I wondered if anyone could address a question I have about the how the Austrian school treats forced savings. Savings is good, right? The more people save, the more economic growth there will be in the long term, and without savings there could be no growth at all. So, superficially at least, it would seem that by compelling people to save a greater portion of their incomes, to forgo consumption, a government could increase long term economic prosperity. Now, I understand in practice this rarely happens, and governments tend to decrease savings through instituting social security programs. But, Singapore is an example of a country with a mandatory savings program, with the State forcing people to save around 30% of their incomes, and its economy has been extremely successful, with the highest per capita rate of millionaires in the world, at 15.5% of households. It could be argued that this is due to the small state and relatively free (by international standards) market, but then Hong Kong has (as far as I'm aware) an almost equally free market, however has only 8.6% millionaire households per capita, a difference that could be attributed to Hong Kong's lower compulsory savings requirements (the exact % would be in here somewhere: http://www.mpfa.org.hk/eindex.asp if anyone's feeling adventurous :P). So, my question is, what would be the Austrian response to the statist assertion that government intervention can increase long-term economic growth by compelling people to save more than they otherwise would? (Assume say a minarchist government with a monopoly on force, which jails people who fail to save the required percentage of their income but otherwise intervenes as little as possible in the economy.) If the natural rate of savings (defined as that which would occur absent State intervention) in the economy was 10%, and the intervention raised it to 30%, would that lead to a more prosperous economy in 100 years time than would exist otherwise?
I'll just qualify, I'm not actually advocating such government intervention, as I understand the Austrian tradition is based around principles of choice/liberty rather than totalitarian utilitarianism. I'll also add that I find it somewhat ironic that I've never seen this argument advocated by statists, since it seems like one of the few good arguments for how state intervention could indeed bring about a greater (utilitarian) good; I guess their Keynes-induced aversion to thrift precluded them from considering it?
Forced saving (deflation) distorts the market no less than forced spending (inflation). Both alter the market interest rate and will cause economy-wide misallocation of resources. Of course, this is the weaker argument against forced saving. The strongest argument is that it's simply wrong to force people to do things they don't want to do unless you have a good justification for it (i.e. they committed a crime against you, etc.)
Clayton -
z1235: Neodoxy, I felt like we were talking past each other. No biggie, not that important.
Neodoxy, I felt like we were talking past each other. No biggie, not that important.
Fair deal, people carry on worthless and unprofitable discussion too much