Sat Feb 28th, 2009 at 10:28:35 AM EST
There is much talk about how best to get the world out of the current economic downturn. One of the bits of arcana has to do with whether tax cuts or spending will provide the most bang for the buck. The measure of this is called the "multiplier". Discussions about multipliers are what happens when economic policy is viewed as a mathematical exercise rather than as the physical manifestation of ethical principles.
All economic and policy recommendations are based upon (unacknowledged) ethical foundations. I discuss these below.
There are two basic ethical views in play these days. In one view people are responsible for their own lives and government's role is restricted to enforcing property rights in the broadest sense. This leads to support for policing, a legal framework for commerce, a military and only enough social services to prevent anarchy.
Disturbances in the capitalist system are to be handled at a macro level via broad-brush policy adjustments such as those dealing with taxes. Suffering by individuals is tolerated for the "greater good" which will happen - eventually.
The second view is that government is an expression of the public desire for empathy and compassion. Individuals sacrifice by paying taxes, restraining themselves from committing acts of theft or cheating (even when they will be undetected) and helping the less fortunate.
In this view, taxes are not a burden, but more like a tithe that we have agreed to because certain functions must be managed at a society-wide level. In a democratic society the majority get to determine how much of a tithe we want to pay by electing representatives who are supposed to carry out the policies we favor. The more closely the democratic system conforms to the idea, the more likely the policies will favor more social and economic equality. The least democratic states tend to have the widest disparities in wealth, just look at Saudi Arabia or the other Middle East petro states. Notice how Russia is simultaneously becoming less economically balanced and less democratic. Then look at Scandinavia to see the opposite extreme. The US is an outlier, it has great wealth, but it is unevenly distributed and has gotten more so over the past 40 years. This has also coincided with a period where democratic institutions were subverted by the rise of money in politics to an unprecedented degree.
So back to multipliers. If we give money directly to those in need, whether through payments or tax cuts, then these people will be less in need. It's that simple. Humanitarian aid helps humans. Whether this ultimately is the best course of action to affect things like the GDP is not a primary consideration.
All that need concern us is whether money spent on large-scale infrastructure programs has lasting value or not. So building F22's does not, building high speed rail does. This type of multiplier is relatively easy to determine.
Why we have such a large group in positions of influence who are bereft of any feelings of empathy for those in need is something for social scientists or philosophers to ponder.
I'm constantly reminded of the last days of the French royalty. The aristocracy was clueless as to the state of society. They even built themselves fake farms with clean animals so that they could experience the rural life. Their version of Disneyland. Advancement of careers and programs was done on the basis of cronyism, bribes and flattery at court. We know how that ended.
Bring down social and economic disparity and things will get better. While you are doing it there will be less suffering. After you have reached your goal society may be back at the prior level of GDP or it may not, but at least all will be sharing a common fate.