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Bridge over ocean
1 March 1978 Financial Analysts Journal Volume 34, Issue 2

What Professor Galbraith Neglected to Tell His Television Audience

  1. Jack Treynor

There are only two ways to keep a modern economy running—the market mechanism and force. But it takes wealth to use the market mechanism. When a country runs out of wealth, it has only two options—rely entirely on force to keep its economy running, or return to the stone age.

There is a limit to how far a country can go in raising taxes on earned income before workers riot in the streets. Beyond that point, the burden of government spending falls on capital, rather than labor. When that burden gets too heavy, private enterprise won’t replenish the country’s capital stock. It is then only a matter of time until private wealth is exhausted and the country is reduced to relying on force—i.e., on a totalitarian government—to keep its economy running.

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