We
must rethink globalization, or Trumpism will prevail
Thomas Piketty
Wednesday 16
November 2016 11.00 GMT
Rising inequality is
largely to blame for this electoral upset. Continuing with business
as usual is not an option
Let it be said at
once: Trump’s victory is primarily due to the explosion in economic
and geographic inequality in the United States over several decades
and the inability of successive governments to deal with this.
Both the Clinton and
the Obama administrations frequently went along with the market
liberalization launched under Reagan and both Bush presidencies. At
times they even outdid them: the financial and commercial
deregulation carried out under Clinton is an example. What sealed the
deal, though, was the suspicion that the Democrats were too close to
Wall Street – and the inability of the Democratic media elite to
learn the lessons from the Sanders vote.
Hillary won the
popular vote by a whisker (60.1 million votes as against 59.8 million
for Trump, out of a total adult population of 240 million), but the
participation of the youngest and the lowest income groups was much
too low to enable key states to be won.
The tragedy is that
Trump’s program will only strengthen the trend towards inequality.
He intends to abolish the health insurance laboriously granted to
low-paid workers under Obama and to set the country on a headlong
course into fiscal dumping, with a reduction from 35% to 15% in the
rate of federal tax on corporation profits, whereas to date the
United States had resisted this trend, already witnessed in Europe.
In addition, the
increasing role of ethnicity in American politics does not bode well
for the future if new compromises are not found. In the United
States, 60% of the white majority votes for one party while over 70%
of the minorities vote for the other. In addition to this, the
majority is on the verge of losing its numerical advantage (70% of
the votes cast in 2016, as compared with 80% in 2000 and 50% forecast
in 2040).
The main lesson for
Europe and the world is clear: as a matter of urgency, globalization
must be fundamentally re-oriented. The main challenges of our times
are the rise in inequality and global warming. We must therefore
implement international treaties enabling us to respond to these
challenges and to promote a model for fair and sustainable
development.
Agreements of a new
type can, if necessary, include measures aimed at facilitating these
exchanges. But the question of liberalizing trade should no longer be
the main focus. Trade must once again become a means in the service
of higher ends. It never should have become anything other than that.
There should be no
more signing of international agreements that reduce customs duties
and other commercial barriers without including quantified and
binding measures to combat fiscal and climate dumping in those same
treaties. For example, there could be common minimum rates of
corporation tax and targets for carbon emissions which can be
verified and sanctioned. It is no longer possible to negotiate trade
treaties for free trade with nothing in exchange.
From this point of
view, Ceta, the EU-Canada free trade deal, should be rejected. It is
a treaty which belongs to another age. This strictly commercial
treaty contains absolutely no restrictive measures concerning fiscal
or climate issues. It does, however, contain a considerable reference
to the “protection of investors”. This enables multinationals to
sue states under private arbitration courts, bypassing the public
tribunals available to one and all.
The legal
supervision proposed is clearly inadequate, in particular concerning
the key question of the remuneration of the arbitrators-cum-referees
and will lead to all sorts of abuses. At the very time when American
legal imperialism is gaining in strength and imposing its rules and
its dues on our companies, this decline in public justice is an
aberration. The priority, on the contrary, should be the construction
of strong public authorities, with the creation of a prosecutor,
including a European state prosecutor, capable of enforcing their
decisions.
The Paris Accords
had a purely theoretical aim of limiting global warming to 1.5
degrees. This would, for example, require the oil found in the tar
sands in Alberta to be left in the ground. But Canada has just
started mining there again. So what sense is there in signing this
agreement and then, only a few months later, signing a highly
restrictive commercial treaty without a single mention of this
question?
A balanced treaty
between Canada and Europe, aimed at promoting a partnership for fair
and sustainable development, should begin by specifying the emission
targets of each signatory and the practical commitments to achieve
these.
In matters of fiscal
dumping and minimum rates of taxation on corporation profits, this
would obviously mean a complete paradigm change for Europe, which was
constructed as a free trade area with no common fiscal policy. This
change is essential. What sense is there in agreeing on a common
fiscal policy (which is the one area in which Europe has achieved
some progress for the moment) if each country can then fix a
near-zero rate and attract all the major company headquarters?
It is time to change
the political discourse on globalization: trade is a good thing, but
fair and sustainable development also demands public services,
infrastructure, health and education systems. In turn, these
themselves demand fair taxation systems. If we fail to deliver these,
Trumpism will prevail.
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