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John Quiggin 
America sure is a perplexing place.
Some of the best science, the noblest of people, the most innovative music, literature and art has its origins in the United States. Some of the world’s most inspiring people have been Americans. Yet within the bounds of that jurisdiction lurk also the ugliest and darkest of human passions. I can’t imagine how you could count it but as the recent hysteria over health reform reminds us, they surely punch above their weight in numbers of unhinged and misanthropic people per capita.
In America, it seems every group of psychopaths imaginable has a support group. There are “birthers”, creationists, open racists, gun nuts, states’ righters, anti-abortionists, death penalty proponents, people still fighting the Cold War and now, anti-tax populists, the people who think giving access to health care to millions of fellow Americans before they are on death’s door in a plan that looks like the Republican responses to Clinton in 1994 is the flagstone of the international socialist revolution. The latest rubric for this is the so-called “tea-party” movement, which is kind of apt, because watching on the TV last night, some of them did look like extras from a scen out of Alice in Wonderland.
I’ve often wondered why this is so. America, as most know but forget, is not nearly as secular as one might suppose. One tends to think of countries like Iran or Saudi Arabia when one thinks of religious absolutism, but American fundamentalism is surely every bit as rooted at the level of the populace as in either of these places. The intersection of this religious foundation with slavery and the broader colonising and pioneering ethos has left scars which are still not healed. Watching the braying mob outside the Congress, and recalling those hurling racial epithets at Lewis the other day, one can see that there are people who aren’t happy if they can’t be part of a lynching.
In June of 1933, Trotsky in a pamplet entitled What is National Socialism? wrote the following:
The program with which National Socialism came to power reminds one very much – alas – of a Jewish department store in an obscure province. What won’t you find here – cheap in price and in quality still lower! Recollections of the “happy” days of free competition, and hazy evocations of the stability of class society; hopes for the regeneration of the colonial empire, and dreams of a shut-in economy; phrases about a return from Roman law back to the Germanic, and pleas for an American moratorium; an envious hostility to inequality in the person of a proprietor in an automobile, and animal fear of equality in the person of a worker in a cap and without a collar; the frenzy of nationalism, and the fear of world creditors … all the refuse of international political thought has gone to fill up the spiritual treasury of the new Germanic Messianism.
Fascism has opened up the depths of society for politics. Today, not only in peasant homes but also in city skyscrapers, there lives alongside of the twentieth century the tenth or the thirteenth. A hundred million people use electricity and still believe in the magic power of signs and exorcisms. The Pope of Rome broadcasts over the radio about the miraculous transformation of water into wine. Movie stars go to mediums. Aviators who pilot miraculous mechanisms created by man’s genius wear amulets on their sweaters. What inexhaustible reserves they possess of darkness, ignorance, and savagery! Despair has raised them to their feet fascism has given them a banner. Everything that should have been eliminated from the national organism in the form of cultural excrement in the course of the normal development of society has now come gushing out from the throat; capitalist society is puking up the undigested barbarism. Such is the physiology of National Socialism.
These people are not (yet) for the most part fascists, but that, in the midst of this profound disturbance in US and world capitalism, they have found their voice and congealed portends something quite ominous.
Forget Iceland, forget Greece, – now the real problem emerges: The IMF has finally, coyly, admitted that the whole capitalist world is bankrupt: see –
http://tinyurl.com/IMF-debt-warning
While we have just gone through a GFC primarily based on just housing finance; what happens when the same problems emerge across every sector of all capitalist economies.
There were similar warnings with respect to housing debt, in the year in the lead up to the GFC, and this is now what is emerging for the next broader event.
The tragedy is that debt can be easily controlled by Governments, but because of threats from capitalists, Governments do nothing, but hope that future population growth or some future ‘boom’ will solve all.
So far I have noticed newspapers looking for a ‘education exports boom’, ‘yellowcake boom’, and ‘China boom’.
As ever, the underlying problem, is to get rid of capitalism. It is the only way the world will survive.
The Victorian Government’s War against Wildlife
After the Epping community, including a school teacher, school children and volutary wildlife carers worked for months to plan to relocate 21 kangaroos trapped by the Victorian Government’s irresponsible overdevelopment of the area, the Victorian (so-called) Department of Sustainability sneakily, behind everyone’s backs, had the kangaroos killed.
A memorial for the murdered kangaroos will be held on Sunday 28 March at 2pm at Oleander Drive off McDonalds Rd in South Morang.
I have a question about taxation, specifically about GST.
GST is a goods and services tax. Suppose a decision is reached on a positive carbon tax of x$ per t of ghg emission. I say GST should be calculated on the before carbon tax amount because carbon tax is meant to deal with a negative externality in the production process.
Any opinions?
So, Chris – an admission that many governments have overspent and are close to bankruptcy means that it is the time to hand more power over to governments, huh? Yes, I can understand that sort of logic.
So, next time a bank is looking shaky, I suppose you would advocate making that bank the central bank? Perhaps compelling us to deposit there?
Hmmmm, “interesting” logic at best.
EG,
In a tradable (per Rudd) system the permits are a financial instrument and therefore GST exempt.
If a carbon tax is imposed it would be very difficult to impose the GST on a before CT amount as the CT amount would be bundled up in the final cost of the goods and services supplied.
@Ernestine Gross
Thye right to dump effluent is a service like any other and making special rules for CO2 would thus be a subsidy. GST gets imposed last in my opinion.
After all, the full value of GST is returned to the public in one form or another. Of course, an ETS could avoid this problem.
Well done Fran Barlow for an exegesis that so fully explains the SA Election, Australian politics at the mo, in fact global politics and globalisation as directed from the bread and circuses plebs of Ozark county, Arkansas, USA, in their imposed ignorance, as presented by MSM.
Big busines wants to takeover something else somewhere; media upsets the rednecks and they’ll call for an invasion and bloodshed, which politicians will not resist for the basis upon which de facto world government is predicated upon, eg “democracy”is nothing more or better than the conditioned responses of manufactured or real idiots; the vote of the plebs.
Chris W said;
“As ever, the underlying problem, is to get rid of capitalism. It is the only way the world will survive.”
Chris, only a commo could make such a statement. Maybe you missed ‘the wall’ coming down after 65 years of communist dysfunction?
Fran, if you think the US is on the threshold of facism you are definitly delusional.
@Tony G
It is simple, simple intellectual rigor.
If you read political economy properly (Ricardo, Smith, Marx, Keynes) then it is clear that capitalism leads to social and economic collapse.
This has nothing to do with your concepts at all.
So when will the wall between the United Sates and Mexico come down?
When will the wall through Gaza come down?
What do you want? walls coming down, or banking systems crashing to the ground.
Maybe people like you should forget about walls for a while and attend to deeper issues.
@Tony G
You obviously don’t read for meaning. I made no such claim. The teaparty delusionals remain a tiny and noisy minority, the numbers of which are very probably inflated by the lobbying firms acting on behalf paying people to show up and make the kind of spectacle that will get on TV. Most of them probably aren’t putative fascists.
That they can exist at all in numbers big enough to be the subject of regular discussion tells us something about unresolved aspects of US culture and the need to find rational solutions to problems of human need.
@Andrew Reynolds
Andrew the problem is not just ‘governments have overspent’.
The problem, in its current guise, is debt of all types, public, private, and derivative.
But this debt problem, ranted-on about by Keen and Co., is a mere symptom of a general crisis tendency that can also manifest itself as, inflation, unemployment, or impoverishment of the population (or any mixture of these).
We have the debt problem now, because capitalists in the 1980’s and 1990’s struggled with the inflation/unemployment symptoms then bursting forth.
They (Keating, Hawke, Thatcher, Regan) did not tell us that they were only making matters worse for future generations in 2010.
Today’s debt is yesterday’s unemployment and inflation.
The only way to solve the debt crisis is to skyrocket unemployment or inflation.
The only way to solve unemployment and inflation is to skyrocket debt.
This is capitalism, irrespective of government.
Chris W said;
” it is clear that capitalism leads to social and economic collapse.”
Where is the evidence for that?
One thing is clear, keeping a costly bloated government at bay and its filthy hands out of peoples pockets, is the best way to stave off social and economic collapse.
Sorry Fran I must of misread it.
@Andrew Reynolds
Thanks for your reply. If a carbon tax is levied at the source then the accounting problem you mention is not a serious one. I take it as given that a cap and trade (ETS) would not attract a GST. A carbon tas should leave GST revenue unchanged. It seems to me there are a few questions of detail left.
Derr…. Um…… where do you think?
http://tinyurl.com/IMF-debt-warning
Ann Pettifor’s “Debtonation blog” is also useful.
The group ChristianAid has also produced useful analysis in the past, particularly on international aspects.
@Chris Warren ,
My understanding of the Chartalist account of monetary creation (which is perhaps the best available account atm) is that national debts, being debts that a nation creates in a currency which it itself endows with value, are not capable of “bankrupting” a country in any meaningful sense. “Unlike the mainstream rhetoric, insolvency is never an issue with deficits. The only danger with fiscal policy is inflation which would arise if the government pushed nominal spending growth above the real capacity of the economy to absorb it.” Austerity programs and balanced budgets are like medieval hair shirts – the suffering impresses onlookers with your piety to the faith (of neo-liberal mercantilism) but it doesn’t actually achieve anything.
@James
A proper, natural, money creations, including some appropriate debt, is not capable of bankrupting a economy.
Deficits by themselves are mundane and threaten no-one.
The problem arises when any entity pushes spending above the real capacity of the economy, cycle after cycle.
However national and personal debt, created as a bailout, stimulus, or to fund capitalist price structures is not of this type.
There is good debt, and bad debt. Inflation and debt are, in essence, the same phenomena.
However it is also possible to conceive of a totally debt-free, interest-free economy. What happens to IS-LM then?
EG – in practice I suspect that it does not matter a whole lot whether GST is applied or not. For exported goods GST does not apply. For goods consumed domestically a given cap under the ETS will set a higher carbon price if GST does not apply and a lower one if GST does not apply. Either way the cap will be met and the same amount of revenue extracted. It may however have implications for how much the states get. For reasons of administrative simplicity I think GST should apply. I believe this is currently the case with fuel taxes.
Chris – if by capitalism you mean government bailouts of private banks and businesses, government debt to fund adventureous wars, economic stimulus packages and government spending oriented towards consumption and the pump priming of demand rather than investment in core infrastructure then I share your sentiment that these things should be brought to an end. However such folly is rooted in ancient tradition and I doubt anything you or I might wish for is going to suddenly change the direction of society. Some key institutions may collapse or come to pass buy I suspect the debate about statism versus markets will be raging a hundred years from now just as strongly as it does today.
TerjeP, I have heard you say previously that CO_2 emissions reductions should be achieved through a revenue neutral carbon tax. This means we would have to cut some other tax. I’m quite sympathetic to this idea, provided the tax change didn’t include any increase in regressivity (along the income scale) of the tax system.
Since the GST is also regressive, it would seem an obvious candidate. Say, for every $10/ton we could cut the GST rate by 2%. Those numbers are just wild guesses, but probably not totally wrong. You may argue that this society should increase it’s tax regressivity anyhow, but surely climate change mitigation should not be mixed up in that debate.
Much the same result could be achieved with an ETS, so long as no permits were given away to polluters. It would then just be a bit harder to estimate how much GST you should cut, for every cut in allowable emissions. What does everyone think of this? TerjeP, if you don’t agree with me, what other kind of tax would you cut?
EG,
I think that, as the GST is an input tax then the prices of those inputs affect the amount of tax raised. If there is a meaningful carbon tax then that would (by necessity) flow through to GST revenue. If, however, this was balanced by a reduction to other taxation to leave overall revenue unchanged I would expect that GST revenue may also be substantially unchanged – but with sectoral changes as the sectoral impact of a CT would be unlikely to be matched by the sectoral impact of any tax reduction.
.
Sam,
The problem with treating the GST in this way is that the revenue from the GST largely goes to the States and the impact of a CT would also disproportionately hit the States (through their owned coal fired power plants). The States could be almost guaranteed to stop it. If you thought that reducing regressivity was a good outcome, then (IMHO) rebalancing through the income tax system would be better.
.
Chris,
It may be possible to conceive of a totally debt- and interest-free economy, but this is unlikely to be either economically efficient (in fact it is likely to be seriously injurious to the people living there) or something that can occur without serious compulsion. Debt and interest (or at least some compensation for the time value of money) are just too useful.
Andrew
I see no reason why a debtinterest free economy would be inefficent. The distribution of incomes and goods would still be allocated to maximise utility.
However debt and interest can create greater productivity which I think is the point you were trying to make.
Please do not confuse efficiency with productivity.
However capitalist debt and interest is different to normal debt and interest, so you have to specify what form of debt and interest you are cheering for (if any).
Chris,
Perhaps you can clarify the difference between “capitalist” debt and interest and “normal” debt and interest before I respond fully.
I also admit to not understanding Chris’ distinction here. Chris, you seemed to agree earlier that deficits are no big deal, but also argue that they are a major threat to the system.
This is really angels on the head of a pin stuff, innit? I don’t see Chris Warren arguing for a completely debt-free economy, except as a theoretical construct.
As a theoretical construct I can see some distant post-scarcity future where it could happen. But that’s just science fiction.
Normal debt means I issue a voucher today, that equals production tomorrow. The total amount of vouchers over a period equals the amount of production.
Capitalist debt means I issue any number of vouchers today, controlled only by the interest rate.
In the second case – if tomorrow’s production is insufficient, then I issue more vouchers to pay-off the old ones. The amount of vouchers over a period does not equal the amount of production.
IN the first case the observed rate of profit (the key economic signal) equals the rate of wealth growth.
In the second case the observed rate of profit (the key economic signal) equals the quantity of paper.
The first is sustainable with no population increase or sales outside the economy.
The second is only sustainable as long as either population increases or the relative amount sold outside the economy increases.
AR,
GST may look like an input tax from a company’s point of view but it is a consumption tax on domestic consumption. I am quite sure about this. Again thanks for your reply. This is a manageably small technical problem, which, IMO, can be quite easily discussed in blog conversations as we do.
Terje,
In a full information economy (everybody has the same information and all of it), your argument about ETS prices for ghg emissions would hold, assuming everybody agrees that a GST should be levied on the price of ghg emissions. I am not convinced this is how it works in practice. Further, my point was about a carbon tax (ETS certificates do not attract a GST according to AR and he tends to be pretty accurate on the regulatory rules; so I take it as a given). I still maintain that a carbon tax should not attract a GST in addition. I know one can undo the effect by suitable redistributions but this involves a lot of paper work. At present it seems to me the simplest way of having a carbon tax is to tax at the source and applying GST before the carbon tax. More specifically, a carbon tax should be applied only to the emissions generated by the physical production and not attract a GST in addition. To illustrate, an electricity bill would have the following components:
a) Sales price per unit *unit price (including carbon tax)
b) carbon tax
c) GST on (a)-(b)
Total
(I know, given public information on carbon tax per unit, consumers could deduce, approximately, how much they pay for overheads!)
@wilful
Wilful is right.
Modern society benefits from debt, we just have to object to capitalism.
And in fact that is all.
If there is no scarcity, then there is no political economy.
Could there still be debts? I really do not know.
Presumably, even in abundance, various endowments could be shifted to maximise utility. Could debt assist this?
EG,
Most companies respond to the GST as an input tax (as you normally have to pay it on your input before you receive value from your outputs) so at a micro level that is what (IMHO) it is. If the sum of all these micro interaction is somehow to transform that into an output tax then I would have to bow to you on that. I just cannot see how that happens.
.
Part of the difficulty in any tax system is complications and I would think that this method of levying GST would be more complicated than is necessary. As I said up the thread, the GST is (at least in theory) paid straight to the States who, through their electricity utilities, would also be high payers of the tax.
Calculating the CT on an individual unit of power may be reasonably easy, but this would then neglect the other elements of the CT that would have an impact on the final power bill – like the cost of cement, transport and many other things that are bundled up in the final bill.
Would it not be much simpler just to levy the GST on the full amount of the whole lot and then, by calculation, compensate for the increase GST revenue in other ways for example reducing or eliminating payroll tax? This would then result in a simple tax that targets carbon emissions directly.
.
Chris,
You seem to have a misunderstanding of the process of bank lending, falling for the old Rothbardian / Social Credit idea that somehow banks can lend out unlimited funds. They cannot. If they could, no bank would ever fail as all they would need to do would be to create more money for themselves through more lending. This misconception is driven by looking at the circular flow of funds (a process) in static form.
In fact, the process you have identified as the “normal” process is the one that happens as a normal consequence of business. The only real source of more “vouchers” (by which I take it you mean money) is government or, in a specie system, the production of more specie.
Chris,
If I may make a further observation – you also seem to have a misunderstanding of what “capitalism” is. At least from my point of view, capitalism is what results when you let people get on with their lives with a minimum of interference. It can also be called “freedom”. All of the faults you have so far pointed to as those of “capitalism” seem to me to be the faults that arise from interference by non-capitalist sources – i.e. the State.
AR, I can’t agree with you on the GST. A company pays per period, say per quarter, the difference between GST on sales and purchasings (alternatively put, GST on invoices it issues (receivables) and GST on invoices it receives (payables). This amount may be negative, in which case the ATO sends a cheque. It is a value added tax paid at the final consumption stage (hence consumption tax). It is not an output tax. I am quite sure about this.
Sam – I agree that we should avoid confusing these debates. And in terms of general tax cuts I think there is a good case for making the system more progressive in the short term by agressively inteasing the tax free threshold.
@Andrew Reynolds
HUh? Misunderstanding of capitalism.
You are pulling my leg.
Everyone knows that capitalism is investing capital where it makes maximum profit (and politically manipulating society to maximise this process).
Capitalists make the greatest profits where there is less freedom.
p.s. One approach I like is to index the tax free threshold each year by the rate that ensures no net increase in averge tax revenue per capita (inflation adjusted and for all taxes). In the early years the tax system would become much more progressive as low income earners lose a big chunk of their tax burden.
Chris – your ultimately engaged in a semantic argument then. Nobody publicly argues for the system you call capitalism. Those that advocate capitalism don’t mean what you describe.
TerjeP, but specifically, would you cut the GST in order to introduce a revenue neutral carbon tax?
p.s. What you call capitalism is close to what I call neo-socialism.
Sam – GST would not be my first choice. I rather cut payroll tax or fuel tax. And I’d increase the tax free threshold before cutting GST. Likewise cuts to stamp duty on property purchases (the house moving tax) or the tariff on textile imports (our clothing tax). GST would be low on my list but I would cut other regressive taxes.
@TerjeP (say tay-a)
Follow the dollars, not the labels.
This fiddling with words is only a tactic of last resort.
Capitalists know how to extract profit, irrespective of what their greed is called.
@TerjeP (say tay-a)
What any sane person would call laissez faire is what Terje calls” capitalism”..but then Terje never did have the common insight of the sense of order a capitalistic system needs that most of us have instinctively
As well (thank the lord for the rest of us..Terje and his ilk have never fully experienced the utter disorder he so craves, only partially and not nearly enough to change his stubborn mind – when the rest of us are already screaming “enough”).
Chris,
If that is the case then we are all capitalists. All of us know how to extract profit through such activities as selling our labour, investing or lending our savings and even such prosaic activities as working around our home. We also all know how to profit our communities by doing community work, donating to charities and other such activities.
Only the scale differs.
Congratulations, Chris. On that basis you are a capitalist.
The important point with a free system is that we are able to make decisions of our own accord on what is, or is not, something we want to do. We also have to bear the responsibility for those decisions.
@Ernestine Gross
Of course it is Ernestine. GST is a tax on consumption instead of income. It is meant to grab the tax when it comes out of an individuals pocket on spending – rather than into a persons pocket as income (as income tax does).
Its meant to catch people who work in the cash economy on the assumption that if they dont declare trheir income at least they spend it and will pay GST on their consumption.
Trouble is it catches old folks who do declare their income and income taxes should have been reduced to match the imposition of the GST exactly. This never happened to the correct proprtions (ie income tax was not reduced to the xtent it covered GST impact fully) – so it is a tax on a tax and it is regressive being a flat rate. That hurts the poor.
It has also turned thousands of small – medium and large businesses into defacto tax collectors for the ATO – forcing them to work out and pay quarterly BAS. The accountants have had a field day, the ATO save money but small business is smothered in a layer of regulation they dont need – collecting GST for the ATO.
I dont know what Andy is rambling on about. I dont think he gets the GST impact but thats not unusual.
Andrew
You probably realise by now just how much you misunderstand.
Anyone can profit from their own labour. On the other hand, capitalists profit from others labour – this is what “extract” means.
The scale is not even relevant. Extracting 20cents from a worker is capitalism, making $100 from your own labour is not.
Alice,
It is usual that you do not understand. Don’t worry, you may one day actually be employed in the real world.
.
Chris,
So – governments are by their very nature capitalist? They “extract” a lot more than 20c from every worker out there.
If this is not the case, what do you mean by “extract”?
@Andrew Reynolds
If you are referring to taxes, then this formulation is misleading. Governments (even capitalist ones) don’t “extract” money from workers. They move value (less the transaction cost) from one part of the economy to another, whereas the value extracted from workers by capitalists becomes the property with which the capitalist extracts value from other workers.
Andrew is getting closer.
Yes, governments extract from workers and business owners.
However, now that you have got your toe dipped into the water, you should be aware that capitalism arises, not totally because of this extraction (which also occurred under fuedalism), but when the extract is reinvested to extract more.
Although you will not understand this: capitalism is represented by:
M – C – M’
A two stage process. The extraction is stage 1.
When democratic governments extract, they do not necessarily use this fund to generate profits for themselves. They tend to use the funds for non-capitalist bandaids.
Capitalists rant and raille and winge and cry about this all the time.
Chris,
You seem to be operating with cardboard cut outs, both of “workers” and of “capitalists”. Let’s get a little more clarity, then.
I am trying to work out what makes a “capitalist”. Say I employ a team of builders to build a house for me to live in. Am I being a “capitalist” if I do this once? How about if I do this twice, selling the first house to pay for the second? Have I extracted value from the workers that built my house if I only do it once and then pass the benefits on to my children or does it take me doing it twice before I have “extracted” value?
@Andrew Reynolds
If the house is not constructed as part of a regular process aimed at become a property investor then no, you aren’t. The contracting company are likely to be capitalists who emply builders. The builders themselves could be independent contractors i.e. petit bourgeois. If you are a property developer than you are one or other kind of rentier capitalist.
Ultimately, being a capitalist of one kind or another entails profiting from trade in labour power (or seeking to).
One may profit from trade in articles (such as when I use ebay to sell some personal effect, but unless I do this for a living I’m not a a capitalist. If I do it for a living I am a merchant petit bourgeois. If I emply people in my business then I am a merchant capitalist.
Ultimately though the labels are not really all that interesting since it’s not capitalists we care about politically but the consequences attending capitalism as a system.
One of these — the appropriation of surplus labour power — is of especial interest to us because it lies at the root, not only of social inequality, but of the persistent and recurrent crises within the system as a whole which in turn lead to stagnating and declining social production and the stalling of human progress.
Fran,
I know several people (most of them teachers) who do this on a regular basis – they buy a house and do it up and then move on two or three years later, mostly directly employing the people that they know and trust to do the work well. Most of the time this is a profitable little sideline for them and compensates them for the comparatively low wages they earn as teachers. Would you say that they are contributing to “not only … social inequality, but [also] the persistent and recurrent crises within the system as a whole which in turn lead to stagnating and declining social production and the stalling of human progress”?
All they are doing is renovating houses using willing workers paid at rates the workers are happy to accept for the work supplied. Should they not be allowed to do this or would you do something else to reduce or eliminate the “…the stalling of human progress…” that you seem to think comes from this behaviour?
@Andrew Reynolds
In that case I wouldn’t. The problem is not that teachers or those positioning themselves to become househopping merchants. It is the system that makes equity in housing a tradeable commodity that is the problem.
Perhaps it is your particular libertarian paradigm that is the problem, but you seem have to have a near-mechanical impulse to focus on individuals as instantiations of the system as a whole, as if these individual acts authored the system as a whole, when this is nearly the opposite of the case — it is the system as a whole and what it permits that authors individuals and their activities.