How Government Takes from Workers to Help the Wealthy

Deal
Barry Brownstein

The list is short of politicians who are economically literate. Until recently, I was unaware of Pierre Poilievre, a member of the Canadian Parliament. In a speech to the House of Commons, Poilievre demonstrated his economic literacy as he explained how government steals from the working poor and middle class to help the politically-connected wealthy.

Poilievre began by citing economist Steven Horwitz. Typically, when one says “thank you” the response is “you’re welcome.” Not so, in many commercial transactions. Instead, Horwitz observed, the reply to “thank you” is “thank you.” The parties to the transaction exchange what Horwitz calls the “double thank you.”

I recently heard myself exchange the double thank you when I bought a $15 turtleneck at Kohl’s. I valued the turtleneck more than my $15, and Kohl’s valued my $15 more than the turtleneck. Simply, both parties in an uncoerced transaction are made better off by the trade.

If uncoerced free-market transactions make both parties better off, why does government keep interfering? Government argues it intervenes in the economy to protect the weak from the strong. Poilievre asks, “Since when does expanding coercion help the weak?” What happens, he asks, when voluntary, uncoerced exchange is replaced by bigger government?

Poilievre uses an example of Apple selling an iPad to an 18-year-old to show how “voluntary exchange takes the most powerful company in the world and lowers its power to the level of an 18-year-old with barely enough money in his bank account to pay for a tablet”:

“An 18-year-old walks into an Apple store in order to consider buying an iPad. Now this young man is worth about $1000. He earned it on his summer job mowing lawns. The company he is dealing with is worth $878 billion, almost $1 trillion… How can that negotiation be fair? The answer is voluntary exchange. Apple cannot get his $1000 for an iPad unless it proves to him that it is worth more than the money he had to part with to get it. By contrast, he cannot get the iPad unless he can convince Apple that the $1000 is worth more to the company than is the product it has to part with in order to get it.”

Big companies have little unilateral power in a system of voluntary exchange. If you doubt that, take a moment to remember Blockbuster, Sears, Woolworth, A&P, and a legion of other companies that failed to keep up with shifting consumer demands.

As a thought experiment, Poilievre asks us to imagine a “different universe” where Apple seeks subsidies from government rather than earning their money through voluntary exchange. In that world, Apple would end up with more power and consumers less:

“If Apple decided it wanted a subsidy from government paid for by the taxes of that young man, I’m afraid Apple would have a heck of a lot more power in making that decision come about… Apple can hire an army of lobbyists, make political donations and influence public opinion, whereas that poor young guy is too busy mowing lawns to in order to have the same pollical power.”

In short, Poilievre points out, “When government is in control of the economy, the bigger, the stronger and the more powerful forces are always going to get ahead. They can use money to acquire political power and political power to acquire yet more money. That is why countries with big government typically have much more poverty and much bigger gaps between rich and poor.”

Bombardier is a Montreal-based aerospace company. After heavy lobbying by Bombardier, the Canadian government gave the company $400 million in subsidies. The money, according to Poilievre, “was in part used to boost the salaries of the billionaire executives by 50% while 14,000 workers got laid off.”

The Canadian Infrastructure Bank recently provided $15 billion of loan guarantees to wealthy investors.  The loan guarantees, Poilievre explains, “will ensure if the project succeeds, the private investor will make money; but if it fails, the taxpayer will take all the loss.” No taxpayer would voluntarily enter into such an arrangement.

Or consider how Canada’s Green Energy Act forced Canadians to “to pay 90 cents for a kilowatt hour worth only 2.5 cents.”

“Green energy” winners? “Of course, it was the wealthy investors who turned themselves into multi-millionaires with this enormous wealth transfer.”

Losers? “Of course, the poor, the working class, the people whose power bills doubled in order to fund this monstrous wealth transfer from the working class to the super elite.”

Poilievre goes on, “In all these cases, the government is using coercion and force to appropriate more and more of the economy and favor those who have the most political power. All of those [subsidized] are rich.”

Please give a listen to Poilievre’s short and exhilarating speech. See if you agree with his conclusion:

“Therefore, when the government claims it is expanding its power and control over the economy to help the less fortunate, I ask at the very least that this House look upon such great claims with great skepticism. I ask that this House should favor the free market where people are judged on their merits, on their contributions, and on the voluntary exchange of goods and services that requires of every single person that wants to get ahead to offer someone else something worth more to him or her than what it costs. That is the free market, that is true empathy, and that is the way we build a just and prosperous society.”

Right now, the forces driven by economic illiteracy are gathering strength. If Poilievre is correct, rather than moving towards a more humane economy, we are moving increasingly towards an economy where productive individuals subsidize the politically connected elites.

 

 

This article was originally published on Intellectual Takeout. To read the original, please click here.