[Reprinted from Progress, July, 1979]
Socialism attempted to create a new social order, based on a theory
which promised to eliminate the economic exploitation experienced in "laissez
The socialist theory did not work in practice. Instead of an ideal
society of free and equal citizens, it has changed into closed
societies ruled by a privileged bureaucracy and party leadership which
regimented and dictated the lives of the citizens.
Whilst the wealth of the capitalist classes has been expropriated,
the promised social justice, the equal sharing in community incomes
did not come about and living standards rose incomparably slower under
socialist systems than under freer, more capitalistic systems.
The disenchantment with socialism generated a different approach to
correct the exploitation inherent in the "so-called"
free-enterprise economies. Realising that socialist theory inevitably
leads to dictatorship, well meaning humanists proposed a number of
pragmatic measures to re-dress the injustices of income distribution
by confiscating the earnings of the well-to-do and redistributing
these amounts in the form of various welfare benefits.
Undoubtedly, the idea of correcting a measure of injustice was well
founded. However, the supporters of such welfare benefits could not
define how much of the "well-to-do" earnings could be
confiscated without actually being unjust with the "exploiters".
In fact supporters of welfare policies did not differentiate between
incomes from individual efforts (including returns from personal
trading, saving and investment) and income from communally created
values, such as land value increases.
As a result the major proportion of welfare benefits were financed by
"re-distributing" incomes through taxation which penalised
production and raised costs. This was certainly contrary to social
justice and is an economic absurdity!
At the same time, various vocal pressure groups have formed making
claims for larger benefits and for ever increasing kinds of benefits.
To obtain the electoral votes of the widespread pressure groups,
politicians were forced to promise more and more benefits.
In the tragic Australian fiasco of the unlimited Welfare Society
where the Whitlam Government enforced a drastic re-distribution of
incomes (during 1973/75 Wages increased by 50.8%, whilst Profits have
decreased by 0.5%. - A.N.Z. BANK: Business Indicators Aug. 1975) --
even the doctrinaire Dr. Cairns admitted that the workers have
out-priced themselves of a job, as a result of the indiscriminate and
unrealistic income re-distribution.
A vicious circle of vote-buying has developed amongst political
parties, which became totally separated from the original aim of the
Welfare State. The result was that unrealistically high incomes and
benefits were granted for reduced work or no work at all to an
increasing number of dependents and "clients" of the welfare
system. This led to crippling high costs, increased taxation of the
working population, inflation, unemployment, depression leading to
This is another example of failure of a social experiment for lack of
consistent, clearly defined principles. No matter how idealistic and
humanitarian are its aims, the modern Welfare Society is doomed to
bankruptcy since it is committed to satisfy the ever-increasing,
limitless needs of its members while the available human, energy and
natural resources are limited.
Sooner or later even the idealists realise that having confiscated or
taxed away the riches of the "haves", the "have-nots"
are still not satisfied. Galloping inflation is tried, as it happened
after the first world war in Germany, or in the recent experiment in
Chile -- but economic chaos follows usually, which leads to
There are fortunately more practical ways to ensure lasting social
justice, without the destruction of individual rights and incentives
to productivity, and without the unintended but inherent parasitism
which is the result of the Welfare State ideology.
In a democracy which is committed to maintain the freedom and equal
rights of the individual, social justice is ensured by the community
collecting all revenue which derives from the mere existence, and the
activities of society in a Public Fund, in which each citizen holds an
We do not seem to realise what vast fortunes and incomes are
generated by the mere existence of the community as different from the
personal exertions of individuals.
The fact that the value of a block of land in Collins Street,
Melbourne has increased from Batman's time to millions of dollars
today cannot be directly related to any one individual. Other natural
resources such as water, coal or oil have little value, as long as a
conglomeration of people or the industrialisation of a society creates
a demand for them. Then of course their value and the revenue from
Beside of natural resources, the existence of society creates other
new sources of revenues which are independent of personal effort. When
we grant licences to a limited number of hotels, taxis or other
services, we create new sources of monopoly-revenue.
In industrial societies the concentration of the resources of
capital, knowhow and technology is necessary for the production of
complex products, such as chemicals, motor cars or space rockets. The
necessity for vast concentration of capital and specialised labor
which form themselves into powerful, monopolistic bargaining
organisations such as cartels and trade unions, create also a new
source of revenue, which is unrelated to individual effort.
Without the demand created by an expanding industrialised wealthy
community -- none of these incomes would exist.
Therefore these incomes, which derive from the vast increases of land
values and other community-created advantages, should be returned to
the conimunity - as the proper fund to be distributed to each citizen.
This can be done in the form of a minimum income, social welfare
benefits, government services etc.
And this income is not a mere trifling sum. It has been estimated
that the revenue raised on the Un-improved value of land (which is
land, excluding any buildings, improvements or crops) at the rate of
5% p.m., returns nearly the ½ personal income tax collected.
The mere existence of a community creates incomes which have
increased to vast sums directly related to the general development and
improvement of society as such - and totally unrelated to individual,
This vast and increasing fund is the only fund which is justly
available for distribution to each member of the community without any
special entitlement for it.
The extent of this community fund is also the limit within which
social welfare distributions must fit. Once this fund is distributed
no one can justly claim that society "owes" him more without
his personal contribution.
Once this clearly defined fund is collected, the bitter struggles
within our society over "social justice" will disappear.
Without the existence of such a defined fund, all groups in society
can feel justified to fight for a "larger share of the cake".
Who could not justify that the work, the contribution of the bank
clerk, the inventor, the process worker or coal miner is worth more
than what he gets for it. How can we deny our "social obligation"
to the deserted wife as well as to the "drop-out", when we
do not know what are the limits of then- financial rights?
The distribution of incomes and social services in our society depend
on the struggle of pressure groups, and the resulting taxation which
collects money for social welfare is a form of civil war.
And in fact, the struggles led by pressure groups and idealistic
humanitarians in the name of social justice are the bitterest, and
increase hi vehemence - exactly in "so called" Welfare State
Those self destructive struggles will go on between the "haves"
and "have-nots"; between "protected" or "subsidised"
industries, monopolist restricted professions, Trade Unions and the
consumer - so long as the contestants remain convinced of the justice
of their causes. So long as one side believes that society owes and
should provide a good living to everyone - irrespective of its
contributions - the other side will maintain that they are robbed by
force of the results of their honest work.
Once we recognise that the community creates a vast, though limited
fortune which does not belong to private property, and we collect it
for the community - we remove the basic social justifications from the
power struggles in democratic societies.
This "Public Fund" can be clearly defined, and equally
distributed. The distribution of benefits will be the legitimate
subject of political party differences - but the parties will not be
able to buy votes by promising limitless handouts which eventually
bankrupt the economy!
One party may propose a cash distribution. Another party may want to
retain part of the Fund to finance essential services such as internal
security, minimal health insurance, basic education - vouchers plus a
small cash distribution. A third party may propose that all of the
fund should be used for wider public services. No one could, however,
propose spending beyond the limits of the Public Fund.
Anyone who wants additional social security will be personally
responsible to set aside part of his income for insurance or
entertainment, gambling and trivia.
Anyone who wants to "drop-out" from the rat-race and live
on his social security entitlement will be justly entitled to it. But
no one will sympathise with irresponsible demands to be kept on the
earnings of honest, industrious, hardworking people.
Anyone who chose not to provide adequately for his sickness,
accidents, unemployment etc. through buying insurance has only himself
Social justice will demand the removal of the present punitive
taxation on individual effort and will restore the right of everyone
to the result of his labour. No more shall we punish overtime earnings
with higher taxes.
Idealistic as it seems, the modern Welfare State which is based on
the principle of taking from tine "haves" and giving to the "have-nots"
destroys social justice by placing unequal responsibilities on some
and giving unequal rights to others.
The resulting injustice and self-destructive civil wars can be
avoided by the collection of communally created incomes as the fund
for social security. Its distribution ensures equal share, equal
entitlement: equal rights.