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The problem of the day is that Cypriot banks, in effect, don’t have that money anymore: it was invested in now-depreciated Greek bonds and real estate investments that were partly illusory. Quite naturally, the European authorities are reluctant to bail out banks without getting anything in return, especially if that ultimately means bailing out Russian millionaires.
just an interesting example of how big the chain of failure was (and still is)
To pick up a few billion in exports, we’re now willing to sell anything to anyone. We’re willing to become a tax haven, to have oligarchs and multinationals paying less in taxes than the middle and working classes, to ally with rather unprogressive oil emirates just to get a few crumbs for our football teams. [...]
this is savage
(on France selling arms to Russia)
The saddest thing about the European crisis is the determination of today’s leaders to present their policies as the only ones possible, and the fear they feel when any political shock looks likely to disturb this happy equilibrium.
great opening sentence
Partly due to intensified competition between countries, national governments have focused more and more on the most mobile taxpayers (highly skilled and globalized workers, owners of capital) at the expense of groups perceived as captive (the working and middle classes). This pertains to a whole set of social policies and public services: investing in high-speed rail rather than commuter trains, elite educational institutions rather than ordinary public schools and universities, and so on. And of course it also pertains to how it’s all financed. Since the 1980s, the progressivity of tax systems has been sharply reduced: rates that apply to the highest incomes were massively lowered, while indirect taxes hitting those of the most modest means were gradually increased.
A particularly interesting case is that of Germany and France, which in 1945 found themselves with public debts of around two years’ worth (200 percent) of GDP, levels even higher than Greece or Italy today. By the early 1950s those debts had fallen to less than 30 percent of GDP. Obviously, such a swift reduction wouldn’t have been possible through accumulating budget surpluses. On the contrary, the two countries used the whole panoply of fast methods. Inflation, which was very high on both sides of the Rhine between 1945 and 1950, played the central role. At the time of the Liberation, France also instituted an exceptional tax on private capital, reaching 25 percent on the largest wealth holdings and even 100 percent on the biggest accumulations that had taken place between 1940 and 1945. Both countries also used various forms of “debt restructuring,” the technical term used by financiers for simply canceling all or part of a debt (the more prosaic term haircut is also used). As, for example, in the famous London Accords of 1953, where the bulk of Germany’s foreign debt was canceled. It was these fast methods of debt reduction—especially inflation—that allowed France and Germany to launch into reconstruction and postwar growth without the burden of debt. That’s also how the two countries were able to invest in public infrastructure, education, and development in the 1950s and ’60s. And it’s those same two countries that are now explaining to southern Europe that public debts must always be repaid, down to the last euro, without inflation and without exceptional measures.
[...] Africa doesn't need aid; it simply needs an international legal system that can protect it from permanent pillage.
[...] Austerity is what led to the rise of national selfishness and tensions around national identity. Social development with equity is how hatred will be defeated.
[...] there’s a very interesting discourse that I quote in my book in chapter 13 by the founder of Sciences Po, and so that was right after the expanse of the commune, which was very traumatic at least for the elite, a very traumatic experience of redistribution in France. And so he has a very clear way to explain, well okay, now that we have universal suffrage, there’s a risk that basically the poor and the majority of the population will try to expropriate us, the elite. We have to display merits and our own standings so that it will be a completely crazy idea to get rid of us. So in a way it’s as if the meritocracy, the modern meritocracy discourse is invented as a way to protect the elite from democracy basically, from the universal suffrage. And he has a way to put it, which is very interesting, because at the same time Sciences Po is a private institution with very high tuition fees where it’s difficult to access if you’re not from the elite. So in the end this is the same elite in the sense that if you don’t come from a high income group it’s very difficult to access this elite, so — , but in terms of discourse it tries to present itself as based on merit.
[...] there’s a point that nevertheless goes strangely unmentioned in the Cotis report: firms have been pampering their shareholders in recent years, resulting in a troubling fall in the share of profits devoted to investment. This reality is hidden by the authors’ choice to focus on gross profits, or profits before deducting capital depreciation. But since productive capital is always depreciating, worn-out equipment must be upgraded or replaced before any new investments can be made: computers are regularly upgraded, buildings and other assets have to be maintained and repaired, and so on. From an economic as well as a tax point of view, the relevant concept is net profit—profit after deducting depreciation. These net profits are more difficult to estimate, but since INSEE takes the trouble to produce the best possible estimates of depreciation, it would be better to use them than to leave them unmentioned. Especially since the overall picture of profit distribution changes completely when you move from gross to net profits. The Cotis report tells us that over the last twenty years, gross profits have been 32–33 percent of firms’ value added, versus 67–68 percent for wages, which is true. But capital depreciation has been around 15–16 percent of value added, or roughly half of gross profits. In other words, pretty pie charts showing that firms generously devote half their profits to investment are kind of a joke. The truth is that companies replace old equipment before they pay their shareholders—which is the least they can do. If we use net profits, however, we see that firms paid out practically all their profits to their owners, in the form of interest and dividends. [...]
[...] When he became president in 1933, Roosevelt knew precisely nothing about the policies he would adopt. But he did know that the Depression and austerity were bringing America to its knees, that the state had to assert control over a financial capitalism gone mad. Today, in 2012, four years after the onset of the 2008 world financial crisis, Hollande finds himself in exactly the same situation. When he started his campaign he didn’t know he would end up proposing a 75 percent tax on incomes higher than €1 million. But he quickly came to the same conclusion as Roosevelt: taxes are the only weapon that can put a stop to the insane explosion of very high pay.