It is important to understand what is leading this economic downturn. Its driving force is a collapse in private investment in the US and all major economies.
I’m not sure that I agree but what do you propose to do about the problem you have identified?
Introduction of a more progressive system of taxation
Lessee, the wealthier you are the lower your marginal propensity to consume and the higher your marginal propensity to save. As we’re not Post-Keynesians around here, higher savings lead to greater investment. Taxing those high income earners more will, therefore, lead to lower savings and less investment.
So, Ken Livingstone’s answer to a fall in private investment is to insist that in future there should be less private investment.
Sounds like a plan really, don’t it?
19 responses so far ↓
1 dearieme // Jul 10, 2009 at 9:56 am
Ken’s answer to all eventualities is to raise taxes, preferably on “the rich”. That’s because he’s a hoodlum.
2 Letters From A Tory // Jul 10, 2009 at 9:57 am
The concepts of ‘wealth creation’ and ‘private investment’ are well beyond the intellectual reach of many Lefties.
3 Luis Enrique // Jul 10, 2009 at 10:20 am
This isn’t necessarily correct, but it is interesting:
“n early stages of industrialization, as physical capital accumulation is a prime source of economic growth, inequality enhances the process of development by channeling resources towards individuals whose marginal propensity to save is higher. In later stages of development, however, as the return to human capital increases due to capital-skill complementarity, human capital becomes the prime engine of growth, and equality, in the presence of credit constraints, stimulates investment in human capital and promotes economic growth. As wages increase, however, credit constraints become less binding, differences in the marginal propensity to save decline, and the aggregate effect of income distribution on the growth process becomes, therefore, less significant.”
from here
Tim adds: It is interesting indeed. If we accept that argument then all this stuff people have been saying about give money to the poor because they spend more (ie, more bang for your stimulus buck) of it is bollocks then, ain’t it?
4 Kay Tie // Jul 10, 2009 at 10:20 am
Economy in downturn: more progressive taxation (“wealthy should more fairly share the pain”).
Economy in boom: more progressive taxation (“wealthy should give a fairer share of gains”)
Pattern?
5 john b // Jul 10, 2009 at 10:32 am
@3, I think that’s well beyond the intellectual reach of many Righties.
6 Curly // Jul 10, 2009 at 10:37 am
It’s about what one comes to expect of Ken, and a good reason why he is no longer Mayor of London.
7 Luis Enrique // Jul 10, 2009 at 10:37 am
Tim,
I guess that’s true: you can’t have it both ways
8 JuliaM // Jul 10, 2009 at 11:11 am
Mr ’6 Months’ himself, johnb, isn’t really in a position to criticise anyone else’s intellectual capacity, now is he…?
9 john b // Jul 10, 2009 at 11:20 am
@JuliaM estimating a very rare event as slightly rarer than it actually is, even though it’s still very rare, is entirely irrelevant to anything unless you’re an insane obsessive freak. I accept that, unfortunately, you are, but give it a fucking rest wouldyer?
10 JuliaM // Jul 10, 2009 at 11:52 am
“…estimating a very rare event as slightly rarer than it actually is…”
Surely you meant ‘slightly less rare than it actually is’…?
Or are you expanding your ’6 months’ to ’8 months or longer’ now?
11 john b // Jul 10, 2009 at 12:30 pm
Eh? I admit that I estimated it as slightly rarer than it actually is.
In case you’re struggling, ‘rare’ means ‘doesn’t happen very often’, and ‘I estimated it as slightly rarer than it actually is’ means ‘I wrongly claimed that it happened less often than it actually does’.
12 JuliaM // Jul 10, 2009 at 12:34 pm
I’m not struggling at all.
You claimed 6 months, and you were promptly thoroughly spanked by the facts, indicating that it was far more frequent than that.
13 Luis Enrique // Jul 10, 2009 at 12:41 pm
Julia – I have no idea what the source of this was, but you’re claiming whatever it was turned out to be more frequent than John supposed, meaning he estimated it to be more rare than it was, meaning you are indeed, struggling
14 JuliaM // Jul 10, 2009 at 1:00 pm
“..he estimated it to be more rare than it was..”
‘More rare’ by an exceedingly large margin. Not ‘slightly’ at all, as he claimed.
15 Luis Enrique // Jul 10, 2009 at 1:15 pm
Julia
ok, you’re now disputing magnitude, ‘slightly’ versus ‘large’, but earlier you were questioning the direction – ‘more’ versus ‘less’ – look at what you wrote @10, John’s response @11 and then your denial of any error @12.
Why not just say you made an error – it’s plain for anybody reading this thread to see.
16 ukliberty // Jul 10, 2009 at 1:45 pm
Get a room you two!
17 AntiCitizenOne // Jul 10, 2009 at 3:17 pm
Income tax is an abomination. The state certainly didn’t earn it so it shouldn’t take a penny of it.
Income Tax is a modern form of slavery.
18 gene berman // Jul 12, 2009 at 12:15 am
AntiCitizenOne:
You have just got your perspective out of kilter:
slavery was just the older form of income taxation!
We’ve managed to stamp out the grosser and more comprehensive forms, disproportionately so for some of the more-oppressed minorities but
seem to have gone backwards in selling more of everyone into that form of bondage.
Remarkable what just a slightly different angle permits you to see.
19 gene berman // Jul 12, 2009 at 12:19 am
johnb:
I haven’t been around for awhile but see, from your ruckus with Julia, that nothing much has changed.
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