Harry Binswanger Hijacks Real Capitalism

Harry Binswanger is completely misguided in his article that the 99% should give back to the 1%. His argument is not that we should have a less progressive tax, not that we should have a flat tax, not even that we should have regressive tax, but that “anyone who earns a million dollars or more should be exempt from all tax.”

Henry Blodget does an interview with Binswanger – probably the most worked up I have ever seen Blodget, who is normally cool and collected in his interviews.

These are not legitimate capitalists

Don’t get me wrong. I believe wealth is great. My job is to help other families (and my own) preserve and grow wealth for generations.

It’s people like Binswanger that give Adam Smith and capitalism a bad name. This type of extreme laissez-faire capitalism is nothing like what Adam Smith was describing in The Wealth of Nations. The reason for the divergence? Basically Adam Smith was extremely intelligent and prophetic, while guys like Binswanger are reactionary ideologues.

And this is what really irks me. The economic system outlined by The Wealth of Nations, if you actually read the book, is very reasonably presented. Unfortunately, the extreme laissez-faire ideologues have latched onto it and taken it to an absurd level, ignoring what Smith actually wrote.

From the book

Here are some of the more famous quotes from The Wealth of Nations:

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

“The third and last duty of the sovereign or commonwealth is that of erecting and maintaining those public institutions and those public works, which, though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain.”

In fact, Smith said there were three basic duties of the government:

1. Defense

2. Justice System / Protection of Property

3. Public Works

A lot of hard line laissez-faire types try to forget about #3.

Another important but subtle point – Smith believed that the wealthy should pay more taxes to fund the justice system. Why? Because is was the justice system that protected their ownership of the large amount of property they had accumulated. And why was private property so important? Because private ownership was the major safeguard reducing the power of a king – a concept that still holds true today.

British style capitalism from the Enlightenment has a tremendous amount of wisdom and practicality.  I hate to see it hijacked and misunderstood.