For anyone not familiar with Jude Wanniski’s 1978 book The Way the World Works, it offers a surprisingly simplistic premise about political preferences and voting patterns. In almost every case, elections break down to a governing conflict between income growth and income redistribution. The majority of people want economic growth and will vote in whatever form they think will best achieve it (as best as they can understand it; Wanninski assumed that collectively people did), with a great deal of consideration for some kind of what would now be called “fairness.” However, in the absence of credible growth prospects, people vote for redistribution as something of a form of (ultimately false) economic security.

I think there is a great deal of truth in those sentiments, some that go beyond simply electioneering and politics. The very nature of economic theory seems to fall in line with that rough sketch too. Take, for instance, the recent return to popularity for Marxism. It began back with Occupy Wall Street, but reached somewhat of a high crescendo just recently with the fury over Thomas Picketty (until he was caught cherrypicking data by FT and others).

Contained within that neo-Marxist (though there really isn’t anything new about it) wave was a Rolling Stone article by one Jesse A. Myerson. It was clearly written with the millenials in mind, childish in so many ways, cut to sound like their vernacular and mannerisms. Of “his” 5 reforms, the fourth was “make everything owned by everybody.”

Just today, however, Mr. Myerson tweeted that his laptop was stolen from a car. In what is really a cheap shot (though not undeserved), Twitter is giving it to him very hard in the vein of “socialism for thee but not for me” and “I though it wasn’t ‘your’ computer.” Whatever the cosmic irony here, the larger point is one of redistribution. Whether we recognize it or not, theft and crime of that nature is very much redistribution along the lines of might and sheer will.

The fact that this is such a stark and tangible example of redistribution does not alter the very real nature of it in more financial or broad economic terms. The modern economic orthodoxy is literally obsessed with it, using it as a tool in every mean and measure at its disposal. That is why some economists cannot distinguish the destructive nature of war from “stimulus.” When your whole paradigm revolves around redistribution, in the name of whatever fad social “good” you adopt, the extension of it to further extremes simply conforms.

They will not admit to the Marxist roots of it all, but it is there plainly for everyone to see. Among Myerson’s four other “demands” for economic order, he recounted what is essentially “rent theory”, a line of economic thought tracing back to the 19th century. Among its first proponents was John Hobson, a good little Marxist who wrote in 1889:

We are thus brought to the conclusion that the basis on which all economic teaching since Adam Smith has stood, viz., that the quantity annually produced is determined by the aggregates of Natural Agents, Capital, and Labour available, is erroneous, and that on the contrary, the quantity produced, while it can never exceed the limits imposed by these aggregates, may be, and actually is, reduced far below this maximum by the check that undue saving as the consequent accumulation of over-supply exerts on production; i.e., that in the normal state of modern industrial Communities, consumption limits production not production consumption.

The Keynesian strain, the ideological obsession of the Bernanke’s and Yellen’s of the modern age to always and everywhere appeal to debt-based consumerism, is totally contained within that quotation (Keynes was a fan of Hobson). But it is not that simple, as the other part of Hobson’s formulation is equally as important as the disastrously ill-conceived notion that “consumption limits production.” In order to change that “capitalism” concept means redistribution, by might if necessary, from “savers” to the poor. The theory underwent some refinement over the decades, becoming “underconsumption” and then “aggregate demand”, but the principle remains almost fully unaltered.

Again, whether they admit it or not, the central idea of modern monetarism is redistribution along these lines. The modern enhancement, if you will, is an assumed high degree of precision. The FOMC or Mario Draghi or the high practitioners of the Bank of Japan have offered the premise that they can accomplish redistribution in a more elegant fashion by correctly identifying the “right” people or projects to target for its ends. In other words, in Bernanke’s terms, he has identified savers as “losers” to take the short end of redistribution in favor of “risk takers”; though, sadly, only financial in nature, he believes(d) will net out favorably for the economy which is now a social construct rather than a collection of individual actions.

That is the ultimate vanity for the redistributionists, that they can identify winners and losers in such a manner as to create a net forward motion. But that literally means to be a thief to some. Setting aside any due moral abhorrence, the very notion simply sounds silly and comically childish. Yet that is exactly the direction central banks are moving at a surprisingly rapid, if largely unnoticed, rate. As they go further and further, they seem to miss the big correlation whereby they have to constantly downgrade economic prospects in direct proportion to their attempts at “stimulus.”

For Jesse Myerson, the theft of his property is cause for engaging government redress, but if it had occurred under a monetary equivalence Janet Yellen would simply acknowledge that he “deserved” theft because its receiver would do more for society with the resources (which is another theme of derision being wielded in his direction on Twitter, given the history of his past efforts). That sounds as ridiculous as the arrogance that supports it, but because current means of redistribution are quite intangible and seemingly more remote does not make it any less robbery.

An economy based on just such a manner of circulation is one bound to fail; repeatedly. What monetarists cannot seem to appreciate or grasp about true capitalism is that it does not require the appropriation of resources to create a beneficial trend – historically the economy does far better when left alone than under heavy duress. True wealth comes from adding to the collection of the system’s past gains, not taking them and refocusing them by way of political calculations. Such is the mark of great inefficiency, which is what we see all too clearly all over the world. That system is not perfect by any means, and some people are surely “left behind”, but more than not that is based on free choice and merit than some stain of institutional perversion.

But the main conundrum now is exactly this problem, distilled only somewhat by Wanninski three and a half decades ago. The more redistribution undercuts the positive and vibrant economic trend of true capitalism, the more the inevitable malaise turns attention toward further redistribution – Picketty or Myerson or OWS spring up on the failures of monetarists’ “best” theft. And it is there that I think Wanninski’s theory falls short in the current age, because the people, to this point, are not collectively noticing that there is no theoretical root difference between a monetarist and a Marxist (neo or not). They are all collectivists that desire redistribution, differing only by means of achieving those ends, but the modern paradigm hides the uniformity as if central banks are fully compatible with capitalism; not just compatible but a full and inseparable part of it. That sets up a false choice, as some like to say, which is not really a choice at all – pick one form of distribution or another, and in some cases both, without being able to choose an actual alternative.

Capitalism is not theft, though Marxists throughout history see it as such because they refuse to believe that labor exchange is everywhere voluntary; and therefore means beneficial to both parties of the exchange. The shame of the modern age is not that, as there will always be those that decry their station, but that central banking was anything other than theft, and thus completely and totally incompatible with capitalism. Financialism has far more in common, almost completely so, with Marxism than anything of free markets. The paradox today is that the longer free markets remain repressed, under threat of constant theft, the more politics runs away from them.


Click here to sign up for our free weekly e-newsletter.

“Wealth preservation and accumulation through thoughtful investing.”

For information on Alhambra Investment Partners’ money management services and global portfolio approach to capital preservation, contact us at: or 561-686-6844 . You can also book an appointment for a free, no-obligation consultation using our contact form.