Charles Adams has offered powerful arguments for progressive taxation as the primary mechanism to tackle inequality in a new blog post for Progressive Pulse.
I'm not going to repeat them: this is a case where going to read the original makes sense. I recommend it.
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Thanks for the link, Richard.
People think this is contentious? They really must be living in a bubble of utter complacency.
As far as I know, money was created by those who rule to be used and not necessarily stored or hoarded. Money was created as a utility to enable people to swap goods and services anywhere.
Progressive taxation helps to reduce the effects this hoarding instinct and keeps more of this money in real use in the real economy. It may reduce the wealth of the rich, but it is reborn again in the wider economy for the good of all.
While a more progressive taxation regime would, to a certain extent, contribute towards redressing the current trend of growing inequality, in itself it’s not the solution. As Charles Adams concludes: ” …. are we talking enough about what the desired distribution should look like?”.
We now urgently need to shift the emphasis of debate away from continued criticism of Neo-liberalism – conclusively proven to be economically flawed and socially regressive – to agreeing and implementing a radically new economic order that can sustainably deliver the social needs of the 80% (or whatever % majority it is). There is little deck-space left for further rearranging of the deck-chairs.
Pre-distribution is vital too
Call it economic justice
I find this line in the conclusion to be interesting: “what is the desired distribution of wealth and income, and how are we going to get there?”
For some time I have been thinking that there is an inequality threshold beyond which consumer demand is insufficient to sustain returns to capital.
Put another way it is a level of inequality where there is an excess of rich folks’ dollars (and pounds) looking to invest but no promising markets to invest in because most people can’t afford to buy. So the investors turn to asset market speculation and other forms of unsustainable rent-seeking as financialisation takes hold and crisis becomes inevitable.
That’s the situation we are in now as consumer debt struggles and fails to fill the shortfall in demand. There is an interesting chart in Charles Adams’ article showing that the relative fortunes of the top 10% were at their lowest in the late 1970’s. That was a time when many among the powers that be felt there was too much income equality and that higher wages were driving inflation.
I know that to be largely wrong for 2 reasons: 1970’s inflation was driven by a lot of cost-push factors including the OPEC oil shock and the increasing market power of corporate oligopolies (a lack of competition) Conservatives were among those that complained of a wage-price spiral but when you really think about it you can’t have a wage-price spiral in a price-competitive market.
Those that complained of excessive wages were effectively suggesting that purchasing power outstripped industry’s capacity to produce. What is more likely is that monopolistic industries captured the benefit of rising demand by raising prices — because they could. Needless to say neo-liberalism restored the relative fortunes of the top earners by pretending to encourage competition and suppressing demand (creating inequality) instead. That’s one way to tackle inflation.
Now that demand has been suppressed to the point of permanent stagnation, the question of “what is the desired distribution of wealth and income”? arises and I would suggest the more equality the better. Failing that, I suspect, looking at Adams’ chart (for example) that at this point there may be a sufficient historical data to determine a minimum level of equality to sustain employment, avert crises etc. Genuine demand-pull inflation should not become a problem given that technology/automation has created a situation of permanent excess capacity. Or so it seems.
As to the 2nd part of the question “how are we going to get there”. I think that we are going to need a lot more than progressive taxation. We need competition to be enforced or (alternatively) oligopolies to be effectively regulated. We also need greater income equality and, given the growing threat of technological unemployment something like a job guarantee coupled with a reduced working week.
That would be nice for starters. Without that, the combined threat of social inequality and automation will see a paradox emerge where technological advances create additional poverty and lower our overall standard of living.
I am going to muse on this