Home' acuity : Acuity Aug 14 Contents Reimagining capitalism
Can a more inclusive style of economic growth help close the global gap between rich and poor?
BY STEVE LEWIS ILLUSTRATIONS BY LAURA CATTANEO
hen Australian Prime
Minister Tony Abbott
leaders to Brisbane
for November's G20
summit, he'll be under pressure to
embrace more than a mantra of growth
for growth's sake.
Australia's year-long presidency
of the G20 coincides with a nascent
debate about the future of capitalism,
amid concern over inequality and the
gap between the world's uber-rich and
The G20 -- representing 19 leading
economies, plus the EU -- has embraced
an ambitious plan to lift global output
by 2%. Australian Treasurer Joe Hockey
is forging ahead with a strong "go for
growth" agenda, hoping to lock in other
nations before the leader's summit in
But while world leaders will debate
trade liberalisation, cross-border tax
havens, jobs and investment, there is
a growing call for the G20 to embrace
an agenda aimed at lifting hundreds of
millions out of abject poverty.
Closing the gap between rich
and poor may not make front-page
headlines. But world leaders, ranging
from US President Barack Obama to
China's Xi Jinping, are being urged
to seek out a more inclusive form of
The catalyst for this push? French
economist Thomas Piketty, whose
ambitious tome, Capital in the Twenty-
First Century, has triggered a global
firestorm since publication last year.
Capital has provoked robust
criticism from journals such as The
Financial Times. But the progressive
W Left has embraced Piketty as a Messiah
whose work might, just might, trigger
significant and lasting change.
Piketty has analysed data from
20 countries, some of it dating back
several hundred years. From this, he
concludes that the tendency of returns
on capital to exceed rates of economic
growth has been the main driver of
global inequality. The rich get richer,
the poor get the picture, as Midnight Oil
Several years after the "Occupy"
movement set up their protest camps
on the streets of New York and other
world capitals, Piketty warns from the
Ivory Tower that government inaction
could lead to extreme inequality. This
in turn could undermine democratic
values and stir civil unrest on a scale
To remedy this inequality, the man
hailed by The Economist as "the modern
Marx" argues for a progressive annual
tax on capital across the globe. The
richer you are, the more you would
pay -- up to 10% on capital earnings,
according to Piketty's preferred model.
Such a tax "would contain the
unlimited growth of global inequality
of wealth", he says, an inequality
increasing at a rate that "cannot be
sustained in the long run".
Has the Piketty analysis resonated in
modern Australia and New Zealand --
two economies that escaped the worst
of the global financial meltdown of five
Tim Costello, the chief executive
of World Vision Australia, believes
there is no appetite -- yet -- for a global
But Costello warns that failure by
"rich" nations to embrace a more
inclusive style of economic growth may
have serious consequences.
Speaking at the conclusion of the
C20 forum in Melbourne in late June,
Costello said there is "recognition that
the trust deficit in government is almost
"Ordinary people really don't think
there are serious policies that include
them, when you have got youth
unemployment at 75 million across the
world, child slavery at 80 million, when
you have 200 million unemployed."
The C20 -- civil society 20 -- was about
debating a programme ahead of the
G20 forum. Costello warns that failure
by world leaders to heed the call for a
new style of capitalism will backfire.
"If you come up with a growth
package that doesn't include jobs, that
doesn't include female participation
and stamping out child slavery, this
will only emphasise the trust deficit.
And when the trust deficit widens, it
then becomes seriously painful, so you
are seeing the rise of anti-immigration
parties across Europe.
"That is the lesson of history,
when you start to have severe stress,
extreme groups start to have a
veneer of respectability and become
So, what needs to be done?
A range of commentators and policy
advocates want the G20 to embrace
measures that will help developing
countries stand on their own. For
instance, Costello backs an initiative
called Taxation Without Borders.
"If Sub-Saharan Africa is to have a
tax collection system like Australia's
that pays for education and health,
acuity | AUGUST
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