Cooking the Books 2
The limits to tax and spend
‘Raising tax on businesses will kill off investment, CBI says’, was the headline in the Times (11 September) about a speech to be delivered that day by Tony Danker, the Director-General of the employers’ organisation, in which he said:
‘I am deeply worried the Government thinks that taxing business… is without consequence to growth. It’s not. Raising business taxes too far has always been self-defeating as it stymies further investment’ (tinyurl.com/y5trf9vx).
He would say that, wouldn’t he? Yet businesses have to be taxed, whether directly or indirectly, to pay for the upkeep of the government and the services it renders them as a whole. Capitalist enterprises recognise this and Danker himself qualifies his statement by saying that it is raising tax ‘too far’ that risks discouraging investment.
He does have a point. There are limits to how much tax governments can raise from businesses. The capitalist economy is driven by business investment for profit and, if governments tax too much, this will provoke an economic slowdown or even downturn. It is something Keynesians learned the hard way but which has yet to be learned by the ‘Modern Money Theorists’ and the Green New Dealers.
Danker went on to make another point:
‘It’s clear that consumption is likely to rage in the short run. Consumers have saved and will spend… But unless investment catches up, rather than falls behind, that story will be short lived’.
True again. If investment doesn’t pick up, the post-lockdown consumer boom will peter out when all the pent-up demand has been spent.
We don’t suppose that it will contribute to Danker’s ‘rage’ in consumer spending, but if you live in Northern Ireland you’re lucky. Well, sort of.
The devolved administration there is giving away £100 to anyone who claims it under its ‘High Street Voucher Scheme’. Actually, it’s not a voucher that they will be given but a plastic card with £100 pre-paid on it which they can use in local shops and eating places to pay as they would with their bank card. The money has to be spent by the end of November.
It is not exactly the ‘helicopter money’ that some economists propose as a way to get the economy out of a recession. Not that that would work anyway since what drives the capitalist economy is not consumer spending but business investment, as the CBI’s Director General pointed out. The aim of the scheme is simply to support local businesses. It will to a certain extent.
When Marxists hear the word ‘voucher’ they tend to think of the Labour-Time Voucher Scheme that Marx mentioned in passing a couple or so times. Under this, people, in the early days of socialism, would be issued with vouchers based on the amount of hours they had worked and which they could redeem for consumer goods at the local distribution centre. It wouldn’t have worked and Marx didn’t go into any detail (it wasn’t his idea anyway) about how the goods to be redeemed would be ‘priced’.
In any event, given the tremendous development of the forces of production since his day, socialist society should now be able to go over very rapidly to free access and free distribution and there would be no need for vouchers. Or plastic cards.