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Transcript
Rob Johnson:
Welcome to Economics & Beyond. I’m Rob Johnson, president of the Institute for New Economic Thinking. I’m here today with a long time, how do I say, a person who I’ve taken guidance from in looking at the problems of the world, Max Lawson from Oxfam. He has spoken to our commission on global economic transformation, helped us frame agendas, dig deeper and see some of the things, particularly in relationship between the global north and global south, should be attended to if we are striving to achieve a common good. Max, today is here to talk about an extraordinary and very, very vivid report that Oxfam has created called Inequality Kills: the unparalleled action needed of combat unprecedented inequality in the wake of COVID 19. Max, thanks for joining me.
Max Lawson:
Thank you, Rob. And just to say, I’m a huge fan of INET and I love this podcast. So it’s a real thrill to get this opportunity to talk.
Rob Johnson:
Well, we’re glad you’re here. And I think there’s chilling and thrilling embodied in your report that we can go into today. But in essence, what I would say just as a prelude is there’s a lot of awareness that you impart. Jayati Ghosh, who’s from our commission on global economic transformation and a former podcast participant, and probably will be again soon, and Abigail Disney, who’s made a podcast with me and is part of the Patriotic Millionaires Group wrote the prefaces to this report. There are two people I really respect and admire.
But you have a report, which I think does a lot of unmasking that COVID brought to us. But the data on concentration of wealth, the acceleration of concentration of wealth, questions about governance, questions about broad based prosperity, life and death, so many vivid chapters in this report of about 60 pages. I’m really looking forward to it. But tell me, I mean, when one reads this, it’s very, very, if you will, chilling, haunting. But where did the inspiration come from? Where did you and your colleagues get to a place where you say, “We got to paint this portrait. We got to sound the alarm.”?
Max Lawson:
Well, I think there’s two things there, Rob. I think the first thing is the report. We’ve done a report around this time, about the time of the Davos meeting where the billionaires come together, for some years and kind of scoping and looking at the kind of evolution in inequality, and particularly the wealth of the very, very richest, the 2,000 and 2,500 billionaires worldwide. And so we were kind of doing that anyway and in coming to that and reviewing the numbers.
And I mean, I see myself as quite a hardened inequality person. I’ve been watching these things for some time. And even I was completely shocked by the absolute leap in billionaire wealth that we’ve seen during COVID. And the fact that just hasn’t really been talked about that much, partly I think because the Davos meetings themselves have been very subdued, they’ve just been online. There hasn’t been the kind of scrutiny that we’ve seen in years before.
So I think we really wanted to draw attention to the fact that when you look at the graph, I mean, billionaire wealth has been climbing, with the odd dip, climbing consistently since the early 2000s. But then when you get to the last two years of COVID-19, it actually looks and kind of mimics the graph for the Omicron variant. I mean, it goes just exponential. So I think this is something everyone should be talking about, everyone should be worried about. And at the moment, they’re not.
But then at think the other key message of the report, which comes in the title, Inequality Kills, is, again, some ways a reflection on COVID, because I think we saw from the beginning, the way that COVID-19 across the world, in the richest countries, in the poorest countries where the Oxfam works, kind of it was like an X-ray if you like. It kind of showed up these fractures and these in qualities, which I know you’ve talked before on the podcast about, many of us have discussed.
But really, what brought it across was this sense that inequality is not just about having less money or not being able to buy that nice car. But when the chips are down, it means you’re more likely to die. And inequality is killing people. And I was incredibly struck by the … There was a big editorial in the Economist a few months back, which had looked at some studies showing that there’s a great correlation between the level of inequality in the country where you live and your chances of dying from COVID-19 than there is even with old age.
So everyone’s view is that the most dangerous thing for COVID-19 is how old you are. But in reality, it’s actually much, much scarier if you live in an equal country. And the reason for that is the lack of access to health services, lack of access to support. Just a very fragile environment when COVID hit, which makes it much, much more of a death sentence. And so we really wanted to draw attention to that link, not just between the economic and social impacts of inequality, which of course are profound, but also this more deadly impact and try and put a number on that.
So we put together, looking at data around healthcare, around climate change, deaths from extreme weather events, looking at gender-based violence, all the different kinds of intersections of inequality. And we think a very conservative estimate that inequality is killing someone every four second. And that’s a pretty dramatic fact and something we haven’t tried to do before. And we had some experts looking at it from outside Oxfam. We were all being conservative. I think we were very, very cautious. I think the real figure is significantly higher. So it’s billionaire bonanza. I mean, absolutely insane. There is also this sense that COVID shows us what really matters, and that inequality is killing people.
Rob Johnson:
I mean, there are a bunch of charts early on where you, what you might call, not only talk qualitatively, but you show the extreme degrees to which things have gone in the period during COVID, about how the 10 richest people have doubled their income since COVID started, but 98% of people have lower net worth as a result of the distress and displacement associated with COVID. That’s an economic measure. That’s not a health measure. You talk about how 250 men have more wealth than all basically of the women in the global south. You have all kinds of different things on, what was it? I don’t remember. The top 1% has gained 20 times the wealth that the bottom 50% of humanity. I mean, these are just hard blasting, what you might call, vivid facts. They’re not just facts about how out of balance and how extreme everything has become. There’s a phrase you use, explain it to me and to the audience, the billionaire variant. What is that referring to?
Max Lawson:
Well I mean, that was my idea, actually, because I’ve been working a lot on the … We have a kind of parallel campaign fighting more for vaccine equity and fighting against the kind of monopolies of the big pharmaceuticals. And so we’re always constantly closely observing the evolution of COVID-19. And as we were writing the report, reports of Omicron were coming through, and we’re just seeing these really scary graphs of kind of exponential growth. And then they did the billionaire graph and they were remarkably similar. So we’re thinking like is the biggest problem we have here a billionaire variant? And I think that …
I mean, I was really, really struck, when was that? I think last summer, wasn’t it? When Jeff Bezos launched his rocket into space. And I was discussing with colleagues about could this be perhaps the most iconic inequality moment in history? Before now, we had kind of Marie Antoinette and let them eat cake. But to have a global pandemic with, by some estimates, nearly 20 million people dying and untold destitution. I just recently returned from living in Kenya for some years, and was there at the beginning of the pandemic, and the destitution that people were forced into by these lockdowns, by the economic impact, which continues.
So this is going on, and at the same time we have a billionaire in a cowboy hat, like something out of Dr. Strangelove, he has … I mean, let’s face it. His rocket is remarkably phallic it in his presentation. You don’t have to be Freud to think that something’s going on there. And then when he returns to earth, he gives a press conference where he thanks the workers of Amazon for working so hard that he’s got the money to go into space.
And as our numbers say in the report, just the increase in his wealth, just the increase in his wealth, we’re not talking about taking all of his wealth, he’d be as rich as he was before COVID began, so we just claw back that increase, would be enough to vaccinate the entire world. So we reckon it’s about 27 billion to pay for enough vaccines for everyone who needs one. So that juxtaposition, I think, I personally think probably Trump’s Marie Antoinette. I mean, it’s pretty incredible. So it’s quite hard to exaggerate the scale of inequality and the impact that has. And it is with these kind of cut through facts that we really try and get to the public imagination so they can really visualize the juxtaposition.
Rob Johnson:
Well, Joe Biden is the president now. So saying something was Trumped, it doesn’t have the pun status that it once did.
Max Lawson:
It’s true. It really doesn’t, not anymore.
Rob Johnson:
But I think this is a fascinating phenomenon because you can talk about life and death. If you had taken a windfall tax from the 10 just men in the world of the gains they’ve gotten since the onset of COVID, you could vaccinate everybody. That, straight away, a lot of people don’t die. But in addition to that, perhaps a lot of variants don’t form, perhaps a lot of macro economies don’t require such broad based and long assistance and growth of the debt to GDP ratio. Perhaps it would have saved a tremendous amount of money for rebuilding infrastructure, hospitals, education systems, and climate change all over the world. But instead, as you say, we watched a cowboy movie. I guess, best supporting actor was Richard Branson for his own version.
Max Lawson:
Yeah. The less known kind of B-actor.
Rob Johnson:
But it does seem like, as you say, it makes Marie Antoinette seem kind of small play comparatively. It’s so vivid.
Max Lawson:
It is. And it’s not getting any better. And I think when you look at the absolutely cast-iron economic arguments made by the IMF and others, just a small investment in vaccinating the world would reap these immense benefits economically. And not just in poor countries, because of the fall-off in trade and tourism, all those things, rich countries losing out substantially, because poor countries are not vaccinated. So you have to think why are they not doing this? And then you have to look at for who is this two-year period of COVID actually doing well for? Who’s winning out of it?
And I think politicians are very, very nationally focused. And I can understand that even Boris Johnson, who I can’t bear, I can understand his primary job is to vaccinate people in Britain and make them safe. But to then block the vaccination of developing countries and defend the profits of Pfizer or the profits of Moderna, to see Joe Biden basically unable overrule the interest of a small firm like Moderna and insist they share their publicly funded vaccine with the world. And then you look at the fact that during COVID-19, according to Forbes, there’d been 40 new vaccine billionaires created either from PPE, including the head of Moderna. And that’s our modern world. We can’t vaccinate billions of people, but we can create vaccine billionaires. So it’s pretty twisted and quite hard to oversell as a failed situation.
Rob Johnson:
Well, I guess where we’re kind of digging into here are, what you might call, the ramifications of this failed system. And as we explore this, I think the vividness of political economy, how public common good decisions are made is revealed. In this instance, it was made to perhaps inspire perhaps the pharmaceutical industry to rise to the challenge. Except once they had risen to the challenge, which a lot of public subsidies, the power of the industries thwarted the dissemination that would’ve helped humankind, orders of magnitude more. The question I’m getting at though is what is the process that’s underneath this political economy? What kind of, what you might call, moral deadness or what kind of fearful dependency on money the politicians have that requires them to, or I won’t say requires, that’s too strong, but leads to them acting in this unmindful way?
Max Lawson:
I think it’s really interesting, particularly when you look at the parallel we often draw with HIV/AIDS where you saw a Republican president, George Bush, overrule the interest of the pharmaceutical, insist on generic production of cheap HIV/AIDS drugs just 20 years ago. So you’re thinking if he could do that then, what’s changed now? And often the optimists among us like to think that we passed peak neoliberalism and we’re in this period of kind of Gramsci called it a kind of morbid phase where we don’t really know what’s going on, but at least we’ve kind of peaked that, past that peak ideology.
But I’m increasingly thinking that might not be the case because it’s true, if you look at the lobbying power of someone like Pfizer in America is enormous. But the lobbying power of Moderna is pretty weak. So I don’t think it’s a simple case of they’ve bought politicians. I think that has a big part to play. And then equally, if you look at the Pfizer vaccine is produced with a German company called BioNTech. And in Germany and Europe, it’s known as the BioNTech vaccine.
And again, they’re a small startup. They got some government money. It’s not the case that they’ve got enormous links to politicians and a huge lobbying power. So I think your phrase that the deadness of the political imagination, the idea that you would even question the intellectual property of these firms, I think it is almost worse than it was 20 years ago. And I find that really quite shocking, because if you can’t do it now, if not now, when? In the midst of a global pandemic, when the economic arguments are unassailable, when the arguments from self-interest are unassailable, then when are you going to do it? So that does worry me deeply, I’ll be honest.
Rob Johnson:
Yeah. And I think your point of just separating between just the raw power of money and what you might call the deadness of mind from ideological habits that reinforce the power of money is very important. We’ve had an episode in the United States that some of the members of the house like AOC and others have reacted to, which was when leading politicians, including the speaker of the house, Nancy Pelosi, started diff defending the right of people in the legislature to trade in stocks while they’re making legislation about those stocks.
And when you’re talking about, what I’ll call, an awakening and rebalancing that I had hoped the pandemic would’ve triggered, the idea that politicians don’t perceive a conflict between them being legislation makers on behalf of the public good, and them filling their own pocket by what you might call the way they tweak the policies and the legislation is quite haunting. And we’ve had a number of studies to come out of INET, a scholar named Tulum has written about how, in essence, the blind trusts of house and senator often outperform people like George Soros and Warren buffet. So there’s something going on there that it’s the old Buffalo Springfield song. There’s something happening here, what it is ain’t exactly clear. I think people think it’s getting pretty clear that this [crosstalk 00:19:47].
Max Lawson:
I think it’s getting pretty clear. But I do think that kind of marriage, I was listening to Adam Tooze talking about this the other day, about the kind of relationship. Is neoliberalism dying or is it just really pliable as an ideology? If you look at one other big aspect of our report, and I think something that isn’t really talked about enough is the relationship between quantitative easing and a huge injection of money from the Fed, from other central banks, that we saw after the financial crisis for the first time, and now dwarfed by the interventions during COVID-19.
And that is the single biggest reason that billionaires have got so rich in the last two years, and particularly the ones at the top. And you’ve got this actual inequality between billionaires. So if you’ve got 100 billion, you’re doing a lot better in the last two years. And if you’ve only got a billion, pocket change. But you’ve got this situation where basically you’ve had this immense injection of money, which is driving up asset prices. And then as a result, an incredible spike in billionaire wealth, which it’s not like these billionaires were working twice as hard in the last two years. It’s not like they’re twice as clever. It’s a kind of structural impact of QE.
And I’m not against QE. I think it was probably in some ways the best thing to do. But the case we try and make in the report is there’s an absolutely unassailable case for using the tax system to kind of claw that money back in some way because if you’ve got this side effect of a massive growth in wealth at the very up, then we need extraordinary moves to claw that back, put it into the public purse and use it for things that would make a difference worldwide.
But I was really struck by that. And I don’t think enough economists are talking about it. And I don’t think enough people are reflecting on the relationship between this quite … Well, it’s now quite standard of monetary policy. But you still see this fairly hetero dogs and not very neoliberal. Still Adam Tooze’s point, if you see neoliberalism as effectively a class project, then the last 10 years the people at the very top have done even better than they did before the financial crisis. So it’s quite a pliable ideology. And I would’ve said I completely agree all the way through is this sense that the absolute kind of almost incredulity that you would suggest that there might be a difference of interest between the private sector and the political class.
I mean, we have this within the global health situation. You have a situation where COVAX, which is the system designed to try and vaccinate the world, they have public private partnerships. The pharmaceutical firms sit on the board of these global health endeavors. They’re not like the UN. They don’t just have member states. Basically, industry has a voice at the top table about the prices that are paid for the drugs the industry is producing. And that’s just standard in the global health world now. And little wonder that these things like COVAX are paying through the nose for vaccines when they could be shouting loudly about the need for pharmaceutical firms to lower their prices. So there’s a kind of structural closeness, which is just seen as positive, which is really hard to get around.
Rob Johnson:
Yes. Coming back for just a second to the macro framework, I remember after Paul Volcker had left and Alan Greenspan had taken over at the Fed, the essentially easy money from the fed to support the stock market was a bit shocking. There was a sense in which what’s going on? But as time evolved, what we started to see was what you might call the macro policy mix. A fiscal stimulus, something that rebuilt education systems, infrastructure, or whatever, could contribute to productivity, but it contained within it a contingent liability that wealthy people feared. Using monetary policy, as you’ve cited, inflated the bubble and increased their wealth. So the favoring of monetary ease and QE with fiscal austerity and periodic threats to cut things like social security, but not much attention to say, if you look at the United States on a comparative basis, our healthcare costs per capital are the highest in the OECD, and we’re rated 38th in the quality of healthcare.
If you were a fiscal hawk you should have gone after normalizing it, not related to a fantasy, but related to what other OECD countries did for their health system. And you would’ve created fiscal austerity at, how would I say, orders of my magnitude that really do matter in the long term. You have all kinds of things related to war than actually the healthcare costs for PTSD and so forth, which Linda Bilmes at Harvard has mentioned is $30 trillion over 30 years for all the people who came back from Iraq.
So there are all kinds of things accruing within the power structure that are big fiscal burdens, but we’re not doing the baseline things that create broad-based prosperity. And where I’m most concerned about that is not just from what you might call static material, but when it feeds despair. Angus Deaton and Anne Case have created the notion the diseases of despair. When it feeds despair, it makes an authoritarian alternative like Donald Trump who comes out and says the system is rigged and I’m going to fix it. People lurch to that because they feel so abandoned and so terrified.
So I think this, what you might call, this system is getting so out of balance. Your report is extraordinary in illuminating almost the ridiculousness of it. And now we’re talking about a competition for world leadership between the United States, which has been the leader since World War II, and China. Kishore Mahbubani is writing a new book, 21st Century Asia. And he’s got chapters in about is America democracy or a plutocracy? Why would you want to emulate these results? Why would anybody who studies Eastern philosophy, which, whether Indian or Taoist, has a more awareness, I guess, of public goods, common goods built into it? Why would you adhere to the system from the west, the Cartesian enlightenment notions, when you can … First of all, you can cite Adam Smith in contradiction to the way we’re behaving.
But secondly, the Eastern philosophy is telling you goodness comes from a different place. And what are we going to do? Prevail with our military budget? There has to be a healing here. There has to be a change in direction to inspire people to integrate within this system rather than choose an alternative.
Max Lawson:
Yeah. I mean, and if you just look just at the basics in the last year or so, you had president Biden having his kind of originally 3.5 trillion package, which for the first time in three or four decades involved a substantial increase in taxation on the richest. It wasn’t enormous, but as a kind of bottoming out, it was really quite an interesting proposition. And of course, that comes off the back of the amazing work by Elizabeth Warren and others, just the general mood music shifting towards the need to tax the richest more. And that now run into the sand.
Contrast that with China, where for various reasons, and opinions differ as always with China watching, but it’s absolutely the case that Xi Jinping is out to defenestrate lots of billionaires, he’s out to talk about inequality and kind of try. I mean, they have their own interest, but actually taking steps to reduce the wealth of the super-rich. So not only are we seeing a kind of plutocracy in the US, if you’re looking about kind of action taken to reducing inequality and following through on it, then there’s more delivery in China at the moment than there is in the US, despite all the mood music.
So I agree. But I suppose what fascinates me, Robert, and I’d love to get your view on this, is kind of the US has been here before. I’m a great student of US history. And the insane plutocracy that obtained in the early 20th century and the capture of politics and the media, and yet it was improved and it did turn around and kind of democracy was regained. So I think we will take heart from that story, but also aware that it’s somehow historically unique.
And just as an America watcher, I just think, “How do we get back from this insane capture of the rich?” And I would say, as Oxfam person, we always try and take a global perspective. Personally, I’ve spent most of my career outside the UK and Africa. But I was working very closely with Latin American colleagues. And you see this kind of upsurge in progressivism, again, in Latin America with the Chile election, now Brazil.
So I mean, I do find some hope, and I do think there’s some real interest in progress. But this sense in Latin America, again, which is it’s the capture of wealth and power at the very, very top that has never really been resolved, and unless they break that stranglehold, you might get the odd progressive government introduces a few positive measures, like we saw with Lula the first time around. And you can even see the genie coefficient reduce, which we did for a good decade. But you haven’t really tackled that kind of core problem of concentration of power and wealth. And until you do, it’s never going to be more than a temporary reprieve. So it’s kind of how do we do it? How do we bring America back to its roots?
Rob Johnson:
My assertion is that if we don’t bring it back to its roots, the old famous Berry white song, you’ve got to practice what you preach, if we don’t demonstrate that, we should not be surprised if people abandoned what you might call follow our leadership or emulating the structure of our society. And I don’t know. When I look in your report, I see some very vivid things where you’re moving towards what you might call after the evidence, the violence towards people of color and violence towards women, violence towards the global south, deaths, non participation in healthcare. And I see a handful of things that are underscored here. I’ll just read them off.
Only systemic solutions will do to combat economic violence at its root and lay the foundations for a more equal world. One, claw back extreme wealth into the real economy to tackle inequality. Two, redirect the wealth to save lives and invest in our future. Three, change rules and shift power in the economy and society. These all seem like … I made a piece on the podcast yesterday with Ajay Chhibber from … He’s got a new book out that’s extraordinary with Salman Soz. It’s called Unshackling India.
And he basically had worked as the evaluation minister of the Indian government in 2013, 2014. He’s been at the UN, UNDP and World Bank in his career. And looking as someone, which Michael had, the responsibility to design and implement the state, he sounded very much like the things I’ve just quoted from your report. And he’s talking about obviously an enormous project in the context of climate change rebuilding India.
And one of the things I wanted to add, I think that now the urgency and timetable on climate change and reducing carbon emissions is interfered with by the resistance to transformation that comes from the people at the bottom who fear change, because they’re used to seeing the winners win and the losers devastated. So if you’re in West Virginia and they say, “You’re going to stop burning coal.” Are you going to get adjustment assistance? The old adage in free trade theory, we can make everybody better off and nobody worse off, involves significant strategies and transfer payments to fulfill them so that the system evolves in a way that does make everybody better off. In this frightened environment that your report brings about, how many people are going to, what you might call, express faith and join the transition when they think they’re going to get flushed down the toilet?
Max Lawson:
Oh, I think that’s true. I think it’s an ongoing issue with the left behind. And it links back to your point about death and despair. But I mean, the main point in making the report about climate change is also looking at it from, I mean, some kind of perspective of individuals rather than countries, because the climate debate is dominated by the kind of is China the bigger emitter compared to the US? And what about India? As if they kind of operate as distinct entities. And of course that’s relevant to climate negotiations. But the point we want to make in the report is the emissions … We’ve got an amazing statistic, which is that the average Ghanaian in their lifetime emits less carbon than the average US refrigerator.
So basically you’ve got this in credible disparity of emissions, but also within rich countries, because you the emissions of the very, very rich are astronomical. And apparently it makes a massive difference whether you own a yacht or not because yachts are apparently, I don’t own a yacht myself. Maybe you do, Rob. But you don’t strike me as the sailing type. Maybe I’m wrong. But I think the kinds of yachts these billionaires … I mean, Jeff Bezos has just had one built in Amsterdam or in the Netherlands. And they actually had to dismantle a historical bridge because it’s so big. They couldn’t get it from the shipyard.
So these guys are emitting, we calculate … Well, we don’t calculate. We use some research that some guys did in the US. But they look at 20 of the world’s richest people, and they look at their consumption, kind of the amount they travel, whether they have a yacht, how many houses they have. Bill Gates has 23 houses. And who needs 23 houses? But anyway, so they emit about 8,000 times more carbon than the average citizen. And that’s true of the Chinese elite. It’s true of the African elite. So it’s not just American billionaires.
So these rich people are not only consuming immense amounts of carbon, if you look at the projections, if people implement what they agreed at the Paris Accords, then you will see in rich countries, the emissions of what I call the middle classes will begin to reduce. And that’s a good thing. I mean, we’re still a long way from it happening. But the average citizen, we’ll see their contribution to climate change manifest as energy transitions. But the rich are set to increase their emissions over the next 10 years. So I think, again, it’s this kind of taking that perspective.
And then you ask yourself where is their money invested? It’s not just your working man who is in West Virginia who’s worried about the future of coal. A lot of these billionaires still have quite a lot of money invested in fossil fuels. They’re still making quite a lot of money from it, some than others. I mean, obviously it’s a mixed bag. But on balance the stock market is still quite heavily invested in a fossil fuel future. And billionaires represent a significant proportion of stock. So I think there is an intersection between this description of inequality and the desire to transition away from carbon and beat climate change that we need to talk about more, because they’ve seen us two separate problems, two separate crises. And I think they’re intimately linked.
Rob Johnson:
Yep. Well, I don’t want to evade your question. Yes. I have been a lifelong sailer. When I was a little boy, my mother and father had a boat in Michigan. And I am told I was duct taped in drawers so that they could sail while I napped and didn’t fall out of the drawer.
Max Lawson:
You didn’t fall out. I see.
Rob Johnson:
So they didn’t tape my body, but they taped the drawer. So it wouldn’t hurt me. But I sailed quite a bit. And when I left the financial industry, I did build an 88-foot sailboat that was called Shaman, which I own from 1997 to 2009, in large part to create expeditions through places like Antarctica, Spitsbergen, and take three generations, meaning my parents who were big sailors and my children and bring everybody together. But it was a sailboat. It did have an auxiliary engine. But I don’t think it was as big a polluter as-
Max Lawson:
I think the carbon emissions were probably pretty low. So you shared that with FDR then, a love of sailing. I think your yacht, compared to Jeff Bezos’s, I think your emissions are … I don’t think have to worry, Robert. I think you’re okay.
Rob Johnson:
Yeah. I would like say there I just didn’t want to avoid your exploration.
Max Lawson:
That’s fair enough.
Rob Johnson:
I enjoyed tremendously sailing and the ways in which when I would have friends who would have a traumatic episode, one lost a child, I’d put them on the boat. They have a daughter now who’s almost a college age named Sailor who was conceived on the boat. So there were some healing dimensions in that too. That’s why I called it Shaman because it brought the spirits of people together. And a guy in an art gallery in Santa Fe, New Mexico, told me what a Shaman was. And I said, “That’s what I want my boat to be.” But anyway [crosstalk 00:39:48].
Max Lawson:
A healer.
Rob Johnson:
But I think these questions, whether it’s private airplanes, number of houses, yachts, are what you might call inconsistent with climate change. I think the way in which ESG type marketing is done, and when do you practice what you preach as an investor, is an open question. I know people like Mark Carney, who I’m well acquainted with, aspire to channel the energies of finance in the direction of climate change. But how we do that is I think still a question that’s on the drawing board.
But it’s very tricky. I mean, Peter Goodman, as you know, recently released a book called Davos Man, where he vividly … You bring the data of the contradictions in the pandemic, but he brings all kinds of experience of contradictions in profiles, five or six billionaires, plus the founder of the World Economic Forum in that book. So I think this what you might call the awakening to these contradictions is preceding quite vividly right now.
Max Lawson:
I think so. I thought his book was great. I love the podcast you did with him. I think just the kind of sense that everything has a win-win solution, he was so eloquent about that. This idea that every problem on the earth can be solved in a kind of win-win way. And I’m not saying there aren’t win-win solutions for some things. But I think a lot of the solutions on earth, and not least of that inequality and climate change, involve those with significant power losing a little, not losing a lot. But there needs to be some … It is zero sum to a certain extent. And I think no more so with wealth and extreme wealth and the power.
I mean, my former boss Winnie, who was the Director of Oxfam, now at UNAIDS, she used to say, “This isn’t about buying a yacht or buying a nicer car. It’s about buying a judge. It’s about buying impunity from justice. It’s about buying a newspaper.” And she’s thinking as much of Uganda as she is of the United States. This is in Kenya where I’ve just been living. The level of impunity and the idea that justice is just something you just buy your way out of problems.
So I think that the link between extreme wealth and a corruption of our democracy and the way things are done. And then the faith, as you said, the faith from ordinary people in that same democracy, the faith in government. We campaign for increases in taxes in Kenya or somewhere like that. And people don’t want a campaign for increases in taxes because they don’t believe that money is going to be spent well, they don’t trust the state to spend it well. So that whole contract is eroded. And so it’s not just the revenues that you’re losing, but by seeing that impunity at the very top, you’re eroding a whole kind of social fabric, which is devastating for progressive policies.
Rob Johnson:
I was once in a climate related meeting that I participated in just before the pandemic. And they were talking about how there is a great need for what you may call deployment of renewable resources, particularly wind and solar, in Africa. And a gentleman from Norway said the irony is we can borrow to build solar panels in Norway for 100 basis points over the rate of inflation. 1% real interest rate. Said in Africa, it costs them almost nine over the rate of inflation on real interest rate. And he said, “We all are going to benefit if it’s built in Africa much more than if it’s built Norway because it’s dark a lot in Norway and the impact in terms of energy for planet earth would be much greater in Africa.” He said, “But we can’t get the creditors to believe that their money will actually go into making solar panels. They think it will go into a Geneva bank account from some government minister. How do we share the burden so that we all revive the planet?”
I was kind of shaken to hear that. And obviously I’m not creating a moral, what you might call, denigration of African people, because this is the product of history and colonialism and all kinds of elements of corruption, not some deficient moral fiber in these countries. But wrestling with these problems, wrestling with what you might call … Here’s an earnest guy in a credit market saying the risk premium is going to stop us from doing over-penalties exactly where we should be doing them. How do we overcome these things?
Max Lawson:
Well, I think certainly an organization like Oxfam is effectively an anti-poverty organization. Our job is to try and eliminate poverty. So we do get people challenging us and saying, “Why are you talking about rich people? Why are you talking about billionaires? Who cares about inequality? Let’s focus on the job in hand, which is to eliminate poverty.” And I think what an inequality perspective has brought us and has been really useful in two different ways is to really ask exactly those questions. You have historic inequalities between north and south. Obviously, you have the whole colonial history. I weep with every teleconference I’m on with Oxfam people from all over the world. It becomes a running joke that there’s some angle where the British screwed them over at some point the last 200, 300 years.
So I mean, I think there are huge inequalities north and south. And so you have to ask about not just poverty in developing countries, but richness in Norway, and why they have access to credit markets, and why it’s so much easier for them. But then also at national level, I think it’s in … And this is driven very much by our Southern Oxfam, by our staff all over the world. And they say, “Look, can we move away from this simplistic frame of the kind of virtuous, angelic developing world and the evil rich world?”
And again, an inequality perspective gives you that because in each of these countries, I know this painfully well from living in Kenya, and previously in Malawi and South Africa, there is some very rich and powerful Kenyans who are benefiting enormously from the kind of state failure just as there are in the US, and just as there are here in the UK. Look at the incredible fraud around COVID with Boris Johnson’s cronies. So it’s not to say in any sense that corruption is some problem in the global south and not in the north. It’s a problem everywhere.
But it also makes you think. It makes you reflect on the realities, as you were saying, for those working people in West Virginia or poor people in the north of England. And it is this understanding that, certainly since the financial crisis, that there are an enormous number of people in these rich countries who are really hurting and really we need to speak to their reality as much as anything. We can’t say to them, “You should feel really guilty. You live in a rich world. And look at these Africans. They’re starving.”
I read yesterday in the Guardian we have almost four million people in the UK now regularly using food banks to get free food because they don’t have enough money to feed themselves, in the sixth richest country in the world. So you’ve got this. I think all of that, it doesn’t answer the question of what to do. But I think the inequality analysis gives you a much more nuanced perspective about what’s going on, and it can see how things are working for those at the very top. I mean, I think of the lending to Kenya for some of these huge infrastructure projects, when they do get the money, the reason the risk premium is so high is because it is true that so much of it does go missing. But then it’s also packaged up so that they’re kind of high risk. You’ll have a portfolio of debt, which would have a bit of Kenyan debt, which will be very high risk, but it’s kind of mitigated by low risk debt in other places.
So you do have situations where creditors don’t really mind if the Kenyan debt goes bad. They don’t really mind if it’s not spent on the thing they’d spend it on because overall it’s just about a much more complicated financial product. So it’s really the morality and the kind of lending to Africa, it continues to be very dubious. And the debt crisis, we’ve got a new report coming out in the next month looking at the relationship between debt service and health spending for these African nations. And we’ve got country spending four, five, six times more servicing their debts now than they are on healthcare. And that’s completely unsustainable. So I think something has to give in terms of those debt markets.
Rob Johnson:
In the scheme of things, you refer to, how would I say? Had we taken the tax on the gains during the pandemic of the wealthiest people and so forth, and these are what you might call hypothetical scenarios, there is a political economy of resistance that we’ve been exploring a little bit. But there has been a little bit of a movement, I would say. I know scholars Michael Woodford, Paula Cabot-lodge, Scott Solomon, Gabriel Zucmann, Emmanuel Saez, and others are talking about a global wealth tax. And I guess the question that comes to my mind is, as I watch my commission on global economic transformation talk about the ramifications of globalization, when you read things like the Panama papers, you can envision that tax, you can see what to do with the proceeds that heals a lot of woundedness and despair in society. But how do we implement it? What does the system look like that creates the wealth tax that is, how do we say, embodied in that research and some of the vision that’s in your report?
Max Lawson:
Well, I mean, the recent report by Piketty and his team in December was probably the best analysis I’ve seen of this. And I think the first thing to say is there are multiple ways to tax wealth. And many of the countries in the global south where Oxfam works don’t even have the basics in place. They don’t have a property tax, they don’t have a capital gains tax. There is a kind of low hanging fruit before we get into the more … Very few with inheritance taxes.
So I think there are some basic things that lots of developing countries could do. And we have seen them. I mean, Cambodia a couple of years ago introduced a property tax. We’re seeing inheritance taxes. So that’s a kind of bread and butter. And also top income taxes. The top income rate in most developing countries is kind of still around kind of 25, 30%. So I think that there’s lots of scope in lots of countries for doing that before we get into what I’d call net wealth taxes, which are when it’s calling for Elizabeth Warren is calling for, what Piketty has called for.
But then if we look at them, and this is the interesting thing with what Piketty and Zucman, because they’re such experts on the whole dark arts of tax evasion and tax avoidance that they see the two things as very much going hand in hand. And one of the interesting things in Piketty’s recent was the … His point was that, I mean, you tend to think that data availability is spotty, but getting better as time goes on. But data on wealth, which obviously he monitors closely is getting worse. And the reason it’s getting worse is because you’ve seen a reduction in the number of wealth taxes. And so the revenue authorities are not forcing the discovery of people’s assets.
So there’s a kind of symbiotic relationship between making an effort to implement a wealth tax and a discovery function where you actually demonstrate just how rich people are. And there’s a practicality in that too. But I think in our surveys around the world, you do find really interesting examples, often historic, and still there, because they’ve never been challenged. But countries like Columbia, Morocco have wealth taxes. It’s not implausible. It’s difficult, but it’s not implausible. And will some money escape? It will. But can you get a reasonable amount of revenue? We think that you can.
And we are not advocating, as much as it would be wonderful, some form of global wealth tax. These taxes have to be implemented at a national level. But we think if you look at the shift we’ve seen on corporate tax in the last 10, 15 years, and still a long way to go, but to see a global agreement on a minimum corporate tax rate, and what that means for people’s inability to shift their profits to very, very low tax jurisdictions, I think you could see a similar thing in the next two, three years on individual taxation. We could see that the anger and frustration around the incredibly low tax rates paid by the richest people, two, 3% Warren buffet always going on about the fact that he pays a higher rate of tax than his clean out or his secretary. I think that finally will translate into increased taxation on the rich.
And I do think that yes, in a world of mobile capital, taxing wealth is difficult. But it is not beyond the wits of humanity. And I think we will start to see that happen more and more. It’s one of the few areas where I do remain quite optimistic. I think the shift in public opinion on this one is getting significant momentum. It may be a few years yet. But I think the kind of U-shaped curve of tax rates on the richest, I would hope, is beginning to bottom out, and we’ll start to see it going up in future years.
Rob Johnson:
Well, I think, how would I say, if that U-shape does take place, you deserve some co-authorship because of the illumination, the impetus that you’re creating to this awareness. I think it’s a valuable dimension of, how do I say, arousing the value of votes in relation to the value of money. And so I think, how do I say, if you stay on it, my children are going to be better off.
Max Lawson:
Mine too.
Rob Johnson:
Yours too.
Max Lawson:
Yeah. My nine-year-old, he makes many a joke around about Jeff Bezos. In our house, billionaires are not popular. So yeah, I agree. I think we will. But we just need to keep … We’re a campaigning organization at heart, Rob. So as you said, it’s all about the political economy. And unless you can generate, unless the voice of ordinary people is stronger than the voice of plutocrats, progressive things never happen. So we’ve just got to keep on fighting and keep on hoping that we’ll get there.
Rob Johnson:
Yeah. Well, thanks for being here today. Thanks for this report. We’ll post it on our website and send people to yours. I think when they come to your website, they’ll find a lot of other, how would I say, accompanying material that fortifies, how I we say, the depth of your work and also the power of the mission that you’re on. So how would I say, say hello to your team and thank them, and give a nod to Winnie who’s been part of our Commission on Global Economic Transformation, and I think was the person that catalyzed you and I meeting one another.
Max Lawson:
Yeah. Amazing woman. One of my absolute heroes.
Rob Johnson:
Yeah. She was vital. Great. Well, let’s, how would I say, stay in touch. We’ll do another chapter in the not too distant future. And keep up to good work.
Max Lawson:
Thank you, Rob. Thanks for the opportunity. And I think encourage everyone. The one thing you can do with Oxfam is you can join in, and you can start campaigning as well. It’s not just about reading the report. So please take part in that. It’s a collective effort. So thank you very much.
Rob Johnson:
Thank you. Talk again soon. Bye-bye for now. And check out more from the Institute for New Economic Thinking at ineteconomics.org.
