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Sunday, 2 September 2012

Fair Enough?

The election campaign in the USA is now in full swing, with unprecedentedly large sums being spent, largely on advertising that is virulently abusive of the candidates, their histories and the probable effect of their policies. The incumbent President carries a heavy burden of blame for the ongoing - relative - stagnation of the US economy; while his challenger carries the double burden of being a Mormon [which most people privately dismiss as a nutty religion] and being rich, with most of his wealth having been gained by his own efforts. The extreme disparity in wealth between the very rich and the poor in the USA is the greatest that it has ever been, certainly since the abolition of slavery. Thus there is a constant call that the rich - and especially any rich men or women who dare to enter politics - should be made to surrender some of their wealth, and/or more of their income, through revised taxation. There is behind this the assertion that this would simply be 'fair'.

In the UK, where a weak coalition government is struggling to achieve any policy consensus that may have a chance of stimulating economic growth, there is an even more strident call from one of the coalition parties [the Liberal democrats] for taxation of the rich to be increased, probably by introducing a wealth tax [sometimes narrowed down to a 'mansion tax'] on the grounds that this would simply be 'fair'.

In Ireland, Spain, Portugal, Italy and Greece, governments have formally agreed to impose highly restrictive policies, which include higher taxation and reduced state borrowing. In these countries there is resentment of those who prospered greatly during the credit bubble years at the start of this century, exacerbated by anger at those who use their guile and their contacts to move money out of the country before it is exposed to the risks of higher taxation and the threat of devaluation if the country is forced out of the eurozone. The rich - and the comfortable, especially senior bureaucrats and politicians - are vilified for their [real or imagined] past depredations against the economy: and the whole farrago of criticism is crystallised in the call "it is not fair".

China has been rocked by a scandal at the centre of which is a party official whose wife had become deeply embroiled with a British businessman who was helping her to move massive sums of money out of China. Both in China and abroad this case is regarded as an example of what has been happening on an heroic scale: officials have protected their families and associates as they have accumulated massive fortunes, and tried to move significant sums to the relative security of foreign banks and assets. For a communist country to permit the emergence of extreme inequality, in direct opposition to the most basic Marxist principles, is hugely embarrassing: and popular feeling can be summarised in the assertion that "this is not fair!"

One could circumvent the globe many times and find similar assertions about the state of society and of the economy in the great majority of countries. But while there is a widespread feeling that the distribution of wealth [and with it, the distribution of power] is 'not fair'; there is no clear and universal model of what would be 'fair'.

The rich can say, with considerable justice, in the UK or in France or in many other countries, that far too much tax is taken already to keep hereditary paupers in comfortable idleness; free to take and to trade in drugs, bootleg alcohol and smuggled cigarettes; and prone to civil disturbance. These people are propitiated because they could have votes; even though a very large proportion of them do not exercise that right, or even register as voters. In the USA the Congress is very careful to keep benefits for able-bodied adults of working age on a temporary basis, so there is a constant pressure on them to seek work; but for the elderly who are 'on Welfare' and potentially for people receiving treatment under 'Obamacare'  there is no time limit to their dependency. Thus although the structures are different as between the USA and Western Europe, the underlying issue is very similar. The relatively new aspect to the problem is that the concept of 'fairness' is becoming confounded with the necessary debate about the capacity of the economy [and of the social system, and of the political arrangements that prevail] to tackle the closely related issues of growing public debt and of long-term benefit dependency. People kept by the state are usually not contributing either to economic activity or to taxation of income or of wealth: so it is a fair question for the rich to ask:"where is the fairness in taking more taxation from productive individuals and dissipating it is the perpetuation of idleness?"

This question is ignored by the political charlatans who offer the voters the proposition that it is 'fair' to soak the rich, without questioning the ways in which government money is spent and the efficiency of that spending in promoting development of the real economy. Yet this is the nub of the issue, and that point must properly be drawn into the political debate.

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