It’s Time again

I copied the following from:

http://wolfessblog.wordpress.com/2012/06/12/war-or-revolution-every-75-years-its-time-again/

JUNE 12, 2012 BY LEEN61
War or Revolution Every 75 Years. It’s Time Again.
http://www.commondreams.org/view/2012/06/11-3

by Paul Buchheit
When Charles Dickens wrote “It was the best of times, it was the worst of times” to begin “A Tale of Two Cities,” he compared the years of the French Revolution to his own “present period.” Both were wracked with inequality. But he couldn’t have known that 75 years later inequality would cause the Great Depression. Or that 75 years after that, in our own present period, extreme inequality would return for a fourth time, to impact a much greater number of people. He probably didn’t know that the cycles of history seem to drag the developed world into desperate times about every 75 years, and then seek relief through war or revolution.

It’s that time again.

It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way. — CHARLES DICKENS

Three cycles (225 years) ago, in the years before the French Revolution, inequality was at one of its highest points ever. While it’s estimated that the top 10% of the population took almost half the income, as they do today, the Gini Coefficient was between .52 and .59, higher than the current U.S. figure of .47. The French Revolution began a surge toward equality that lasted well into the 19th century.

Two cycles ago, in Dickens’ day of the 1860s, European inequality was again at a nearly intolerable level. It took the second industrial revolution and the U.S. Civil War to start correcting the economic injustices.

One cycle ago was the Great Depression. The New Deal, World War 2, and the laborious process of war recovery put an end to this third period of extreme inequality.

Now, nearly 75 years after we started World War 2 production, we again feel the agony of a wealth gap expanding, like grotesquely stretched muscle, to intolerable limits. If history repeats itself, we will be part of another revolution of long-subjugated people. Indeed, it has already begun, in Europe and Canada and with the Occupy Movement.

The face of plutocracy has changed, but not the consequences. Just before the French Revolution, Paris and London were dismal places for the masses, with islands of unimaginable splendor for aristocrats, who, like the multi-millionaires of today, found it hard to relate to the commoners. Dickens portrayed it well. Exclaimed the Marquis St. Evremonde to a gathering crowd: “It is extraordinary to me that you people cannot take care of yourselves and your children. One or the other of you is for ever in the way. How do I know what injury you have done to my horses?” This he said after his carriage had struck and killed a young child.

Today the two cities could be Los Angeles and Chicago, both among the ten most unequal metropolitan areas in the United States. Instead of lords and noblemen, we have CEOs and hedge fund managers. The economic injustices are fashioned in more civilized ways. Insidious ways.

Los Angeles is the biggest city in a state with a $9-16 billion budget deficit. It is facing severe cuts in education, health care, social services, and the court system. College tuition increased 50% in two years. Public schools are down to one counselor for every 800 students.

But California’s deficit wouldn’t exist if corporations had paid their state taxes. Apple is a prime example of nonpayment. While the company’s 10% federal tax rate has been widely publicized, its 2% state payment (rather than the required 9%) is less well known. For state avoidance purposes, they claim residency in Nevada. And despite conducting most of its research and development in the United States, they channel much of their sales through Luxembourg and Ireland and the Caribbean.

What about Chicago? It has the highest sales tax in the country. Illinois cut 2012 education spending by a greater percentage than any other state. The state tax rate was just increased by 66%. Property taxes went up by about $300 per homeowner. Illinois was recently named one of the ten “Most Regressive State Tax Systems,” with the third-highest “Taxes on the Poor.”

Yet if just 20 large Illinois companies had paid state taxes at the required statutory rate over the past three years, an additional $7.5 billion would have come back to the state, or about half of the state’s current deficit.

Just as Los Angeles loses out to technology, Chicago is victimized by finance. The Chicago Mercantile Exchange (CME), with billions of untaxed contracts worth well over a quadrillion dollars, and whose profit margin over the past three years is higher than any of the top 100 companies in the nation, demanded and received an $85 million per year tax break.

“A man grown grey in treachery…who once when it was objected, to some finance scheme of his, ‘What will the people do?’ – made answer, in the fire of discussion, ‘The people may eat grass.’” — Thomas Carlyle, “The French Revolution,” the main source for Dickens’ novel.

In our ‘civilized’ times people aren’t being run down by noblemen or forced to eat grass. The aristocracy has learned a lot about suppressing crowds in 225 years. But they need to fear the growing revolution. They need to fear, as Dickens put it, “the remorseless sea of turbulently swaying shapes, voices of vengeance, and faces hardened in the furnaces of suffering until the touch of pity could make no mark on them.”

Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of “American Wars: Illusions and Realities” (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

Invest in people, infrastructure and technology for future prosperity

I just read this very interesting transcript of a broadcast from the 30th of June 2014. Joseph Stiglitz says, if Australia wants to prosper in the coming years, the Abbott government should be spending more, not less. I copied the transcript hoping that some of my blogger friends might find it interesting too. Here now is the transcript:

http://www.abc.net.au/lateline/content/2014/s4036416.htm

Australian Broadcasting Corporation

Broadcast: 30/06/2014

Reporter: Steve Cannane

But Nobel prize winning economist Joseph Stiglitz says if Australia wants to prosper in the coming years the Abbott government should be spending more, not less.

Transcript

STEVE CANNANE, PRESENTER: The Nobel Prize-winning economist Joseph Stiglitz has warned that the Abbott Government’s proposed spending cuts are a threat to Australia’s future prosperity. Professor Stiglitz, who is in Australia for a series of public lectures, has told Lateline Australia’s future relies on investing in its people and that means spending more, not less. And the Nobel laureate had some harsh words for multinational companies avoiding tax, describing the amount of tax the tech giant Apple pays as an outrage. I spoke to Professor Stiglitz earlier today at the Australian National University in Canberra.

Joseph Stiglitz, welcome to Lateline.

JOSEPH STIGLITZ, NOBEL PRIZE-WINNING ECONOMIST: Nice to be here.

STEVE CANNANE: The Abbott Government is about to try to push a whole lot of large spending cuts through the new Senate. You’re advocating for spending rather than spending cuts. Why’s that?

JOSEPH STIGLITZ: Well there are two reasons. The first and most obvious one is that Australia is not in a bad fiscal position. Its debt-to-GDP ratio – net debt-to-GDP ratio is under 14 per cent. It’s one of the lowest in the advanced countries. It’s absurd to think that that is your major problem. Even your deficit GDP ratio is very, very low. The real challenge for the future of Australia are going to be related to investments – investments in people, infrastructure, technology – to make Australia competitive in a global economy. If you don’t make those investments, where will you be?

STEVE CANNANE: Well, Tony Shepherd, the chair of the Commission of Audit, made the point today that the Department of Human Services writes out cheques for $400 million per day. How is that an investment?

JOSEPH STIGLITZ: A country’s most important resource are its people. And if you don’t invest in your children, if you don’t invest – make sure they have adequate nutrition, education, health, it will jeopardise your future.

STEVE CANNANE: So you see welfare as an investment?

JOSEPH STIGLITZ: Appropriately-designed policies are clearly an investment. One of the reasons the US has not been performing as well as it should is that if you’re not lucky enough to be born with the right parents, able to give you a good education, your prospects are really bleak. The likelihood that you’ll be able to live up to your potential are really very small.

STEVE CANNANE: The Government though is making the point that we’re already paying a billion dollars to finance the debt per month on the government debt and that is likely to blow out even further as Australia’s population ages. Is the kind of spending increases that you’re advocating for unsustainable?

JOSEPH STIGLITZ: They’re very sustainable. I mean, think about it the following way: if you were a firm and you could borrow at very low interest rates – in Australia, the United States are currently able to borrow at a negative real interest rate. You know, take into account inflation. And you could take that money and you could invest it in high-return investments, investments in infrastructure, technology, education, in people, in making sure that all of your citizens are able to live up to their potential, then these investments more than pay back. We’ve done studies in the United States – I haven’t done them for Australia – but we’ve done studies in the United States where we looked at the return on these public investments across the board, and they yield a far higher return than the cost of capital. So, it’s actually making a country stronger when we make those investments.

STEVE CANNANE: But I know you’re a fan of the way Australia handled the Global Financial Crisis, but wasn’t one of the reasons they were able to do that was that their budgets were balanced, that they had that money up there sleeve for difficult times?

JOSEPH STIGLITZ: Well it is a good thing to have, you might say, a rainy day fund. Today, though, the world is in very volatile shape. The global economy is very weak. The US economy is growing about 2.2 per cent, not even able enough to create new jobs for the new entrants in the labour force. Europe, many of the countries are in depression. This is not the time for fiscal contraction. Now obviously you want to be very careful on your spending. You want to make sure you get high returns. But a lot of people talk about the waste in government. The private sector waste a lot. And in fact, no government has ever wasted money on the scale of America’s private financial system, which has cost us trillions of dollars. But if you don’t make these investments, you’re wasting resources.

STEVE CANNANE: You’ve written a lot about inequality. Are you concerned that the Budget measures recently announced by the Abbott Government, which the Crawford School here at the ANU found hit the lowest paid workers the hardest, that they could lead to increased inequality in Australia?

JOSEPH STIGLITZ: Very much. I mean, that’s why they’re widely perceived to be grossly unfair. Already – Australia is not the worst, but it’s not the best. Australia ranks about fifth among the advanced countries in the level of inequality after tax and transfer. That’s not an enviable position to be. I mean, you’re not worst – America is the worst. But the other countries are like – that are up on the scale are not countries you would want to envy. So, the point is, you’re already not performing in terms of equality very well. Your inequality in the standard measure Gini is twice that of the best-performing countries. So you’re not really, as I say, performing well. And these cuts are going to make Australia even worse.

STEVE CANNANE: What can we learn from the American experience, where you have argued that growing inequality is linked to America’s sluggish growth rate?

JOSEPH STIGLITZ: This is not just true for America. The IMF has pointed out that high inequality is associated with lower economic growth and more economic instability. This is a very big change in perspective from the way we thought about things before. We used to say, “Well, inequality is bad, but if we do anything about it, it will slow economic growth.” Now we realise that inequality has reached a level where it’s actually having adverse effects on countries like the United States and other advanced countries.

STEVE CANNANE: But you want to see higher income tax rates at the higher level end of the scale, in excess of 50 per cent, I understand. How do you know that that won’t be a disincentive to create wealth and also an incentive to avoid tax?

JOSEPH STIGLITZ: There’ve been very careful studies looking at what we call the supply elasticity, the response of the private sector to – in labour supply, in savings, to an increase in the tax rate. And the leading experts on this have looked at these numbers very carefully, have said there’s really no problem, so we could increase taxes substantially above 50 per cent. They’ve talked about …

STEVE CANNANE: How much higher before it becomes a problem?

JOSEPH STIGLITZ: They’ve talked about 70 per cent or more. Now, it depends to some extent on how targeted you can be in your taxes. If you tax monopoly power, if you tax excess what we call rents of a whole variety of kinds, there are some ways in which raising taxes at the top can actually improve the efficiency of the economy. Let me give you an example. In the United States, the speculators are taxed at lower rates than those who work for a living. The result of that is more resources go into speculation. The result of that?: an economy that has an excessively large financial sector, an economy that’s excessively is unstable, excess activities in speculation, and, less of our scarcest resource, our most talented young people, fewer of them are going into research, into the kinds of things – transistors, lasers – all these basic research that would improve our standard of living. Why go into those low-paying research jobs if you can make a lot more money after tax in speculation?

STEVE CANNANE: The Treasurer Joe Hockey says that 10 per cent of the Australian population pays two-thirds of all income tax and two per cent pay more than 25 per cent. Aren’t they paying their fair share?

JOSEPH STIGLITZ: Well I don’t know the data for Australia, but I do know the data for the United States. Rich people like Romney, hundreds of millions of dollars in wealth. We’re paying half the tax rate that people of comparable income were paying because they were taking advantage of all these loopholes that they and people like them have put into the tax system. So, you look – I know for the United States that those at the very top pay a smaller percentage, smaller percentage of their income in taxes. Now they do pay a lot of taxes. Why do they pay a lot of taxes? ‘Cause they have a lot of income. The top one per cent in the United States gets over 22 per cent of all the income, has more than 30 per cent of all the wealth. So, yes, they should be paying a lot.

STEVE CANNANE: You want to see a crackdown on multinational companies who are avoiding tax. Now this issue is meant to be on the agenda at G20 in Sydney next year. What should they be doing about it?

JOSEPH STIGLITZ: Some of the problems are pretty obvious. You have companies like Apple that basically have created a corporate organisation that exists in cyber space. They claim to be in Ireland, but they found a loophole so they don’t even pay full taxes in Ireland. So, here you have the largest American company in capitalisation pretending as if all the production, all the profits are generated by a few people in Ireland. It’s an outrage. It’s particularly outrageous because a company like Apple would not exist if it were not for the internet, if it were not for government investments in technology that led to the internet, that led to a lot of the advances that they’re taking advantage of. So they’re willing to take, but they’re not willing to give back.

STEVE CANNANE: So how do you crack down on them? Because some of these companies have just as much innovation when it comes to avoiding tax as they do to creating new products.

JOSEPH STIGLITZ: Precisely. And that’s the point of the G20 discussion. Say – look, this is a question of moving money around to these tax havens. Those tax havens exist because of what the governments – the governments in the United States and Australia have allowed them to exist. You know, a few years ago, we discovered that the terrorists were using these islands, offshore senders to help fund their terrorist activities. We quickly found out where that money was and we shut them down, for purposes of terrorism. But we said, “OK, it’s alright if you go ahead and engage in money laundering, tax avoidance. Those activities are OK,” but they’re not OK.

STEVE CANNANE: Do you think the will is there within the G20 to suddenly crack down on these companies?

JOSEPH STIGLITZ: There is a beginning to get a will. Part of the reason is if they escape taxes, there are more taxes that have to be imposed on ordinary citizens. And they’re already having these cutbacks, they’re seeing basic services cut back and that’s going to become less and less acceptable. So, I hope, I hope they actually do something and not just talk.

STEVE CANNANE: You were the lead author on the 1995 IPCC report which received the Nobel Prize in 2007 alongside Al Gore. Last week Al Gore stood next to Clive Palmer at a press conference as he announced that his party would in the Senate vote to kill off the carbon tax. Were you surprised Al Gore turned up at that press conference?

JOSEPH STIGLITZ: I was a little surprised, except that there was a deal as part of what Palmer was doing where he made a commitment to get a price of carbon if other countries were willing to do it.

STEVE CANNANE: And we know from the reality in the US that cap-and-trade is dead there, so …

JOSEPH STIGLITZ: Well, it’s not quite dead. Actually – the States are actually doing a lot in both the East Coast and the West Coast, so there is an understanding in certain parts of our country that climate change is a real – really serious problem. And there is a resolve on the coast to do something about it. And if we had the right president and right congress, we will do something about it. I would prefer to keep the carbon tax. I think having a price of carbon to send a signal that one of our most valuable resources is our environment, and once we destroy it, we won’t get it back again.

STEVE CANNANE: The Australian Prime Minister Tony Abbott has said that he’s not going to take action on climate change, which “clobbers our economy”. Would maintaining a price on carbon have clobbered the Australian economy though?

JOSEPH STIGLITZ: Absolutely not. In fact, I would say it actually puts you in a better position, because we know that eventually there will be a price of carbon. The fact of the matter is – even the United States, which is a moderate climate, some of us used to think that, yes, the south would get hotter and less pleasant to live in, but Minnesota would get warmer and actually would be nicer. We now realise that our economy is facing a very big cost, as where variability goes up, crops are being destroyed, hurricanes. We are paying a very big cost.

STEVE CANNANE: But if Australia acts before the rest of the world, are they not ceding an economic advantage to those countries?

JOSEPH STIGLITZ: No. First, you’re getting in a better position than other countries to deal with the inevitable. And secondly, if you’re taxing carbon, you’re getting revenue that you would otherwise have to get from other sources. Ask a simple question: is it better to tax bad things or good things? Is it better to tax something that’s destroying the global planet or to tax work or savings? And my view is: let’s tax carbon and use that revenue to enable a lowering of taxes on savings and work. To me, it’s just common sense. Tax bad things rather than good things.

STEVE CANNANE: Joseph Stiglitz, we’ve run out of time. Thanks so much for joining us.

JOSEPH STIGLITZ: Thank you.

Uta’s Diary on Taxes and Walking

After a night with a lot of cramping in my legs I ask myself what did I do wrong? Does it  perhaps have to do with not going for a walk the day before?

If I would stick to my perfect plan I would go for a walk every day. Why then, why did I not take care to fit it in yesterday, on Sunday? For instance, we drove to the Club in the afternoon for our coffee and cake. Why did I not say to Peter, let’s walk to the club? Why didn’t I think of it? Actually I cannot see any reason at all why we should not have been able to walk.

When I could not sleep during the night because of the cramping I thought a lot about what I had been reading yesterday on the internet and also what I had been reading in kindle. Well, in kindle I have finally come to the last pages of ANNA KARENINA. Tolstoy wrote in this novel not just about AK. A lot of other people are written about in great detail, especially LEVIN, one of the big landowners. But I can see now how ANNA has turned into the main character of this book. She is a woman of her time and her circumstances, seen through the eyes of a male writer who definitely has a lot of insight into what a woman’s feelings may be. LEVIN’s connection with the land is dealt with in great detail in the novel and seems to have a lot to do with Tolstoy’s feelings about land ownership. And this brings me to what I have been reading and reblogging yesterday about HENRY GEORGE and the land question: How the way the land is taxed or not taxed affects our lives.

It is said if we had what is called a “single tax” we would have a more just society. A single tax on what you may ask. Well, we are talking here about a single tax on land. Of course, whoever owns some land, would not want such a tax. I learned yesterday about Neoclassical Economics. Apparently this is being taught at universities these days. Everyone who is being taught NCE would be discouraged to consider the teachings of HENRY GEORGE. The teaching of NCE protects the established land ownership and goes against the teachings of HENRY GEORGE. This is the way I see it. Tell me if I am wrong.

If you belong to the top third in society, of course you want things to remain the way they are. For sure, the very,very top want to continue ‘earning’ millions every year without paying any taxes. If you are more in the middle, you are constantly in danger of falling behind, but you have hopes of eventually arriving in the top where you are safe. The bottom third in society they are the ones who can be squeezed in all sorts of ways. Entitlements or security for them? Most countries cannot afford it or soon won’t be able to afford it any more. If more and more people in the bottom third become more and more destitute, what then? Do economists ever consider this? I am sure, some do, but feel they cannot change anything.

Apparently HENRY GEORGE  was thinking of solving problems.  To him a trade-off is a compromise that overlooks the possibility of a reconciliation or synthesis. He was for reconciling by synthesizing, taking two problems and composing them into one solution. He was of the opinion that reconciling is better than compromising. If you read what I reblogged yesterday,  you find for instance the following:

“He (HENRY GEORGE) took two polar philosophies,

collectivism and individualism.

He synthesized a plan to combine the better features

and discard the worse features of each.”

Zacchaeus, a senior Tax Collector and a Wealthy Man (Lk 19-1-10)

Zacchaeus said to Jesus: “Look, Sir, I am going to give half my property to the poor, and if I have cheated anybody I will pay him back four times the amount.”

Occasionally there may be a wealthy person in our society who does likewise. Wouldn’t it be a marvellous world if more wealthy people had a similar attitude?

 

I want to mention here that you can now find “The Crisis of Civilisation” among my pages at the top. You may remember that I reblogged it from The Guardian.