Excerpt: America’s top 1% enjoy a fifth of the economy’s income and pay nearly a third of its federal taxes. Many politicians think they should cough up much more. Zohran Mamdani, New York’s mayor, wants a new 2% city levy on incomes over $1m. Virginia, Rhode Island and Washington state are weighing up similar measures; Californians are likely this year to vote on a “one time” 5% levy on billionaires’ wealth. In Europe, too, there is a similar clamour to target the wealthy. France has seen a popular campaign for a wealth tax. And with Sir Keir Starmer weakened or doomed as prime minister, the left wing of Britain’s Labour Party may implement one of its own. The “Robin Hood” state, which takes from the rich to give to the poor, has obvious appeal. Governments across the developed world are strapped for cash. Budgets are burdened by legacy debts, ageing populations and the need to spend more on defence. But few politicians will countenance raising broad-based taxes at a time when voters, scarred by the high inflation of the early 2020s, are worried about affordability. Booming stockmarkets, meanwhile, have reinforced the idea that inequality is too high. And it always sounds good to say someone else will foot the bill.
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I’m not necessarily advocating for total reshoring. I don’t think it’s necessary. However, as I said, globalization led to its own problems. We saw during the pandemic how fragile complex global supply chains can be. Plus, there’s a certain amount of autonomy lost when a country is dependent on another country for some vital resource or product. That’s a great way for an independent country to become a vassal state.
You are clearly unfamiliar with Japan in the 90s. Despite falling prices, Japanese consumers didn’t go out and spend mindlessly. They saved, causing prolonged deflation. It got so bad they had to make savings rates negative to try and get people to spend the money the government was printing instead of saving it.
Insatiable consumption is a cultural thing, not necessarily “human nature.” Here in the US where I am, the culture of endless consumption has been carefully, deliberately cultivated over generations. Here, if you put money in someone’s hands, generally they will spend it, that’s true, not save it like the Japanese did. But clearly not every country is like the US.
And not every person is that way, either. Here in the US there are people who aren’t so loose with their money. Or at least there were. My grandparents lived through the Great depression and they were quite thrifty, regardless of what the Federal Reserve’s policies were at any given time.
But it isn’t just my explanation. That’s just how it works. Supply and demand determines price. Prices go up when demand outpaces supply. The amount of money in the money supply can influence that, because, as we’ve established, under many circumstances at least, if people have money to spend they will try to spend it. But central banks rarely just print money and hand it to people. When they do, yeah, that can definitely be a recipe for runaway inflation.