Rick Kelo - Has Socialism Helped Europe?

Rick Kelo

Campaigning politicians, especially of the leftward bent, take it for granted that Socialism has created a utopia in Europe.  Senators like Bernie Sanders will go so far as to brag that the United States should become more like Sweden.  However, among those educated in economics like Rick Kelo, this matter is far from a settled question.

Rick Kelo points out that, "Europe has been in decline since adopting more and more socialist programs.  Sweden in 1970 was the 2nd richest nation on earth behind America; today it is the 17th richest.  A generation from now it will be insolvent."

Richard Kelo likes to specify "more socialistic programs" because he points out, "Sweden is not a Socialist economy.  They are heavily taxed and regulated, but they are a market economy just like America."  Sweden's high levels of taxation are necessary to maintain their generous social programs.  However, the effect of those programs on the country is telling.

"When you look at median incomes a totally different story emerges," Rick Kelo points out.  "Were Sweden to become a US state it would be the fourth poorest state in the country.  Even at that we're being too generous because - remember - that low income in Sweden is also subject to a tax burden more than double the American living in Mississippi and the few other equivalently poor states to Sweden."

The failure of socialism, and its extreme position of communism, is universal everywhere it has been implemented.  And those societies where it has not yet collapsed outright have suffered considerable decline once they become burdened with the inherent bureaucracy necessary to enforce (force compliance from the citizens by the bureaucrats) these programs.  Look at the rapid decline of once very prosperous nations in Europe after they became satellite nations of the Soviet Union.

Rick Kelo examines how Tax Rates Change Behavior

Rick A Kelo

The most basic tenet of economics is that people respond to incentives.  This is a universal law that has never been disproved.  If, for example, I offer you $10 to chop off one of your fingers and you refuse we haven't proved you don't respond to incentives.  All we've shown is that $10 isn't incentive enough for you to chop off one of your fingers.  However, members of the Japanese crime syndicate the Yakuza routinely chop off one of their own fingers as an offering to their crime boss.  The only matter at question is whether the incentive is incentive enough.

Knowing that people respond to incentives Rick Kelo wonders why we don't more frequently bear that in mind when discussing increasing tax rates.  Kelo has more than 10 years of experience as a Chicago tax recruiter at the prestigious TaxScout, Inc.  However, before that he studied economics and finance and worked in both fields.  On the topic of tax rates creating an incentive to change behavior he notes:

"We have seen in American history, that when marginal tax rates increased substantially business owners elected to retain earnings in corporations in anticipation of a lower taxed regime in the future.  Policies like the abusively hyper-progressive federal income tax rate of mid-1900s America created the "fringe" benefit system that existed until well into the 1970s."
~ Rick Kelo

So, as Richard Kelo points out, the question is what becomes incentive enough? If we raise the individual tax bracket to 70% or 90%, then we can certainly expect business owners to have their company purchase most of their needs in pre-tax dollars through "fringe benefits" rather than take that money as a wage and lose 70+% of it.

Rick Kelo Rebuts Marxian Surplus Value

Karl Marx was the last Classical Economist.  He logically carried to conclusion the thinking of the Classical Economists beginning with Adam Smith.  However, Marx shared the same economic short-coming as his classical predecessors because the theory of Marginal Utility had not yet been discovered.

When Marx published Das Kapital it was unheard of for almost 2 decades outside of the German speaking world.  Before it had even begun circulation in English Marx entire theory of Surplus Value had been demolished by another brilliant German economist named Eugen Böhm-Bawerk in his piece "Karl Marx and the close of his system."

Böhm-Bawerk, like Rick Kelo, pointed out that surplus value is an impossibility.  The reason is that in a capitalist economy every factor of production is bid up to its full marginal revenue product.  When a business sells something that sale generates some amount of profit.  That profit is, what economists call, "reverse imputed" backwards into the original factors of production that created it says Kelo.

There are 4 original factors of production:

• Land
• Labor
• Capital
• Time / Entrepreneurship

Rick Kelo

The capitalist is paid for time.  Most people want to be paid immediately for their labor, every 2 weeks.  They don't want to wait 5 years until a final consumer good is produced, then sold.  So the capitalist does the waiting for them and gets paid accordingly.  It is this payment to the business-owner that Socialists object to because they believe it must be coming from a portion of money that was owed to the worker.

Not so says Rick Kelo.  "The wage rate paid to the worker is bid up to its full marginal revenue product, and in more technical economics is mostly determined by something we call the 'Marginal Product of Labor.'  It is impossible for workers as a large chunk of society to be systematically under-paid because another entrepreneur would merely open a business and recruit them all away."

Rick Kelo Looks At the Dislike of Capitalism

Famous 20th century Classic Liberal thinker Ludwig von Mises considered why so many people are envious of the wealthy:

What makes many feel unhappy under capitalism is the fact that capitalism grants to each the opportunity to attain the most desirable positions which, of course, can only be attained by a few. Whatever a man may have gained for himself, it is mostly a mere fraction of what his ambition has impelled him to win. There are always before his eyes people who have succeeded where he failed. There are fellows who have outstripped him and against whom he nurtures, in his subconsciousness, inferiority complexes.

Such is the attitude of the tramp against the man with a regular job, the factory hand against the foreman, the executive against the vice-president, the vice-president against the company’s president, the man who is worth three hundred thousand dollars against the millionaire and so on.

~ Ludwig von Mises, The Anti-Capitalist Mentality

Rick Kelo, an economist and social thinker who often follows in the Misesian tradition agrees.  To Kelo the topic is really about a basic economic condition: scarcity.

"Mankind is forever stuck in a mismatch," says Kelo.  "The power of our imaginations give us unlimited wants and desires, but we don't exist in our imaginations.  In the physical world around us resources are limited," he points out.  "If we use corn to make the corn syrup that goes into soda then we can't use it to make popcorn," Richard Kelo explains.

The irony is that Americans in the 21st century enjoy the highest standard of living of anyone in all of human history.  All of which has been achieved by the productive engine unleashed by capitalism.

Rick A Kelo

Richard Kelo Discusses John Locke

John Locke was a seminal thinker in human history.  His writing represents one of the first times a philosopher examined economic questions.  Locke looked at questions like property rights: who owns what and what represents legitimate ownership?

Rick Kelo

Even in 2018 a lot of modern political topics still center on the same questions Locke examined.  As Rick Kelo points out that the "1%" and wealth inequality are just one example.  Who owns what, and was the wealth of the 1% acquired by exploiting the 99%?  Is it a legitimate function of government to redistribute wealth in order to correct for this?

Rick Kelo points out that many of these questions are answered if we take the time to read Locke's analysis and apply it.  For example, in his Second Treatise on Government, John Locke examined property rights and ownership:

"The labour of his body and the work of his hands, we may say, are properly his. Whatsoever, then, he removes out of the state that Nature hath provided and left it in, he hath mixed his labour with it, and joined to it something that is his own, and thereby makes it his property." 

~ John Locke, Two Treatise, Book II, Chp 25, Sec 27

That statement forms the basis for original property rights, or what many philosophers call the "Homesteading Principle."  When a person combines his labor the product he owns.  The exception is when someone has entered into a contract to sell their labor for a fixed price.  Since most of the 1% are business owners, Rick Kelo mentions, their property is their own.  That includes if they improve it, and that includes if they enter into a contract and pay someone else a fixed sum of money to improve it.

Rick Kelo speaks on Freedom of Association

Every individual makes their own moral decisions about how they'll interact with other people, and how they'll live their life as an individual.  Since this is an intrinsic aspect of what it means to be human anything that is a fundamental aspect of moral agency is called a "basic human right" or a "fundamental right."

One such example is the ability to associate with whomever you choose.  Rick Kelo, like many Classic Liberal social thinkers before him, teaches that the Freedom of Association is a basic human right.  Anything that infringes on this right is, by definition, tyrannical and illegitimate.

Rick Kelo

Consider the example of same sex marriage.

As Rick Kelo explains any law that prohibits voluntary association is illegitimate.  The various prohibitions on same sex marriage in many states is one example.  Many states hide behind pretending to promote what they consider "moral goodness" by banning same sex marriages.  However, as Rick Kelo and those who believe like him note, it isn't a legitimate function of government to dictate what types of people can associate with what other types.

The only morally consistent viewpoint is that people be left free to choose for themselves with whom they associate.

Rick Kelo - Did Mankind Start as Socialists?

Richard A Kelo

Rick Kelo, a prominent Classic Liberal thinker, weighs in on a common claim by advocates of government control of society.  Socialists often claim that the human race begin in Socialism as its natural state.  Socialists imply that because small tribes began as socialist that mankind should return to our natural, preferred method of organizing ourselves.

Surprisingly, Rick A Kelo agrees with the Socialists on this point: their claim is truthful.  "Humans began as what economists call autistic economies, which is a term that refers to an economy where only 1 will governs.  The tribal economy is an example, and so are the Crusoean economy, the slave economy & the household economy.  They are all proto-command economies," says Kelo.

However, Rick Kelo notes that there is one crucial difference between the tribal economy and the Socialist economies of the 20th & 21st centuries: no division of labor.  In a division of labor economy there are only two types of command economies that can exist:

1) Socialism: state control of production in a division of labor by state ownership of all producer / capital goods.
2) Fascism: state control of production in a division of labor by state regulation of all producer / capital goods

Richard Kelo goes on to point out that if we want to be technically specific Socialists are actually conflating communalism with communism, but the different is nuanced.  Kelo briefly addressed the structure from tribal economy forward to advanced division of labor economy and this exact point in this article: Human Freedom: The Untold Cause of It All.