How would wealth tax address income inequality?


The “Global Wealth Report 2015: Winning the Growth Game”, published in mid-June by the Boston Consulting Group BCG, announces nothing new, which does not mean that we should not be concerned about this development. "Super-rich get richer even faster" is the headline of the Internet platform, whose report I would like to quote in full here:

June 20, 2015: The Boston Consulting Group BCG published its "Global Wealth Report 2015: Winning the Growth Game" in mid-June. The report is full of success stories. Global private financial assets (business assets, real estate, luxury items are not included) rose from 2013 to 2014 by US $ 17.5 trillion (US $ 17,500,000 million) to US $ 164.3 trillion.

"Worldwide" means only 62 countries, about a third of the almost 200 UNO members. Above all, all African countries south of the Sahara (except South Africa) and most of the former Comecon, which stretched from Yugoslavia to Vietnam, were left out. There are many people here, but no financial capital. Global financial assets are expected to rise to US $ 222 trillion in the next five years up to 2019. This is 2.4 times the world economic output expected by the International Monetary Fund for 2019, world GDP, of US $ 93 trillion.

BCG has a strong old-world versus new-world dynamic. The former consists of North America, Western Europe, and Japan; They currently store 64% of world wealth at US $ 105 trillion, but the New World - that is, all other regions, especially the emerging Asian countries - are catching up: in 2019 they are expected to concentrate 43% of world wealth on themselves. Asia excluding Japan has been the second-highest wealth region since 2014 and will take the top spot by 2019, ahead of North America and Western Europe. This is hardly surprising given the much faster pace of economic growth.

Where does the financial wealth come from?

When it comes to this question, BCG does not discuss Marx's theory of exploitation, but rather distinguishes between new wealth and income from existing wealth. On a world average, around three quarters of the growth of US $ 17.5 trillion in 2013/14, i.e. US $ 13 trillion, comes from income from existing wealth (slightly less in the Middle East and Latin America, more in Japan). The essential point here is investments in stocks and similar holdings. In 2014 they brought a return of 11% through price increases and dividend payments. Not to be despised are bonds (government bonds, etc.) with a yield of 6%. The so-called New Wealth brought the remaining US $ 5 trillion in 2014. According to BCG, they result from the savings from the increased economic performance in 2014. According to the IMF, world GDP was US $ 77 trillion in 2014. From this value, the aforementioned US $ 5 trillion and a substantial portion of the above US $ 13 trillion were used for the appraisal of financial assets - enormous amounts of curdled work that go to those who already had decent financial assets in 2013.

Who owns the financial assets?

According to BCG, there were 17 million millionaires worldwide in 2014. Even if that is more than Bavaria has inhabitants, that is a negligibly small percentage in relation to the world population. With US $ 68 trillion, they held 41% of the private financial wealth of US $ 164 trillion. In just five years, by 2019, their share is expected to rise to 46% from US $ 222 trillion. This is far exceeded by the sub-group of the UHNW (ultra-high-net-worth), that is, people with at least 100 million assets. There are likely to be around 20,000 worldwide, again a tiny fraction of the millionaires. Her wealth is expected to grow from $ 10 trillion today to $ 18 trillion, an 80% increase.

Money in tax havens

Around US $ 10 trillion are now offshore - at BCG that is foreign money that has flowed into the banks and asset managers in the relevant tax havens from Switzerland to the British Virgin Islands (a quarter of it in Switzerland alone). Unfortunately, BCG does not provide any information as to which asset holders account for this US $ 10 trillion. Probably most of the millionaires - then they would have invested a seventh of their wealth in tax havens. The percentage may be higher for the UHNW.

And the rest of society ...

There are many more people who are on the verge of starvation than there are millionaires: 800 million people according to the statistics of the UN organization FAO. At the beginning of the 1990s, the UN's Millennium Development Goals were formulated, a catalog of lofty goals for the turn of the millennium that should be completed by 2015. One goal was to cut hunger in half (actually a terribly undemanding goal in such a rich world). In 1991 a good 1 billion people went hungry - the halving goal was therefore terribly missed. In the last few years the number of starving people has decreased even less than before. Of the 215 million reduction between 1991 and 2015, China alone contributed 165 million.

The G7 summit in Elmau has just ended. 7 heads of state and 7000 hiwis brought with them formulated a text about climate change, which was hailed in the press. The isw has already made it clear how completely inadequate this lip service is. In the meantime, another preparatory round for the Paris Climate Conference at the end of 2015 has come to an end with no results worth mentioning and no sustained consensus. In the meantime, more and more experts in the World Bank, UN, IEA etc. assume that the 2 ° target cannot realistically be achieved - under the given political circumstances: This is primarily the fact that the energy substances stored in the ground are in Hundreds of thousands of billions of dollars can be converted if they are promoted. A circumstance that is likely to interest and electrify the UHNWs more than the collateral and consequential damage, especially in poor countries (where there is no financial capital anyway) - especially since you can fight these problems with the military (i.e. profit opportunities) , see the construction of Fortress Europe (and Fortress USA) with upstream military action against the refugees who can no longer stand it at home.

The anti-G7 alternative summit and the anti-G7 demos were shaped in terms of content and appearance by an extraordinary breadth of organizations and topics, all of which united the concern and endeavor: How can we create another world that is socially, environmentally and remains habitable in terms of peace policy and enables a good life for non-millionaires as well? And everywhere there was an explicit position or even the premonition that this goal is absolutely contrary to the financial maximization goals that BCG serves. In the meantime, even the Pope is on our side socio-politically. This shows that the opinion is increasingly gaining ground in society at large that the vital interests of the 99% can only be enforced against the financial interests of the top 1%.

txt: Franz Garnreiter, taken over by isw