Saturday, August 20, 2011

The downfall of the welfare state

Who does not want to get a free lunch? Most people likes the idea. Every society is building its strength on a moral ground. The modern Welfare State has been created on the myth that someone else is paying for the good gifts that the political class offers the masses. The guiding principles of the Welfare State were first explained by Ferdinand Lassalle (1825-1864), both a friend and rival of Marx. Lassalle ridiculed the socialist economic doctrines and in his eyes the state was God and Santa Claus at the same time. The state had inexhaustible funds at its disposal, which could freely be used to make all citizens prosperous and happy. The state should nationalize big business, underwrite projects for the realization of which private capital was not available, redistribute national income, and provide for everyone security from the cradle to the grave. The socialist's and the progressive's proposition is that the "rich" can be endlessly plundered on their wealth, the next generation is able to pay for the previous generations benefits, and other countries can be endlessly soaked to pay for the "free" entitlements. But when the political class believe they unpunished can plunder others on their wealth they are fatally mistaken.

In reality the money supply from other nations is about to evaporate and the rich wealth is not an inexhaustible resource. There is not enough money to take away from the rich to raise the standard of living anywhere in the world. Even if all taxable income of those earning more than $250,000 were confiscated, the additional income to any government would not cover all the good gifts promised by the political class. The Greeks who has been rescued twice by their Euro Zone partners have not changed their attitude. And Europe has not got it yet, that this approach is leading to a long and painful road to the downfall of the welfare state?

Germans and Frenchmen are though worrying that the PIIGS (Portugal, Ireland, Italy, Greece and Spain) are in such trouble that entire Euro Zone structure could come to a dismantling. When ordinary Germans learned that Greeks retired well before they themselves, they began to ask why they should continue to work so that others could rest on the beach, drink, and joke about the others who pay for them.

The European socialist economics doctrine (Keynesians) is about to crash like a house of cards. We are now facing the downfall of the welfare state and not the collapse of capitalism. Only nations based on a solid economic capital base founded on savings provides survivability. A society based on borrowing for consumption will consume itself and decline. When finally the costs of government exceed the gross domestic product the state can only survive by depleting their community wealth. This will result in the decline of the quality of civic life.

The nanny welfare state in front of others, Sweden, has been in terminal decline since the 1980s. The socialist “cradle-to-grave” welfare state did not work and there is little opposition to the slow dismantling of the benefits by the leading political party's. The working class does not anymore sympathies with the left for the solution of their problems.

Only one country in Europe, Switzerland, has managed to keep its welfare system under control. When the checks and balance is made by the people its less likely that unfunded and costly welfare reforms will survive a referendum (popular vote) by the people. This has been proven by several empirical results, like by Pommerehne (1978, 1990) and Matsusaka (1995). Government expenditure is lower in a representative direct democracy (republic) than in a pure representative democracy. The existence of citizens initiative leads to a particularly large reduction in the state and local public spending. Public services are produced more efficiently in representative direct democracies than in pure representative democracies. Swiss municipalities with private suppliers had the lowest cost. Those costs are at between 20 - 30 precent higher in representative than direct democracies. Most notable is that the willingness to finance the public sector is higher with referenda than in pure representative democracies. Most important public debt is lower when the citizens can vote on the issuance of public debt in referendums. Swiss cantons with direct democracy had a significantly (5 - 15 percent) better economic performance than purely representative systems. According to the European Commission’s 2009 European Innovation Scoreboard, Switzerland is by far Europe’s most innovative economy.

Switzerland has the highest European rating in the Index of Economic Freedom 2010. The nominal per capita GDP is one of the highest in the world and higher than those of the larger Western and Central European economies and Japan. Switzerland has the highest average wealth per adult at $372,692, defined by the value of financial and non-financial (such as real estate) assets. In 2005 the median household income in Switzerland was an estimated 95,000 CHF, the equivalent of roughly $100,000 (as of December 2010) in nominal terms. The Swiss model with popular vote as checks and balance has lead to lower welfare expenditure and less tax revenue per capita. Even though the Swiss welfare state has not yet broken down, and no severe cutbacks has been made in public welfare expenditures.

A comparison between Sweden and Switzerland clearly shows that the Swiss model from 1970 produced a greater wealth than the Swedish Income socialized model. Sweden must make a growth rate of eight percent per year for five years to catch up with Switzerland. How can it be that Switzerland with fewer natural resources managed better than Sweden? A Swedes average wighted yearly salary is €56.053 and a Swiss €82.725. The Swede pay income tax with 28.89–59.09 per cent and an additional 31.42 per cent in payroll tax, while the Swiss pay federal income tax with 0–13.2 per cent. The total rate does not usually exceed 40% and in most cases, the maximum tax rate is much lower than this. For example, in the Canton of Schwyz, the top rate, inclusive of federal, cantonal/communal tax is approximately 22 per cent. The cop orate taxes are that low the cantonal tax system has come under attack from the European Commission, which is attempting to make Switzerland change aspects of its corporate tax regime designed to attract holding companies to the jurisdiction. The European Commission does not like competition from Switzerland and that cantonal governments has the freedom to set their own tax rates to attract new companies and wealthy expats. Obwalden and Appenzell-Ausserrhoden, both charge 12.7 per cent.

Switzerland has a very weak central government and small public sector (government). The referendum institute provides a good protection for minorities and local opinions. Sweden in contrary has since 1521 (when King Gustav Vasa ceased power) had an extremely strong central government and over time a larger public sector (government) than any other country in the entire world. This has hardly given Sweden an advantage in building a wealthy society with wealthy citizen's.

When the socialist leader Olof Palme was appointed in 1969 as prime minister, he needed more money to fund a flood of new entitlement reforms. He explained that the parliament in payroll taxes has found "a new tax source." Labour costs increased at a record pace in the early seventies. Wages increased 59 percent between 1973 and 1976. During the same period the socialist majority in parliament increased payroll taxes by 109 percent! Labor costs exploded by more than 80 percent in three years. The companies had no way to compensate for raising prices, because export prices were determined by world markets, and the Swedish companies were barely the price leader. The result was that corporate profits was wiped out and job's evaporated.

When the Swedish Social Democrat Party launched their radical ideas of equality, social justice and redistribution of wealth the opposition criticized and warned for the economic consequences of the abolition of any economic incentives. But the opposition never took up the criticism of the idea. During the first decades of industrialization a large part of the proceeds from the new Swedish industrial society remained with the owners. This kept up growth, as riches were reinvested. Those who subsequently criticized the unequal distribution of income during the decades around the turn of the century never discuss this aspect. The idea of ​​equality has become not only a reaction against unwarranted disparities in income, or "injustice," but it has evolved into a general intolerance of difference at all. Much of the so-called serious Swedish journalism is to detect differences between groups and criticize them as manifestations of "inequality."

Sweden did increasingly during the 1970s and 1980s focus on socialist entitlement arrangements. It is known as social insurance and guarantees income from unemployment and sickness and old age have largely been organized as state-controlled collective system, with a very weak link between taxes paid (fees) and insurance outcomes.

Sweden has since 1970, a single legislative chamber. All questions are decided by a simple majority: 51 percent win over 49 percent. The protection of minorities in the constitution is extremely weak. Property rights are protected, but so vaguely that a majority parliament vote may freely dispose of private property.

Switzerland has a uniquely decentralized democratic system that provides a long-term stability and political reliability that makes entreprenours dare to invest. In Switzerland a decision is not made like in Sweden at a congress and becoming law a few weeks later. Each member of the Swiss Government are elected separately by the Parliament. The parliament can not by censure compel a government member or the force the government to resign. The government, on the other hand, can not dissolve parliament and call for elections.

Above all, the Swiss referendum, provide "checks and balances" that prevent minorities from pushing through decisions that are against the popular opinion. The people can speak in the post of parliamentary decision by the decision-making referendums. At the federal level referendums are mandatory for constitutional amendments. Federal laws and decisions in general and international agreements are not in force until further notice and are subject to optional referendum. Unlike Sweden, Switzerland has implemented very few damaging and costly reforms since the early 1970s. This veto right by popular vote helps to make the country more stable and predictable compared to Sweden.

If Europe and North America shall avoid a slow and painful downfall its time to improve the political system and introduce checks and balance by the people. The only people who do not like more power to the people is the politician class. Anyhow, the demand for direct democracy is growing, not only at the level of the national level, but also at the transnational European level. Lively debates are going on in many countries about an European-wide referendum on the new Reform Treaty, and in these debates popular participation is frequently contested by the politician class with the same arguments the defenders of purely representative democracy always have used. If any of those arguments were true, the stable direct democracy which has been alive in Switzerland for more than 100 years could not exist, because a referendum democracy should be self-destructive; and come to a rapid and catastrophic end on the reefs of cognitive incapacity.

US Senator Mike Gravel and the National Initiative want empower the citizens to check and balance representatives, at a national level. This will give the people a "Plan B" whenever representatives don't represent the people. The Founding Fathers would agree! George Washington said "The basis of our political systems is the right of the people to make and to alter their constitutions of government." America's leading Constitutional expert agrees. Akil Reed Amar says in Popular Sovereignty and Constitutional Amendment "We the People of the United States have a legal right to alter our government – to amend our Constitution – via a majoritarian and populist mechanism akin to a national referendum, even though that mechanism is not explicitly specified in Article V."

I would like to see a lot of people raising this issue and debating it frequently. There is still time to save a great country from a destruction by a runaway congress.

Ben Hedenberg

Sunday, August 14, 2011

Living on the margin totally dependent on the nanny state

Sweden is one of the world's richest countries with a $37,526 GNP per capita, but has a population that is hardly wealthy. While politicians are rubbing their hands on good margins and record high surplus in the Treasury, many citizens desperately hard to get everyday to make ends meet. According to recent statistics presented June 2011 more than one-fifth of the population younger than 45 years could not meet an unexpected expense up to $1,250 without having to borrow, or ask for help. Among single-parent families more than 18 percent has at some time during the past 12 months defaulted on payment of rents or mortgages. Almost all Swedes lack a fortune beyond the value of the dwelling.

How could thing turnout this bad? The Swedish state and the individual are traditionally the two main actors in politics. Like most other northern European countries the socialists has painted the political development in Sweden during most of the 1900’s in the big government colors. Special features of Swedish social democracy is that from the beginning, they have advocated an addiction to the impersonal state instead of free families and a free society.

This transformation has not happened without criticism within the socialist party. Arne Montan and other leading socialists could not understand why the welfare state should take away half a worker’s income. Instead of letting the workers self-manage their security through insurance and savings banks the big government deprived their money and imposed a social-political system. During the past years with big government the feeling of powerlessness have made many Swedes to lose faith in their own ability to influence their lives.

In 1900 the second half grew the Swedish state power relatively quickly. In area after area increased policy influence. The tax burden rose in step with the welfare state ambitions, a development that particularly affect low-and middle-income earners. From a level of 21 percent in 1950 increased the tax burden at a brisk pace for 30 years at 50 percent. 1989 recorded a record level of 56.5 percent.

The Swedish nanny state was founded in several crucial aspects between 1970 and 1980. The welfare principle means that the citizen in relation to the public is assured of certain basic social benefits. Certain rights and benefits are generally guaranteed, regardless of the individual taking any initiative or not. The general welfare nanny state was made more attractive and generous, but it reduced the margins in the everyday life of the citizens. For every dollar taken in taxes, the individual consequently had to give up one dollar that could have been used for his own wisdom. Taxes soared not only for the wealthy but also for the working class and appeared not only on the wage slip but also on the receipts they got in the store or at the hairdresser. Much of the tax burden could largely be explained by the introduction of new invisible taxes, like the value added tax and various excise taxes, as well as a substantial increase in employer

payroll tax. The resistance was low on the conservative side.

As long as the Swedish economy grew and the living standard improved for broad social groups, few critical voices were able to break through. In the 1950’s the country had a healthy public sector share of 25 per cent of GDP. But under government Olof Palme it grew to 50 percent 1970. Eight years later, it would represent the entire 64 percent. While the cost of bureaucracy increased, the resources could be used for productive livelihoods. As the public sector devoured an increasing share of the workers' income it also reduced the space for personal savings. Finally the conservative voice wakeup.

The conservative member of parliament Professor Staffan Burenstam Linder tried to influence developments. In the book “The heartless Welfare State” (1983) he argued convincingly that the welfare state had grown over its banks at the expense of the citizens' individual freedom. Professor Linder had a professorship of International Economics and pointed to a paradox. After paying taxes the welfare state citizens had to little money left to cope with the financial pressures of everyday life. The high tax burden also led to people stopped saving for future contingencies or anticipated needs. Expectations on the state was high. When the government eventually was exposed to an economic crisis and was forced to cut public spending the citizens were often defenseless without their own resources. The big government nanny state had created a brutal system resulting in a double social regression.

During the early 1990‘s the ruling Social Democratic government did not change its line of policy and defended its position. They thought that deeper democracy, where citizens have the opportunity to shape their own future, requires an even distribution of resources, including knowledge and skills, self confidence but also economically. Amazingly they came to the conclusion that a publicly funded welfare system does not deprive the individual responsibility to choose. Eventually the arguments advanced by the conservatives won the ear to the left of center in Swedish politics.

Leading socialists dared to question eternal truths. Not least prevailing power relations in Swedish society was questioned and new ideas of a recognition of the individualistic tendencies was recognized. However, the socialists were clear on keeping the highest tax pressure in the world.

The socialization of the income has resulted in a constant poor private economy, and many find it difficult to cope with temporary loss of income or expenditure increases, such as on new clothes for graduations, unexpected high utility bills, or a new washing machine. The stories of the difficulties to cope with even the most basic expenses are all over the country. It not only about individuals having difficulties managing their everyday finances, but about ordinary families with two full-time working adults. The research literature tends to talk about a lack of cash margins. The Swedish Welfare Administration classifies the absence of a cash margin as one of several poverty indicators, points out that the economic vulnerability may be due to the low income or high expenses relative to revenue. The lack of cash is not a phenomenon limited to certain specific groups in the Swedes society, but a condition of everyday life for most citizens.

It is not only thin margins that are weighing down. Many Swedes do have lack own savings. When Statistics Sweden last investigated the wealth in 2007 it showed that very few individuals had any net worth after excluding the value of their real assets.

A recent survey showed that 20 percent of the Swedish households lack a buffer and over 20 percent of those who say they have a precautionary saving less than $3,125.

The lack of cash that the citizens can use after paying bills are for sudden expenses has not been regarded as a major social problem in Sweden. The basic idea of the kind welfare state has been to satisfy people's needs through publicly funded community schemes.

In the Swedish politicians' rhetoric the concept of welfare over time has become synonymous with social security and public services. Security has become synonymous with big government instruments for care and treatment. A substantial part of the Swedish capital formation has been made in collective state controlled funds which have contributed to the private Swedes' weak capital position. The Swedish government control a lot of capital, both in state enterprises and in the various pension funds. This is a bizarre situation, especially given that the money are citizens' own, which the politician class has transformed to state capital.

The welfare state comes at an extremely high price which is an obvious but in Sweden overlooked fact. Every dollar spent on public welfare is, after all, a dollar less that citizens could use on their own security. While the welfare nanny state confiscates resources to monopolize the citizens social security systems it restricts the people's ability to handle the surprises that life inevitably imply.

Ben Hedenberg

The decay of the welfare state – What can we learn from the Roman Empire?

Are we heading towards the same destiny that hit the Roman Empire only a few hundred years after Jesus Christ was born? The the smily fascistization of free enterprise, socialization the US health care sector, is made on a morally corrupt and rotten ideology.

Every society is building its strength on a moral ground. In the US that moral has been written into the Constitution granting the citizens law and order, as well as, a sincere respect for all citizens’ property and income. When the representatives believe that they by the power of the government apparatus unpunished can plunder certain citizen groups on their incomes and property, they are fatally mistaken.

In ancient Rom a large scale social welfare support was introduced by Gajus Gracchus (158-122 BC). All citizens of Rome were entitled to buy a monthly ration of grain at a fixed price. The subsidized staple food of Rom became immediately the weapon of choice for the ruler to stay in high favor with the crowd and to maintain control over the political power.

Cheap grain was initially sold without any means test to every individual willing to queue up. From the beginning about 50,000 people used this benefit. The free food policy evolved gradually over a long period of time. Since the inception of the system the number of people living on public social assistance increased and few rulers in power dared to put an end to it. The first ruler to make an attempt was the great commander Lucius Cornelius Sulla (138-78 BC), but it was stopped by severe social riots forcing him to retreat. Then no less than 200,000 Roman citizens received public social assistance and did stand up in defense of their right to cheep basic food.


At the time Julius Caesar seizure of power (49 BC) the number of people living on social welfare assistance had increased to a staggering 320.000, in a city with 1 million inhabitants. Publius Clodius Pulcher abolished the charge in 58 BC, and began distributing the grain for free. The result was a sharp increase in the influx of rural poor into Rome, as well as the freeing of many slaves so that they too would qualify for the dole. Ceasar managed later to introduce a means test that squeezed down the social welfare population to 150.000.

After his death followed several weak rulers, causing the number to again reach 320,000, a number that Gaius Julius Caesar Augustus (from 31 BC) by a new means test managed to squeeze down to 200,000. The welfare system had by then become a well-established institution by its own power that withstood every attack during the coming centuries.

One notable act of Marcus Ulpius Nerva Traianus, commonly known as Trajan (98-117 AD), was his formalization of the Alimenta, a welfare program that helped orphans and poor children. It provided general funds, as well as food and subsidized education.

Under Septimius Severus (193-211 AD) free oil was also distributed. Subsequent emperors added, on occasion, free pork and wine. A milestone in evolution was made 274 by emperor Lucius Domitius Aurelianus commonly known as Aurelian (270-275 AD) who not only made the right to social welfare hereditary but also boosted welfare benefits considerably by providing baked bread instead of corn supplemented by pork, olive oil and salt.

The Romans did not only demand cheap basic food but also subsidized culture. The emperors assumed the responsibility of providing the citizens with publicly funded entertainment and arts programs. One historian estimates the modem equivalent of $100 million a year was poured out in circuses and gladiator duels alone.

None of the emperors, not even Caesar or Augustus, dared to circumscribe the Roman’s welfare privileges. Indeed they had access to the Praetorian Guard having power to crush any insurrection. However, they preferred to be generous and to keep the crowd in a good mood. They wanted to be greeted with enthusiasm by the crowd of people at the public celebrations and entertainments. Ovations and cheers was sweet music for the emperors that they where willing to pay a very high price for.


Monetary, fiscal, military, political, and economic issues are all very much intertwined, because any state normally seeks to monopolize the supply of money within its own territory. The development of Rom to an empire was created by an expensive military power and plentiful of stupendous palaces and monumental buildings. Combined with immense costs for the military, free food and entertainment the emperors need for incomes became insatiable. The expenditures grow fare above the tax revenues, a problem the government solved by reducing the value of the money value. By other words inflation was created.

In absence of a modern monetary system, where the printing press for banknotes could be used, the rulers had to deteriorate the coin.

The silver coin denarius was introduces 268 BC and contained 95 percent silver. Nero reduced the silver content to 90 percent. Trajan (98-117 AD) reduced the silver content to 85 percent. Debasement continued under the reign of Marcus Aurelius (161-180 AD), who reduced the silver content of the denarius to 75 percent, further reduced by Septimius Severus to 60 percent, and Caracalla evened it off at 50/50.

Caracalla was assassinated in 217. Then followed an age that historians refer to as the Age of the Barrack Emperors, because throughout the 3rd century all the emperors were soldiers and all of them came to their power by military coups of one sort or another. There were about 26 legitimate emperors in this century and only one of them died a natural death. The rest either died in battle or were assassinated, which was totally unprecedented in Roman history, with two exceptions (Nero, a suicide, and Caligula, assassinated earlier).

Caracalla had also debased the gold coinage. Under Augustus this circulated at 45 coins to a pound of gold. Caracalla made it 50 to a pound of gold. Within 20 years after him it was circulating at 72 to a pound of gold, reduced to 60 at the end of the century by Diocletian, only to be raised again to 72 by Constantine. So even the gold coinage was in fact inflated (debased).

The real crisis came after Caracalla, between 258 and 275, in a period of intense civil war and foreign invasions. The emperors simply abandoned, for all practical purposes, a silver coinage. By the middle of the third century AD, the denarius had silver content of just 5 percent and year 268 AD the content was reduced to only 0,02 percent, a reduction by 1/4700. The decline in the silver content to the point where coins contained virtually no silver at all was countered by the monetary reform of Aurelian in 274.

Soldiers' wages went up. But silver content went down,

making the currency worth less — considerably less. (source: Mapping History)

It sound a lot, but the price increase was only 1.6 percent per annum. For us it looks almost like as close to a stabile money value you can get. However, the inflation ratio increased, as it use to do in a welfare state. And during the hundred years beginning 200 AD to 300 AD and the price for an artaba (approx 77 lbs) wheat from 12 to 120,000 drachma, i.e. 10 000 times the original value. Roman historians refer to this period as the "Crisis of the 3rd Century." And the reason is that the problems of the Roman society in that period were so profound, so enormous, that Roman society emerged from the 3rd century very different in almost all ways from what it had been in the 1st and 2nd centuries.

At that time Rome was going fast on the downhill slope, with stark increase in prices, averaging 10 percent per annum. The only people who were getting paid in gold were the barbarian troops hired by the emperors. The barbarians were so barbarous that they would only accept gold in payment for their services.

Since prices were rising too rapidly it became impossible to count on an immediate proportional increase in the fiscal revenue, because of the rigidity of the apparatus of tax collection. Of course, people having savings where hit harsh by the inflation, particularly small savers in coins. Such inflations are in reality working as a systematic plundering of the savers assets and discourage the desire to save.


During the centuries prior to Christ’s birth, when the Roman Empire evolved, the society’s financial base was created on a healthy model that stimulated entrepreneurship and productivity. Without a free market economy with free production and trade no development would have taken place. Taxes and duties where favorable to businessmen and the agriculture blossomed. The farmers developed a capacity big enough to provide Rom with all staple food needed. Artisanship and commerce flourished and enterprises grow.

Then came the redistribution of wealth, transforming Rom to a welfare state, with free bread and entertainment, as well as, with extensive government support for a place to live at, child support (due to the low nativity), and lots of jobs in the constantly expanding public sector. This development was not possible to slow down, as it created its own unstoppable force. Oppression and extortion began early in the provinces outside Italy and reached later fantastic proportions. The mob of Rome and the palace favorites produced nothing, yet they continually demanded more free gifts.

This was gradually leading to taxation on the citizens living in Italy, and later leading to an intolerable tax burden on the productive classes, as they earned good money and often managed to buildup considerable fortunes. Emperor Nero once declared, "Let us tax and tax again. Let us see to it that no one owns anything!" Later, more unscrupulous emperors like Domitian (81-96 AD) would use trumped-up charges to confiscate the assets of the productive entrepreneurs. Most emperors continued the policies of debasement and increasingly heavy taxes, levied mainly on the productive and wealthy.

The war against wealth was not simply due to only fiscal reasons, but also as a conscious policy of exterminating the Senatorial class, to eliminate any rival to the emperor. As the private wealth of the Empire was gradually plundered away though confiscatory taxes, an increasing number of entrepreneurs could not manage their businesses any longer. This caused the economic growth to slow to a virtual standstill. Once the productive were no longer able to pay Rom's bills, the burden fell onto the working class. Evidently average people suffered severely from the deteriorating economic conditions.

To prevent businesses from shutting-down, resulting in mass unemployment, the government was increasingly nationalizing the economy. This caused a total breakdown of the division of labor. The entrepreneur’s difficulties were not only caused by high taxes but also by massive government regulations. At this point 301 AD, the Emperor Diocletianus, commonly known as Diocletian, took action in order to subdue the increasing civil unrest. He attempted to stop the inflation with price controls (Edict on Maximum Prices) on all services and commodities. Despite the fact that a brutal death penalty applied to violations of the price controls, they were a total failure. Goods disappeared from sale, resulting in shortages and destitution. Diocletian put the blame on the merchants; they where the avaricious greedy types who caused the inflation and he spoke about himself as "the protector of the human race."

Every kind of price control where the producer is prevented from charging the price the consumer is willing to pay for is thieving from the producer. This kind of plundering and assault did severely discourage the producers desire to produce. Businesses were literally pulverized under the burden of this public hostility.


Under Emperor Aurelian (270 AD) Rom had one million inhabitants. But here the curve is turning down. The financial assault on the businessmen and the farmers caused the supply to decline. Constantine, the first Christian emperor of Rome issued new taxes. One tax was on the estates of the senators. This was new because senators were usually free of most taxes on their land. He also issued a capital tax of merchants; not their earnings. This was to be levied every five years and it was to be paid in gold. Constantine also required that the rents from the imperial estates, which were rented out to tenants, were to be paid only in gold.

Constantine let the gold coinage sufficiently large that it began to take hold and to circulate more freely. However, the silver coinage failed and at no time in this period did the central government try to control the token coinage. The result was that token coinage was being minted not only by the imperial mints, but also by the mints of cities. In other words, if a city couldn't pay its costs or pay the salaries of its employees, it simply struck up some token coinage and issued that.

When people began to say "it used to be I had five people paying this unit of taxation, but two of them have fled and it's only half the land in production," the response of the government was, "that doesn't matter, you still have to pay for the land that is now out of production." There was no relationship between taxes and actual productivity. All of this resulted in a serous flight from the land, massive evasion of taxes, people left their jobs, and their homes. Businesses closed and the inhabitants of Rome where forced to move to the provinces, basically leaving the city as an economic empty shell. The plundered population left their social status in desperation. The legal market with controlled prices and shortage was replaced by a black market with sky-high prices.

Already by the late 3rd century massive appearance of counterfeits appeared. People needed small change, and they did simply manufactured it. This meant that the amount of token coinage in circulation was uncontrolled and increasingly massive. In the course of the inflation the government found that when it paid its troops in token coinage, or even in debased silver coins, prices immediately rose. Every time the silver value of the denarius dropped, prices naturally rose. The money economy finally completely broke down and the government, in order to try to protect its civil servants and its soldiers from the effects of inflation, began to demand payment of taxes in kind and in services rather than in coin. They wound up, in effect, repudiating their own issued coins, not accepting them for tax collection purposes.

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In the end, there was no money left to pay the army, build forts or ships, or protect the frontier. It was an easy task for he barbarian German chieftain Odoacer to push aside the last Roman emperor, Romulus Augustulus, and install himself 476 AD as the new authority and liberator of a corrupt and decayed ideology. The Roman state was the enemy; the barbarians were the liberators. The early 5th century Christian priest Salvian of Marseille wrote that the Roman state collapsed because it deserved the collapse; it had denied the first promise of good government, which had a just system of taxation. The Roman mass had one wish after being captured by the barbarians: to never again fall under the rule of the Roman bureaucracy.

The more recent American progressive rulers has elevated the government’s power and influence based on a morally rotten and corrupt ideology resembling the Roman ideology to plunder the productive entrepreneurs in favor of good gifts to the poor and unproductive. The county’s moral code written into the US Constitution has been under constant attack since the progressive presidents Herbert Hoover, the grandfather to the New Deal, and Franklin Delano Roosevelt the inventor of the New Deal [for Socialism] introduced the un-American ideology of redistribution of wealth. Ironically FDR’s Treasury secretary Morgenthau admitted that the polices did not work and said that “We are spending more than we have ever spend before and it does not work. . . And an enormous debt to boot!” FDR himself said that government dependency could be “a narcotic, a subtile destroyer of the human spirit.” It appears that politicians act like drug dealers working for making its constituency hooked and dependent on the good gifts. Are the checks and balances in the present US Constitution preventing the political class to sacrifice the freedom of choice and the respect for citizens’ right to dispose over most of their income? Will the never ending innovation of new good gifts to the people and increased taxation on the entrepreneurs finally cause a welfare death like the one Rome experienced 1500 year ago?

Ben Hedenberg

Masters Degree in Law and Economics