Welcome to the new version of European Tribune. It's just a new layout, so everything should work as before - please report bugs here.

The Morality Of Taxation

by afew Sun Feb 2nd, 2014 at 09:28:34 AM EST

From Frances Coppola on Pieria:

Laffer and the Yeti

we need a serious discussion about the morality of taxation. While the rich believe they are morally entitled to low tax rates, they will continue to avoid higher rates by taking advantage of the global mobility of capital and the fact that tax arbitrage is a survival strategy for small countries. For higher tax rates to be economically effective, therefore, the moral case for them must be so clearly made that the rich themselves buy into it because they cannot in conscience do otherwise.

Can this be done? How?


Display:
By way of pointing out the difficulties (and wondering about the "conscience" of the very wealthy), here are the results of a poll of the US 1% (pdf) (compared to the rest of the population):

h/t naked capitalism.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jan 31st, 2014 at 08:16:42 AM EST
The Empathy Ceiling: The Rich Are Different -- And Not In a Good Way, Studies Suggest | Common Dreams
Psychologist and social scientist Dacher Keltner says the rich really are different, and not in a good way: Their life experience makes them less empathetic, less altruistic, and generally more selfish.

In fact, he says, the philosophical battle over economics, taxes, debt ceilings and defaults that are now roiling the stock market is partly rooted in an upper class "ideology of self-interest."

"We have now done 12 separate studies measuring empathy in every way imaginable, social behavior in every way, and some work on compassion and it's the same story," he said. "Lower class people just show more empathy, more prosocial behavior, more compassion, no matter how you look at it."

In an academic version of a Depression-era Frank Capra movie, Keltner and co-authors of an article called "Social Class as Culture: The Convergence of Resources and Rank in the Social Realm," published this week in the journal Current Directions in Psychological Science, argue that "upper-class rank perceptions trigger a focus away from the context toward the self...."

In other words, rich people are more likely to think about themselves. "They think that economic success and political outcomes, and personal outcomes, have to do with individual behavior, a good work ethic," said Keltner, a professor of psychology at the University of California, Berkeley.

Because the rich gloss over the ways family connections, money and education helped, they come to denigrate the role of government and vigorously oppose taxes to fund it.

"I will quote from the Tea Party hero Ayn Rand: "`It is the morality of altruism that men have to reject,'" he said.

That's Social Class as Culture: The Convergence of Resources and Rank in the Social Realm (pdf).

by afew (afew(a in a circle)eurotrib_dot_com) on Sat Feb 1st, 2014 at 08:31:59 AM EST
[ Parent ]
It's better economically and politically and socially if it is simply impossible for anyone to ever be that wealthy, to insure that no great wealth is passed on inter generationally, and to break the connection between the basic necessities of human development to wealth.

What they are proposing is like convincing Sauron or Voldemort to use their powers for good, not evil.

The existence of the wealthy is a menace to the survival of any livable and humane society.

by Zwackus on Sat Feb 1st, 2014 at 09:15:31 PM EST
[ Parent ]
Would you outlaw compound interest? Why do people without money value it so much?

The political change has to overcome that narrative of freedom as well. You know, freedom to exploit others.

by das monde on Sun Feb 2nd, 2014 at 01:47:41 PM EST
[ Parent ]
How would you outlaw compound interest?

And why do some people fixate on compound interest? It's not like it does anything that inflation won't solve for you.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 2nd, 2014 at 03:18:01 PM EST
[ Parent ]
In today's practise, compound interest is the tool with which inequality is screwed up. Inflation is just a rhetorical possibility that buys time (with interest).
by das monde on Sun Feb 2nd, 2014 at 04:11:38 PM EST
[ Parent ]
And how do you propose banning compound interest?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 2nd, 2014 at 05:42:34 PM EST
[ Parent ]
Would putting a personal wealth limit be easier?

A government (and not only a government) can influence rent and interest markets as a big benevolent player, offering "humane" rents, interest rates. That is basically how governments operated a few decades back. That gave brutally less wealth (counted in the number of resourceful "wealth creators"), we have to understand.  

by das monde on Mon Feb 3rd, 2014 at 12:37:34 PM EST
[ Parent ]
None of that has anything to do with compound interest.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Feb 4th, 2014 at 05:59:47 PM EST
[ Parent ]
What does your "anything" mean when the word "interest" appears twice in my reply?

I may have skipped an "outright ban" suggestion - but I sort of reminded how compound interest was made irrelevant in those exceptional post-WWII decades.

by das monde on Wed Feb 5th, 2014 at 04:36:37 AM EST
[ Parent ]
The operative word is compound, not interest.

"Compound interest" is a technical term with a specific meaning, not a shibboleth for the unethical financial practice du jour.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 5th, 2014 at 03:12:14 PM EST
[ Parent ]
The border between unethical and fair compound interest is not clear cut.

In principle, the interest rate defines the doubling period of financial privileges. That doubling period is rarely sustainable in reality, so the clients are forced to run harder rat races and take greater risks. When a crisis hits, the clients feel hardship soon, while big creditors only gradually loose their revenues. And arguably, crises themselves are largely (or deeply) caused by prolonged disparities of unsustainable interest rates.

So even moderate interest rates might deserve political attention (while not too late). Or give you a timely opportunity, if deciders would only care to obscure (rather than to deal with) a storm, perhaps inevitable. Who would not like to play the masses for as long as possible?

by das monde on Wed Feb 5th, 2014 at 04:40:13 PM EST
[ Parent ]
In principle, the interest rate defines the doubling period of financial privileges.

No.

Really, it doesn't. Not outside pension funds and Ponzi scams.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 5th, 2014 at 05:25:44 PM EST
[ Parent ]
Oh my. A dog is an iguana.

Check the Wikipedia definition, if pensions funds are not enough.

by das monde on Wed Feb 5th, 2014 at 05:36:14 PM EST
[ Parent ]
I am conversant with the behavior of the differential equation dot{y} = y, thank you very much.

But the only human endeavors to which that differential equation actually maps are Ponzi scams and pension funds.

In all other human endeavors, there are several additional terms on the right-hand side, which change the behavior in non-trivial ways.

Now, getting back to the practical: How would you ban compound interest, supposing this was a good idea in the first place?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 5th, 2014 at 06:23:32 PM EST
[ Parent ]
Firstly, it is your initiative to taut a "catch my frame" game.

Secondly, even if other terms are present, the core behavior of dot(y)=y still lurks behind.

Thirdly, those other terms look sadly negligible now. The only thing that today's governments are consistently doing as assumed is taking care of dot(y)=y accounting.  

In practice, I would indeed try to make the core implications of dot(y)=y irrelevant for as long as feasible - and I contributed subtle suggestions up this thread. But when the other terms cannot keep up, then it is time to think about a drastic reset (to yours and mine taste). This is not an unseen situation in the history...

by das monde on Wed Feb 5th, 2014 at 07:02:22 PM EST
[ Parent ]
Firstly, it is your initiative to taut a "catch my frame" game.

No, it's your obligation to either use terms of art correctly or clearly spell out your objection to the conventional definitions.

Secondly, even if other terms are present, the core behavior of dot(y)=y still lurks behind.

No, there is nothing unique about the first-order term which automagically makes it dominate all other terms of the equation. In an annuity which is not in default, for instance, the principal shrinks over time, irrespective of the compound interest involved.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Feb 6th, 2014 at 03:19:22 PM EST
[ Parent ]
I like symmetry of obligations, really.

"To lurk behind" does not mean "to dominate". Most closely, it may mean "ready to dominate at any time" in this example.

by das monde on Thu Feb 6th, 2014 at 06:36:13 PM EST
[ Parent ]
As for compound interest in general, I have no particular opinion.  I've not read or thought much about it.

Savings can serve all sorts of legitimate functions, but they also make possible the accumulation of financial power, and thus can be enabling of evil.  The answer to this would be to properly socialize all the legitimate functions of individual savings, so that people will have access to reasonable credit when they need it (buying big things, and starting small businesses), not have to worry about financial destruction due to illness or serious bad luck (health and disaster insurance, though the latter needs to be managed with long-term ecological issues in mind),  and have proper funding for their retirement years.

Since private savings are in no way necessary to bank lending, and since bank lending can be done more cheaply and with better governance by public institutions backed by the direct creation of money, then a full nationalization of all basic banking functions seems the way to go.  Further, there's no reason any form of insurance pertaining to private individuals should be managed by anyone other than the state - in particular retirement insurance.

With these legitimate functions nationalized and out of the way, the remainder of individual saving is just hoarding, and beyond a certain point, it is economically and socially destructive.  In this context, expiring money might be the way to go.

As all basic credit functions would be performed by state banks, have them issue payroll in "fresh" money, and allow old money to be cashed in at 1:1 for payroll expenses.

The idea would be that everyone survives thanks to their own labor (or the guaranteed minimum income), and that labor is always the most valuable stream of income for any individual.  Everyone would effectively be a proletariat, owning little of real worth aside from their labor, and this would be a good thing.

I'm no economist, and am one of the least informed on this blog, so I'm sure there are all kinds of problems here.  However, the more I've read here, the less I think that savings and financial assets of any sort serve any positive function in the modern context.

by Zwackus on Sun Feb 2nd, 2014 at 07:30:54 PM EST
[ Parent ]
the remainder of individual saving is just hoarding
Ee, how do you ban or control hoarding?

Proposals here are easy to confuse with communism.

by das monde on Mon Feb 3rd, 2014 at 12:44:29 PM EST
[ Parent ]
You don't ban hoarding.

You make it irrelevant by monetizing fiscal policy.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Mon Feb 3rd, 2014 at 01:28:44 PM EST
[ Parent ]
Economists go to great lengths to circumvent core problems and issues. Hoarding is a basic problem in the simplest models already. Irrelevant, right.
by das monde on Tue Feb 4th, 2014 at 02:15:32 AM EST
[ Parent ]
Hoarding is a problem if you have commodity money because hoarders reduce the amount of money in circulation.

If you have fiat money and a proactive fiscal policy (see Abba Lerner's Functional Finance) then you can always compensate for the contractionary effects of hoarding by spending to get things done. You don't need to convince the hoarders to loan the government money.

The problem, as usual, is not technical but political. But yes, in a fiat money system hoarders can be made macroeconomically irrelevant.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Feb 4th, 2014 at 05:43:47 AM EST
[ Parent ]
I'm just barely groping my way towards understanding some of these issues, so bear with me for a second.

Given that financial instruments worth trillions and trillions of dollars in nominal value are in existence at the moment - an amount larger than GDP by many times - and that these financial instruments at nominal value can be used as collateral for loans of one sort or another, it seems to me that the sheer size of the private pool gives utterly insane amounts of actual financial power to the international investing class.

If you can use 1% of the value of your total investment portfolio into actual cash in an amount that you can overwhelm the market in actual property of any sort, then there is a problem, and its a problem beyond the commodities markets.  People have commented on how London's real-estate market has turned perverse as the global ultra-rich buy and commission expensive houses as speculative investments, with the prospect of whole neighborhoods being nothing other than uninhabited investments.

Hoarding, as in gathering currency and denying its use to society, is one problem.  But actively managed hoards which participate in the economy as "investors" are just as bad.

by Zwackus on Tue Feb 4th, 2014 at 08:23:49 PM EST
[ Parent ]
Derivatives have "fair values" which are a fraction of the notionals, and cannot generally be used as collateral. So don't pay attention to the scare stories about hundreds of trillions of derivatives. That's a different issue.

Nevertheless, the abuse of banks' ability to underwrite debt amounts to counterfeiting money, and that's what the subprime securitization bubble enabled. Financialization and the increase in the proportion of GDP accounted for by financial services is also a manifestation of this counterfeiting.

The solution is what neoliberal economists call financial repression, but even adopting functional finance would have such an effect without appearing to be explicit "financial repression". It's what Keynes referred to when he predicted the euthanasia of the rentier.

There can be no doubt that this criterion will lead to a much lower rate of interest than has ruled hitherto; and, so far as one can guess at the schedules of the marginal efficiency of capital corresponding to increasing amounts of capital, the rate of interest is likely to fall steadily, if it should be practicable to maintain conditions of more or less continuous full employment unless, indeed, there is an excessive change in the aggregate propensity to consume (including the State).

I feel sure that the demand for capital is strictly limited in the sense that it would not be difficult to increase the stock of capital up to a point where its marginal efficiency had fallen to a very low figure. This would not mean that the use of capital instruments would cost almost nothing, but only that the return from them would have to cover little more than their exhaustion by wastage and obsolescence together with some margin to cover risk and the exercise of skill and judgment. In short, the aggregate return from durable goods in the course of their life would, as in the case of short-lived goods, just cover their labour costs of production plus an allowance for risk and the costs of skill and supervision.

Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital. An intrinsic reason for such scarcity, in the sense of a genuine sacrifice which could only be called forth by the offer of a reward in the shape of interest, would not exist, in the long run, except in the event of the individual propensity to consume proving to be of such a character that net saving in conditions of full employment comes to an end before capital has become sufficiently abundant. But even so, it will still be possible for communal saving through the agency of the State to be maintained at a level which will allow the growth of capital up to the point where it ceases to be scarce.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Feb 5th, 2014 at 05:05:50 AM EST
[ Parent ]
What is needed is financial extermination of the clients of those neolliberal economists. This would have happened as a matter of course had the Bush & Obama Administrations and Bernanke's Fed not contrived to resuscitate them when they were in need of life support.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 5th, 2014 at 11:33:27 PM EST
[ Parent ]
Thanks for clearing that up!
by Zwackus on Thu Feb 6th, 2014 at 03:43:39 AM EST
[ Parent ]
It is not hard to see why the neo-liberal/neo-classical economists were willing to go to any length of misdirection, obfuscation and general intellectual dishonesty to discredit Keynes. That was their job.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Feb 6th, 2014 at 09:57:42 AM EST
[ Parent ]
The core problem is political indeed. But keeping something basic as irrelevant for long periods requires intensive attention ans dealing with augmenting pressures. A couple of human generations pass - and the system typically resets to square 1.
by das monde on Wed Feb 5th, 2014 at 04:31:56 AM EST
[ Parent ]
A yearly tax on assets over a relatively high threshold, single digit millions, per year would be harder to avoid. Include a 300% penalty for undeclared assets with the ability of private individuals to win a substantial percentage of the take from successful prosecutions based on efforts they undertook and there would be a strong disincentive to conceal assets. And the tax should be graduated, increasing at each order of magnitude increase in wealth. At least this would capture real property owned in the country of domicile and the stocks and bonds of publicly listed corporations.

Compared to the efforts required to pass such a law, enforcement would be a breeze. A simpler approach would be to tax exclusive use of commons in a Georgist fashion. This would fall on real estate and intellectual property and on the privilege of incorporation. A comparable tax on the domestic earnings of foreign corporations and individuals would round out the system in either approach.

Given the difference between income and assets the rate could be low. If effectively enforced less than a 1% rate should suffice.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 31st, 2014 at 10:03:54 AM EST
But Frances Coppola is saying the wealthy have to be morally persuaded they should pay higher taxes. How would you set about that?
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jan 31st, 2014 at 12:23:10 PM EST
[ Parent ]
Guillotines in public squares. Purely ornamental ones, of course.
by Colman (colman at eurotrib.com) on Fri Jan 31st, 2014 at 12:24:27 PM EST
[ Parent ]
The problem with guillotines is that they would be used on the protesters.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 31st, 2014 at 09:22:11 PM EST
[ Parent ]
Or the ci-devants would all have become émigrés, more like.
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Feb 2nd, 2014 at 05:05:27 AM EST
[ Parent ]
Yeah, like Snowden.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 2nd, 2014 at 10:56:27 AM EST
[ Parent ]
Or you could just name and shame them.

It seems to me that the crux of the problem is that belief that society only extracts wealth from individuals, having no role in the creation of this wealth.  Inherent here is the belief that individuals have a moral claim on income, because it is the creation of their actions alone.  This is sheer idiocy.

Without public investment in infrastructure, education, etc.... the vast majority of wealth held by wealthy individuals who believe it to be the product of their actions alone would disappear.  In short, the wealthy are already overwhelmingly the beneficiaries of public investment.  Thus, their unwillingness to pay their due is all the more galling.  But.... we as societies have allowed this basic truth to be hidden.

Without public investment, the wealth of society disappears.  The wealthy benefit disproportionately from this wealth creation, yet they refuse to pay their share of the investment necessary to create it.  And...  we rarely know that this is happening.  And... we pick up the bill.  If the wealthy don't pay their taxes, we do.  In short, here again the wealthy are subsidized by society because they are able to evade their paying their full share.

A modest proposal.  This subsidization is money being redistributed from the public pursue to private individuals, and we rarely get an accounting of this.  Any discussion of public budgets and taxation should begin with full disclosure of the amount of money that is being taken out of the public purse in order to subsidized the tax bills of individuals.  And yes...  I mean names, amounts, and details being made available to anyone who requests the information.  This is a disbursement of public funds for which there is arguably a public right to know.

Name the people being subsidized in this manner, and disclose the amount by which they are being subsidized.  

Shame those that are unable to justify the sheer amount by which they are being subsidized.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sun Feb 2nd, 2014 at 04:43:40 PM EST
[ Parent ]
I think the first priority should be to keep telling the story of the hut tax. Over and over again. It's not just a matter of rich people defending their dragon hoard. It's also a matter of them wanting to have the government burn down lots of huts so they can feel good about having it.
by generic on Mon Feb 3rd, 2014 at 04:30:14 AM EST
[ Parent ]
Money is a token of State power used to mobilize resources.

Hard money is a token of rentier power withheld to pre-empt people.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Mon Feb 3rd, 2014 at 04:38:52 AM EST
[ Parent ]
rentier power

the funny thing here is that while the economic concept of rent (and rent-seeking) has its origins in Georgist talk, today when you hear the term in Anglo-America it's talking about how when non-elites organize themselves for collective action it is supposed to harm society as a whole, because they supposedly chain the "makers."

The morality tale goes something like this. Wealth is an outward manifestation of merit.  Those who lack it, envy those who do.  So they use the power of popular government (notice that prior to the enfranchisement of the masses in the early 1900s, elites were quite comfortable with state power.  And now that the government is, nominally, the property of the people as a whole, they clamor for privatization...  hmmm....) in order to impose something akin to tolls on the "makers."  These "tolls" shrink the sum total of wealth accrued by society.  So.... changing the way social wealth is distributed shrinks its sum total.

Does any one really believe that government is the only entity which imposes "tolls" of this sort on the economy?  Let's talk about transaction fees alone. With so much of the economy depending upon electronic transactions, the transaction fees that banks impose on businesses accepting credit/debit payment alone represent an enormous toll, or tax, on the economy as a whole.  If brought into the public sector by means of a postal savings bank which provided this service at cost, how much additional money would this allow to circulate annually in the economy as a whole?  This is but one example.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Mon Feb 3rd, 2014 at 06:23:24 AM EST
[ Parent ]
Well, in Europe we're being bombarded with complaints about how savers (pensioners are used as unquestionable figures of sympathy here) are being robbed of interest income by central bank intervention to lower rates.

In the US, too, "investors" complain that low rates force them to "chase returns" in risky investments.

So there's a presumption that "savers" have an inalienable right to (roughly 5% per annum, it would seem) risk-free interest income from their hoards.

This is a different narrative from "makers vs. takers".

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Mon Feb 3rd, 2014 at 06:57:37 AM EST
[ Parent ]
But... I think we'd both agree much of the "wealth" created by derivatives, and related financial instruments, is illusory, if not outright non-existent.  

It's the Anglo Disease, which unfortunately appears to be catching again, now that the memory of 2008 is receding.

That said, I do think that a public bank, along the lines of the Sparkassen, tasked with the narrow role of financing public investment and interceding in exceptional circumstances in the private sector as a direct lender of last resort for limited roles such as factoring and lending to non-financial firms, would create an economic safe haven.  If we can let the big financial firms infatuated with derivatives die, then then an evolutionary approach would suggest that unfit firms of this sort will be culled from the economy. Yet, without an economic safe haven of this sort, you get contagion and credit crunch.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Mon Feb 3rd, 2014 at 07:21:32 AM EST
[ Parent ]
The European banking crisis has precious little to do with derivatives and everything to do with crony capitalism mediated by the likes of the Sparkassen.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Feb 3rd, 2014 at 08:28:20 AM EST
[ Parent ]
So long as "you get what you deserve" is a compelling and useful explanation, conservatism will thrive.  That story needs to be destroyed.
by Zwackus on Mon Feb 3rd, 2014 at 07:38:01 PM EST
[ Parent ]
One of the observations made by Machiavelli is one on the basic motivations of social actors.

The great want to oppress the little, and the little want to avoid being oppressed.

This seems to explain most of our problems today.  The conservative movement wants to create a society in which the social power of wealth is maximized, so that the rich can exult in the joy of oppression.

Or more simply, they want to make everyone else so poor that they will do ANYTHING for a few crumbs from the table.  

by Zwackus on Mon Feb 3rd, 2014 at 07:43:14 PM EST
[ Parent ]
Yes... tell a story whose point is that the government wants to burn down your house... that will certainly make the moral argument that you should pay your taxes....

Sorry, but I have to be snarky here.  

My story would go something like this.  If you think that the "government" is unduly "coercive" then you should by all means go someplace "free" of this "coercion."  Like Somalia.

Classical liberals thrive off the highly questionable belief that: 1) we can by some means revert modern society back to a state of nature, and 2) that this state of nature is conducive to good living.

As to the first point, I ask this.  The basis of any modern economy is the idea of a division of labor. In this day and age we all can not live outside of society.  Unless you make all that you consume, you are by default party to a division of labor.  This means that you are a beneficiary of society.  

I really think that we need a secular form of shunning.  If you insist upon denying society, society should deny you.  If you believe that you have no obligations to society, society should have no obligation to you. Even as a "thought experiment" this quickly gives lie to the belief that anyone can live outside of some sort of society.

As to the second point, I think that romanticism about the past aside, we should all appreciate precisely what it is that society provides us all.  This whole idea that without the state there is no coercion quickly dissipates when you start to look at crime rates in societies with weak states.  Medieval Europe and modern developing countries share in common both that they have small states and that you are far more likely to die a violent death, which I think qualifies as a form of coercion albeit a private one.

At the very basic level of keeping you healthy, government is a requirement.  Without law, you end up murdered.  Without public health, you die of the cholera because the "freedom" to shit where you please.  Without public investment in infrastructure, the cost of bringing goods to market far exceeds any benefit that can be achieved by doing so.  Without public investment in education, firms are burdened with the need to closely supervise their labor force because they lack the skills to operate autonomously. Without public investment in basic research, creative destruction disappears because the basic research upon which radical innovation is built is never funded.

If you think that the state is coercive, you better take care to understand exactly what a world without the state looks like.  It isn't pretty.  In fact, it's downright medieval.  It is no coincidence that the development of strong states paralleled the economic development of Western Europe. The destruction of private power inherent in the rise of the public power of the state is the road from serfdom, quite literally.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Mon Feb 3rd, 2014 at 07:01:58 AM EST
[ Parent ]
The point of the story is that "government fiscal responsibility" amounts to refusing to provide jobs for those who need them and then going and burning their houses.

A moder monetary production economy without a fiscal authority willing to spend in order to improve demand will never achieve full employment.

Government money is, in fact, not very different from scrip in mining company towns. Except that the government is subject to democratic accountability instead of lording over hirelings.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Mon Feb 3rd, 2014 at 07:05:34 AM EST
[ Parent ]
The point of the story is that "government fiscal responsibility" amounts to refusing to provide jobs for those who need them and then going and burning their houses.

A moder monetary production economy without a fiscal authority willing to spend in order to improve demand will never achieve full employment.

I'm not this is a very effective sermon.  At least for general consumption without some sort of homily.  Even with explanation, still don't think that you're going to get the message you want through.

In the context of the sort of cultural hegemony that neoliberalism enjoys today, attempts to offer alternatives face the unenviable task of first debunking "common sense" before you can go about making a positive argument for the alternative.

Right it is not, but it is what it is.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Mon Feb 3rd, 2014 at 07:28:52 AM EST
[ Parent ]
But if we get this through we have basically won. We can still argue whether we should let the oligarchs keep their hoard or not, but at least we have established that we don't need them.
by generic on Mon Feb 3rd, 2014 at 07:53:40 AM EST
[ Parent ]
I'm not this is a very effective sermon.  At least for general consumption without some sort of homily.  Even with explanation, still don't think that you're going to get the message you want through.
And that's why Randy Wray is trying to come up with new memes for money. (Paper and blogs)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Feb 3rd, 2014 at 08:27:09 AM EST
[ Parent ]
I normally have high regard for Frances Coppola, but I fear the majority of the large wealth holders are far beyond moral persuasion. They happily spend their money directly on the politicians instead of paying taxes. That is cheaper. Perhaps what she is suggesting is that they have so little to fear from the law that the only hope of getting taxes from them is because they think it is morally right. Else the argument is unbelievably naive.

But being naive may be easier to live with than having to accept that the wealthiest are unaccountable and have used their wealth to hire post-modern priests whose job it is to convince the people that it is right and proper that the rich should pay so little. Popular views are fruit of a sustained propaganda campaign paid for by the rich. The cost of that campaign plus the cost of hiring the politicians combined is far cheaper than paying appropriate taxes.

 

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jan 31st, 2014 at 09:21:00 PM EST
[ Parent ]
Buying off politics and society isn't even about saving money, it's about recreating the social privilege of aristocracy.
by Zwackus on Sat Feb 1st, 2014 at 09:19:03 PM EST
[ Parent ]
One follows from the other. A two for one.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 1st, 2014 at 09:34:44 PM EST
[ Parent ]
Incentivizing prosecution and whistleblowing on financial crimes is an idea that's been tossed around a few times in SF.  I wonder at what kind of creepy and fucked up evil might result, though,
by Zwackus on Sat Feb 1st, 2014 at 09:16:51 PM EST
[ Parent ]
As opposed to the creepy and fucked up evil the current system of government owned by an unaccountable oligarchy brings? But even without the prosecution for profit option, taxing the value of real property, preferably the unimproved value or use value, taxing the privilege of incorporation  and taxing the revenue from intellectual property rights should be easier to enforce than are the present laws.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 1st, 2014 at 09:49:44 PM EST
[ Parent ]
There is no need to pretend that all financial crime is created equal.

Keep the law as it is for all financial crime involving sums less than the median pre-tax income. Then go all-out against the big fish:

  • A bounty of 10 % of all confiscations resulting from your information
  • Total blanket immunity for all non-violent crimes committed in the process of obtaining your evidence
  • Total blanket immunity for all non-violent crimes committed by anybody against financial institutions which do not collaborate with the tax authorities and financial regulators to the latter's complete satisfaction
  • Full citizenship for any and all who deliver substantial evidence of tax fraud, or substantial caches of confidential internal documents from financial institutions, regardless of whether the evidence results in confiscations
  • Confiscation of all property and revocation of all remaining public and private obligations to any who defraud the tax man of more than ten years' median income in a single year, or more than three years' median income in any ten years (which do not need to be consecutive).
  • Universal jurisdiction for tax fraud
  • No trade treaties or double taxation treaties with any state that does not force its financial institutions to collaborate with the tax man
  • Legal equivalence between unfriendly currency speculation and terrorism

There are plenty of ways to make tax fraud difficult and burdensome. What's not plentiful is the political will to make it happen.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 2nd, 2014 at 02:43:46 AM EST
[ Parent ]
The keystone of your edifice is "Universal jurisdiction for tax fraud", since the individual nation-state that enacts the rest on its own will simply be demonised as communist spawn of the Devil, while Freedom™ will ring out in all other countries.

Coppola is arguing that the wealthy will always find ways to offshore (unless they agree that it is right for them to pay tax).

If it's impossible to apply moral suasion to the rich (as this thread seems to be saying), how possible is it to obtain universal agreement on your tax regulation slate?

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Feb 2nd, 2014 at 04:41:29 AM EST
[ Parent ]
If you can get the US, EU and the BRICS on board, you win.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 2nd, 2014 at 04:59:37 AM EST
[ Parent ]
The trend of comments here is to say that the wealthy pwn politics and public opinion. Absent the consent of the wealthy, how do we reach the agreement you suggest?
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Feb 2nd, 2014 at 05:02:28 AM EST
[ Parent ]
Oligarchies in large countries are in symbiosis with small countries functioning as offshore tax havens. So a "democratic" revolution would have to defeat the oligarchy in the large countries before taking on the tax havens. By definition oligarchs pwn politics and public opinion, but the pwn3rship is not complete.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 2nd, 2014 at 05:11:46 AM EST
[ Parent ]
Universal jurisdiction does not mean that tax fraud is universally prosecuted. It means that the country which claims universal jurisdiction prosecutes tax fraud happening in other countries.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 2nd, 2014 at 05:59:08 AM EST
[ Parent ]
It means that the country which claims universal jurisdiction prosecutes tax fraud happening in other countries.

This system seems to work for intelligence gathering. Just substitute 'spy on' for 'enforce taxes'. But there should be penalties for officials under whom tax evasion by oligarchs is tolerated - enforced, perhaps, by lawsuits brought by foreigners?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 3rd, 2014 at 12:05:05 PM EST
[ Parent ]
This system seems to work for intelligence gathering.

Yes, because intelligence gathering is 90 % of the game.

Once you have actionable intelligence, you can start confiscation from any point at which their cash flow touches your jurisdiction.

Or you can permit the entrepreneurial spirit of private enterprise to do it for you, by offering bounties and safe haven to those who betray the trust of banks which collaborate with tax frauds.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Feb 4th, 2014 at 06:10:48 PM EST
[ Parent ]
It's not impossible to apply moral suasion. It's just that applying the kind of moral suasion that works is messy and usually only temporarily effective.

In spite of appearances, the rich are not the problem. The problem is some people really, really care about power (and wealth) and they will do almost anything to get it.

So whatever political system you create, and however you create, the single most important goal is making sure those people never get power and influence - and that the only people who do get power and influence have a social conscience and can use power responsibly.

Forget heroin, alcohol, meth, or even krokodyl - power is the ultimate human corrosive. It literally lays waste to countries, and is well on the way to destroying the planet.

Lakoff won't help here. Nor will voting, signing petitions, or occupying public areas.

The most likely answer is a whole new moral philosophy, which brands power-seeking for its own sake a shameful, criminal activity.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Feb 2nd, 2014 at 08:28:21 AM EST
[ Parent ]
It's possible that the only hope is enlightened despotism. The odd chance that the guy that gets to the top of the heap actually cares about the general welfare. It's happened occasionally.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 2nd, 2014 at 08:54:38 AM EST
[ Parent ]
The problem is that the Enlightened Monarchs didn't win an election or buy their way into office. And often they had experienced 'arbitrary, capricious and unreasonable' tyranny first hand before they ascended to the throne, as with Frederik VI of Denmark.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 2nd, 2014 at 11:12:44 AM EST
[ Parent ]
Particularly socipathic power-seekers are a problem, no doubt.  There's something wrong with their brain.  We can always hope that this will become visible to medical science at some time in the not too distant future.  We can also hope for some sort of real and useful and reliable lie detector.

The rich are still a problem, though.  The culture and environment of inherited wealth creates bad people, and these bad people are enabled by their wealth to do bad things.  Social researchers are showing how being wealthy is strongly correlated to being a rather horrible person, and I'm willing to bet that at least half of this is nurture.  There seems little reason to tolerate this.

by Zwackus on Sun Feb 2nd, 2014 at 07:38:01 PM EST
[ Parent ]
the fact that tax arbitrage is a survival strategy for small countries.
Maybe we need to get rid of the small countries.

AFP via Google: Liechtenstein accuses Germany of attacking its sovereignty (February 19, 2008)

Liechtenstein on Tuesday launched a withering attack on the German government for paying an informer in the Alpine state for bank secrets to launch a tax probe targeting hundreds of wealthy Germans.

Liechtenstein's Crown Prince Alois said Berlin had violated the sovereignty of the tiny principality and broken the law by buying secret data and sending in spies to uncover the scandal.

...

The investigation is said to involve four billion euros (5.8 billion dollars) hidden in secret bank accounts in Liechtenstein, a tax haven nestled between Switzerland and Austria, by Germany's business elite.

Cry me a fucking river, Alois of Liechtenstein.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Feb 2nd, 2014 at 04:09:23 AM EST
The fundamental challenge in developing a fair and effective tax collection system which would enable states to pursue basic public purpose is doing so before the current system crashes the world climate and ecology. The former is a prerequisite to the latter. But I don't know if even a wider appreciation of that issue will matter. If we are a social species it would seem that we are one hardwired to self destruct.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 3rd, 2014 at 12:11:32 PM EST
Here is a game-theoretic perspective.

Nash equilibria are supposed to describe stable configurations of player's preferences, where no one can improve his payoff without the others changing their behavior. Here is a dirty secret: There might be plenty of Nash equilibria (exponentially in the number of players and their options) or various quality (by any statistics), and they are hard to compute. For example, telling if a given game has a Nash equilibrium with a guaranteed payoff for a certain player (or any average or extreme payoff that good enough, etc) is an NP-hard problem. A Nash equilibrium is basically a way for a game to get stuck at some outcome. Even if we define stronger equilibria for practical applications, the computational picture should be the same.

A simple example is a coordination game. Say, two players have to tell a number from 1 to N, and they both get a prize if they tell the same number. Otherwise they get nothing. Agreeing on a particular number is a Nash equilibrium clearly. But playing the same subset of {1,2,...,N} with uniform probability is a Nash equilibrium as well - you have to try that without communication (with far less expected payoff). The number of Nash equilibria equals the number of subsets of {1,2,...,N}, which is 2^N (because each number is either in the subset or not) minus 1 (because the empty subset is not allowed).

Other example is a congestion game. A cargo ferry leaves every hour, and K players want to transport their goods. The cost for a player is H+P*X, where H is the number of hours (s)he waits, X is the number of players using the same ferry, and P>1 is a constant ("latency"). For a Nash equilibrium, you can order the players and let them use the ferry one by one. That is pretty effective in the total or average cost. This gives K! equilibria. More democratic equilibria are obtained by randomizing ferry choices for players, or mixing player ordering and randomization. There is an overall cost for the equal treatment of players, however.

Today's political economics is clearly stuck at some nasty equilibrium, where most of the players do not have much choice but to suffer high rents, low wages or no income at all. Intentionally or not, the rich were seeking this equilibrium consistently in the last decades. Since the rich control the rules as well, the system is stuck for a long time. What would it take to escape this equilibrium? Serious planning and action will certainly be required. And by definition, non-optimal choices (aka sacrifices) at each step, for you and for many others, will also be a must.

by das monde on Tue Feb 4th, 2014 at 02:50:31 AM EST


The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Thu Feb 6th, 2014 at 06:58:40 AM EST


Display:
Go to: [ European Tribune Homepage : Top of page : Top of comments ]

Top Diaries

A Trip to the Woodshed

by Cat - Nov 3
20 comments

Catalonia?

by Frank Schnittger - Oct 28
17 comments

The Brexit effect

by Frank Schnittger - Oct 25
20 comments