Lately, talk of inequality has dominated the media. Everybody is talking about it. Probably because of this year’s Davos Summit, but everyone seems to be keen on reminding us just how economically unbalanced the world is. Just how a few people own huge amounts of wealth, while the rest live on breadcrumbs.
Yesterday, it seems Mark Carney, governor of the Bank of England entered the fray, when he said:
“Without this risk sharing, the euro area finds itself in an odd position,”
While the context of Mr Carney’s statement may have been different to the subject of this post, and directed more to institutions on a country level, on a personal level, I don’t believe in the RobinHoodesque notion of ‘stealing’ from the rich to give to the poor. I don’t believe that such an approach works because it’s a dangerous idea that is not only open to abuse, but that can backfire. And before you jump on me and criticise my socialist credentials, let me qualify it.
I know inequality is real, and I know its crippling effects on people and communities across the world, especially in poor countries.
My contention is that if people work hard to earn their money, if they pay their taxes and do not accrue wealth using dodgy (or outright illegal means); if they do not use tax havens or other immoral ways of depriving governments of the much-needed lifeblood of corporation tax; if these business magnets are no more than scions bequeathed of inherited blood money (money tarnished with the proceeds of slavery and colonisation), if they have earned their way to the top, why should anybody sensible think it is a good idea to take it away from them?
I believe in fairness, I believe that corporations must pay their fair share in taxes. That the government must act in the interests of the people, not just working for the interests of corporations. I believe that those who are rich, or who have the means, must do more to help the disadvantaged – whose spending ironically often drives the profits. Doing all these things will likely lead to less inequality, less strife, and better social harmony.
And here’s why:
If you look at recent events, not only comments made at Davos, what you find is that it’s not so much that the money isn’t there. Instead the problem is that the money which is made on the back of extremely liberal national and international tax regimes – is stashed away in enclaves where cash-strapped governments be they in Africa or elsewhere cannot get to it.
As a result the government cannot sufficiently invest in services, cannot create jobs or help those at the bottom of the pyramid improve their lives. This increases inequality, including spurning side effects such as crime and social unrest.
So then, where’s a good place to start, when addressing this problem of inequality?:-
1. Change the laws to ensure that companies pay a fair share in taxes from the revenues they generate.
Essentially, it also means being firm with tax havens to reveal the sources of blood money or any untaxed funds.
2. Crack down on corruption, and stop illicit financial outflows.
3. Streamline services (a streamlined small government that is cheaper and efficient to run is preferrable to an inefficient large and bloated government that is expensive to run).
4. Stop unnecessary privatisation. But encourage responsible Investment
Everybody knows that employment tax revenues are not a sufficient revenue source. That’s why there are so many governments across the world that have budget deficits, simply because all the tax companies pay plus the tax their employees pay – IS NOT ENOUGH to sustain all the functions of government. From Britain, the US, France, Ireland, Italy and Greece to South Africa, Malawi, Ethiopia and Mozambique, and many others, budget deficits and debt are commonplace. As a consequence most of these countries fail to adequately invest in healthcare, in poverty alleviation, in education, in job creation for young people, in women’s health and advancement…because there isn’t enough money coming into the government coffers for them to spend on these things.
Simply put, the state has no full-time job and is only employed part-time. So how the hell can it spend, or raise its family properly?
5. Instead of privatisation, countries should enter into joint venture partnerships with businesses, for win-win deals because these will not only provide tax revenues from employment tax, and corporation tax, but will additionally earn the government dividends (which can be significantly higher than corporation tax and employment tax combined).
It also means deals that involve raw materials should principally benefit the people of the country in which the raw material is first (NOTE I’m not using ‘politicians’ or a country’s leaders here. Contracts must benefit the people not a handful of politicians). As I like to put it, when was the last time an African mining company was given a 70% mining/ oil drilling stake in Europe or the Americas?
Providing Aid is not good enough, emphasis on ‘Trade not Aid’ (other than Fairtrade or better) is becoming cliché. Further, I think the advantages of possessing a first degree are overstated. In my experience they rarely equip students with entrepreneurial skills.
What is required to begin denting inequality is to train young people to be ‘go-getters’. And that is a different ball game altogether over and above merely providing a quality education.
7. Finally invest in services (hospitals, transport, policing and security, infrastructure, the youth and women, etc) including investing in things like ecofriendly energy. Because if everybody paid their dues, such investment would create jobs. And they’d be enough funds for people to receive living wages.