The Shifting Perspective of the Financial Times

Ideas that were dismissed out of hand just a few months ago as being unrealistic, if not outlandish, are now being embraced even by the most orthodox of economic loyalists.
Financial Times, Financial Times editorial board, FT, Financial Times editorial, coronavirus, coronavirus economy, wealth tax, wealth tax news, Yanis Varoufakis, Peter Isackson

London, UK © Claudio Divizia / Shutterstock

May 22, 2020 13:57 EDT

On April 3, the highly traditionalist Financial Times expressed its vision of this curious moment in history in an editorial that bore the title, “Virus lays bare the frailty of the social contract.” Its subtitle reads: “Radical reforms are required to forge a society that will work for all.” The article could have credibly been signed by Jeremy Corbyn, Thomas Piketty or Bernie Sanders, none of whom have in the past been treated kindly by the FT. And yet, this editorial appeared under the rubric, “The FT View.” It’s the equivalent of a pontifical pronouncement, urbi et orbi.

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The editorial board’s message lacked any dithering, pussyfooting or other forms of ambiguity. It is time for a change. “Governments will have to accept a more active role in the economy,” the article says. “They must see public services as investments rather than liabilities, and look for ways to make labour markets less insecure. Redistribution will again be on the agenda; the privileges of the elderly and wealthy in question. Policies until recently considered eccentric, such as basic income and wealth taxes, will have to be in the mix.”

Here is today’s 3D definition:

Wealth tax:

The formally legislated theft by a national community of a tiny fraction of the fortune of certain individuals who have accumulated immense wealth largely through historical practices often related to theft, such as exploitation of a dominant position, undue use of political power and influence, aggressive monopoly, various forms of privilege and mere luck that deprives others of resources that have fallen into one’s lap.

Contextual Note

The justification for a wealth tax is not to punish the wealthy for what may well be, in some cases, illicit or immoral practices enabling the accumulation of wealth. In a society that believes in justice and wants to enforce the idea, that kind of reparation could conceivably be a legitimate policy to pursue. But systematic recrimination rarely produces anything other than social strife and often distorts the very idea of justice. 

Several nations in the recent past have created a wealth tax, but economic orthodoxy has consistently dismissed the idea as risky in a globalized world where people can easily transfer their assets across borders. Opponents of the wealth tax reason that it incites the wealthy to leave the country and park their wealth elsewhere. 

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France had a wealth tax until very recently. When the former Rothschild banker, Emmanuel Macron, won the French presidency in 2017, he promptly followed his banker’s instincts and, among his modernizing reforms, abolished the wealth tax. That measure turned out to be the most serious factor motivating the protests of the yellow vest movement that began in November 2018.

The year 2017 may mark the borderline between two eras in terms of the way people perceive the combination of wealth and power. Three years ago, people could still accept as “logical” the idea that it’s always desirable to keep the wealthy within one’s borders because some of their wealth will inevitably trickle down to the rest of society in one form or another. But the cumulative effects of the austerity that followed the 2008 crash and a wealth inequality gap that has been visibly growing year after year gradually changed many people’s perception of the logic.

It is only in the past few years that voices calling for a wealth tax have emerged on the public scene and been taken seriously by some in the media. The Dutch historian Rutger Bregman became famous in January 2019 for speaking truth to financial power at the billionaires’ annual feast of self-celebration in Davos, the World Economic Forum. Today, impressed by the Financial Times’ editorial board’s unanticipated conversion, Bregman continues to stress, as he did at Davos, the need for a wealth tax as well as other fundamental reforms. Bregman sees the coronavirus pandemic as a moment in which a radical shift in economic culture is already taking place, offering the possibility of a very real transformation of the world’s and the West’s economic culture.

One sentence in the FT editorial highlights what the shift is all about. The article recommends a new economic vision to guide our governments. “They must see public services as investments rather than liabilities.” That shift of perspective tells the whole story. Instead of dismissing social programs as an unnecessary cost, it acknowledges the structural and economic value of services provided by and for the collectivity. It recognizes something called the “public good” or to use a more traditional formulation, the “common wealth,” as a concrete economic reality and not just a vague cultural idea.

Bregman makes his case, not for a revolution but for a solution that would make sense of capitalism and prevent the kind of totalitarian outcome that typically emerges from systems that have descended into a state of chaos: “The most important step? Pass an annual progressive wealth tax on all multimillionaires. Turns out, high taxes need not be bad for the economy. On the contrary, high taxes can make capitalism work better.” Like former Greek Finance Minister Yanis Varoufakis, Bregman who, as an activist on the left, says “our job is to stabilize capitalism and use its stabilization as a foundation on which to build an alternative to capitalism. Then we can start having the second conversation. What comes after capitalism? What will post-capitalism look like.”

Historical Note

History changes when the ideas that guide people’s intentions and actions change. A massively disturbing effect can accelerate the process. The shifting perspective of the Financial Times in a very short period of time provides an excellent illustration of the speed of change.

Here is what the FT had to say about the then-leader of the Labour Party, Jeremy Corbyn, in November 2019 just weeks before the UK’s general election: “Mr Corbyn has gone way beyond what is achievable in a single term because of an ideological focus on re-engineering the entire market economy.” The FT editorial board is now recommending precisely that kind of reengineering of the economy. How’s that for an ideological conversion?

On February 25 of this year, the FT published its review of Thomas Piketty’s latest book, “Capital and Ideology.” In its scathing assessment, the reviewer dismissed Piketty’s recommendations in the following terms: “The French economist’s data-driven analysis of inequality offers a flawed prospectus for change.” The author, Raghuram Rajan, complains that “the sky-high taxes Piketty wants could have serious adverse effects on effort, gross domestic product and tax revenues. Also, one virtue of the entrepreneurial rich retaining control over their wealth is that they have already shown an ability to put resources to good use — which is why they are wealthy.”

This is the credo of a belief system that was still credible three months ago. It belonged to a culture in which the Zuckerbergs, Bezoses and Musks of the world could be admired for their ability to accumulate riches thanks to their talent and vision. With the shift of perspective now taking place, who is really ready to believe the idea that the wealthy have “shown an ability to put resources to good use?” The evidence is greater that they have mismanaged the planet’s resources and regularly allow conditions to accumulate that generate crises of ever-increasing dimensions. After which, it’s the citizens who will bail them out.

The notion that people should trust the rich and powerful to come up with solutions because they alone have the capacity has lost any currency it once may have had. Governments of the people, by the people and for the people have much more capacity than any billionaire competing with other billionaires. 

In his review, Rajan asserts that Piketty’s book “will persuade few outside his devoted following.” Five weeks after his review, he could have noticed that it had already persuaded the FT editorial board.

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

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