'It's Going to Blow': Germans Propose Tax Reforms to Prevent Economic Disaster

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A group of German financial experts and entrepreneurs have proposed a radical new way to reform the economic and political system in order to avoid what they believe to be its impending collapse.

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In their new book, German financial experts Marc Friedrich and Matthias Weik propose a radical new economic model, which they say will help society to cope with the changes wrought by increasing digitalization.

Friedrich told Sputnik Deutschland that action taken to arrest the 2008 financial crisis, such as quantitative easing, has only papered over the cracks in the global financial system.

"Things are going in the wrong direction. Unfortunately, nothing has changed since the 2008 financial crisis. On the contrary, problems were only covered over with a lot of cheap money. Don't forget that the European Central Bank (ECB) has pumped 1.75 trillion euros into the system to buy bonds from bankrupt companies and to support insolvent countries, in order to keep the whole money carousel running.  [However,] that has only bought time," Friedrich told Sputnik.

Their idea builds on proposals for a universal basic income that have been discussed with increasing regularity in recent years. In a referendum last summer, the Swiss rejected a referendum proposal to give every citizen a basic income of 2500 Swiss francs ($2,478). 

However, the idea remains of interest to people seeking a way to alleviate social inequality. In January 2017, the Finnish government began a two-year pilot scheme which pays 2,000 unemployed Finns an unconditional basic income of 560 euros ($680).

Friedrich and Weik joined forces with Goetz Werner, founder of the drugstore chain DM who supports the implementation of a basic income, to write their book, called "Or else it's going to blow: Why we have to radically rethink economics and politics."  

"This common purpose led us to write this political wake-up call, this book. We understand that there will be no change from above, the change must come from below, from the people, otherwise it's going to blow. That's why the title is, 'or else it's going to blow,'" Friedrich explained.

The authors believe that the implementation of a universal basic income is unavoidable, given the scale of job losses that will continue to be caused by automation and increasing data exchange, what some observers refer to as the "fourth industrial revolution." 

"According to the UN and World Bank, Industry 4.0 will lead to 50-75 percent of jobs being lost. Then we have to think, what are we going to do with these millions of people who don't have a job? We have to distribute wealth more equitably. That is, without an unconditional basic income there won't be any digitalization at all, it isn't possible otherwise," Friedrich told Sputnik.

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In their book, the authors try to show how the unconditional basic income could be financed in Germany. This includes a 'tax revolution' that would replace the current system of social welfare payments.

"We all have already a basic income, because each of us receives a tax deduction of almost 8820 euros per year, which is 735 euros per month," Friedrich said.

"In parallel, we will increase the tax on consumption, value-added tax … from its current level of 19 percent to 30, 40 or 50 percent. That will cover it because on the whole prices will stay the same, other taxes will merely be replaced with this consumption tax and thus finance it." 

"Ultimately, we believe that the state budget will develop positively, because we all have to consume," Friedrich said.

"Germany would become a tax haven and there would be no longer any possibility for big corporations and very rich people to avoid or evade paying taxes, because taxes will be paid transparently at the cash desk."

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The authors believe that a "democratically elected fourth pillar of the state" should be elected to decide monetary policy, instead of the "not really politically independent Bundesbank or the ECB."

"We citizens should decide who will be the boss of this 'monetary authority,' this bank. For example, former Goldman Sachs banker Mr. Draghi was simply appointed. It can't be right that we can vote for every mayor and council but when it comes to our money, people are simply appointed without us being asked. This is an absurdity and has nothing to do with democracy," Friedrich said.

The reluctance of governing elites to change the economic system was motivation for the authors to write their book, in an attempt to engender change from below.

"We have to initiate this from below. Neither Macron nor Merkel will initiate the necessary profound structural reforms. Change comes from the people and if we are lucky, it is peaceful like in Leipzig in 1989 and if we are unlucky it is like Paris in 1789," Friedrich said.

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