Taxing wealth is an essential part of the only road forward in the crises we face

The hurricanes and floods have exposed a deep series of crisis in New Zealand society including a decades long:

• degrading of basic infrastructure from water, roads and railways.
• decline in health and education services including staff and infrastructure
• failure to implement any meaningful action to combat the climate emergency and reduce greenhouse gas emissions
• failure of the reliance on free-market ideological dogmas that depended on profit-driven companies instead of democratic collective decision-making to govern our lives.
• failure to prevent an explosion of homelessness and poverty amongst the most vulnerable in society

Most of these failures can be put down to the refusal to tax wealth at all. The tax system is based on taxing only declared wage and salary incomes or consumption taxes the are unequal in their impact. Working people are taxed heavily and the wealthy can easily evade taxes through capital gains, wealth accumulation and hiding their money in trusts or offshore accounts.

To save the capitalist system of production worldwide in the face of the Covid shutdowns the capitalist governments spent trillions of dollars in rescue operations across the globe. This included running huge budget deficits and simply having central banks print money.

This new wave of monetary expansion came on top of the expansion that followed the 2008 crash in an attempt to promote growth during what was the slowest expansion in the period since the end of World War two in 1945.

The end result has been the unleashing of levels of inflation worldwide not seen since the 1970s. The only way the central banks can now reign in this inflation is by a triggering a renewed economic slowdown by increasing interest rates.

However, the world now has more debt than ever before. And much of this debt is with what are effectively already bankrupt entities. “Three hundred trillion dollars. That is the record debt which global governments, households, financial corporates and nonfinancial corporates owed in June 2022, as estimated by the Institute of International Finance. The $300 trillion is equivalent to 349% of global gross domestic product, 26% higher than the pre-GFC figure of 278% (June 2007, see chart 1). The $300 trillion works out to $37,500 of debt for every person in the world, compared to a GDP per capita of just $12,000.”

The interest rate rises will inevitable cause a cascade of corporate and banking collapses or developing country defaults in the months and years ahead. The rapid collapse of three US banks last week with around $200 billion in assets each and the impending buyout of the giant Swiss-based Credit Suisse Group with $700b in assets despite an emergency $50 billion loan from the Swiss central bank. Credit Suisse rank among the 30 most important banks in the global financial system, and they have almost $1.7 trillion in assets. Their shares lost 98% of the value before being taken over today by the Swiss-based UBS bank their chief competitor for small change.

The deposits in the US banks were guaranteed by the US Fed invoking emergency rules to cover accounts in excess of the $250,000 covered by the banks insurance system. Otherwise hundreds of US banks would have been threatened very quickly. The US central bank is able to, for now, protect deposits but shareholders can still be wiped out losing tens of billions of dollars in the process so there is good reason to dump shareholdings as quickly as possible to try an minimise losses. The US has about 4000 banks so there is plenty of carnage still to come depending on whose the next objects of a collapse in confidence. At the moment, unlike 2008, the shareholders are not being bailed out so there is still a lot of money to lose.

New Zealand must navigate this new world reality. Access to funds abroad will be more difficult to get and more expensive. That means the record current account payments deficit will be harder to cover which will in turn compound the recessionary pressures that are already present and demonstrated by the 0.6% Gross Domestic Product decline in the December quarter.

Stuff reported on March 18 that “Ratings agency Standard & Poors has warned that New Zealand’s credit rating could be reduced if the current account deficit does not improve and government interest costs rise substantially to more than 10% of revenues.”

New Zealand also needs a massive multi-billion dollar recovery spend. That will worsen the current account deficit and increase deficit spending without tax increases. But the the New Zealand Reserve Bank governor Adrian Orr has told the government it can’t increase the already high deficit spending without unleashing further inflation which the bank is determined to reduce by raining interest rates and inducing a recession. The new money the government needs will have to come from new taxes or from cuts to existing planned spending. Given the already existing deficits in needed infrastructure, if the government wants wants to avoid decades of austerity in spending on health education and welfare it has no choice but to increase taxes. The only people currently not paying taxes are the wealthy.

The only alternative for a government that wants to protect jobs and living standards and spend what’s needed on the rebuild that New Zealand desperately needed is to bring in a multi-billion dollar tax take on the wealthy to pay for a Green New Deal to transform New Zealand. The goal is not to make capitalism work better using market mechanisms which seems to be the most that both the Greens and Labour are currently putting on offer. The goal should be to transform Aotearoa into a society that is no longer governed by the pursuit of profit. That transformation would include (courtesy of Elliot Crossan):

Emissions Reduction Now

All fossil fuel extraction in Aotearoa must be banned by 2030. Real action on agricultural emissions must be taken, with the dairy herd halved. False climate solutions such as fracking and biomass must be banned. Native forests and wetlands must be restored, and our oceans protected.

Green Jobs

The government must guarantee a just transition for all workers currently involved in polluting industries. New green jobs which rebuild our infrastructure and move Aotearoa towards a low emissions, climate resilient society must be created, with decent pay and conditions.

Public Ownership

Vital sectors such as public transport, energy and water must be taken into public ownership, with services being provided to all free at the point of use. Public transport must be radically expanded, with free, frequent and reliable services within and between cities.

Economic Justice

A living wage must be guaranteed for all workers, and a liveable minimum income guaranteed to those not in work. To further reduce emissions, we must move towards a reduced working week at the same level of pay. The housing crisis must be dealt with through rent controls and the rapid expansion of energy efficient state housing, built through a Ministry of Green Works. We must pay for these reforms through a wealth tax which affects only the richest 5% of New Zealanders.

Refugees Are Welcome Here

The effects of climate change do not respect arbitrary national boundaries and will create millions of refugees around the world. Aotearoa must immediately increase its annual refugee intake to at least 10,000. Climate refugees from the Pacific must be given safe passage and citizenship due to Aotearoa’s historical responsibility in the region. Internal refugees must be properly provided for by the state.

Peoples power from the bottom up

This programme can only be fought for and realised if we radically transform our communities and workplaces so that ordinary people are empowered to be agents of the transformation we require through peoples power being exercised directly from the lowest level of society to the highest.