Contributed by Drieu Godefridi © Mar 2020

In Europe, the partial collapse of economic activity – of which the financial crisis is only a consequence, in a reverse sequence but clearly more devastating than the chronology of 2008 – will immediately lead to a collapse of tax revenues .

We tend to forget it, but the tax, by which so many of our contemporaries live, supposes the creation of value. If no value is created, the tax is reduced to nothing.

For example, VAT is a consumption tax; as consumption is reduced by 50%, VAT receipts will be reduced by the same amount.

Another example, corporate tax, which is not a tax on the activity , but the earnings . In the foreseeable future, there will hardly be any profit to be taxed, only losses. Even when the profits are timidly low, the tax losses carried forward will erase them, probably for years.

Our states will see their revenue collapse, while the structure of their spending has not changed an iota (when it has not worsened). Which solution ? in economic theory as in legal technique, there are only three: drastically reducing expenses, borrowing, launching programs of confiscation of private property. In reality, as we will see, the drastic reduction in spending will happen sooner or later.

In fact, on the European continent, most of the states were already financially drained before the crisis, and their “credit” remaining on the international financial markets was weak.

Consequently, the “external” headlong rush which would consist in contracting new loans to compensate for the collapse of tax revenue is, in Europe, a path not only dead end, but which does not exist.

Indeed, States which, often for decades (Italy, Belgium, more recently France), have contracted loans to repay the only interest on their debt – never the capital – will struggle to convince the lenders in the while their tax revenues collapse.

The alternative is the “internal” headlong rush, consisting in a State launching into massive confiscations on national territory, using different pretexts (necessity, crisis, solidarity) dressed in legal categories (nationalization, crisis tax) .

Apart from the moral judgment that can be put on these processes, and the procession of arbitrary violence that their implementation involves everywhere and always, it must be emphasized that the path of confiscation – actively encouraged for years by neo-Marxist economists such that Thomas Piketty [1] – is not chimerical; examples taken from history (French Revolution [2] ) and current events (Venezuela) attest to this.

The fact remains that this process is exhausted by its use: one confiscates only once. Behind, there is nothing more to confiscate.

In the short or medium term, out of necessity and in the absence of a structural alternative, European states will drastically reduce their spending.

Drieu Godefridi

[1] Piketty, naive ideologue of egalitarianism – About “Capital and ideology”, -of-capital-and-ideology / article-opinion-1205601.html? cookie_check = 1584865738
[2] F. Aftalion,The Economy of the French Revolution, 2007.

Drieu Godefridi, philosopher and jurist, is author of “The Green Reich” among other books.