IIRC, high taxes in early seventies Britain led The Rolling Stones to flee into tax-exile to France and produce Exile on Main St., one of their all-time best albums.
C'mon Europe, raise them taxes!
Rolling Stones are stooges of the plutocracy.
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And I want to make abundantly clear that I have nothing at all against Spain and the Spaniards, just like I have nothing against the British, the Americans or the Japanese. On the contrary, I admire certain aspects of each of those nationalities. However, that doesn't make me want to be British, American or Japanese. I'm Catalan, simple as that.
I'm an outsider, and come from a position of privilege (white, male, educated parents, America), so take what I say as being deeply colored by that.
I'm all for preserving culture, language and history. I think Spain would be better off if those aspects of the Catalan people were rigidly protected, not at the exclusion of other things, but that people can't mess with it (like not forcing children to only speak certain languages, or banning certain languages in school).
From an economic, and political view point though, the world doesn't need more smaller countries that are more rigidly divided by ethnic and cultural backgrounds. It only entrenches differences between countries making stability and cooperation harder to maintain.
As an outsider, I would see a peaceful way to stay united as more beneficial than a peaceful way to separate. Both Catalan's and Spain's bargaining position and political influence will be greater if you remain together than if you part. There are too many examples of countries that have split and had horrible conflicts afterwards. Pakistan and India being one example.
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Crisis? What crisis? *chomps on kielbasa*
In Poland even crisis failed...
Rolling Stones are stooges of the plutocracy.
Actually, I think they're all, like, Knights of the Realm or something and Mick Jagger owns (used to own?) an island in the Caribbean. I think that qualifies as straight up plutocrats.
As opposed to Bowie who refused honors. Twice.
In Sweden, our social democrats actually instituted a non-marginal progressive tax. Legions of people refused to take salary increases because they would lead to getting LESS money remaining after taxes. Worst of all, there was no upper limit to this progressivity. Our national icon, Astrid Lindgren, children's book writer and creator of Pippi Longstocking, made som much money they really DID tax her over 100%. Yes, you read that right. For every 100 swedish krona she earned, she had to pay more than 100 in taxes... Being a verbal and smart woman, she wrote to the newspaper about how it's called per cents because there are only a hundred of them, about how the government apparently did not have anyone who could do middle school maths. It was called the Pomperipossa tax, and swedes today are quite aware of this incident of twenty years ago. The entire system was changed to respect marginal earnings, but don't tell me it's not possible to find progressive tax systems that refer to total earnings in Europe.Ok, so there's one brief example 20 years ago. Have there been others since? Are there any now? We should therefore assume that all taxes will work that way, rather than take 30 seconds to look up the details of the tax we're talking about?
Which I did. Before posting. Hollande's 75% tax is in fact a marginal tax.
It was not brief. This was kept up for many years, but when the Pomperipossa situation happened, it went down quickly. Raising taxes is no kind of guarantee for not being stupid.
I know how important that is to remember what happened to ones forebearers, but I also know how less than ethical people can use such experiences to rubber stamp the most egregious of practices
Yes, I'm well aware of that, and I thank you for your sympathies. Bear in mind, though, that I was not speaking about events that happened two hundred years ago, those things happened within living memory, a mere 40 and 50 years ago. The victims and witnesses are still living and they remember. In mentioning that, I was merely enumerating the reasons for the growing independentist feelings in Catalonia, because I realize it must be difficult to understand from the outside, without the whole historical and social context.
In that regard, one of the major claims by the victims of the dictatorship (not only in Catalonia but across all Spain) is that, unlike other armed conflicts of the 20th century, after the Spanish Civil War (which began as a fascist military coup against a democratically elected government) there hasn't been any kind of reparation or compensation for the victims, there wasn't a true attempt to mend wounds or to repair the social fracture that still very much divides Spain in manichean "good and evil" sides (both right-wing and left-wing sides see themselves as the good ones, of couse). All there was was an attempt to turn a blind eye and the hope that people will eventually forget. Fat chance, in my opinion, as long as the generations involved are still living.
Also, please remember that the only threats of violence have come from the Spanish side, from retired military officers and even right-wing politicians (one of them suggested three days ago in a tv program a military intervention to dissolve the Catalan government and arrest our political leaders, stating that "and if the Catalan people take to the streets, let them! After a month or so they will go back home. They will have to eat and work, eventually" (my translation). A true lesson in democratic thought!
I'm all for preserving culture, language and history. I think Spain would be better off if those aspects of the Catalan people were rigidly protected, not at the exclusion of other things, but that people can't mess with it (like not forcing children to only speak certain languages, or banning certain languages in school).
I agree. The Catalan society is 99.9% bilingual, we learn Catalan and Spanish from the cradle, so to speak. One of those languages predominated, of course, depending on your upbringing (what is known as L1 in linguistics), but we have no troubles shifting between both languages at a moment's notice. We are used to that. I will use myself as an example: I speak with my parents, brothers and most of my friends in Catalan, and with my wife, in-laws and some friends in Castillian (a.k.a. Spanish, though that's somewhat of a misnomer.) I speak Catalan to my 2-year-old son, and my wife speaks Spanish to him. And that's absolutely normal here. We study both at school, alongside a foreign language, usually English, sometimes French.
No one who has ever lived in Catalonia can say that the Spanish language is endangered here, on the contrary, it still has a hegemonic position as the official language of the state. Catalan, on the other hand, is an endangered language that is still recovering from almost 40 years of banning and suppression, and it needs a certain amount of protection to ensure its long-term survival. This reality, that can be confirmed by 7 millions of people, is often attacked by certain extreme-right Spanish propaganda that attempts to paint Catalans as some sort of linguistic fascists. How anyone in their right mind can believe that a language like Spanish, with more than 400 millions of native speakers and second only in number of speakers to Mandarin Chinese, can be endangered by the Catalan language and its about 11 milions of speakers beats me completely, but that doesn't stop them from trying.
From an economic, and political view point though, the world doesn't need more smaller countries that are more rigidly divided by ethnic and cultural backgrounds. It only entrenches differences between countries making stability and cooperation harder to maintain.
As an outsider, I would see a peaceful way to stay united as more beneficial than a peaceful way to separate. Both Catalan's and Spain's bargaining position and political influence will be greater if you remain together than if you part. There are too many examples of countries that have split and had horrible conflicts afterwards. Pakistan and India being one example.
For most Catalans, independence hasn't been the first option until now. The party that governed for the best part of 30 years with ample support by the people is characterized by its tendency to deal-making and negotiation, always fighting for more autonomy but always within Spanish boundaries. It is seen as a moderately conservative and very cautious party, and it has been a force for stability in the Spanish government, acting as a balancing element in the heavily bipartisan state politics. So you can imagine that when such a non-independentist party decides that its political trajectory is a dead end and that the popular claims for independence have to be heard, it is not on a whim and it is not a decision lightly taken. We know that it will be a difficult process, made more difficult by a confrontational Spain that resists aggressively against what president Obama rightly called universal values: freedom and self-determination. If we Catalans decide by an ample majority that we want to be independent, we'll want that done peacefully and democratically. It is the task of our politicians to figure out how to do it, and to explain us how they will do it, so we can cast an informed vote. For now, all we're asking for is the chance to decide.
Oh, by the way, did you know what Spaniards like to call Catalans as an insult? Polacos, i.e. Polish/Poles. For years, our elected president was received in Madrid with multitudes in the streets shouting "Polaco, Polaco" and "Pujol, enano, habla en cristiano" ("Pujol, you dwarf, speak like a Christian"). It goes without saying that most Catalans are really puzzled as to why being Polish can be considered an insult in their minds, and usually assume that is because we speak a different language. The truth is that it originated during the Civil War and it makes reference to the 1939 Invasion of Poland, which has much, much nastier connotations.
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I have never understand by Polaco (Polish) is some kind of insult in some places of Spain (Gorbacz, what have you done in Madrid?), thanks for the information.
I am with Authrym in some questions, not in others. I really feel Spanish, but really, everytime some politician of the PP (the right party) speaks, I think better of the independentist people.
My language is Spanish, but I have absolutely no problem with catalan. Authrym is absolutely right about the castillian. In all my live I have never seen the discrimation agaisnt castillian-speakers that some PP people says is everywhere here.
On the larger scale, the complexity of the situation make hard to search for an answer, but seems clear that only with austerity Europe is going to end really bad. The politics leaders have absolutely no interest in the country people or necessity, only in the finantial situation. I dont want to think that way, but is what our politics are making people think. Europe, specially south Europe need desperetaly good leaders.
What do Europeans think of the "Estonian miracle"
I realize that the UK's Global Post is the "pro austerity" paper. I also realize that Estonia, at 1.3 million people (less than the metro area I live in in the US) can do things that are politically impossible in larger states.
On the other hand, I look at economic news out of Greece and wonder if the voters there never took elementary school arithmetic, or can balance a checkbook.
I also wonder how it's going to fare as we progress through the Great Disintermediation reshaping human productivity and global economics.
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On the other hand, I look at economic news out of Greece and wonder if the voters there never took elementary school arithmetic, or can balance a checkbook.I also wonder how it's going to fare as we progress through the Great Disintermediation reshaping human productivity and global economics.
No, I havent heard of this from Estonia. Shocking news, will look more, thanks.
But two things.-Dont understand what you are saying in that last line. Can you explain yourself?
-Certainly, the extreme austerity here in Spain is not well implemented, but is not working. And to me at least, that line about arithmetic is very insulting and offensive. Can only imagine how much insulting can be to a Greek. Is easy to say thinks like that when the problem is not on your land.
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Why the hell don't we have a protectionist policy like the US and China do ?There are plenty of Euro protectionist policies. PDO and subsidization of part-time/jobsharing, for example.
The problem in Europe does not really lie in not having a protectionist policy, but rather on being all starry-eyed about free trade and ready to dismantle all our trade barriers (and never put back anything that would even look like it) even when it is obvious that the greatest proponents of free trade (ie the good old USA) are quite ready to put a break on it when free trade threatens their interests (or rather the political interests of their elected leaders)
Why are we so excited about the iphone5 when we should be concerned about the latest Nokia ?Because Nokia phones suck.
I think it was kind of his point
What do Europeans think of the "Estonian miracle"
I realize that the UK's Global Post is the "pro austerity" paper. I also realize that Estonia, at 1.3 million people (less than the metro area I live in in the US) can do things that are politically impossible in larger states.
On the other hand, I look at economic news out of Greece and wonder if the voters there never took elementary school arithmetic, or can balance a checkbook.
I also wonder how it's going to fare as we progress through the Great Disintermediation reshaping human productivity and global economics.
When it comes to economics, one cannot ignore the cultural aspect. They could have a very, very different approach to money and property than their neighbors.
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On the other hand, I look at economic news out of Greece and wonder if the voters there never took elementary school arithmetic, or can balance a checkbook.I also wonder how it's going to fare as we progress through the Great Disintermediation reshaping human productivity and global economics.
No, I havent heard of this from Estonia. Shocking news, will look more, thanks.
But two things.
-Dont understand what you are saying in that last line. Can you explain yourself?
We are entering an era where computer automation is increasing productivity while simultaneously reducing the number of people who are employable at all.
There are now computer programs that can do legal database searches and produce legalese briefs and contracts at least as well as a 3rd year attorney; they're much more extensively sourced, but not quite as well written.
This technology grew out of a service that converts box scores and player lists of high school and small college sporting events and generates the two paragraph newspaper writeups that used to be written by interns from Journalism schools.
We're seeing the first wave of viable consumer 3-D printers. We're doing an economic transition from centralized manufacturing and the rights of workers to, well, something radically different involving a lot more computation and automation, and a lot fewer employable humans.
Certainly, the extreme austerity here in Spain is not well implemented, but is not working. And to me at least, that line about arithmetic is very insulting and offensive. Can only imagine how much insulting can be to a Greek. Is easy to say thinks like that when the problem is not on your land.
Honestly, I wasn't trying to be insulting.
In 33 years - a third of a century - Greece has run structural deficit spending in excess of 6-7% of GDP every year. Greece has some of the highest "tax the rich" rates in Europe - and tax evasion has become the national sport. Greece transfers field tax collectors to desk jobs for bringing in too much money. Greece retires every tax collector who's got more than 3 years of field experience as an anti-corruption mechanism.
Greece's tax collectors usually take on bribes that about triple their salaries.
Greece has 60% of its population working government jobs, because in the 1970s, they instituted a law saying you couldn't fire the civil servants of the previous government. So, rather than fire them, they transfer them (with full salary and seniority) into new positions, and hire their own cronies into the now vacated civil service positions that theoretically do things.
Greece's accounting standards are so bad that in the economics press, the "Projected revenues and expenditures from last quarter were off by 20%" is the new normal. In any other accounting regime, that kind of discrepancy would result in mass firings.
Greece is so far behind on its payments for its socialized medical system that pharmaceutical companies are demanding that they at least pay the last two years of outstanding bills before they'll send in more drugs. Greece is currently facing a SERIOUS threat by the government of Turkey to turn off the natural gas pipelines that provide electricity for the country...because Greece hasn't paid the bill in 20 months.
And yet, the political party that won the elections last summer won on a platform of "No government worker will be fired, no pensions will be cut (retirement age in Greece is 57, 7 years lower than most of the rest of Europe), no benefits will be cut. We'll still work out a deal to pay down our debts."
What's hilarious is that Greece's "official" debt at 153% of GDP is A) using Greece's own figures, which are lies right up there with the kid with his face smeared with chocolate saying he didn't eat the candy-bar) and B) AFTER the two rounds of refinancing and financial intervention that effectively slashed foreign held Greek debt by about 40%.
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Greece has some of the highest "tax the rich" rates in Europe - and tax evasion has become the national sport. Greece transfers field tax collectors to desk jobs for bringing in too much money. Greece retires every tax collector who's got more than 3 years of field experience as an anti-corruption mechanism.
My line has always been that I have a hard enough time following the lies of my own ruling class, following those of Europe's is too hard, but:
I was under the impression that rich Grecians paid some of the lowest taxes in Europe as part of a tax code that had been put in place by the '60s military junta.
Which isn't mutually exclusive with what Citizen Games is writing here--see the US's own tax loopholes and whatnot--but I was wondering if any of our European brethren could comment on whether Greece has high or low "tax the rich" rates compared with the rest of the continent.
Table of Greek tax rates as of 2009
Greece has a 45% tax rates for people making about $150,000 per year and higher. In many ways the Greek tax code is simpler than the US's because of the nature of their Parliament. This is in addition to 28% and 16% for employer and employee contributions to social security.
It is theoretically possible for someone in Greece to be self employed, make over EUR 100,000 and have to pay 45%+28%+16%=89% of their income in taxes.
The median Greek personal income appears to be about EUR 33,000 or so.
You're right - I realized as I stepped out to run an errand that I should've stepped that out to a real tax rate.
Working out the marginal tax rates, a self-employed person in Greece making 200,000 EUR per year would pay 38.3%+28%+16%=82.3% of their income in taxes.
Someone earning EUR 200,000 in salary from a corporation would pay 54% in taxes.
One of the reasons why Greece's taxes have a horrible compliance rate is because they're high enough for people like Doctors, Architects and Engineers, that it's cheaper to bribe the tax collector (and socially acceptable to do so, since everyone does it...) than it is to pay your entire tax bill.
There are entire islands in Greece that are fantastic resort towns where doctors keep villas, fleets of sportscars and have helicopters to take them to and fro - where the doctors have declared incomes of under $12000 EUR per year.
So, AdAstra, would you say this is a fraud-based problem or an austerity being performed incorrectly based problem?
You're right - I realized as I stepped out to run an errand that I should've stepped that out to a real tax rate.
Working out the marginal tax rates, a self-employed person in Greece making 200,000 EUR per year would pay 38.3%+28%+16%=82.3% of their income in taxes.
Someone earning EUR 200,000 in salary from a corporation would pay 54% in taxes.
One of the reasons why Greece's taxes have a horrible compliance rate is because they're high enough for people like Doctors, Architects and Engineers, that it's cheaper to bribe the tax collector (and socially acceptable to do so, since everyone does it...) than it is to pay your entire tax bill.
There are entire islands in Greece that are fantastic resort towns where doctors keep villas, fleets of sportscars and have helicopters to take them to and fro - where the doctors have declared incomes of under $12000 EUR per year.
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So, AdAstra, would you say this is a fraud-based problem or an austerity being performed incorrectly based problem?
I think it's an example of austerity being promised but not actually executed. The problem with austerity is that with the exception of Estonia, advocating it is political suicide.
From my outsider's perspective...
Greece's government promises more than it can afford to deliver. It has done so because you win your seats in Parliament by promising things to your constituents. You lose your seat by promising to take things away from people who aren't your constituents.
The reality is that Greece needs to run a 4% surplus, year over year, for about 30 years, to pay down that debt.
The Greek government claims to have run the following deficits for the last four years:
2009: -13% (ECB says -16%)
2010: -11% (ECB says -12%)
2011: -09% (ECB says -10%)
2012: -09% (ECB says -11% so far.)
The reason why this matters to everyone (and more to Alaryth, in Spain) is because when Greece defaults on its debts, the odds say that it causes the Eurozone to fracture into the northern half and a bunch of rapidly devaluing currencies in the south of Europe.
This will pretty much make 2008's credit seize-up and banking disaster look like being kissed by all of the models in the Sports Illustrated Swimsuit Issue, while you're petting kittens.
Every time Greece has an election or protests about austerity, the rest of the world clenches its collective anus and holds its breath.
The horrifying thing is that it's not some grand conspiracy of bankers. It'd be better managed if it were.
It's a 4 quadrillion dollar derivatives bubble that nobody knows how to deflate without collapsing the entirety of international trade and probably every first and second world economy with it.
Table of Greek tax rates as of 2009
Greece has a 45% tax rates for people making about $150,000 per year and higher. In many ways the Greek tax code is simpler than the US's because of the nature of their Parliament. This is in addition to 28% and 16% for employer and employee contributions to social security.
I don't know if this is meant in response to my previous post or not, but how does that compare to the rest of Europe, rather than with the US?
I don't know if this is meant in response to my previous post or not, but how does that compare to the rest of Europe, rather than with the US?Table of Greek tax rates as of 2009
Greece has a 45% tax rates for people making about $150,000 per year and higher. In many ways the Greek tax code is simpler than the US's because of the nature of their Parliament. This is in addition to 28% and 16% for employer and employee contributions to social security.
First, note the corrected percentage when I did the math for marginal tax rates. It's 82.3% of income at the very tippy top of the pyramid. I'd rather admit a mistake than bury it.
The maximum tax rate is a little lower than France, and higher than Germany's. The employer/employee contributions are higher in Greece than either of those two countries. Italy's tax code makes no sense to me. Nor does Spain's, and I can't find decent explanations that I can follow without digging out some textbooks.
Greece's is higher, overall, than France or Germany's, which clock out under the same scenario at about 78% for France and 73% for Germany.
Both France and Germany have economies that are growing; Greece's is...not shrinking as quickly as it once was.
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All of you forget one fact about Greece :
This is the most pious country in Europe, because ... the church is exempt of ANY taxes.
- All you have to do is build a 5ft chapel in your otherwise unlimited terrain, and you are exempt from land tax as your home is now a religious site.
- If you are a single girl, and your father dies before you marry, you will have a pension of some 1200 € (not sure exact figure). So Greek girls don't marry. 1200 € is a fortune there.
- The Greek tax administration cut into fake pensions on some islands which had a 30 % rate of blind people. The guys cut off from the pension staged a protest.
We made an error getting those guys into Europe, and we are making an error keeping them.
All of you forget one fact about Greece :
This is the most pious country in Europe, because ... the church is exempt of ANY taxes.- All you have to do is build a 5ft chapel in your otherwise unlimited terrain, and you are exempt from land tax as your home is now a religious site.
- If you are a single girl, and your father dies before you marry, you will have a pension of some 1200 € (not sure exact figure). So Greek girls don't marry. 1200 € is a fortune there.
- The Greek tax administration cut into fake pensions on some islands which had a 30 % rate of blind people. The guys cut off from the pension staged a protest.We made an error getting those guys into Europe, and we are making an error keeping them.
So..where should they be? That's sounding a bit intolerant, and I don't think you mean to.
Well, my feeble understanding of all of this is that if Greece were outside of the EU it would be able to devalue its currency to lessen its debts. (I believe that's what the Greek Communist Party ran on and got 8% of the vote.) Oh, but the German banks might lose some money? Oh, I'm crying.
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Freehold,
I assume he meant the Eurozone. Greece, and Italy, were let in for mostly political rather than economic reasons. If hey had their own currenies, they could devalue which would be less destructive than the current situation where the can't afford to stay in and the Eurozone can't afford for them not to.
EDIT: Comrade,
The EU is not the same as the Eurozone. There are lots of coutries in the EU, such as the UK, that are not in the Euro and still have our national currency. If Greece left the Euro, it would still be in the EU.
Okay, thank you.
Also, [points to the words "feeble understanding" in my previous post] just because I have no idea what I'm talking about doesn't mean I'm not going to post!
For most Catalans, independence hasn't been the first option until now. The party that governed for the best part of 30 years with ample support by the people is characterized by its tendency to deal-making and negotiation, always fighting for more autonomy but always within Spanish boundaries. It is seen as a moderately conservative and very cautious party, and it has been a force for stability in the Spanish government, acting as a balancing element in the heavily bipartisan state politics. So you can imagine that when such a non-independentist party decides that its political trajectory is a dead end and that the popular claims for independence have to be heard, it is not on a whim and it is not a decision lightly taken. We know that it will be a difficult process, made more difficult by a confrontational Spain that resists aggressively against what president Obama rightly called universal values: freedom and self-determination. If we Catalans decide by an ample majority that we want to be independent, we'll want that done peacefully and democratically. It is the task of our politicians to figure out how to do it, and to explain us how they will do it, so we can cast an informed vote. For now, all we're asking for is the chance to decide.
I hope things work out well for you guys, I just worry about a world that wants to continue to fracture along these lines. From your side of the story, it's pretty clear it isn't just you guys, but abuse by right-wing elements of Spanish society pushing you and using you as scapegoats. That kind of behavior never benefits a society. If it does push you to vote for independence, Spain will be weaker for it.
The long term problem that I see is that independence isn't going to solve the relationship between the two peoples though. It's just going to separate you without solving the underlying problems. In the short term it will provide relief. If something like WW2 happens in Europe again and Spain were to invade Catalan, I think the atrocities you'd see would be made worse by independence, though unity isn't a guarantee of protection either (especially if the anti-catalan feelings are allowed to openly fester and worsen).
Hopefully, for more reasons than just the Catalan people, something like that doesn't happen in Europe and I don't think its necessarily likely in the next few years. It is interesting to learn a little more. I knew a little more (but not much) of the Basque movement and knowing that there's a second one tells me there are some fundamental problems in Spain. I think overall, the country, Europe and world would be better served if a unity solution were found and all group identities respected and protected.
Okay, thank you.
Also, [points to the words "feeble understanding" in my previous post] just because I have no idea what I'm talking about doesn't mean I'm not going to post!
My understanding is that newer countries are required to join the Eurozone when they meet the requirements, but the UK and Denmark negotiated opt-out clauses. The UK exercised its partly due to Soros's and others' short-selling the Pound on Black Wednesday. Sweden snuck out through a loophole.
So your confusion is pretty understandable.
You're right - I realized as I stepped out to run an errand that I should've stepped that out to a real tax rate.
Working out the marginal tax rates, a self-employed person in Greece making 200,000 EUR per year would pay 38.3%+28%+16%=82.3% of their income in taxes.
The main problem of Greece is that its tax code comes straight from the 60's dictatorship. So, are totally tax-exempted the shipping industry (the foremost industry in Greece) and the orthodox church (hands down, by far the richest institution of the country, owning large chunks of estate and businesses). They contribute absolutely for nothing.
Therefore, there is (almost) only the middle class left to pay taxes and support the burden of a malfunctioning state.
Yes, tax evasion is a national sport there. It's bad, but somewhat undestandable given the inherent injustice of the system. What we have here is a breaking down society, with no sense of national solidarity.
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Every economist I've ever heard of agrees that in a depressed economy consumer and business spending are both decreased from pre-depression levels. Basically, people spend less because they are worried about the financial situation and businesses spend less to produce goods because people are buying less. Where economists disagree is on the effects of >governments< spending less.
If, during the recession, the government also spends less, aka 'austerity', that means total spending is down (since consumer, business, and government spending are ALL down). Which means that total earnings are also down... because every euro (or whatever unit of currency) someone earns was spending by someone else. If total earnings are down then either a lot of people have to take pay cuts, which they aren't about to agree to in a depressed economy, OR fewer people have to be working.
Ergo, during a depression, less government spending = less earnings for the population = more unemployment. The more the government cuts spending the greater the unemployment. It is a simple and inescapable progression which has been proven true by history over and over again.
The 'austerity' doctrine claiming that cutting government spending will so greatly increase "confidence" in the economy's FUTURE performance that people will ignore the IMMEDIATE economic downside and go out and start spending more, thus raising the country out of depression, is and always has been INSANE. People who lose their jobs or see others losing their jobs ARE NOT going to be filled with such confidence in the economy that they are willing to spend as if there was nothing to worry about.
Austerity is a wise doctrine... during boom times. When the economy is humming along well governments should be doing everything in their power to cut spending and tighten regulations... the exact opposite of what was actually done during the boom years preceding the current collapse. Too many modern economists live in an upside down fantasy land which ignores the lessons of Keynes and the Great Depression... and thus are well on the way to re-creating it.
Every economist I've ever heard of agrees that in a depressed economy consumer and business spending are both decreased from pre-depression levels. Basically, people spend less because they are worried about the financial situation and businesses spend less to produce goods because people are buying less. Where economists disagree is on the effects of >governments< spending less.
If, during the recession, the government also spends less, aka 'austerity', that means total spending is down (since consumer, business, and government spending are ALL down). Which means that total earnings are also down... because every euro (or whatever unit of currency) someone earns was spending by someone else. If total earnings are down then either a lot of people have to take pay cuts, which they aren't about to agree to in a depressed economy, OR fewer people have to be working.
Ergo, during a depression, less government spending = less earnings for the population = more unemployment. The more the government cuts spending the greater the unemployment. It is a simple and inescapable progression which has been proven true by history over and over again.
The 'austerity' doctrine claiming that cutting government spending will so greatly increase "confidence" in the economy's FUTURE performance that people will ignore the IMMEDIATE economic downside and go out and start spending more, thus raising the country out of depression, is and always has been INSANE. People who lose their jobs or see others losing their jobs ARE NOT going to be filled with such confidence in the economy that they are willing to spend as if there was nothing to worry about.
Austerity is a wise doctrine... during boom times. When the economy is humming along well governments should be doing everything in their power to cut spending and tighten regulations... the exact opposite of what was actually done during the boom years preceding the current collapse. Too many modern economists live in an upside down fantasy land which ignores the lessons of...
That's the post I was planning to make this evening, back at home.
Countercyclical public investment is the ABC of keynesianism : in a recession, as private money is cowering in fear, there is nobody except government to put grease in the wheels.
@stereofm, as a fellow frenchman: do you remember, back in 2000, when the Jospin government intented to use a 30 billion euros fiscal excedent to reduce our national debt, and president Chirac called it on that, asking that this "cagnotte" (hoard, in english) had to be distributed ? That day, he made a nice political coup but also demonstrated his extreme shortsightedness and disregard for the common interest. It was almost as bad as selling our highways to private interests, just before they got profitable : again, nationalizing the costs and privatizing the profits.
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Some spending is more stimulative than other spending. Taking a huge lump sum and handing to the richest guy in the country won't do much. Hiring a lot of people to do useful things does a lot more. Not only does the money circulate much faster, but you also get the useful work out of the deal.
Unfortunately our government is so screwed up now that the only real stimulus lately has been through the Fed, which can't really do much other than hand money to banks. It's better than nothing, but about the worst form of stimulus.
I agree entirely. Though, in THEORY the banks then go out and loan the money to lots of individual people, in practice it often doesn't work out that way. Still, even that is better than just handing a huge tax cut to people who were already in good shape. Keynes' classic line about it being better to hire one group of people to dig ditches and another to follow up behind them and fill the ditches back in remains true today... that is, even if you DON'T get extra productivity out of it, you are going to generate more economic activity by giving money to a large number of people who need it than to a small number of people who do not.
So, just thinking out loud (with my fingers?) here, and I'm sure most here have thought of it before, but:
Imagine X is the total number of man-hours of labor required, per day, to fulfill the basic needs (food, water, clothing, shelter, entertainment, healthcare, etc.) of all the citizens in a region (nation, city, doesn't matter).
On average, each citizen will have to perform X/Y hours of labor per day, where Y is the total population. Because some citizens don't or can't work (elderly, children, etc.)
As time passes, X is reduced, due to industrialization, specialization, basically factors that increase efficiency will reduce this number. Which ought to reduce the number of hours that you need to work to survive, but it doesn't.
It seems clear to me that the solution is reducing the work week to something like 32 or 28 would be a rational course of action.
In all likelihood, X/Y for the US is something like 3. Probably less now that I think about it, but we'll go with that. The only solutions are reducing Y or increasing X. In the west our method seems to be stimulate X by convincing people they need much more than they do.
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So..where should they be? That's sounding a bit intolerant, and I don't think you mean to.
Yeah, I could use a course in anger management right now... after receiving my tax advice forecast for next year, which bites me.
Still does not excuse them for allowing my genuine examples to happen, nor does it excuse the EU for waiting until our back is to the wall for acting.
We should have done this 5 years ago, and it would have been way less painful. Courage and politics...
It also creates the situation where millions are unemployed and those who are left with jobs have to clock something like 50-60 hours a week.
Marx had a lot to say about this.
Anyway, the 30-hour work week with no loss in pay has been a demand of the socialist movement since the 1930s. Today we could drop down to, like, 20 or so.
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@stereofm, as a fellow frenchman: do you remember, back in 2000, when the Jospin government intented to use a 30 billion euros fiscal excedent to reduce our national debt, and president Chirac called it on that, asking that this "cagnotte" (hoard, in english) had to be distributed ? That day, he made a nice political coup but also demonstrated his extreme shortsightedness and disregard for the common interest. It was almost as bad as selling our highways to private interests, just before they got profitable : again, nationalizing the costs and privatizing the profits. [..
I nearly missed your comment.
Yeah, that was quite bad as well. I can't agree with this guy as well.
Well, I remember him as the lesser evil after Mitterand, but that's it.
In truth, I don't think positively about many French politicians when I think about it.
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It seems clear to me that the solution is reducing the work week to something like 32 or 28 would be a rational course of action.
That is the theory that was tried with the 35 hours in France.
The practice quickly became in a lot of places : yeah, right, so you are PAID 35H, and you WORK 45H to compensate for all the extra days off that you get.Heck, we get regular reminders that it is "forbidden by law to work more than 48h /week.
In truth, I don't think positively about many French politicians when I think about it.
Travailleurs, travailleuses! On vous ment, on vous spolie!
It seems clear to me that the solution is reducing the work week to something like 32 or 28 would be a rational course of action.
That is the theory that was tried with the 35 hours in France.
The practice quickly became in a lot of places : yeah, right, so you are PAID 35H, and you WORK 45H to compensate for all the extra days off that you get.Heck, we get regular reminders that it is "forbidden by law to work more than 48h /week.
Right, well, the problem being you were only paid 35 hours. If you worked 3/4 time but were paid full time, it'd be fine. They might have to hire more workers even!
The reason it didn't work is because, in that scenario, costs weren't reduced commensurately. The reason why we work so much for so little is because there's someone taking a big chunk: the company.
Unless you eliminate the profit motive the money always just floats to the top.