Taxes and capitalism

► We call this thing capitalism for lack of a better term. Well, the “gifts of Athena” or the “enlightened economy” others have dubbed it already. Yet, taxation and welfare continues to be crucial despite technological progress.

► Right after the 1973 oil shock, two developments occurred. First, a new wave of financialization was initiated. People called the other side of the same coin “de-industrialization” at the time.

► Second, multinational corporations became widespread. In the late 1970s many economists were talking about states withering away in terms of taxing or other forms of economic power. They were losing their administrative prowess in terms of economics, or so people said.

► The neo-liberalization wave clearly proved that without public finances it was impossible to rule, administer, regulate or even save capitalism. After 1980 public debt soared in the developed world.

► Add to this hitherto unimaginable monetary expansion. Not only central bank balance sheets exploded after 2008 and then again in 2020, but also money supplies skyrocketed. And also interest rates were lower than ever.

► And this episode created an unparalleled income and wealth inequality over the span of 40 years. It completely reversed the Roosevelt New Deal. It also rendered the Keynesian consensus obsolete.

► It also meant dismantling of industries across Europe, contributing to the demise of the unionbased Left, communists and social democrats alike. The French Communist Party faltered after 1978, and was reduced to nothing in only a decade.

► Now it is payback time. Governments have spent so much money, and have been so constrained to bend the monetary and fiscal policy rules admitted before that somebody has to pay the bill. The 15% tax floor is testimony to that.

► But it is nothing compared to the huge corporate gains, corruption and all that facilitated by tax havens. 15% tax won’t wash. Still, it is only the beginning because Biden seems to be both disposed to fix things beyond make-up and eager to leave a dent in the back of people’s minds as a second Roosevelt: low interest rates, high (consumption) taxes, etc.