Inequality and poverty, “Abolish the super-rich, soberly and reasonably”: it is not naive to fight and contain extreme incomes and wealth

ROMA – The introduction:

Luke Hildyard is the director ofHigh Pay Centre, a London-based research center for policy analysis on issues such as pay, work and economic inequality. He writes for the Guardian, the Times, the Independent, and is a regular point of reference on issues of inequality, often called upon by BBC News, CNN and other important television channels. The site of Let’s get clear published his article which summarizes the concepts expressed in his book “Enough: Why it’s Time to Abolish the Super Rich”. Sbilanciamoci – it should be remembered – since 1999 has brought together 51 organizations and networks of Italian civil society engaged in the issues of public spending and economic policy alternatives, the inclusion and reception of migrants, ethical finance, international cooperation, fair trade and solidarity economy.

So writes Luke Hildyard.

Why is it that those who, with the aim of combating extreme concentrations of income and wealth, declare themselves in favor of measures such as wealth taxes and super-wage caps are seen as naive or idealistic, while those who criticize those policies are considered (and is considered) sober and reasonable?

This is not “left-wing” reasoning. In my recent book Enough: Why it’s time to Abolish the Super Rich I maintain that exactly the opposite is true. A major and transformative policy program to redistribute and redirect fortunes from the super-rich to the population at large would be an obvious, effective and immediate way to increase the prosperity of large numbers of people. This is not an ideologically left-wing argument.

It would only be a logical answer. It is the logical answer that arises from any pragmatic evaluation of the ways and means potentially capable of improving the general standard of living; an issue that should concern the entire political spectrum, including voters of the center and right. The excess and undeserved wealth held by those at the top represents an immense and readily available resource that can be used much more efficiently to achieve enormous socio-economic improvements. Policy makers who show no curiosity about how this could be achieved demonstrate a lack of scrupulousness.

The re-balancing of well-being. The potential impact of a re-balancing in the distribution of income and wealth on well-being is demonstrated by both evidence and experience. Throughout history, governments have raised living standards by introducing policies that have channeled income and wealth, previously the preserve of the richest in society, to the rest of the population.

The different ways to redistribute wealth. This can happen through direct redistribution, such as that resulting from welfare programs and public services financed by progressive taxation, or through provisions such as minimum wage laws or labor standards that allow workers, generally the lowest paid, to earn income higher thanks to revenues that would otherwise have benefited the richest entrepreneurs and managers.

The policies of Europe. These policies are typically associated with continental Europe, where taxes tend to be higher and regulations are stricter. This implies that public services and infrastructure are of better quality, and inequality is more limited. However, although to a different extent, they are adopted in all advanced economies and there is a widespread belief that they have raised the standard of living, in particular that of families who needed them most because their incomes were medium or low.

That 1% that owns everything. Today, the share of total income and wealth held by the richest 1% of the population is at historically very high levels. According to World Inequality Database, In the UK, where I live, the share of total income going to the top 1% of the population is around double its lowest point (around 6%) in the early 1980s, and higher than at any other time since the second half of the 20th century. Furthermore, by some estimates, the richest 1% of the population holds almost a quarter of all wealth. In the United States, the numbers are even more extreme. The richest 1% in terms of income holds almost a fifth of total income, while the richest 1% in terms of wealth owns about a third of all wealth. In both cases these are the highest figures since at least the Second World War. These trends are found, to varying degrees, in most advanced economies.

Furthermore, the environmental, demographic and political challenges. They make it more difficult to achieve higher levels of total income and wealth. In Europe, policymakers are struggling, especially after the Covid pandemic and the war in Ukraine, to implement policies that can support economic growth. In the United States, growth levels have been higher, but when the bottom 50 percent of the population barely receives 10 cents for every dollar of income generated in the country, growth is unlikely to have any significant effect on the standard of living of the entire population. population. According to a recent analysis by Financial Times while the richest Americans are richer than their counterparts in other rich countries, the income of the poorest 10% of American families is lower than that of the poorest 10% in Slovenia, let alone countries like France or Germany.

What could be done. To address this deplorable state of affairs and ensure that the wealth generated in different countries is distributed more equitably and efficiently, we must both redistribute the wealth of those at the top and – and prevent them from accumulating such wealth in the first place. enormous fortunes. This could involve measures such as a global wealth tax, which would allow some of the wealth of the super-rich to be transferred to the general population either directly or through social security spending or, de facto, by funding better public services. We could also put a cap on managers’ salaries, for example by anchoring them to a multiple of the average worker’s salary or, alternatively, through mandatory profit-sharing agreements, which guarantee workers a share of the profits generated by their work. In this way, some of the money that now goes to wealthy directors and shareholders would be channeled to ordinary workers.

The risks appear less serious than we think. The economic risks that these policies would generate are greatly exaggerated. There is clearly a danger that the rich will try to escape measures that harm them financially. But the evidence suggests that both the propensity of the super-rich to relocate for financial reasons and the extent to which society would suffer if they did not are far lower than what many say they fear.

It is not said that the rich run away, on the contrary. From the interviews conducted by London School of Economics with some of the UK’s wealthiest residents showing virtually no appetite to leave the country in the event of a tax rise. All this is not surprising. Being rich means, simply, having more money and being able to afford a more expensive lifestyle, which is why the super-rich tend to concentrate in the most expensive places on the planet rather than in those where the cost of living is lower.

Only a small number of people would become “poorer”. Furthermore, policies such as those discussed above would primarily target incomes and wealth above the threshold that delineates the top 1%. As a result, only a small number of people would become poorer, while still remaining objectively very rich. Within this group, a very large percentage benefits from inherited money that they never earned, or from speculative income, whether speculative or from jobs does not require any particular or unique qualities: only 4% of S&P 500 CEOs are founders of their company, while the rest are made up of managers chosen for their skills, but the conditions of origin, social relationships and subjective preferences of those who assign those roles also inevitably play a role. Compared to true innovators, the argument is that their creativity and productivity would be discouraged. But that’s a rather fatuous argument, because by any objective standard they would still be incredibly well compensated.

Citizenship and taxation. There are also many things that countries could do both individually and collectively to mitigate flight risks abroad. At the individual level, one could link citizenship to tax contributions (as the United States already does) or introduce exit taxes that would make it much more difficult for the super-rich to escape their fair share of required contributions. Collectively, governments could engage in coordinated actions to combat the extreme concentration of income and wealth. In this regard, promising signs are emerging, such as the proposal, put forward at the G20 meeting in July by the Brazilian government, of a joint declaration in favor of wealth taxation; the proposal is supported, among others, by the French government and the director of the IMF. The G20 initiative appears more timely (and urgent) considering that the shares of total income and wealth belonging to the top 1% are also historically enormous (and this is very evident).

Inequalities cannot be ignored. In this context, politicians who promise to raise the population’s living standards through greater economic growth, while ignoring the problem of inequality, appear, at best, naive utopians and, at worst, obstructionists and wreckers acting on behalf of a small elite of rich people against the interests of the population as a whole.

The role of the reasonable and sober. Consequently, sober and reasonable realists are those who recognize that distribution matters and call for addressing the problem of the super-rich. They are entrusted with the most well-founded hope of achieving immediate and transformative improvements in the population’s standard of living. If this is not understood by everyone, our societies will not be able to fully exploit the potential they have to change the lives of many for the better. I cultivate the hope that my book can make a small contribution in this direction.