Should drivers of electric vehicles be taxed more to use the roads? - ABC listen
If we are not careful, the use of incentives to encourage people to purchase electric vehicles could backfire by…
Wayleed and Scott discussed the issues of subsidising “good” behaviour with incentives at the expense of those who cannot afford the same behaviour. Scott was concerned about the backlash of resentment because those who can afford good behaviour look down on those who can’t. The less fortunate resent those who can afford good behaviour for looking down on them. The mistrust in society this brings weakens democracy and weakens society.
Unfortunately, Scott has good reason to be concerned because mistrust in society is endemic. After all, our economic system is built to be unfair, and it is celebrated. It starts with the creation of money and the unfair advantage of access to loans for people with money. If you have money, you can get a loan. If you don’t already have money, you can’t, which is unfair. Even worse, it does not have to be this way, as it reduces the productivity of capital while being fair increases productivity increasing wealth.
Banks create money — not by lending deposits- but because they have a license from the government to put new government money into people’s bank accounts when they take out a loan. When the person repays the loan, the loan is cancelled. The banks do this because they profit from the interest they charge. The borrower pays extra money for the interest. Some of this covers the cost to the bank of making a loan, but most of it is profit that goes to the bank shareholders. The cost of loan defaults and operating the bank is small compared to the profit, yet the Bank keeps it all.
However, the worst part is that if the banks increase the interest rate but share the interest according to the risk of repayments, then loans could become affordable, and the Banks would receive the same profits but over a shorter period. Even worse is that when the Reserve Bank increases interest rates, the Banks take even more profit and charge interest on the interest. Money is a common good, yet wealthier people exploit the commons at the expense of those who can least afford it.
The same situation occurs with all businesses that make a profit. Societies would act more ethically when wealthy people act ethically by sharing profits. Societies that act this way are stronger and wealthier because of the more productive use of money. Productivity stagnates in Australia because Capital is unproductive as it is tied up in overpriced assets like housing, company shares and other financial assets derived from loans.
The situation can change quickly if banks become ethical and give loans to local communities, as described in How Community Banks Outcompete Shareholder Banks. The ethical dimension is described in Economics and Balanced Reciprocity.