IMF: U.S. Could Be Headed For Social Unrest From Wealth Inequality, More Taxes Needed
Advanced economies should tax the rich as a hedge against revolution.
That’s the message from the International Monetary Fund, a Washington, D.C.-based international financial institution whose 190 member countries work to promote global financial stability. The IMF describes itself as an overseer of members’ exchange-rate policies and “an enemy of surprise.”
To distribute wealth more fairly and close the wealth gap, rich countries could use more inheritance, property and progressive income taxes, and more taxes on “excess” corporate profits, the IMF advised.
Eight-five percent of the world’s wealth is held by just 10 percent of the population, according to global investment bank Credit Suisse’s “World Wealth Report 2103.” If wealth isn’t soon distributed more equally, expect more social unrest worldwide, said the IMF recently.
The covid-19 pandemic exposed pre-existing inequalities in access to health care, education, and digital infrastructure, the IMF’s Fiscal Monitor revealed. To correct these inequalities, countries could increase investment in education, health, and early childhood development, and strength social safety nets, the international financial institution advised.
“The pandemic has deepened inequalities,” Susana Ruiz, the non-profit group’s international tax policy leader, told Reuters, noting that billionaires’ wealth increased globally by “a staggering $3.9 trillion between March and December 2020.”
The IMF warned that economic inequality could undermine public attitudes to the fairness of taxation and welfare systems and lead to social unrest, The Guardian reported. Governments should shift the burden of taxation from low and middle earners to wealthy members of society, the IMF advised.
If not, revolution may be on the horizon.
“It is almost universally true that violence has been necessary to ensure the redistribution of wealth at any point in time,” Stanford Professor Walter Scheidel, told Stanford News. This is the thesis of his book “The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century.”
But Scheidel said he is pessimistic that governments will resolve inequality. “Reversing the trend toward greater concentrations of income, in the United States and across the world, might be, in fact, nearly impossible.”
Billionaire hedge fund founder Ray Dalio has said that the wealth and income gap in the U.S. is a national emergency.
“Flaws in American capitalism have created destructive and self-reinforcing gaps in education, social mobility, assets and income — and the result could be another revolution,” Dalio wrote in an essay entitled “Why and How Capitalism Needs to Be Reformed.”
The IMF, however, sees hope. “If governments can meet demands for basic services while strengthening transparency and accountability, trust will improve,” its report stated.
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“If governments are unable to meet the challenge, the erosion of trust could lead to more polarized politics in which some call for a smaller government, while those affected by illness or job loss would urge for more government services.”