Occupy protests in Canada and the birth of the "nothing burger"

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But the apologists for capitalism also need to understand two things. First, that capitalism is a tool for society and not the other way around. If it fails to deliver what the people expect, then they will demand change (whether there is a good alternative or not). Second, there is nothing natural or virtuous about unregulated markets. The capitalism that has existed for the last sixty years owes its existence to vast networks of laws, regulations, and policies.

The coercive power of states is used to protect assets and police intellectual property. Contracts are mediated by the courts. The education of workers and critical transportation infrastructure are funded by the state. Research and development is massively subsidized by the work of publicly funded universities. Finally, through redistributive processes, real class warfare is avoided.

So what is to be done? From easiest to hardest: adjust regulations on financial institutions and the investment industry, alter tax codes to favour productive activities, and increase the tax burden of the wealthiest citizens.

As demonstrated in the prior crisis, banks and investment firms have huge influence on the real economy. Regulations that enhance banking stability (e.g. higher reserve requirements) and reduce parasitic trading activity (e.g. Tobin Tax) should be a “no brainer”. We might also decide that no firm should be allowed to become “too big to fail”.

Such changes are only opposed, as far as I can tell, by members of the financial industry and their hangers-on. They will cry that somehow this will reduce liquidity and make it harder for businesses to start and grow. This canard can be ignored. Competition (one of the good things about capitalism) will ensure that loans are made to deserving borrowers. Capitalists should not fear regulation so long as the playing field with their competitors is level.

Tax codes today do not differentiate between money generated creating and delivering new or better goods and services (think Apple, Steve Jobs) and money simply invested in the market (I buy Suncor shares and they go up). The former deserves to be rewarded with lower tax rates since it involves risk, creativity and the provision of new and better things. The latter is just rent seeking behaviour (again, see Adam Smith) and should be taxed as income.

The hardest thing to implement will be to increase taxes on the wealthy. It will be difficult because the wealthy have loud voices and well paid lobbyists. It will be hard to get right because there is real hazard in taxing the wealthy. There are levels of taxation that will discourage work, investment, and economic activity. Based on sixty years of history, it is reasonable to assume we are nowhere near those levels now.

Regardless, our governments (Europe now, the US soon, and Canada if the price of our natural resources ever takes a serious dive) are going broke and they need the money. Since we know very well where the wealth is being concentrated we know where to go knocking for a bigger slice. There isn’t really another choice. The lower and middle classes are tapped out. And, the alternative, cutting the big spending programmes like education, old age security, and health care leads us back to the 1930s. It isn’t class warfare to suggest this. This is a time of crisis. Those with means need to step up. Of course we need to seek savings and efficiency where we can find it, but we will not nickel and dime our way out this.

None of the above is new or original. But, if the "Occupy" protest is to have a real policy impact, the movement needs to offer real, pragmatic solutions and demand government and industry come to the table.  Mark Carney, at least, sounds like he will listen.

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