The “having just enough” opens the door for a discussion on relevant and irrelevant inequalities

Sir, I refer to Janan Ganesh’s “The holy grail of having just enough” April 6.

It is a great article, though because of its honest shadings, those who want to see all in black or white will criticize it. But its real importance could be in helping to put the finger on the need to redefine all discussions and measuring of inequality, by allowing these to focus much more on the relevant existing inequalities, and much less on the irrelevant inequalities.

That some “filthy rich” has decided to use his purchase power to buy a yacht, something which makes yacht builders happy, or to contract a yacht crew, something that gives those crew members a job, or freeze $450m of it in a painting, such as Leonardo da Vinci’s Salvator Mundi, which should make the one who sold him that painting very happy, does not make me feel one iota unequal to him. But, I can perfectly understand that the fact I own a house, a car and a reasonable amount of money, can make many owning much less feel unequal to me, and many who have nothing feel unequal to all.

And clearly those without a job must feel unequal to those with a job… and in that case unequal to the yacht crew, not unequal to the yacht owner.

In these days when redistribution and polarization profiteers seeding so much hate and envy, at zero marginal costs, create so much odious societal divisions, it behooves us to, as a minimum minimorum, make sure those divisions are in reference to something real and relevant, and not just fake divisions that can lead to absolutely nothing good.

PS. My generous feelings towards what the “filthy rich” own, are of course based on that they have obtained all that wealth in legal and decent ways.

How the improvement of public finances is achieved, must be made a part of that “moral challenge”.

Sir, Martin Wolf correctly holds that “Improving public finances is a moral challenge”, since “Morality requires a balance between meeting legitimate demands upon the state and the cost of taxation. October 31.

Absolutely, but let us never forget that, in order to make the state more accountable to its citizens, avoiding forging a separate power, the how that fiscal balance is met, is also an issue of morality, not only a question of numbers balancing.

A government which receives its revenues mostly from citizens, by means of personal income and property tax will probably feel, one way or another, to be held much more accountable for its action, than a government which receives its income mostly from corporate taxes, sales taxes, and, in some extreme cases, like that of my poor Venezuela, from revenues like oil that governments believes to be rightfully theirs.

As a former Executive Director of the World Bank, I often toy with the idea of having WB evaluating how much governments around the world are revenue-wise accountable to its citizens, but, since the shareholders of the WB are governments and not citizens, perhaps that would just be too much to ask of it. Nonetheless, someone, on behalf us citizens, should be doing just that.

That way perhaps concepts like allowing governments to pay off their debts through inflation (financial repression) would be more understood as something immoral than as something financially savvy.

PS. And of course, while on this issue of morality, and though very few are concerned with it, let me remind you that for regulators to regulate banks without distorting the access to bank credit, favoring some and discriminating against others, should be a moral challenge too.

Tax the 1 per cent with no other changes and all you get is the 1 per cent of the 1 per cent becoming even wealthier.

Sir, I refer to Richard Robb´s “If you tax the 1 percent it is the middle class who will suffer” May 16.

He is absolutely right and I have myself made similar arguments in an Op-Ed published in Venezuela about a month ago.

That said, what Robb misses is that 99 percent of the 1 percent would, though quite bearable, suffer too, because unless the current wealth concentration channels are altered, the resulting flows would just signify that the 1 percent of the 1 percent, the real plutocrats would become wealthier.

http://perkurowski.blogspot.com/2014/04/avoid-merchants-of-poverty.html

When referencing cash, remember it is usually not really cash... & do we need special taxes on profits from patents?

Sir, I refer to Sarah Gordon’s “Be wary of the tax incentives in pharma’s deal financing” May 1, in order to make the following two observations:

First I believe that we should take the opportunity of the inequality frenzy that Piketty’s Capital has brought on, to discuss the treatment given to intellectual property right profits… as there can be little discussion that patents and similar, are among the biggest de facto inequality drivers. I, for instance, have held for some years that profits obtained under the umbrella of patents, and or of extravagant market shares, should be taxed higher than profits obtained from competing naked in the markets.

Second, when Gordon writes about the “$1.64tn of cash” that Moody estimates US companies held at the end of 2013, she would do better referring to “$1.64tn of liquid assets”… since we have no reason to believe the CFO’s of those companies keep stacks of notes hidden in their mattresses. I say this because we should not forget that any alternative use of these assets, will require their disposal… which has other effects in the market.

Towards a counter cyclical Basel?

Sir, the financial system is there to safeguard savings, to generate economic growth by channeling investments, and to promote equality by providing full and free access to capital and opportunities.

Currently, our bank regulators headquartered in Basel are primarily concerned with the first goal, that of avoiding bank collapses, and how could it be otherwise, if you have only firemen on the board that regulates building permits.

Now, one of these days, the financial system, neatly combed and dressed in a tuxedo, but lying more than seven feet under in the coffin of financial de-intermediation, is going to wake up to the fact that it needs the presence of others in Basel. At that moment, perhaps we might start hearing about flexible capital requirements, moving up to 8.2 % or down to 7.8% by region, in response to countercyclical needs.

Meanwhile it’s a shame that even their first goal might turn out to be elusive, since although the individual risks have fallen with Basel regulations, the stakes have increased, as those same regulations accelerate the tendency towards fewer and fewer banks. 

PS. This letter that, while being an Executive Director of the World Bank I sent to the Financial Times. It was not published. But, because of its importance, I included it in my book Voice and Noise of February 2006