They say there's no money. We say tax the rich!

Submitted by Matthew on 25 January, 2012 - 12:49

Since the start of the Thatcher government, in 1979, the rich have been getting spectacularly richer in Britain (as in many other countries), and the gap between rich and poor has been increasing.

The gap has continued to increase in the economic downturn since 2008. All the main political parties say that cuts in social spending and a squeeze on wages and benefits are necessary — even if they argue about the extent and the speed — because, as Ed Miliband puts it, “we are not going to have lots of money to spend”. In fact there is lots of money to spend. The question is, who has it, and what will they spend it on?

Between 2009 and 2011, the richest one thousand people in Britain — just one thousand of them — gained £137 billion, a 53% rise in their stash to £396 billion (Sunday Times Rich List).

Directors of the top 100 companies had a 49% rise in average earnings in 2010-1, to almost £2.7 million each, while average gross earnings for full-time workers fell 5.9% in real terms between April 2007 and November 2011.

That was not a blip. Payments to top-100 bosses have risen since 2000 from 47 times average earnings to 102 times.

According to a recent report by the OECD, income inequality among working-age people has risen faster in Britain since the mid-1970s than in any other well-off country.

Annual average income of the top 10% in 2008 was about 12 times higher than the bottom 10%’s average. The gap had increased from eight to one in 1985. The increase in the gap is driven mostly by the top one per cent whizzing higher and higher: their share of total income more than doubled between 1970 and 2005.

Research published in the Guardian on 23 January indicates that the better-off will continue to pull ahead from now until 2020. On present trends, not only people reliant on benefits and social services will fall behind. A solid chunk of 15 million people in households where adults have jobs and do not rely heavily on benefits will see their real wages fall or stagnate. The average annual disposable income in that category is set to be 8% lower in 2020 than in 2007.

Top pay has risen specially fast among those same financiers whose frantic money-juggling brought us the crash of 2008. Bonuses in high finance and in other industries totalled £22 billion in 2011.

There is lots of money around. There is lots of real wealth represented by that money. The problem is who has it, and how they use it.

Taxing the rich, and bringing the whole of high finance under public ownership and democratic control, to gear it to social goals, would abolish poverty and end gross economic inequality.

It would also permit the expansion of public services so that everyone able to work could have a decent, useful job, rather than some people being jobless and others being overworked, with the pressure of mass unemployment helping to keep them overworked, as at present.

Sometimes the rich say that inequality is regrettable, but not really hurtful. If the incomes and the wealth of the top few were redistributed among the population, they say, the average person would get only a little extra. But (they claim) the availability of great riches for a few spurs people to compete and excel, and thus increases the average well-being more than redistribution could.

It’s not true. There is no evidence that unequal societies are more productive and innovative than more equal ones. Probably they are less so.

Statistically, more equal societies have better rates of health, education, and public safety than more unequal societies on the same average level of income and wealth: they thus waste human productive resources less.

The Coalition government’s planned cuts for 2011-2015 total £18 billion from benefits, and £16 billion from education and other local services.

They are big cuts. But the amounts going to the wealthy — £22 billion in bonuses for a single year, £137 billion gain in wealth by the top one thousand over a single year — are much bigger.

In 2008 the Government supplied £1100 billion in cash, credit, and guarantees to banks on the brink of collapse. £1100 billion! There was “lots of money” for the Government to deploy then.

Most of the £1100 billion was notional in the sense that it was not cash, but guarantees, loan facilities that might not be used, etc. But amidst it was a real transfer of cash from the Government to the ailing banks, some dozens of billions at least.

Another argument used to counter the case for taxing the rich and expropriating the banks and financial institutions is that much of the wealth of the rich is not hard cash which could easily be switched to other purposes.

That is partly true. Some of their wealth is houses, cars, and so on, which could be redirected to social purposes. Some of it is “fictitious capital”. It is pieces of paper, shares, bonds, and so on, which are essentially tickets to shares in future surplus value, i.e., in future wealth-production.

On the latest figures (2006-8), total individual wealth in Britain was about £9,000 billion. That was made up of £3,500 billion in property wealth and £1,000 billion in other physical assets; £3,500 billion in private pension wealth; and £1,000 billion in financial wealth.

The total of notes and coins in circulation is £63 billion (latest figures, December 2011).

That total has not been shrinking. It has gone up about 26% since mid-2008, with the Bank of England pushing to get more notes and coins in the hands of the banks so as to limit the economic downturn.

Capitalist crises are not caused by simple lack of cash in circulation. If there were such a lack, then the government could easily fix it just by printing more notes.

Most financial wealth is not held as notes or coins. People holding large amounts of shares or bonds are not holding cash which could otherwise be spent on social goals.

They are, in essence, holding social power: certificates which enable them to grab a share of future wealth production, and which embody the capitalist imperatives shaping future production according to the priorities of profit and revenues for the wealthy.

How can it be that we see scarcities of cash all around us — in our own pockets and purses, in our neighbours’. and evidently in the tills of the thousands of shops in working-class areas that have shut in recent years — and yet the total of cash in circulation has increased substantially?

The gap is not all, or mostly, explained by the rich spending more, though they have done that. It is mostly just that the cash is circulating more slowly.

Businesses usually keep as small a cash reserve as they can. If they have more revenue than they want to invest straight away, they buy shares, bonds, and other financial assets that yield them at least limited profits. But currently businesses in Britain are holding about £70 billion in cash (mostly in electronic form, in bank accounts, rather than in notes and coins).

Worried about the economic crisis, they are holding more cash so as to have bigger buffers against sudden calamities. Banks, too, are holding more cash in reserve, and lending out proportionally less.

That is how capitalist downturns work: reduced market demand makes firms and banks hold on to more cash, and extend less credit; and that, in turn, reduces market demand further.

The answer to the crisis is not just to tax the rich (though that will be a start), and not just to talk vaguely about more “responsible” and “moral” variants of capitalism, but to combat and replace the whole logic of capitalism, a system that makes the lives of the many depend on the profit priorities of the few.

Some people argue that whatever the justices or injustices, the government has no choice but to fix its budget deficit, and if it did things like taxing the rich heavily or expropriating the banks, then the world financial markets would strike it down. Financiers would refuse to buy British bonds (IOUs), and so any good results from taxing the rich would be immediately overwhelmed.

It’s true: today’s huge, fast-moving, global financial markets, where trillions flow across borders every day, can cripple governments very quickly.

Nevertheless, even this government could be pushed to delay and reduce social cuts, and to levy some more taxes on the rich. It’s not pushing against the limits of what the global financial markets will allow. Current policies reflect high finance being a more powerful lobby against taxes in its area than the labour movement is against cuts in ours, much more than the limits put on individual governments by global markets.

Of course, a government taxing the rich really heavily would suffer a flight of capital as much as or more than one running big budget deficits.

The only answer to the power of global finance is to get workers’ governments which will take over high finance, put it under public ownership and democratic control, stop the free flow of capital across borders, and create new forms of cross-border economic ties based on working-class cooperation and solidarity. A big fightback here, flagging up radical alternatives, will encourage resistance elsewhere in Europe, and vice versa. The crisis is global; it would be foolish to think we can deal with it by working-class action only within the framework of single countries.

Our immediate demands should include an outline workers’ plan for the crisis:

• Sack the bank bosses — for a single, publicly-owned, democratically controlled banking, pensions and mortgage service.

• Jobs for all — fight job losses, cut work hours, expand public services.

• Inflation-proof wages, pensions and benefits; attack inequality.

• Decent homes for all.

• Stop and reverse privatisation — top quality public services for all — tax the rich!

• Open the bosses’ books! Fight for workers’ control!

• Fight for democracy; and, most of all, for the replacement of the anti-trade union laws with a positive charter of workers’ rights (to unionise, strike, picket, take solidarity action, etc.).

• For a sustainable economy — nationalise energy and transport, develop “workers’ plans”.

• For a workers’ government — a government based on and accountable to a revived and democratised labour movement, and serving the working class as loyally as the coalition serves the bosses and bankers.

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