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REDISTRIBUTION IN THE TWENTY-FIRST CENTURY STATE

July 28, 2014

REDISTRIBUTION IN THE TWENTY-FIRST CENTURY STATE
Piketty gives considerable space and a fresh look free of politics to modern redistribution of the wealth in his great book (Capital in the Twenty-First Century). He tells us that modern redistribution does not consist in transferring income from the rich to the poor (or at least not explicitly). He thinks such redistribution instead consists in financing public services and replacement incomes that are more or less equal for everyone, especially in the areas of health, education and pensions. Per Piketty, modern redistribution is built around a “logic of rights and a principle of equal access to a certain number of goods deemed to be fundamental.”
Of course, as he points out in a footnote in a different context, there is less consensus in the United States than in the social democracies of Europe on just what is fundamental, writing that “In the United States . . . there are certain minority factions who radically challenge the legitimacy of all federal social programs or indeed of social problems of any kind,” noting further that “Once again, racial prejudice seems to have something to with this – as exemplified by the debates over the health care reform adopted by the Obama administration.” The French economist is right; the means of coming to resolution of such an important need as health care has utterly nothing to do with anyone’s skin color.
He then recommends modernizing rather than dismantling the social state, and I agree with him. I would hope that we have not yet arrived at a state of new feudalism in which capital is lord and the rest of us serfs are valued only for our contributions to the lord and his estate with zero consideration given to our health, education, social mobility etc. The lord and court should know that we live here, too.
It seems strange to me that those in this country who deny the legitimacy of investing (not spending) in health care and education, for instance, where the return on investment can be guaranteed to stimulate our economy, can at one and the same time favor spending on tax cuts and other preferred treatment for the superrich and corporate culture where little if any stimulation of our economy can be measured by such giveaway welfare. Indeed, as Robert Reich points out, corporate America can invest its assets (and those it can leverage) globally for whatever it pleases. They have our money via tax cuts; its possession has passed from public control to that of some corporate board for further investment, and some boards (as we have seen) have invested their capital (which included our gifts) for bribery in China, fraud in manipulated mortgage securities, laundering Mexican gang drug money etc. etc.
Reich is right; we have no capital constraints on the sloshing of billions if not trillions in capital daily over multiple borders, including our own. Such investments may range from Central American apparel sweatshops to Greek and Argentine bonded debt, as such “trickle down” PR hacks try to sell us on the idea that their newly enriched capitalist patrons are going to use such funding to build new plant and create new jobs in America. There is no trickle down from the rich to the poor; there is only trickle up from the poor to the already rich. There is irrefutable reason to believe that much if not all of the tax cut money our politicians lavish on the superrich and corporate sector will never see the light of day in our American economy but rather go to fund production elsewhere (which in turn tends to suppress employment here). It’s a heads I lose tails I lose proposition. Someone tell me how that is good policy.
Incessant propaganda from the superrich has persuaded us that tax increases are bad. They have done a good job. We now by and large accept such a view as axiomatic – an article of faith – but there’s a problem, to wit: Such blind acceptance does not conform to reality. We have a living laboratory among the social democracies of Europe to demonstrate that our “faith” is plainly misplaced.
Thus some of the social democracies in Europe have higher taxes than others. Piketty (without comment on the propriety of such rates) sets out the numbers in a footnote at page 631 of his book): “The wealthiest and most productive countries have the highest taxes (50 -60 percent of the national income in Sweden and Denmark), and the poorest least developed countries have the lowest taxes (barely 30 percent of national income in Bulgaria and Romania”). If high taxes mean poverty, as we are told, then how is it that Scandinavian countries are the richest and most productive counties in Europe while also paying the highest taxes? The question answers itself.
It is not a matter of how much taxes you pay, it is a matter of what you do with the money collected. I recall that I was in Stockholm years ago on a family visit (my wife was half Swedish) and that one of the people we visited was a fellow lawyer (“Karl”), a multi-millionaire husband of my wife’s cousin. I played the role of right wing American and told him I understood that they paid a 50% tax on income and went on to say, “That’s a little high, isn’t it?” Karl (who spoke British English), said, “Well, Gerald, that depends upon what you get for your money.” He then catalogued all of the great social investments Sweden made in its people such as day care, health care, education etc. to such an extent that I have since been and am now of the opinion that Swedes pay “less taxes” (considering value received) than we do.
What is the difference? It is this: the Swedes invest their tax revenues in their people – here we give our revenues away to the rich and corporate class – and the results are plain to see. I was there in the month of June, and while driving my rented Saab saw many Mercedes pulling speedboats on their eight-lane autobahns. The lesson – you can be rich and pay high taxes at one and the same time. Indeed such a situation may be causal rather than merely correlative. It depends upon how the political class wants to distribute your money – back to you as an investment, or to the black hole of global investors.
I am not in favor of higher taxes with our present system of “trickle up,” but if at some future date a politician wants to increase taxes for targeted social investment purposes such as education and healthcare, I will listen, especially since I am paying for both of them anyway. As fundamental rights, bodily care and education should never have been for-profit enterprises in the first place.
We Americans need to take another look at what we want to do and how we want to do it by first reframing issues such as tax rates, perhaps looking to Europe for a better model than the one we are now laboring under with our unemployment, wage inequality and outsourcing travesties. We have the resources to outdo Sweden; what we are lacking is the political will (currently in the hands of the superrich with their “campaign contributions” and other goodies for the greedy and short-sighted).
We have been globalized and need a new mindset to reflect that fait accompli. This is not the frontier anymore, and I for one will not allow any politician of any party to persuade me that yesterday’s solutions will solve tomorrow’s problems. Let’s jettison old ideas that may have worked at one time but are unworkable in this new dimension. Let’s welcome change rather than be fearful of it. GERALD E

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3 Comments
  1. I believe you are right. What separates our economy from the Swedish economy is “political will.” That said, the trillion dollar question is: how can our Corporate Government change their “will” ??? It should be obvious to anyone that the letter following our politicians name means little. What says more are the corporate “sponsors” of those politicians. Or, as the infamous “Deep Throat” said to the Watergate journalistic investgators in the early 1970’s….”follow the money.” It’s another way of following the evidence although what the evidence leads us to may not be what we want and make us uncomfortable. Picketty follows the evidence. Very few in this country can care less about his findings, hence the absence of his findings being discussed anywhere in the so-called “liberal” media. Yes, a few here and there quoted him in the few weeks or so following the book’s public release. But where is the long term discussion??? Is Rachael Maddow taking Picketty’s findings and running with them??? There is a profound absence of this vital discussion (your blog notwithstanding) at the public level where it needs to be: Washington D.C.!!! That says volumes, I believe, about the collusion between the Corprate Media and the Corporate Government. If we cannot even talk about it at the public level (with action to back up the talk), then what is the possibility of change within our society and our governing officials? The answer is, of course, none. I think things are far worse than we even know, for what we know is already bad enough!

    • I don’t know how bad it is, but it is plainly not good, and I think one of the reasons is that we are not all paddling in the same direction. We have two distinct economies afoot in this country, one for the rich investor class and one for the rest of us. The Dow doesn’t measure the economy you and I live in; it measures the state of affairs for the rich and investment class and their banking handmaidens. Yours and mine is stuck in an apparently long term economic malaise that our rich folks don’t care about – just show them the money. They make noises about veterans from time to time, but that is because they need members of this other economy to go protect their property interests – from oil in the Mideast to courts we pay for to protect their patents and other such intellectual property in China. We seem to attract their interest in direct proportion to their occasional need for our services. I, for instance, would feel more war-like if I were assured that the paper shufflers on Wall Street were the first in the front lines in protecting their property in Iraq and elsewhere. Instead it works out that the people who protect the property (both tangible and intangible) of the rich are the ones who are thereafter ignored and/or screwed over by the people they protected (see veterans who die waiting for a doctor’s appointment). Can’t raise taxes on free enterprise, you know. GRRRR! I just wrote today on some of the trade atrocities being committed by China and have another part in the offing, after which I will spend four days down in Indiana at a Stinson family reunion – during which you will perhaps enjoy a four day hiatus from my ramblings. Quite cool here, like furnace at nights. Tsk! Jerry

      Gerald E. Read my blog at: elderblogger.wordpress.com

      On Tue, Jul 29, 2014 at 3:19 PM, elderblogger wrote:

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  2. Always enjoy and am enlightened by your “ramblings!” Have a good visit in the Hoosier State! My great grandfather was born in Madison county, Indiana in 1857. He eventually raised a family in Lexington, Missouri which explains my presence in the land of Missery ( aka Missouri) just a few minutes from Truman’s home in Independence, our own “home town boy done good!”

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