Anantonese Journal of Economics and Theory

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Kalistani Economic Policy: An Overview
How ZPG, Progressive taxation and a Nationalized Workforce Promote Equality

Henry S. Edwards, Ph.D.,
Director of Economic Central Planning, Imperial Bank of Kalistan
Cathy M. Bradley, Ph.D., Kaliburg Polytechnic
Dept. of Economics

Introduction

Kalistan has a fairly unique economic model which bears exploration. This model is designed to ensure a basic and comfortable standard of living while allowing the nation to provide steady fiscal and monetary policy that keeps the Empire on an even keel. We have sacrificed the wild swings of the boom-bust cycle which benefits liberal financial actors (while providing a fairly steady conveyor belt of wealth from the working class to the owning class) and replaced it with the perpetually sustainability of Zero-Percent Growth policies.

Of course, we miss out on fabulous wealth that liberal apologists claim accrues to all under a liberal economic system that will generally raise the relative standard of living for even the poorest workers, (though, when a person is making one ruble a month, and his wage jumps to 1.50 a month, liberals like to use that as evidence in support of their hypothesis, without noting that the person paying that worker is making infinite rubles a month relative to that worker, and that hording of wealth is why the worker only makes so little in the first place.) But we also miss out on the catastrophic disruption to the lives of our people by crushing down the business cycle, slowing growth, consuming less, and ensuring that whatever growth our economy does experience stays within a very narrow band, controlling for growth of our population.

All of these very strict policies stem from Zero Percent Growth strategies and serve our people very well. Namely, we will focus on three specific policies that our Empire employs to ensure that we have relative equality: Zero Percent Growth, Progressive income taxation, and a Nationalized Workforce through policies like National Service and the universal basic income. All of these policies contribute to redistribution of wealth and a spreading of the wealth of society to all, and ironically, it also leads us to large budgetary surpluses annually, that allow our nation to sop up whatever excess wealth their is in society to discourage saving, encourage consumption, and pay for things that benefit all Kalistanis, rather than just a handful.

The GINI Coefficient

First, it is important to look at the GINI Coefficient of this nation. Our analysis shows Kalistan to be one of the least equal nations in the world, and at the same time one of the most equal nations in the world. This seeming paradox is resolved through steep progressive taxation, with the highest bracket paying 90% of income, while at the same time, treating investment as realized income, because stocks are just assets, eliminating preferential capital gains tax rates, eliminating most business taxes (except payroll tax, which in other nations, is just called wages) completely, and having a 2% wealth tax on held assets. These policies tend to redistribute wealth down to populations who do not make a lot, resolving the contradiction. High inequality pre-tax, resolved by wealth distribution downward through taxes, leveling out inequality significantly

Let's take a look at Kalistan's GINI breakdown.

Kalistan's GINI breakdown, excluding the Royal Family, House Ananto and Miramar

Another note here: This data excludes the Royal Family, who are, for the most part, an entity unto themselves. Adding the Royal Family would fatally skew this data to the point of being unintelligible. So please keep this in mind. Miramar pays payroll taxes, as all businesses do, and its employees, as such, all pay their share of income taxes, but the Royal Family is exempt from paying wealth tax, and the only support they receive is a small budget to pay administrative staff and security for the Royal Family, but otherwise, draw all of their support from the House fund itself. So they are not major contributors to our nation's revenues, but nor are they burdens upon it.

These two Lorenz Curves, from which the GINI is calculated, show the difference between pre- and post-tax inequality. As you can see, progressive taxation produces a massive decrease in the amount of inequality, from a coefficient of about .61 to one that is closer to .3 (the lower the coefficient, the more equal a society is believed to be.) For those who do not understand how GINI is calculated, you plot a line of perfect equality, which in all GINI graphs is a 45 degree angle with a positive slope of 1. Easy enough. And then you plot the relative shares of income belonging to each decile. 0-10 percent, or the lowest decile, have about 3% of the income, makes sense, because the poorest have the least amount of income, while a decile like the 70-80% decile make about 30% of the income. They're richer, they make more money. The coefficient is the difference in area between the ideal and where you are as a percentage of the total area under the ideal-- the more are there is between Ideal and Real, the bigger the gap is between where you are and where you should be at perfect equality, the higher the coefficient, and the the more unequal is your society.

The inequality, therefore comes in the 90-100 decile, where the curve takes a dramatic swing upwards, so that the top 10 percent make a LOT more than the bottom 90% and the the top 1% make a LOT more than the other 99%. This is fairly common in non-Communist countries which aim to pay everyone the same thing. Even with our UBI policies, we still set those based on difficulty, desirability, and technical requirements, so we don't even pay workers the same in terms of UBI. The UBI also doesn't account for wages in excess of the UBI. So people are still making money. The bottom (orange) line shows that profile of Kalistani workers, where the richest are very much more the richest, than the poor are even just "ok".

The correction, which we'll talk about later, comes in how much of that excess is soaked up by and redistributed through our tax system. When you are talking about the percentage of income kept by workers after taxes annually, you see that the working deciles are far wealthier as a share of the national economy, and the wealthy are still wealthy, but that line is significantly flattened out by just the progressive tax structure, and lack of regressive tax structures, so that the entire social system costs Kalistan about ₭52,500, the majority of which is paid for by payroll contributions from Employers toward universal income, in lieu of them paying those directly to workers as wages, and Kalistan ends up with a surplus of about ₭220 Billion annually, year over year over year, by just not contracting things to the private sector, ensuring social services are nationalized, and not giving people loopholes.

The GINI numbers show a Kalistan which is uniformly poor, except for a few wealthy actors at the top, before taxation, and after taxation, a population with generalized relative wealth distribution far closer to equality. The rich are still nominally wealthy, but relative to the entire population, they are less wealthy, while the poor are much less poor than they would be without progressive taxation.

Zero Percent Growth

The name of the game in ZPG is controlling the ups and downs of the business cycle. Much of capitalism's (claimed) success in providing (only relatively) more wealth for larger portions of the population comes from the upswings of the business cycle. Increased economic activity means hiring, more production and more investment. It is a virtuous cycle that leads employers to hire more workers, increase the wages and spending power of larger segments of the work force, and increase the overall prosperity of the society. We don't even deny that happens--It is indisputable. The adage "A rising tide raises all ships" is appropriate. That's what actually happens when you introduce liberalism into the poorest countries on the planet. Suddenly, as a worker, I go from digging through the city dump to find a pair of shoes that fit or not, making a single ruble a day, to having a job where I can save up because I am now making a ruble and a half a day due to an upswing in the economy, and can now suddenly imagine a time when I may eventually be able to buy my own shoes!

But there are a couple problems with this model: First, almost all gains in a rapidly liberalizing economy accrue at the top, not the bottom. So for every raise of fifty cents that trash digger, gets, a raise by the way of 50 percent, quite impressive, the people at the top also get a 50% increase, and for them, its going from a million rubles to a million and a half rubles. Relatively speaking that's about the same jump, but when you're talking about purchasing power, the wealthy person's increases don't allow him to dream of a shoe of his own, but a shoe factory of his own. That's a bit different. This leads to the second issue: That growth always comes with corresponding social churn as workers in traditional industries and occupations, which pay low wages and have high expenses are often displaced by new jobs that require a high specialization, which liberals do not like to invest in, because that would require profiteers to actually take some responsibility for the society they are looting. So: A rising tide raises all ships, but if you are like tens of millions of workers in liberal nations that lack structural commitment to addressing the political and social consequences of a rapidly modernizing economy, a rising tide merely sinks all ships which are hard tethered to the bottom of the pier. It's not just good for everyone--for some its good, for some its REALLY good, and for many, often who possess the least amount of power to stop it, its almost always a disaster that far outweighs the pathetic nominal gains in income they may earn from it.

But the third problem is the one that no liberal will mention, because it undermines the moral justification for liberalism. And that is, without serious state intervention, booms always come with corresponding busts. Always. Every single time. Moderate intervention to prevent the bust just prolongs the boom and it will eventually always collapse in on itself: the larger and longer the growth period, the harder and prolonged will be the corresponding depression. It is an iron clad law of liberal economics. And for most of the people who live pay check to pay check, there is no insulation whatsoever from the crash. So you are that guy making ₭1.50 a month or whatever, and suddenly your employer, and all other employers in your neighborhood go bust, and now you have nothing. Except, I suppose the shoes you can still pull out of the dump. Liberals hope you never find out about their dirty little secret about the ironclad law of the business cycle, because they have in the meanwhile undermined any public or political support for anything that takes from their private pile of wealth to redistribute to the rest of the population, and they don't want the government intervening for social spending, because they, the only once with any money left, will be required to chip in more than it costs them to keep their workers from starving to death so they will return to work the next day.

Kalistan, however is now, and has always been honest about the problems with the liberal economic model. And to address these fatal flaws in the reasoning and the moral justification for liberalism, we have adopted zero percent growth. There will be growth periods and shrinkage periods. Kalistan's aim is to squash down the growth period so that when the economy falls off a cliff, there's not that far to fall, and then there is something there to catch those who do and greatly soften the blow. Falling from a 7% growth to a 7% shrinkage is a 14% nominal drop. That means that 14% of the economy is wiped out. That's 1 in 7 members of society go from having wealth to not having wealth. And that creates catastrophic effects in the economy. Meanwhile, going from a .5% growth rate to a -.5% is less like falling off a cliff and more like tripping over your shoelace. It can still lead to some pain, but it isn't going to kill you. And our social safety net is there to bail you out when you do fall.

Another added effect of ZPG is that it allows us to produce for need rather than for profit. We are not overproducing anything, and so we are not producing a glut in any sector. This allows us to avoid wild price swings as producers try to markdown their goods to sell their surplus inventory, which leads to recessions in the first place, but more importantly, it allows our producers to focus on producing on a schedule, using (and wasting) fewer resources, cutting costs, and maintaining their bottom line easier. Supply chain disruptions are less critical, labor demands for higher pay are largely shifted off onto the public system, and corporations have an easier time pricing goods correctly because production is more controlled, limited, and related to actual demand, rather than a good guess that maximizes profit as you see in most private economic planning. This allows Kalistan to also be ecologically responsible as well, and provides a very strong measure of security for both Kalistan's workforce and for their producers.

The ZPG then is able to foster equality by ensuring that our productive capacities are not wasted in the pursuit of endless profiteering. By producing for need, rather than for profit, we can supply consumers goods and services at a much closer margin than profit-seeking capitalist corporations can. Lower prices in the market mean more money saved to the consumer to do other things with: whether it be to purchase other reduced priced goods and services, or invest, or do whatever. It is far easier for a poor person with little income, to eat when the food he is consuming is produced extremely inexpensively and then is not marked up by the time it gets to the food bank. And meanwhile, ZPG also depresses wild profiteering on the top end by slowing not only economic growth to basically stagnant, but removing the incentives in the economy to profit from need.

To be clear, there is still money to be made in the provision of luxuries, but if you have a society that is characterized by stronger equality, the value of those luxuries that liberals would claim due to scarcity also goes away: If everyone can get a yacht, the value of the yacht which comes from you having one and your neighbors not being able to afford one sort of evaporates. This forces prices down, and creates a production incentive to produce yachts because people want them and I can reliably sell them to those people, not because I can make a ton of money marking up my luxury yachts. I no longer have an incentive to overproduce and glut the market, needing to create demand to sell my over priced and over produced goods: my incentive instead becomes to supply the demand at the price that allows me to make a little extra, and people to get what they want.

(continued here)