The Mouse Reads a Book

A 2005 book by Daniel Altman [Neoconomy] describes what he believes to be the overall strategy of our current central economic planners. They seek to eliminate income taxes on all forms of potential investment – no more income taxes on interest, dividends, inheritances, capital gains, and corporate profits. In the long run this strategy will lead (certainly) to the amassing of huge sums of capital, which in turn will lead (supposedly) to a greatly expanded industrial base.

Altman suggests that by “long run” these planners mean something on the order of a decade or so. People in the Mouse’s world know, however, that long term economic plans become less likely to succeed as the length of the term increases. Some horrible event like an unwanted war may upset the trends, or the holders of all that capital may choose to invest it in cheap labor markets overseas. The most likely scenario suggests that the great capital accumulations will be invested where the cheapest labor and most unsatisfied demand can be found. Thus, the working classes in the already industrialized nations, forced to compete with labor in third-world countries, will take home lower real wages than they do now. The plan may or may not benefit the nation that made the changes to its tax structure.

But two things are sure. If the Congress actually implements the plan, those among us who derive their income from investments will live free of all income taxes, while (if the size of government remains relatively the same) taxes on income earned by labor will increase. And here’s another certainty. Even if the great masses of capital do not produce the intended result, even if the plan completely fails, those whose taxes were reduced to zero will have become fabulously wealthy. At the same time, those who earn their living by the sweat of their brow will benefit only if the plan does work. That is, labor takes all the risk, capital none. I think the great libertarian, F. A. Hayek, will turn over in his grave when news of this reaches him.

Altman did not mention that this scheme was given a trial run in Chile during the reign of Augusto Pinochet. At the request of the dictator, the alleged economist Milton Friedman dispatched a swarm of his trainees to Chile. They convinced Chile’s dictator that so-called supply-side economics would produce great wealth. The plan was implemented in the mid-70s, pretty much as Altman described it in his book. By 1990 Chile was in deep recession, with wages down almost 20% and the numbers of people living in poverty up 100% from pre-Friedman levels. The plan did, however, work exactly as planned – the wealthy people of Chile got wealthier. Pinochet finally sent Friedman’s pack packing back to Chicago and reverted to the economic tactics of Salvador Allende, the legally elected socialist Pinochet had assassinated in the 1973 coup. Illustrative of how the world now seems to work, the Friedmanites and their cronies in the U.S. State Department branded that colossal failure of supply side economics, “The Miracle of Chile.”

But neoconomy may not be an evil scheme. It may be that it just looks like one. It could turn out that our current planners really have their hearts in the right place, and the fact that they are all wealthy men has nothing to do with the nature of the plan they’ve concocted. But how can we know this? Any means by which the facts could be communicated to us flow through channels controlled by the “suspects.” If these devils are really Devils, the poor working stiffs may be eight months gone before they begin to show.

But there’s always the possibility that Altman has it wrong. There may be no such plan. It does seem strange that trained economists would radically change the system that during the previous six decades produced the greatest accumulation of real wealth in the history of the world. Yeah...it must be that Altman’s got it wrong. Nobody’s that stupid.