Democratise the economy and tax the rich

In clear echoes of what UNISON, the TUC and the STUC amongst others have been saying for some considerable time, Iain Macwhirter makes the case for taxing the banks and the super-rich and putting money back in the pockets of the middle classes. He challenges the conventional economic wisdom that high taxation stifles enterprise and therefore economic growth arguing that exactly the opposite is the case. (Global economic Armageddon is nigh – so let’s tax the rich, Sunday Herald 7.08.11) http://www.heraldscotland.com/comment/iain-macwhirter/global-economic-armageddon-is-nigh-so-let-s-tax-the-rich-1.1116148

The share of the national wealth going to wages as opposed to profits fell from 65% in 1963 to 52% in 2005 and now, income and wealth inequality has returned to the levels of the 1920s, with a tiny fraction of the super-rich taking a vast proportion of the wealth of the economy and investing it in stocks, houses and other speculative assets.

If this is not reversed, warns Macwhirter, the recession will become a depression.

Describing how bank bail outs, “the siphoning off of money from the general population to the financial elite,” has already left a big hole in the ability of people to buy goods in the High Street, he references Nobel Prize-winning economist, Paul Krugman. Krugman argues that what is needed is a massive shift of wealth from the super-rich to the middle classes, as effected by FD Roosevelt in the 1920s and 30s, alongside a huge hike in taxes for the very rich. This substantially shifted the balance of corporate income from profit to wages, and increased the spending power of the working person.

This continued high taxation after the Second World War led to a consumer boom in the 50s and 60s and in the UK allowed us to create the Welfare State, the NHS and build social housing. In America and Britain over the last 30 years, however, there has been a reversal of this democratisation of the economy and a massive increase in wealth inequality.  If capitalism is to be saved (again), Macwhirter posits, then FDR’s strategy must be revisited.

"In Europe and America, a start could be made by levying a super-tax on bank bonuses, on speculative land holdings and on properties worth over £1m. And come to think of it, would anyone other than speculators vote against a package like that?"

KR