Taxes & legitimation

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.

Comments

[CS Clark]

To the same extent, I suppose it means a virtue of liberal democracy for the rest of us is that it makes it easier to judge how much indulging the personal moral and ideological hobby-horses of elites and special interest groups is likely to cost us.

[Jim]

The trouble with paying Danegeld is you never get rid of the Dane. I suppose every time there's a riot, useful idiots will pipe up 'We must make a gesture' and rack the tax up a bit more. The top rate of tax went up to over 50% this year, have you forgotten that? Considerably higher than in France too, even with a 3% surcharge, and on incomes over £100K not £500K. Didn't stop any riots as far as I can see.

Could we have an estimate of what top rate of tax does guarantee no riots, and is it legally binding (ie next riot after the increase reduces the tax back to where it started)?

[ortega]

The difference with taxes and democracy is that now they bribe us with our own money.

[Keith]

Well Jim I am looking forward to the return of 91 per cent Income Tax. oh for the good old days of free University study proper NHS dentistry and five hundred thousand new council houses a year from super mac. "You've never had it so good" as Macmillan said, and he was right! The days Before public policy was taken over by people who only care about their wallet rather than Human Welfare. Oh and by the way we always had riots and probably will in future. Crass Materialism is not the same as a social Conscience. After all the Bullingdon club is supposed to wreck restaurants as their entertainment and initiation ritual. Will Camerons' Gang injunctions apply to his friends in the upper class gang of Bullingdon bullies? Exemplary punishment at once I say for the upper class nitwits, Borris to the stocks immediately. Mayor of London ? Village idiot more like.

[Guido Fawkes]

I think libertarians are well aware that the welfare state is a protection racket.

[cjcjc]

Japan's rigid hierarchical culture and racial homogeneity probably have more (or at least as much) to do with it, don't they?

[Luis Enrique]

isn't that an advantage of liberal democracy for all of us?

I mean, speaking as a member of the masses, I would far rather be bought off with redistributive fiscal policy and a high standard of living, rather than survive for decades under the heel of oppression and then have to overthrow el presidente in a bloody revolt.

[Boursin]

1) It is a rather flimsy protection racket that one can freely leave whenever one wants.

2) As to "bribing us with our own money" - I've never seen any money with my name on it. As I live in the eurozone, the money I use currently has the name of the European Central Bank on it. In fact, if I tried to print my own money and pass it off as legal tender, I could easily end up in prison. Money is a social convention whose existence is entirely at the mercy of the government and not any individual or individuals - unless these individuals are numerous enough to vote the government out.

[Steve Williams]

Boursin - I recommend ignoring Guido. Most people manage to troll just one or two comment sections. He's been trolling the nation of Britain (with a dismaying amount of success) for most of the last ten years.