08 October 2016

Greed and Folly

Everyone loves the Taj Mahal, right? The romantic story of one man's undying love for this wife, blah blah. Take a step back and look at Shah Jahan. He led an incredibly opulent and extravagant life which required him to appropriate something like 40% of the GDP of his kingdom to pay for it (this is an estimate). This is not just 40% of workers incomes, but 40% of profits from business as well.

The modern day Royal family of the UK is paid a 15% cut of the rents from the Crown Estate (144,000 hectares of rural land, plus the whole seabed, and many commercial properties including all of Regent St in London), or about £43 million which is about 0.003% of GDP (note they are not paid out of taxes!). The government pockets £255 million. So the Royals actually make us money. 40% of UK GDP would be £600 billion. The Prince of Wales has a private income of £20 million from 53,628 hectares of land that go with the title.

Jahan's son was concerned about the impact of these taxes, but also concerned to get his own slice of the action, so he overthrew his father. But the damage had been done and the Mughal Empire was in terminal decline. This created a power vacuum, into which stepped the British. At which point vast amounts of wealth where transferred from India to England - which is partly why today India is a poor country and UK is rich.

Another example is Ankor Wat in what is now Cambodia. King Suryavarman II bankrupted his kingdom building this elaborate temple complex and when he died the kingdom erupted into bloody civil war. The temple was complete disaster, though it is now appropriated as a symbol of piety and holiness.

Capitalism involves a part of society appropriating the wealth created by the labour of others. This is justified on the basis of the risk of losing capital is the business fails. But when the balance of the economy shifts from production to appropriation and gambling (as it is now) then inequality starts to build up. Empires tend to fall when this happens.

Note also that the high tax rates routinely levied in Scandinavia are not detrimental to society because the taxes are spent on the people, rather than on monuments. In fact the socialist countries are widely regarded as the best places to live on many measures including standards of living and health care. People in socialist democracies are more prosperous and happy compared to people who live in free market democracies. Singapore is often cited as an example of a successful free market economy, but this comes at a severe cost to civil liberties and other freedoms.

The Taj Mahal and Ankor Wat are both symbols of greed and folly. We shouldn't romanticise them. Both caused a great deal of suffering.

Based on an article in the Financial Times 2012. Direct links hit the paywall. Search "The monumental folly of rent-seeking" you can get to it that way. 

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