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[00:00:00] Hold up, what was that? Boring, no flavor. That was as bad as those leftovers you ate all week.
[00:00:09] Kiki Palmer here and it's time to say hello to something fresh and guilt-free. HelloFresh. Jazz
[00:00:15] up dinner with pecan-crusted chicken or garlic butter shrimp scampi. Now that's music to my mouth.
[00:00:20] HelloFresh. Let's get this dinner party started. Discover all the delicious possibilities at
[00:00:26] hellofresh.com. Does the fact that you have ruled out raising wealth taxes mean that you are, to borrow
[00:00:37] a phrase, intensely relaxed about the current distribution of wealth in Britain? Well we've got
[00:00:42] the highest tax burden today since the second world war and I don't wake up every morning
[00:00:49] thinking how we can introduce new taxes and I don't believe the way to greater prosperity
[00:00:55] is through higher taxes. We've got to grow our way to higher prosperity. This is the
[00:01:00] Debunking Economics podcast with Steve Keen and Phil Dobbie. Well as the shadow chancellor in
[00:01:07] the UK, Rachel Reeves, soon to be the UK's chancellor of the exchequer speaking at an FT
[00:01:12] forum and avoiding the question about whether the UK's Labour Party would tax wealthy individuals
[00:01:17] more. So does it make sense to tax wealth? We do of course but not as much as we tax
[00:01:23] income. So does that help wealth accumulate and what impact does that have on those people who
[00:01:28] don't have quite so much wealth? Does it make any difference to someone if someone else is a
[00:01:33] billionaire and you're not? That's this week on the Debunking Economics podcast.
[00:01:44] So here's a scenario Steve, you've got a university professor, I thought I'd keep it
[00:01:49] local to you. He's inherited, this part's not you of course, he's inherited this daily
[00:01:53] home from his parents. He's struggling to make ends meet, his salary is well 35,000 a year
[00:01:59] and lots of that goes on the upkeep of this big old stately house so he doesn't actually have
[00:02:04] very much money left to spend on anything else. And then there's another university professor
[00:02:09] also on 35,000 a year. He's got a small apartment for which he's paying a mortgage
[00:02:14] which costs about the same as the upkeep on the stately home. So they've both got the same
[00:02:20] amount of income, they both have the same spending power, it's just one has got a lot of inherited
[00:02:26] wealth but until he sells it he is no better off. So we talk about the wealth divide but in
[00:02:35] this scenario there's actually not too much difference between those two people, is there?
[00:02:42] Can I start by saying you should go out more often? This is the sort of thing that most
[00:02:47] people give examples saying wealth, like John Hearn for example, you would have seen quite a few
[00:02:51] tweets from John saying you know wealth doesn't matter, it's income distribution that matters.
[00:02:56] Holy shit, have you seen some of the wealth the wealthy have?
[00:02:59] I was the first one to respond to that by the way so I am being devil's advocate.
[00:03:03] I get criticized on this podcast and people saying the crazy ideas that Dobby has,
[00:03:07] thank god someone picked, well actually maybe he's being devil's advocate, do you think so?
[00:03:12] I agree entirely, you get a bad rap on it but that's the point. This is a John Hearn's mistake
[00:03:18] as well of course, John doesn't have the Witton and Subway fare that you've got by a large
[00:03:23] margin, I wish that was funny. So to answer people like him, what is the difference between
[00:03:31] these two scenarios? One of them has got wealth that doesn't injure any income,
[00:03:35] okay you've got wealth without income, you've got income without wealth, those are your
[00:03:38] combinations. The normal thing is wealth and income and wealth generating enormous amounts
[00:03:42] of income. Now I'll give you the richest person I've met, I think I'm not sure but I presume,
[00:03:46] actually I've met George Soros, so the second richest person I've met is a guy who runs
[00:03:54] the world's major online, how do you call it, the fast trading schemes, the instant
[00:04:01] trading schemes that try to front run market performance and that guy,
[00:04:07] when I met him some over a decade ago now, he told me that operations in 30 countries had not
[00:04:14] made a loss in over 700 days, basically clipping the tickets of transactions on the stock
[00:04:20] exchanges because of having high-speed technology that gets in before the buy and sell
[00:04:26] operations are executed and basically clips every trade. And the poor man is down to his
[00:04:33] second yacht, his first one was only 80 foot long, the second is 120 with a gravy rant on
[00:04:40] board etc etc, he owns an island in the Caribbean, this is all true by the way,
[00:04:44] the first hand, I'm not repeating somebody else's comments. Now this and the wealth he has
[00:04:50] is all these buildings right next to the stock exchanges in 30 major countries on the planet
[00:04:56] which is clipping, getting high-speed data, so high speed that its optical fibre wasn't good
[00:05:01] enough they're putting in radio because quote unquote the speed of light in air is faster.
[00:05:07] That's what creates income, they go together and people if they're going for their own
[00:05:11] experience they have basically no bloody idea of just how extreme the wealth and income
[00:05:16] divides are. Yeah well it is a big difference isn't it, the wealth divide is so much greater
[00:05:22] so in 2020 according to the Office of National Statistics in the UK the richest 10% of households
[00:05:28] holds 43% of all the wealth in the UK, at the other end we have half the country that owns 9%
[00:05:34] of the total wealth. So that's and that is a much bigger divide than the income divide
[00:05:40] and yet everyone does tend to focus a lot on the income divide but your point is if you've
[00:05:45] got that wealth you can use that to generate income and that would be that that would
[00:05:49] normally be the case wouldn't it but the example I gave is somebody who is asset rich
[00:05:56] but cash poor, he can get rid of his house but his house has been passed down from generation
[00:06:01] to generation so it would be unfair to put him in the same bracket as those high-speed
[00:06:08] traders who are making vast quantities of income from their wealth. Yeah exactly the point so
[00:06:15] people's personal experience for most people is limited to a social circle which is defined by
[00:06:22] their own wealth and income parameters in many ways so they rarely see people who are uber
[00:06:27] wealthy equally if you're ever wealthy you rarely see people who are uber poor unless you're
[00:06:32] stepping over them on the way to the stage at some performance you're giving or you get to go
[00:06:36] past the stock market and and you know dodge around the homeless encampment outside the entrance
[00:06:41] to the stock exchange so the the extent to which we're divided and as we have we had Yannis here
[00:06:47] a few weeks back talking about techno feudalism the gap in income between people who have assets
[00:06:54] which generate income and those who don't is so enormous we might as well be in a feudal system.
[00:06:59] So in the introduction just before before you came on I played a clip from Rachel Reeves
[00:07:06] who's probably going to be the Chancellor of the Exchequer she's the Shadow Chancellor in
[00:07:09] the UK at the moment I think everyone is fully expecting that labor is going to be
[00:07:14] the next government in the UK in fact probably Rishi Sunak is going to be the next person
[00:07:18] to defect to labor because everyone else has given up haven't they but I mean she
[00:07:23] she dodged this question about whether the Labour Party would tax wealthy individuals
[00:07:28] more and her point was you know should there be some form of wealth tax
[00:07:33] and her answer to that was I mean she's quite right-wing for the Labour Party but
[00:07:38] that seems to be the go these days see her answer was well you know no we want to see growth
[00:07:42] happen and we do you know we're already taxing a great deal but do you actually need a wealth
[00:07:47] tax if you because if you're wealthy you're making money out of that wealth then surely
[00:07:53] you can just be taxed as that wealth is converted into income surely you don't need
[00:07:57] a wealth tax separately. This is the trouble because again I don't know how many people
[00:08:02] have been to the Cayman Islands but I have been I have been to the major profit center for
[00:08:07] News Corporation and that 30 other companies the one I remember still is News Corporation
[00:08:12] it was a two-story whitewashed house in the middle of you know the town with 30 plucks on
[00:08:22] the outside 30 brass plucks including News Corporation and no one was home and yet that
[00:08:26] was the building is one of the majority of Rupert Murdoch's profits for the previous 30 or
[00:08:31] 40 years in other words they'd launder by ownership by having the money to be able to
[00:08:36] hire accountants and lawyers to be able to set up your operations in such a way that you evade
[00:08:41] tax the tax doesn't hit them and this that's one reason I think in jam tax is a useless way
[00:08:50] of trying to redistribute income because primarily the people you can catch with that
[00:08:54] are the poor and the middle class who can't afford the lawyers and the accountants to evade
[00:08:59] their payments. And yet if you go the other way and you say well okay let's have a
[00:09:06] wealth tax in the easiest way and we've talked about this before and I've sort of been a supporter
[00:09:10] of it but I think there's you know a number of caveats on it the idea that well okay
[00:09:14] let's have a land tax a land value tax but the problem with that is you know let's start
[00:09:18] with our example you know the university professor who's struggling to make ends meet
[00:09:24] he's inherited a stately home from his parents do you take it off him if you take
[00:09:28] it off him that's a bit of English heritage that's disappeared does the government then
[00:09:32] have to pay for it it's not so clear cut is it? No I mean that's again the wealthy can evade
[00:09:38] that too because you know you can have what they call non-domicile status you're not paying tax
[00:09:43] in there so long as you don't spend more than a certain amount of time in the country
[00:09:47] and if you're ultra wealthy we were talking about multiple houses a moment ago on a personal
[00:09:53] front but you know nothing nothing going to stop a wealthy person from having homes in 12
[00:09:58] major cities and commuting between them on a on a monthly basis and never and never becoming
[00:10:04] a resident for tax purposes of any of the countries I don't know if that works I'm not
[00:10:08] wealthy enough to find out but the capacity of the wealthy to avoid tax to avoid this
[00:10:13] regulation we try to control their consumption is just enormous so I think the problem is
[00:10:18] we're always thinking how do we take it away from people after they've already got it
[00:10:24] the real question is how do we stop them getting it in the first place? Right but then if you stop
[00:10:28] but then you'd stop somebody building up a you know perhaps building up an empire which
[00:10:33] is going to be very successful. No I don't mean that I mean things like money which decays
[00:10:37] over time there's a gazelleian concept of money things of that nature because the real
[00:10:42] problem we have is that we have a form of money which doesn't depreciate over time
[00:10:46] and whereas so if you accumulate it you take it out of circulation from one country you put
[00:10:52] it in another country you want to use it for asset purchases or for minimizing your tax whatever
[00:10:57] else you can do that easily and never disappears but we don't the gazelleian concept the gazelleian
[00:11:03] concept of money was somebody who could decay if it wasn't used for transactions
[00:11:06] and so therefore in that case if you actually were trying to if we had a money system of
[00:11:10] that nature then you're trying to pull the stuff and hang onto it and shift it elsewhere
[00:11:14] for your own benefit it would still degrade and so I think that it is really and this is
[00:11:20] I mean I'm not people who've been working in gazelleian money systems and other forms of
[00:11:26] alternative currency ideas like that. We've been making this case for quite some time
[00:11:30] I've managed that I've got to model the actual existing system first of all because I
[00:11:34] know how bloody ignorant most people especially economists are about the actual nature of the
[00:11:38] system we even have right now but you know I think the reformers are right you have to
[00:11:44] have some form of money which automatically decays in such a way that if you're not
[00:11:48] using it for transactions it decays over time and you will stop that accumulation
[00:11:53] it's not the earning income I worry about that's fine it's accumulating the wealth as a result
[00:11:58] of that and buying assets and then being able to amplify the inequality you achieve through
[00:12:02] income. Can we go through that step by step then because I think this is important so if I've got
[00:12:06] a million pounds let's talk small numbers for these people but I've got a million pounds
[00:12:11] you're saying that that that million pounds if I did nothing for it would in effect be worth
[00:12:17] 900,000 for example. Yeah it would be rated like 10 per cent per annum or something.
[00:12:22] I've actually just read just with one of the you know the little chat I have on Saturdays
[00:12:26] the Steve Kean and Friends show the person who does the production there has just found a
[00:12:32] document I'd never heard about before from some 12th century I think it was pope or bishop
[00:12:38] in some region of Europe who issued a currency which just simply wore out in a year
[00:12:42] every year that when you had to bring it back for recirculation and what that meant
[00:12:46] was you could earn the income but you couldn't accumulate the wealth and a combination which
[00:12:52] sort of between that and where we are now where you can earn the income and accumulate some
[00:12:56] wealth but the wealth only made the wealth was relied upon you continuing to make turnover out
[00:13:02] of out of the assets you'd purchased. That might be a better system what we have right
[00:13:06] now and then we'd have less wealth inequality and also the income equality with the only one
[00:13:11] that really matters we're actually living in that world that John Hearn thinks is in right
[00:13:14] now but you can apply that to money can you apply it to assets so I've got that million and
[00:13:19] I think it's only going to be worth 900 000 well I'll spend that million on buying a property
[00:13:22] won't I and then on the basis of that property might be worth 1.2 million in 10 years.
[00:13:28] Yeah I mean it is a real problem like I know that the situation of somebody who
[00:13:33] is an asset rich in income was my mother's situation before she died where she had no
[00:13:38] income coming in from superannuation and some minor investments but the main asset she had
[00:13:44] was the house and she had no money on it now if you had a if you had a land tax on that
[00:13:48] at the rate of appreciation of that she would be forced to pay would have been forced to pay
[00:13:54] taxes on that which would have forced her to sell the property and so that's that's and
[00:13:59] that comes down the whole family you know family experience the memories and we're
[00:14:04] degrading a large part of what makes us human this sense of place if we try to bring in
[00:14:10] rules just like that. Yeah but when she's gone then it's all up for grabs yeah so then and
[00:14:17] then it becomes income for somebody it becomes income for you and your and you know your
[00:14:21] brothers and sisters in inheritance yeah but like again what did we do this is this is where the
[00:14:27] the Henry George group come in and quite validly on this point what did we do to
[00:14:31] create that wealth bugger all you know we just the real cause of the increase in the
[00:14:36] wealth of that property was not capital investments done to it by my family
[00:14:40] it was by the growing population of Hurstville the town it was in and the and the public
[00:14:45] investments improving infrastructure and so on and that then turns up on the property values
[00:14:49] so again the Henry George mob are quite correct to say that sort of gain should be captured by
[00:14:54] the society not by individuals in the society that would also reduce the level of inequality
[00:15:00] the inequality coming out of effort and talent I think is a very different thing
[00:15:04] the income inequality coming out of ownership right and that's but that's much right but
[00:15:09] that would yeah it's an interesting approach it's I mean yeah I think there would be what
[00:15:15] 10% of the population or less would support that idea because most people would say well you know
[00:15:19] I'm working hard buying a property and the intention is that this does get passed down to
[00:15:24] the kids but at the very least I mean we have a you know a capital and inherited well
[00:15:31] in Australia there's no inheritance taxes at all really in this country in the UK I think it's
[00:15:35] sort of like with a house like you know in effect you can get it so that it's a basically
[00:15:40] a million pounds worth of inherited wealth before it gets taxed I mean if at the very
[00:15:46] least to keep things simple you could just say doesn't matter where the money came from
[00:15:50] a house has been sold shares have been sold wherever that money comes from your wealth
[00:15:55] has now been turned into an income so you should pay the same as you would be if you're working
[00:16:03] for that income and actually this is you know this is a Margaret Thatcher idea it's hardly
[00:16:07] a left-wing idea the income and wealth should be taxed exactly the same if you're getting
[00:16:12] income from wealth then that should be taxed the same as if you're working for that income
[00:16:17] yeah and that's the lucky good Australian cases again is where that used to be the rule
[00:16:21] the capital gains tax was the same rate as the income income tax and then Howard one of
[00:16:27] the many wonderful things you did to make Australia the asshole pardon me the place it is today
[00:16:32] was to halve the rate of tax on capital gains so in fact you made more money if you could if
[00:16:38] you could put your money into appreciating assets then it made more money than if you're
[00:16:43] working and this is this is encouraging the entire speculative mindset we have but at the
[00:16:48] same time the trouble is many people look at that and think well I I spotted that as well I
[00:16:52] want to be on that particular gravy train so you end up having a political situation where even
[00:16:57] though the majority of people lose out courtesy of this like I imagine 80% or more of the
[00:17:01] population loses out because they don't have the assets in the first instance to be able
[00:17:06] to benefit from this maybe even 90% but probably 60% of them vote in favour of
[00:17:10] maintaining the system as it is because they aspire to that outcome yeah I wonder it's all
[00:17:15] coming home to roost now there because rental prices in Australia are getting crazy but I mean
[00:17:20] the other side and the rest of the world and the rest of the world did the same same deal
[00:17:24] but more so in Australia I think and they've got this crazy situation in Australia where
[00:17:28] you know it's not only have you got that half of you halve your capital gains tax if
[00:17:32] you've if you've got an investment property you can write off your losses against other
[00:17:39] income so in in the UK I think I've got this right if you've got an investment property and
[00:17:44] you're making a loss on that investment property you can only you've got basically got to slice
[00:17:49] up your income so you can only write losses against that that income that you're getting
[00:17:53] from the from the property in Australia you can write those losses off against your income
[00:17:57] from your main job if you want to so you're minimizing your tax by having several houses
[00:18:02] well I mean how in what world who thought that was a good idea oh that's again that's
[00:18:05] Howard yet again oh that's not Howard that is actually under labor pardon me I've got to
[00:18:09] make a buy a corporate there it was Howard and Keating who brought that in what we call
[00:18:14] it's called negative gearing for those that don't have the benefit of an Australian past
[00:18:19] and negative gearing lets you write off losses on a property against all your income so they're
[00:18:24] basically it's a great good great encouragement to have have loss-laking landlords or landlords
[00:18:31] lose money and then they lose they use the losses from the from that to write off of their
[00:18:37] profits for all those sources and they minimize their tax that way so again it's one of these
[00:18:41] people it has an aspirational effect people think I'd like to you know I'd like to get that
[00:18:45] negative game never negatively geared going to thanks very much I'm going to vote for the
[00:18:50] party that maintains negative gearing but the result is a perverted distorted speculation
[00:18:56] focused wealth lazy wealth approach to capitalism rather than one which actually has people
[00:19:03] innovating and again we're here but we're more of a feudal system these days than a
[00:19:07] capitalist one so we're going to take a break but I mean just for you know the take out from
[00:19:12] this first part of today is we can actually say margo thatcher for once was right I mean
[00:19:19] there's no reason why income from wealth should be taxed at a different rate to income from
[00:19:25] work they should be the same shouldn't they and it's just a question of it's just a
[00:19:30] policy shift it may be unpopular but it would fix quite a few problems wouldn't it
[00:19:35] would it would and I said I'd actually go the other one so you have a lower rate of income than
[00:19:39] you have on on wealth makes sense too all right we'll take a break back in just a second it's
[00:19:44] the debunking economics podcast it's me and steve keen stay with us hold up what was that
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[00:20:54] podcast with steve keen and phil dobby so steve we are looking this week at the
[00:21:01] difference between wealth and income and we talked before the break about how you know they
[00:21:07] they are taxed differently we're not even trying it seems actually so and it does get down to well
[00:21:13] two things doesn't it inheritance tax which we've talked about and capital gains which
[00:21:16] we're talking about as well capital gains is well below income tax in all parts of the
[00:21:20] world so capital gains in the uk varies between 20 and 24 percent the worst culprit is
[00:21:25] the u.s though if you hang onto investments then you could end up and hanging on means
[00:21:31] only a year you could end up just paying 20 capital gains or possibly nothing at all so
[00:21:37] if you've got an asset for more than a year it's zero percent if you make 47,000 from it
[00:21:44] if you make half a million in gains then the most you're going to get taxed is a maximum
[00:21:49] of 20 percent so no wonder there's billionaires in america because they're they're raking it
[00:21:55] because they're paying a maximum of 20 percent on their capital gains which of course will be the
[00:21:59] majority of their income and does it what happens if you hang on for longer than one year is it
[00:22:05] before you further or it's just the one year it's just the one year i mean it's just like
[00:22:08] oh yeah i guess it's it's you know in one year they just mean it could be one minute
[00:22:13] couldn't it this is it's just like canes made a wonderful point which john blatt followed
[00:22:19] up on very well assumption between why they call investment why and what he called placement
[00:22:24] placement is putting your bet down on a casino table that's the stock market and you know if
[00:22:29] you get the placement wrong you can flip it off to another another placement in a matter of
[00:22:33] milliseconds investment is long term you decide to build a car factory you know you're going
[00:22:38] to take 15 years and know whether that was a good or a bad idea so we have all these rules
[00:22:43] which basically encourage placement you know put your money somewhere move it somewhere else make
[00:22:48] a profit out of that and holding on for one year is encouraging placement it's not encouraging
[00:22:54] investment so let's go back to this idea that if currency because i didn't quite i don't think
[00:22:58] we've quite finished on that point where currency is losing value and i raised the question well if
[00:23:02] that was the case wouldn't i just buy more assets i mean what's what is the advantage of
[00:23:07] having a currency which loses value apart from the fact if you've got the cash then you're
[00:23:11] going to you're going to you're going to spend it quickly it's made it's made advantage
[00:23:16] for when it was actually used in apparently in argentina was actually quite widespread as well
[00:23:20] we had somebody came in one of the sk and friends discussion groups and pointed out there's
[00:23:25] millions of people involved in a similar form of currency in argentina which is part that will
[00:23:29] keep the bloody country going some currency experiments apart from its own own disasters
[00:23:34] at the national level but with the gazelleian currency in wargill in germany during the lead
[00:23:40] up to the second world war the whole idea was there was 25 percent unemployment the local
[00:23:46] council had a mayor who was a fan of gazelle's work he brought in his currency where you had
[00:23:51] to put a stamp had to be put on on a note issued by the council otherwise it would depreciate at
[00:23:58] a time it had to but unless you spend it you had to put a stamp on it and that was a depreciating
[00:24:03] currency and that caused such an increase in economic activity that you went from an
[00:24:07] unemployment rate for the town of 25 to zero very very rapidly but that wasn't people
[00:24:12] that wasn't people hoarding money for reasons of accumulating welfare was it that was so you know
[00:24:17] that was people hoarding money because they worried about the darks and the economy was
[00:24:20] going and yeah that's why there's different with the situation of deflation now what we're
[00:24:24] talking about here is you you want to have a way of you're going to come economy functioning
[00:24:30] as much as you can call anything in capitalism normal normally but you what you want to do is
[00:24:36] stop without wealth accumulating and turning into unearned income and unearned wealth with
[00:24:43] unearned income coming out of it so your idea would be to say if you if you don't actually
[00:24:48] use it again in transactions it will depreciate in situ so the account will be will be you know
[00:24:53] that much will be clipped from the account if the money is stationary you've got to turn
[00:24:58] the money to some other form to avoid that and your other form would preferably not be
[00:25:03] stocks and properties but investments in real corporations and you know providing working capital
[00:25:10] to current firms providing money to entrepreneurs something to get us back into
[00:25:16] generating investment because the more I look at capital is the more I see a system that's
[00:25:19] turning into feudalism as you know we have said three times already in this in this
[00:25:24] discussion when you get together through accumulated wealth you're in the you're in
[00:25:28] the Marie Antoinette world again and that wasn't particularly good for Marie in the long
[00:25:33] term well let's give you an opportunity for a fourth time to mention feudalism then because
[00:25:36] I'm going to talk about I'm going to talk about share buybacks because if you are
[00:25:40] a shareholder and you're working for a company and you you know that you hold those shares in
[00:25:44] and you want to see those shares increase in value then buying back shares so less shares
[00:25:51] same company value higher value per share you're going to win from that so Joe Biden actually
[00:25:56] has tried to tackle that so he's introduced a one percent corporate tax on share buybacks
[00:26:01] so that money is you know arguably then invested not in buybacks it's invested in operations it's
[00:26:07] invested in employees it's invested in growing the business that was introduced as part of the
[00:26:13] inflation reduction act the problem is it's not really made much difference and so now he's
[00:26:18] wanting to quadruple it which actually doesn't sound like a bad idea does it if you get
[00:26:25] tax from share buybacks then that encourages you to basically say well okay there's less
[00:26:31] incentive for us to do that we'd better grow the company instead and employ more people
[00:26:35] for example yeah I mean some of the stuff that I mean Biden gets a fair bit of criticism
[00:26:40] from the left of what I've seen and certainly the stuff over Israel isn't helping very much
[00:26:45] at the moment but some of the things he's doing are actually quite remarkably progressive
[00:26:49] you know things which you might expect to come out of a Roosevelt rather than out of the fairly
[00:26:57] bland figure that he comes across as so yeah that sort of thing happening is quite a
[00:27:03] it's an unexpected development in American politics that that's been done by the
[00:27:06] president and I'm sure it would be a surprise to most Americans I'm sure most Americans aren't
[00:27:10] even aware of it nor a shock than a surprise but still yeah but I wonder whether our
[00:27:14] buybacks always that stormy weather ahead yeah well there is for one man isn't that
[00:27:22] well there's stormy weather in the past as well that's been the problem but I mean
[00:27:26] just being devil's advocate on that our share buyback is always that bad I mean
[00:27:30] presumably companies wouldn't do it if they thought they could make more money from
[00:27:34] investing in growth it's really good it's a really really good thing for a brain dead
[00:27:38] management yeah because this is but if you really can't see the economy's had a downturn
[00:27:46] you've made a profit because you are one of those companies that does well when the economy has a
[00:27:50] downturn like for example you're in IT for example your Facebook or somebody like that
[00:27:54] and you can't see an obvious way to invest for growth within your business
[00:27:59] as you say it's lazy management perhaps it is actually you're right it's lazy management
[00:28:03] and everyone wins of course it's of course you've got to stop that it's lazy management
[00:28:07] and I was about to say I was going to say a few little choice words to you Boeing Boeing Boeing
[00:28:13] yeah they're the ones that heavily into the share buybacks and that's easy because their
[00:28:18] planes are falling out of the sky yeah they should make it matter than rubber actually
[00:28:20] so they do go boing boing boing but they should bounce that's a good idea we need
[00:28:24] bouncing planes opposed to bouncing checks we need bouncing planes yeah so okay well that's
[00:28:29] one way around I mean the whole thing as well because of this difference between
[00:28:38] taxing wealth and taxing income is that we have a very complex system which even I find myself
[00:28:44] tied up in and lots of people in a similar situation you've got a one person business
[00:28:48] you're running as a limited company your accountant says well pay yourself the minimum
[00:28:52] tax so you're you know you're not paying a great deal of income tax instead you pay
[00:28:56] corporate tax on the profit the company makes and then you pay tax on dividends
[00:29:01] and there are barriers or points at which that corporate tax will increase and just as there
[00:29:07] are barriers at which you know there's levels thresholds at which income tax increases and
[00:29:12] similarly for dividends so it's immensely complicated you need a and you know then
[00:29:17] there's a question about you know how you manage all of that you need an accountant
[00:29:21] I mean if you just say it makes no difference actually whether you're getting dividends or
[00:29:26] getting income it's all taxed at the same rate because we have listened to Margaret Thatcher
[00:29:31] doesn't matter where the money is coming from if it's income it's income it should be taxed
[00:29:35] at the same rate with the same thresholds then we'd have far fewer accountants and we
[00:29:40] could all just file our tax returns quite easily online ourselves because it wouldn't
[00:29:45] be quite so complex yeah and that's something I have a great deal of sympathy for
[00:29:49] because the complexity is what enables the rich to hide their wealth they can afford the accountants
[00:29:54] the poor can't so it ends up being tax burden falls on the poor and the middle class rather
[00:29:58] than the rich and that's partly where I think the near the Thatcher working class and the
[00:30:03] Reagan working class came from because they were being screwed over by this stuff which was
[00:30:08] caused by Thatcher and Co but what it meant was they felt themselves you know they're
[00:30:13] getting huge tax burden the tax versions are very visible they can't necessarily see the
[00:30:18] government spending and that's been cut back by austerity anyway put the two together and people
[00:30:22] then end up voting for the conservatives because they think they have their interests at heart
[00:30:26] well that's a beautiful little con job but that's been the impact so income tax ends up
[00:30:33] being a major reason why people are anti the government and yet it's if the government was
[00:30:39] funded itself sensibly isn't understood how it actually created money then there'd be a lot
[00:30:44] more income for people at that level and a lot less insecurity which and potentially
[00:30:50] the whole tax thing is a way of making people anti the idea of collective behavior when in
[00:30:57] any complex society you need to have collective as well as individually motivated behavior to make
[00:31:02] it functional. The problem isn't because tax is localized but the world is globalized and if you
[00:31:08] start to say well okay we're going to tax wealth in the UK or in Australia anywhere but the United
[00:31:14] States every billionaire is going to go well just as well we're establishing our company in
[00:31:19] the United States because we've got very low capital gains tax here it needs to be a
[00:31:23] there needs to be a global approach because otherwise you'll make not a jot of difference.
[00:31:27] Well that's again where it is changing the actual nature of the attempt to stop their money
[00:31:31] accumulating in the first place rather than try to tax it back which then means you have
[00:31:36] you know countries competing over having the lowest tax rate to encourage people to make that
[00:31:40] speculative move you're talking about. The other way if you have a currency which just wherever
[00:31:45] it is whichever national currency it is which appreciates in the first place if you want to
[00:31:48] have business in that country you've got to have operations there your income is going
[00:31:53] your income will still occur but your wealth will decay courtesy simply the national
[00:31:58] monetary system so you could do it on a national level as long as the economy is you
[00:32:03] know wealthy if you need the foreign investment if you need other forms of technology to be
[00:32:09] brought in and if you don't want your own capitalists to disappear then you could make
[00:32:16] that system work even though you had the remainder of the world operating on a conventional
[00:32:21] accumulative money system. Right so I'm going to be devil's advocate again here so
[00:32:25] please don't. You've been a devil quite a few times yes you've been. So please don't.
[00:32:27] Please don't. I'm glad it's the weekend you need the weekend obviously.
[00:32:31] Well some people listen to this middle of the week of course but look don't tweet nasty things
[00:32:35] about me you know I know Twitter is the natural place to get across the vile side
[00:32:40] of your personality but just go easy on me but here's what a lot of people would say
[00:32:45] you know a couple of years ago I suspect it's more pronounced now but we had 2,800 billionaires
[00:32:51] in the world they owned three and a half percent of global wealth so some people would
[00:32:57] say well done to them how is this growth of millionaires actually impacting the incomes
[00:33:05] of other people you know they are very much the American approach isn't it that you know
[00:33:09] if you can be a billionaire well well done to you why is that going to hurt Joe Blow
[00:33:14] living in Illinois. Yeah I mean there's some validity to that argument when you have people
[00:33:19] making the wealth out of innovation dude I mean I'm no great fan of Facebook putting it
[00:33:23] mildly but it was an innovative system when it came out the same for you know the for the
[00:33:29] Musk's electric cars the same for China's electric cars as he want the innovation to
[00:33:34] occur in a capitalist economy that's the one great advantage capitalism has any other social
[00:33:39] system is the capacity to spare innovation and you want to have that continue. So we
[00:33:43] shouldn't be stopping Jeff Bezos accumulating wealth then. I don't like how he's been
[00:33:47] I mean we're entitled to end value judgment how he spends his money and I prefer how Musk
[00:33:53] is spending his to how Bezos is spending his but apart from that you know the fact
[00:33:59] that he accumulated the wealth from like Amazon was a complete innovation in product distribution
[00:34:06] space it still manages to be the same it's the easiest way to buy anything so we have
[00:34:13] people have benefited from that innovation above and beyond Jeff Bezos. So you've got no problem
[00:34:19] with wealth being accumulated so long as it is from productive growth of productive and yeah
[00:34:27] like certainly that's going to be we're now in a new world on that front we can we afford
[00:34:31] that anymore with the state of the ecosystem and my point is decidedly not but you still
[00:34:38] want the innovation to be coming out of people trying to bring out new energy systems which
[00:34:42] are going to reduce our dependence upon fossil fuels.
[00:34:46] Right so that's decided because that's just going to complicate the story for today let's
[00:34:51] assume we live in a we're living in harmony with the planet and the planet loves us and
[00:34:55] we love it so we can carry on growing in that scenario then the only concern you have about
[00:35:01] accumulated growth is that where that growth is coming from investment in assets that are
[00:35:07] non-productive and so in that case you'd be saying well okay you stop that through
[00:35:12] taxing the investment in those assets rather if it's a non-productive asset so you're
[00:35:18] taxing the transaction tax on financial assets yeah yeah would that do would that solve the
[00:35:23] problem? No no one thing will solve the problem because it's been a very complicated
[00:35:28] as well as complex society but a range of them would be necessary I think a form of
[00:35:32] money which depreciates if it's not being if it's if it's not being turned over that the
[00:35:37] gazillion concept is an important one. Taxes which accumulate on on wealth increase caused by
[00:35:45] actions not of the owner of the property but of the of the social system around them
[00:35:50] the Henry George type of idea that's also a sensible concept you'd need to fine-tune all
[00:35:56] these things you need to be oriented towards saying we want a society which in which the
[00:36:02] majority the vast majority of people live a comfortable or better life because if that's
[00:36:07] not what we're achieving then the society is you know not exactly achieving social objectives
[00:36:13] so you you have a quite a bit of redesigning going on you'll be redesigning a money system
[00:36:18] you'd be changing from taxation to another way to getting government money out of circulation
[00:36:22] all these things would be necessary to make it function well it's feasible and therefore
[00:36:27] it won't happen. So Michael Train I don't know who he is I just saw a piece from him from
[00:36:32] the American Enterprise Institute arguing that billionaires are great for the economy so long
[00:36:39] as they are billionaire investors exactly your point rather than billionaire well as long as
[00:36:44] they're investors in productive things he doesn't actually do that but he says rather than
[00:36:48] billionaire heirs and heirs so he says innovators like Jeff Bezos only take out about
[00:36:53] 2.2 percent of the value created by their technological innovations they invest the rest
[00:36:59] and so they're adding value to society and we shouldn't want to stop that happening.
[00:37:03] Yeah and that I think that's true the one great is the one thing you can argue for
[00:37:08] capitalism above any other social system is encouraging innovation and now if you look at
[00:37:13] what we get out of things like people being allowed to do share buybacks taking wealth offshore
[00:37:19] tax havens lower rates of tax for wealth than for income are these encouraging innovation not
[00:37:25] bloody nearly the one thing they're encouraging is evasion the whole financial insurance and
[00:37:31] real estate industry appropriately acronym FIRE burning the productive industrial capitalism down
[00:37:39] and back to my old mate Karl Marx with the best comment going on it this mob knows nothing about
[00:37:44] production and should have nothing to do with it but every now and then they get the capacity
[00:37:48] to interfere with it out of the sheer power that finance gives them and we need a world
[00:37:52] which is far less dominated by finance and far more by industry and innovation.
[00:37:56] Right so finance so a transaction tax on financial assets and real estate
[00:38:03] would sort of go a long way to redirecting wealth so that's invested in productive use.
[00:38:10] And some form of depreciating currency which means you can't accumulate it in the first place
[00:38:14] but you can make income out of it. Right and what do we do about those stately homes?
[00:38:18] So it's an interesting one isn't it where you've got this piece of history
[00:38:23] if Lord Ponsonby Smythe has been looking after it for several generations
[00:38:28] several generations and you know he can't really afford to maintain it's falling into
[00:38:34] a bit of disrepair if when he dies it's not passed on to his children the taxpayer is
[00:38:44] going to have to pick up the tab or we just let these little pieces of history
[00:38:48] become blocks of flats or fall into disrepair.
[00:38:51] Yeah there's no easy answers to this sort of thing I mean I remember going through
[00:38:56] the Mansfield house I think it was in London which is in one of the major parks I've forgotten
[00:39:00] which one and being quite stunned to see a photograph there of another photograph of painting
[00:39:06] of a wonderful incident where I think it was Lord Mansfield was one of the first people
[00:39:10] one of the first judges to make a legal judgment against slavery and part of the reason
[00:39:16] why was that his daughter or his son had brought back a child from the colonies
[00:39:22] and they raised their child as the grandparents raised their child as their own and he could see
[00:39:28] racism they weren't exactly totally brilliant towards that child but they could see the impact
[00:39:34] of racism and the elder of racism and that treatment if it was abhorrent so that's that
[00:39:39] house still exists it's open to the public it's become part of a state I think half the state
[00:39:45] half the house is still reserved for the for the stately family itself something of that
[00:39:49] nature is necessary I think to make these things function yeah well there's hundreds of them all
[00:39:53] over the UK and they are a piece of the UK's history it's why people come to this country
[00:39:58] so they can get it I mean you know and I guess they represent an age where there was a
[00:40:02] massive wealth divide and so but you know but still you know startling pieces of architecture
[00:40:10] and you know just overwhelming to see lots of them yeah yeah and part of the cop part of what
[00:40:16] makes your country what it is so you know you don't want to destroy all this stuff and end up with
[00:40:21] core vozio style concrete blocks all over the bloody country in the name of name of equity
[00:40:26] all right well there we are we've sort of half solved the problem today but you know what I
[00:40:31] mean a lot of people would say you're very progressive and you know in your attitudes or
[00:40:36] even you know raving socialist but you're not really are you it's um you know I think quite
[00:40:42] a few people I think there might be a few Tory members who haven't left for the Labour Party yet
[00:40:47] who might listen to what you've said today and said well all of that makes perfect sense to me
[00:40:50] well I was actually challenged by this on the BBC ages ago on that hard talk interview
[00:40:55] yeah are you anti-capitalist and so look I'm in many ways I am a capitalist because I do
[00:40:59] innovate and I have the software package Minsky the one ravel them about to release
[00:41:03] commercially hopefully next month these are all things which are only possible in a world in
[00:41:09] which you get a chance to do innovative things and not lose your shirt and so yeah I think we
[00:41:18] the ultimate defense of capitalism is that capacity to innovate and there's far too much
[00:41:23] the people want what they what they justify ends up being justifying a form of feudalism
[00:41:27] as well instead the whole defense of you know no no income no tax on wealth share buybacks
[00:41:35] all the various parasitic attitudes of not a genuine capitalism but parisism off capitalism
[00:41:43] that's what a lot of these so-called right wing reforms have done carving the rate of capital
[00:41:49] gains tax you know tax havens etc etc that's encouraging parasitism not innovation yeah we just
[00:41:56] need to go through and reverse everything has been done on that since the 1980s I mean there
[00:42:01] is the issue as well jeff bezos is too powerful you know that's a separate issue we fair back to
[00:42:06] our podcast on techno feudalism for that one but that's enough for today good to talk catch
[00:42:10] you soon thanks very much steve thanks mate bye the debunking economics podcast
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