The economics of nemo dat quod no habet

The arguments rage over “cuts” (which is the word that the UK opposition parties use to describe government savings and “savings” which is the word used by the government to describe cuts in government expenditure.

There are freely interchangeable but neither word really communicates the process that is now happening. Latin has a habit of communicating in a few words a concept that takes many words to explain, so at the risk of appearing pretentious I shall use a Latin phrase, nemo dat quod non habet, which roughly means “you cannot give what you have not got”.

That legal phrase indicates the basic law about passing good title; if you do not own something you cannot sell it (although numerous exceptions are made to the rules, especially to gentlemen in hedge funds and banks who seem to make billions out of selling what they do not have. For many years the governments of many nations – the United Kingdom, Ireland, Greece, Portugal, France, the USA, have given what they do not have. They have particularly spent money that they do not have on services for people.

I do not suggest that people should not be allowed to have services for their health, well being, protection, education, and the like, but sooner or later the services have to be paid for. It is an illusion to claim that we can pay for past services out of future growth, which may or may not happen.

I do hold that every civilised society should care for the less fortunate but it can only care for them out of the wealth earned by society as a whole – taxation. It should of course ensure that as far as possible the undeserving cannot manipulate the system, because in doing so they steal from the serving and from the taxpayers. Governments of all persuasions like to bribe people for their votes. At one time the bribe consisted of a guinea or two, or a few jugs of ale. Today the bribe is more subtle. If those in charge of our economy understood nemo dat quod non habet, we might find ourselves in future not arguing over cuts and savings.

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