive along the lines of a married couple paying 1.5 times as much as a single person.

        Of course, we would have to get rid of same-sex pseudo marriage first.

        There’s also the issue of state and local governments. I wonder how they were funded before sales, income, and property taxes (talk about a triple whammy!)

        In my ideal world, only tax-paying married men with children may vote, and so only they would be required to pay taxes, but again, restricting the franchise is too far off-topic.

  3. This is a change of topic, and it is too long, I fear. But I have a question that I really want to have answered, if anyone has the answer to it. If this is too long for an off-topic comment, I apologize, please delete it.

    Several months ago I heard about the petrodollar system, and it immediately struck me as completely believable.

    I am wondering if it is true or not. Is there such a system in place?

    It makes awful lot of sense, but of course, all good conspiracies would make sense, wouldn’t they?

    Does anyone know anything about this? Does the U.S. economy really depend on this system?

    Simplified to the basics, the system works like this: start off with either guns/wealth, use one to get the other, continue accumulating both. For example: you have guns, use guns to get wealth, buy more guns with wealth, use guns to get more wealth, by more guns with wealth, use guns to get more wealth, buy more guns with wealth….

    And now, after we’ve been doing this for a few years, we have accumulated a whole crap-load of guns!

    Note: by “guns” I mean military superiority, whether actual firearms, or vehicles, or technology, or information, etc.

    Apparently, I gather it works like this in practice: some years ago we reached an agreement with the House of Saud that they would accept U.S. dollars for oil. We have reached similar agreements with many other such oil-producing countries, and have established embargoes and placed pressure on those who will not cooperate.

    Since oil is necessary for the modern world, this places a demand on other countries to acquire dollars from somewhere. And since dollars are, by their very nature, created only by the United States, we have the only source of supply for an item that is in demand in every other country in the world. And indeed, our supply is unlimited and costs almost nothing to create and move. It’s fiat currency; or as I like to call it, “poof money.”

    So every country says: “Hey, Arabian people, we need to buy oil.”
    The Arabian people say: “We only accept U.S. currency.”
    Here’s where America jumps in with this helpful advice: “Hey, you want dollars? Then give us some stuff, we pay out dollars for stuff…”
    And so what ends up happening is that everyone else gives us their cars, trucks, boats, engines, engine components, computers, mother-boards, graphics cards, hard-drives, solid-state drives, television sets, software, hardware, firmware, jewelry, entertainment, research, technologies, beef, poultry, diary, produce, candies, tools, gears, wheels, both thingamabobs and watcha’ma’callems, paper stock, pharmaceuticals, gold, silver, diamonds, rubies, services, manpower, sweat, blood, tears, and time.

    And what do we give them in return? Little green pieces of paper. Little green pieces of paper that they desperately need to to possess in order to purchase oil. That we poof into existence with no immediate cost to us.

    This would be completely hilarious if it wasn’t actually so terrible. And, also, if I didn’t think it was going to come back and completely screw us over in the end.

    If this is true, then somehow the people producing the fiat currency figured out a solution to their dilemma that does not involve restraining themselves or maintaining a mathematical balance.

    The common man’s reasoning goes: if fiat currency only gets it power and authority through fiat and thus through the influence of the one issuing the currency, make sure you have enough gold or precious metals stockpiled as collateral. But the way these people reasoned went as such: actually, you don’t have to stockpile anything expect for bullets, missiles, armored vehicles, and supersonic jet aircraft. But not to use as collateral. No, not even close. To use as an incentive to take our poof money seriously, if you know what I mean.

    What happens if they don’t? What happens if an oil producing country tries to get around the system, by accepting currency other than U.S. dollar bills? Well, according to the petrodollar theory, let’s just say that if you are a small primitive country (every country but the U.S.), you would do well to look at the U.S. and note that our firepower is unrivaled, our armor is too strong, our smart bombs too smart, and our planes, let me tell you something about them, our planes are too fast, their flight surfaces too aerodynamic, their weapon systems too accurate, their flight ceiling too high, and oh, also, if you were wondering, the answer is yes, they are indeed cloaked and they cannot be detected by your primitive radar.

    Oh, and small primitive countries of the world, just in case you haven’t been paying attention, we should also warn you that we are also highly erratic, and that in addition to viewing ourselves as the saviors and police of the world, we also have a recent history of preemptive attack.

    Are you sure you want risk irritating us?

    It would be oh so much easier to just do things our way, and only conduct oil business using our currency.

    Now it seems other countries have adapted in their own way to this system, and if we stopped stealing from them, they would be dead in the water, oddly enough.

    So as to the results: it turns out we can actually tax unusually close to 100 percent, since we don’t actually have to work very hard for anything we have, it just comes to us by intimidation. We can also print out money without suffering the effects of inflation as quickly.

    Really, if we were honest with ourselves… we’re just raiding at this point. Raiding by intimidation. We’re like the mafia, demanding money for our protection services, but really, it’s us you’re gonna need to be protected from if you don’t pay up your protection dues. We have too much muscle. We can pretty do whatever we want. If you want to work and get more stuff, you can, and you’ll get more than if you don’t work, but you don’t have to work. You’ll be fine, cause we’re planning on stealing it all.

    But there is inequality in the States, you say? We had to work for our stuff, you say? Yes, but that is the local system, and overall, there is enough stolen wealth in the system that is damn near impossible to tell who actually deserves what they have or not, and you’ll likely be fine if you never work at all.

    “I worked for all I have,” you can say that all day, but if your customers are paying you with poof money and stolen goods, if the entire system is set up on poof money and stolen goods, then you’re out of luck as soon as the poof money finally does and the stealing ends. And how do you know if your job is dependent on poof money or not? Most of it is poof money, it may actually be true that we’d all be worse of material-wise without the poof money and the crooks. What jobs will actually be found to be useful once the poof money finally fades away without a trace?

    Could the system go on forever? Possibly, but our greed and growth is outpacing the amount we can raid. It’s like some other form of Laffer curve, were eventually the amount you can raid starts to diminish the more you raid.

    Of course, the amount that other countries need oil and can produce valuable goods for us to take is limited, while we are expanding out of control. So eventually there will not be much left to raid, we will have out-grown our neighbor’s stockpile, and by “neighbors” I mean everyone who is not the U.S. A., so we will be forced to realize that the system is artificial after all. Also, the perpetual “petrodollar warfare” that is needed to insure the Arabs stay in line with our plans is wearing us out, being both emotionally and spiritually taxing for the nation.

    So, what I want to know: does this system really exist? Is there really an agreement between us and Saudi Arabia that all oil much be purchased with U.S. dollars?

    And if it does exist, why is it brought up less? It seems to be very important with regards to the current situation, influencing both politics and economics, as well as heavily influencing our national foreign policy. It seems to explain many things that are mysterious without it, such as why we are not feeling the inflation all that heavily in comparison to how much dollars we are actually poofing into existence (a lot!) and it does answer many questions in regards to why it can often seem that the U.S. has very strange foreign policies that make little sense on the surface, usually appearing random without this theory, and only falling into place when looking through the lens of “petrodollar warfare.”

    Thoughts?

    • One addition to the above:

      One key point that I keep seeing related to this, and that I would like to know whether or not is true as well, is that we also have an agreement with their oil-producing countries that when they receive the payment of U.S. dollars for oil, they then send the dollars to us and we will in exchange give them U.S. bonds that will pay them at a higher rate sometime in the future.

      Once again, this would completely hilarious if it wasn’t actually so terrible!

      If true, it means that we do not even add to the inflation of the U.S. dollar, whether looking at a global or national level, when we poof in the cash to “buy” all of this stuff. We poof the money in, we purchase a good from another country with our poof money, the other country gives that poof money to Arabs in exchange for oil, Arabs give us back our poof money , we leave them holding them a I.O.U. for more poof money some years in the future.

      We poof, and end up getting to choose what our poof money does in the end: we can recirculate, destroy it, do whatever we want with it, its poof money, its our poof money poofed by us, and it’s traveled full-circle to end up right back in the poof factory where it came from.

      Japan has now replenished their oil reserves, we now have several thousand new Toyota automobiles in our country, Saudi Arabia is holding on to our debt (!), and we haven’t lost a penny!

      Of course, what happens when the bonds mature, I don’t know. Convince them to invest in more? And why don’t the oil-producers start trading the bonds as if they were real currency? You’d think an I.O.U. for poof money (which was originally conceived of as an I.O.U.) would be trusted as having a value worth the I.O.U.

      It’s not like we’re gonna run short on poof money, if we promised you a bazillion poof bucks, we can poof, we’re good for it, you’ll get paid your poof dollars.

      • Poof money would be worse if China didn’t have so many poof boys. But then again, some day they might want to stimulate our package back.

      • FHL,

        You are speaking of the dollar’s exorbitant privilege which began in 1922 and was expanded in 1945. De Gaulle was publicly warning the world about this as early as the 1960’s. But yes, so long as the global savers save in our currency, we can print without inflationary consequences. But this privilege is given or earned, not taken. The US military is only as strong as the dollar, not vice versa (see: the Soviet Union). The oil states almost went off the dollar in 1980 but were talked back, not by the Americans, but by the Europeans who understood that the world did not not have an alternative currency large enough to take over oil trade from the dollar without massive worldwide deflation. That is no longer the case (ie. euro) and the dollar’s privilege is ending, which is why massive QE is necessary to keep the government afloat (for the time being).

    • I’m sorry but I don’t believe this scenario to be true.. If the US can print dollars without inflationary consequences, why is it then that we have experienced inflation pretty much non-stop? Why would USGOVCORP ever worry about increasing taxes when all they would have to do is print more money?

      It is true that if people worldwide were to stop saving in dollars then the value of the dollar would go down; but, it is not true that increasing the supply of dollars does not also debase the value of a dollar.

      Maybe there is some truth to the petrodollar hypothesis in that this relationship causes the demand for dollars to increase; but, the amount the US economy spends on foreign oil is trivial compared to the size of the economy. Less than 1% of GDP. Meanwhile, taxes MUST be paid in dollars and the amount the US economy spends on taxes is 27% of GDP. So the demand for dollars isn’t going anywhere.

      • I’m no expert on these matters, but I think we can print without inflationary consequences up to the amount that other countries are spending on oil. (or at least that’s how it used to work, but now, not so much)

        For example: China needed the U.S. dollars to buy its oil, so we printed off money which we then used to buy Chinese goods, the Chinese spent the dollars on oil, and the money ended up coming back to us since the oil countries invested in U.S. bonds. We now have a whole bunch of Chinese stuff, as well as the money which we used to buy the stuff, quite oddly.

        It’s not so much how much oil we are buying, but how much oil everyone else is buying, since they have to go through us first to buy it.

        Of course, like I said, this can’t go on forever, so it’s a stalling maneuver, and the more we stall, the worse it will be for us.

        I think we have been experiencing non-stop inflation because we are printing off more than this petrodollar system can handle.

        But I must admit, we have been printing dollars almost non-stop, and we have experienced inflation pretty much non-stop, but it does seem kind of weird that we can be trillions of dollars in the hole and yet no one starves in the U.S. and the vast majority of us have comfortable lifestyles… we have automobiles and homes and TV’s and all of this stuff, all of these luxuries, yet very few people in the U.S. seem to actually make anything, like actually physically make the products; most of us just move them around… and it just seems out of proportion.

        But like I said, I may be mistaken, take my words with a grain of salt.

      • That just seems ridiculous to me. Why would we print money so China can buy oil? Just because the price of oil is denominated in US currency doesn’t mean it has to be paid with US dollars. Just because countries have dollars doesn’t mean that have to spend it on US bonds.

        If countries invest in U.S. bonds it is because they think U.S. bonds are a good investment.

        If countries stopped buying U.S. bonds that just means the relative cost of imported goods will go up and the relative cost of US manufactured goods will go down, which would be good for US manufacturers. Maybe it would also mean that the US govt would have to be fiscally responsible. Might actually be a good thing.

      • As to whether or not oil has to be paid with U.S. dollars, well that was the whole thing I was trying to confirm. Because what is proposed is that we have a deal with the oil producing companies where, in return for our military protection, they will refuse to trade oil with any country for any currency other than the U.S. dollar. Of course, left to their own devices, they don’t have to, but that’s the deal we made with them.

        The whole system was intended to provide a backing for the dollar when was taken off of the gold standard, so people would still have some reason to value it.

        I’m not sure if we print off the money right then and there because China needs oil, but more so that we are in a privileged position now -we don’t have to buy their stuff, but they have to get their hands on some dollars. And since the money comes back to us, we got stuff for free (or at least for free for now, as we have delayed payment).

        I don’t know if part of the deal involved that the oil countries were required to invest in U.S. bonds. I don’t know why they would trust them anymore, and indeed, it looks like they’re not.

        Also, this why proponents of the theory also suspect that the system really has to be coerced under threat of force. Its not a natural economic system, it’s us telling them at a barrel of a gun, “you will take this currency and you will do that with it!”

        I posted a comment at the bottom here referencing a part I found in a book of Ron Paul’s. I linked to the website where you can download the book in PDF format. He probably explains it a lot better than I do. He believes that we are dong this, but he isn’t a fan of it, and he also explains how the system actually has eliminated a lot of manufacturers in the U.S.

      • FHL,

        The exorbitant privilege I mentioned earlier refers to the dollar’s role in settling trade balances. This came about as a result of the 1922 monetary conference in Genoa and extended in 1945 at Bretton Woods. Jacques Reuff, economist and attache to the French government during this time, wrote a book in the 1960’s called The Age of Inflation which explains the mechanics of this privilege in detail. You can download the book into pdf for free if you google it. In outline, if central banks settle trade balances (that is, save) in a designated reserve currency rather than something tangible then that puts incentives in place that will lead to ever growing imbalances in the world economy.

        The petrodollar is something else. I would not describe it as the result of some clandestine arrangement between the Saudis and the Americans. It was just good business. Standard Oil bought exploration rights from the House of Saud in 1928 and then partnered up with Exxon and others to form Aramco in the late thirties after oil was struck. It made sense to invoice in one currency and the dollar was the obvious choice given the companies involved and the size of the US economy relative to the rest of the world.

      • @ Andrew E.

        Thank you for your reply.

        I tried looking for the The Age of Inflation of free online, but was unable to find it. I found several books written as commentary on the original book, as well as several PDF copies that required payment to access. I will look for it at a bookstore, since this seems very interesting and important to know.

        As for good business, I would agree that it does seem like good business. The thing I wonder about, however, is if what started as a voluntary deal has now turned into something much more violent and shady. I also wonder if they knew how badly the dollar printing would ensue… since it seems the whole deal was intended with the purposes of allowing the U.S. to print the dollar without any gold standard, or any standard for that matter. It still doesn’t seem as benign you say it was.

        I am still researching this, so I don’t know, but this is what I wonder. I will look for the book you told about.

  4. Pingback: Lightning Round – 2013/08/07 | Free Northerner

  5. Thank you for your comment Andrew E.

    I did read that the system came into play out of mutual deals between the U.S. and the Arab oil countries, and that neither hand was forced. I was also told by the friend who originally brought this up to me that many countries are locked into the system, and if the dollar collapses, they go down with it. So I knew that as well. The reason I think it hinges on the military might of the U.S. (or why it did, seeing as how I guess it is falling now) is because the U.S. navigated the original deals by promising military protection to the oil countries, and also because some people have claimed that the recent wars the U.S. was/is involved in had something to do with the petrodollar system. Frankly, it’s the only reasonable answer I can think of in relation to Iraq; no other answer for why we not only invaded but had to spend years trying to take over the country makes any sort of sense. That, and the hostility displayed to Iran (a threat to the petrodollar system but not a threat to us physically and certainly no match for our military) falls into place as well.

    While, of course, if the dollar collapses suddenly then so does the military, I am just speculating based on what I’ve heard and read on the internet about military actions taken by the U.S. in an attempt to postpone the collapse. The so-called “petrodollar warfare.”

    The dollar may be collapsing, but it hasn’t happened quite yet, and the military is still functioning. Really though, if it came to pass that if the people in charge predicted they could postpone the inevitable collapse a few months or years by direct military actions, do you think they would not try it? I mean, there is a lot hanging on this -if we have a monopoly, we can print out all the money we need without consequence! But if we then lose that monopoly…

    Anyways, I don’t know, but it seems that the original intent of those who put the system in place was to put up the system with no reasonable end plan in mind. If they had one, I can only think it was to build up the military in the hopes that we can influence people that way.

    Nonetheless, thanks again for your reply, it answered my questions as to the truth of this system.

    • Although I am very upset that no one thought to tell me this before.

      I was honestly angry when I was told about it.

      There are hundreds of websites detailing the current economic situation and many, many websites discussing the Fed, fiat currency vs. gold standard, and fractional-reserve banking, yet no one ever thought to tell me “Oh, by the way, here’s an odd fact: for almost 4 0 years, we have had a system in place that requires all countries to gain possession of U.S. dollars in order to purchase oil, a necessary resource for the modern world. It’s our fiat currency, so being our fiat currency, it naturally can only come from us, via our fiat, and we can create it whenever we wish at no cost, via our fiat! It’s our fiat currency -now a heavily desired product on the market! And get this- we even figured out a way to print the dollars other countries needed without it contributing to our inflation! Interesting stuff, huh?”

      What the–?!

      Honestly, I felt betrayed by everyone who’d ever tried to teach me the truth about banks, currency, and economics. I felt betrayed by them when my friend revealed the petrodollar system to me- really, isn’t this something that people should know about?

      “What does it change?” Everything, man, it changes everything! That the dollar is not only just another fiat currency but actually occupied the same space as, and was actually viewed in a like manner, as if it were a necessary resource; almost as if U.S. dollars actually were the oil, or energy, or freshwater, or fertile land, and it was held in this regard by almost every freakin’ country in the world until very recently ? It changes everything. man!

      Ok, I’m done, sorry Kristor for taking up so much room on your post for my off-topic comments.

  6. Adam, thank you for the verses (although I’m not sure if you intended them for me or Kristor) . I find that the entire 18th chapter of Revelations completely terrifies me, because Babylon sounds almost exactly like the U.S.A.

    And another apology is due to Kristor, because I’m gonna post on the petrodollar issue again, this time I have quotes. I have not read this book before, and actually ran into this chapter when I was skimming through the PDF. It’s Ron Paul, who is a politician, but he seems to have a high standard of morality and sense of honor and duty, so I trust him on this.

    I also trust him on this because he says the exact same things I said!

    Which I guess makes me feel kind of foolish, because he was one of the people I felt betrayed the people who looked to them for advice, and I kept asking my friend concerning Ron Paul, “If he knows about it, then why doesn’t he ever tell anyone about it? Because it does change the game we’re playing.”

    But it turns out he does explain it, fully, in one of his books.

    From Ron Paul’s book, Pillars of Prosperity (pgs 259 – 269):

    The truth now is: “He who prints the money makes the rules”—at least for the time being. Although gold is not used, the goals are the same: compel foreign countries to produce and subsidize the country with military superiority and control over the monetary printing presses.

    Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation’s people—just as was the case when gold was the currency and it was obtained by conquering other nations.

    ….

    Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it—not even a pretense of gold convertibility, none whatsoever!

    ….

    In the short run, the issuer of a fiat reserve currency can accrue great economic benefits. In the long run, it poses a threat to the country issuing the world currency. In this case that’s the United States. As long as foreign countries take our dollars in return for real goods, we come out ahead. This is a benefit many in Congress fail to recognize, as they bash China for maintaining a positive trade balance with us. But this leads to a loss of manufacturing jobs to overseas markets, as we become more dependent on others and
    less self-sufficient. Foreign countries accumulate our dollars due to their high savings rates, and graciously loan them back to us at low interest rates to finance our excessive consumption.

    Most importantly, the dollar/oil relationship has to be maintained to keep the dollar as a preeminent currency. Any attack on this relationship will be forcefully challenged—as it already has been.
    In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat.

    And this next paragraph is almost word for word how I described it. It’s uncanny!

    Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar. As long as foreign recipients take our dollars for real goods and are willing to finance our extravagant consumption and militarism, the status quo will continue regardless of how huge our foreign debt and current account deficit become. But real threats come from our political adversaries who are
    incapable of confronting us militarily, yet are not bashful about confronting us economically.

    That’s why we see the new challenge from Iran being taken so seriously. The urgent arguments about Iran posing a military threat to the security of the United States are no more plausible than the false charges levied against Iraq. Yet there is no effort to resist this march to confrontation by those who grandstand for political reasons against the Iraq war. It seems that the people and Congress are easily persuaded by the jingoism of the preemptive war promoters. It’s only after the cost in human life and dollars are tallied up that the people object to unwise militarism.

    ….

    Using force to compel people to accept money without real value can only work in the short run. It ultimately leads to economic dislocation, both domestic and international, and always ends with a price to be paid.

    • I would find the “Iran is no threat” position farcical if it were not for the awful consequences of that position.

      It’s not that Iran poses a threat to us now; it’s that a nuclear Iran would pose a threat to the world. Armed with nuclear weapons, Iran could

      …blackmail the West, blackmail Europe, render Europe even more dhimmified than it already is, and extend the power of Islam over and within the West. At the worst, it will use the weapons—against Israel, which Iran’s leaders have repeatedly sworn to destroy, possibly against Europe, possibly against some other country.

      Nuclear Iran could blackmail the world over access to oil, most of which is shipped past Iran on its way to the rest of the world. Nuclear Iran could (threaten to) take out Saudi oil-producing facilities. Nuclear Iran could give some nukes to terrorists, and let them bomb Israel. The possibilities for mayhem and destruction are endless.

      However, this is not really the correct forum for this sort of discussion. When will the American Traditionalist Society site be up and running, I wonder?

      • And nuclear world, nuclear Jews, could nuke Iran. What if nukes are have a stabilizing effect on Iran? What if nukes bring them out of their Jew killing fantasies and into serious statesmanship? What if nukes in Iran force Iranians to put up or shut up with all their stupid blustering and posturing?

      • Earl,

        What evidence is there that gaining additional armaments stabilizes a saber-rattling country? What evidence is there that the Iranian leadership would become more stable and responsible if they acquired nuclear weapons? What evidence is there that any Moslem anywhere, in any age, ever gave up his “Jew-killing fantasies”?

        My understanding is that many politically prominent Iranians are millennarians who would welcome a nuclear war that brought about their own destruction, as long as they were able to murder as many Jews as possible in the process of bringing on the apocalypse. This makes the Israeli possession of nuclear weapons irrelevant.

      • There are many examples. North Korea, India, Pakistan. There are many secularized Muslims, too. Turkey comes to mind. Iraq.

        Your understanding of Iran’s escatalogical intentions are a valid concern, but require intimate familiarity with Iranian authorities and culture.

      • This rethoric about Iran reminds me of the one I’ve heard about Iraq before. Why should I believe it?

        Iran sits on considerable oil stock and they want to build their own pipelines, do their own oil business and become independent local power. This view seems to be more realistic to me. Not every muslim is al-qaida fanatic. I don’t really see how one can do business while throwing nuclear bombs on his neighbors or rich and better armed western countries.

        It explains US (and British-French) support to Syrian rebels who really are al-qaida (partly) and who kill christians just to overthrow pro-iranian government of Syria that is otherwise hard to understand.

      • Earl,

        I’m afraid that North Korea is an example in favor of my position; also, I would hardly call the ongoing conflicts that equate to a low-level border war between India and Pakistan to be an example of stability.

        In Turkey, the serious Moslems have been gaining, not losing, power since Erdogan assumed office. In Iraq, sectarian violence is an everyday occurrence.

        You’re making my argument for me.

        RT,

        As Lawrence Auster observed, Islam is sui generis. There are significant differences between an Islamic mindset and all others, and we cannot assume that what makes sense to us would make sense to them.

        On the one hand, it makes sense to us that a country would want to exploit its resources, become a regional power, and expand trade with the world because that’s what we would do. However, most of us are so far removed from serious religious faith that we have a hard time understanding, for example, the Crusaders, many of whom spent their fortunes and lost their lives for their religious beliefs. We have a hard time understanding missionaries who are willing to sacrifice their lives for the Gospel. If we cannot understand our co-religionist members of our own culture, then how much harder must it be for us to understand the mindset of people as alien as Moslems? For Moslems, murdering Jews and other “infidels” is a shining example set by their perfect man, Mohammed, and is exalted in the Koran. This is not to say that all Moslems will kill non-Moslems, just as not all Christians take up the Great Commission—but it is something that the devout support.

        So perhaps the Iranians just want to do business. It would be much more believable if their leaders didn’t publicly swear to obliterate Israel.

        Western support of Syrian rebels is another example of the self-destructive path the West is on. We no longer support our allies, nor do we defend ourselves, but we do support our enemies, and walk into the gaping maw of destruction.

      • Wm. Lewis, perhaps you’re right.
        Since I spent substantial part of my life under communist’s rule I’ve learnt not to take to seriously statements and promises of politicians, including Iranians. I don’t see much difference between their public promises and those of our politicians about reducing crime or bringing economic growth.
        Human mind works the same in general. Even someone who wants to conquer the whole world for his god must think in terms of strategy provided he’s sane. People living in conquered regions were usually converted, not exterminated by Moslems in the past. From all that I assume they try to get rich first in order to arm themselves and to become local power. Then they try to unite the world of Islam against West.
        Of course, this assumption can be wrong. But who should I as Middle-European fear more? Strong Iran or US gov. having monopoly over oil business and trying to weaken other superpowers? Why did Russian communists not use nuclear bomb? They could build their brave new world on destructed remains of the old one? And they had and still have much bigger arsenal than Iran will ever have. North Korean fanatics also have not use the nuke so far. The only country that ever did it is the US and it was to demonstrate power that other did not have at that time.
        I think a world where there is division of power is really more stable. The more countries possesing nuclear arms the more stability. There are game theory models on that. It’s like the difference between armed and unarmed society. Unfortunately, it brings more opportunities for accidents and unwanted disasters.
        So it is very difficult question.

      • @ RT

        You said: “But who should I as Middle-European fear more? Strong Iran or US gov. having monopoly over oil business and trying to weaken other superpowers?”

        This is an interesting question, but in terms of war and risk, I’ve recently wondered why the U.S. doesn’t seem to fear European nations at all. I mean there is zero fear or concern. No one thinks of them at all (at least not in public, I don’t know what our military and intelligence departments do behind closed doors).

        But as a U.S. citizen, I can actually get more nervous thinking about Europe than I do the Muslims. (The Islamic threat can be stopped quite effectively by simply shutting down immigration. They can’t blow you up if they can’t reach you!)

        And if push came to shove, the Muslims could be taken out fairly quickly by the white Americans, even if their numbers were very large enough in the States. It doesn’t seem to me like there is much of a point of no-return where white Americans would have to think: “it’s too late, we will be enslaved.” They (white Americans) have got too much firepower, too much knowledge, and too much intelligence and will-power to be easy prey like that. The Muslims pose a threat so long as they aren’t actually too much of a threat so as to be so obvious, and thus draw the full attention of white Americans onto them.

        And while there have been many unfortunate American casualties in our wars with them, I don’t even see why we had to land our planes or deploy any troops (…unless we had other reasons other than the official ones, of course, such as the one’s described above..) -if we were in an all out “It’s Either Us or Them” sort of war, we could destroy entire cities from the air, easily.

        But Europe has enough power and technology to be a legitimate threat. And it is also going bankrupt. And divided. And agitated. And the more Christianity is diminished and the more secular the world gets, the less likely people will act in a humane way, and more likely they will act on greed and opportunity.

        And it’s not like we haven’t been to war before…

        Anyways, I don’t know anything about this stuff, really, I’m just thinking out loud.

      • FHL,
        1) US and EU is under control of the same liberals. Why would they fear each other?
        2) Europe doesn’t have united military power. There is a military alliance between UK and France. But I think London doesn’t do anything without having called Washington first. Germany is much less willing to play its part in foreign military adventures. Other countries are not important.

        Interesting information about Egypt. It’s refreshing to hear “insider’s” opinion.

    • @ RT

      Well, like I said, I don’t know much about this!

      As far to as why liberals would fear each other, I think when the going gets really tough, they attack each other. Communist groups would always have infighting, wouldn’t they?

      But as far as Europe’s military power, I agree, it doesn’t seem like any single country would be able to take on the U.S. on its own. I suppose I envision something like a conflict that sucks up everyone into a complicated war with each other, similar to the other two world wars.

      But I don’t know, of course. I just see how the previous world wars were fought primarily between white countries that I imagine another war of that scale would have to be the same. No other countries could fight such a war, it would be too one-sided, the white nations would easily gain victory. So I am trying to imagine if there ever was such an Armageddon, how it would take place.

      Also, a large part of me thinks that America is going to be the villain in the next World War. We haven’t been doing so hot lately when it comes to morality or even trying to hold to basic Christian principles, so as hard as it is for me to say so because I love this country, I fear that in the future we may do some stuff that will really be quite evil if things break down too much and we feel the need the to.

      Just rambling thoughts of mine.

      Thank you for your comment about my thoughts on Egypt, also even the “insider’s” can be wrong (as my parents were on this issue)! I think an important thing people need to consider when it comes to that situation in Egypt is that the military compromises a group of its own. It’s not like in the West, where there are various political parties and the military is neutral, and whichever party gets power also gains the military; rather, the military in Egypt is almost like its own political party.

  7. Pingback: This Week in Reaction | The Reactivity Place

  8. Ok Kristor, I’m just gonna hijack the thread. It’s too late. I’m sorry if you wanted to talk about taxes and your ideas concerning them, I didn’t think the discussion would get this far.

    But I really feel need to post my thoughts on the matter of the Middle East and the culture of its people. If you are unaware, I should mention that I am racially Egyptian, but a U.S. citizen by birth; my parents immigrated to the U.S. from Egypt before I was born. We are Christians, and we belong to the Coptic Orthodox Church.

    The following comment was actually intended for Dr. Bruce Charlton, but it was not published, as per his (very reasonable, in my opinion) rules concerning discussions of Islam.

    An important note: I AM NOT SAYING THAT ANYONE HERE IS CROOKED AND NOR I AM SAYING THAT MY KNOWLEDGE OF EGYPT’S CULTURE IMPLIES I HAVE KNOWLEDGE OF IRAN AND IT’S CULTURE (I DON’T)!

    I am not accusing anyone here of anything, since I have not seen enough of anyone’s stuff to really know where they are coming from and because I also do not have enough knowledge of Iran and their culture to really know what I am talking about concerning them.

    But I feel that this comment may be (but perhaps not) important, and so just in case it is relevant, I will publish it here:

    It seems to me that even the right/conservatives/traditionalists will often have the same sort of crookedness that affects the left. The reason, I feel, is because they are not intimately looking into the issues and when they think about the issue, their thinking is goal-oriented to the purpose of winning the argument, not finding the truth of the matter.

    An example recently struck me: I had called all the stuff that is happening in Egypt back over a year ago. And I was the only one. Neither anyone online, nor even my family, agreed with me, but I called it, and I even posted about it on another person’s blog back right after the first Egyptian revolution.

    I knew the Muslim Brotherhood would have difficulty maintaining power, and I knew that they had immediate opposition from the military, I did not know this but I guessed it just from looking at the people, they were clearly two different groups with two different goals and values.

    As for popular support, I knew the Brotherhood would attempt to make a push, but I voiced my opinion that I did not think the Egyptian people would put up with them for very long. I knew that the average Egyptian is frightened by the Brotherhood, that any respect he shows them has to do more with fear than it does a kindred heart. I knew that the Egyptians were pragmatists first, Islamic zealots second, and that the average Egyptian man wants to smoke his pack of cigarettes, wants to skip mosque attendance if he feels lazy, wants to drink a bit of wine every now and then, and will welcome and treat kindly the tourists that he encounters because he knows they have money, and he wants money.

    It was all too clear to me. I knew the Brotherhood was too extreme for the majority of Egyptians (they lost every opinion poll, every election that I heard of [on the local level, such as city and district]), and while one can say that Mubarak may have influenced that, the attitude of the people towards them gave them away: they are made anxious by these people, they don’t know how far they will go, and they don’t know if they will lose luxuries that they have become accustomed to, such as the smoking and the sip of wine now and then, should they come into power.

    I was surprised that the military allowed them to take power for a time. I had expected the military to simply muscle their way into power and deal with the Brotherhood on their own terms -with their guns!

    So I was not surprised by their recent actions toward Morsi and the Brotherhood, but I was rather puzzled earlier, because I expected it to happen sooner.

    But here’s the thing -no one that I knew, no one that I heard or saw, either in person or online, other than perhaps a sharp uncle of mine, predicted it and expected it. Everyone just knew that the Brotherhood must take control, that it was inevitable that the Egyptians would accept anyone other than an extremist Muslim, and they thought this because they viewed the truth as being a product of argument, that so long as they opposed the liberals, they were correct about the facts. But they didn’t care for the facts, which clearly showed that the average Egyptian’s lifestyle does not agree with the heavily restricted and extreme view of the Brotherhood. It was absurdly clear that that the Brotherhood and the military were different: for one, the military men are all clean shaven, or have mustaches, as their rules prevent them from growing beards; the Brotherhood is exactly the opposite, with almost all of them having a beard with no mustache. Young guys in uniform and boots riding on tanks do not mix well with bearded fanatics in robes and flip-flops who shield their eyes whenever they speak to a woman!

    But they wanted it to be one way, not even because they wanted the outcome, they didn’t want the Brotherhood in control, rather they wanted to speak out against the left, they wanted to humiliate the left, and they let that motivation run them into not taking all the facts presented into consideration.

    I also heard things like Lawrence Auster’s claim, sorry to pick on the recently departed, that the U.S. was responsible for Mubarak’s overthrow. I severely doubt it, and I also doubt the Brotherhood caused it, it really does seem to be the case that it was started by teenagers and college kids writing on Facebook, and the Brotherhood took advantage of the situation.

    People on the right were talking about it like they thought Mubarak would live forever or something “What will Egypt do without him? They will be taken over by Islamist extremists and enforce anti-west policies! The left will regret their support of his removal!”

    But I mean, come on now, get real, Mubarak was born in the 1920’s. His white hair is dyed jet black, perhaps that threw people off. The guy was gonna go anyways, whether it came by his ousting from office, or by his natural death at old age.

    And his son certainly wasn’t gonna take power, because not only did the public not like him, but more importantly, the military didn’t trust him. He was never in the military, he never served, he was not one of them. I knew this before the whole revolution ever happened. I just thought the coup would take place at the occasion of Mubarak’s death, where the military would refuse to follow his son -and an Egyptian president without military support is like a roofing contractor without a crew, powerless.

    The things were set to go the way they did regardless of whether there ever was a revolution or not. There was little the U.S. could do at that point, short of a military intervention, to swing the pendulum to one side or another. Plus, it was very clear from the way Obama was acting and the White House was responding, that they didn’t know what was going to happen, and they tried to hedge their bets. They shifted from side to side, and I remember that they supported Mubarak at first, until it became clear that he was on his way out for sure, then they turned on him.

    So I knew from the beginning, I saw it, but others did not see it, because they wanted to win. I don’t care that much about winning anymore, and it frustrates me when I (and this happens often) try to talk to people but they have that mentality in their mind, that “in it to win it” instead of “in it to find out what is actually happening!”

    Now what is going to happen from here, I don’t know. But my original suspicions were that the Brotherhood would lose the vote and they would lose support from the military, and that they would not give up after this loss, but try to overthrow the military somehow, probably with violence and causing of general chaos. From there it’s up to the military to respond, and I’m not sure what their plan is.

  9. Although I wouldn’t go as far as saying, which I think Kristor implies, that income and property taxes are in themselves immoral, I do agree that taxes on transactions (sales, VAT, “sin”, and excise) and tolls & fees are more just and better ordered to human thriving. Taxing income from work is, at least, profoundly imprudent.

    I do think being sovereign must be in some sense profitable. Otherwise no one will want to do it. The better sovereigns should cost a bit more, but they presumably will be worth it.

    • In writing the post, I had not worked my way round to the explicit conclusion that income and property taxes are immoral, but now that you mention it, I think they are. And you have provided the last bit of the reasoning that gets me there: a tax that is neither just nor ordered to human thriving is ipso facto immoral, no?

      Agreed that being sovereign must be profitable, along some dimension of utility, even if only as satisfying the impulse to do the right thing by one’s fellows (as with say, Cincinnatus). And in practice it must be thus profitable, somehow, or no one would ever subject himself to the many hassles and dangers of leadership. That being so, the optimal system design will make the profitability of leadership a direct and explicit function of general social welfare.

      • It seems a very high bar to clear to say that income or property taxes are, in themselves, unjust and not ordered to human thriving. If they were, I suppose it would be a hop, skip, & a jump to proving immoral. That they may be often imprudent does not prove they always and everywhere are. Every human government, being fallible, may be imprudent, and will inevitably be imprudent to some extent. Yet they can and must exist.

      • By reducing the returns to thrift and enterprise – both essential to human flourishing – income and property taxes cannot but discourage them at the margin, ceteris paribus. Thus they cannot but generate a situation in which there is less enterprise and thrift than there would otherwise be. Furthermore they cannot but then teach a culture that enterprise and thrift, as less valuable in practice, are less valuable in fact; and from this men must eventually conclude that they are less valuable in principle.

        At the margin, then, income and property taxes cannot but deprave both the mores and the moral fiber of society; and, likewise, eventually also its morale, its moral energy.

        Such taxes then, as essentially ordered to the depravation of human welfare and morality, are inherently immoral.

        Thanks for prompting me to think this through!

      • A tax on wealth is, in part, a tax on services rendered by the govenment. If part of the government’s job is to protect private property then the more property a person owns the more service they are being rendered.

        Therefore a tax on wealth is not inherently unjust and is not always ordered against human thriving.

      • Just to further expand on my point. The government can be said to be providing a sort of property insurance with the justice system. Just as insurance companies are justiified in increasing rates based on increased limits of coverage so are governments justified in increasing taxes based on increased property covered by law.

      • Mr. Nowell, you make a good point. There is a sense in which all government services can be construed as social insurance. And social insurance is not always inherently unjust. But the problem with collecting premiums for such services by way of property taxes, as I point out in the post, is that they are unilateral – they are not optional for the payer. This makes them more like extorted protection money than insurance premiums.

      • Mr. Nowell, I don’t think income or property tax can be called insurance. Government will not pay me when my property is somehow damaged or stolen as insurance companies usually do. For that, people usually have insurance contracts with private insurance companies.

        Otherwise, I am not sure that income or property tax is not immoral. There should be payment for services provided by government but the method matters and income tax is not very different from robbery. To me it is more about what one must spend than what one can spend. In some cases one doesn’t even see the money he’s supposed to pay.

      • Taxes upon real property are voluntary in that it is entirely optional to own real property. In that sense they are as voluntary as a road toll. Furthermore it is a burden upon the sovereign to support your claim to real property, and by public services possibly enhance its value.

        That is not to say they are not protection money of a sort. Roving bandits become government once they become stationary. Someone’s gotta do it.

      • Not sure what you mean by “more than freedom is.”

        Understood that thrift and enterprise compete with other goods in any budget. But the more that is allocated to them, the greater all future budgets.

      • Well, I meant “any more than freedom is”… but that’s not really relevant.

        Your argument hinges on the idea that anything that in its nature that reduces thrift and enterprise is evil by that very fact. But I say in order for that to be true, thrift and enterprise would have to be unalloyed goods, i.e., ones that you could not have too much of. And I think that is not correct. There is right amount of thrift and enterprise that is less than infinity. I’m not saying anyone could necessarily calculate it, for it is a subject-dependent value. But the right amount is surely less than infinity. Therefore, it is not necessarily evil, at least on this basis, to tax property and income.

      • Say that x is the proper amount of thrift and enterprise that you notice is less than infinity. Say that in a state of nature, your society is generating x. Now impose a tax on thrift and enterprise. The result: you’ll get thrift and enterprise amounting to less than x.

        Now, the same argument goes for transactions, that are discouraged from attaining their proper velocity x by the presence of tonlieux. So there is no free lunch. But the reason it is more just to tax transactions than thrift or enterprise is that the tonlieu does not introduce distortions to the market. A flat tax on all transactions does not encourage or discourage one type of transaction versus another. This means that the market is able to transmit price signals with the least possible interference from artificial noise. The result will be that the proper amount of total social resources will be allocated to thrift, enterprise, worship, quality time with the kids, observing the progress of the clouds, and playing Halo.

      • Kristor said, “But the problem with collecting premiums for such services by way of property taxes, as I point out in the post, is that they are unilateral – they are not optional for the payer.”

        I fail to see the prolem with non-optional taxes. Every person within a nation’s borders benefits from the existence of the an entity that provides justice within and freedom from invasion from without. These are collective goods and by virtue of the fact that one lives within this society one is benefitting from the provision of these goods. If a person does not pay then he is free riding (stealing) from everyone else by forcing to them to pay for goods he cannot help but to enjoy.

        I like substituting user fees for taxes where appropriate; but, a government that is financed entirely by fees will be unjust. If everyone benefits from the provision of justice and the protection of property it is unjust to force the unlucky few who are forced to use it to pay for it all.

      • Well, this is a very strong argument indeed, prima facie. But upon examination, I am not so sure. The possession of property comes about in the first place, presumably, by way of some transaction or other, upon which the sovereign collects a tonlieu, as payment for the maintenance of a market. The maintenance of a market entails among other things (regulation of weights and measures, market rules, and so forth) the enforcement of contracts, and the prevention of crime. It’s no good to charge a fee for the safe transport or possession of goods within a domain, and then sit idly by while those goods are plundered. A sovereign who behaved in such a fashion would have reneged upon his own contract, and his market would soon collapse. So to charge a tonlieu in the first place, a sovereign must provide a safe and secure commercial environment within the borders of his domain – a commercial environment worth paying to get into.

        Now, say you had come to such a place and bought a nice bit of land. In doing so, you would have paid a tonlieu, and so would your counterparty (however the payment was accounted for on paper, in reality both parties would bear the cost of the tonlieu). I don’t know what it’s like in your jurisdiction, but here in California the tonlieu on a real estate transaction is a really sickening amount of money.

        Taxes on holding the property one has already paid a tonlieu to buy in the first place is double taxation. In claiming the property tax each year, the state is charging repeatedly for the same service. It would be more just – simply because it would be more accurate, and honest, and explicitly forthcoming – for the state to roll its whole revenue into the tonlieu, set as a function of real market prices, rather than imputing a value to the property each year according to some formula, and then levying a tax on that purely notional value. If it were done in that way, then the velocity of transactions in his marketplace would provide information to the sovereign about the reasonableness of his tonlieu, given the quality of his civic product. It would introduce some market discipline into the setting of tonlieux, and this would have beneficial knock-on effects upon the budget and reasonableness of state expenditures. As Mr. Steves is right to point out, being a sovereign could then still be a ridiculously great business to be in, but it would be extremely difficult to charge economic rents on values one had not truly delivered. All of which would make both for good government and for good business.

        One of the interesting corollaries may be seen from considering the case of a domain in which there was, in the limit, only one owner of property. Such a domain could not easily form the basis of a very lucrative market, for there would be only one seller and one buyer: the market maker himself, the Lord of the Manor. A lucrative market wants many prosperous market participants – many proprietors.

      • RT said, “Mr. Nowell, I don’t think income or property tax can be called insurance. Government will not pay me when my property is somehow damaged or stolen as insurance companies usually do. For that, people usually have insurance contracts with private insurance companies.”

        Of course government is not exactly insurance; but, it is very much like insurance. Government will not pay you when your property is damaged or stolen but it will expend resources to force those responsible to do so. Just as an insurance carrier’s liabilities increase with the amount of coverage you have, so too do the government’s liabilities increase with the amount of property you have.

      • But Kristor, you just got done (first implying and then finally) saying that income and property taxes are per se immoral. You cannot now prove that by showing them only imprudent or less market efficient. I actually agree with you on all points that a tonlieu is the more prudent and efficient, but that doesn’t make alternatives per se immoral.

        Yes, you can hypothesize that some non-infinite x is the right amount of thrift and industry in a society. Then (and only then) can we say, yes, income or property taxes would be unjust by reducing x. The trouble is no man knows or may ever know with certainty x. We don’t live in that society. (Far from it.)

      • To the extent that a policy reduces market efficiency, I would suggest that it is ipso facto, per se immoral. Does an act reduce the values possible to a state of affairs below optimality? It is then wrong.

        This assumes of course that there is some determinate absolutely optimal amount x of thrift and industry in society. It seems to me that it follows mathematically that there is necessarily such an optimality. Given the whole of history to date, there is some maximum of value really achievable to us. How could it be otherwise? Any achievement of value, then, that falls short of that optimum is by definition suboptimal, a defect of act; and any policy that prevents the achievement of that optimality is immoral.

      • Kristor,

        I have three points to make.

        1) I think it is not proven that a tonlieu tax on wealth and is more conducive to maximizing the amount of thrift & industry in a society than a mixture of both tonlieu and a property taxes, consumption taxes and poll (per-person) taxes. Transactions exchanging goods in the market are a priori good for both parties as they both have freely entered into the exchange and therefore both must think that they will benefit from the exchange or they are behaving irrationally. A tonlieu acts as a tax on these exchange, by increasing the transaction cost associated with these trades. This will then cause less of these trades to occur which will in fact create a deadweight loss to the economy.

        The taxes with the least amount of deadweight loss are on goods with the most inelastic supply. Land, being fixed, and persons are the most inelastic goods available to tax. Therefore the majority (but not all) of the government’s revenue should be based on taxes on these goods. Other taxes and tonlieu should be based on the marginal cost to the government. Therefore a tax on wealth should be based on how much the government’s liability increase with an increase in the amount of wealth to protect. (A tax on wealth is much more efficient and just than a tax on income.) This can be calculated. Consumption tax should be set equal to or greater than the tax on wealth so that there is no disincentive to save one’s income. Tonlieu should be based on the how much each transaction costs the government in terms of paperwork and officials and such and society in terms of negative externalities.

        2)It is not historically accurate that medieval lords did not tax income. It is true that there were certainly mainy fees with which medieval lords collected income. Chevage, gersum, heriot, merchet, and mortuary are just some of the fees they charged; but, the majority of the villeins obligation to his lord was in working the lord’s demsne. Villeins were expected to work approximately 3 days each week on the lord’s land. If you assume a six day work week then half of a villeins labor went to his lord. The parallel to an income tax is obvious.

        3)It may be true that there is some optimum level of thrift & industry but it is not necessarily the same as the maximum value as there is a tradeoff between thrift & industry and prayer and contemplativeness (is this a word?) and relationship building. I’d say since the exact values of these trade offs are not known then it is impossible to know what the optimum level of thrift & industry is or should be.

      • Thanks, Mr. Nowell. Taking your three points in order:

        1) Revenues to sovereigns are not necessarily dead weight losses to the economy. Sovereigns can provide true goods and services, that are worth buying: guaranteed weights & measures, honest currency, enforcement of contracts, guarantees of safe passage and domicile of persons and property, public order, criminal justice, rule of law, market rules, market venues, and so forth. Their revenues are dead weight losses only insofar as they exceed the value of such goods as they have provided. This may certainly happen, of course, and often does. But provided that goods and people can move their market activities to a competitive sovereign, even at the margin, competition among sovereigns should nudge the prices sovereigns charge toward Pareto optimality (and should likewise generate competition with respect to the goods and services they provide their customers).

        So much then for the problem of minimizing dead weight losses to society imposed by sovereign revenues. All that remains is to determine what methods of revenue collection are likely to optimize market activity, and therefore sovereign revenue.

        2) Medieval lords are not our moral exemplars in all things. That Medieval villeins were slaves for three days in each week does not mean that slavery is A-OK. On the contrary, the slavery of the villeins was profoundly immoral. If such slavery is analogous in its effects to the earned income tax, then so much the worse for the earned income tax.

        3) Agreed that it is impossible for us to know the Pareto optimal quantity of thrift and industry, as compared with sanctity, video gaming skill, and sleep. Agreed also that the maximum of any value is almost never the optimum thereof, given all the trade-offs. This means that, insofar as possible, we ought not to tax any one of these activities, over and above any of the others, *so that* our idiosyncratic decisions about these trade-offs are not perturbed by noise about their true prices.

        Take then a man asleep in his garden. Say that at the time he bought them he paid the tonlieux on his properties. If he were then to engage in any freely contracted (and rational) transactions, he would ipso facto increase the total stock of social value local to the realm, and so in the stock of valuable goods all wanting surety and protection, thus generating an additional obligation on the part of the sovereign, and justly triggering a compensatory tonlieu. But so long as he refrains from any such transactions, he will not have added to the obligations of his sovereign. A man alone in his garden wants of no government intermediating between that of his own rational will and that of the Logos.

        The tonlieu, then, is a cost imposed only upon those activities that generate a measurable increase in social wealth – a measurable increase *that is worth measuring.* Thus the cost of the business he does is imposed only upon the business he does.

        NB that social wealth, which wants for social government, is distinct from personal wealth, which as personal warrants only personal government. A man asleep in his garden is enjoying his personal wealth, but apart from such externalities as his improved mood and health, and even then only insofar as these result in marginal increases in his production of social value, his slumber produces no measurable delta in the general welfare. It does not therefore impose any burden of risk upon his fellows, that they must all then manage through the good offices of the sovereign. So it ought not to be taxed.

        Ditto for his prayer, his reading of his books, his practice upon his piano, his inspection of the clouds.

        Under such a regime, our man can decide how to allocate his personal wealth, as between activities that reward only him and those that reward also his fellows (as with trade), without interference from noise.

        The main advantage of the tonlieu is that it can eliminate sovereign noise.

      • Kristor, if I follow your reasoning correctly you suggest that tonlieu sort of tax is neutral towards economic behaviour while property tax has a negative effects. In fact, all taxes have negative effects. I agree with you that tonlieu is better than property tax but do not think property tax etc. is immoral per se. The difference between them is not as substantial as you suggest.

      • Mr. Nowell, as to your first point, property tax means less market exchanges as well – the deadweight loss effect is the same. Inelasticity of taxed goods is better for government than for the governed. As government’s position is more advantageous it would be respectful towards subjects to tax consumption rather than property. I don’t mean to exclude property or poll tax entirely but reduce it significantly in favour of consumption taxes.

      • Hi Kristor,

        I do not understand the distinction between a sales tax and an income tax that would make the former just in principle and the latter unjust in principle.

        For most people, an income tax is a tax on wages. But what is a tax on wages if not a sales tax? Someone is transacting his labor for a price in the form of a wage. The state levies a tax on this transaction, called an income tax, but how is this any different from a sales tax on any other transaction? Why is taxing a transaction that involves labor on one side of the ledger any different from taxing a transaction that involves goods or services on one side of the ledger?

      • An excellent question. Not all transactions are just the same. If you tax earned income, you’ll penalize industry, and you’ll get less of it. But industry is the sine qua non of the economy. If you want any economy at all, you’ve got to have industry. Revenues of any sort, to any party at all, supervene upon industry. So the last thing you want to do is penalize industry. To penalize industry is to penalize the realization of social value per se.

        And this is not just a pragmatic consideration, but a moral consideration (there are no considerations that are not moral). To prevent the realization of optimal social values is to cheat society and all her members of the prosperity they might otherwise have enjoyed.

        I explain the same thing in slightly different words here.

      • Kristor,

        Thanks for the response.

        Don’t sales taxes on goods also penalize industry? If you tax goods, the cost of the transaction goes up, so the producer of the good will have to cut back on production since the higher cost will drive demand down. Cutting back on production means less industry, no? Or are you just saying that income taxes penalize industry more than a sales tax would?

        Another question: you say: But provided that goods and people can move their market activities to a competitive sovereign….

        By sovereign, do you mean sovereigns of nations? Or do you mean local sovereigns within a nation? If it’s the former, doesn’t this mean we need relatively open borders? Which is something a traditionalist would balk at.

      • By “industry” I meant, not “manufacturing,” but “enterprise” – initiative, hard work, etc.

        By “sovereigns” I meant both local and national sovereigns. If revenues to a given sovereign flowed mostly from tonlieux, he would be very strongly motivated to control his borders. If you have to pay a hefty tonlieu just to get admitted into a country, you are not going to want to go to the trouble unless you expect to do enough business there – i.e., add value to its economy – to make it worth your while. The tonlieu will effectually close the border to all but the most valuable – and therefore prosperous – trading partners.

        There is of course nothing to prevent a sovereign from erecting other sorts of barriers to entry, so as to keep out, say, Muslims or drug lords.

  10. The Capitalist “system” cannot be destroyed for the simple fact that some man or even one man will always seek more credibility.

    When you ask even the most hardened modern “Who is the man with the most Capital…? Carlos Slim or Jesus Christ,” they, will to a man, balk and then remain speechless. For the lie is too absurd and the truth, too painful. They attempt to do the impossible and will self-annihilate in the process.

  11. … but we suffer also on account of heavy taxes on our labor and thrift.

    It is in *everyone’s* interest that individuals generate wealth if they are able to do so; for most of us, this is done via (direct) labor — income. It is in *everyone’s* interest that as individuals, and as a society, we generate more wealth over time than we consume; this is done via thrift — the accumulation of wealth … and this accumulated wealth allows for reinvestment, which is to say, it allows for the labor we have already completed in the past to benefit us in the future.

    Now, as every rational being knows, if you tax a behaviour, you see less of it, and if you subsidize a behavior, you see more of it. The current policy regime of taxing labor (income) and thrift (wealth) — taxing the creation of and accumulation of wealth — while subsidizing the mere consumption of wealth, is contrary to our own best interests, as individuals and as a society.

    • Of course, we are subsidizing sloth, bastardy, improvidence, and a host of other sins. The spending habits of our government make drunken sailors on shore leave seem positively niggardly in contrast. On top of that, the government is “printing” its fiat money with reckless abandon. All this and more is why some are predicting the collapse of the entire edifice, with hyperinflation being the most likely means.

      • Well, of course.

        And here’s how it “works” — until it destroys us all:

        Those who *could* work, but do not want to do so — those who could generate the wealth they need to consume in order to sustain their own lives, but do not wish to do the work — and those who “earn” their livings by the management of public “charity”, rather than by generating wealth, have teamed up in order to “democratically” determine how much of the labor (*) of those who *do* generate wealth is “owed” to those who do not, and do not wish to.

        THEN, since the wealth confiscated from those who generate it is used by those to whom it is distributed (whether as “charity” or as direct income) to purchase the wealth they consume in order to live, these economic transactions are counted in government statistics as though they involved, or were the equivalent of, the generation of wealth, even though they do not and are not. THUS, the bureaucrats can claim that “the economy is growing”, when, in fact, it is self-cannibalizing. THUS, the politicians can “focus” on “jobs creation” … even though any jobs they “create” are always a net loss of wealth to our society as a whole.

        (*) the answer is “more”, always “more”.

      • The coming collapse will be terribly hard on those who are unprepared, which is almost everyone. Children will be malnourished; medicine will be unavailable; the government will confiscate provisions “hoarded” by the provident; mobs will loot, perhaps even murder.

        The only possible upside is that liberalism might be discredited, but only if the pain is long enough and intense enough.

  12. I have a small and perhaps ignorant question. If the state has its origin in the family and the community is a sort of extended family, then why shouldn’t it have a claim on my income? Even if my brother were an absolute slob I would still feel obligated to render economic assistance to him, and his wife and children if he had any, strictly because he is my brother. Traditional communities often had drunkard or ne’er-do-wells that the whole community supported and took care of simply because they were members of the same community. Furthermore, if my father demanded money from me to give to such a slob I would not complain, because it is his right to do so. Therefore, if I am irked by being requested to give money to someone else for whatever reason does that not just mean that I consider them an alien to whom I have no duty? Likewise if I am upset at giving money to the state for such purposes is this not just a sign that I think the state is illegitimate? The state, assuming it is legitimate, can rightly draft me into the army and then send me on a suicide mission. Surely one’s life and limb are more important than one’s thrift and enterprise.

    • Excellent, searching questions.

      Are you sure that it is morally right for the state to draft us and force us to fight? That does not seem clear to me at all.

      You write:

      … if I am irked by being requested to give money to someone else for whatever reason does that not just mean that I consider them an alien to whom I have no duty?

      Well, not quite. I have felt quite irked indeed at the necessity sometimes imposed upon me by plain duty to extend charity toward relations whom I knew would just waste the money. But the request came, and I responded duteously. Even a complete stranger would prompt some such charitable, albeit perhaps resentful, response in me; for I would remember that once I had been a slave in Egypt. The case would be altogether different, had someone approached me and, at the point of a gun, demanded funds in their behalf, rather than requesting them and invoking my sense of familiar or Christian duty.

      You write:

      Likewise if I am upset at giving money to the state for such purposes is this not just a sign that I think the state is illegitimate?

      Yes. A state that you considered legitimate would earn your fealty, and you would be eager to do your duty to it. Such a state would not need a draft. Men would flock to serve it in the hour of need, at the risk of their lives. At the onset of WWII, many men who were deemed unfit for the military were so ashamed of their shortcomings in the eyes of the state *that they committed suicide.*

      There is all the difference in the world between an organic community that lays natural burdens of moral obligation upon its members, and a tyrannical state. There is all the difference in the world between a Duke or King to whom I have freely pledged my fealty, and an armed and powerful state to whom I have not. The former sort of community levied tonlieux; the latter, income and property taxes, to boot.

      • If I may make a hypothetical scenario for the sake of clarifying the issue for my benefit, let us suppose that the Norman conquest and American revolution had never occurred. In this timeline we are all still ruled by a descendant of Cedric of the house of Wessex. Let us also suppose that he is an ideal king. He is everything a king should be and does everything a king should do until a crisis comes. Mexican Drug lords ally with Marxist Huns and set out on a warpath with their sights on Anglo-Saxondom. This dire situation put the king in the following scenarios:

        1) Attila Molotov has broken through all the defenses and the Anglos need reinforcements badly if they are going to reverse his gains. However It is also approaching Harvest season and many of his would be recruits would wait until they get their crops in before signing up for military duty. The King decides that their crops won’t be needed if they are all slaughtered by the commie scourge, so he declares that all healthy males between 17 and 42 years old must report for duty or be exiled as traitors.

        2) The vile villains of the contra Cortes cartel have scorched all the farms in the region of New Mercia. Seeing that some of his people are on the verge of starvation the king decides to buy enough food to feed the people. However, no one is eager to trade in a war zone so the state is making nothing from tolls. So the king decides to tax the property of the very wealthy to pay for his endeavor.

        3) The economy of Vinland is dependent on trade by sea. While not directly harmed by the war, the decrease in trade prevents them from repairing their boats. If this continues their ships will soon cease to be seaworthy, thus collapsing their entire economy. The king decides to levy a tax on income in order to subsidize ship repair in Vinland.

        4) Varg Vargson is a wealthy 44 year old citizen of Orkney. He was outraged that his son was drafted and irked at paying for food for New Mercia when they themselves still had money. As such he refuses to pay the income tax. In an audience with the king Mr. Vargson argues that he made all the money himself and had never sworn fealty to the king. The king replies that he could only have made that money given the entire social order around him and he certainly could never had made it if his parents hadn’t conceived him and it is by parental authority that the king rules, so that given oaths are irrelevant, because The king was owed Mr. Vargson’s fealty at birth. The king then proceeds to take the back taxes and has Mr. Vargson caned for treason.

        In which, if any, of these scenarios has the king acted immorally? I apologize for the length.

      • All these acts of the King are evil. They may nevertheless be the best practical alternatives open to him and his subjects in the circumstances. But the fact that a wicked act may be our best practical option does not transform it into a righteous act. A nun sworn to honesty lies to the Gestapo about the Jews hiding in her attic. Should she? Yes. Is her lie therefore A-OK? No. Lying is still always wicked.

        The least among evils is still an evil.

        Keep working on that alternative history. It sounds like a trad Game of Thrones.

      • I am glad you enjoyed it. I get so few chances to be creative. However, I must disagree with some of your points. Immorality is to be found solely in the rational will. As such I think the idea of choosing the lesser of two evils is meaningless. That would be like saying that if I don’t rob this bank I’ll have to murder that person, when in fact I don’t have to do either. Furthermore, I think that while we may have some influence over other people, we do not control them and their evils do not accrue to us. Finally, I think pragmatism is irrelevant, If I must commit an immorality to live, then I should die. By the way, I think to say one should do something just is to say it is right for one to do said thing. Likewise if saving others requires an immorality then they should die. After all, we have no right to life and we are all going to die anyway. We were given this life and in gratitude we must try, however feebly, to uphold our creators laws. If holding unto it means violating one of those laws, then we should remember that it is not ours to hold on to. Which is not to say that we should not readily forgive those who transgress under duress, but, as you say, that does not make it A-ok. Now just as it is a father’s duty to see to his family’s virtue and make sure they fulfill their duties, so to it is it the king’s duty to see to his subjects virtue and that they fulfill their duties. Some of those duties include mutual defense, at least for healthy adult males, and supporting each other in hard times and sacrifice and long suffering are as virtuous as thrift and enterprise. So long as the king tries to fulfill his duty in good faith, without violating any higher duties, he does nothing immoral. It seems like I am always critiquing you, so if I may take this opportunity to say that you are an intelligent and skilled writer and I very much appreciate all your hard work.

  13. No doubt I’m a bit slow …

    Nevertheless, I’m not seeing the analogy between

    Kinsman, will you please give me some of the fruit of your labor so that I may sustain my life?

    and

    Citizen (so-called), give us *more* of the fruit of your labor so that we may “share” it with “the less fortunate” (after we take our cut, of course) … or we shall kill you!

  14. A nun sworn to honesty lies to the Gestapo about the Jews hiding in her attic. Should she? Yes. Is her lie therefore A-OK? No. Lying is still always wicked.

    If it really were true that lying is always wicked — morally impermissible — then morality itself would be self-contradictory. Fortunately, it’s not the case that lying is *always* wicked; it generally is, but not always. You know, just as killing a human being is almost always, but not *always*, morally impermissible.

    • I see what you’re getting at, but I don’t think it’s quite right. That it is sometimes best to perform a trivially evil act so as to prevent a monstrous evil does not, it seems to me, introduce a contradiction into morality itself, but rather into history. The tragedy of Fallen life is that we are so often forced by circumstances outside our control or purview to choose among evils – or goods, for that matter.

  15. Two enormous problems with this.

    A) It is entirely incorrect to state that property was not taxed in the Middle Ages. What do you think a tenant farmer is, anyways? I think you are confused about what “government” was prior to the advent of the Westphalian system.

    B) While it is true that the maintenance of an orderly marketplace is a public good, taxing the use of this marketplace is a disincentive to trade. The antithesis of trade is not autarchy but war: if human beings cannot reach a peaceful understanding of how to allocate resources, then the strong take what they want from the weak. The point of a marketplace is to allow those with the means to acquire what they want to do so peacefully. Contrary to what modern libertarians seem to think, you can pay for a public good out of tax revenues but you cannot place a tax on a public good in order to pay for it. This is intrinsic to the definition of a “public good”.

    Contrary to Kristor’s statement, a tax on property is both i) moral and ii) rational.

    i) A tax on real property is moral because property has a teleology. God gave man dominion over the earth. To have “dominion” means to be responsible for taking care of. We are given the right to property so that we can use it to fulfill out duty to God; that is, to be fruitful (to grow in our love and understanding of Him) and multiply (to have children and spread this love and understanding to them and throughout the world). Property’s moral utility is thus not in and of itself but arises from its existence as the necessary input to act – to fulfill God’s commands. The purpose of real property, then, is not just to be owned but to be worked/used.

    ii) A tax on production (e.g., on income or earned wealth) is a disincentive to production. A tax on a productive asset, however, such as real property, is an incentive to use that asset wisely and productively. This is why the American Founding Fathers first proposed a tax on land ownership, and a graduated tax on large estates. Their reasoning was that land, on its own, is a fallow productive asset which produces no benefit without the addition of labor and capital. If a man owns land but does not work it to produce a crop, this asset is being wasted and could be better used if someone else had ownership of it and used it productively. Therefore, they reasoned, a tax on land is an incentive to either a) use it wisely and productively, or b) sell it to someone else who will do so. Furthermore, given the economic concept of diminishing returns, one man who owns a large amount of land is likely to be less productively efficient than a man who owns a smaller plot to which he can pay suitable attention and care. Thus, a graduated tax on property incentivizes large land-holders to sell parcels of their land to those who might use it more productively, unless the large landholder really can work all that land more efficiently and productively.

    Conclusion:

    A tax on trade disincentivizes trade, and therefore production, and therefore work, and therefore the fulfillment of God’s command to rule over every living thing (rulership does not mean being a miser and putting things in a box; we are given fruit-bearing seeds, for example, explicitly so that they may be used for food). A tax on trade is irrational, inefficient, and contrary to God’s command. In contrast, a tax on real property incentivizes productive use of that asset and incentivizes trade so as to best allocate the ownership of said asset to the most productive owner. An efficient and productive allocation of real property creates the ideal environment for rulership/dominion over it, such that each parcel of land is owned and managed by that person who can best care for it and use it in the manner God intends.

    • “It is entirely incorrect to state that property was not taxed in the Middle Ages.”

      I didn’t say that it wasn’t. This leads me to wonder whether you read carefully enough to be clear on my argument, which you have not at all addressed.

      “While it is true that the maintenance of an orderly marketplace is a public good, taxing the use of this marketplace is a disincentive to trade.”

      *All* costs that are cognized by the pricing system are disincentives. This is not a problem. Where costs exist, they *should* discourage us from acting. Where they do really exist and are not accounted for in prices, misallocation of resources results.

      Is the maintenance of an orderly market a public good per se? Why? The NYSE is a private operation.

      “A tax on real property is moral because property has a teleology.”

      Human body parts have each their proper teloi. Is it just, then, for the sovereign to harvest a few pounds of flesh from each of his subjects every year? What about children? May he justly take them?”

      *Everything* has a telos. That a thing has a telos does not make its taking just. The bottom line is that taking is unjust. It is robbery, and was prohibited on Sinai.

      “A tax on a productive asset, however, such as real property, is an incentive to use that asset wisely and productively. This is why the American Founding Fathers first proposed a tax on land ownership, and a graduated tax on large estates. Their reasoning was that land, on its own, is a fallow productive asset which produces no benefit without the addition of labor and capital. If a man owns land but does not work it to produce a crop, this asset is being wasted and could be better used if someone else had ownership of it and used it productively. Therefore, they reasoned, a tax on land is an incentive to either a) use it wisely and productively, or b) sell it to someone else who will do so. Furthermore, given the economic concept of diminishing returns, one man who owns a large amount of land is likely to be less productively efficient than a man who owns a smaller plot to which he can pay suitable attention and care. Thus, a graduated tax on property incentivizes large land-holders to sell parcels of their land to those who might use it more productively, unless the large landholder really can work all that land more efficiently and productively.”

      This is a good argument. NB that tonlieux on real estate transactions would have exactly the same effect. They would have the further advantage that they would be, not coerced takings – not robbery – but freely undertaken by their payors.

      It may be objected that property taxes are tonlieux levied as a stream of payments, rather than as an upfront lump sum. But not so. The crucial difference is that property taxes may be increased at any time by the sovereign. They are not specified, and paid in full, at the time of the transaction. Any such increases are takings – theft.

      • Human body parts have each their proper teloi. Is it just, then, for the sovereign to harvest a few pounds of flesh from each of his subjects every year? What about children? May he justly take them?

        Well in a sense – yes, the sovereign can do just that in the context of common defense. The sovereign’s essential role is to attain the common good.

  16. Pingback: automated toll collection (ATC) | amnah

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s