July 17, 2020
The pandemic created a rare economic opportunity. In effect, the whole economy was thrown up for grabs, with the winners and losers determined by who had the political power to wrangle a nice bailout. Needless to say, those who were already rich got the big handouts, those at the bottom got crumbs, if anything at all.
If the market had run its course, all the big actors in the airlines, hotel,restaurant and aircraft industries, along with the oil industry, would be bankrupt. Shareholders would have been wiped out, banks and other creditors would have taken large losses and highly paid CEOs would be looking for new jobs.
Things did not turn out that way because almost no one in policy circles actually believes in the market. The people in power believe in using the government to give themselves as much money as possible. Usually, they do this by structuring the market so that money flows upward.
This is clearest in the case of patents and copyrights. These government-granted monopolies in areas such as prescription drugs, medical equipment, software, pesticides and fertilizers likely transfer more than $1 trillion a year from the pockets of ordinary people to those who own these monopolies — monopolies that are responsible for many of the country’s largest fortunes.
It is easy to point to market structuring in other areas, most notably finance and corporate governance, which have allowed for the accumulation of great fortunes at the expense of the rest of us. Again, the rule changes that allow for massive upward redistribution were mostly done with little public attention, even though large amounts of money were at stake.
The point is simple: The rich have structured the market in ways that hugely increase their share of income. They pretend that this is just natural market outcome. In normal times they get away with this fiction, outwith the pandemic bailout, they just took the money.
The special handouts provided during the crisis call for a special response. A one-time excise tax of 10 percent on high-income people is a great place to start, along with a 10 percent corporate income tax based on the stock returns we gave them in the bailout.
Special times call for special policies. We will have to do much more to even the score, but this special tax will be a good start.