Open letter from the world’s leading economists

At the start of the World Economic Forum in Davos, 30 of the world’s leading economists and economic experts from 16 countries signed an open letter to the heads of state and government, calling for bold steps to tax wealth, income and companies to avoid a dangerous threat to democracy .

Jayati Ghosh, professor of economics at the University of Massachusetts Amherst, said: “This week many of the world’s wealthiest people will gather at the World Economic Forum in Davos in the Swiss Alps to discuss the many crises threatening the global economy. However, they are unlikely to have the courage to speak out about the real roots of these problems – skyrocketing wealth and income inequality.”

The letter said most people are “kept in a state of economic insecurity” even as the world is wealthier than ever. “Rising costs of living, stagnant wages, a looming recession and persistent poverty” are contributing to inequality reaching such extremes that it poses a threat to democracy. What’s more, in the midst of the climate crisis, the richest 1% – over 80 million people – are by far the fastest growing source of emissions.

The Transformational Economics Commission of the Earth4All initiative concludes that wealth and income inequality will continue to grow unchecked, with devastating consequences, including rising social tensions and unrest. The Commission concludes that the growing gap between the super-rich and the rest of society threatens to fuel distrust and erode the foundations of democracy, making it more difficult for governments to deal with the many crises facing the world is currently facing.

Sandrine Dixson-Declève, Co-President of the Club of Rome, said: “If we value democracy, the world must undergo profound economic change. Put simply, we need a new social contract in society. Uninhibited, directionless growth has become long enough and has created a deep divide between the super-rich and the rest of society. It is time to change that. A more equitable distribution of wealth and income will reduce social tensions and improve the well-being of all, making democracies more stable and resilient to the many of the challenges they are currently facing.

Jorgen Randers, Professor Emeritus of Climate Strategy at BI Norwegian Business School, commented: “Unless extraordinary action is taken to solve the global problem, the result will be a decline in human well-being in the next generation – both in the rich and the poor including in poor countries. The resulting decline will create social tensions and could pose a very real risk of social collapse in vulnerable countries. A small decline in individual consumption growth is a small price to pay for better well-being for all.

In their speech in Davos this week, Dixson-Declève and Randers will highlight the urgent need for action and possible tax policy measures to be addressed in the Earth4All initiative and in their recent book Earth for All: A Survival Guide for Humanity.

An excerpt from the letter reads:

“If we care about democracy, stability and our future, governments need to redistribute wealth and income more equitably.

We propose that by 2030 the richest 10% in all countries receive less than 40% of national income. Many levers are needed to bring about such fundamental change – but all require a much higher level of public engagement and spending. Reducing wealth and income inequality can be achieved through progressive taxation of income and wealth for individuals and companies.

Unfortunately, most tax systems in the world are both outdated and regressive. They simply are unable to generate the revenue needed or ensure that the rich pay more than the poor relative to income. However, there are ways to change this if there is the political will to take the right action. So we call on world leaders to take bold steps this year:

– To tax wealth, particularly the wealth of the extremely wealthy, wherever that wealth is held, including in tax havens, and to facilitate this through the development and sharing of national registers of wealth held in various forms.

– Tax income, including capital gains, more progressively

– Corporate Taxation – Applying a global minimum corporate tax in 2022, close to the global average rate of 25%, and applying the same tax rates to multinational corporations as domestic corporations by introducing a uniform taxation of their global profits on the basis each country’s share of sales, employment and assets held in each country.

– Taxation of chance profits in all sectors, especially profits made in times of scarcity and speculation when the rest of the world is worse off.

– Tax luxury consumption of carbon and biosphere and phase out all fossil fuel tax incentives.

Complementing these efforts, governments must once and for all close international tax loopholes and eliminate perverse tax structures to reinvest all proceeds from progressive wealth and income taxes into social programs, strengthening gender equality, decarbonization, and transforming energy and food systems that serve the needs of the people.

The business leaders gathered in Davos this week may believe that this strategy runs counter to their short-term and individual interests, but that is a very narrow and ultimately self-defeating view. We call on you to champion this agenda and be a positive force for democracy, stability and the long-term future of humanity.

The letter is supported by the Transformational Economics Commission of Earth4All, a group of leading academics and experts formed to explore new economic thinking based on models of various futures on Earth. Signatories include:

– Sharan Burrow, former General Secretary of the International Trade Union Confederation (ITUC) 2010-2022

– Robert Costanza, Professor of Ecological Economics, Institute for Global Prosperity (IGP) at University College London (UCL)

– Sandrine Dixson-Declève, Co-President, Club of Rome and Project Manager, Earth4All

– Lorenzo Fioramonti, Professor of Political Economy, Director of the Institute for Sustainability, University of Surrey

– John Fullerton, Founder and President, Capital Institute

– Owen Gaffney, Earth4All Project Manager and Chief Impact Officer Nobel Prize Outreach

– Jayati Ghosh, Professor of Economics, University of Massachusetts Amherst

– Tim Jackson, Professor of Sustainable Development and Director of CUSP, the Center for Understanding Sustainable Prosperity at the University of Surrey

– Jorgen Randers, Professor Emeritus, BI Norwegian Business School, co-author of The Limits to Growth