The United Nations, as reported by Reuters, and rereleased by index.hr, has committed to a massive redistribution plan to “aid” the most poorest countries. It is asking for a global tax on billionaires (some 1226 of them) to pay for this “aid”.
Well, the IMF has given a trillion or so more to sub-Saharan countries in the past decades and nothing much has changed. The only thing that might have changed is the debt level of these countries. How is this money really lent out? Who gets it first and for what endeavors? We may be inclined to ask the simplest of questions: Why are the poor, well, poor?
Even tough this may seem as an easy question which contains an even simpler answer, the mass science of modern “new” economics has dumbfounded analysts, researchers and the rest to explain why such poor performance persists in the presence of such grandiose ventures. Reading von Mises, it is easy to unlock the answer of wealth creation versus wealth destruction. A poor country is one which has a low capital base. I.e., it doesn’t have sufficient savings to bring forth a larger and more roundabout capital structure. The individuals living in some of the remotest areas, are unable to accumulate capital because their time preferences are so high, that they survive by living day by day.
Now, it is true, that some regions of the planet are more abundant in resources, than others and the know-how isn’t capable of delivering sufficient results, but that doesn’t negate the fact that, in order to be wealthy, one has to sacrifice and sustain form present consumption. In the “Third World”, if there is capital formation, there is no real system of private property to ensure a viable and peaceful exchange of goods and services. Europe, nor America weren’t rich in the 1100’s as they are today, but the natural resources were still there, people still lived, technology improved and so forth, but the absence of a cohesive legal and economic structure, the “Third World” can resort to nothing but barbarism.
Taxing the wealthy will just mess up,in the margin,time preferences between their wishes and consumption/investment patterns with one of coercion and anti-entrepreneurialism. If the tax is marginally high, why keep the capital structure intact? Why not consume present goods, as they will bring about a lesser tax burden. Let socialism prevail and all we be well. Not to mention, the ability to create fake “aid” through inflation and redistribution to the privileged few.
A global tax won’t fix the problem, it will only aggravate current unsound financial positions, wherever they may be located, whether geographically or on an industry basis. Soaking someone with aid, rises the price of those goods at home and creates a disincentive to produce on your own and built up a viable capital structure in the process.
This is however, not the first call, for such a feat. There has been, over the past few years, of a global derivatives tax, dubbed the Tobin tax. Instead of recognizing that the problem of a massive global derivative position, notionally, many times larger than the GDP of planet Earth, is a function of rapid credit expansion and fractional markets in the stages furthest from the initial expansion taking place at the commercial banking level, as well as the negative real interest rate loans provided by the central banks, subsidizing the very originators of fraudulent debt.
If the UN wants to help, it should start by looking itself in the mirror and explaining why their employees are exempt from paying income taxes in their home districts, as well as special subsidies for housing and medical costs…
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