A recent post by Richard Murphy, a left-wing former accountant who acts as a mouthpiece on tax issues in the UK, says:
We were all motivated by a concern for those in the poorest countries of the world who have never seen the benefit of the oil, gas, minerals and timber that their countries export. Some clearly want to keep it that way.
It is a common theme amongst the political left that citizens – or rather, governments – of countries which export natural resources should be the main beneficiaries of any subsequent wealth, as opposed to the companies (and their shareholders) involved in doing the actual work.
Now, consider a case whereby the great-grandson of a Victorian industrialist finds himself sole heir to a run-down but huge residential building in a nice area of London. He rents it out to some people, mostly immigrants and students, who work in the city doing menial jobs, and who are attracted by the relatively low rents due to the place being badly in need of repair. Over the course of 2-3 years, the landlord (who up until the time of his inheritance was skint and living in a mate’s spare room smoking weed and playing Playstation all day) collects enough cash to refurbish his property to a higher standard. At this point he whacks up the rent thus putting it beyond the means of his current tenants, and rents his place out to high-earners who work in the City. For the next 20 years, our landlord becomes astonishingly wealthy as a result of his rental incomes.
So, how many people on the political left would consider the landlord’s wealth to be “unearned” and therefore subject to hefty taxes? And how many would consider his behaviour to be parasitical on the hard-working folk who effectively paid for him to refurbish his property? A cursory glance at contemporary political debate, in which the terms “unearned wealth” and “mansion taxes” have become commonplace, will give you the answers.
But let’s compare our landlord with the government of a country which sits on a sizeable mineral wealth which it has no idea how to extract. For hundreds of years this wealth remains unrealised as it sits beneath the ground, whilst the people living above it barely know it exists. Then some foreigners turn up and spend years (sometimes decades), millions if not billions of dollars, and the lives of thousands of individuals working in pretty dire conditions to figure out how to extract this resource and make it worth something. Eventually these efforts pay off, and the foreigners start making some money. Thus far, the locals have contributed next to nothing. So what share of the proceeds are they entitled to?
According to the likes of Richard Murphy, they are entitled to most of it. After all, they happened to be born sitting on top of an oilfield. Yet the same justification is not applied to our fortunate heir in the example I gave above. He is exploiting the workers and reaping the rewards of unearned wealth, whereas the governments of oil exporting countries are reaping the rewards of what is theirs by right.
The two positions are somewhat inconsistent, aren’t they?