Archive for December, 2016
Thursday, December 29th, 2016
The Coalition government in Australia and the policy of the incoming President of the US Donald Trump propose substantial decreases in corporate tax rates and assert this will stimulate growth and jobs.
However, consideration of past decreases in tax rates reveals the recent behaviour of corporations and their executives and boards as an increasing trend to devote retained earnings to share buy backs and dividend distribution. Thus additional revenue flowing from further tax breaks is likely to contribute to further enrichment of the already super rich including many at the helm of large corporations, especially in the financial sector. Few companies are paying the marginal tax rate and many are avoiding tax altogether.
The campaigns by business to downsize government, reduce wage growth, limit union influence and reduce regulation have been self-defeating. The behaviour of the super-rich is the principal driver of the significant increase in inequality over the last 40 or so years, especially the Global Financial Crisis. This has led to a stalling of demand. In Australia, substantial investment has been directed to property, now a vehicle for financial enrichment at the expense of those wishing to find somewhere to live.
It is vitally important to recall that rising prosperity benefiting the population generally does not depend simply on economic growth: unending growth is a concept believed in only by the naive and many economists. The United Nations Development Program Report for 2009, Real Wealth of Nations: Pathways to Human Development points out that improvements around the world in education and health have been due principally to cross border transfer of ideas: there is little if any correlation with economic growth! Growth in incomes is not unimportant but it is not the main reason for improved prosperity.
In other words we can learn a great deal from other countries and other domains: seeking out those lessons is vitally important. Most particularly the notion that for any individual country the growth of population is critical is nonsense. Indeed, countries where the birth rate has slowed are generally more prosperous and a significant influence on that is education of women.
Governments have a fundamentally critical role in both encouraging transfer of ideas, in the provision of education for women and in encouraging responsible and sustainable population policy. Many developed economies lack any coherent population policy.
In Australia weakening of institutions, increasing inequality, primitive approaches to debt, especially for infrastructure development and to deficit budgeting, ongoing downsizing of government along with poor investment in education, health and science and a lack of understanding of innovation and what drives it is putting Australia’s future at risk. Isolation from the ideas emerging in other countries is a major feature of public policy!
A postscript to the associated essay notes the recently published book on Neoliberalism by George Monbiot and also deals with the behaviour of banks and the involvement of US administration officials in failing to prosecute bank executives for their behaviour which led to the Global Financial Crisis.
A postscript to the associated essay “Managerial Firms and Rentiers” notes the recently published book on Neoliberalism by George Monbiot and also deals with the behaviour of banks and the involvement of US administration officials in failing to prosecute bank executives for their behaviour which led to the Global Financial Crisis.