Blending autonomy, pride, and international cooperation

 •  Filed under International economics, fiscal policy and taxation

Gordon Brown spoke at NYU earlier today. The expectation was that Brexit would be a case study of anti-globalization, but it sounded like Brown was more worried about countries like Austria, Hungary, France, Poland and Hungary (he also mentioned Geert Wilders' rising support in the Netherlands).

Brown covered a lot of ground; the main things I heard are:

  • The Brexit vote was a rebellion against the advice of the cultural, political, and business establishment.

  • Globalization awakens in people a need to belong. That's why we hear things like "let's take back control". The irony is that the people who have the most to lose if nations duck in their own silos are the same people who have tend to listen to populist messages.

  • You can be a patriot and still believe we should work together. The slogan should have been "Britain leading, not leaving". Self-critically, Brown said that "we have failed to make a positive case" for globalization and international cooperation.

All valid points. I would have liked to know how we can appropriately provide income support to those whose living standards are falling. Wage floors? Wage subsidies? Maybe create more public sector jobs (personal/health care for the elderly might be a good start)? Should policies focus on the people who lost jobs because of "trade" or are people displaced by technology equally worthy of attention and support? (It seems obvious to me that trade vs. non-trade discrimination is wrong.)

The kinds of income support that would make people more secure are expensive, so tax base erosion ("insufficient fiscal capacity", you might say) looks like a serious issue when a large share of people is needs help. In debates about "autonomy", "globalization", or the EU being out of touch, why don't we pay more attention to how nations are struggling to collect taxes from various entities?

The revenue side cannot be an afterthought if we really believe that resources should be devoted to protecting the livelihoods of people who are not well-placed to deal with globalization...

Maybe things are changing (I hear people talk about profit shifting and other problems a lot more now than I did a few years ago). But the attempts to find solutions against tax avoidance are meeting strong resistance. There was a relevant op-ed on this question by Philip Stephens in today's FT with this telling passage:

The banker John Pierpont Morgan thought he could treat Roosevelt as an equal. With something of the same righteous indignation, Tim Cook, Apple’s chief executive, lambasts the European Commission’s ruling as “political crap”. Never mind that Apple funnels revenue though “stateless” entities unaccountable to any tax authority. Mr Cook seems to believe his business operates on a higher plane than that occupied by mere politicians or regulators. Government should just get out of the way. To my mind, Apple makes stylish, clever digital gadgets, but this scarcely bestows a special status.

Google, like Apple, always insists that it is scrupulous in meeting its legal tax obligations. There is no reason to doubt its word. What this misses is that the responsibilities of business go beyond strict adherence to the statute book.

[...] it invites a populist response. To borrow from Roosevelt: “When aggregated wealth demands what is unfair, its immense power can be met only by the still greater power of the people as a whole.”

Stephens concludes:

Roosevelt was no socialist. His insight was that capitalism requires legitimacy. It would thrive over the long term only if it were seen to be on the side of the welfare of the nation’s citizens ... everyone who supports the liberal market economy that made possible the success of Apple, Google and the like should be applauding [Vestager's] courageous effort to reset the balance.


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