John Mauldin writes
That income inequality stifles growth is not simply the idea of two economists in St. Louis. It is a widely held view that pervades almost the entire academic economics establishment. Nobel prize-winning economist Joseph Stiglitz has been pushing such an idea for some time (along with Paul Krugman, et al.); and a recent IMF paper suggests that slow growth is a direct result of income inequality, simply dismissing any so-called “right-wing” ideas that call into question the authors’ logic or methodology.
The suggestion that income inequality stifles growth is a fraud, designed to promote a socialist agenda of redistributing wealth to the poor. We are currently experiencing slow growth because of the GFC, not because of rising income inequality.
The real question that needs to be answered is: which system best promotes growth and improves the living standards of the broad population? Evidence of the last 100 years is difficult to dispute. Socialism has an abysmal track record in uplifting the poor, while capitalism has fueled a massive upliftment in living standards over more than a century. High rates of tax on top income earners kills growth and redistribution to the impoverished does little to improve their living standards, whereas low tax rates encourage growth and raise living standards.
To recover from the GFC we need to allow capitalism to flourish instead of impeding it at every turn.
Read more at The Problem with Keynesianism | John Mauldin.
The logic of promoting capitalism v socialism is inescapable. Why does this obvious logic escape so many???
…because people are driven by emotions rather than logic.
The problem is that the argument is dominated by the set in concrete assumption that there are only two alternatives, capitalism or socialism. In reality socialism is a bandaid solution for the consequences of capitalism as currently practised, not a viable alternative.
The assumption that it is a matter of Capitalism verses Marxism or Socialism keeps the public debate frozen and people polarised. Then Socialism is a useful foil for those who do not want change.
Our current tax system focussing on taxing wages and business had its historical origins in 18th century Britain and was formulated to keep the tax burden off the elites of that time, the landed aristocracy. Even though the world has changed so much since then the tax system still looks after the 0.1%
Many people can arrange not to pay income tax, or receive more in benefits than they pay in tax. Then there’s the deadweight losses in the system, estimated at 32% of all taxes collected in our inefficient system.
If we are serious about funding health, education and infrastructure, then we would tax land, natural resources and government-created monopolies.
These things are not created by any individuals, but are, by right, the property of the whole community. All could be efficient tax bases, simple to collect and hard to avoid.
When these economic rents of land, its resources, and monopolies are not collected as revenue they are privatised and result in the extreme wealth and income inequality, and huge private debt for the masses, that is well documented.
Perhaps some of the quantitative easing trillions should be given to the middle class. This could just result in a “trickle up” effect.
However, providing middle class welfare is unthinkable.
Providing welfare to the rich, of course, is essential.
QE does not ‘give’ money to anyone. It merely replaces one form of govt debt (Treasuries) with another (excess bank reserves held at the Fed).
…..and occasionally with Perpetual Zero-Coupon Treasury Notes (also known as Dollars).
Every time socialism competes against more free market economies in similiar geographies, capitalism has won. North vs. South Korea, East vs. West Germany, Russia vs. Western Europe, China (pre-deng) vs. Japan, Burma (or whatever it is called now) vs. Malaysia, Albania vs. Italy. The head of the European central bank says “Europe’s experiment with socialism is over, we can’t afford it.” And now progressives in the U.S. have decided that we need more socialism. Great call!