7th August 2011
Reverse wealth inequality and tax the rich - it's better for the
economy
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, Herald on Sunday 7.08.11)
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 the 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, as 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, Macwhirter posits, then FDR's strategy must be revisited.
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