Like every year, and right on time for the best snow in the Alps, the richest and the most powerful in the world gathered last month in Davos to fraternize with politicians, academia, and NGOs. A perennial topic of discussion is climate change — rightly so — although nearby airports cannot cater to more private planes those days.
This year’s joke is a good one: a group of billionaire heirs has urged governments across the globe to “tax their huge wealth.” This is a very touching philanthropic move that comes from individuals who have the best tax lawyers in the world, whose job is to find loops holes in the law — or to create them.
This ludicrous proposal raises some important questions about why this “donation” would be needed, or not. The current structure of many economies is leading to increasing inequality. After WWII, the developed world experienced great convergence thanks to the role of the manufacturing sector. Industry was the great middle-class creator, resulting in a phenomenal social transformation: better education, better access to health services, entrepreneurship and, most important, political empowerment. Towards the end of the 20th century, globalization and offshoring to more cost-competitive markets shifted the “development machine” to emerging countries, especially towards Asia. We find analogous success stories in Korea, Taiwan, and definitely China.