Saturday, 4 June 2016

Australia's real lifters and leaners

Economist Philip Soos argues our current system is a racket designed to generate free banquets for the rentier class. Spend a few minutes and read the compelling analysis. It’s a crackerjack article. First posted in  Independent Australia.

WHEN THE infamous duo of Abbott and Hockey came to power in 2013, they embarked upon a polarising rhetoric of “lifters” versus “leaners” separating Australians into one of two camps.

The split was a simple one: those who earn and engage in productive activity, indicated by making a revenue or wage and hence paying income tax, in contrast to those who pay no net income tax, mostly social welfare recipients.

In Australia, the Duncan Storrar episode once again brought attention to this rhetoric. It expanded into a moral uproar with those who believe the poor should be provided more assistance, and those who think such people are a useless economic deadweight on society.

Earned versus unearned wealth and income

There is only one small problem.

The notion that the rich have earned all their wealth and income is completely false. Not only is it false, it is obviously false when one considers the issues at hand. Although the mass media and intellectuals often assert the rich must have become so by cause of effort, the available economic theory and documentary evidence, readily available, demonstrates otherwise.

Overwhelmingly, the pathway to riches is not through earned wealth and income but that which is unearned. The 18th century physiocrats and the later classical economists from Adam Smith to John Stuart Mill to Karl Marx, ultimately finding its peak expression in Henry George, argued for a clear difference between earned and unearned wealth and income. The term economic rent was used to identify this distinction. Those who make their living off economic rent are called rentiers.