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When ideas matter

Parti Socialiste du Loiret

The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.

John Maynard Keynes, the author of these words, knew what he was talking about. Few economists have had a bigger impact on either the way the world is governed or the way we think about economic activity. But it is not enough simply to have the right idea: the times have got to suit them, too.

It is important to remember that The Economic Consequences of the Peace, in which Keynes accurately predicted the impact of the reparations imposed on Germany following World War One, did not have any impact until it was too late. Likewise the ideas that underpinned the General Theory of Employment, Interest and Money, while exerting a powerful intellectual influence in the late 1930s, had to wait until the conclusion of the Second World War to be put into practice.

Eventually, however, the idea that the state has a critical role to play in stabilising economies became the economic orthodoxy in most of the Western world.

Although Keynes was one of the key architects of the Bretton Woods institutions that became such integral parts of the postwar international order, some of his ideas, such as the development of a world currency, never got off the drawing board. American ideas about the basis for the emerging economic regime prevailed—not least because the US government was funding so much post-war international reconstruction. Political, economic and strategic power – not just good ideas – proved decisive.

Having the good fortune to be in the right place at the right geopolitical time was something that eluded Keynes’ great friend and rival, Friedrich Hayek, until late in his life. Significantly, it was not until Hayek’s ideas were championed by two of the most powerful political figures of their era – Ronald Regan and Margaret Thatcher – that what we’ve come to describe as ‘neoliberalism’ began to be taken seriously and influence public policy.

Much the same can be said about Milton Friedman’s theory of monetarism, which briefly came to supplant the Keynesian orthodoxy. Between them, Friedman’s and Hayek’s ideas provided an intellectual rationale for rolling back the state and letting the market rip. Yet whatever else the recent global financial crisis may have done, it served as a powerful reminder that there is still a good deal of mileage in Keynesian ideas and that markets cannot be relied on to regulate themselves.

These debates are not simply of historical interest for two reasons. First, capitalism remains as crisis-prone as it was when another giant in the economic intellectual landscape – Karl Marx – first spelled out its ‘internal contractions’ more than a century ago. He may not have been too good at predicting the course of history, but he and his followers still have something to tell us about the way market economies work.

The second reason the relationship between ideas and events is still so relevant is because economic thinking – outside the cloistered mainstream, at least – continues to evolve. The most tangible recent expression of this possibility is Thomas Piketty’s Capital in the Twenty-first Century, which has generated a timely debate about the management of modern economies.

Piketty has assembled a wealth of persuasive empirical evidence to demonstrate a simple but compelling idea:

When the rate of return on capital exceeds the rate of growth of output and income … capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.

Put simply, the rich really are getting richer and the poor are getting relatively poorer. The widely observed declining rate of growth in the developed economies – caused in part, at least, by slowing population growth – and the much greater concentration of wealth held by a very small percentage of the population, seem to bear out Piketty’s central claims.

Worryingly, it is not only the ‘developed’ economies that are displaying such traits: China, too, is distinguished by growing levels of inequality and a looming demographic crisis.

The significance of Piketty’s research lies in its exposure of the underlying dynamics of contemporary capitalist economies. Left to their own devices, free market economies look likely to further entrench what do indeed look like normatively and practically unsustainable levels of inequality and – equally importantly, perhaps – opportunity. This is not good economics and it’s potentially fatal for political legitimacy.

The fight over scarce resources has, of course, been at the heart of the relationship between politics and economics for centuries. The rise of the welfare state was one way of addressing such distributional questions and creating a common sense of purpose that made capitalism politically sustainable.

The reality of a commonly shared fate may always have been illusory, but systematically dismantling social welfare nets whilst simultaneously allowing the creation of ever greater private fortunes threatens to undermine that implicit bargain.

Australia has some way to go before it reaches the levels of inequality that have come to distinguish the US. But without a state that is prepared to ‘intervene’ to correct the sort of unsustainable excesses Piketty identifies the direction of travel is increasingly clear. His suggestion that a tax should be imposed on capital rather than labour seems both practical (it won’t kill demand) and equitable (especially where capital is not invested productively).

Piketty is not optimistic about the prospects for his proposed global tax on capital, however. Although he has plainly sparked a useful debate, his pessimism looks all too justified: without powerful political advocates or an existential economic crisis of the sort experienced in the 1930s, such ideas are unlikely to be acted upon.

To judge from the recent budget, Australia is certainly not going to lead the way in developing policies to address structural inequality.

Ironically enough, it has generally been the critics of capitalism that have been its most acute observers. Plutocrats and policymakers alike might do well to read and learn from Monsieur Piketty’s weighty tome: it contains ideas that might keep them in their privileged positions, to say nothing of making life a little more agreeable for the rest of us.

Join the conversation

64 Comments sorted by

  1. david henry

    Electrician

    A tax on capital. Does that mean if I have a bank account with savings, the government can just take money directly out of my account?

    Is that why European grandparents kept cash "under the mattress"?

    Perhaps governments could somehow trick people into making their wealth more traceable by putting their finances online and getting rid of cash. That way the average punter wouldn't be able to put money "under the mattress."

    It's fascinating how culture and economics intertwine. The current…

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    1. Mark Beeson

      Professor of International Politics at Murdoch University

      In reply to Russell Y

      Yes, I think it's close in spirit to the Tobin tax, but not restricted to financial transactions. The details are a bit thin, but it's essentially a global tax on wealth that requires - what Piketty concedes are unlikely levels of international cooperation and transparency to work. The point of his book is to trigger a debate about the possibility and perhaps necessity of 'progressive' reform - he's done that at least.

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    2. david henry

      Electrician

      In reply to Russell Y

      Transaction taxes and absolute wealth taxes act to decrease money velocity (liquidity) and push down asset prices respectively, remarkably the exact opposites of the stated aims of reserve banks. Accordingly asset prices and credit expansion in France are depressed. Both taxes are deflationary which as I said is not something to worry about, just something to prepare for.

      Obviously we already have a covert absolute wealth tax in the form of inflation which erodes the value of savings. However…

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    3. david henry

      Electrician

      In reply to Mark Beeson

      My limited understanding of history is that taxes are generally collected by coercion rather than cooperation. In that regard I'm sure the IMF could coordinate with the "No Secrets Anywhere" to encourage compliance.

      Progressive reform is dependent on the middle class losing hope that they will one day become the rich. That's the problem, people have to lose hope. It's happening slowly, for now.

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    4. Amanda Barnes
      Amanda Barnes is a Friend of The Conversation.

      Voter

      In reply to david henry

      David, please correct me if I am wrong but you are inferring that this budget is designed to put us into a recession. Certainly the anti growth measures in taking money out of industry investment and anti spend measures in taking money out of the productive economy by the economics of trickle up seem to point to this. You are saying that the aim is to soften up the middle classes to accept that their privilege is not a given. Nay, that it is downright shaky. Meanwhile, more profits than ever will…

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    5. david henry

      Electrician

      In reply to Amanda Barnes

      Hello,

      My comments generally are about the abstract possibility of a wealth tax and nothing whatsoever to do with the budget.

      Incidentally you may well be correct about the budget being designed to put us into recession. Perhaps, to borrow a Keating Phrase, it will be the recession we had to have. Keating's recession gave us some 20 years of uninterrupted growth.

      A falling AUD would reduce wages, make our labor market more competitive, temper rises in home values and increase profits for…

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    6. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to david henry

      Ah yes recessions - good for the economy - not too good for the rest of us... bit like wars really. And it depends what bit of the economy you'd be talking about - good for exporters of untouched rocks - not too good if you actually make something here for us. Like food say.

      The disturbing thing about the last few years is that we can have a floppy listless national economy (better than most but still sluggish) while the dollar is going gangbusters because of a mining boom or a good price on…

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    7. ernest malley

      farmer

      In reply to Peter Ormonde

      PO - surely one reason that economists make lousy accountants/book keepers and even worse businessmen (viz Ergas' firm going cold stoney broke) is that they see money as a commodity, a 'good' rather than a tool to facilitate exchange.

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    8. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to ernest malley

      It goes some way to explaining why rich economists are as rare as horse feathers Ern ... just don't really understand the stuff most of them. Don't see enough of it - pay economists better!!!

      The curious thing is that such a central ubiquitous artifact is so poorly understood and hotly disputed.

      When we look at national economies let alone a fully globalised system all I know is it's complicated, counter-intuitive and perverse. Does things one doesn't expect, takes on a dynamic all its own ... like a fission reactor, despite the best planning.

      Sorry if I've been wordy today on this .... but a few folks have made comments of late about "printing money", fiat currency and fractional reserve lending - none of which, to me, are sufficient to explain or cure the problem.

      And I've been also reading Msr Picketty's tortuous tome ... an interesting take and well worth the read, but I'd wait for the executive summary ... the bloke must get paid by the page!!!

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    9. Amanda Barnes
      Amanda Barnes is a Friend of The Conversation.

      Voter

      In reply to david henry

      Yes, I knew you were commenting on Mark's article, David. I was just extrapolating from your comments in the context of the budget. The 1% and 2% levy being the connection. If we follow your argument, it would be the PAYG earner who will pay this tax whilst the serious money hides their excess in multifarious ways: http://www.smh.com.au/comment/budget-pain-not-for-millionaires-who-pay-no-tax-20140512-zr9o3.html

      Whilst I am neither an economist nor an accountant, it would seem counterintuitive…

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    10. Alex Fletcher

      retired medical practitioner

      In reply to david henry

      Research on tax collection has shown that "salient" taxes which arrive in the form of a bill, are more likely to make people stressed or angry. There is much less resistance to stealth taxes. I think GST would be a stealth tax as, although it can be seen on individual receipts, few people would have much idea of what they had paid over a year. For income tax there seems to be a trend to no longer be issued with fortnightly pay slips. I am sure governments are well aware of this research.

      The incredible…

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    11. Michael Shand

      Software Tester

      In reply to david henry

      Yes cos that's where the big piles of money are, grandparents and you

      When economists think of big piles of money, they are most definitely thinking about thouandares like you with your piles of tens of dollars

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    12. david henry

      Electrician

      In reply to Alex Fletcher

      Alex, two interesting observations. I could not agree more on stealth taxes.

      Regarding India, it is in a very different economic phase to Australia, the resilience, hope and optimism that you describe reminds me of my grandparents (ten pound poms, still wears a shirt every day), the generation that gave birth to the boomers here in Australia.

      Conversely the mood in Australia at the moment is one of suspicion, fear and pessimism. While we discuss blaming the government and ways to "eat the rich" even though compared to the people you mention in the slum, we live like kings.

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    13. david henry

      Electrician

      In reply to Amanda Barnes

      Amanda, "should economic models directed to us from on high be ignored?"

      A. The government should probably accept it, but their interests run contrary to yours, so you should not.

      Steady as you go sounds great, endless growth sounds great too. History suggests neither of these are possible.

      Whilst it is good to train people for existing jobs, it's unfortunate that we have spent and continue to spend so much time, money and effort training people for jobs that don't exist. Recessions exist to correct these imbalances. The longer the gap between recessions, the greater the imbalance to correct.

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    14. Amanda Barnes
      Amanda Barnes is a Friend of The Conversation.

      Voter

      In reply to david henry

      'The government should probably accept it, but their interests run contrary to yours, so you should not.' That solution is a little difficult considering the difference in the level of influence between the State and the individual. The government is of course our elected body and as such should act in the majority of the people's interests. If it does not, then surely it's legitimacy should be questioned? Thankfully, we live in a democracy of sorts so we can make that decision sooner or later…

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    15. david henry

      Electrician

      In reply to Amanda Barnes

      "government should act in the majority of people's interest" I agree

      "government's legitimacy should be questioned" I agree.

      The current two party system is anti-democratic, choosing between two parties both of whom prioritise their special interest groups ahead of the electorates and the voters is hardly democracy. However at the last election, the majority of Aussies voted for a continuation of the current system.

      As far as your macroeconomic suggestions, they all sound fine, It's certainly…

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    16. Amanda Barnes
      Amanda Barnes is a Friend of The Conversation.

      Voter

      In reply to david henry

      A well considered response David. The soft upper middle classes need to feel some pain before they will realise that they are being duped? I tend to agree with you but in the meantime those 50% of the population who enjoy the luxurious earnings of $46,700 or less will carry the burden of their betters largess for some little while yet. There will be more than pain that will come out of this little exercise in extreme class warfare. There will be genuine suffering and the single parent will the the…

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    17. Alex Fletcher

      retired medical practitioner

      In reply to david henry

      David, point taken re India. I made the example more in the broad sense of how humans treat each other and the extreme wealth gap that can be tolerated.
      Re ways to “eat the rich”, they and the aspiring middle classes, do in effect eat the community, although, for most, unwittingly.
      The concept of economic rent has been neglected by neoclassical economics but renewed attention to it would make Piketty’s recommended wealth tax a practical proposition, (if not a political one).
      If we define economic…

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    18. Michael Shand

      Software Tester

      In reply to david henry

      Well money is just a representation of resources and ability to achieve desired outcomes or purpose

      the ability to achieve an intended purpose is what we would call power.

      so they want money not power to me sounds like they want gold not riches, because gold is a form of riches.

      I agree the government in general want power, but the individual politicians also want power and more importantly they want a cushy well paid lobbyist or consultant job after there time in parliment

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    19. Michael Shand

      Software Tester

      In reply to david henry

      Because some people in the world live in slums, we can't complain

      Well if you get raped, you won't feel bad because there are others being gang raped right? you don't have it bad, not nearly as bad as others in the world - you got violated once, others have to live this day to day

      so you wouldn't complain right

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    20. david henry

      Electrician

      In reply to Amanda Barnes

      Seemingly it is not just the middle class that lacks the desire for change, the 50% that are "carrying the burden" also had their chance to register discontent with the current two party system at the last election, they did not do so. Not only did they register satisfaction with the 2 party system, their resounding consensus was to give power to Abbott and Palmer, those MOST likely to represent the so called "1%"

      As an aside, GST might be a more practical way to tax the wealthy class than a "wealth…

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    21. david henry

      Electrician

      In reply to Alex Fletcher

      Thank you Alex,

      You're obviously a bit more knowledgeable about some of the concepts. Economic rent is something I've heard a bit about, and the concept is interesting. Australians are certainly the subjects of, rather than the beneficiaries of a variety of corporate and government enforced monopolies.

      The Norwegians are clearly a fine example of how a resource can be used to benefit all. They clearly have a different cultural approach to unexpected wealth then we do. Who know's why we are…

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    22. Graham Bell

      Scrap-heaped War Veteran

      In reply to david henry

      The titles of this article is When Ideas Matter ....so, following on from the comments of Amanda Barnes and David Henry above, I'll chuck in an idea that matters:
      That the Australian finance industry is actively HOSTILE TO INNOVATION and, further, that it is not merely Risk Adverse but RISK PERVERSE .... that is, absolutely loony schemes and wild flights of fancy are readily promoted - provided they are put forward by "people who are just like us"; whereas unmarketed but excellent innovations, ones that tick all the boxes for venture capitalists elsewhere in the world, are routinely knocked back by the Australian finance industry..

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    23. Alex Fletcher

      retired medical practitioner

      In reply to david henry

      A simple definition of economic rent is “the value created by the community through its demand for land and natural resources”. It can be collected by resource rent taxes like land value tax and mining tax and many other possibilities, eg licences for companies to use the public airwaves could be given with the condition they provide free air-time for election campaigns, thus eliminating the potential of corruption in exchange for campaign donations.
      Re taxation, you can more justify a collective…

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  2. Craig Myatt

    Industrial Designer / R&D

    Sounds interesting...but not clear what a "tax on capital" is exactly.

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  3. Notta Mehere

    logged in via Facebook

    such sensible ideas, such a shame they'll never be instigated as long as the 1% (not sure what % that is in australia?) weld so much power and influence over mediocre, power hungry pollies, and in out present situation, like minded right wing ideologues.

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  4. Dave Bradley

    logged in via email @yahoo.com.au

    I wonder if we could just raise the GST to 110% and leave the poor old 'capitalists' alone, they have enough to worry about with negative gearing etc. They seem to get very grumpy with the sleep they lose worrying about how to manage their trillions and want to hurt us, and when they know as members of the lying class they can't even trust each other, it must be so scary,. If they didn't have to worry about paying tax at all that would have to increase the trickle down effect. You can only drink so many bottles of Grange before the need to trickle overwhelms you

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  5. Garry Baker

    researcher

    "" Australia has some way to go before it reaches the levels of inequality that have come to distinguish the US ""

    Not for long, Joe Hockey is working on it .. And when his Free Market model comes into play we should quickly bridge the gap with the US

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  6. Jay Wulf

    Digerati at nomeonastiq.com

    We wave our hands in the air and claim how communism had failed.

    Capitalism is too dead. It is a frankenstein monster with our blood coursing through its veins. The big banks, the ultra-rich, the big end of town are its flesh. So wealthy, that are not even capable of a sneer of contempt when passing by us in their ultra-comfort armoured limousines. They gamed the system. They had shown what happens when you buy so much political influence you can just dismantle effective financial controls to…

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  7. James Hill

    Industrial Designer

    When the Late Roman Empire imposed feudalism upon its citizens in order to more easily guarantee the tax "take", it reduced the democratic freedoms those citizens formerly enjoyed, they became poorer, and so felt no inclination to support the state when it was being assailed from without.
    So Piketty might, in his assemblage of evidence, have taken that instance into account, especially as the modus operandi of the new feudalism is to ensnare citizens into so much debt that they only ever can be "Battlers", be they the "effective" interest paying captives of Abbott or Howard.
    That original Evil Empire collapsed, is that part of the Piketty message?
    It is the message of history, for all the economists and philosophers who are interested, especially those who erroneously imagine that money is modern.
    Time to wake up from that intellectual self -deceit and re-learn the neglected lessons of history.

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  8. Peter Ormonde
    Peter Ormonde is a Friend of The Conversation.

    Farmer

    Excellent piece Mark ... many thanks.

    I think it is a bit brutal to summarise Picketty as the rich getting richer and the poor poorer though.

    It is the unchallenged dominance of the current crop of capital (especially finance capital) that is the menace - they threaten social mobility - the "hard work can make you rich" mantra that built the USofA - and to a lesser extent Australia.

    This is why the howls of outrage are heard - not from the poor (they always howl) - but from the previously…

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    1. James Hill

      Industrial Designer

      In reply to Peter Ormonde

      I think those doomed citizens of the Late Roman Empire would understand your arguments exactly, Peter.

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  9. Graham Bell

    Scrap-heaped War Veteran

    Thought-provoking article.
    Sadly, many of the issues raised here are doomed to be resolved only by bloody conflict (thank goodness I no longer live in a big city). Only when the smoke has cleared and the stench has dissipated will the survivors rummage through all the ruin and come across scorched copies of the works of thinkers, such as Thomas Piketty and his ilk, and ask themselves "Why the blazes didn't our political and business leaders read this before they caused all this devastation?"

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  10. David Arthur

    resistance gnome

    A useful start might be to simply kill off tax avoidance through overseas tax havens. If you're facing a tax of, say, 50% on the 6% you get from your domestic savings leaving you with net gain of 3%, then surely you'll be tempted to send it somewhere overseas where you can get 4% on yak fat futures tax free?

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  11. Alex Fletcher

    retired medical practitioner

    The author mentions “the fight over scarce resources” so must recognise their relevance to the wealth/poverty dynamic but he omits the main historical precedent for this debate which is “the land question” of the late nineteenth century/early 20th century. The book “Progress and Poverty” by Henry George, as the title suggests, came to the same conclusions about the dynamics of wealth and poverty, through observation, not statistics, which were not available in 1879.
    Henry George, unlike Picketty…

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    1. Graham Bell

      Scrap-heaped War Veteran

      In reply to Alex Fletcher

      Very interesting points there, Alex Fletcher. Naturally, the scoundrels and robbers who prey on us would prefer this to be not widely known.

      23.6% of GDP is pelf and loot, is it? No wonder I am not prosperous as a result of a lifetime of frugality, foresight, good planning and bloody hard work.

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  12. David Collett

    Sales at https://aussiebuilder.com

    "First, capitalism remains as crisis-prone as it was when another giant in the economic intellectual landscape – Karl Marx – first spelled out its ‘internal contractions’ more than a century ago. He may not have been too good at predicting the course of history, but he and his followers still have something to tell us about the way market economies work."

    IMHO it is our monetary system that is the problem, not so much capitalism.

    Was the GFC about capitalism or our financial system? Or even…

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    1. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to David Collett

      "Was the GFC about capitalism or our financial system?"

      In my best short answer - both ... intrinsically connected. But not how we might think. The financial tail wags the economic dog. I'd be pretty certain that all capitalism's inherent crises start out with financial symptoms.

      The GFC was initially a purely financial crisis - rooted in asset speculation and easy debt (together with some dodgy accounting like CDOs etc) ... but this was also due to a collapse in Western industrial investment…

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    2. Michael Shand

      Software Tester

      In reply to David Collett

      Both are a problem, capitalism unrestrained, like herion is so damn good, it's so effective, it's so fantastic it will destroy you and everything you care about

      Currently corporations are buying the regulators and the politicians across the world

      heard of Trans-pacific-partnership? if that ain't unrestrained capitalism gone a muck then I don't know what is

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    3. Alex Fletcher

      retired medical practitioner

      In reply to Peter Ormonde

      The huge private debt and destructive potential of the financial system is secondary and enabled by a tax system that encourages speculation by subsidy. The GFC was preceded by speculative land booms. There are three basic subsidies to real estate: low interest rates, special tax reductions, and the generation of rent by government’s territorial goods.
      The capital gain (economic rent), in one land boom period may return to the home owner/ investor all or more of the income tax or other taxes they…

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    4. David Collett

      Sales at https://aussiebuilder.com

      In reply to Michael Shand

      That corporations can dictate politicians is a symptom of politicians operating their political parties in a way whereby they are dependent on donations. I don't see any value in blaming it on concepts such as 'capitalism'. Corporations can buy politicians in China and Russia too.

      There is too much submitting going on from my perspective.

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    5. Michael Shand

      Software Tester

      In reply to David Collett

      You are right that this is how they have structured the political system however that doesn't remove liability from Corporations, bribery is still bribery and illegal - a pollie accepting a bribe does not make the person offering the bribe somehow innocent

      Also, China is soon to become the Biggest Economy in the WORLD

      you might need to rethink what you mean by the word capitalism, if the biggest economy in the world is not an example of capitalism then I might suggest your definition needs adjusting

      corruption is part of human nature, in a market economy resources and power are represented by money - those with resources/money will always try to maintain power be it MP's or CEO's

      That's somethign we need to be actively aware of and on the look out for

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    6. David Collett

      Sales at https://aussiebuilder.com

      In reply to Michael Shand

      China and Russia still have capitalism, because capitalism is a very general word that does not help discussions very much.

      Whether we have 100% state planning allocating all our resources or a hybrid mix of varying degrees as we do now in Australia/USA/China/Russia etc, there will always be individuals in positions of power who can make decisions to allocate resources. "Not capitalism" is not going to change that which I presume you agree with from your comments.

      Hence blaming capitalism is a waste of breath.

      I guess all we can really do is our best to educate ourselves and make the best decisions we can in our own sphere of influence, based on the limited information we have at any point in time.

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    7. Michael Shand

      Software Tester

      In reply to David Collett

      I do not blame capitalism I blame human nature

      I just said that you need to be aware as in not naive about that in a market economy

      In response to your statement that we can't blame the poor business man for offering bribes, we can only blame the politician for accepting the bribes

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  13. Michael Shand

    Software Tester

    Sounds like a fantastic idea, thanks for sharing

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  14. Michael Leonard Furtado

    Doctor at University of Queensland

    What bothers me is that Piketty, and Keynes before him, are in a sense the saviours of modern capitalism and that the complexity and subtlety of their analyses evidently isn't understood by the slash and burn short-term idiocies of those who think they understand the business cycle and who control university business faculties, the banks and, through being elected to government on the basis of short-term austerity-mongering fiscal and monetary policies, the economy.

    These, if you like, are by definition the culprits whose severe, 'calvinistic' austerity-based policy panaceas bring on rather than resolve capitalism's routine crises.

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  15. John Doyle

    architect

    There are 7 stages of empire:-
    First; Sound money
    Second; Layers of public works
    Third; Massive military
    Fourth; War
    Fifth; Currency debasement
    Sixth; Loss of faith
    Seventh; Currency crisis, where gold accounts for fiat currency.

    Which country would you think this mostly applies to now?
    Probably most countries but we can single out the mighty USA as the most obvious example [and because they have lots of info on themselves].

    I don't know how Piketty would parse this list but IMO…

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    1. John Doyle

      architect

      In reply to Graham Bell

      I thought 5 because it's still happening unawares for most people. But yes, some of us are on 6.

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    2. Michael Leonard Furtado

      Doctor at University of Queensland

      In reply to John Doyle

      I don't accept John Doyle's historical timeline (above) and the so-called facts as he asserts them.

      So called fiscal and monetary correctives to so-called failed strategies of so-called prior profligate governments to inflate the economy actually do not work in the long run and simply end up visiting misery on those sections of the polity that are most vulnerable to them.

      Hayek's & Friedman's so-called correctives, as implemented by Thatcher in the UK and Reagan (Hockey's alter ego, surely…

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    3. Graham Bell

      Scrap-heaped War Veteran

      In reply to Michael Leonard Furtado

      Thanks, M L Furtado, for your insights. You will search in vain for any logic in it. I do like your - "The so-called economic recovery undertaken by the Abbott-Hockey cabal has no prior basis in fact ....." - . It will take a century for the (currently) United Kingdom to recover from the unnecessary devastation inflicted on their economy, their society and their military power by Thatcherist pilferers and fanatics.
      And there is the heart of the problem: Are there any real-world theories or hypotheses economics left at all? Everything said about economics lately seems to be either (a). Excuses For Plundering, or, (b). the Ideologies Of Fanatics.
      John Doyle: I stand corrected. Yes, a lot of people are still in the FIFTH stage .... and, I think, will crash-and -burn straight through to the EIGHTH and NINETH stages - the poor devils.

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    4. Graham Bell

      Scrap-heaped War Veteran

      In reply to Graham Bell

      Sorry M L Furtado, I meant "You will search in vain for any logic in current economic policy making and its planned and unplanned outcomes".

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    5. John Doyle

      architect

      In reply to Michael Leonard Furtado

      I was going to reply to this earlier. I had seen a video blog with a very different take on what Thatcher did to"save" Britain. I haven't been able to find it again to post it here. He spoke about Britain being bankrupt by 1979 and what Madam did to turn it around.
      In any case I don't see any reason for MLF's disagreement with the 7 point timeline I posted in this piece. We are well into the ruinous debt financing stage of history.
      I'm mostly in agreement with what he says about Thatcher's Britain.

      report
    6. Alex Fletcher

      retired medical practitioner

      In reply to John Doyle

      John Doyle and Michael LF, this article by Steve Keen is relevant:-http://www.businessspectator.com.au/article/2014/5/19/australian-news/why-clive-palmer-speaks-budget-sense
      He says” So for Hockey’s economic ambition to be fulfilled, bank lending must equal 9.5 per cent of GDP. Since total bank lending to households and businesses is about 1.5 times GDP, that means that bank lending has to grow at about 6.6 per cent per year -- or about 1.6 per cent a year faster than the desired rate of growth…

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