Political Economy of Taxes and Inequality

By pjain      Published Oct. 25, 2019, 2:39 a.m. in blog Fin-Plan-Strategy   

Inequality, Capital, Taxation and Political Economy - Key Takeaways for Us

Nothing is going to happen

Inequality, Capital, Taxation and Political Economy 101

Resources

Books

  • Capital and Ideology by Thomas Piketty, 2019, 1232pp, Wide scope: outlines potential means of redistributing wealth, and explores historical and contemporary justifications for inequality, bemoans the ineffectiveness of the traditional parties of left and right at coming up with solutions for redistributing wealth, and advances his own ideas for making economies fairer.

  • Capital in the Twenty-First Century, Piketty's 2013 focused on wealth and income inequality in Europe and the United States - popular after the financial crisis of 2008.

  • It shot to the top of the Amazon bestseller list, but hasn't had impact.
  • Popular with young progressives!
  • Piketty’s call for a global wealth tax to counter inequality has not been heeded.

  • General Theory of Employment, Interest and Money, John Maynard Keynes, 1936 - became reputed in weak growth after 1930s The General Theory was the template for the full-employment policies pursued by most western governments in the decades after the second world war

Solutions : Innovation, Productivity and Reduced Inequality

Wealth Tax

Estate and Inheritance Tax

Universal Income

Inheritance for All

  • "Inheritance for all," a payment distributed to citizens by their country at the age of 25 - Piketty, 2019

Changes in the System

Runaway top pay - in the US

Rising Real Asset inflation - urban land prices in Europe

=== Socialism, PSUs and State Policy

Problem: Abuse of State PSUs - trade unions, Pensions, Work Rules

Problem: Inefficiencies of PSUs

Example of India

  • Sovereign guarantee for all policies issued by LIC will continue.

Dirigisme is also seen in India. The state has complete control and ownership of railways; majority control and stake in banking, insurance, electricity, and oil and gas industries; and has substantial control over telecommunication, port and shipping industries

Problem: Crony Capitalism

Smart eGov - can help Social Justice

Enlightened State Policy - Right Mix of Socialism-Capitalism

Dirigisme - State control of economic and social matters

Known as dirigisme, here the doctrine of the state plays an active and strong directive role in control of economic and social matters.

As an economic doctrine, dirigisme is the opposite to laissez-faire, stressing a positive role for state intervention in curbing productive inefficiencies and market failures. Dirigiste policies often include indicative planning, state-directed investment, and the use of market instruments (taxes and subsidies).

  • "An Economic History of Twentieth-Century Europe", Iván T. Berend, Hungary

Enlightened Funding of Initiatives

Most modern economies can be characterized as dirigiste to some degree – for instance, the state may exercise directive action by performing or subsidizing research and development of new technologies, through government procurement (especially military) or through state-run research institutes.

Globalism, Open Economies and Cheap Labor

The economies of the East Asian tigers are sometimes characterized as being "dirigiste" due to the strong role played by the state in development planning and guiding investment.

Communism

Totalitarianism and Fascist systems

Fascist systems were created by Benito Mussolini (Italy), António Salazar (Portugal), Francisco Franco (Spain) Emperor Hirohito (Japan), and Adolf Hitler (Germany) are a varied mix of elements from numerous philosophies, including: nationalism, authoritarianism, militarism, corporatism, collectivism, totalitarianism, and anti-communism.

Enlightened Policies Examples

Chinese Miracle

Chinese model overview

Japanese Miracles of 180s

German post WWII

France 1945-1975 - Thirty glorious years

Dirigisme describes the economic policies of France, which included substantial state-directed investment, the use of indicative economic planning to supplement the market mechanism, and the establishment of state enterprises in strategic domestic sectors. It resulted in an unprecedented economic and demographic growth leading to the coinage of the term "Thirty Glorious Years".

French policies influenced Prior Colonies

Dirigisme has been brought up as a politico-economic scheme at odds with laissez-faire capitalism in the context of French overseas holdings which have been influenced by this motif to varying degrees throughout the post-colonial period.

  1. Lebanon

  2. Syria

Proactive American - NASA

American School (1860s-1970s)

Soviet Economic progress yet Agriculture Commune Fails

Singapore Economic Progress

Korean

National Policy of Canada (1876–1920)

=== Causes: Economic Policy, Taxation and Inequality

Billionaires made as after tax and inheritance accumalate

Princelings and Silver Spoons common in 10%

When majority of wealth is in hands of top 10%, rich kids can swan aimlessly from gap year to internship to a job at father's bank/ministry/TV network – while the poor kids sweat into their barista uniforms – is not an accident: it is the system working normally.

Wealth when Capitalism ROIC%) Exceeds GDP Growth%

In an economy where the rate of return on capital outstrips the rate of growth, inherited wealth will always grow faster than earned wealth. - Piketty argues

This is made even worse in high taxes on earned income, and slow GDP growth, and negligible real wage growth - sadly all are common in Western countries.

What happens is even worse that with ZIRP and NIRP better financial returns are obtained by upper 10% and even more by top 0.1%.

Net net - inherited wealth will, on average, "dominate wealth amassed from a lifetime's labour by a wide margin".

Why Inequality

Globalization - ship jobs abroad for cheap chinese shit

What happens to global economies? Will China become the highly-capitalized owner of African, Mideast resources? Will western wealth slip back once China has caught up with the west?

Have Economists become Whores of The Elite?

Churchill-era Racism and Colonialism for Empires

Emerging Economic Slavery post Independence

Neoliberalism

Neocons - war is profitable

Capitalism and Stocks

Index Funds are Dumb

Corporate Buybacks - just enrich Top Management

Buybacks and Concentrated Shareholdings

Employees as stakeholders on boards

  • Employees should have 50% of the seats on company boards
  • Capital and Ideology by Thomas Piketty, 2019

that the voting power of even the largest shareholders should be capped at 10%; much higher taxes on property, rising to 90% for the largest estates; a lump sum capital allocation of €120,000 (just over £107,000) to everyone when they reach 25; and an individualised carbon tax calculated by a personalised card that would track each person’s contribution to global heating.

In an interview with the French weekly news magazine L’Obs, Piketty made no apologies for the impact his ideas would have on the stock market. He said: “[Yes], it will also affect the price of real estate that is crazy in Paris, and it will allow new social groups to become owners and shareholders.”

Real Estate pricing is crazy

Price Inflation

NIMBY

Causes: Political Factors and Variants

Laissez-faire - exploited by smart elites

Capture of Political Regimes by Oligarchs

Industrial Policy - Capturing international advantage

Will Chinese really own 5G, AI, Robotics and dominate path to higher value.


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