For a Europe-wide coordinated levy on wealth
A constantly increasing disparity of wealth is an intrinsic aspect of capitalism. Therefore, strong political correctives to create a fairer distribution are necessary. This applies even more in the currently dominant form of capitalism driven by financial markets, since here the disparity in the distribution of prosperity has been growing especially rapidly.
The nature of the crisis
As this polarization of the distribution of wealth grows, so does the amount of capital circulating around the world in search of profitable investment opportunities. In particular since the 1970s, this mass has increased dramatically. It became less and less possible to exploit this capital profitably in the productive economy. In the search for new sources of profit, the international financial markets became more and more important. This transition was accompanied and fostered by constantly increasing deregulation and globalization of the financial markets, and led to a quite novel dynamism involving the polarization of the distribution of income and assets.
The increasing dominance of the financial markets has allowed gigantic profits – and also losses – to be made within seconds. Thus the system is becoming more and more unstable. More and more speculative bubbles developed, which must burst sooner or later. Such a burst was the beginning of the current crises dynamic. A huge real-estate bubble burst when the lenders were no longer able to meet their obligations to repay their mortgages. The banks involved had to write off claims amounting to trillions of dollars. A global banking crisis was the result. Since the productive economy and the financial sector are closely interwoven, the global economic crisis was a logical next step. The economic crisis, and the gigantic, spectacular actions to save the banks, in turn imposed such a burden on public and private budgets that government debt soared. Sovereign debts have increased as direct consequence of the bail-outs and of the economic slow-down induced by this chaotic situation.
Reduce wealth instead of cutting back welfare
While public indebtedness is increasing, private wealth continues to grow in value, even in the context of the crisis. In 2011, it amounted to 69.5 trillion euros in Europe. This wealth is highly concentrated. The richest one percent of European society holds more than 30% of it, while the poorer half of the society has nothing.
Thus it can be said that the accelerated accumulation of private assets and the associated rise in wealth inequality is a major determinant of the global crisis, and it is also continuing in the midst of the crisis. This is the first reason why the burden of the crisis must be shouldered by reducing extreme concentrations of wealth, and not by brutal orgies of spending cuts, as the dominant policy for dealing with the crisis demands. The adequate tool for doing that is the implementation of a strong one-off wealth levy which is followed by permanent wealth taxation.
A second reason is that the policy of cuts prescribed makes matters even worse. Countries such as Greece and Portugal are being "economized" to death. A third reason is that it is completely unacceptable for the costs of the crisis to be imposed mainly on those who had nothing to do with creating it. After speculation with huge assets has plunged the world into a crisis, in Europe, especially in the Southern and Eastern European countries, social-welfare systems are being destroyed, public property sold off for a pittance, and the people bled dry – ignoring their democratic rights in order to do so.
Outline of a European wide coordinated wealth levy
In imposing a wealth levy, we want to base it on all private assets, both financial and physical assets. The individual taxable net assets (minus debt burdens) of all persons falling under the jurisdiction of the law should be assessed. These persons are the group of millionaires and billionaires, in particular the richest one percent of the population. But even within this segment of the population, we find that the wealth of super-rich multibillionaires is growing even more rapidly than that of the simple millionaires. This is why the levy on assets must be progressively graduated. Therefore, the excessive rates of growth of wealth concentration upwards could be met by a graduation starting at a 20% levy on assets, and ranging up to 80% for the super-rich.
That only the very rich are burdened and that small and medium-sized firms do not have financing difficulties, an allowance of one million euros for private assets and two million euros for operating assets should be made. In order to prevent liquidity problems of companies and new turbulence on financial markets, payment periods of ten years should be granted for the levy where it is necessary.
An important aspect is that the levy should get implemented European-wide. The crisis is a European problem, not one of single countries. Therefore, it cannot be solved with plans that relate only to single states. If it were imposed in the whole of Europe, the revenue would be around 7.5 trillion euros. Just to give an idea: the public debt of the same area is around 10.5 trillion euros. So the levy is a concept which is able to provide a comprehensive solution to the current burdens.
What is done with the revenue is a matter of democratic decision-making. In general, it is necessary to generate the means to overcome the crisis, to finance public expenditure (e.g. investment in education, social security, public investment, ecological transformation) and to reduce the power of financial markets by reducing the circulating capital by a re-distribution to the public sphere.