Comment by AnthonyMouse
16 days ago
That's the premise, isn't it? The local sandwich shop owner, a small business, makes more money relative to the global price of an iPhone or a solar panel so there is less wealth inequality.
The only useful increase in equality is the one that makes ordinary people better off. Making them poorer just to spite the rich by a larger amount is absurd.
The idea behind subsidising re-education is that it benefits the society in the long run. I guess I have no proof that it isn't what makes Scandinavian GDP/capita lower.
It isn't funding education in itself that lowers GDP, it's high tax rates. Investors put money where it gets the best returns. Suppose one country has a 20% tax rate and the other has a 60% tax rate, i.e. they keep 80% of the returns instead of 40%. Then they don't invest in the second country unless the returns are twice as high to begin with, and in most cases they're not.
Governments making beneficial use of tax dollars can counteract some of that, because the investments would increase productivity there (e.g. more educated workforce), but for that to work the government would have to make net positive investments against the losses resulting from higher tax rates. That's notoriously difficult and governments more often fail than succeed at doing it efficiently, and there is a strong incentive for corruption. If any significant amount of tax money is directed to cronies or politically connected constituencies, the possibility of not causing net harm quickly plummets.
Moreover, government spending has diminishing returns. Collecting enough in taxes to have a basic government that can at least enforce laws against violence and provide transportation infrastructure has very high returns. The first $10M you spend on police might cause the number of unsolved murders to go from 1000 to 500. The next $10M you spend might cause it to go from 500 to 450, because the remaining ones are harder to solve, and because there are fewer remaining to solve. At some point additional spending isn't getting enough of a benefit to be worth the cost. And the same for infrastructure and education and all the rest of it.
The exact breakeven point is obviously a matter of some debate, but there is generally a negative correlation between higher tax rates and GDP per capita, implying that most current governments are either taxing at inefficiently high levels because the marginal government program isn't worth the cost, or that there are productive investments governments could be making with the existing money but instead they're allocating it to something else, e.g. because of government corruption or mismanagement.
> There is generally a negative correlation between higher tax rates and GDP per capita
There are lots of reasons for high/low GDP per capita, but I would like to see proof of this to believe it.
Why is Denmark so high up for example, generally considered the country in the world with the highest tax pressure, and without any substantial natural resources. Cherry picking of course, but your claim is very sweeping, so I'd put the pressure on you to prove it.
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...
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They are optimising different things and the GDP for them is just a means to an end. They are trying to achieve objectives like: healthcare for all, certain minimum standards of living and safe neighbourhoods everywhere. It's natural that if you don't optimise for GDP then GDP will probably not be maximised.
What our objective function should be is of course a very deep and interesting question. We don't talk about it enough. Most people think about solution first like: socialism, liberalism, sharia law, biblical law etc...
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