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Billionaires, Fiscal Paradise, World Debt and Victims

The world’s motto seems to be: Let us protect the riches, and expect less from them and more from the others. This policy, hidden to citizens, and never legitimized by any formal act of law, is now becoming evident because of the giant increase of inequal
Billionaires, Fiscal Paradise, World Debt and VictimsBillionaires, Fiscal Paradise, World Debt and Victims

Among Bloomberg’s many profitable activities is a convenient Bloomberg Billionaires Index that has just published its findings for 2017. It covers only the 500 richest people, and it proudly announces that they have increased their wealth by $1 trillion in just one year.

Their fortunes went up by 23% to top comfortable $5 trillion (to put this in perspective, the US budget is now at 3.7 trillion). That obviously means an equivalent reduction for the rest of the population, which lost those trillion dollars. What is not widely known is that the amount of the circulation of money stays the same; no new money is printed to accommodate the 500 richest billionaires!

In fact, Forbes, the magazine for the rich, states that there are over 2,000 billionaires in the world, and this number is going to increase and increase fast, Roberto Savio wrote on Inter Press Service.

China has now overtaken the US, by having 594 billionaires as compared to the US’s 535 – and every three days a new millionaire is born. There is even an exclusive club of billionaires, the China Entrepreneur Club, which admits members only by the unanimity of its 64 members at present. Together they have $300 billion, the 4.5% of the Chinese GNP. As a norm, the Chinese wealth is a family affair, which means that in 10 years they will leave a heritage of $1 trillion, most probably to their sons; and the amount of inherited wealth is going to rise to $3 trillion in 20 years.

Trump’s tax law just adopted in the US, cuts taxes to companies, and increases the US deficit by $1.7 trillion over ten years. Nobody is noticing that the US deficit is already at $18.96 trillion or about 104% of the previous 12 months of the Gross Domestic (GDP).

This tax reform will have a deep impact on Europe, by shifting there many of the costs of the reform, through balance of payments and trade. The five most important ministers of finance of Europe, UK included, have written a letter of protest, obviously much to the glee of President Trump, who perceives only the US as winner, and all others as losers.

All this staggering amount of money in a few hands (8 people have the same wealth as 2.3 billion people), brings us to three relevant considerations: a) what is happening with the world debt b) how are governments helping the rich to avoid taxes; c) the relation between injustice and democracy. None of those perspectives gives space for hope, and least of all trust in our political class.

Let us start with the world’s debt. While the media is ignoring the matter, the International Monetary Fund has alerted: gross debt of the non-financial sector has doubled in nominal terms; since the end of the century to $152 trillion. This is a record 225% of the world GDP. Two thirds come from the private sector, and one third from the public sector. But this increased from below 70% of the GDP last year now to 85%, a dramatic rise in such a short time.

In fact, the institute estimates that at the end of this year the global debt, private and public added, would have reached a staggering $226 trillion, more than three times global annual economic output.

But let us take the state of the American economy, and a proud president boasting about the index of growth, now estimated at 2.6%. Well, this shows the inadequacy of the GDP as a valid indicator. Growth is a macroeconomic index. If 80% goes to a few hands, and the crumbs to all the others, who pay most of taxes, it is not an example of growth, it is just a problem waiting to explode.

What is more, nobody is thinking about the increase in deficit. The total private debt at the end of the first quarter of 2017 was $14.9 trillion, with an increase of $900 million in three months.

While salaries increased from 9.2 billion dollars in 2014 to $10.3 billion in the second quarter of 2017, the debt of families rose from $13.9 billion to $14.9 billion, an increase of one billion dollars, in just four months.

  Poorer Still

In fact, 86% of the population facing an increasing debt, but poorer at the same time, because of the concentration of wealth in just 1% of the population’s hands. This should be a cause of concern for any administration, left wing or right-wing: in fact, it is not surprising that the 400 richest men of the US, led by Warren Buffet, have written to Trump telling him that they are doing fine and that they do need a tax rebate; and that he should worry about the poorest part of the population.

Now a favorite way of avoiding taxes, is to place money in tax havens, where between $21 and $30 trillion are ensconced. The Tax Justice Network reports that this system is “basically designed and operated” by a group of highly paid specialists from the world’s largest private banks (led by UBS, Credit Suisse, and Goldman Sachs), law offices, and accounting firms and tolerated by international organizations such as Bank for International Settlements, the International Monetary Fund, the World Bank, the OECD, and the G20. The amount of money hidden away has significantly increased since 2005, sharpening the divide between the super-rich and the rest of the world.

The West proclaims principles of transparency and accountability, as long as it can impose these on others. But there is a paradox for the western governments: if those tax havens were closed, as the majority of the deposit comes from the West, they would be able to get much more taxes.

  Mortgaged With Debt

Nobody is paying attention to the world debt. It is increasing beyond control, but we are leaving the problem to the next generations, hoping that they will address it. We are mortgaging them with debt, with climate change, and whatever else is possible, to avoid any sacrifices on our part now. Our motto seems to be: Let us protect the riches, and expect less from them and more from the others. And now comes from Trump the giant tax gift for companies.

This policy, hidden to citizens, and never legitimized by any formal act of law, is now becoming evident because of the giant increase of inequality, which has no precedence in history.

The world is moving faster to financial investments and transactions, and not the production of goods and services, which do not fetch instant rewards. It is estimated that with one trillion dollars you can buy the world production of a day of goods and services. That same day, the financial transactions reach 40 trillion dollars. That means, that for every dollar generated by human hands, there are $40 created by financial abstractions.

Globalization is obviously rewarding capitals, not human beings. There is everywhere an increasing number of losers, especially in rich countries, also because of technological development, and shift in consumption.

Finally, globalization has lost its shine – but not its power. Now, the debate is about how to de-globalize, and what is worrying is that the debate is not about how to bring the process to the service of humankind, but how to deploy populism and nationalism, and xenophobia, to “let us make US great again”, to the increase in clashes and conflicts.

International organizations like the IMF and the World Bank – who have been claiming for two decades that market is the only basis for progress, that once a totally free market is in place, the common man and woman would be the beneficiary – have switched the reverse gear.

Now they are all talking about the need for the state to be again the arbiter for regulations and social inclusion, because they have found out that social injustice is a brake not only for democracy, but also economic progress. But despite all the mea culpa, they are rather late in the day. The genie is out of the bottle, and the powers that be do not even try to put it back. Utter hypocrisy, vested interests, and the lack of vision have regrettably replaced policy.

 

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