Saturday 22 October 2011
Why higher taxes wont help the poor
About two weeks ago Dave and Angela Dawes from Cambridgeshire won the lottery. The final amount they bagged was more than 101 million pound sterling. It made them one of the richest couples in the UK. It certainly, in case you wondered, put them into the top 1% of people who are called by the protesters outside St Paul’s the ‘filthy rich’.
When asked about what they would do with the money Dave Dawes, a Chelsea fan, mentioned that they may buy a house near the Chelsea football ground. Chances are that, once they have spent their win, or invested it somewhere, they will not have gained entry to what Pareto long time ago called ‘the elite’. As they may or may not find out, to get access to power, money is in fact of little consequence.
Presumably, that is not what the protesters outside St Paul’s think. Their anger is firmly targeted at the inequality that comes with income. We have been here before. In 1974 the Labour government under Harold Wilson identified the root cause of all social injustice: personal riches. It took to tax everyone into oblivion. The top rate of income tax reached the dizzying height of 83% with a marginal top rate of personal income tax of 98% including investments.
While this meant that government expanded exponentially, income redistribution to the poorest in society (in the age before tax credits) did not improve. In fact social mobility was affected very little. The main beneficiaries were people in the middle income bracket who gained big pay rises and generous pension settlements through their employment in the public sector.
What is so puzzling about the obsession of the ‘Occupy London’ campaign with money is that taxes as a primary mechanism to transform society have long failed to show any results. Income inequality may be bad or good for society, taxing the super rich however does not tilt the balance of power in favour of the poor.
Marx knew a thing or two about this. He had very little interest in money as such; the cause of power imbalances, so he argued, was ownership of means of production. In our times, you may call this access to resources, educational, economic and social. They’re the things that make a difference to your chances in life as you grow up, and the record of any UK government, Labour or Tory, is pretty bad at transforming the life chances of the bottom rank.
Top schools and universities in the UK are still fiendishly out of reach for ordinary people, social networking amongst the country’s elite still significantly contributes to the chances you have in landing a plum job in the city or in government, and with the banking sector ever more reluctant to lend money, establishing a business (still the most important route out of poverty) is near impossible.
So where does that leave the ‘Occupy London’ campaign? Their ignorance of the Marxist critique of capitalism is mind-boggling. Marx was full of disdain for ‘re-distributive policies’. He clearly saw that any preoccupation with income and taxes is likely to fail to make any significant dent in the distribution of economic, social and political power. And he was also (famously) critical of any moral case for re-distribution of income. Taxing the ‘rich’ may conspicuously be in line with our immediate sentiments of equality, yet, he was convinced, it would leave the fundamental iniquities in place. So whether or not the ‘Occupy London’ campaign will be successful in making the case for more taxes, chances are it wont change a thing for the bottom 1 per cent of this country.