George Monbiot tells us that we really do have to go out and tax all those rich people out there just because they’re passing it on to their children. This isn’t actually true, as any observation of the varied rich lists shows. The vast majority of members of such gawpfests are entrepreneurs who have made that money in generation 1. But, the insistence all the same:
There are endless arguments about the Laffer curve, which purports to show where this level lies. But these discussions overlook something crucial: raising revenue is only one of the purposes of tax. Another is breaking the spiral of patrimonial wealth accumulation.
Breaking this spiral is a democratic necessity: otherwise the oligarchs, as we have seen, come to dominate national and international life. The spiral does not stop by itself: only government action can do it. This is one of the reasons why, during the 1940s, the top rate of income tax in the US rose to 94%, and in the UK to 98%. A fair society requires periodic corrections on this scale. But these days the steepest taxes would be better aimed at accumulated unearned wealth.
Of course, the offshore world the billionaires have created makes such bold policies extremely difficult: this, after all, is one of its purposes. But at least we know what the aim should be, and can begin to see the scale of the challenge. To fight something, first we need to understand it.
So let us try to understand. We’ve had societies without such patrimonial accumulation. Both the Ottoman and Mughal Empires had no real inheritance of property. Each, in different ways, had great wealth laid upon those who served the Sultan/Emperor. All of which reverted upon the death of that particular Pasha/Zamindar. The result was not a lot of long term investment. Why bother when the returns to delayed consumption would revert to the State?
To be trivial about it, planting oaks today might produce harvestable timber in a century’s time. Your or my incentive to do this is greater if it’s the great grandson who can finance his wedding as a result, or whoever has been elected to John Prescott’s old job? Which system is going to lead to greater investment in that long term?
We do have an empirical answer, one gained from observation, which is that allowing the family to benefit - the family being the human institution with the longest time horizon - benefits the society as a whole.
As to how to prevent the hijacking of the country by those plutocrats we should do what we have been doing, having that continued technological advance. For what destroys those old patterns of wealth is the new patterns brought about by free markets and free trade.
To use a very Monbiot example, land. Some thousands of acres of Derbyshire once financed the building of Chatsworth. Today the same land won’t even maintain it, let alone staff it. We radically changed the value of British farmland by having that free trade. We substituted that rolling greensward with the prairies of North America, the steppes of Asia. Got our grain from the US, Canada, the Ukraine, and that’s what broke the old grand aristocratic landed fortunes.
We’re entirely fine, delighted even, with a turnover of wealth. But the confiscation of it leads to fewer attempts to create it to the disbenefit of all. Making it technological change which eats away at it benefits all. So, let’s use the method that does aid all. Free markets and free trade mean that the capitalist - or even patrimonial - wealth accumulation happens, benefits and erodes in a manner that swingeing taxation doesn’t allow. That should therefore be our system.