John Quiggin goes stark staring…..

Eh?

What the US needs at this point is someone willing to advocate a return to the economic institutions that made America great – 90 per cent top marginal tax rates, strong trade unions, weak banks and imprisonment for malefactors of great wealth.

There\’s two things wrong with this idea.

1) It\’s necessary to show the causality, not just the correlation, here. How did 90 % top marginal income tax rates make America great? There are a number of alternative explanations out there about the post-WWII growth for example: like that it was catch up from the huge improvements in technology and productivity in the 30s and 40s just as one that\’s recently been floated.

I could see that high tax rates on rent seekers could be a good thing: high tax rates on entrepreneurs not so much.

2) If these policies were such good things in the 1950s and 60s then why was it that they entirely screwed up in the 70s? And if they did screw up the 70s then what is it about the \’teens that means they\’d be a good idea again?

16 thoughts on “John Quiggin goes stark staring…..”

  1. Can’t go back to the ’60s punitive taxation without going back to a closed economy (capital controls, etc.).

  2. “…imprisonment for malefactors of great wealth.”

    I presume he means ‘when they break the law’? Or is having great wealth sufficient grounds, in his eyes?

  3. Surreptitious Evil

    Julia,

    To be fair (ish), I had read “malefactor” as meaning somebody who had done wrong. Now, whether that “wrong” was actually illegal, or whether there was sufficient evidence to prove it so in court even if it was, different points.

    But, let’s be honest – from the Natwest Three, to Bernie Madoff, Jeffery Skilling, Paul Allen (no, not that one, although that he does deserve some time slammed up is a matter of little contention amongst geeks), Martha Stewart & Bernie Ebbers, rich people do seem to go to jail in Quiggin’s nation.

    Even the Italians seem to be getting in on the action, as long as it doesn’t involve Berlusconi!

  4. Well presumably the other side of this equation is that the US should return to the government polices of the 1950s and 1960s on the spending size.
    Medicare and Medicaid was signed into action in 1965, so the USA should drop those.
    The retiree-worker ratio should be reduced to that prevailing in the 1950s and 1960s, whatever that was. I can think of three ways to do this – massive immigration, raising the retirement age sharply, or open-season on hunting old people.

    Cut government spending per pupil back to that of the 1960s – according to Wikipedia real spending per pupil in the USA has risen by 212% since then.
    http://en.wikipedia.org/wiki/Education_in_the_United_States#Funding_for_K.E2.80.9312_schools

    So, let me see, drastic cuts to healthcare, retirement spending and education, at least as a starting point.

  5. Surreptitious Evil,

    John Quiggin is a stark raving mad Aussie. He is the exception that proves that UQ is a very fine uni.

    Tim adds: Steady on, bit over the top. He’s always been an entire gent to me despite our very different views.

  6. As regards the malefactors, you might have noticed that a trillion dollars or two of US net worth went missing recently, and that all of those close to the centre of the action are much wealthier than they were ten years ago. Meanwhile, the median net worth of Americans has declined by something like 50 per cent.

    As you say, this is the natural working of the market, and to suggest otherwise woudl be stark staring …

  7. But, as SE points out, you can find a dozen or so who’ve served time over the past decade, so the system is clearly working fine.

  8. So Mr Quiggin, you think I should be whacked with confiscatory tax rates as a punishment for doing well in the future despite not benefiting at all from the meltdown? Interesting.

  9. Quiggin, so I’m a bit lost. Are you advocating convicting rich people even when prosecutors can’t identify a law that was broken?

  10. “Capital controls are coming back into fashion.”

    They certainly are in the US. Exhibit A: FATCA. Exhibit B: HEART and the US ‘exit tax’. All wrapped in the usual American for-the-children patriotic rhetoric of course, but de-facto capital controls nonetheless.

  11. Surreptitious Evil

    But, as SE points out, you can find a dozen or so who’ve served time over the past decade, so the system is clearly working fine.

    I would strongly suggest that it is working better in the USA than it is in many other places, the UK included.

  12. @tracy Umm, no. I’m suggesting that a system where this can happen is pretty seriously broken. And, yes SE, that’s also true of the UK.

  13. Mr. Quiggin:

    Those of us who are advocates of market freedom would certainly not agree that such is the system prevailing in the U.S.–or anywhere, as a matter of practical fact.

    Further, advocates of market freedom have long been reasonably consistent opponents of most of what constitute the regulatory apparatus in the U.S. and moreover (and I emphasize the “moreover’) have been in the forefront both in the specificity and the accuracy of advance warning of the types and degrees of failure to be experienced therefrom.

    But no matter how pernicious I understand the effects of economic interference to be nor how ably arguments for that case are made by those prominent on that side (and by which I refer to the Austrian School), it seems, quite simply, that vast majorities of the electorate in all advanced nations are either convinced they need some type of protection from businessmen or that the interferences urged on them by their political leaders will trim some of the “fat” from the envied–to their benefit; the illusion is shared by those all across the cognitive spectrum (and, indded, forms the basis on which their living and status is achieved by something approximating a majority of the more cognitively able.

    For myself, I’m almost certain I’d be happier if people were, generally, able to do better owing to a better appreciation of economics. But I’m also mindful of the old saying that, “People get the government they deserve.” I guess what I wish is that people actually deserved better.

  14. I’m suggesting that a system where this can happen is pretty seriously broken.

    So what laws do you think should be introduced, to stop this from happening in the future? Something general like “It’s illegal to profit from government actions”? How do you think that would work out in the future? (It does rather attract my libertarian tendencies, such a law I guess would limit the role of the state drastically.) Or something more specific?

    And also, do you now advocate cutting the American welfare state back to that of the 1950s and 1960s, as part of returning to the policies that made the USA great?

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