Expropriation and Elite Insecurity

This post is partly cribbed from a talk given by Guido Hülsmann at the Property and Freedom society which I linked to a while back.

Pervasive and ongoing expropriation by the progressive state motivates a small elite to work much harder than they would otherwise. Because income, capital gains, and effective regulatory taxation creates so much waste on each marginally profitable dollar, it creates conditions of more rigorous competition than might otherwise exist.

Competition in markets in turn creates signalling waste, as companies then need to spend more in advertising, marketing, and financial expenses in order to gain the same level of earnings which they’d be able to in a less democratic, more private order.

This is readily observable in any highly competitive market in which there are few qualitative differentiators among firms. This can even extend down to floral shops, which sell a mostly perishable commodity below a certain price point. When products are urgently needed and there are few providers, those providers need to spend less in market signalling to earn a profit. Instead, they can invest more into long term improvements, product quality, staff retainment, and other areas.

Long term investment — in a society which expropriatory legal norms — is an invitation to expropriation. This is one of the reasons why many third world societies have trouble igniting lasting economic growth: pockets of wealth will tend to get looted rather than respected.

When the state effectively takes half of every dollar that a company brings in, the short term needs of the enterprise become more acutely felt, especially because it’s harder to accumulate funds. In turn, the state creates vast classes of exceptions for its favored friends — the ‘corporate class’ in modern America falls under this umbrella. For example, a pharmacy conglomerate like CVS is in part more able to crush its local competitors in most markets because it’s more capable of negotiating tax credits, regulatory compliance, and supplier deals.

This fear of expropriation tends to keep what mercantile elites there are in modern democracies in line — or at least busy corrupting legislators and bureaucrats to respect their interests. In states with secure and absolute property rights, the laws are relatively simple. In states with arbitrary and shifting property rights, the people who can pay the bribes can keep their property, and those who can’t cannot.

This creates a social divide between the small business classes, the higher end corporate classes, and the slightly larger welfare-bureaucratic classes. The former two pay for the latter third, but both are subordinate to the bureaucracy. The bureaucracy plays the two groups of the productive against one another, with the corporates having an upper hand over the former thanks to their regulatory advantages.

What is gradually happening is that the higher end corporate entities are being slowly gobbled by the state bureaucracy, with the former’s interests being suborned to the latter’s. Starbucks enourages all its baristas to ‘have a chat about race,’ in return for some unspecified favors down the line. This sort of thing is a violation of the previously established line between state and private propaganda — you could get the same sort of ‘chat about race’ in any public school, but for the most part, ignoring the occasional HR initiative and casting calls in advertisements, the link was kept subtle.

Now, not so much.

Similarly, ‘Google Doodles’ were once subtle accents on the homepage. Now they are as didactic as any public school curriculum with a parade of featured (mostly invented) heroes of the United Soviet States of America.