"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."

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"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 counterproductive, doesn't it? You can't just think one step at a time. If you want to sell something, you need buyers. But like I said, you can only do it as long as it doesn't hinder foreign trade." Marah paused in her explanation and sipped her tea again. "If you have an export, then there are several possibilities where it comes from. You offer high quality or desirable 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. Nor can you introduce a minimum wage that is too high or increase the minimum wage too much, because then you would no longer be cheap. You would ruin your export business, so you can't increase social security payments."

"How would you solve the problem?"

"What problem?"

"Um... The unemployment, the poverty...?"

"It depends on what the rest of the situation is like, but when it comes to Hypos specifically, they don't want that. They don't want a budget with a loss. They don't want social security payments that are too high. They don't want full employment either, because it would make the workers too powerful. If they can easily push through higher wages, then companies will raise prices if they can. They don't want a higher inflation under any circumstances. They want to maintain their competitiveness. Unemployment is desired. Exploitation is desired. Poverty is desired. That is not a problem. That is intentional. There are not enough jobs for all those who don't have any. Nevertheless, they don't want to pay social security payments that are high enough to live from, so that the rest will let themselves continue to be exploited. Children get the least, so that parents remain motivated to keep their jobs or find the jobs that don't even exist. You can't educate yourself further either. Their unemployment pay for the long-term unemployed includes one S-Mark for education per month. That's a thin book per year. You can't do any training either, because you get paid so little that it's not even enough to pay the rent. There aren't enough daycare places either, which is why parents who can or have to afford it only work part-time or not at all. At the same time with everything else, employers are complaining about a shortage of skilled workers. Most governments are not there for their citizens, but only for themselves and their friends. They rather have the small gains for a few now than work for decades towards prosperity for all. They don't understand that it would be worthwhile for everyone if they pulled their underclass out of the mud."

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 jobs was considered city law according to the constitution and only as a temporary measure. The constitution was pretty old and in many respects unchangeable.

.../ End Part