AS (2017) CR 13
Addendum 1



(Second part)


Thirteenth sitting

Tuesday 25 April 2017 at 3.30 p.m.

Fighting income inequality as a means of fostering
social cohesion and economic development

The following texts were submitted for inclusion in the official report by members who were present in the Chamber but were prevented by lack of time from delivering them.

Ms JAKOBSDÓTTIR (Iceland) – Mr Hunko gave a good description of how the degree of inequality has risen in the last few years. At the same time, we have witnessed a progressive change of attitudes towards the emergence and development of economic equality and inequality within international organisations, hitherto not considered radical in any way. Gradually, the study of empirical evidence has bent the trajectory of economic theory from a near religious belief in the free market as the most efficient way to generate economic growth, towards a more balanced view, where the disadvantages of unleashed markets get due attention.

The empirical data on which the Organisation for Economic Co-operation and Development, the International Monetary Fund, and the World Bank establish their research discloses that from the onset of deregulation in the late 1970s and early 1980s economic inequality has increased in pace with the liberation of market forces, less government intervention and the privatisation of the public sector. This unfortunate evolution has damaged social cohesion and reduced economic growth in the countries affected. New research carried out by the OECD concludes that the member countries would be more prosperous had their economies not been affected by increased inequality. Cambridge University in England has also published research results that have established that the British economy has grown substantially less than it would otherwise have done because of the effects of neo-liberalism and policies pursued by Margaret Thatcher. It is clear that new, challenging evidence has emerged that calls for a revision of economic theory. We have experienced a paradigm shift, and we should act accordingly.

As mentioned in the proposal, we need to reinforce and expand our social welfare systems and strengthen the pillars of the welfare state to ensure equal opportunities and rights for all. However, I also agree with those who claim that radical change is needed in our approach to taxation if we sincerely aim to increase economic equality. The tax system is probably the most efficient tool to enhance economic equality. It is, in my opinion, beyond all doubt that taxing should be progressive: super-high salaries should be taxed accordingly. A tax on capital gains should also be an integral part of any tax system, since the huge difference between the amount of revenue generated by capital gain and wages is one of the main reasons for growing inequality in the contemporary capitalist society. Therefore, even though it is important to focus on income inequality, it is also important to talk about inequality in wealth, with which we are also familiar in my homeland of Iceland. Furthermore, since the world economy has now become global, it is imperative that the world’s legislatures discuss the implementation of a global wealth tax across borders as a viable and realistic option within international taxation.

To reach the important goals of fair taxation, sustainable growth, and social cohesion, we need a broad degree of co-operation between governments and a broad understanding of the need for equality to achieve social and economic development.

Mr VALEN (Norway) – Wealth is concentrated among the owners of capital, while the share of income to workers is decreasing in many developed countries. Inequality is rising across OECD countries and a whole generation in Europe has every reason to be worried.

Over time, this development is simply not sustainable, and it drives disillusion and lessens the public’s belief in our political system. If millions of people learn that they have to work harder and harder over the year, while at the same time their economic situation worsens and welfare systems are weakened simultaneously, the legitimacy of our political system is eroded accordingly.

I stress that this is a political problem that requires political attention; first and foremost because the economic regime driving the rising inequality is inherently unfair; and, secondly, because the absence of constructive, political solutions is dangerous. The absence of solutions in the face of rising inequality opens the door for demagogues, for far right movements, for blame games, and for general distrust, which, in turn, further contributes to eroding the trust-based welfare systems that enabled more equality in the first place. In other words, we are in a downward spiral unless we are able to change the way the economy works for most people.

Rising inequality does not only mean increased instability in peoples’ lives and instability in the fabrics of our society, it also means increased instability in our economies. A more equal economy, with a well-paid and organised working and middle class, paves the way for more sustainable economic growth.

It is not a law of nature that taxes should always be decreased, that capital should always generate more income than labour, and that the largest corporations should be allowed to evade tax by employing extremely complicated tax schemes and shipping their profits offshore, leaving ordinary people with the bill. It is all the result of political choices – or an absence of political choices. Other political choices can, and must, be made.