Last week, protestors across the country jointed with the Occupy Wall Street movement to urge people not to shop at Corporations during Black Friday.

A Facebook event page called, “Occupy Black Friday” urges people to either not shop on Black Friday or to shop at small local shops instead of shopping at franchise shops.

The Occupy Seattle group wrote that, “Wal-Mart is the largest corporation in the world and proof positive of how big business is destructive to our democracy. While Americans are shopping at Wal-Mart, Wal-Mart is buying Congress. Last year, Wal-Mart paid over $4.3 million in campaign contributions (not to mention the monies funneled through donations to lobbying organizations) to protect its interests.” (http://www.masslive.com/business-news/index.ssf/2011/11/occupy_wall_street_movement_calling_for.html#incart_mce).

The point of the Occupy Black Friday (according to one protestor) is to “boycott all of the corporations that corrupt our government [as opposed to boycotting the government—by punishing them by not voting for people who act this way in the future and if once in office to get the corrupt politicians removed from office— from accepting these bribes in the first place], and put profits before people. We will show the corporations [NOT the government] who believe they wield all the power in this country that they are nothing without us, the 99 percent.” (http://www.masslive.com/business-news/index.ssf/2011/11/occupy_wall_street_movement_calling_for.html#incart_mce).

Other protestors will conduct sit-ins and dressing as zombies to symbolize what they view as mindless and excessive consumer spending (this is not an original idea; George A. Romero used zombies to reflect mindless consumer in his 1978 film, Dawn of the Dead).

It seems that the OWS movement (along with most people) are ignorant in basic economics. In the words of the great Milton Friedman, “Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.” The Occupy Wall Street and Occupy Black Friday protesters seem to occupy this economic fallacy.

“The rich are getting richer while the poor are getting poorer” is a common axiom from people who seem to believe that one can only get rich off of the exploitation of another. If you truly believe that the rich getting richer leads to the poor getting poorer, then you believe that wealth creates poverty and if you believe that wealth creates poverty, then I recommend taking some economic classes and reading Adam Smith’s The Wealth of Nations.

What is interesting about the OWS and OBF protests is that they seem to not understand what Corporatism is. Businesses and politics becoming partners is Corporatism and is corrupt and destructive. But what Corporations want from government are two things: 1) handouts (aka subsidies), like bank and farm handouts for example, and 2) protectionist policies, like import quotas, bankruptcy protection, cash for clunkers, and asking government to put a tax on internet purchases to make a “level playing field.”

What Corporations want aren’t free markets without governmental interference, but governments interfering in the market.  Protectionist policies and handouts don’t increase the production of goods and services, they limit it. Corporations asking for government policies to help them don’t want to create a free market where more goods and services are produced; instead they want the government to implement policies that restrict competition and stifle creativity and production so the big businesses can get a monopoly, but this monopoly can only be done not through laissez-faire capitalism (the word, “faire” is in there for a reason) but through governmental interference.

Corporatism doesn’t want to increase free market capitalism, production and growth, they want to limit it. And it seems that the OWS and OBF protestors want the same thing.

People getting richer is a good thing. We don’t want fewer rich people, we want more.

It seems that the protestors believe in soaking the rich and the redistribution of wealth. Many people say that the government needs to step in and regulate the economy in some way (something both Corporatism and the OWS protestors want) and to tax the rich more.

Taxing the rich more doesn’t hurt the rich, it hurts everyone. The rich already pay more income tax than anyone else. While it may be that the lower-class are paying more taxes than the rich, this is due to trying to soak the rich. As a result of this, the rich find loopholes to pay less taxes—such as putting their money in not-for-profit companies and investing in real estate.

Another reason that high taxes on the rich hurt everyone is that high taxes means getting fewer taxes. If the tax rate for rich people would be 70% then they would create and invest less than if the tax rate were lowered. Prices affect quantity. Companies lowering their prices result in people buying more of them, while raising prices result in people buying less of them. Most goods that are created get lowered in prices over time. The television, dvd player, washer, dryer and many other items cost more when they were just created than they do today. People lower the prices on goods to get more customers (why else do you think Black Friday is the busiest shopping day of the year?).

Just like lowering prices results in generating more revenue the same is true for taxes. Benjamin Franklin famously said, “Penny wise but a pound foolish” and I wish more people would listen to his advice. When there are lower taxes, this causes incentives to buy more goods and create more. If one knows that they will get to keep more of their money that they make, they will have more of an incentive to make more money than if taxed too high. Likewise, if taxed too highly, this depresses growth. People don’t work to pay taxes, they work and create to benefit off the fruit of their labor.

The theory that higher tax rates lead to lower tax revenue is known as the Laffer Curve, created by Dr. Arthur Laffer.

During the 1920s there was a depression in the United States (this is not the Great Depression which started in 1929). President Harding’s Treasury Secretary, Andrew Mellon conducted a study which showed that lower tax rates increase tax revenue. Andrew Mellon believed that if the tax rates were too high, then the people would try to avoid paying them. He observed that as tax rates had increased during the first part of the 20th century, investors moved to avoid the highest rates—by choosing tax-free municipal bonds, for example.

According to Mellon, “The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business.” (http://en.wikipedia.org/wiki/Andrew_W._Mellon#Financial_prodigy). If the rates were set more reasonably, taxpayers would have less incentive to avoid paying. His controversial theory was that by lowering the tax rates across the board would increase the overall tax revenue.

Under Woodrow Wilson, the tax rate for the rich was 73%. President Harding (followed by President Calvin Coolidge) gradually lowered the tax rate every year of his presidency until the tax rate was 24%. This got America out of the depression of 1920, increased employment (the unemployment under Coolidge was 3.3%, the lowest unemployment rate under any other American president), and reduced the public debt from almost $26 billion in 1921 to about $16 billion in 1930. (http://en.wikipedia.org/wiki/Andrew_W._Mellon#Financial_prodigy).

Thanks to Mellon, Harding, and Coolidge, what began as a depression in the beginning of the 1920′s (thanks to Wilson), ended up being known as “The Roaring Twenties” (compare that with policies of Hoover and FDR–both of which increased taxes and governmental interference in the markets (if you still believe the myth that Hoover was a laissez-faire capitalist, read this: http://en.wikipedia.org/wiki/Smoot-Hawley_Tariff_Act) whose policies made “The Great Depression” last almost 20 years (as opposed to the depression of 1920, which was gone within a year because the government didn’t try to “help.”).

Another instance of how lower tax rates increases tax revenue is from the IRS’s own statistics (http://www.irs.gov/taxstats/bustaxstats/article/0,,id=152029,00.html) (and we know how much the IRS loves to collect taxes). During 1980, the top tax rate was 70% and in 1988 the top tax rate was lowered to 28%. As the chart below shows, when the tax rate was greatly lowered, five times as many taxes ended up being collected then when taxes were raised:

While the protestors seem angry, it seems that emotions are guiding their actions more than logic. The rich create more jobs than poorer people. How are people who barely have enough money for themselves able to employ more people than those who have a lot of money to invest in? Do you really believe that the cashier at Gap is employing more people than the CEO of Gap? It is the rich people investing and having people buy their products which results in economic growth. Taking money away from the people who create and employ people (the rich) to give to people who don’t create (the poor) doesn’t increase employment and economic prosperity, it stifles it. The OWS protestors are talking about high unemployment and wanting more jobs, but requesting people to shop less doesn’t improve businesses expansion (which is what is needed to create jobs). Depriving (or stealing) from the rich, is really just taking from yourself.

I understand that the OWS protestors are upset at the crony capitalism that takes place (so am I), but their actions seem to be cutting off their nose to spite their face.