26/10/2011 - 10:25

Real reform possible from Greek tragedy

26/10/2011 - 10:25

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While painful for all involved, Europe’s debt crisis presents an opportunity for positive change.

FROM the ashes the phoenix rises, or so the Greek legend goes.

While catastrophe and destruction are shocking and horrible they do, at times, allow the opportunity to build afresh, starting from the foundations.

After WWII, defeated nations Japan and Germany were both rebuilt from the ground up with the help of those that beat them, notably the US. 

While vital, it was not the physical reconstruction that mattered most; the Western allies took the opportunity to rebuild the shattered nations’ cultural and administrative systems – making them more democratic and less warlike.

Both Japan and Germany have developed into solid and important parts of our global economy as a result.

Mao Zedong’s approach to embedding communism took the same concept to a different level. During China’s cultural revolution, Mao deliberately imposed chaos on his own people, unleashing the nation’s youth to destroy Chinese history. While this was, of course, about maintaining Mao’s grip on power, it would also have been obvious to him that his communism was fighting against a legacy of ancient belief systems that were not far below the surface of the old Middle Kingdom.

If you read about communist leaders from Joseph Stalin to Fidel Castro and his poster boy colleague, Che Guevara, they often talked about the kind of revolution required to not only win power, but to completely erase the power structures that existed before. 

Stalin waged war on peasants and particular ethnic groups as much as he did the aristocracy, while Castro was happy to see his enemies flee to Miami en masse.  

While you may abhor the reason for the ensuing chaos – be it war or revolution – there is no doubt that the vacuum created provides the opportunity for wholesale change, be that good or bad.

A classic example appears to have been the invasion of Iraq, in which the US-led forces obliterated the regime so quickly that they failed to adequately fill the vacuum with an appropriate administrative alternative. Instead, militant extremists arrived offering their own version of the future.

So what has this got to with Australia, or Western Australia?

Probably not much in a direct form, although some might argue those in the Occupy Wall Street movement and similar thinkers among anarchists and the green brigade believe they need to tear down capitalism before building some socialist/conservationist utopia over its ruins. ‘Building’ might be the wrong word there.

But really, the link to me is the issues in global markets and particularly the European Union, which is a system teetering on the edge of collapse. This has both a direct trade impact on us and an indirect impact in terms of seeing how a troubled economic system might right itself.

The chaos in Europe is most evident, today, in Greece, where the country has bankrupted itself by using other people’s money to pay the bills while its underworked and underemployed population refused to pay any taxes to pay that back. Now they are rioting about having to do some work and pay their bills. Given the old system is untenable, it probable that the real intention of the rioters (as opposed to the great bulk of the peaceful protestors) is to create further chaos. 

This would be line with objectives of Europe’s long history of anarchists, who have sought to destabilise societies there for hundreds of years. No doubt such people would hope a new Greece would emerge from the ruins, one that had defaulted on its debts and as a result would be poor, isolated and economically stagnant but also divorced from those nasty capitalists who won’t keep giving them money for nothing to fund their lovely lifestyles.

Alternatively, a democratically elected national government could quell the protests and use the chaos in Greece to reinvent the country’s administrative system in a way that would not normally be possible.

Clearly the big problem in Greece is, culturally, that the people don’t want to pay tax. This is an issue in most countries but places such as Australia have managed, through an inefficient and expensive bureaucracy, to harness people’s at-times-reluctant goodwill. 

In Greece, corruption and poor attitudes to work mean that even if the whole population were tax collectors they still would be unable to collect the money owed on income and consumption.

So why not use the current chaos to start afresh? They should find a tax system that is simple, efficient and easy to administer but difficult to avoid. Many people have argued in the past that the most fair, equitable and efficient tax is one on land (the purest argument is a tax on the unimproved value of the land, that is not counting buildings or other forms of productive assets the landowner has added). Land value is transparent and land cannot be moved to tax havens in the Caribbean. 

This is an easy tax to install, even in a place like Greece. The tax is calculated simply using systems that even local councils have here in Australia. Those that default lose possession of their property, an easy process because the government controls the land administration. The land that is reclaimed by the government can be sold to increase revenue and pay off debt and establish land value benchmarks, which help set the tax rate on nearby property.

This kind of thinking took place in parts of Eastern Europe after the collapse of the Soviet Union. Several newly liberated countries adopted simple tax systems – such as flat rate income tax – in the belief that this would help stimulate growth and form a bedrock for their new society. There was also a form of post-Soviet reaction in this against the potential for governments to use tax power as a new form of the wealth redistribution, which had failed so badly in the Soviet Union – especially where the wealth had mainly been redistributed to Moscow and those in power.

An interesting thinker from this perspective is Vaclav Klaus, the president of the Czech Republic, whose anti-conservationist views are driven by his concerns that the EU’s centralist policies, including those on climate change, are too close to the communism his country escaped. It is also notable that his neighbour, Slovenia, was the most reluctant nation to sign up to the latest European rescue of Greece. A leading Slovenian power broker wondered why a relatively poor nation like his ought to help save the much richer Greeks from their own poor lifestyle choices. 

If a genuine Greek tax experiment worked, perhaps other nations – like Australia – might look at it as an option to changing what has become a cumbersome and expensive system. 

The recent tax forum in Canberra shows how difficult it is to change things. This is especially the case when ideology is involved – and there is certain amount of that in the case of the land tax, as there is with income tax, mining tax, carbon tax and various forms of wealth tax.

There is also the issue we have in Australia that if it isn’t broken don’t fix it. I accept that is a reasonable standpoint, which is why I’d like to see experimentation take place where the system is not just broken; it probably never worked. 

If a new tax system could help Greece rise from the ashes of its self-created inferno, perhaps that would help those who champion real reform in more stable countries like our own.  

• mark.pownall@wabn.com.au

 

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