"Mhm... I'm sorry for interrupting you. Please carry on where you left off before."

  "So raising a corporate tax, like corporation tax, instead of a wealth tax for the purpose of redistribution should not be done. Because if you do that, you don't make the poor richer, you make everyone poorer. Companies maximize profits. If I run a company, I will always try to increase the profit I already have even further. If my tax burden is increased, this means new costs for me that reduces my profit. If it is within my power to do so, then I will not let that happen. If you increase corporation tax, then companies that can afford it will either reduce wages or increase prices in return. What happens next depends on how many companies can afford it. In a scenario where companies are taxed and the income of the lower class is increased in return, that would basically be a lot of companies. The lower class gets more money and automatically has a higher demand, which is mainly for everyday goods. The middle and upper classes always have unused purchasing power anyway. The supermarkets can raise their prices without hindrance and when the supermarkets raise their prices, everyone notices. This creates an expectation that prices will rise. This enables even more companies to increase their prices. If a company is already raising its prices anyway, it will always try to increase its profits through the price increase. A successful company behaves opportunistically. This scenario may be considered unrealistic because it is an income tax, and also because I have just said that when demand increases, companies first increase their production and that would also happen, but the difference to the other case is that the maximum profit per unit of goods has virtually fallen due to the higher corporation tax. You don't want that. An increase in production cannot necessarily compensate for this and is also not possible for all companies. The whole business may no longer be lucrative enough. If you increase corporation tax, then some companies will come to their knees, even though it is an income tax, because they simply don't want to bear the higher tax burden. If profits fall here, then it's better to go where the profits are higher, if that's possible. People will be made redundant. More people will need social security payments that have just been increased. There will be less production. There will be less supply, which will meet with high demand. Prices will rise and wealth will decrease. When making changes to tax law, you always have to consider what you could trigger. If you increase the income of the lower class, you create more demand. If you increase the incomes of the middle class, they will have more purchasing power, but people will not spend everything, they will also save more. If you increase the incomes of the upper class, you may not change anything except their bank balances. The more income a natural person has, the less they know what to do with it. You can also see this very clearly in the size of the financial market. The big investors play with their money to make it grow, but that's the only reason they do it."

  "In Hypos, corporate taxes were cut at the end of last year and some social benefits have been reduced this year. What do you think of that?"

  "I had read about it. I was expecting it. Maybe I'll explain it again in simplified and general terms. The social security system doesn't cost nearly what it seems to cost. That's money that goes directly into the economy. If you cut social security payments, then everything that the affected citizens can no longer buy will no longer be sold domestically. Depending on how you are positioned economically, you simply need fewer workers or you become more export-oriented in the long term. If you cut unemployment pay, you may create more unemployment. If you reduce consumption and increase criminality, you don't necessarily become more productive. The government of Hypos certainly knows that too. They do it anyway because they want to keep inflation low in their country in order to maintain their competitiveness within the free banks. I think that's stupid. Just as a frail and uneducated worker cannot become rich, a country that only has such workers cannot become rich either. The real limit of the social security system is production capacity, because if you have to import more because people are consuming a lot but not producing enough, then the currency loses value."

  "So you're saying you can easily increase social benefits if you still have production capacity, but why don't we do it if it's so easy?"

  "We are approaching full employment. Social security payments are adequate. Even more than announced today is not sensible at the moment."

  "Hypos is nowhere near full employment. So should the government increase social benefits to get more people into work?" the man asked, irritated.

  "It sounds counter-intuitive, doesn't it? You can't just think one step at a time. If you want to sell something, you need buyers. However, as I said, you can only do it as long as it doesn't hinder foreign trade." Marah paused in her explanation and sipped from her tea. "If you have an export, then there are several possibilities as to where it comes from. You offer high quality or unique goods, or you're cheap. It's easier if you don't have to be cheap, because if you're cheap, it's usually because the currency is weak and or wages are low. You can't keep increasing social security payments because work has to be worthwhile. You can't introduce a minimum wage that is too high either, because then you would no longer be cheap. You would ruin your export, so you can't increase social security payments, which means that a proportion of citizens have to live in poverty."

  "How would you solve the problem?"

  "What problem?"

  "The unemployment, the poverty...?"

  "That's not a problem for everyone. When it comes to Hypos in particular, they don't want that. They don't want a budget with a deficit. They don't want excessive social security costs. They don't want full employment, because that would make the workers too strong. If they can easily push through higher wages, then companies will raise prices if they can. They don't want to risk higher inflation under any circumstances. They want to maintain their competitiveness. Unemployment is wanted. Exploitation is wanted. Poverty is wanted. That is not a problem. It's part of the economic concept. Unemployment is relatively high and politicians complain about laziness, but if you look at the figures, you'll see that there aren't enough jobs for everyone who doesn't have one because the economy is so bad and consumption is so low. Nevertheless, you don't want to pay adequate social security payments, so that workers remain weak and continue to let themselves be exploited; so that parents are afraid that their children will have to go hungry, so that they remain motivated to keep their jobs or to find one of the jobs that don't exist. You can't educate yourself either. The long-term unemployed receive one S-Mark per month for education. That's enough for one thin book a year. You can't do any apprenticeship either, because the pay is so low that it's not even enough to cover the rent. At the same time, employers are complaining about a shortage of skilled workers. It would be funny if it wasn't so tragic. People are supposedly too lazy. Yet a large proportion of the supposedly unemployed are actually working, but still need top-up payments from the state since wages are so low, or can no longer work because there is not enough childcare available. Most politicians are not there for their citizens, but only for themselves and their friends. They would rather have small gains for a few now than spend decades working towards prosperity for all. They don't understand that it would be worthwhile for everyone if they pulled their underclass out of the mud."

  "However, it is undeniable that Hypos would lose competitiveness as an export country with higher wages."

  "You want to make your tree house bigger, but you only have one tree, so you saw pieces out of the trunk and hope the tree doesn't die and grows back fast enough that nobody notices. If someone does complain, you point to the shavings on the ground. If the deception works, you end up with a house on roots. If you don't want to increase social security payments, if you don't want to increase wages, if you don't want to lose your competitiveness, if you don't want to create money but still want to make your friends richer, then you eat the middle class and toss the bones to the lower class. There's not much else you can do."

  "What would you do?"

  "What I'm already doing. You don't have to increase social security payments and wages just because they are too low. You can also reduce taxes or the cost of living, then you retain your competitiveness and can still increase consumption and grow the economy. Abolition of the tax on basic foods, state food companies and or subsidies for private companies for cheaper food. More social housing, state building companies and or more state building contracts for cheaper housing. Free public transport for cheaper transportation. Not everything has the same signal effect. Many things take a long time. Building a sensible economy takes a long time, especially if you don't want to use your most important tool. Saving Hypos would take decades. I don't believe it will happen. I rather think that at some point people will realize that it will soon be nothing more than a house on roots, then they will burn it down in anger and a new tree will grow from the ashes."

  In Baele there was a constitutional right to work. If you wanted to, you could theoretically sue for a job. The constitution was a tome with countless pages. Very few people actually knew what was written in it. Even if you did know, you probably would still not sue, because the minimum wage was state law and the payment of such replacement positions was city law and exempt from the minimum wage and therefore lower than the minimum wage in most cities.

  .../ End Part