Thanks for sharing the key messages of the World Economic Forum (WEF)’s 2014 report. However, I do not see any reason to rejoice: “at long last the business leaders are talking about inequality”. Many conservative think-tanks and international organisations are also on the band-wagon. In my judgement, this is nothing but agenda capture with a view to deflecting the attention from the underlying causes and solutions to them.
It’s ok to talk about inequality, but you talk about progressive taxation or against tax haven or tax competition, there will be scare-mongering – “you cannot tax the wealth creators”; your “doing business” ranking will suffer. You talk about raising minimum wages or improving labour standards, your “doing business” ranking will drop further. The rich and corporations are wealth creators; so by implications, the ordinary souls are wealth destroyers – slam them with consumption tax!
It’s ok to talk about inequality, but universal social protection or universalisation of education and health is a taboo. It’s fiscally irresponsible; but don't put building up high-tech arms and military establishment through the same fiscal sustainability.
Band aid solutions, such as philanthropy or so-called corporate social responsibility (CSR), favoured by the conservatives or the big business houses, are unlikely to be able to stop or slow down the rising inequality.
These are basically veils to cover up the big businesses’ unwillingness to discharge their fundamental CSR, i.e., paying tax. Philanthropy and CSR to hide their tax dodging through tax havens as well as obnoxious executive pays.
As I highlighted in my last posting, ESCAP’s 2013 Economic and Social Survey found the Gini coefficient negatively correlating with both tax-GDP ratio and public social expenditure spending. The year’s Survey advocated progressive taxation and proposed a “regional tax forum” under the auspices of UN-ESCAP to prevent tax competition and deal with profit shifting and base erosion. It also proposed “special tax courts” to deal expeditiously with tax frauds, a proposal made originally in the 1960 issue of the Survey.
UN-ESCAP has been consistent in its focus on inequality and recommendations to deal with the underlying causes. For example, the 1950 issue of the Survey noted (pp. 180-81), “[s]o long as the people are unable to share sufficiently the fruits of economic progress there is apt to be little incentive for them to exert their maximum effort… As the great majority of the population in the region is employed on the land and the bulk of the national income is derived from agricultural activities, any attempt to bring about a more equitable distribution of wealth would naturally start with agrarian structure and land tenure… Another development towards a more equitable distribution of wealth and income is in the fields of agrarian credit and interest. In most parts of the region, more than half of the farming population (sometimes as much as three-fourths or even more than nine-tenths) are heavily in debt and usurious rates of interest (ranging from around 20 to over 200 per cent per annum— usually 30 to 50 per cent) are charged by the money-lenders. Not only is a considerable share of the current income of the farming population given to the creditors in the form of interest, but failure to pay interest and principal has constituted a major cause for the increasing alienation of agricultural lands from the cultivators to the non-agriculturists”
While ESCAP had raised the critical role of credit and interest rates in addressing the issue of poverty and inequality more than half a century ago, it has only been since the 1990s that some aspects of the issue have attracted the attention of policymakers owing to the popularity of the microcredit movement. However, the question of exorbitantly high interest rates and perpetual debt trap still remains unresolved. As matter of fact, the problems have become more entrenched with financial sector deregulation since the 1980s as part of structural adjustment programmes which required States to stop subsidising rural and agricultural credit through specialised banks and institutions, while microfinance institutions continue to charge usurious interest rates.
Noting growing social discontent over rising inequality, the 1970 issue of the Survey observed, “[t]he major policy issue which confronts the developing ECAFE countries in the Second Development Decade is how to bring about a better blend between economic growth and social justice” (p.1).
In the 1979 Survey, the discussion was widened concerning inequality beyond income and wealth at the country level to cover many other dimensions, including inequalities between countries, especially developed and developing countries. “In the case of distributive equity, …some documents [national development plans] emphasize the reduction of disparities in the interpersonal distribution of income and wealth; others accent the reduction of international, interregional and rural-urban inequalities.
Still others stress the equitable distribution of land (by means of land reform) or food (by means of subsidies) or services, namely, health, education, water supply, transport and sanitation. The central focus of all discussions is that in the 1980s the world’s poor, the ‘target groups’, must be given a fair share of the growing stock of assets and the flow of goods and services” (p. 96).
So, back to the basic question, why haven’t the underlying causes of growing inequality in all dimensions been addressed for more than half a century? Why the world’s poor didn’t receive a fair share of the growing stock of assets and the flow of goods and services, especially since the onslaught of structural adjustment and globalisation?
Anisuzzaman Chowdhury, PhD
United Nations ESCAP
Rajdamnern Nok Avenue
Bangkok 10200, Thailand
Tel: (662) 288-1486;