The curse of Europe

For the purposes of this post, I'll define a parasite as a person who extracts more from their government's budget than they annually pay into it. This is a very broad, but also a very consistent definition, and it is a very useful one: it includes all people in a state who directly benefit from the confiscation of other people's wealth that we know as taxes. Because they benefit, they have an interest in perpetuating their situation. Regardless of their output, one would expect that it would be in a parasite's self-interest to vote for politicians who will increase taxes and the benefits derived from them, or at least will be comitted to sustaining them at an existing level. It is against a parasite's self-interest to vote for a politician who would reduce taxation; any such prospective action makes the economic future of the parasite uncertain. It is a central feature of parasitic life that one depends on an entity much larger than oneself, so that one's economic future is relatively certain. It would be easy to imagine that this state of things is what the parasites prefer.

The curse of Europe is that parasites appear to constitute so large a proportion of the population that they dictate political outcome. In other words, in Europe, a large proportion of people appear to extract a direct benefit from confiscation of other people's incomes. This seems apparent if we look at the size and structure of government income. According to the Slovenian Statistical Office, recent government budgets represent consistently about 40% of the country's GDP. Meanwhile, an analysis published by the Slovenian Tax Administration at the time of the last income tax reform showed that a large majority of income tax revenue comes from a small minority of taxpayers.

Some 14% of Slovenian GDP are spent on parasites outright, as per our definition: these are social transfer and pension payment portions of government revenue, and the recipients of these payments mostly obtain this way more than they pay in taxes. The remaining 26% is government budget proper, and includes such things as the sprawling government bureaucracy; the health care system; the army; the police; public schools and universities. All the people employed by these institutions are strictly speaking parasites, as they derive the majority of their income from forced confiscation of other people's income. Even when they also provide a useful service, they do so through a mechanism which does not make them accountable to the consumers of their service, but rather relies on confiscation of income from the most productive people in the economy. Parasites include also employees and shareholders of private sector companies who receive a greater proportion of their revenue from government contracts than they pay back to the government in taxes; and indirect parasites include people who make use of public services to a greater extent than they pay for them in taxes.

Altogether, about 15% of Slovenian citizens are retirees who are receiving pensions; about 7.5% are directly employed by the public sector; if each of these finances one other dependent person on average (seems likely given that the average family size is 3.4 people), that's 30% of the population already. In 2005, about 3% of the population received social support in any given month, in an average monthly amount of some EUR 200; according to the same source, a good 1% received a 'large family' allowance of EUR 300. Assuming one dependent family member each, that makes 8%, and now we're already at 38% of the population. Then there's the 'special child care' allowance, a whopping EUR 1100 monthly payment for each disabled child, who are 0.25% of the population: again, with an average family size of 3.4, at least two people with voting rights besides the disabled child can be expected to benefit from this payment.

Now add the employees of companies in the private sector whose revenue comes primarily from the government; and so we have another few percent.

As we add the figures together, it seems conceivable that certainly more than a third, and possibly up to half of the population appears to be benefitting directly from a system that confiscates income from others, and whose benefit appears to be proportional to such confiscation. Obviously, the confiscation itself - the high tax burden on the productive people in the economy - is a burden to economic growth. In the long run, most people would benefit more if the taxes were lower. But it is a common Slovenian saying that "a sparrow in hand is better than a pigeon on the roof"; while people might vaguely understand that "reform" might be better for the "economy", especially in the "long run", these are intangible things that give people little certainty about their own economic futures; whereas the rents they are currently receiving from the state, whether a direct or an indirect salary or whether a social support or an allowance, is a "bird in hand" which they would not like to be taken away. "Reform", perhaps; but not at "their" expense - and yet that is impossible, since "they", and that is the people who benefit from confiscation of other people's income, represent easily 40% of the population.

Conclusions

The example in this post is representative of most of Europe, as well as Australia; Canada; New Zealand; even the U.S. Obviously, a country like this is experiencing a substantial drag on its economic growth. With substantially lower taxes, annual growth levels would easily double or triple, leading to higher prosperity in years down the road, all-around. But dismantling a system of confiscation on this grand-scale seems nearly impossible in practice. Such large-scale reform would require the consensus of at least 50% of the population to be even considered, and a much more substantial majority to really take place. But we see that any such reform will be against the immediate interest of nearly 40% of the population; all it takes is a small proportion of the remaining 60%, say one fifth, to be confused enough, and the anti-reformers clearly have a majority.

How do we get out of this mess?

It is a commonly recognized principle that people with conflicts of interest in a decision-making process should abstain from making decisions in that process. The mess we are in is a result of not having taken this principle in account in the design of our systems of power. Constitutional amendments need to be passed to ensure that only those people can vote who in recent years have paid more to the state than they have directly collected from it. This would provide a much fairer representation for those people who actually pay the bills, and due to whom the system can actually even keep running. The conflict of interest would be resolved; taxes would likely be lowered, almost certainly resulting in much higher growth; and in years down the road, everyone, including the people currently collecting rents, would benefit from substantially higher purchasing power.

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