Comment by cperciva
9 years ago
Indeed. And saving/investing is important! It's not a coincidence that the industrial revolution happened in a country with a secure established rule of law such that people could make investments without worrying about losing them at the whim of a dictator.
Much better to tax consumption.
More importantly, it happened in a country which forced people off their land at gunpoint, into urban poverty, where they provided a huge supply of cheap, fungible, and utterly disposable factory labor.
But that would run counter to the neo-liberal narrative... After all, the rule of law serves to protect investments, not the peasant forced off his land.
Where was the rule of law to protect said peasants? Perhaps the rule of law isn't actually necessary for industrialization - as long as capital is protected, everything is all well and good. Unless you're a peasant.
[1] https://en.wikipedia.org/wiki/Inclosure_Acts
Urbanization was certainly important in the development of industrialization, in that urbanization is essential for all forms of specialization; but I would dispute the notion that having a large supply of cheap labour was important. To the contrary, since industrialization is the process whereby capital is invested in order to increase worker productivity, it is less useful where there is a cheap workforce, not more useful.
I agree that the rule of law didn't protect peasants who were forced off their hereditary lands. You'll note that it wasn't the peasants who led the industrial revolution.
Remember also that at the time, breach of employment contract by the employer was a civil matter the employee would have to pursue out of his or her own pocket. Breach by the employee was a criminal matter (see the Master and Servant acts, which essentially perpetuated feudal norms into the industrial age). It was also illegal for workers to "combine" -- band together to say that either all of them would get a higher wage, or none of them would work -- and organizing such a "combination" was also a criminal offense.
Like several major sectors of the US economy at the time (and later), Britain's "revolution" was utterly dependent on coerced labor, viciously enforced by the power of the government. But some people still like to think of those times as the good old days of "laissez-faire" and government "staying out of the market".
Now, you can argue that this was a "rule of law", just a brutally repressive one which systematically granted special rights to certain classes of people, but then you're on much shakier ground.
That happened as well in S. America, but S. America did not become a superpower. There's something else at work.
South America, unlike England, did not have captive colonial markets, that it could sell its mass-manufactured goods to. South America was the captive colonial market.
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This is an underappreciated factor in the industrial revolution.
Taxing consumption is regressive; as your wealth increases, the amount of dollars spent relative to your wealth continues to decrease.
In the long run, every dollar of wealth gets spent.
As a practical matter, consumption taxes can be made progressive by combining them with a low-income tax credit or a universal basic income.
> In the long run, every dollar of wealth gets spent.
Not necessarily.
"Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco Systems (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody's Investors Service. That's even more cash concentration than in previous years, as these five companies held 27% of cash in 2014 and 25% in 2013. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors." [1]
Also, the top 1 percent owns 90 percent of wealth in the US [2].
"First, economic inequality has worsened significantly in the United States and some other countries. The richest 1 percent in the United States now own more wealth than the bottom 90 percent. Oxfam estimates that the richest 85 people in the world own as much wealth as the bottom half of humanity.
The situation might be tolerable if a rising tide were lifting all boats. But it’s lifting mostly the yachts. In 2010, 93 percent of the additional income created in America went to the top 1 percent."
> As a practical matter, consumption taxes can be made progressive by combining them with a low-income tax credit or a universal basic income.
I agree that a consumption tax can be combined with other policy to prevent the regressive nature of a consumption tax alone. This requires wealth be taxed in various forms (ownership of investments, land, etc).
[1] https://www.usatoday.com/story/money/markets/2016/05/20/thir...
[2] https://www.nytimes.com/2014/07/24/opinion/nicholas-kristof-...
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