Former Nobel laureate tells Davos that high taxes and handouts to the poorest are less effective than other options such as subsidising childcare
On January 23, 2015, Winnie Agbonlahor writes The Guardian:
Governments should combat inequality by using their tax revenues to create jobs, rather than simply redistribute money from the rich to the poor, a leading economist said this week in Davos.
Christopher Pissarides, professor of economics at the London School of Economics, told the World Economic Forum annual meeting that citizens around the world suffer extreme inequality, but punishing people on high incomes is not the answer.
“I don’t think taxing high incomes and simply taking the money and passing it on as transfers to lower incomes can work in today’s open globalised world,” Pissarides, who won the Nobel prize for economics in 2010, said in a briefing on income inequality.
Redistribution takes away the incentive for lower-skilled people to acquire skills and go into the labour market, he argued, and creates disincentives for higher earners to stay in the country, work hard and look for new ventures to make money.
Instead, he called for governments to use more imaginative ways of rebalancing incomes by creating more and better jobs at the lower end and investing in better education.
One example of such innovation, Pissarides said, is in Sweden. Tax rates can be as high as 60% but tax revenues are used to provide services that would not otherwise be created by the free market at a reasonable price. He said the best example is subsidised childcare, which allows both parents to work, and creates jobs for carers.
This, he said, “is boosting the income of the family, as well as the childcare worker because their salary is subsidised, and it reduces inequality”. Couples on lower incomes, who would not be able to afford expensive childcare, can stay in the workforce while raising a family, not just people on high incomes.
One reason this model is so successful in Sweden, he argued, is that people have faith in the state: “You have to have trust in the public sector. There should be no corruption. [In Sweden], because people have trust in the public sector to make use of the money, they pay it and tax evasion is very low.”
This stands in stark contrast with countries such as Italy, where citizens don’t see the results of paying their taxes in anything other than extremely highly paid politicians and civil servants, he added.
“Taxes in Italy are almost as high as in Sweden, but the money goes to the highest-paid politicians, highest-paid senior civil servants, and a big civil service – [there is] no market-driven provision of services which will create jobs,” he said.
However, he added that Italy’s prime minister Matteo Renzi is doing a fantastic job in trying to reform this system and moving in the right direction.
Asked by a member of the audience to give his view on a report by anti-poverty charity Oxfam, which reported that by next year 1% of the world’s population willown more wealth than the other 99%, Pissarides said: “It’s a shocking statistic and given the inequality it’s not difficult to construct other shocking statistics. It’s obviously something to worry about, but my view is that the real issue, and what you should really address, is poverty.
“I think we’d be doing better by emphasising ways of reducing poverty rather than by sensationalising the issue by saying how much the very rich people are worth.”
Here is another misguided Keynesian-bent “job-creation-focused-solution/problem-defining article, this time by Professor Christopher Pissarides, a Nobel laureate for economics in 2010. Pissarides fails to offer up any REAL solutions that would reverse income and wealth ownership inequality and put us on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice. But rather than just the same old problem-defining writings and wealth redistributive proposals, which include greater tax extraction on those who already are in the wealthy ownership class; taxpayer-funded job creation, as in infrastructure rebuilding and expansion, but with no stipulation that the taxpayer-funded government contracts are ONLY awarded to employee-owned corporations; substantial minimum wage increases to “pacify” the vast majority of low-income wage slaves and which result in inflation; expand the government safety net; etc.,
Pissarides does not think the rich should be punished. He completely ignores how the system facilitates the constant concentration of capital asset wealth ownership among the 1 percent at the exclusion of the vast majority of people, and instead calls for “governments to use more imaginative ways of rebalancing incomes by creating more and better jobs at the lower end and investing in better education.” Again the focus is on job creation and education for shrinking job opportunities due to tectonic shifts in the technologies of production eliminating jobs and devaluing the worth of labor. Such proposals make the citizenry more economically dependent on government rather than economically independent. And in Pissarides’ case he actually applauds big government deficits and taxation to fund socioeconomic needs that effectively raise low-income wages earnings to a level just enough not to stir rebellion against people on high incomes.
Unbelievably, this closed-minded thinking is the case of another notable academic, this time from the London School of Economics, who fails to turn his brain on to realize inherently obvious solutions––that the reason the rich are rich and income and wealth inequality persists is because the rich OWN wealth-creating, income-producing capital assets and the majority of people do not to any significant degree, and because the system is rigged to empower the 1 percent to continually acquire more and more capital ownership, while the vast majority of people struggle daily, weekly, and monthly to earn wages to pay for basic necessities of living as individuals and as providers of families.
How the conceptual and practical lack of personal wealth-creating, income-producing capital ownership can evade a Noble laureate is telling of the extent to which academia is failing to properly educate people. Pissarides should KNOW the solutions that will REALLY reform the system and abate further concentration of capital ownership and eliminate poverty, but his solutions resort to wealth redistributive policies and government expansion, which are the essence of socialism. Such proposals undermine our nation’s founding principles based on individual strength through private property capital ownership whereby citizens become empowered as owners to meet their own consumption needs and government becomes more dependent on economically independent citizens.
Pissarides should be advocating the need to reform the system and advocate for broadened individual capital asset ownership, purposely and continuously as we together grow our respective nations’ economies, without taking anything from those who already own.
I have made it a practice to continuously comment on the postings and writings of notable academics, always pointing to the obvious––if you want to solve income and wealth inequality then the system needs to be reformed to empower EVERY child, woman, and man to acquire wealth-creating, income-producing capital assets simultaneously with the growth of the economy, thereby creating new capital owners and “customers with money” to drive the growth of our future economy that can support general affluence for EVERY citizen. It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.
The HOW to achieve this objective is to support and implement the following:
Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice
Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.
Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.
