In my preceding four posts, I have demonstrated that the total cost of maintaining the public sector and all providers of public goods and services in any economy is borne by those engaged in the production and exchange of private goods and services. The fact that the former also pay taxes does not alter this reality.
This is a fact that neither economics nor mainstream social science recognizes. For it can be discovered only by analyzing economic processes from the point of view of human needs and the means of satisfying them, and not, as in the mainstream, from the point of view of the national economy. And it is only by learning about it that one can understand and properly evaluate the economic and social processes taking place in any country..
The first logical conclusion to be drawn from this stated fact is:
THE MORE PEOPLE WORK FOR THE PUBLIC SECTOR, THE GREATER THE PROPORTION OF THEIR INCOME THAT THE REST MUST GIVE TO SUPPORT THEM.
This statement prompts reflection on the rationale behind the two fundamental objectives of economic policy in contemporary market economies: ensuring FULL EMPLOYMENT and achieving a HIGH GDP GROWTH RATE. These concepts were first articulated by the British economist J.M. Keynes in his 1936 treatise, The General Theory of Employment, Interest and Money, which marked the advent of modern macroeconomics.
The demand for full employment, which is the fundamental premise of his work, is not only rooted in social considerations but is also closely intertwined with the author’s proposed concept of income. This concept laid the foundation for the subsequent development of the macroeconomic measure of economic growth, namely the gross domestic product (GDP). This concept is based on the assumption that all labor contributes to the creation of value. It thus appears reasonable to conclude that full employment at full utilization of productive capacity (physical capital) allows GDP to be produced at the optimal level under the given conditions (GDP produced equal to potential GDP). The larger the aggregate economic output (or “economic pie”) the greater the potential for distributing goods and services among the citizens of a country. If market forces fail to achieve full employment, as Keynes’ theory suggests, it falls upon the government to create employment opportunities through the establishment of new workplaces.
To further elucidate the point being made, Keynes made the following sarcastic remark (Keynes 1936, “The General Theory,” p. 129):
“If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing”.
The logic of this reasoning appears indisputable when economic processes are analyzed from a MACROECONOMIC perspective, that is, when the ENTIRE ECONOMY is considered. This involves examining concepts such as global product, global demand, global supply, global consumption, and global investment. However, the sources of funding for state expenditures to ensure full employment and the distribution of the resulting benefits are not addressed. In essence, THIS THEORY IS INCONGRUOUS WITH THE TENETS OF A MARKET ECONOMY, wherein decisions are made by individuals based on their own needs and how to satisfy them. Indeed, Keynes himself acknowledged this in the preface to the German edition of The General Theory (cited in Blaug 2000, Economic Theory). A Retrospective View, p. 691 (emphasis mine): “The theory of global production, as presented in this book, is more readily adaptable to the conditions of a TOTALITARIAN STATE than the theory of production and distribution of a given quantity of products produced under conditions of free competition and with a considerable level of laissez-faire.”
However, if one looks at the economy from the point of view of a HUMAN PERSON operating in the market on the basis of the principles of VOLUNTARY AND MUTUAL EXCHANGE, and if one applies the UNAMBIGUOUS criterion for distinguishing PRIVATE GOODS from PUBLIC GOODS, as is the case in my approach, then the matter takes on a completely different dimension. For then it becomes obvious that producing goods or doing various public works (see the quote above) JUST TO GET PEOPLE TO WORK not only makes no sense whatsoever, but that it is done at the expense of those who would never make such a decision, and that it thereby WASTEES MEANS that could be used in a rational way.
It is erroneous to assume that an increase in employment necessarily signifies an increase in the prosperity of a country’s citizens. Employment growth is a positive phenomenon only when the number of people engaged in the production and exchange of PRIVATE GOODS AND SERVICES is increasing. This is the only scenario in which the number of people who live on their own expense while producing and voluntarily exchanging their goods on a mutually beneficial basis is increasing. Conversely, when employment in both the public sector and the production and exchange of public goods and services increases, it is at the expense of others, as previously demonstrated. Therefore, the redistribution of wealth by the state inevitably entails A GAIN FOR SOME AND A LOSS FOR OTHERS.
It is important to reiterate that this statement does not imply that individuals employed in the public sector are engaged in parasitic activities. It is evident that these individuals are also engaged in WORK ACTIVITIES FOR THE PURPOSE OF ENSURING THEIR OWN SURVIVAL. It is important to note, however, that the remuneration received from the public sector for the goods and services provided is derived FROM THE RESOURCES THAT HAVE BEEN APPROPRIATED BY THE STATE FROM OTHER INDIVIDUALS. As previously stated, this fact remains unchanged regardless of whether this income is taxed at the same rate as other income.
In conclusion, it is essential to recall a fundamental principle regarding state employment policy:
For every additional zloty (dollar, ruble, or other currency) spent by the state (public sector) TO CREATE JOBS, there is an equivalent burden ON THE PRIVATE GOODS AND SERVICES SECTOR.
There is nothing revelatory in this, of course, because from the beginning of history this has been the nature of the state, understood as the apparatus of power, along with all those who serve it in whatever role. Regardless of the political system, it always has only what it takes from its citizens and possibly robs from the subjects of other states. However, it is worth remembering this, because it is very common for people to think of the State as a demiurge that, when it wishes, can create out of NOTHING and give the people what they demand of it.
Furthermore, it is important to note that this principle remains unchanged regardless of the means by which public expenditures are financed. This includes the use of debt incurred through the issuance of treasury bills and bonds sold domestically or internationally, as well as the financing of these expenditures through the issuance of additional money. This is because in such a case, this additional burden will simply manifest in A DIFFERENT FORM; instead of an immediate direct increase in taxes on incomes, the purchasing power of these incomes will be reduced somewhat later due to INFLATION. This latter form, by the way, is much more convenient for the authorities in terms of image, since the increase in the prices of market goods and services is unlikely to be associated by anyone with public spending. The culprits are, in theory, impersonal market forces (rising costs without knowing why, excessive demand, external shocks) and, in popular opinion, greedy sellers.
I am aware, of course, that those who work in the public sector, as well as those who work in enterprises that provide public goods, such as arms factories, public health and education institutions, etc., are indifferent to the means by which their salaries and all other expenses are covered. They all work, of course, and of course they provide the goods and services needed by those who pay them. So they don’t get anything for nothing. So is it worth making them aware that everything they do is at the expense of the rest of humanity? What is the point of this “exposure”? After all, it is not the fault of the seller that he has been paid for his goods with money that has been stolen by a thief.
It is accurate to conclude that the seller is not culpable if they are unaware of the theft. However, if they are informed and do not disclose this information, they become complicit in the wrongdoing of the thief. Similarly, any other individuals who are aware of the theft and do not disseminate this information are also complicit in the resulting harm. This is the rationale behind my decision to address this issue.
So far, none of the known forms of the State has been and is what it pretends to be and what its apologists proclaim it to be, namely, the TRUE COMMON GOOD. This fact is not changed by any solemn declarations in constitutions concerning this sphere. Always and everywhere, the State has been and is a political organization that SERVES THOSE IN POWER to realize their goals AT THE EXPENSE OF THE GOVERNED. This is evidenced by the laws enacted which establish the ABSOLUTE PRIMACY of the INTERESTS of the STATE, i.e., the minority supposedly ruling in its name, OVER THE INTERESTS OF THE CITIZENS, i.e., the majority. Even when those in power take on the poor and those who, for various reasons, are unable to cope with life in society, such as the unemployed, and provide them with some material security, they do so with funds that have been TAXED from the rest. So it is always CHARITY AT OTHERS’ EXPENSES, something diametrically opposed to TRUE CARITAS – charity given voluntarily and selflessly out of love for one’s neighbor. Nota bene, institutional government “charity” causes many people to feel relieved of the moral obligation of personal charity.
Therefore, in the context of what I have written above, is it reasonable to ask whether it is possible to have a form of state that is an authentic common good? I will answer yes: IT IS POSSIBLE. For those who are interested, I refer them to my book entitled. “Foundations of Personalist Economics”, available for free here. On the other hand, the second part of the answer to this question is that the REALIZATION of this idea is unlikely to happen soon, if ever.
In one of the traditional Polish songs, there is a phrase that goes as follows: “It is very good to dream on a Sunday afternoon.” In the recent past, one of the aspirations of many was to travel to the moon. It is likely that it will not be long before individuals will be able to fly there, for example, to observe how Earthlings celebrate the new year. So who knows, maybe people will wise up after all?
In the meantime, I wish everyone a blessed Christmas and all the best for the New Year 2025.