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The role of the rich during crises

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What happened in the past and what happened in the last 15 years

Ο ρoλος των πλουσων καττη &delta ιαρκεια κρΙσεων

Photo. AP

Guido Alfani*

For much of the history of the West the wealthiest were regarded as a potentially unfavorable presence, who to mitigate this impression used their wealth to prop up their societies through war, famine or pestilence. This symbiotic relationship no longer exists. Today's rich, while their wealth remains largely intact despite the latest crises, have opposed reforms aimed at using it to finance mitigation policies of all kinds.

In the past, when the richest were seen as unmoved in the face of the plight of the masses, riots and violent attacks were provoked against them. In the Middle Ages, theologians considered them sinners, or at least the wealthy were expected to provide generous bequests to charities for the benefit of their souls. From the 15th century, and starting from the more economically developed regions of Europe, such as central and northern Italy, the wealthy were assigned a specific social role, that is to act as private repositories of money. Very aptly, the Tuscan philosopher Poggio Bracciolini argued in 1428 that cities, which set up public granaries to store food, should also have “many greedy persons, in order (…) to constitute a kind of private money barn for the help of all” .

For centuries, throughout the West the wealthy dutifully fulfilled these obligations in a variety of ways, from paying emergency taxes in times of crisis to lending to governments, not only monarchical but also democratic, such as that of Venice. The haves provided emergency loans during World War I and World War II in the US, such as the so-called Liberty Bonds in 1917-1918 for the Allied war effort. But in the 20th century, as in the 17th, the lines between free choice and constraint were blurred, as rulers welcomed every opportunity to increase social pressure on those reluctant to contribute. In the 20th century, the real innovation was the significant increases in top personal income tax rates (in the US, the all-time high was reached in 1944-1945 at 94% on incomes over $200,000) and estate or inheritance taxation.

But even during peacetime economic crises, such as the Great Depression of the 1930s, the wealthy were expected to contribute much more than the general population. In the past 15 years, we've experienced the Great Recession, the sovereign debt crisis, the pandemic, the ongoing war in Ukraine, and the looming threat of large-scale conflict in the Middle East. We would expect that in this period too the rich would have been called upon once more to fulfill their traditional role. Indeed, related proposals entered the political agenda in many Western countries. However, we have not put it into practice and recent fiscal reforms seem to have done little in this direction.

Research in European countries after the pandemic shows that increases in top personal tax rates or (where there are ) of property taxes were rare and mild. Finally, we should also consider whether the impressive resilience of the rich in recent crises has been achieved in such a way as to make society as a whole less resilient.

* Mr Guido Alfani is Professor of Economic History at the University Bocconi of Milan.

Source: www.kathimerini.com.cy

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