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WHY THERE ARE CRISES? (utdrag från Harry Brownes bok från 1978, “New Profits from the Monetary Crisis” ingenting har ändrats sedan dess.)

THE FORGOTTEN MAN
When A takes from B to give to C, the world is well aware of the benevolence of A and of the plight of C; but B is the forgotten man.

The relevant point is not that B is treated unfairly; the point is that B is not going to stand still for this. He will look for ways to prevent A from stealing from him.  He may earn less, he may move out of A´s jurisdiction; or he may start pretending to be C.

The end result is a society in wich everyone wants to be C (or A) and no one want to be B. But B was the person who originally financed A´s generosity; and without him, there will be little to redistribute. In addition, if C does not have to pay for his own needs, it is inevitable that his needs will grow larger.

And so a society develops that has boundless needs and no one to pay for them.

The politician offers “free” something, but he never says, “You will have this free because we are going to force B to pay for it.”

The “plan” is unrealistic from the start – in that it assumes that B will submissively pay the bill without looking for loopholes.  It is unrealistic, also, to believe that the costs of the program won´t change when the economics of it change.

The politician sees that people presently spend 100 billion dollars per year on X. So he plans to collect 100 billion in new taxes, and use the money to pay for X.  He believes that this will make X free.

But once the program is underway, the economics change drastically. The 100 billion was what people had spent yearly when the money came from their own pockets. Now that X is free, theirs X needs suddenly increase.  Many people will see that this is wasteful - for the nation. But for each individual, the consideration is always that it costs zero dollars to obtain something that might prove to be valuable. So free X turns out to cost far more than 100 billion per year.

And after a while B decides that he is tired of paying for these loafers – and use more free X too.

Or at least he stops working so hard. His income is taxed to pay for free X and for all the other government programs. And so leisure (unpaid and therefore untaxed)  seems more attractive to him. He earns less; and he saves less, too, because he´d just have to pay tax on the interest his savings earn.  And because he and all the others B´s are earning less taxable income, the politicians have to raise tax rates even higher than they planned – to collect the money they need for free X.

Because even the government´s resources are limited (it can´t tax what doesn´t exist), it is forced eventually to do something to limit the costs of the program. Naturally it won´t end the program; it will declare that a “crisis” exists and impose rationing.

So when the cost of free X has reached double or triple or quadruple the original estimate of 100 billion, the government announces that it will decide who get the X first.  You will have to go without – unless you fill out the right forms or know the right people.

And most people will have no choice but to wait in line for free X. The billions spent on the program will have bid up the price of X services; only the very wealthy (of whom there are fewer) will be able to afford to hire X services on their own.

Just as the politicians “promised”, X is free; it just is not available.

But this is not a warning to a politician. It is an excuse to enlarge the government´s program.

The crisis is always a conflict between the government´s goals and the actions of individuals.