Friday, July 10, 2015

Capitalist are bandits, socialists are slimy. What is the answer?

Capitalism is an economic system in which business is in private hands and the government acts as a regulator. In this system only those with brains, ideas and willingness to take risks become successful. A study has shown that the super rich are extremely intelligent and more likely to have attended elite schools. Rich people have created new businesses, providing employment to millions and pulling them out of poverty. Henry Ford's Model T revolutionised American society by reducing the cost of a car from $850 to $300. So, the wealthy are beneficial for society and have become rich by creating wealth for others. After all no one works without reward. But there is a dark side to them. The top 1% maybe even richer than we thought because they hide their wealth in tax havens. The richer they are the easier it is to hide their wealth. They are extremely intelligent and can afford an army of accountants and lawyers to find every loophole there is. This is supported by negative balance sheets of almost all countries. If money is going out of one country it must be going into another. But it vanishes. According to one estimate around $7.6 trillion are missing, which means $200 billion in lost taxes. Surely it is the duty of governments to stop tax evasion and punish the guilty? Not so easy. There is fierce competition between nations for investments, which means private capital. Why should any company base itself in India where corporate tax is at 35% when it is 12.5% in Ireland and 0% in the Cayman Islands. That is precisely what Vodafone did when it bought Hutchison Essar for $11 billion through a subsidiary registered in the Cayman Islands. The rich also influence what laws are passed by buying up politicians by financing their campaigns. There are lots of studies showing how the rich game the system and are bandits. Socialists aim for the moral high ground by preaching about inequality and are ardent supporters of financial help for the poor, by taxing the rich. After all, a person has become rich by benefiting from opportunities provided by the nation so it would be very mean if he refuses to share a little bit by paying higher taxes. Giving money to the poor increases their spending power and helps them to earn more by increasing their well being. But evidence point the other way. Every socialist country in the world is poor. The poor become dependent on handouts and see no reason to work. A social scheme maybe immensely successful initially but it makes poverty comfortable, causes inflation and reduces growth, as happened in Brazil. A much better way is to increase productivity which increases wealth and train workers to increase their worth. Crying for the poor buys votes for the socialists, giving them immense power, they control NGOs, where they use the money for personal gain, and can coerce the rich to obtain bribes. As has happened in India.

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