“You cannot spend your way out of recession or borrow your way out of debt” — Daniel Hannan.
Most of us were taught, or instinctively know, that sharing and charity are desirable. In fact, most of us practise both daily at some level. However, it is important to understand the role that human behaviour, the economy and government play in our ability and willingness to share and to be charitable.
A growing economy puts more money in families pocketbooks and charities’ budgets, the poor and unemployed have an easier time finding jobs and families saving for retirement or their children’s education can see their nest eggs grow. Economic growth is not the consequence of some master economic plan managed by the government.
It is the collective consequence of people individually seeking what is in their own best interests by providing what is in the interests of others. The economy grows when individuals agree to accept the risks involved in pursuing opportunities in the hope of earning income.
Governments have no money. Taxes are a way of pooling funds from taxpayers to be shared and redistributed. The idea of transferring income from families and businesses to government gets repackaged in all sorts of creative and palatable ways. Governments don’t create new income, they are merely redistributing existing income.
Government spending does not increase income. So when government attempts to slice the economic pie into equal pieces, it is simply spreading income around by taking from some and giving it to others. At best, that’s win-lose.
Picking winners and losers distorts the incentives that lead those who produce more to do their best, which means they produce less, they earn less, and the economy shrinks. Does this mean that society and individual citizens should do nothing to aid those that need our help? Of course not. People at all income levels benefit when the overall economy grows.
To suggest that there would be no sharing, no charity, no education, no medical care, no roads without government is not true. Governments are merely a conduit through which our common goals are expressed. It is true however, that without individuals endeavouring to improve their own lot in life, they are unlikely to improve the life of others.