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High tax? Low tax? This is getting us nowhere. Let's rethink the whole thing High tax? Low tax? This is getting us nowhere. Let's rethink the whole thing
(7 months later)
The rich get richer and the poor get poorer. That phrase is probably uttered thousands of times in this country every day. I'm pretty sure this elegiac cliche provides a dying fall to many unhappy conversations, a moment of resigned salute before people move on to less painful distractions, like what's good on the internet today. So let's turn the world upside down. Let's use the phrase to start a debate, not end one.The rich get richer and the poor get poorer. That phrase is probably uttered thousands of times in this country every day. I'm pretty sure this elegiac cliche provides a dying fall to many unhappy conversations, a moment of resigned salute before people move on to less painful distractions, like what's good on the internet today. So let's turn the world upside down. Let's use the phrase to start a debate, not end one.
Despite its apparently irrefutable and timeless wisdom, it's a negatively comforting homily that isn't strictly true. If Karl Marx could return to Britain today, 130 years on from his death, he would be surprised, perhaps even disappointed, to note that while capitalism and the class system continue to hold sway, and no revolution has occurred, the leap in general prosperity among ordinary people has been enormous.Despite its apparently irrefutable and timeless wisdom, it's a negatively comforting homily that isn't strictly true. If Karl Marx could return to Britain today, 130 years on from his death, he would be surprised, perhaps even disappointed, to note that while capitalism and the class system continue to hold sway, and no revolution has occurred, the leap in general prosperity among ordinary people has been enormous.
This observation is generally made from the right, where it has long been fashionable to curl one's lip at the idea that "poverty" even exists in the UK. Free education, free healthcare, a state that is obliged to put a roof over people's heads and a little money in their pockets, a high level of access to fantastically sophisticated technology – all this, they say, means that absolute poverty has been banished from the land, more's the pity. The problem is that the poor, they will argue, are coddled too much. It does them no good.This observation is generally made from the right, where it has long been fashionable to curl one's lip at the idea that "poverty" even exists in the UK. Free education, free healthcare, a state that is obliged to put a roof over people's heads and a little money in their pockets, a high level of access to fantastically sophisticated technology – all this, they say, means that absolute poverty has been banished from the land, more's the pity. The problem is that the poor, they will argue, are coddled too much. It does them no good.
The left, in turn, will be incensed by this dismissive attitude to a pervasive environmental condition that is in itself damaging – to confidence in dealing with others, to physical and mental health, to the very employability that is, without capital, the only route out of poverty. The problem is that the poor, they will argue, are coddled too little. It does them no good.The left, in turn, will be incensed by this dismissive attitude to a pervasive environmental condition that is in itself damaging – to confidence in dealing with others, to physical and mental health, to the very employability that is, without capital, the only route out of poverty. The problem is that the poor, they will argue, are coddled too little. It does them no good.
I liked the speech Ed Miliband gave on Thursday, because it laid out that latter view without sentiment. I also felt he expressed the culpability of the Blair and Brown governments in a more nuanced, less Look-I'm-Drawing-a-Line-Under-This way than he had before. But I was painfully aware that Miliband was playing catch-up. He's promising that the next Labour government will do things that already urgently needed doing back in 1997, often things that the coalition don't dispute are theoretically desirable. It's possible that the speech was a little bit of a game-changer, in electoral terms. I certainly feel happier about the idea of voting Labour than I have for 20 years.I liked the speech Ed Miliband gave on Thursday, because it laid out that latter view without sentiment. I also felt he expressed the culpability of the Blair and Brown governments in a more nuanced, less Look-I'm-Drawing-a-Line-Under-This way than he had before. But I was painfully aware that Miliband was playing catch-up. He's promising that the next Labour government will do things that already urgently needed doing back in 1997, often things that the coalition don't dispute are theoretically desirable. It's possible that the speech was a little bit of a game-changer, in electoral terms. I certainly feel happier about the idea of voting Labour than I have for 20 years.
But the ideological terms of the debate haven't yet changed. It is the supporters of neoliberal economics who need to be swayed, not the critics or the don't-knows. The battleground has not been redefined. It's just that there are some signs Labour is preparing to go on the offensive again. Yet we all know how well defended the rich and powerful are, whether in government or not.But the ideological terms of the debate haven't yet changed. It is the supporters of neoliberal economics who need to be swayed, not the critics or the don't-knows. The battleground has not been redefined. It's just that there are some signs Labour is preparing to go on the offensive again. Yet we all know how well defended the rich and powerful are, whether in government or not.
Miliband offers no incentive for the powerful to adjust their views. The left still blames the private sector, however much its leaders offer it the flattery of faint praise. The right still blames the state, no matter how greatly the electorate suffers from the fact that the state always picks up the pieces for private-sector failure. The ideological world needs to be turned upside down. Neo-liberals need to understand that while, sure, economies need entrepreneurs and innovators, economies also need customers – lots of customers, with lots of disposable income. That's the real crisis in the neoliberal west: a crisis of consumption. Too many people are not rich enough for capitalism to function properly.Miliband offers no incentive for the powerful to adjust their views. The left still blames the private sector, however much its leaders offer it the flattery of faint praise. The right still blames the state, no matter how greatly the electorate suffers from the fact that the state always picks up the pieces for private-sector failure. The ideological world needs to be turned upside down. Neo-liberals need to understand that while, sure, economies need entrepreneurs and innovators, economies also need customers – lots of customers, with lots of disposable income. That's the real crisis in the neoliberal west: a crisis of consumption. Too many people are not rich enough for capitalism to function properly.
Think about it. Yes, bankers' profligacy caused the financial crisis. But however misguidedly, bankers were addressing a real problem. Too many people didn't earn enough money to service their mortgages. Sure, a complex and unscrupulous chain-of-supply to highly competitive retail outlets caused the horsemeat scandal. But, again in a highly unsuitable way, a genuine structural difficulty was being addressed. Too many people didn't earn enough money to afford beef of a decent provenance.Think about it. Yes, bankers' profligacy caused the financial crisis. But however misguidedly, bankers were addressing a real problem. Too many people didn't earn enough money to service their mortgages. Sure, a complex and unscrupulous chain-of-supply to highly competitive retail outlets caused the horsemeat scandal. But, again in a highly unsuitable way, a genuine structural difficulty was being addressed. Too many people didn't earn enough money to afford beef of a decent provenance.
The trick is not just to "create" wealth, but to keep money moving round from business to business. The more money that is circulating, the more people are able to buy and sell the quality products and services that enrich working and domestic lives. It's hard, getting poor, damaged, deskilled people to be good producers – which makes it even harder to get them to be good consumers.The trick is not just to "create" wealth, but to keep money moving round from business to business. The more money that is circulating, the more people are able to buy and sell the quality products and services that enrich working and domestic lives. It's hard, getting poor, damaged, deskilled people to be good producers – which makes it even harder to get them to be good consumers.
Since the start of the financial crash, there has been endless talk about separating investment banking from high-street banking. Miliband mentioned it again on Thursday. But perhaps it isn't just banking that needs to be divided in this way – it's the entire economy. There needs to be a division between the abstract currency banks create by lending for investment in the future, and the hard currency of the real economy that people are paid in and buy things in.Since the start of the financial crash, there has been endless talk about separating investment banking from high-street banking. Miliband mentioned it again on Thursday. But perhaps it isn't just banking that needs to be divided in this way – it's the entire economy. There needs to be a division between the abstract currency banks create by lending for investment in the future, and the hard currency of the real economy that people are paid in and buy things in.
Sod the endless debate about whether high tax or low tax is the way to go. Abolish tax. Or, at least, transform its nature. Imagine you got a receipt from the government for the tax you paid each year. Imagine that receipt was called a "UK bond". You wouldn't get to keep the money that you earned to spend as you pleased – in the way that right-wing tax abolishers envisage things. But you'd get a different currency in return for it, which you could invest for the future in a specially designed investment fund. Tax would be explicitly acknowledged as something you paid in in the earlier part of adulthood, and withdrew at a later date.Sod the endless debate about whether high tax or low tax is the way to go. Abolish tax. Or, at least, transform its nature. Imagine you got a receipt from the government for the tax you paid each year. Imagine that receipt was called a "UK bond". You wouldn't get to keep the money that you earned to spend as you pleased – in the way that right-wing tax abolishers envisage things. But you'd get a different currency in return for it, which you could invest for the future in a specially designed investment fund. Tax would be explicitly acknowledged as something you paid in in the earlier part of adulthood, and withdrew at a later date.
How would it help the poor? It would revolutionise the way ready cash, even in the form of "state handouts", is perceived. Currently, the hateful perception is that money given to the poor is money wasted, on fags, booze, tellies, horseburgers, high-interest loans. Actually, the important thing is that it's spent – money is released into the economy, rests briefly in the hands of the poor, then heads straight into the coffers of businesses, from where it is taxed, reinvested, often abroad in this globalised world, or – highly problematically – hoarded offshore in tax-avoidance schemes. It's those people – the "wealth creators" that are starving the economy of money, not the people who are buying Tesco value burgers and subscriptions to Netflix. Doh!How would it help the poor? It would revolutionise the way ready cash, even in the form of "state handouts", is perceived. Currently, the hateful perception is that money given to the poor is money wasted, on fags, booze, tellies, horseburgers, high-interest loans. Actually, the important thing is that it's spent – money is released into the economy, rests briefly in the hands of the poor, then heads straight into the coffers of businesses, from where it is taxed, reinvested, often abroad in this globalised world, or – highly problematically – hoarded offshore in tax-avoidance schemes. It's those people – the "wealth creators" that are starving the economy of money, not the people who are buying Tesco value burgers and subscriptions to Netflix. Doh!
The great thing about this mad-sounding notion of mine is that it reveals the reality of spending. If there was a choate demarcation between spending on wise and sensible stuff for the future and spending on whatever gets you through the day, both saving and spending become their own rewards. People would mind less that their hard-earned cash was being taken from them, and "given to the poor", because they'd have their UK bond anyway, that they could save for the future. (Or even cash in at a private market rate, I guess, if they wanted to spend in the short term.) Result? The rich get richer and the poor get richer. Why? Because if you invest your UK bond with the government, having already paid the tax, the bond becomes a government asset as well. So there's more for the state to spend, while the citizen understands that in old age those taxes they paid will be helping to provide security and care. As they really ought to anyway, but all too often don't.The great thing about this mad-sounding notion of mine is that it reveals the reality of spending. If there was a choate demarcation between spending on wise and sensible stuff for the future and spending on whatever gets you through the day, both saving and spending become their own rewards. People would mind less that their hard-earned cash was being taken from them, and "given to the poor", because they'd have their UK bond anyway, that they could save for the future. (Or even cash in at a private market rate, I guess, if they wanted to spend in the short term.) Result? The rich get richer and the poor get richer. Why? Because if you invest your UK bond with the government, having already paid the tax, the bond becomes a government asset as well. So there's more for the state to spend, while the citizen understands that in old age those taxes they paid will be helping to provide security and care. As they really ought to anyway, but all too often don't.
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