Spread the Wealth?

October 19, 2004 12:15 PM (Archive)

With all due deference to the libertarian credentials of Karol Boudreaux, this suggestion seems to be a bad one. I was alerted to this article by a post at Cafe Hayek.

The idea is devoid of any individual (actual) property rights claims and this should be the first caution light. That Boudreaux suggests as her model the Alaska Permanent Fund is another.

A longtime libertarian activist and tax resister regaled me one evening with the sad story of the acendancy to the Alaska legislature of Libertarian candidates who promised much in the way of liberalization, but joined the bandwagon for the Alaska Permanent Fund, which was in opposition to the ideology of the libertarian prophets of the day, Hospers and Rothbard. My friend and his compatriots felt betrayed.

Strangely, the modern Alaska LP platform does not call for repeal of the institution, a type of institution that would be repealed under the "unowned resource use" plank of the US LP platform. My guess is that even Alaskan LPers realize how popular a tax-and-redistribute policy is, and that they are therefore silent on the issue, except for noting on their site how low Alaskan taxes are while how high legislative spending is. Hmm.

Now, given the situation in Nigeria, Boudreaux's suggestion may, in fact, be the best course of action for those desiring peace, since a great deal of political rents are paid on the oil, and spreading the rents to the general population may quell fears and will certainly pad incomes. Further, this may be the only politically viable solution.

However, allow me to suggest another solution: I propose that the Nigerian government cut their political rents on oil. While they are unlikely to do this, some consequences of such an action would be:

1. There would be less money to fight over. Less political rent, less political rent-seeking. This means less corruption, less militia action, and perhaps the government will save itself from civil war. One of the reasons Boudreaux cites to support the case for the Permanent Fund is that as individual claimants on political oil rents, insurgents are less likely to disrupt production. However, this argument cuts both ways. With more at stake, insurgents have more to gain by attempting to control the state apparatus. Also, it is well known that people often act for ideological reasons well out of proportion to their narrow self-interest. Cutting political rents will pull the moral rug out from under insurgents, which is more important than protecting this or that pipeline or installation. I am familiar with this sort of thing from my time spent in Iraq. Having made the case that security of facilities, if anything, is an inverse function of the level of political rents collected,

2. Investing in petroleum-producing and -processing capital in Nigeria will become more profitable. More capital will find its way to Nigeria, and this capital will improve productivity, raise incomes, and increase wealth in all its forms (hospitals, roads, schools, even manners).

3. Petroleum products in Nigeria may become cheaper. If this is the case, then Nigerian consumers will get a gain from foregoing their political rents, and these gains will be more certain than a government-managed program.

Ms. Boudreaux herself suggests why cutting political rents instead of redistributing them is the better option, while at the same time underscoring the thesis that neither of our proposals are likely to occur: "The Nigerian public sector is notoriously corrupt and highly unlikely to part with its power to control oil-revenue largesse. Could a Nigerian government agency really operate under these strictures? Almost certainly not in today's world."

Politics can affect culture, and perhaps even for the better sometimes (ack! did I say that?). In this case, Nigerians' dedication to peace and property seems woefully underfunded. When a fellow Esperantist and Nigerian came to stay with me in my home in The Woodlands, Texas, I was surprised by his flippant disregard for property rights, and muddled interpretation of my wealth: that since I had more than he, such a state must be unjust, and that I should certainly subsidize him. While anecdotal, I have met similar experiences in all of my travels. Whenever a country is rich, there one finds respect for property. It is the ideas of liberty that will build wealth and security.

So, this puzzle of whether we can help the Nigerians, and if so, how to go about doing it, is vexed, and repeats itself all over the globe (and, indeed, begins at home). Being a fan of the historical scholarship of Thomas Sowell, I find myself at a loss for any really good "plan".

The best plan, it seems, is often for a people to take bitter medicine (such as cutting political rents) and mend their ways. But, usually, folks are more interested in taking good-tasting medicine and hoping for the best. I'm guessing the Nigerian government will inflate the money supply and spend into a short-lived boom.