Myron J. Frankman myron.frankman@mcgill mfrankman.googlepages/index.htm

1. Justice, Sustainability, Progressive Taxation and Redistribution:The Case for a World-Wide Basic Income12th BIEN Congress June 21,2008 - Dublin Myron J. Frankman myron.frankman@mcgill.ca http://mfrankman.googlepages.com/index.htm

2. Outline • Meade, Free Trade & Distribution • How Much Inequality? • Does Inequality Matter? • Discourse change key • World-Wide Institutions, among which: • Global Taxation • Global Redistribution, including BI

3. James E. Meade (1907-1995) • Nobel Prize, Economics 1977. Shared with Bertil Ohlin for "pathbreaking contribution to the theory of international trade and international capital movements." • Listed first among the Life Members of BIEN

4. Ohlin & H-O-S • Heckscher-Ohlin-Samuelson (H-O-S) • Factor Price Equalization Hypothesis: • Given the necessary assumptions, one can demonstrate that free trade leads to absolute equalization of factor prices in both countries in a 2 country model (e.g., wages in the North and South).

5. Samuelson on Trade & Inequality • In the face of these hard facts [i.e., reality] it would be rash to consider the existing distribution of population to be optimal in any sense, or to regard free trade as a panacea for the present geographical inequalities. • -- Paul Samuelson (1949) ‘International Factor-Price Equalisation Once Again,” Economic Journal 59, June, p. 197. • [This is the last sentence in the article]

6. Meade & International Redistribution • . . . we should strive . . . to arrange for direct international transfers of income from those to whom income means little to those to whom income means much.’ [Emphasis added] • James E. Meade, A Geometry of International Trade (1952). • [This is the last clause in the book]

7. Meade on Keynes His great appeal was that we should treat the whole economic problem as a unity and be prepared to present to the public a total solution which really did present a prospect of a radical solution of the problems of unemployment and of raising standards of living. • Similarly, progressive redistribution, including a BI, should be a part of a total world-wide approach • Meade’s judgment also applies to his own work

8. Meade on Building a Post-War Order • (1940) The Economic Basis of a Durable Peace • Advocated, among other things: • International Treasury • Single currency for liberal economies

9. How Great is Inequality? Is it Growing or Declining?

10. How Large is Income Inequality? ‘True’ World Gini • World Gini according to Branko Milanovic • 198819932002 • PPP 0.63 0.66 0.70 • Unadjusted 0.78 0.81 • Sources: • Branko Milanovic, “True World Income Distribution, 1988 and 1993: First Calculations Based on Household Surveys Alone”, The Economic Journal 112 (2002) • Milanovic (2007) “An even higher global inequality than previously thought” http://ideas.repec.org/p/pra/mprapa/6676.html

11. Branko Milanovic, “Global income inequalities” (PowerPoint) Council on Foreign Relations, New York, December 13, 2005. [PPP=purchasing power parity price adjustment]

12. World: Top 10/Bottom 10 • World Citizen Distribution • Using revised PPP estimates for 2002: Average income of top decile/bottom decile changes from 52/1 to 91/1 • Milanovic (2007) “An even higher global inequality . . .”

13. How Much & Trend? • Implications for the [new] estimates of global poverty and inequality are enormous. . . .[they] show global inequality to be significantly greater than even the most pessimistic authors had thought. • -- Milanovic (Feb 11, 2008) “Developing Countries Worse Off Than Once Thought.” Website of Carnegie Endowment for International Peace

14. Wealth: Million & Billionaires (2000) • Wealth ($ million) Number above • 1 13 568 229 • 10 451 809 • 100 15 010 • 1000 499 Source: Davies, Sandstrom, Shorrocks & Wolff (2006) “The World Distribution of Household Wealth,” p. 31. http://siteresources.worldbank.org/INTDECINEQ/Resources/WorldHouseholdWealth.pdf

15. Wealth: “we have estimated that for the world as a whole the share of the top 10 per cent was 85 per cent in the year 2000 and the Gini equalled 0.892 using official exchange rates . . . While wealth (and income) concentration is somewhat less when the estimates are done on a PPP basis, we have argued that the large share of wealth that is owned by people who can readily travel and invest globally means that converting at official exchange rates is preferable for many purposes when one is studying the distribution of wealth, rather than income distribution or poverty.” • Davies, Sandstrom, Shorrocks & Wolff (2006) “The World Distribution of Household Wealth”

16. Inequality: Does it Matter • Extreme wealth -- Compromises political democracy -- Compromises public truth -- Compromises individual honesty -- Compromises community and solidarity -- Compromises livelihood -- Compromises sustainability -- Compromises domestic tranquility -- Compromises quality -- Destroys societal restraints

17. What Should I Do? • Susan George’s answer to this question: • “. . . study the rich and powerful, not the poor and powerless.” • How the Other Half Dies: The Real Reasons for World Hunger (1976) p. 289

18. The New Class War: the Rich vs. the Super Rich? The New Yorker April 21, 2008, p.56

19. Hard Times2008New York TimesJune 1, 2008

20. Flat World, Tilted Playing Field • . . . The members of the superclass are the most powerful people on earth and when their interests align there are few contemporary forces comparable to them. . . . They have shaped the system to dovetail with their interests . . .[& quoting Stiglitz] ‘You don’t need to have a conspiracy once you have set the rules’. • -- David Rothkopf (2008) Superclass: The Global Power Elite and the World They Are Making, p. 299. [Formerly Editor & Publisher of CEO Magazine]

21. Democracy • We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both. • -- US Supreme Court Justice Louis Brandeis (1856-1941)

22. Inequality & the Environment:Hervé Kempf (2007)Comment les riches détruisent la planète • Globalizes Veblen’s Conspicuous Consumption & Emulation: “Satiation doesn’t exist in sumptuary competition.” (p. 80) • Lifestyles of the rich and famous cascade down to influence each successive lower income level • See also Robert H. Frank (1995) The Winner Take All Society and (1999) Luxury Fever: Why Money Fails to Satisfy in an Era of Excess

23. Inequality & Ecological Footprint • “We have thus demonstrated a striking correlation between economic inequality and biodiversity loss. . . . our findings cohere previous work showing links between inequality and human health . . .” • G. Mikkelson, A. Gonzalez & G. Peterson (2007) “Economic inequality predicts biodiversity loss.” Public Library of Science (PLoS) ONE 2:e444

24. Discourse Change!

25. Societal choice: Entitlement to income received • Setting the bar between • Zero (taxation is theft) • and 100% (property is theft) • During the past quarter century, income & profit tax rates have been reduced substantially

26. Spatial Reach of Citizenship Rights and Obligations • From Local to Global? • Shaping true world citizen with rights and obligations that span national boundaries: • Universality . . . means looking for and trying to uphold a single standard for human behavior when it comes to such matters as foreign and social policy • Edward W. Said (1994) Representations of the Intellectual, p. xiv.

27. World Economy requires a World Polity • We are bound to move toward global community and global democracy, and once we do, many of the functions of today’s national governments --including dealing with extreme cases of inequality and poverty --will be taken over by new global institutions. • Milanovic, World’s Apart: Measuring International and Global Inequality, p. 162. [Emphasis added]

28. World Public Finance Possible Uses of Revenues • Financing World Order • World Peace and Justice (a.k.a. Development) Global institutions, Public Health, Global public goods, Refugees • Well beyond the 0.7% ODA target • Reducing inequality Planet-wide citizen’s income as a major element in poverty elimination • Reducing our ecological footprint

29. World Public Finance: Possible Sources of Revenues • Progressive Taxes on income and wealth (personal & corporate) • Taxes on Nations (related to per capita income, etc) • Taxes on transactions • Taxes on foreign exchange transactions (Tobin Tax) • Taxes on negative externalities (pollution, armaments, carbon emissions) • License fees on geostationary orbit • Royalties from mining deep-sea bed resources

30. To realize the “prospect of a radical solution” • There is no question that the environmental movement is critical to our survival. Our house is literally burning, and it is logical that environmentalists expect the social justice movement to get on the environmental bus. But it is the other way around; the only way we are going to put out the fire is to get on the social justice bus and heal our wounds, because in the end, there is only one bus. • --Paul Hawken (2007) Blessed Unrest, p. 190.

31. Franklin Roosevelt’s 4 Freedoms (1941) • 1. freedom of speech and expression--everywhere in the world. • 2. freedom of every person to worship God in his own way--everywhere in the world. • 3. freedom from want--which, translated into universal terms, means economic understandings which will secure to every nation a healthy peacetime life for its inhabitants--everywhere in the world. • 4. freedom from fear--which, translated into world terms, means a world-wide reduction of armaments to such a point and in such a thorough fashion that no nation will be in a position to commit an act of physical aggression against any neighbor--anywhere in the world. • http://www.americanrhetoric.com/speeches/fdrthefourfreedoms.htm

32. See also • World Bank, Inequality Around the World • http://go.worldbank.org/300LMVGD10 • Papers from the Third World Bank Conference on Inequality (June 2006) • http://go.worldbank.org/F0YCVJUNH0 • Frankman • http://mfrankman.googlepages.com/index.htm • see papers on global order • (2004) World Democratic Federalism: Peace and Justice Indivisible