How the State convinced you to hand over your wealth

Ever since German Iron Chancellor Otto von Bismarck enacted the first pension laws to placate the socialist threat from within Germany in the 1880s, which set Europe on the destructive path towards an ever-growing welfare state, the American and European systems of government had one distinct disparity. The hallmark of the former was limited, the latter increasingly large. It was small State versus big. Individualism versus welfarism. Classical Liberalism (Libertarianism) versus Statism.

Today, such differences are more subtle, and swiftly becoming a thing of the past. Governments on both sides of the Atlantic can rightly be described as Big with a capital B, and appears to be growing perpetually.

So how exactly did the citizens of USA and Europe become cajoled into thinking big government is in their best interest?

 

Growth of the State during World War I & II

The 20th century twice saw America come to the rescue of democratic Europe. As the last dictatorships of Western Europe were consigned to the dustbin of history in 1945, America stepped forward as Europe’s ultimate source of protection from external threats.

Thus in the space of a few decades the former powerhouses of Germany, France and Britain had gone from securing and controlling the whole world militarily, to not being able to protect their own backyard. What was once referred to as the old world was now being rescued by the new.

As the shattered war torn economies of Europe were rebuilt and European citizens caught up with American per capita GDP levels, this security constellation did not change. The American soldiers remained stationed in Germany and other Western European countries continued to seek shelter under the US military umbrella as NATO allies.

With external security now more or less guaranteed by the Americans, European states turned to social security and welfarism. As Paul Kennedy convincingly argues in ‘The Rise and Fall of the Great Powers’, it was during the two World Wars that tax rates were pushed past what governments had previously thought of a unsustainable levels. Prior to World War I the British state accounted for less than 10% of GDP. By 1945 it had ballooned to well over 50%.

 

American warfare, European welfare

Governments across Europe, rather than going back to the successful limited government recipe of the ‘Golden Age of Globalization’, instead took advantage of the exponential growth the state had had during decades of turmoil and continued along the path of high taxes and big government. Now that security was becoming less of an issue, thanks to the Americans, the mantra of big government in Europe changed from warfare to welfare.

In other words, taxes had to stay at previously unheard of levels, for welfare reasons and social programs, despite the fact that the warmongering Germans had finally been domesticated.

America on the other hand, as the victorious party in both the Atlantic and Pacific theaters of war, took her new role as underwriter of European (and indeed world) security rather seriously. Military spending and the need for global security became the biggest rationale behind sustained levels of high taxation and unprecedented levels of government control of the economy.

Although American military spending was cut by 65% shortly after World War II, it remained the biggest single post in the budget and would soon balloon again in response to conflicts in Korea and Vietnam.

The former isolationist Uncle Sam had finally discovered a secret big government potion that was tailor-made for the independent minded average Joe. Americans, Uncle Sam learned, were less inclined to object to a giant state when it was sold in terms of national security and patriotism.

The American state now had the marketing tool it had long been searching for to sell the notion of big government to an anti-statist citizenry whom not too many generations ago, had fled state control, intimidation and poverty in Europe. This security rationale has stuck ever since.

 

Two formulas, identical outcome

What emerges from this story are two different marketing ploys that sell the exact same snake oil, namely big government. Even facing economic stagnation, fiscal crisis and collapse, the European leftist elites, which is in control of every single incumbent government from France and Spain to Germany and Denmark, cling on to the belief that big government is great.

State power is apparently Europe’s greatest public good, citizen power a grave threat. Thou shalt love thy big government, or else you’re a heartless individualist, a threat that in Europe carries the dreaded stigma of being likened to a Nazi.

 In the US, which face the same big government induced economic problems, we find a slightly different story, yet with a very similar outcome. High military spending, which has lead to monstrous budget deficits which inevitably brings with it high levels of taxation and a larger than necessary public sector payroll.

This, however, Americans  are told, is for the good of the citizens themselves, who supposedly benefit from increased national security. Thou shalt love thy military spending, or be labeled unpatriotic and un-American, again a grave sin in the land of the free and home of the brave.

The state on both sides of the Atlantic have constructed these different narratives which have paved the road to big government with one giant national myth. In America that myth is perpetuated by an ever-multiplying array of global threats to national security. In Europe the threat is the supposed harshness of a life without the welfare state. Both myths have proven elaborate enough to construct a behemoth of a government bureaucracy upon.

 

21st Century snake oil

The result in countries across Europe is total tax burdens (VAT, income tax, employee tax, capital gains, fees, etc.) which can reach up to 70% of a person’s income. This in turn is supposedly spent on improving the taxpayer’s life in the form of public goods. But not before the government have gotten its cut in the form of administrative costs which keeps the wheels of a public sector, that in some cases employs over 50% of the labor force, turning.

 This is totally legitimate you see, as these know-it-all state regulators protect you (the citizen) from evil corporations that want to sell you evil stuff and from the bodily harm you may inflict upon yourself through poor health decisions such as smoking.

Few Europeans remember a life without a welfare state and people are frightened to death about the purgatory such a life would supposedly entail. Cuts in European welfare budgets will supposedly throw everyone out on the street and society will collapse, or so we’re lead to believe.

In the US, high taxes and big government is justified on the need for high levels of defense spending which again comes with an army of bureaucrats at the taxpayer’s expense. This again is a must you see, due to the external security threats America face and in order to uphold the global public good of world peace that America alone underwrites.

A cut to US military spending will supposedly see a re-run of the year 410 A.D. Visigoth sack of the imperial capital Rome. Few Americans remember life either without a massive military patrolling the world in he name of American security and world peace, so most simply aquiesce.

 

What’s the alternative?

Now, for the record, in contemporary America, social security spending combined with outlays for Medicare & Medicaid are greater than spending on defense. Yet, defense spending outweighs federal spending on education 7 to 1 and remains the single biggest post in the budget.

Over one fourth of the Federal budget is devoted to defense spending, with some sources putting the total tally at over 35%.  (Britain in contrast spends 7%).Without this spending, Uncle Sam would have you believe, all hell would break lose.

The question that needs to be asked is thus; would Americans accept 30% of the federal budget going towards defense if they weren’t frightened into thinking this was a matter of life or death?

In Europe on the other hand it’s all about welfare. According to nationamaster.com, France spends a whooping 29% of GDP on welfare.

Can someone please tell the French that there would be even more welfare if this money wasn’t first siphoned off through the state bureaucracy before the leftovers are handed back to the very people who had it to begin with? Would Europeans continue to accept total tax burdens of up to 70% if this was the narrative that was taught in public schools?

 

Less government spending equals more individual choice

Now, even with a major cut, let’s say 65% cut in American defense spending (i.e. a repeat of the World War II scenario), the US government would still be a behemoth. Yet, it would be an excellent place to start the downsizing. Once citizens realize that the heavens won’t fall and lower tax rates actually leads to greater personal utility due to increased purchasing power and increased scope for individual economic decision making, this could form the basis for further cuts.

It’s hard to envisage a country as big as the United States without a military. Again, that’s not what this article is advocating. However spending up to 30% of the federal budget on the army in a country with the most heavily armed citizenry in the world seems rather redundant, if not downright wasteful. Suffice is to say that America would be just as safe from external threats were defense related spending to be cut by 60-70%.

Similarly Europeans would be no worse off in a world that saw national welfare budgets cut in half. People would simply get to keep more of the money that was theirs to begin with to spend on their personal welfare without it being filtered first through a greedy and inefficient state bureaucracy.

Cutting out the middle-man (read government) means more individual welfare, not less. That’s something to think about the next time someone labels you a heartless Darwinist because you advocate individual responsibility and lower taxes.

Less taxes doesn’t equal less welfare in terms of citizens being worse off. It equals more personal welfare as supposed to the arbitrary non-voluntary one size fits all state determined kind.

 

Exposing the myth of a virtuous big government

There’s nothing inevitable about big government or extortionate levels of taxation. The US government will have her citizens believe that defense spending of up to $1 Trillion is money well spent. Similarly, governments across Europe continue to espouse and perpetuate the welfare state lie.

If the word, that both are merely a ploy to maintain the state’s control and hold over society at the expense of your personal freedom and economic clout got out, it’d be one giant step in the right direction away from big, and back towards limited government.

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