June 30, 2010
Oxford, UK

I’m impressed by many insightful responses we received from yesterday’s letter. I’d really encourage you to browse the comments section and see how everyone weighed in on the topic of politicians protecting their interests at the expense of our civil liberties.

It’s important to explore these issues from time to time– they serve as a reminder to take action while we still can. But rather than dwell on the political negativity that seems so pervasive these days, I really want to get us refocused on solutions.

After all, there are a multitude of options and opportunities out there that lead to increased wealth, asset protection, and a fuller, more independent lifestyle. Each of us has the power to exploit these.

Before discussing solutions, though, I first want to give you a much better understanding about the philosophy of where I’m coming from. I think it’s probably obvious at this point– you realize that I’m no fan of government, but I want to explain why.

Sure, I’m dismayed when I see signs of increased authoritarianism, such as what happened at the G8/G20 summits in Canada. The greater concern I have, though, is that these rapidly expanding governments routinely destroy value and make things more difficult for productive individuals.

One of the comments that I read yesterday from reader ‘Chengdu Express’ summed it up quite clearly. To paraphrase the comment, there are essentially two types of people– those that benefit from the system (government jobs, free health care, generous pensions), and those that provide the benefit (taxes).

Certainly, while everyone pays a share of taxes and receives a share of services, at the end of the day there are clearly net beneficiaries and net providers… and this system is facilitated by the government.

As governments continue to expand, the number of net beneficiaries will rise, all at the expense of the few remaining productive citizens. Naturally, the bigger the beast becomes, the more people will find their livelihood directly tied to it.

This is what they’re facing right here in the UK, where public sector employment already comprises the preponderance of the economy. Yet a recent report published by the center-right think tank Policy Exchange demonstrated that public sector workers enjoy better pensions, earlier retirement, shorter hours, and as much as 30% more pay than their private sector counterparts.

What do all of these public sector workers actually do? According to some accounts, absolutely nothing. For those UK public employees who actually show up to the office, there are a variety of insane laws and regulations to enforce.

For example, the government has mandated, by law, that a shot of alcohol in a bar must be exactly 25 mL in volume… not 24, not 26. The owner of a private establishment has no flexibility to pour his own drink without violating the law.

Needless to say, there are entire offices of bureaucrats who get paid to inspect and enforce the 25 mL alcohol rule… just one example of the transfer of wealth to the net beneficiaries at the expense of the productive.

Here’s an even more insane example. Over the weekend, the Daily Mail reported that under a new law, British shopkeepers will no longer be able to sell eggs by the dozen, but must rather relabel their packages by weight (“I’d like 322 grams of eggs, please…”)

Clearly this is the most important priority facing a nation in crisis. And you can bet that there will be yet another office of egg carton inspectors to enforce this new regulation as well, if it passes.

None of these laws makes a bit of difference or provides the slightest benefit to anyone, yet they provide jobs to public sector employees at the expense of everyone else… and I mean everyone, from the business owner to the investor to the bartenders and janitors that have to pay more in taxes.

To be clear, I’m not trying to demonize public sector workers. I know that the majority probably work hard and take their jobs very seriously; the problem is that the regulations they are tasked to administer and perform are incredibly costly and destructive to the value-creation process.

This is the fundamental structural failure in our system– politicians are richly rewarded for increasing the number of net beneficiaries at the expense of a shrinking pool of net providers. And as we saw with the G20 protests, they can hide behind their police forces and do it at the point of a gun.

Conclusively, governments exist to support themselves first and keep the party going. They do so by sprinkling a few dollars here and there to the net beneficiaries, and then truckloads of dollars to their crony friends and insiders.

The value equation is highly skewed, though. If the government collects $1,000 from the net providers, the beneficiaries might end up with $100, and the other $900 is wasted or given away in corrupt schemes.

I hold these truths to be self-evident, and my goal is to exist outside of this system as much as possible by pitting competing governments against each other to my advantage– this is what planting multiple flags is all about, and what we’ll be discussing in the coming days.

About the author

James Hickman (aka Simon Black) is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.

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