Zakaria's Version of Reality Built on Contradictions

We are told Fareed Zakaria is an intelligent man, a man of letters and a journalist. With his latest article in TIME, I’m just not seeing it. It is full of contradictions and transparent attacks on conservatives followed by praise for Ye Olde School conservatives, who espoused more or less the same thing as current conservatives.



Zakaria starts by praising the classical conservatives for basing their ideas on reality, as compared to the Marxists as socialists who start from an imagined society. The great conservative thinkers, he goes on, have tried to understand society, accept it and then help it evolve. He’s one hundred percent correct.

This is the point at which he begins to go wrong. His main claim is that conservatives have moved from the concrete to the abstract and he laments this supposed shift. His first attack is on the idea that Americans are over taxed. While it can be argued that America has a relatively low INDIVIDUAL tax rate as compared to other industrialized nations, he doesn’t take into effect two main points. If one includes State taxes, for those states that levy these as well as other taxes, the mean tax rate on Americans is approximately 40%. More importantly the CORPORATE tax rate on American businesses is the second highest amongst OECD nations, also at about 40%. Zakaria goes out his way to point to Germany as a country that has high taxes while avoiding the same financial issues that we see in the US. That is a debatable issue, one that balances on Germany’s role in the European Union and its control of the Euro, but one thing that the article leaves out is that, in 2008, Germany cut its corporate income tax rate by 8.7%, putting it as one of the countries with the LOWEST corporate income tax rates.

The next straw man Zakaria tries to build is in finding another President who has been as hostile to business as Obama. Yes, Nixon was not a conservative when it came to business. Yes, Nixon presided over 70% tax rates and price controls, but nobody can say that Nixon took every opportunity to bash business, increase the regulatory state exponentially or create such a wide swath of uncertainty in the business markets.



This all leads up to what might possibly the most laughable of all arguments, that of China. China is, without a doubt, a command economy. It is, for the most part, pushed by a central government. The only problem is that it is such a centralized economy, and there is no real press coming out of China, so we can’t be sure how much is real and how much is just self reported details. As a matter of fact, there is no lack of credible evidence that the Chinese economy is built on smoke and mirrors. When a country has 64 million vacant houses, it’s a sign that the building industry is working very hard, but nobody is really paying for the products.

While it can be argued that there is some benefit to certain federal infrastructure projects, this is also an arguable point. The investments of the post war generation have produced some fruits, but the vast majority of those ideas, especially in education, have devolved, as is the wont of government-based programs, into frigid and corrupt bureaucratic jungles. Money goes in and is used to prop up the functionaries of that bureaucracy instead of supporting the object to which it was intended.

It isn’t that history has been forgotten as Zakaria accuses conservatives of in his arrogance. It is specifically that history to which conservatives are paying attention. All of these things have been tried. Some work, some work for a short period of time and some don’t work at all.

Zakaria does deserve credit for banging the drum of tax simplification, which was one of Ronald Reagan’s greatest contributions to the American economy. On the other hand, he doesn’t seem to have a problem with a government that continues to dig a deeper and deeper hole of debt with less and less to show for it. There are several ways that are not based on “wooly-headed” theory to improve the economy. The most important is, of course, removing uncertainty from the market. Employers and investors will not expend their capital unless they know what the risks are and what sort of return they can get. The second is, as most industrialized countries have started doing in the last 5 years, reducing corporate income tax. When corporations have more money, they will always re-invest, meaning more jobs and an expanding economic base. The final step is reducing government debt. As the debt increases, the cost of servicing that debt increases until it eventually eats the entire output of the country. Then there won’t be any money for Zakaria’s pet projects.

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