David R. Henderson  

Piketty: "Violent Shocks" Needed to Raise Tax Rates

Correction on Abortion... The Pigovian Minarchist...

War is the health of the state.

I think it would be a big mistake to oppose the objective of global progressive taxation of income and wealth with the objective of class struggle and political fight, for at least two reasons. First, making this tax reform possible would require a huge mobilization. This has always been the case in the past. All the big revolutions engendered a big tax reform. Take the French Revolution, the American Revolution, or World War One: although it was not a fiscal revolution initially, through the Bolshevik Revolution, it had a huge impact on the acceptance of a progressive tax regime and more generally social welfare institutions after World War One - and even more so after World War Two. These were fiercely opposed by the elite and by the right just before these shocks, so this shows that we need a big fight and sometimes violent shocks to make progressive tax accepted. It would be a big mistake to think of progressive taxation as a technocratic process that comes quietly from a minister and experts. This is not at all the history of taxation.

This is Thomas Piketty's statement in a recent interview. The interview, by by Antoine Dolcerocca and Gokhan Terzioglu, is titled "Interview with Thomas Piketty: Piketty Responds to Criticisms from the Left."

Reading it, I was reminded of Robert Higgs' thesis in his classic book Crisis and Leviathan. The difference? Higgs decried the growth of taxation and government that came about because of war. Piketty welcomes it.

HT2 Tyler Cowen.

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CATEGORIES: Tax Reform , Taxation

COMMENTS (9 to date)
Daniel Klein writes:

When I read Isaiah Berlin's book on Karl Marx, I noticed that when it came to every war that came along, Marx seemed to favor war and belligerence. And Berlin seemed to make a point of pointing that out.

Charlie writes:

It reminded me of this quote:

"Only a crisis-actual or perceived-produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable."

-Milton Friedman

I suppose we need a model of left/right/libertarian shocks.

Roger McKinney writes:

Piketty is on to something, though. Major changes seem to happen only with crises. For example, the German miracle after WWII could only happen after nearly a century of socialism and war that impoverished the people.

Recently, Germany and the Scandinavian countries have rolled back socialism only after the money ran out and the people growing poorer. China changed only after 30 million people starved to death.

Conservatives hate immigration because so many get on welfare and threaten the system. Conservatives are more concerned with preserving the welfare state than anything. But imagine what would happen if we flooded the country with immigrants who all got on welfare. It would bankrupt the system and force its abandonment.

Andrew_FL writes:

I think that's wishful thinking, Roger.

Besides which speaking as a Conservative I want to see the welfare state destroyed and my main concern about "immigration" is that said "immigrants" are culturally socialist and will come to vote to strengthen the welfare state, not that they will exploit it into bankruptcy.

Jeff writes:

Yeah, call me crazy, but I for one would like to see the welfare state abolished without completely destroying American society.

Jon Gunnarsson writes:

Roger, you're seriously misrepresenting history. One can make an argument for Germany having a quasi-socialist economy during both World Wars, but certainly not before or between those wars. The German economy during that time was less free than, say, Britain's, but it was still primarily a market economy.

Nor have Germany or Scandinavia ever been socialist in the post-war world (excepting East Germany, of course). Sweden and Germany did roll back their wellfare states somewhat, but they have always been, and remain, mixed-economies, not socialist ones. I'm not sure what sort of roll back you're talking about in regard to the other Scandinavian states.

Jim Glass writes:

"Piketty is on to something, though. Major changes seem to happen only with crises. For example, the German miracle after WWII could only happen after..."

Yes, but the problem is that works both ways -- the big German change that brought about WWII, the rise of the Nazis, was the result of a crisis too. The rise of the Bolsheviks in Russia was the result of a crisis as well.

Crisis produces response and change -- but there is no reason at all to assume it will be good change and not change for the worse.

I think this is the point of the Friedman quote. 'When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function:...' to have *good* ideas prepared and ready to go on that day, to counter the bad ones that will certainly abound.

Jim Glass writes:

BTW, the "gotcha!" quote from Piketty in that interview is...

"... I am very Leninist ..."
In full honest context it is not that bad - but not that good either.

For those who might care about such things.

Mark Brady writes:

Shades of Naomi Klein's The Shock Doctrine?

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