Here are three things that are more connected that generally realized:
- Economists are worrying that the west is heading for Japan’s fate - decades of a near-stagnant economy.
- Some of the ultra-rich in France and the US are calling for higher taxes on themselves.
- Conor Pope points out that the British people just aren’t interested in politics.
To see the connection, contrast Japan on the one hand and Arab states on the other. In some of the latter, economic stagnation has led to violent revolution. Japan, however, has enjoyed relative social stability. Why the difference?
A big factor is equality. Many of the Arab states that have seen revolution or unrest have/had huge inequality, of political power as well as incomes or consumption (pdf). Japan, by contrast, is more egalitarian; its “lost decades“ have been accompanied by low profits and relatively modest CEO pay, rather than by mass unemployment. This matters. People can tolerate slow growth if they feel “we’re all in it together”, but not if they see others getting very rich whilst the majority suffer.
It’s in this context that we should understand the rich’s request to pay more tax. This - whether they know it or not - is an attempt to forestall unrest by showing that everyone is suffering. It is, as the French say, a “gesture of national solidarity”. The stress here should be on “gesture”; a levy of 3% on incomes over €500,000 is nugatory from the point of view of orthodox macroeconomics.
The function of the tax and benefit system is not merely to achieve justice or economic efficiency, however we define these. It is also to legitimate the system, to buy off unrest. Bismarck and Roosevelt understood this. But I fear that right libertarians, with their focus on freedom and efficiency alone, tend to forget it.
And this is where our third point - Conor’s claim that the British people are apathetic - enters. How much the rich must pay to buy social peace depends upon how likely a revolt is. In France, where they take to the streets at the drop of a beret, unrest is a perennial threat. In the UK, it is less so. It is therefore no accident that the rich in France are more keen to see higher taxes than their British counterparts.
This also helps explain why al-Assad, Mubarak and Gaddafi have got into trouble. In dictatorships, it’s impossible to distinguish between genuine support for the (rich) rulers and falsified support. As a result, dictators can never judge how much they have to buy off opposition. And their colossal egos lead them to over-estimate their genuine support and thus to under-bribe the public, with the result that they are prone to revolution.
Herein lies one of the virtues of liberal democracy, especially from the point of view of the ruling elite. Insofar as this produces a less distorted image of public opinion than dictatorship, it enables the rulers to better judge by how much to buy off that public.