Saturday, July 9, 2011

Plains Pops: Income Inequality Edition

The Madville Times highlights this An Inland Voyage post about CEO pay and this Republic Insider post about jobs.  Both illustrate the dangers of income inequality.

In addition to the immediate risks of income inequality, I have been fascinated by this Paul Glastris Washington Monthly editorial.  Glastris observes,
As it happens, the willingness of the rich to defend their wealth from taxation to the point of national ruin is nothing new in world history, as Francis Fukuyama recounts in his magisterial new book The Origins of Political Order. The Han dynasty in China fell in the third century AD after aristocratic families with government connections became increasingly able to shield their ever-larger land holdings from taxation, which helped precipitate the bloody Yellow Turban peasant revolt. Nearly a millennium and a half later, the great Ming dynasty went into protracted decline in part for similar reasons: unable or unwilling to raise taxes on the landed gentry, the government couldn’t pay its soldiers and was overrun by Manchu invaders.

In the fifteenth century, the Hungarian King Matthias Corvinus persuaded his reluctant nobles to accept higher taxes, with which he built a professional military that beat back the invading Ottomans. But after his death the resentful barons placed a weak foreign prince on the throne and got their taxes cut 70 to 80 percent. When their undisciplined army lost to Suleiman the Magnificent, Hungary lost its independence.

Similarly, the cash-strapped sixteenth-century Spanish monarchy sold municipal and state offices off to wealthy elites rather than raise their taxes—giving them the right to collect public revenues. The elites, in turn, raised taxes on commerce, immiserating peasants and artisans and putting Spain on a path of long-term economic decline. This same practice of exempting the wealthy from taxation and selling them government offices while transferring the tax burden onto the poor reached its apogee in ancien regime France and ended with the guillotine. [emphasis mine]
In short, some rich elites have been willing to destroy nations to protect their interests by keeping taxes low.

I've quoted this Thomas Ferguson and Robert Johnson information yesterday:
Between 2002 and 2007, for example, the richest 1 percent of Americans garnered 62 percent of all income gains, while the bottom 90 percent of the population saw their incomes grow by 4 percent. At the same time, thanks to the Bush tax cuts, the rich were also paying proportionately fewer taxes.
In addition, Political Animal Steve Benen contrasts the historical facts with current political realities.
You’ll notice, of course, that all of these measures have something in common: we’re talking about tax giveaways that benefit some very wealthy Americans. It puts Republicans into the familiar role of being a Reverse Robin Hood — they’re desperate to cut spending that favors working families, and equally eager to protect tax breaks that go exclusively to the richest of the rich. The GOP wants to lower the deficit, they say, but not if it means asking their wealthy benefactors to sacrifice even a little. Indeed, asking the rich to pay even a little more would be a disaster, Republicans assure us.
One wonders which disaster is more likely to occur or be more devastating.  Given the small number of people who have received the lion's share of recent benefits, I'm worried that America's top 1 percent live in an echo chamber that makes them to risk ignoring history's lessons.

Update:  Given this Bob Ellis comment on the Madville Times, I'll side with  Fukuyama.

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