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Nobel Prize-winning economist Joseph Stiglitz says the US has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers.
“In the US and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview overnight in Paris. “The problems are worse than they were in 2007 before the crisis.”
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The former prime minister Tony Blair has received millions of pounds through an unusual mixture of commercial, charitable and religious income streams. Since he stepped down from office in 2007, his financial affairs have been described by observers as “Byzantine” and “opaque”. The Guardian is now launching an online competition offering a prize to the person who can shine the brightest light on those financial structures.
Blair has a commercial consultancy, called Tony Blair Associates, plus jobs advising a US bank and a Swiss insurer. He has a multimillion pound book deal. He also has a charity, the Tony Blair Africa Governance Initiative, and another called the Tony Blair Faith Foundation. But much of the income, which includes charitable donations from other sources, has been funnelled through a structure called Windrush Ventures No 3 Limited Partnership. Our contest asks: what is Windrush?
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The conference title says it all. And it won’t come as …
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Keep in the know with news and information from our new Podcast offering. See what we will be sharing with you in this introduction by Fred Harrison.
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The conference title says it all. And it won’t come as …
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In the discussion of how government ought to raise its revenue, the message delivered by Fred Harrison is powerful and makes all the sense in the world. The question is how to get the process going in the right direction: to capture unearned income flows and to lift the burden from earning income — and from the incomes of people in the lowest half of those in society.
I would like to hear Fred’s reaction to my proposal to work for the restructuring of the income tax to become truly progressive as well as simple to comply with. How to do this? First, exempt all individual incomes up to some amount (I suggest the national median income). No other exemptions or deductions would be permitted. Then, above the median income, gradually increasing rates of taxation would be applied to higher ranges of income. By this process, unearned income flows (most of which are rent-derived) would be captured where today they are privatized. The tax rates could be set during the budgeting process in order (get ready) actually balance the budget and thereby eliminate the necessity of government to borrow (at interest) from the financially well-off, then tax the productive sectors of the economy in order to service escalating debt.
As usual great discussion Ross and Fred. I have a few thoughts I would like to share with you concerning our world financial system.
I believe we are witnessing the economic elite making another attempt to control the world financial system.
For us it started in 1913 with the establishment of the Federal Reserve in the USA. The 1914 to 1918 First World War was about to begin. This tragic event would give the economic elite an opportunity to make millions of dollars. The tragic event of the Second World War 1934 to 1945 not only gave the economic elite the opporunity to make millions of dollars but it also set up North America as the only place which had the natural resources, population and money to manufacture what the world needed. This set the stage for the economic elite to prosper for sixty-four more years extracting millions and millions of dollars from the North American economy. Of course there is a trickle down effect that the general public benefits from. North America lived off the backs of the poorer nations for most of this time. The economic elite invested into the countries that were decimated by World War Two (at a cost to the countries of course). During this time 1930 to 1945 the following is also put in place:
1930 bank of International Settlemednts is established
1944 International Monetary Fund is established
1945 World Bank is established
The economic elite now have all the tools they need to control the financial system.
In 1971 President Richard Nixon takes the world off of the gold standard and creates fiat currency This is one of the greatest achievements of the economic elite. All currency as well as gold and silver are tied to the fiat currency.
As the G7 economies prosper their wages go up and standard of living grows. This cuts into the economic elites’s bottom line. There needs to be a change or economic shift. That shift is to the B.R.I.C. countries along with South East Asia.
Ask yourself who manufactures most of the world’s consumer products today?
How do North American and the rest of the G7 who demand $8.00 per hour to $35.00 per hour compete with nations that are willing to work for $1.00 per day to $23.00 per day making the products we consume?
The fix is in and the G7 are going to have to take less.
Who are the economic elites? I believe there are many layers of economic elites. As an example a landlord who charges rent to the rentor but does not maintain the residence and lets the residence fall into disrepair to the point that it is not fit to live in.
To some Govenments that do not listen to the people.
To some major corporations that are only interested in the dollar bottom line.
To some banks and investment houses that will try all types of exotic investments to make money.
In some ways we are all involved. Humanity itself has to change for the betterment of ourselves and the world.
Dave McGowan
Edward, I think you may be missing a fundamental part of Fred’s analysis because what you’re advocating is essentially an income tax. As income is earned your proposal would end up penalising the productive as well as the richer landlords because high incomes can come from either source. Taxing land directly deals with the landlords and speculators by making them pay for the services that add value to their property without any collateral damage to wage earners who happen to be in productive and well paid jobs.
It also doesn’t deal with the huge ‘capital gains’ that land speculators receive during land booms; money for nothing. a land value tax would stop that stone dead if applied properly.
I agree with the assessment as to the mess the world economy is in, but believe the problems to be much deeper rooted.
Whether you like it or not, protectionism is coming and is inevitable – not that it will solve anything. America and Europe will not stand idly by and allow their economies to be massacred in this way.
What we are seeing today is the net result of the unravelling of the policies put in place by Thatcher/Reagan and the falacious argument that our industries would either learn to grow up and compete more efficiently or fade away. This was akin to drinking bleach – for it may well kill all known germs, but in the process will kill you too! The flaw in the argument was that it was impossible to compete with countries like China and India whose costs are cheaper, not just because they are more efficient, but because they have lower standards of living and it is therefore significantly cheaper to produce. We stood no chance. Instead we set ourselves on the road to ruin by turning our economies into service industries and relying on the financial sector to create ‘phony wealth’.
Globalisation complicated matters further and we thereby effectively created a synthetic world economy where China, India and Japan were entirely dependent on America’s, UK’s, Spain’s and Ireland’s consumption to fuel their production – only the consumption was fuelled artificially, via asset bubbles and other phony credit mechanisms.
Now the music has stopped, our governments are simply acting like King Canute trying to turn back the tide, i.e. desperately throwing everything at the symptom (lack of easy money), through schemes like QE, car scrappage schemes, non-existent interest rates etc. and ignoring the cause (the artificial economy we have created over the last 30 years). All they are doing is delaying the inevitable by months, i.e. the total collapse of the world economic system.
However, the answer lies not in tinkering with the system, i.e. focusing on taxing either consumption (VAT, which favours the poor) or production (Income Tax, which favours the rich). Unless we mature and understand that continual economic growth is a mirage and instead CUT BOTH production and consumption the planet will collapse. The credit crisis is our wake-up call.
I concur with Chefdafe, and want to add that progressive income taxes wouldn’t in the end penalize speculation. First of all: income and capital are easily hidden. The real rich always find ways to avoid taxation, they just keep their money in their businesses’ accounts and if they want to spend it they pay fake invoices to foreign companies who give it back to them in cash. Going after capital and profits? Better policies against fraud? These are the socialist recipes, and we have 100 years of empirical evidence that they have not worked. The only ones that constantly get penalized are the productive members of society, the middle class.
Second, and most importantly: Taxing income and not property will not force land in to production, and therefore not end speculation. The most important aspect of the land value taxation principle is that it is independent of the activity, and rests on the value of land, which is defined by its most productive use. Land owners are therefore forced to use it most productively. When taxing on the income only, land owners can easily leave their land idle for as long as they want without being penalized. It is therefore of no help.
What are the macro-economic effects of taxation?
labour -> less labour -> more expensive labour
capital -> less capital -> more expensive capital
but since the supply of land is fixed
land -> more productive use of land + cheaper land