Global wealth concentration has worsened for over 250 years because of favorable taxation and other polices that benefit the wealthy, and stricter taxation rules are necessary to address the inequality, French economist and author Thomas Piketty said in Taipei yesterday.
The author of controversial bestseller Capital in the Twenty-First Century said more than 50 percent of the world’s wealth is controlled by the top 10 percent of income earners, a jump from the 30 percent they controlled in the 19th century.
The increasingly skewed wealth distribution results from a faster rate of return on assets than the rate of economic growth in developed countries, he said in a talk at the Taipei International Convention Center.
Only a wealthy minority can enjoy returns on assets while the entire labor force contributes to GDP growth, the economist said.
If the gap keeps increasing, dynastic wealth will be able to grow to gigantic size and disrupt society, as corporate executives continue to benefit the most from setting remuneration packages in their favor and pulling strings to make themselves the biggest beneficiary of public policymaking, Piketty said.
The US owes a large part of its increase in inequality to the rise of “super-managers” in different sectors who earn extremely high salaries, he said.
Globally, developed countries have accumulated wealth disproportionate to their lackluster GDP growth, Piketty said.
The world and policymakers in different governments can address the inequality issue with fairer taxation and spend more on education so that everyone has a better chance of equal opportunity, Piketty said.
The top income tax rate in the US rose from 25 percent in 1932 to 94 percent in 1944, and the average top rate was 81 throughout the years 1932 to 1980, and the higher income tax helped ease wealth concentration until former US president Ronald Reagan slashed the taxes, Piketty said.
Wealth concentration is more serious in the US than in Europe and Japan, he said.
He said a global wealth levy was needed to help make the world more equitable in terms of wealth distribution, though such an idea would be difficult to implement.
Morris Chang (張忠謀), founder and chief executive of Taiwan Semiconductor Manufacturing Corp (TSMC, 台積電), the world’s top contract chipmaker, said he has reservations about the high income tax rates that Piketty has suggested — such as 80 percent for earnings of more than US$1million.
Chang was a member of the panel at Piketty’s talk, along with Chung Yuan Christian University professor Lai In-jaw (賴英照) — a former Judicial Yuan president — and Nelson Chang (張安平), chief executive officer of LDC Hotels & Resorts Group. The panel discussion was moderated by former National Science Council minister Cyrus Chu (朱敬一).
“Inequality is not all bad, since Piketty’s speaking fees are likely much higher than mine” at NT$10,000 “due to our different achievements in the economic realm,”Chang quipped.
A nation needs to have a safety net so that everyone has health insurance and the government should try its best to close all loopholes on tax evasion, Chang said.
Governments should introduce a sound education system to ensure that all their citizens have the equal opportunity of a bright future, the entrepreneur said.
Additional reporting by staff writer
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