Taxes and Davos

Another year, another Davos, another wildly divergent set of articles on what the super-rich have planned for the rest of us.

Consider the contrasting takes in two news stories today, one in The New York Times, the other in The Washington Post. The contrast is clear even before you read the stories, since they’re expressed in the headlines. “Ahead of Davos, even the 1% are worried about inequality,” reads the headline in the Post. Au contraire, says the Times headline: “Populism is Waning, Which is Reason to Party in Davos.”

Worried? Indifferent? Either way, the Davosites do agree on a common fact: Capital income has been soaring, while wage income has been lagging farther and farther behind. In the United States, that gap has just been pried wider by the GOP’s new tax law. As yet another story in today’s Times documents, the bonuses that Bank of America will pay its employees come to just 5 percent of the savings it will realize this year from the tax cuts. Apple’s bonuses to its workers will come to $300 million; its estimated tax savings this year on just one provision in the new law will come to $40 billion. An S&P Global report says that 75 percent of banks’ reduced taxes will be returned to shareholders through additional buybacks or higher dividends.

So if those Davos Men (and Women, of whom there are fewer) who are concerned about rising inequality are even remotely serious about narrowing the gap between themselves and everyone else, here are a couple ideas they might consider in the intervals between their deal-making and sybaritic pleasures: How about taxing capital at a higher rate than earned income? How about requiring worker representation on corporate boards, at a minimum of half the board seats? How about a new law setting aside a share of capital income to build worker-controlled organizations?

Of course, the Davos intervals between deal-making and sybaritic pleasures can only be measured nanoseconds. ~ HAROLD MEYERSON

Closing the Exits for Capital

Closing the Exit for Capital

Posted by Devaka Gunawardena on 10.20.17
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by Devaka Gunawardena

Since the financial crisis of 2008, capitalism has faced greater scrutiny. There’s growing consensus, even among mainstream economists, that neoclassical models that ignore the inherent irrationality of the financial system are flawed. In addition, austerity has directly undermined most people’s livelihoods, while making the rich even richer. There is much more space after the financial crisis of 2008 to critique financial speculation and the drastic reduction in public spending. Still, it remains unclear how to work toward socialism. Rhetoric opposing austerity doesn’t necessarily imply overcoming capitalism.
Read the entire piece here. http://www.dsausa.org/closing_the_exit_for_capital

The Melting of Social Democracy

Hotshot French economist Thomas Piketty, of the Paris School of Economics, looked at the major democracies with North Atlantic coastlines over the past couple of centuries. He saw five striking facts: First, ownership of private wealth—with its power to command resources, dictate where and how people would work, and shape politics—was always highly concentrated. Second, 150 years—six generations—ago, the ratio of a country’s total private wealth to its total annual income was about six. Third, 50 years—two generations—ago, that capital-income ratio was about three. Fourth, over the past two generations that capital-income ratio has been rising rapidly. Fifth, the flow of income to the owner of the dollar capital did not rise when capital was relatively scarce, but plodded along at a typical net rate of profit of about 5% per year generation after generation. He wondered what these facts predicted for the shape of the major North Atlantic economies in the 21st century. And so he wrote a big book, Capital in the Twenty-First Century, that was published last year.

Capital in the Twenty-First Century- A Review

 Capital, Kapital, and the Continuing Struggle  By Bill Barclay

Capital in the Twenty-First Century

By Thomas Piketty

What can you say about a book that has been reviewed dozens of times, was a New York Times best seller for three weeks, led to numerous book discussion groups, and has been a cultural phenomenon? You can say that Thomas Piketty’s Capital in the Twenty-First Century (here­after Capital) is worth the fuss. It has brought what socialists have known for a long time to the wider public.

Pushing Paradigm Change

In the last 40 years, the dominant paradigm in economics has been that of Friedrich Hayek’s “catal­laxy,” defi ned as “the

order brought about by the mutual adjust­ment of many indi­vidual economies in a market.” Translation: unregulated markets will eventually work out to the benefit of all. In support of that para­digm, Nobel Prize win­ner Robert Lucas has argued that “of the ten­dencies that are harm­ful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on

questions of distribu­tion...” And focusing on distribution is exactly what Piketty does. He analyzes the distribution of income and wealth and their determinants for the past 250 years to show that unregulated capitalism is making the rich richer and the rest of us poorer. This will not come as a surprise to those who have been paying attention. What’s new is that our economic and po­litical elites have taken notice, some favorably (Paul Krugman), others less so (the Wall Street Journal editorial board). Some whose praise we might not expect argue that the book raises important ques­tions (the World Bank’s Branko Milanovic). But none are ignoring it.

A major reason for the recognition, grudging or otherwise, of Capital, is its popular reception. Every­where, individuals, discussion groups, and meetups have been reading and talking about the book—or at least part of it. One analysis maintains that most people reading electronic versions of Capital do not get past page 26, but you can learn a lot from those pages.

A significant part of the cultural phenomenon is a matter of timing, but here luck and hard work rein­force each other. Although Occupy is given the credit for popularizing the 1% versus 99% meme fi rst artic­ulated by economist Joseph Stiglitz, it is Piketty and his colleague Emmanuel Saez who have been doing most of the heavy lifting, with more than a decade of work on income concentration. The combination resulted in what an economist might call a virtuous circle: Piketty and Saez labor in (relative) obscurity

to increase focus on the

top 1%, Occupy’s archi­tects use their work in a mass mobilization, and Piketty publishes a book that further opens the door for new politi­cal thinking and orga­nizing around the prob­lem of inequality.