Category: Economics 10e: Ch 11

The kibbutzes in Israel have always been renowned as a system where everything is evenly shared. However, with the news that Israel’s oldest Kibbutz has agreed to essentially privatise itself and start paying people according to ability, it seems that the reach of capitalism and the market system is now almost total. What alternative systems are left to organise and allocate resources? With most forms of socialist organisation more or less discredited as an efficient way of allocating resources, it seems that globalised capitalism is all that is left. However, in the article from the Guardian below Timothy Garton Ash argues that capitalism may, by its very nature destroy itself.

Global capitalism now has no serious rivals. But it could destroy itself Guardian (22/2/07)
Israel’s oldest Kibbutz votes for privatisation Guardian (20/2/07)

Questions

1. Describe the changes that have taken place in the system used to allocate resources in the Degania kibbutz.
2. Assess the reasons why the Degania kibbutz has decided to pay members according to ability.
3. Discuss the validity of Timothy Garton Ash’s argument that global capitalism is in danger of destroying itself.

In the Guardian article linked to below, Ashley Seager argues that the only way to reduce the extent of social exclusion is to tax the main asset of a large proportion of the population; their house. He argues that the massive increases in land values that have taken place with rising house prices have increased divisions in society and that a land tax is required to address this. It may be interesting to consider this issue along with News Item 4 about global wealth distribution.

A land tax is 200 years overdue Guardian (8/1/07)

Questions

1. Explain what is meant by a land tax and suggest different ways that this could be levied.
2. Discuss the likely impact of a land tax, as proposed by Ashley Seager, on the major economic targets.
3. Analyse possible alternative policies to reduce the levels of exclusion in UK society.

A United Nations report on wealth distribution has found that the world’s richest 1% own 40% of the world’s wealth. Europe, the US and some Asia Pacific countries account for most of the world’s wealthiest with 30% of them living in the US. So is this a problem and should we, or indeed can we, do anything about this. The article below from the Guardian looks at these issues in more detail.

World’s richest 1% own 40% of all wealth, UN report discovers Guardian (6/12/06)

Questions

1. Examine whether the fact that the richest 10% in the world own 85% of all world assets is likely to cause problems for developing countries.
2. Suggest two policies that a developed country could use to narrow wealth distribution and evaluate the likely impact of these policies on the level of economic growth.
3. “”In some ways, wealth is more important to people in poorer countries than in richer countries.” Discuss the extent to which this assertion from the article is likely to be true.

The red top newspapers and others have recently been leading a campaign for the scrapping of inheritance tax. They argue that the growth in house prices means that increasing numbers are becoming subject to inheritance tax and that it is inherently unjustified as a tax. The article below by David Lipsey looks at these arguments and argues that this is a myth.

The ‘death trap’ menacing middle Britain is a myth Guardian (12/1/06)

Questions

1. Explain how inheritance tax is levied and the rates it is charged at. You can always use the HM Treasury budget site to find out more detail on the tax.
2. Assess the advantages and disadvantages of the scrapping of inheritance tax. What impact is the ending of a tax of this nature likely to have on the macroeconomic performance of the UK?
3. Discuss the assertion in the article that “substantial inheritance is the enemy of equality of opportunity”?