Monday, November 12, 2007

Globalisation and inequality

Prof Kenneth Rogoff (Economics and Public Policy at Harvard University) on

...growth and inequality:
Are massive income and wealth differences an inevitable outcome of fast growth? By and large, the answer from history is “yes.” China, whose growth performance since 1970 has now broken every record, is well on its way to having the world’s most unequal income distribution. Indeed, China has passed the US and is nearing Latin American levels of inequality.

...and on relative diferences in income:
How much do America’s highest income earners make compared to the world’s billion poorest individuals? Well, if the top nine donated their earnings, it would be the equivalent of about three months income for the bottom billion.

...with implications for tax policy:
Rather than punitively taxing wealth, globalization strengthens the case for shifting to a flat tax on income (or better yet consumption) with a moderately high exemption. Aside from the usual efficiency arguments, it is just going to become increasingly difficult and costly to maintain complex and idiosyncratic national tax arrangements. Unfortunately, movements towards fundamental tax reform are on the back burner in most countries.

With absolute poverty on the retreat (with the notable exception of Sub-Saharan Africa), massive global inequality is likely to become the next big obstacle.

See for the full story.

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