Redistribution: An evil


When Naseeruddin Shah came to Nepal and acted in a play at the Soaltee hotel, the hall was packed. Niti Rana, president of Asman, which had sold each ticket for Rs 3,000, was happy. The programme was a success, because people were prepared to pay the price set by her for watching Shah.

How many people would have come to see me act? Not many, perhaps none. Even my wife and son would not be there — they complain that I can never hide my feelings, let alone put on an act.

Would there be any justification in taking money from Naseeruddin and giving it to me? Would this not negate the decision of the people who watch his plays and movies and would refuse to watch mine? When government taxes some to give to others, it does just that. It says to millions of satisfied customers, “your decision to spend your money on what you decide is wrong. We must now redistribute”.

This is not the only way the government redistributes. Many times, at the behest of competitors, government will intervene to help one company to complaints filed by rivals like Sun Microsystems, the US government launched anti-trust cases against Microsoft.

Consumers, who were satisfied with the company, had no role to play. Microsoft was charged for being too successful, and had to divvy up billions of dollars to settle cases against it. This is just one egregious example of government redistributing wealth amongst billion dollar corporations.

People of goodwill may want government to redistribute wealth for helping the poor. It would be unfair and have adverse consequences even if it could be done. However, the discussion is academic as it can’t be done. Mere good intentions take you to perdition.

Redistribution by state means our cash goes to those who lobby the government the best, not to those who need money the most. Those who really require help are too busy eking out a

living, and have neither the time nor resources to lobby bureaucrats and politicians.

The strongest lobbies belong to powerful vested interests.

They get what they want. An airline company prevents its rival from getting a licence. Is it in the interest of the poor? No, the result of eliminating competition is higher ticket prices. Wealth is redistributed – from consumers (who don’t even know they have been harmed) to an airline.

Government blocks import of Chinese toys on an allegation of dumping by a local producer. Government helps the local company and hurts all buyers of dolls and teddy bears. The mother, who could have bought a Chinese made doll for Rs 15 for her daughter, has to now pay Rs 50 for the one offered by the Nepali company. Wealth is being redistributed. A company is helped, consumers are hurt.

Even worse, concentration on wealth redistribution ensures that it won’t be created in the first place. Tax the people too much and they will not produce, or will take their money offshore.

India, during the days of prime minister Indira Gandhi, had taxes on income and wealth which, in some cases, exceeded 100 per cent of the taxpayer’s earnings. The economy stopped growing. Indians either quit working or found a way to secrete their wealth in confidential bank accounts in tax havens. The premium on the dollar in the black market reached the highest levels seen after independence.

The story in Mao’s China and Stalin’s Russia was much worse. The Chinese and Russians refused to produce under a system which took everything from the productive to give it to the needy. The system cannot work if everybody becomes needy – which is exactly what happened in these two countries.

Starvation, famine and death were the evils begot by the policy of extreme redistribution.

Wealth cannot be redistributed in Nepal because there is none. It may be a good idea to put mutton in every pot, but before we do so there must be enough mutton to go around. Let us first create wealth, and we will talk about redistribution later.

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