A useful prediction from the ecosystem model of the economy is that an optimum degree of taxation will lead to an optimum level of diversity of lucrespecies in the system and an optimum use of the various resources, in this case including people who are not entrepreneurs or capitalists.
In the US Republican campaign we hear a great deal of complaining about the excessively high tax rates in the US and a suggestion on the parts of all the Republican candidates that they will bring down the tax rates. A quick look at this map demonstrates that the US already has one of the lowest tax rates as a percentage of their GDP of any country in the world.
In fact, the only other countries that have tax rates this low or lower are all very poor central African countries and some of the very poor Middle Eastern countries. Even China has a higher tax rate per GDP than the US.
The other rich countries of the world, especially those in Europe all have tax rates that are much higher than the US. In Canada, our tax rate per GDP is half again as high as the US. Research to look at Canadian corporate behaviour versus corporate income tax rates suggest very strongly that a decrease in corporate tax rate results in higher profits, but not to any increase in the number of jobs. And why should it lead to more jobs?
If we recall that labour is an expendable resource within the capitalist system, and that to remain highly competitive with low wages, it is necessary to have high unemployment so that high turn-over rates can be compensated for by having lots of people waiting to step in and take the empty low-wage jobs. This is identical to the biological concept of a high reproductive rate (fish with thousands of eggs, bunny rabbits with lots of babies) to compensate for high natural mortality.
The equivalent of taxes in a natural ecosystem is artificial harvest such as a fishery, in the sense that taxation removes biomass (wealth). This opens up opportunities for other fish (corporations) to move in where the taxation removed production. If the ecosystem or econosystem has more niches that are not completely filled, increased diversity and productivity will result. Assuming equal richness of resources to support the two systems, one a system with open niches from harvest or taxation, and the second a system with no open niches, there will be roughly equal productivity. However, the diversity of organisms will be greater with no open niches. As with everything in nature, there are optimum levels of diversity to maximize the efficiency of the system.
A useful prediction from the ecosystem model of the economy is that an optimum degree of taxation will lead to an optimum level of diversity of lucrespecies in the system and an optimum use of the various resources, in this case including people who are not entrepreneurs or capitalists. But we need to figure out where and how best to create that optimum taxation system. The next blog to address this is about sustainable yield and sustainable capitalism.