As the FT notes this morning:
They are right.
Which is why wealth taxes should be on the agenda at this election.
And I stress, that's not because we are dependent on the money of the wealthy to pay for public services. We aren't. Public services are paid for by spending on them and creating wealth in the process. Instead, wealth taxes need to be on the agenda because excessive wealth is harmful to societies. I explain why, here.
The billionaires have ridden their luck when it comes to tax. It's time that luck ran out.
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Politics of Envy?
Hell no
Rational economics addressing the market failure that lets billionaires happen
I wasn’t being serious. Interesting what Thomas Pickety has said about the issue.
Missing hyperlink on the word “here”.
Done
Thanks
Or the Politics of fairness.
The “here” link doesn’t seem to be working (at least not for me?)
Corrected
A well-known Scot nailed it 260 years ago:
“This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. That wealth and greatness are often regarded with the respect and admiration which are due only to wisdom and virtue; and that the contempt, of which vice and folly are the only proper objects, is often most unjustly bestowed upon poverty and weakness, has been the complaint of moralists in all ages.”
Adam Smith, The Theory of Moral Sentiments, 1759.
As a result, any attempt to tax, post hoc, (irrespective of how well-justified it is in terms of both equitability and economic efficiency) the enormous gains and huge accumulated wealth of a relatively small number of individuals will encounter the most ferocious opposition from the large number of citizens who possess this disposition to admire, and almost worship, the rich and the powerful. And the intensity of their opposition is often inversely related to their potential to acquire wealth and power.
While taxation is required and the current arrangements require major changes, it is far better to accompany these changes by focusing on the process that generates these enormous gains. Rent-seeking is the dominant driver of capitalism. This in itself is not malign, even if many on the left would excoriate it. Indeed it is a virtue that encourages innovation and generates economically and socially beneficial outcomes. What is malign and has deeply damaging impacts is the sustained capture of economic rents. And the most effective means of preventing sustained rent capture is the brutal enforcement of competition policy and economic regulation.
But that requires hard work and sustained effort. For those on the left, swingeing taxes on the wealthy are a much easier means of charging the blood and rallying the troops. But Adam Smith, a quarter of a century ago, understood why this approach is almost inevitably doomed to failure.
I do not disagree with you
Indeed, I support your idea
But whilst the transition goes on tax helps
I am pleased that you support my contention. This issue, in my view, goes to the heart of what will determine this election. Brexit will impact, and how it will impact is highly uncertain. However, the voters are being offered two very distinctive approaches to governance. Their views on the relative merits and demerits of these approaches will ultimately determine the outcome. A large proportion of voters is made up of small ‘c’ conservatives (across all the main parties) and they have a deep and long-standing adherence to the mixed economy. While there is no doubt that there is a growing public awareness that the boundaries between the public and private sectors have shifted too far to benefit private sector rent-seekers, most voters will resist what they view as radical change.
Labour is proposing to secure ownership and control of some private sector businesses and part ownership of other large private sector businesses (all of which has been ill-thought through), to significantly increase public investment and expenditure and to increase taxation on the highest income and wealth echelons. It is true that where they want to end up is not hugely different from the mixed economy arrangements in many of the other advanced economies in the EU, but it is a radical change from the arrangements that have been developed in Britain over the last 35 years. And many of these arrangements, particularly in relation to competition policy and economic regulation, deserve to be retained and modified, not abandoned. In many cases they have simply been misapplied, gamed or abused. But Labour appears to be totally ignorant of the potential to re-align, and ideologically hostile to a re-alignment of, these mechanisms with the interests of final consumers and voters.
The perception of radical, and potentially disruptive, change, more than anything else, will prevent them securing the votes they require to form a government. And that, in my view, is criminal, because the lives and well-being of so many depend on the election of a Labour government, however ill-led and mis-managed it might be.
Mr Hunt,
May I say, what an excellent comment, and perhaps especially this acute observation; “the most effective means of preventing sustained rent capture is the brutal enforcement of competition policy and economic regulation”: A hit, a very palpable hit.
I see Bill Mitchell has a go at John McDonnell today for his framing of Labour’s planned investment. “British Labour walks the neoliberal plank” (a few paragraphs down – http://bilbo.economicoutlook.net/blog/?p=43606). You would’ve thought that McDonnell should know better. Besides reinforcing the zombie Household Budget analogy, it’s strategically bad electioneering to link tax up front directly with infrastructure investment. Is anyone at Labour HQ listening? Makes one weep 🙁
@ Paul Hunt
Regret I really do not see how “attempt to tax, post hoc, (irrespective of how well-justified it is in terms of both equitability and economic efficiency) the enormous gains and huge accumulated wealth of a relatively small number of individuals will encounter the most ferocious opposition from the large number of citizens who possess this disposition to admire, and almost worship, the rich and the powerful. ”
I doubt anyone under 30 thinks this.
I suggest many are beginning to realise that the rich are there only because we allow them – see Chile https://www.sciencemag.org/news/2019/10/unrest-chile-prompts-cancellation-un-climate-conference
This is, after all, the original neoliberal state.
Or they might even consider that billionaires shouldn’t exist: http://www.progressivepulse.org/economics/billionaires-dont-add-up
@ Peter May,
My focus is on the policies that will ensure the election of a majority Labour government – and on the re-formulation of currently ill-thought through policies so that these policies in their current form do not prevent the achievement of this objective. Although he made it in the context of Australian politics, the aphorism of the late Richard Neville (of OZ fame) that “there is only one inch of difference between a National (Conservative) government and a Labour government, but in that inch we can live and breathe” still holds true.
I am not happy with the behaviour of the Praetorian guard of McCluskey, Murphy, Milne and Murray around Jeremy Corbyn. Their apparent total control of the institutional organs of the party makes me very uncomfortable. And the extent to which the few competent members of the shadow cabinet who might pose a threat to their hegemony appear to have been side-lined is counter-productive and damaging. But despite all that I firmly believe that only a Labour government can provide the governance we badly require.
It is in this context that I argue that taxation should not be the principal or only instrument used to curtail the depradations of the rich and powerful. All other instruments available to a democratically elected government, such as competition policy and economic regulation, should be honed and applied in concert with a revised taxation code to maximse the impact – and, more importantly, honed and applied to secure democratic consent.
A focus on taxation, redistribution, and state ownership, direction and control runs the risk of provoking the opposition of those voters whose support Labour desperately needs. If there is one thing that would get the backs up of most ordinary citizens it is the spectre of an army of bureaucrats and jobsworths dictating the allocation of public expenditure and the commercial and social behaviour of ordinary citizens. However well-intentioned these public officials might be, such a spectre would be conjured up – and used to devastating effect. And there is little point lamenting the fact that the right-wing press would conjure up and propagate such a spectre. Such a spectre would not gain political traction unless it resonated deeply with many citizens.
Labour’s current high command may wish to dispense with or radically alter most of the economic governance arrangements put in place in the last 35 years, but many of these arrangements provide useful policy instruments that may be modfiied and applied in the public interest. Just because some of these arrangements have been misapplied, abused or gamed doesn’t mean they should be dispensed with. Modify them and apply them better. Show how they run with, and not against, the grain of public opinion and secure democratic support.
That is all I ask of Labour.