The Piketty Pessimist

Have a read through:
http://blogs.reuters.com/felix-salmon/2014/04/25/the-piketty-pessimist/
Felix Salmon
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Thomas Piketty's book on Capital challenged that assumption that capitalism is a good thing, by showing that even if everybody plays by the rules, inequality is very likely to increase to obscene levels. It’s not the corrupt and venal robber barons who are the problem, it’s rather that unless we make a concerted effort to impede capitalism’s natural tendencies, the entire middle class is likely to get hollowed out.

And Felix Salmon, in his blog, sets out a summary of the views for and against this argument.
But it is the truth of Piketty's data that is most depressing - capitalism can continue to deliver greater and greater wealth inequality, as it supports individual ambitions to gain short term political power. So there is little incentive to find a solution.

".. right now we’re reverting to a state of affairs which is highly unfair but also both sustainable and, in its own way, unsurprising. Piketty has diagnosed a nasty condition. But I don’t think there’s a cure." - Felix Salmon

Here I disagree. I think that a tax on wealth, by taxing the use of money, could be implemented for two broad reasons.

Firstly - mainstream economics, and the banking industry, do understand the underlying problems with the nature of capitalism; of fractional reserve banking; and of the social problems generated by income and wealth inequality. So while many in these camps and industries will resist attempts to widen the tax base, many will also welcome the chance to be part of the solution.

Secondly - gaining short term political power and ascendancy, quickly pales when it translates into little social good. And much of western democratic government is aware that vested interests and lobby groups currently supply the majority of the data that is used in policy formulation.

So introducing a tax on the use of money is a "saleable" option if the debate focusses on three key points  -  Fair - Efficient - Wise

Fairness is easy to explain, and would be politically a huge bonus in the promise of a tiny tax for low wage earners.

Efficiency appeals to small and medium business, as it makes calculating and paying their tax burden both easy and nearly painless. It also appeals to the banking industry as it adds next to no cost to their IT systems, yet entrenches their interests as a key service supplier to the government.

Wisdom stems from the data that governments can access on the economic activity of their nation.
An insignificant tax on the use of money would be worth implementing for this data alone, any actual tax revenue being a bonus. To be able to drill down to regional and industry data, with next to live feeds, would vastly improve policy making and planning.

Introducing the Taxing of the Use of Money

On the weekend I was asked about how a government could introduce a tax on the use of money.
The view was that it would be politically impossible, and a bureaucratic nightmare.

If you think of it only as a revenue source - yes.

But think of the information flow back to the government. The tax is based on all transactions.
So once in place, no matter how small the revenue, it is possible to extrapolate back to the streams of money flows in various regions and industries.

So the first step is to legislate the tax at a very very tiny percentage - just sufficient to get the data flowing and for the banks to implement the collection and transfer to the government tax accounts.

Then once the tax is in place, Treasury can start to calculate the revenue flows from incremental percentage increases. And public education programs can be started to explain which taxes are being abandoned in exchange for what percentage increase, until the point where all other taxes and imposts have been removed.

The time scale and rate of change is a matter of bi-partisan and public support. But the increase in timely financial and economic information should make it attractive to all parties.

Stalled Debates on Climate Change

Been following the media over the last two weeks? Lots of sensible comments by the "little" people on taking action, lots of small scale good news stories and lots of suggestions on how "you can make a difference".
Lots of nothing from big business and government, lots of targets and future time frames and how much money has been "earmarked" to address climate change.

What is not being said is that diverse alternate energy programs - solar panels on roofs, solar hotwater in houses, bicycles, and public and cooperative transport solutions, don't offer profits to organisations and financial systems that make money by speculation, greasing political wheels, and funding monopolistic large infrastructure projects.

Huge desalination plants, clean coal power stations, geosequestation of CO2, nuclear power stations, hydrogen fuel cell cars, these are great money makers because only the very big industries and large financial groups can fund them - perfect financial monopolies.

The small step solutions are too democratic, too easy to copy, too domestic!!

Pity that they are just as effective. Look at electric cars - the car manufacturers will make some money producing them, but plug in charging will break the service station refueling monopoly and slash the oil company profits, not to mention reduce government fuel excise ( not as easily garnered from domestic electricity costs ) Fuel cell technology maintains the production-service station-tax structure, so it is little surprise it are getting government support and media airtime.

"Look to the money trail" is good advice. If you can not understand the inaction of government, or the illogical action like cutting domestic solar panel rebates, look at who stands to make or lose money - if it breaks a monopoly, if it's fairly easy to copy, if it's achievable by the ordinary person, you can bet it will be resisted, reduced, and struggle for government support.