Building Blocks - Part 2
On the Essential Nature of Surplus and its Implications
As I have shown previously (Building Blocks, July 6, 2018) that surplus is an essential building block of civilization. Surplus comes in many forms. It can be food stocks stored for future consumption, it can be seeds saved for the next spring planting, it can be inventories of commodities ready for manufacture or finished products ready for sale. Such products have, however, limited uses. Seeds can be used for consumption or planting but they are ineffective at slaking your thirst. Horseshoes are really only good for shooing horses even though human ingenuity has also been able to convert them into a game.
Agricultural and manufactured products can be sold at market and the surplus inherent in those products converted into money. Money facilitates the transfer and storage of surplus. Many people direct their ire against money in general. But money is just a tool. It was the labor in growing the vegetables or the ingenuity in creating a fabricated product that created the surplus that was converted into money. As the Swiss say, “money has no smell.”
Karl Marx and his followers believe that surplus was derived from the exploitation of workers and, therefore, was evil. Based on this assumption, Marx developed his concept of Communism, an ideology that would eliminate private property and thusly would eliminate the need or desire to exploit workers in order to obtain a surplus. But communism has proven to be exceedingly difficult to implement in the real world. Jozef Stalin and Mao Zedong both failed miserably in their attempts to impose Communism on their recalcitrant populations, killing tens of millions in the process.
Today’s progressives such as Bernie Sanders and Elizabeth Warren are but pale imitators of those Communist tyrants but their thinking and their social democratic beliefs are based on the same Marxian concepts. Just like Stalin and Mao they believe that surplus is evil because it is based on exploitation. The so-called Fight for Fifteen ($15 minimum wage) is based on the Marxian concept of the Labor Theory or Value where it is the labor performed that has value and not the supply or demand of the product.
In this line of thought, any profit or wealth (an accumulation of profits) is evil and unjustifiable. And because such wealth is evil and unjustifiable, progressives believe that the confiscation and appropriation of such wealth is justifiable and good. Clearly this concept should be applied to narcissistic one-percenters, but it would also apply to the equity in your middle-class home, your modest savings account and your 401(k). To Marxian thinking any wealth or surplus is evil. Obviously great wealth represents great evil but even a little wealth or savings is also evil. Confiscatory taxes on wealth and profits are therefor justified not only for paying the costs of government but also for transfer payments to exploited workers and other deserving groups (as determined by the progressives).
In my previous essay, I showed that surplus, however, is not evil. Instead, it is actually essential. Civilization is built on surplus. Not just our Western civilization. All civilizations. Any civilization. Surplus is an essential tool or building block in the construction of a civilization. And just as any tool can be employed for good or evil depending on who wields it, surplus can be used for good or ill. But if surplus is a tool (and not just a tool but an essential tool) then it cannot be inherently evil. It is just part of life.
But if surplus (and thus wealth) is not inherently evil then the progressive justification for confiscatory taxes is false. Confiscatory taxes are not just poor economic policy but, instead, a falsity. And if confiscatory taxes are a falsity, then the imposition of such taxes is, itself, evil.
So we must consider that if surplus is not inherently evil, what valid reasons would justify government to appropriate surplus from the citizens that produced it? The Enlightenment concept of taxes is very different from Marxian dogma. Within the social contract, citizens agree that the government needs funds in order to operate and to pay for the costs of fulfilling its obligations under the social contract. This is the reason why the Articles of Confederation were rejected and the US Constitution ratified.
Government has a role to play in building civilization and appropriates surplus through taxes in order to provide the necessary governance and to promote the general welfare of the country it governs. In the United States we have three levels of government and each has its own role to play in building our civilization and each has certain powers to appropriate surplus to fund its necessary functions.
In the United States, the Constitution defines the powers of the Federal government and how and for what uses it may appropriate the surplus generated by citizens but leaves the citizens of the states and local communities free to choose what the needs of those communities are and how to fund those needs (so long as they do not violate the Constitution). Authoritarian governments such as monarchies, empires, and dictatorships (unlike representative republics such as the United States) simply appropriate surplus by force for any use decided upon by the ruler. Because the Constitution defines the uses for which government can appropriate surplus the likelihood of misappropriation of surplus is much less likely.
It is the obligation of government to assure that the social contract functions for all citizens as the citizens intended. The Constitution is an important part of the social contract but it is not the social contract. The social contract is between the citizens of America and the Constitution is our formal cession of natural rights to the federal government so that it has sufficient powers to enforce the social contract.
The Constitution empowers the federal government to expropriate surplus produced by citizens but only for constitutionally approved uses. The states and local communities have more flexibility in the uses expropriated surplus may be applied to but less power to expropriate. Yet even within these constraints the various government bodies within the United States often waste this treasured surplus or use it inappropriately. Many people think America is going in the wrong direction, which is another way of saying that surplus appropriated by government has not been used to fulfill the obligations of the social contract.
Left-wing economist Joseph Stiglitz in his book, The Price of Inequality (2012), lists many of the failures of the social contract to live up to its obligations to citizens. But in his Marxian malaise he presumes that because surplus is evil that all inequality in the distribution of surplus is “unfair”. Next we will investigate how to differentiate between “fair” and “unfair” surplus.