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Rights for poor countries

Summary:
The Covid-19 crisis, the most serious global health crisis in a century, forces us to fundamentally rethink the notion of international solidarity. Beyond the right to produce vaccines and medical equipment, it is the whole question of the right of poor countries to develop and to receive part of the tax revenues of the world’s multinationals and billionaires that must be asked. We need to move beyond the neo-colonial notion of international aid, paid at the whim of rich countries and under their control, and finally move towards a logic of rights. Let’s start with vaccines. Some argue (unwisely) that there would be no point in lifting patent ownership rights because poor countries would be unable to produce the precious doses. This is not true. India and South Africa have significant

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The Covid-19 crisis, the most serious global health crisis in a century, forces us to fundamentally rethink the notion of international solidarity. Beyond the right to produce vaccines and medical equipment, it is the whole question of the right of poor countries to develop and to receive part of the tax revenues of the world’s multinationals and billionaires that must be asked. We need to move beyond the neo-colonial notion of international aid, paid at the whim of rich countries and under their control, and finally move towards a logic of rights.

Let’s start with vaccines. Some argue (unwisely) that there would be no point in lifting patent ownership rights because poor countries would be unable to produce the precious doses. This is not true. India and South Africa have significant vaccine production capacity, which could be expanded, and medical supplies can be produced almost anywhere. It is not simply to pass the time that these two countries have taken the lead in a coalition of some 100 countries to demand that the WTO agree to the exceptional lifting of these patent ownership rights. By opposing this, the rich countries have not only left the field open to China and Russia: they have missed a great opportunity to change times and show that their conception of multilateralism is not one-sided. Let’s hope they reverse course soon.

But beyond this right to produce, it is the entire international economic system that must be rethought in terms of the rights of poor countries to develop and to no longer allow themselves to be plundered by the richest. In particular, the debate on the reform of international taxation cannot be reduced to a discussion between rich countries aimed at sharing the profits currently located in tax havens. This is the problem with the plans being discussed at the OECD. It is envisaged that multinationals will make a single declaration of their profits at the global level, which in itself is an excellent thing. But when it comes to allocating this tax base between countries, it is planned to use a variety of criteria (wage bill and sales in different territories) which in practice will result in rich countries receiving over 95% of the reallocated profits, leaving only crumbs for poor countries. The only way to avoid this predicted disaster is to finally include the poor countries around the table and to distribute the profits in question according to the population (at least in part).

This debate must also be seen in the broader perspective of a progressive tax on the highest incomes and wealth, not just a minimum tax on the profits of multinationals. In concrete terms, the 21% minimum rate proposed by the Biden administration is a significant step forward, especially as the US plans to apply it immediately, without waiting for an international agreement. In other words, subsidiaries of US multinationals based in Ireland (where the rate is 12%) will immediately pay an additional 9% tax to Washington. France and Europe, which continue to defend a minimum rate of 12%, which would not change anything, seem completely overwhelmed by events. But this system of minimum tax on multinationals is nonetheless highly insufficient if it is not part of a more ambitious perspective aimed at restoring tax progressiveness at the individual level. The OECD suggests amounts of less than 100 billion, or less than 0.1% of global GDP (about 100 trillion Euros).

By comparison, a global tax of 2% on fortunes over €10 million would raise ten times as much: €1,000 billion per year, or 1% of global GDP, which could be allocated to each country in proportion to its population. Setting the threshold at €2 million would raise 2% of global GDP, or even 5% with a highly progressive scale for billionaires. If we stick to the least ambitious option, this would be more than enough to entirely replace all current international public aid, which represents less than 0.2% of world GDP (and barely 0.03% for emergency humanitarian aid, as Pierre Micheletti of Action Against Hunger recently pointed out).

Why should every country be entitled to a share of the revenues collected from the world’s multinationals and billionaires? Firstly, because every human being should have equal minimum rights to health, education and development. Secondly, because the prosperity of the rich countries would not exist without the poor countries: Western enrichment has always been based on the international division of labour and the unbridled exploitation of the world’s natural and human resources. Of course, rich countries could continue to fund their development agencies if they so wished. But this would be in addition to the irrevocable right of poor countries to develop and build their states.

To prevent money from being misused, the tracking of ill-gotten wealth, whether from Africa, Lebanon or any other country, should also be generalised. The system of uncontrolled capital flows and financial opacity imposed by the North since the 1980s has done much to undermine the fragile process of state-building in the South, and it is time to end it.

Lastly, there is nothing to prevent each rich country from starting now to allocate a fraction of the taxes levied on multinationals and billionaires to poor countries. It is time to pick up the new wind coming from the United States and carry it in the direction of a sovereignism driven by universalist objectives.

Thomas Piketty
Thomas Piketty (7 May 1971) is a French economist who works on wealth and income inequality. He is a professor (directeur d'études) at the École des hautes études en sciences sociales (EHESS), associate chair at the Paris School of Economics and Centennial professor at the London School of Economics new International Inequalities Institute.

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