Fresh Takes

Are the rich also victims of the Great Fiction?

French economist Frédéric Bastiat defined the state as the great fiction by which everyone seeks to live at the expense of everyone else. Judging by an open letter published on July 13, 2020 ahead of a G20 meeting, it would seem that even the very rich succumb to this illusion.

In this letter, they declare that charity does not suffice to meet the needs (educational, health, and other) created by the COVID-19 health and economic crisis.

It should concern us that those with the greatest means prefer to delegate to government the administration of collective services and the protection of the most vulnerable rather than taking these on themselves, but also that they prefer to have taken from them by force what they could give of their own free accord.

There are two possible interpretations of this strange, masochistic impulse that presents itself as generosity.

The first is that success in business, while demonstrating a certain understanding of market dynamics, is no guarantor of economic intelligence. In this case, economist Thomas Sowell points out that if we can afford costly educational and health services as taxpayers, provided as they are by inefficient bureaucratic monopolies, then we can surely afford them as consumers if they are provided more efficiently in a competitive market. The absence of basic economic common sense is thus a possible explanation for this sacrificial impulse.

The second interpretation is less flattering. The correctly informed rich know very well that they will be in a position to shield themselves from a wealth tax if one were enacted. All previous experiences have shown this. Once adopted, new spending is committed, but the new revenue doesn’t materialize. It is therefore the less wealthy (and less mobile) who are stuck with the tax bill instead of the rich, and who are subject to the corresponding economic slowdown. In this scenario, the open letter signatories are engaged in a hypocritical and cynical process in which they only appear generous. They think they will be able to reap the benefits of recognition and gratitude for their big, compassionate hearts (but also an indirect form of ethical marketing) without really having to pay the price.

Authentic generosity is not ostentatious, and this kind of contingent profession of faith does not do justice to those, rich and otherwise, donors and volunteers, who work discreetly each day to ease the suffering of their fellows in need.

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