Today’s debates remind us of the obvious: if we want to quickly relieve the poorest out of their misery and reduce inequalities, which are on the rise today on a global scale, the only way is to take money from the very wealthy (and not only from the impoverished).
It is what every economist today is proposing, while forgetting that the world cannot be reduced to an apple pie to be distributed or modified on a whim: we live in a world where the freedom of movement of capital has become the rule, and this is applicable to almost the entire planet, the wealthy have capital and not just assets of high value; they are also the owners of nomadic wealth, as opposed to sedentary wealth. Riches that they can export on a whim, if they wish to escape unfavorable tax rates: the current debates on the notion of “a new social contract,” or “a new distribution of global capital” have ignored this evidence: even if it is regrettable, capital also votes.
Furthermore, in many countries, because we’ve failed to tax the wealthy fairly (out of fear of seeing them leave or because they have already left), we mostly take from those who have little assets to give to those who have none at all.
The conclusion is terrible: in a very real sense, reducing inequalities is incompatible with the free movement of capital. This would lead us to think that it is a good idea to rethink the freedom of circulation of capital, close our borders and forbid companies from managing their cash flows at will or individuals from freely obtaining foreign currency exchanges for their businesses, travels, purchases and holidays. Is it possible? Perhaps.
But without this freedom, or at least a part of it, we cannot hope to sustainably attract foreign investment, or job creation from these investments. And without this freedom, we can only close our borders to goods, services, ideas and people. Every example in history has demonstrated this. And even countries, for example China, where investors seem to be rushing despite capital controls, are not counterexamples: after making profits in such a huge market, capital uses all available means to take flight.
So? Should we give up on reducing inequalities? Or should we be content, as we are now, everywhere in the world, in France as elsewhere, to take from the middle class their means of living in order to provide the poorest with the means to survive? Thus provoking the revolution of the middle class, without satisfying the most impoverished, while the richest applaud, somewhere far away enjoying their fortunes.
It is the untold story in the backdrop of today’s debates, which most economists, right and left, have carefully masked. They do so to defend different causes. However, in reality, these causes are perfectly aligned.
What can be done to reduce the obscene injustices of the world? Ideally, it would be a necessity to establish a global rule of law, achieved through democratic consensus, which would make it possible to set a cap—minimum and maximum—on income and wealth of all kinds. This policy is obviously unattainable and not necessarily desirable; but this is what is implied by those who speak of a massive tax on capital, or a cap on income.
There is another possible action. It is more difficult, less demagogic and thus generates less media attention. But it is infinitely more efficient. It consists of setting equal level of taxation, at the highest tiers, on capital in areas where there is free movement of goods and people; tax capital invested in stocks, as is already the case for real estate capital, unless an amount equivalent to this tax is sustainably reinvested in companies with a strong social and environmental agenda (exemption); minimize extreme poverty by raising the minimum wage for all who depend on a third party for their livelihood; and particularly, create the conditions for everyone to succeed in life. In short, do everything so that all can become rich, and not so that the few who are cease to be so…
This supposes training, at an equal level for all; access to credit, equally across the board and at equal levels for all; respect, assistance, and though it may be the most difficult, access to influential networks, across the board and at an equal level for all.
When analyzed this way, we understand that the fight against inequality is a far too serious matter to be left only to economists or tax specialists. Moreover, it is also a matter for sociologists, jurists and pedagogues. And, especially, it is a driver of the most important careers of all, along with parenthood, and which, too, is not learned anywhere: helping others gain self-confidence
j@attali.com