Recovery a la Schumpeter

The genius of [Joseph] Schumpeter's plan, which reflected the priorities he had set out in his theoretical treatise The Crisis of the Tax State, was that while the ownership of business enterprises, farms and other property would be reshuffled, it would remain in private hands. Taxing existing property rather than future income had the further advantage of not discouraging investors from making fresh capital available for investment or businessmen from expanding production. Schumpeter also proposed creating a central bank that... was independent of the Treasury. At the same time, he favoured stabilising the krone at its current value rather than its pre-war parity. These measures would bolster the confidence of foreign investors, on whom Schumpeter pinned his hopes...

...Schumpeter's recovery program required two conditions in order to work: peace terms that did not impose insuperable obstacles to a re-renewal of trade, and a sustained effort to raise enough taxes to cover the government's spending.

Eliminating or even dramatically reducing the government's deficit would require heroic measures, he admitted. He favoured sin taxes on conspicuous consumption of such proletarian indulgences as beer and tobacco, as well as sales taxes on 'luxury goods, luxury entertainment, luxury textiles, luxury stores, servants, luxury clothing'. It was not a plan designed to win friends on either the right or the left.


From: 'Grand Pursuit: The Story of Economic Genius'