 Mae'r gweithio yn ennill y gallwn y byd dweud yma'r gweithio'r wyf iawn. Mae'n gweithio cymaint yn syniadau yn ymweld yn rhoi. Mae'n rhan o'r gweithio'r ddisgyngrifio ar yr urnod ar hyn. Byddwn i gyda'r gweithio'r gweithio'r cymryd. Mae'n gweithio i gyd yn y sefyllfa. A oeddwn i'n meddwl i ni, yn unig ystafell o'r cymrydau, yma ywалистodau gyda'r ysgol, gyda'r ysgol wedi cyd-fawr, www.wef.ch. I will be voting on the motion, but I will open it in a second, is promoting inclusive growth calls for more emphasis on access to opportunities and less on redistribution. We will ask you at the beginning of the session whether you agree with that and we will ask you again at the end whether you agree with that. Why do we care about inequality? hungry actually easier to ask that question. But I just wanted to set the scene a little bit with a sense of the scale of what we are facing right now. Over the last twenty five thirty years, the combination of globalisation and particularly technical change has meant that in many countries of the world, the gap the income gap between those the top and the bottom has widened dramatically. I think it's figures from the OECD that say the top 10 percent of people in OECD countries is now nine times that of the bottom 10 percent and it used to be seven. This is also not just an issue within the OECD, whether it's China, whether it's India, whether it's many countries in Africa, inequality has been widening. In fact, the majority of people in the world live in countries where inequality has been widening. At the same time, of course, global inequality has narrowed as poor countries have grown faster, but it is nonetheless an enormous issue in many countries. And I think it is very likely to continue the technological innovation that we're seeing at the moment, whether it's the fourth industrial revolution, as you claim at the WEF, or the third, whichever industrial revolution you're in, there is increasing pace of technological change that is likely to mean more goes to those winners at the top. And in slow-growing economies, that means slow growth coupled with rising inequality mathematically means the median incomes and below stagnate or shrink. This has economic consequences. For a long time there was a debate about whether inequality was good or bad for growth. I think increasingly economists are coming down on the side that it is bad for growth. It makes growth more precarious, more fragile. The OECD and the IMF have done some interesting work on that, and it clearly has political consequences. Many countries now we see the issue of inequality, opportunity, stagnant median wages on the political agenda. I'm struck actually in the United States where in the last presidential election it was really not on the agenda, and in this presidential election it is absolutely on the agenda on both sides. So there's agreement that it is an issue. There is not agreement, I think, on what should be done about it, and where the emphasis should be on how this challenge should be addressed. To caricature slightly, there is one set of people that says the emphasis should be on improving equality of opportunity, and we will discuss what that means. There is another set who says no part of the solution, or if you are extreme, most of the solution involves redistribution. That's what we're going to debate today. We're not going to debate the existence of inequality, we're not going to debate the consequences thereof, we are going to debate what is the right way to try and promote inclusive growth. So before I introduce my panel, why don't you all start voting now? So to remind you, the promotion of inclusive growth calls for more emphasis on access to opportunity and less on redistribution. So while I introduce the panellists, perhaps you could vote. Actually you guys don't need any introduction, but just in case you don't know, to my right here is Joe Stigliff, Professor at Columbia University, author of several books on inequality, Nobel Laureate, one of the most, I would say, high-profile voices on one side of this debate. To his right, Christia Freeland, Minister of Trade for Canada, and author before that, when she was a mere journalist like me, of Plutocrats, probably an extraordinarily good book on the whole inequality debate. Ricardo Hasman, director of the Center for International Development at Harvard University, one of the most distinguished analysts of international economics and international social change. I think that's...have you written a book on inequality? If you have, I've missed it and I apologize. You probably have, you've written so many books. Anfal Goreeia, Secretary-General of the OECD, an organisation that has done an enormous amount of work on this. What is the latest book that the OECD started with inequality, with a question mark at the end? Growing and Equal with a question mark? Growing and Equal, then it was divided. Divide and We Stand? And now it's... Why inequality keeps rising and this one is in it together. Why less inequality benefits all. So there you see the evolution of official thinking. And here we have... And the report is all on board includes the growth. Here we have Richard Sammons, managing board member at the World Economic Forum, who will also offer his perspective. So with that, what is the mood of the room? Let us see. Can we have the results of the voting, please? Sixty... I have very short eyesight. Sixty-five, thirty-five. Sixty-five, thirty-five. So if 65% of you think that it calls for more emphasis on opportunity, but over a third of you think it calls for more emphasis on redistribution. So there you go. Sixty-five, thirty-five. Let's see what happens at the end of this discussion. Why don't we start unheld with you? Thank you. Let me say that it's like Sophie's choice in a way, but then I would tend to slide with the majority being a Democrat. The promotion of inclusive growth calls for more emphasis on access to opportunities than on redistribution. Redistribution important, but promoting access to opportunities should be our first protocol because redistribution is a palliative, where starting with a focus on reducing inequality of opportunity offers a means of actually curing the patient rather than just taking away the headache. Now, and curing the patient should be at the top of every government to do list. Inequality has been called many things, but the latest is the defining issue, the defining challenge for our future. And Zanie mentioned this, the income of the 10% poorest fit 10 times and the income of the 10% richest. And the problem is so what? So is it big or small or whatever? Well, it used to be seven a generation ago. So it increased by 30 to 40% in one generation, clearly moving too fast, clearly in the wrong direction, accelerated by the crisis obviously. Now wealth inequality even higher. We've just been told about some of the numbers, the 1%, the 62 people with half equal to three and a half billion, et cetera, which makes it even worse. But inequality is not just about assets. It seems into every area of people's lives, it's about jobs, health, educational attainment. The better off everywhere report better health, the longer lives, clearly better lives, benefit from greater access to the job opportunities. So equalizing the opportunities is even more difficult because the ones that are better off already are better off in terms of access to opportunities themselves. So to be blunt, we live in a world where your initial conditions matter a lot to determine when you end up. Now it reminds us about where is your code, your postal code, and therefore it will determine what your future is going to be. Taken to an extreme, this is a little bit of this kind of problem. Prominent cause of untold wasted potential. It hurts us all by dragging down productivity and growth. And I have to say the fact that inequality hinders growth is not intuitive, is not a moral or ethical or even political question. We've measured it and we've compared it and we benchmarked it and we followed these numbers and it's taking away, it's chipping away at growth every single day. As inequality grows and the genie grows in every single country etc. And then the growth is being affected in all these countries. Inequality of opportunity we should focus as our priority. It fosters a number of synergies in different areas. Early childhood education, absolutely critical to take a look. Preventive health measures, again absolutely critical. 10 to 1 benefit, it's almost a cliché now. Spend $1 now, you'll save $10 later in terms of treatments. A flexibility approach to labour markets, a flexible labour force. Both where they are both protected but also can be reskilled. Reskilling, upskilling is absolutely critical, particularly when you're talking about the fourth industrial revolution and the impact of technology. There's a problem also productivity differential between firms and that is also important because then the question of equality and equality will depend on whether you are in one of those firms which is on the leading edge or whether you are in one of those firms which may be destined to close or disappear or whether you are part of the workforce and because your company did not upskill you and reskill you enough then you were the object and you were the victim of the increases in technology. We were part of them 40% that is threatened by progress. There are a number also trade-offs, trade-offs, trade-offs. This is also another key question. When you're talking about redistribution the question of the trade-off does not become very obvious but the question of trade-offs is very important to see when you take one decision how does it affect and it is a permanent impact or not. Let me also say when talking about leveling the playing field the question of taxes and the tax system is absolutely critical. Again, when you have the inequalities the answer to the inequalities which has been documented and has been very clearly established as a fact and a threat and a problem the answer has to be inclusive growth. That has to be the way forward. We even had this, I was telling you this discussion about whether we could call inclusive productivity. What we're going to be doing we got into a terrible discussion at the OECD. We're still having that discussion going on because half of the members said absolutely unacceptable, half said it is brilliant, best thing ever. This is like green growth. They go together, they go well and some of the technical people, the staff are divided. But because it's so divisive you feel it's kind of a promise that something good can come out of it. Every segment of society has to buy into this question of opportunities. When we launch our inclusive growth we're now having mayors, we're having private sector, we're having of course governments. Even having some champions that are friends of the inclusive growth concept going forward. But I would say emphasize the equality of the access to the opportunities. We believe that has more promise. As I said redistribution has to be a fact in the policies every day. But we believe the leading edge. If you have to choose between the two, if you have a stark choice 100% of one or 100% of the other, no doubt I go with opportunities rather than redistribution. Thank you. That was a robust explanation for that view. I think two things in particular. You argue that redistribution is a palliative, whereas you are offering a cure, and it is one with no trade-offs, whereas redistribution has trade-offs. Our debaters are set on opposite sides. Joe Stiglitz, I'm going to give you the floor now. You are going to argue I gather in favour of more distribution. Well, I'm actually going to argue that the question is not very well posed. And I would, if you had asked me, I would not have posed the question. Let me begin by pointing out. Actually, there's a third thing that I've emphasised in my last book, which is that we call a predistribution. It's the inequality in market income. And the real disturbing thing of what's happened over the last third of a century is the increase in inequality in market incomes. So what is striking, and Vice President Biden talked about this last night, is that over the last third of a century, productivity of workers has almost doubled. Wages have basically stagnated. This is a new kind of economics. It used to be that when productivity increased, wages increased in tandem. Suddenly, or over the last 35 years, we rewrote the rules of the market economy in ways that led to a less productive economy and more inequality. And that is what has opened up that gap. And so if I were to say, what is the most important thing is to rewrite the rules to improve the market distribution of income, it's important because one of the reasons that there's such unhappiness today with inequality is partly the way it's generated. It's able to be unfair. It's evidence of something's wrong with our economic system. And productivity goes up and workers saying we're not getting a fair share. But then to the point of the trade-off issue, the point is these rewriting of the rules to increase inequality have actually decreased economic performance. So in fact, I would go even further by rewriting the rules to get more equality. We would get a more productive economy. Just to give you one example, one of the things that we've done over the last third of a century is rewrite the rules which have encouraged short-term thinking, which have encouraged the result of that short-term thinking is firms don't invest as much in workers. They don't invest as much in capital and technology. A striking thing about what's happened since the crisis of 2008. Central banks have pumped in gazillions of dollars of money into the system. Investment hasn't increased at all. It's actually decreased as a share. So these are all evidence that our economic system isn't working. And then you have to ask why. It's not working for a majority of our citizens. A few people at the top are doing very well. But for the majority of our citizens it's not working. You have to ask why. Growth more recently and since the last 35 years have been lower than in the decades after World War II when we had shared prosperity. And the reason is we rewrote the rules in ways that led to less opportunity, less long-term economic performance and more inequality. So that's my first point. The second point is that in fact you can't really get in any society equality of opportunity without a certain degree of equality of income. Inevitably when you have the gaps as large as they are in the United States and some of the other advanced countries they get translated into inequalities of opportunity. And in fact there's a very strong relationship that's been shown between inequality of income and wealth and the one-end inequality of opportunity. So if you are concerned about inequality of opportunity and I think you should be, I'm strongly, you know, I can't disagree with anything that you said except the last summary sentence that if you are concerned about equality of opportunity you have to be concerned with the equality of outcome. Inequality of income equality of wealth. These are just the facts. And if you want to understand the mechanisms by which there's this intergenerational transmission of mechanism across generations of inequality if you want to understand the mechanisms by which our societies have wound up with so much inequality they are so intimately connected that you have to actually address both. I guess the third point I would make is that when we talk about redistribution one has the sense that you're taking a lot of money away from the people at the top and moving it down to the bottom. A lot of what I think, if we just had a fair tax system that taxed the people at the top that made multinational corporations pay taxes we wouldn't need more redistribution. The real problem today is in the United States because I know that data better. We have a regressive tax system that people at the top pay tax rate of 15% when people much lower down are paying 30% or more. And the multinationals are escaping taxation so they don't pay. And OECDs had important effort called BEPS to close the loopholes. Angel knows I've been a little bit critical that they haven't gone far enough but he agrees with that there is a lot more that needs to be done but it was an important and impressive first start. But here again what I'd argue is there's not a trade-off because our regressive tax system is very distortionary and there's lower economic growth. When you tax land speculation at a lower rate than you tax work it distorts the economy. I've seen no evidence anywhere in economics that taxing land at a lower rate leaks to more land. And so the supply elasticity you know so so the point is a more fair system would actually lead to more economic growth so again no trade-off in fact positive. Finally the IMF studies have shown that the critical variable in determining the growth is the inequality the final inequality you know what you get at the end. And partly I suppose so the evidence is this macroeconomic evidence is that the redistribution doesn't have the negative effects that one might have thought partly because of some of the reasons I've just described but their evidence is very much in that in terms of that this new thinking about equality is good for growth what it shows is the real variable that you want to focus on is the final what you get at the end but you know my own feeling is it's much better to begin by getting a fair distribution of income more opportunity and then you have less burden on redistribution. Well that was another very powerful intervention in the opposite direction let me let me briefly summarise it so one is that you can't get in a you can't get a quality of opportunity without equality of outcome secondly that it's not about redistribution it's about simply creating an equal playing field on the tax system and that is there's no trade-off there that that is pro-growth and thirdly that it's about redistribution that was the new concept you introduced that actually the rules of the game in capitalism have been rigged what you didn't say this but I'm assuming you mean away from labour towards capital and that that redistribution has to be addressed very very interesting I wonder if that's going to have affected anybody's views Ricardo your turn Okay so let me start by saying that I may differ on some things not too many with Joe but in part of it because Joe is is somewhat focused on US inequality and I think that the issue of inequality in the US is slightly different from two other issues one is inequality at the global level and inequality at the global level say the US is at $60,000 of income per capita India is at $1,600 of income per capita why are these huge differences in income per capita between countries it is differences in productivity it is not differences in schooling by the way I mean the evidence is very clear that it's not differences in schooling that those are not large enough to explain these huge differences it's differences in productivity when you look in the developing world the inequality in the developing world in the studies I've done suggest that there's enormous inequality in productivity within countries while in the US the richest state is about twice as rich as the poorest state in Mexico Nuevo León is nine times richer than Chiapas so there's huge differences in productivity within countries and even across within states between within cities and so on so the inequality I care most about is inequality in productivity because inequality in productivity is loose loose is you are using people in very unproductive ways that don't produce much for anybody else that if they just could be as productive as the people at the top we would get more output and more equality so inequality in productivity is I think a the source of problem that we should address now why do we get these broad distributions of productivity why is there so much inequality in productivity I would say it's because to be productive you need many things you need places where workers can go in and out power is there water is there the logistics work there's a variety of skills in the labor force that can go to work and go back there's commute times and so on so it's places that are productive and if you look across the country there are very few places that can be productive where productive activity can happen in an efficient way so you have these places that are high productivity places and then everywhere is low productivity place now why do we observe this we observe this because many of these inputs that you have to put in place have some fixed cost of putting them in place and then very low variable cost you know it takes some money to put a wire into a house but then you know switching the light is a low cost thing so these fixed costs cannot be borne in by poor people so we don't connect poor people or poor areas because they cannot pay the fixed cost but if we don't connect them they'll be unproductive and hence poor so we get these productivity traps because we have not included people into the ecosystem into the network that would have made them productive so countries governments are facing the following trade-off they can put some of all of these inputs everywhere so everybody democratically gets a little bit of everything or some of everything or you can put all of these things somewhere now if you put a little of these things everywhere you get nothing everywhere so what ends up happening is you get all of these things somewhere and then you have growth there and not everywhere else so that people are left behind and you measure exposed, you measure these rising inequalities so the inequalities are not really in the sharing of the pie it's inequalities in the sizes of the pie in places sizes are very small because it's very hard to be productive there in other places the size the pies are very large and capital and labor can share on on that much larger pie so what I think is called for is to find ways to lessen this trade-off of putting few things everywhere versus everything somewhere so ways in which we can share in the cost of connecting people or including people whether it's you know that will involve changes in the way we urbanize in the places we put housing in the places we connect people to the possibility of going to work in Latin America for example it's typical to have two-hour commute times to go to work two hours to come back you know a daycare center so that women can participate in the labor force and so on so there's a long list of things that we need to do to have more inclusive productive societies and these things cost public resources and I think that the best way to fund this is with a progressive tax system but the reason why we want this progressive taxation is to have the resources with which we're going to include people in higher productivity activities that's a very weasly shift to the other side I may say but a very interesting point the fact that there's a focus on the geography of inequality and the need for investment and infrastructure across a broader area funded by a progressive tax system Christia what's your take on this okay well um I uh spend my days in a Westminster style parliament help but start with a rebuttal gentlemen both of you have made my argument and joe's you've talked about how terrible the inequality of opportunity is you've outlined I think some very wise and smart things we need to do to change it and those things cost money and that money we get by redistribution so really I should stop talking right now look I think we need to begin the argument the discussion by acknowledging a real irony that all of us partake of which is we are having this debate about income inequality at Davos this is a discussion within the 1% and some of the rooms will be in this week is within the 0.1% we all have a vested interest here and I think we need to really acknowledge that and so I wasn't at all surprised to find that 65% were in favour of access to opportunity versus this slightly more touching my personal interests idea called redistribution so please do think about that and also please realise joe and I are not daunted by those odds my party was in third place in the polls in August we won a thumping majority two and a half months later so let's see if joe and I can do that in ten minutes I want to start by really putting a little bit of data behind joe's point about taxation when we talk about redistribution today in 2016 we need to do that from a perspective that really acknowledges the extent to which the tax system since the second world war has really shifted away from the top in 1963 in the United States corporate taxes accounted for 25% of government revenues today it's 10% and falling the top marginal tax rate in the United States in 1965 1963 sorry it was 65% the corporate one in 1963 was 91% this is the United States now not only are the headline rates much much lower today but as joe said the actual rates are really really low Warren Buffett likes to say he pays taxes at a lower rate than his secretary and he's right we know the actual data of one very successful very wealthy American a guy called Mitt Romney he released his 2010 tax return and when he did that we learned that in 2010 he earned 21 million dollars he paid 3 million in taxes that's a tax rate of 13.9% so when you're talking about redistribution in the age of income inequality bear that in mind there's another factor that I think is really important to think about when we think about this and it's something that Zannie is a long time friend of mine and colleague former colleague she's not in the Canadian cabinet yet but and she gave a great introduction and I think without intending to she hit on a point which is core to my thinking about this which is the winner take all nature of what Klaus Schwab calls the fourth industrial revolution what I and my book often talk about as the impact of globalization and technology revolution and I think we really need to start grappling with it's not just a possibility the fact that the way the 21st century economy is working is to tend to concentrate much much more of the rewards at the very top with the people who are yes really really smart really really hard working really really lucky and much less at the bottom so let me give you one number to focus on how that process is working in the 1950s Detroit was the Silicon Valley of the United States GM just one company there employed 600,000 people today Google and Facebook together employ 60,000 that tells you how this new economy is working and why it is creating when it works when it is successful it is creating a more unequal society so I want to be really clear I am not for a nanosecond opposed to innovation opposed to quality of opportunity opposed to success and wealth creation I'm Canada's trade minister you know for gosh sakes you know my job here is to sell you on Canada tell you come and invest in our fabulous country to go and champion Canadian exporters but the reality is that in this fourth industrial revolution economy income inequality is structurally built into this you know we look at a place like Silicon Valley this is I think the world epicenter of opportunity you can't say there is an opportunity there people go from all over the world to get access to those opportunities but it is also the epicenter a geographic epicenter of income inequality as a cabinet minister I often think that there is this paradox of Silicon Valley the only thing worse than inequality of a Silicon Valley is not having a Silicon Valley in your own country so given that we do have to grapple with the reality that we need some redistribution I know that Joe and I are arguing the less pleasant side of this debate access to opportunity this is the milk and motherhood of talking about income inequality no one is opposed to it I'm not opposed to it either it's fabulous and it's easy to champion but I think we all need to confront the fact and we like we're all the winners in the winner take all economy that's why we're here and we need to really face up to the fact that if we want to live in communities in societies of inclusive growth redistribution is an important part of what we need to do now you might accuse me you might say oh Christiw you know you're just an idealistic writer this is politically not possible you could have said that to me two years ago but of everyone seated here I'm the only person who actually needs to get people to vote for her and three months ago I was knocking on doors in Canada cabinet ministers are also members of parliament I represent a district called University Rosedale this is one of the wealthiest communities probably the wealthiest community in Canada I was knocking on people's doors with a campaign platform that said we are going to raise taxes on the 1% meaningfully I won I won 50% of the vote and the Conservatives who were calling for lower taxes 17.5 now this shows me that Canadians are great but no it also shows me now tell you what I said to people at the door because people said to me you know I want to vote for you but actually it's going to cost me $30,000 if you win how can I do this that's a really expensive vote and what I said was societies right now have a big choice to make do you want to live in a society in a community in a country of inclusive prosperity where you're doing well but your neighbors are too or do you want to live in a gated community of the 1% or the 0.1% if you want to live in a society of inclusive prosperity you have to accept that the winners in the winner take all economy need to share it's called redistribution so please be smart like the voters of University Rosedale and support me and Joe a compelling argument from the right honourable member from Rosedale redistribution is important redistribution and you can advocate redistribution and still win votes the economy has become more of a winner takes all economy the shift of power has moved away from labour to capital echoing some of Joe's points before we go open open to a general discussion Richard from your vantage point you at the weft have looked at this from the Davos perspective what would you like to add to the debate well first I'd like to generally congratulate the panelists for being good sports and arguing their brief although there were certainly some wiggling there going on here and there but I think you know we we framed the session you know this was a vehicle for discussion I think all of the the panelists would agree that this is essentially a false choice and that the arguments brought that out how many organisers in the debate say that this is the stage but let me let me let me let me break this down a little bit if you go back in some time and you take a look at what happened in East Asia where you had some very poor countries that had a several decades of very rapid growth the World Bank some 20 or so years ago and and Joe Stiglitz was a chief economist to the World Bank they did a very rigorous study about what were the ingredients of East Asia's success in achieving high growth with equity those countries grew fast but the equity did not suffer and they concluded that essentially I use the word institutions and frameworks you use the term rules that they did a lot of the right things on the efficiency side of the equation but they also did a number of things in institutional frameworks policy incentives and rules and public private labor management relations and whatnot and good public administration to avoid the ability of vested interest to capture policy decision making that had the had the combined effect of actually delivering high growth with equity similarly if you look back at the history of industrialized countries the US, North America Europe and others they learned out of the ashes of the stock market crash in the 20s and early 30s that they needed to change their model of economic growth and they instituted over a series of decades in the post-war period in particular but certainly in the new deal in the United States even starting before the war a range of financial system corporate governance labor institution antitrust rules even environmental labor market institutions public education systems huge infrastructure spending a whole lattice of national economic institution building not just in the areas which economists normally talk about as structural reform and they're the usually referring to efficiency enhancing measures but in a range of other areas and those that set of reforms that broad spectrum of economic institution building or rules deepening if you want to use your language had the effect of creating both growth and larger improvements in median progress in living standards and that had a mutually reinforcing effect we have forgotten over the last 30 years or so the model we used to have a more inclusive economic growth model so what we at the forum have done listening to the debate feeling that it has been largely too much I would not say necessarily largely a false choice too much polemics too narrow very quickly focused on education and redistribution as the sole issues those are absolutely very important levers that can be pulled as part of the national strategy to remedy the situation but actually if you go back and look at scholarship including the growth commission some years ago as well as the east asian and the western experience there are 15 different areas of economic institutions that have a dual purpose they have a growth and a broad based progress and living standards purpose and let me give you a couple of illustrations of this and the problem is that the debate has been a little bit too general conceptual even sometimes polemical and we put together a cross country database of expanding 110 countries 140 different indicators across these 15 different areas that do essentially what a business would do when they're trying to figure out how how to improve as they see what the other the other guys have been doing and you cross we enable a very clean cross country comparison with peers and that opens up a discussion where you see what leavers you're relatively weakened where you haven't fully utilized your policy space relative to the experience of other countries and it's that discussion where you get a little bit out of the 30,000 foot you get down a little bit closer to the ground which we feel is the basis for turning the debate toward what's actionable and the interesting thing is if you look at it you take anti-corruption rents or anti-competitive business practice this is not ordained you can have an influence on that you can institute anti-corruption types of institutions and frameworks you can improve your rules to avoid rent seeking that have an effect that's his point infrastructure is one of the most employment intensive types of investment public and private that can be the case again a dual win there the way you set up your financial system how well it intermediates the savings in the country for real economy real business capital formation as opposed to investment in real estate which is really exchanges of assets it's not net new capital formation let alone to other transfers of financial assets and speculation and the like that's affected by rules it's not ordained so what I would do is simply say in summation here is that contrary to some of the analyses that's contributed to some of the polemics this is an issue that can be worked it can be broken down in very practical ways and you can surmount the false choice and moreover you can you can achieve a deepening and a greater resilience of growth it's very often a matter of a resilience and a sustainability of the growth that we're talking about here at the same time you do what the pot what populations are asking of us and that is to focus not on the GDP per growth per capita growth numbers which I call a top line indicator of national economic performance and you can really start focusing on what you can do to drive what I call bottom line economic performance which is the rate of broad based progress in living standards Well that I think drilling down into the details of how you do that is part of what we'll do in the next 20 minutes or so where I think we will we will move away from the pro con too much but you will we'll focus on I think three areas and I'm going to open up to audience questions and comments too but I think there is three big areas that we need to delve in further two on your side of the debate on one of yours and in the interests of you know doing what journalists do simplifying, exaggerating and provoking I think the question with there is one area we need to talk about this whole idea of pre-distribution changing the rules of the game what do you actually mean and are there really no trade-offs secondly on redistribution what do you really want you can redistribute through the spending system you can redistribute through the tax code the Europeans overall much more redistributive than the Americans do it all through the spending side the the tax code is actually the AT dominated and very regressive in Europe so where do you want that and on your side everyone agrees that promoting inequality equality of opportunity is good but isn't it just motherhood and apple pie and the evidence that you cited about education not really explaining the gaps in income presumably suggest that education isn't really a complete answer either so we'll all agree that equality of opportunity is a good idea but what do you really focus on so why don't we start with possibly the most contentious redistribution Joe and actually Christian both of you the debate always is about people say we need more distribution to pay for we need to pay for all of these things has to be progressive let's raise tax rates at the top why is that the best thing to do well can I just say what I emphasized was it wasn't making the system right now the real problem is we have a regressive tax system and a distortionary tax system we could raise a lot of revenue just by eliminating those distorsions and the regressivity so when Christa mentioned that Romney paid 13.9% that was of his reported income and I don't mean that he was violating the law the law itself says you don't pay taxes on capital gains until they're realized and you have incentive to realize losses and not to realize gains so the net effect of this in terms of what are what economists would call real incomes is the change in your economic position is much lower I mean the system is much more regressive so if we eliminated that regressivity if we taxed capital gains adjust ordinary rates as they accrue if we didn't give all these other kinds of special benefits we would go a long way to get a fairer economic system in addition to that I would actually think that we could have a progressive a more progressive Do you think higher marginal tax rates at the top are an important part of the US agenda? Yes but what I'm saying is even before we get there we have a lot to go just to have a fair tax system which is not regressive Christia, why did your government or your party choose to have a higher marginal tax rate on the 1% of being the route to greater redistribution? Well, we didn't say it was the route but we believe that income inequality is real that it's happening and that it's a drag on economic growth and look, we're just getting started we've only been in government now for 10 weeks since we were sworn in but our tax proposal which we've already started to implement was basically in three parts one part was raising taxes on precisely on the 1% if you earn more than $217,000 in Canada your tax rate is going to go up we use that revenue to cut taxes on the middle tranche of income from $44,000 to $89,000 because our belief is those people are the hardest hit and you know by all of these forces we've been talking about and we wanted them to have more money in their pockets and then the final thing that we have said we're going to do and we're just implementing the legislation is to alter our child benefit system to put more money in it and to skew the money much more towards people at the bottom and this actually is something very important to me what we're going to do once we finish implementing this is effectively we'll have a guaranteed annual income for Canadian children so every Canadian family every Canadian child their parents will get at least $6,500 and that's what economists say is the minimum amount you need to be above the poverty line we think that's really important to this equal access to opportunity agenda but it does take tax revenue to pay for it What is the top margin rate of tax in Canada? What is it right now? Once with this increase that you've proposed with our current increase it will be well I can't give you a full answer I'm not being a politician here because it depends on the provincial rate but so and different provinces have different rates so it will in some provinces go to above 50% I'm going to above 50% Now is there anybody in the audience who'd like to offer a comment or a question or address particularly on this redistribution I say yes, gentlemen here My name is Rob Davies I'm actually also a politician I'm a minister of trade industry in South Africa Conrad Conrad here, hi I want to just say very briefly I think up on the side that says that it's got to be redistribution it's got to be redistribution of opportunity but also of outcome I'm on that side What I wanted to raise was two points One was if you look at Professor Schwab's book which has been handed down to all of us here he's got a couple of pages and he's saying that as you said when you introduced you said the inequality is within countries within social categories and there's been a reduction of inequality between countries He says the fourth industrial revolution could create exactly the opposite So I wonder whether you're going to comment on that It's about things like the new technologies would lead to reshoring relocation of industrial opportunities that kind of stuff So I want to comment on that because I think that would be another dimension And then the other one is to say that I think that a lot of the you know the I agree with Professor Stiglitz it's tax administration rather than tax rates in many cases this stuff about transfer pricing you know a base erosion profit shifting is now a major global industry and you know I know that you know in our country for example I used to be the chair of our finance committee at one stage of parliament and I said how many people here are working to try to avoid you know to try to deal with tax avoidance and tax evasion in fact in some cases and they said well there's about you know 50 of us and I said well and how many people are advising these companies they said well there would be several companies and each of them would have multiples of that who are advising people precisely on how to break the rules and get out of this and that's a very major issue I know that the OECD has introduced guidelines and things like that but I actually think that the truth is that these are way behind the curve way behind what we need and these are quite fundamental questions right now thank you I'm going to ask Ricardo to respond to the idea what do you make of this argument that technological change could in fact start to raise inequalities between countries do any of you agree with that Ricardo you go first and then if anybody else wants to chime in I think that the jury is still out it will first of all I'm not sure that within countries the manufacturing sector is kind of like big enough to change the income distribution that you know it represents less than 15% of employment the things that are going to happen there I don't know that they will impact very significantly or that they will be the dominant determinant of what will happen to income distribution but I do think that whether this new revolution increases the opportunity of countries to participate in the global economy or makes it harder for the countries to participate in the global economy is an open question and it will probably depend on how this technology deploys and how the countries adapt to it so I think the jury is still out Earlier this week we put out a new piece of survey work where we surveyed about 350 big companies around the world 13 million employees asking them their view of where the job market is going to be heading in the next 5, 10 years or so and the aggregate numbers this is survey work the aggregate numbers were they thought that the tech aspect of this probably will result in a net loss of about 5 million jobs but that's just within that dynamic the larger question is what's the growth impact which may create opportunity in jobs elsewhere but let me just say part of the reason we launched this type of work is because the companies the CEOs of the companies for the last couple of years have been having a discussion about what they're concerned about and this is one of the things they're most concerned about that there could be some significant employment effects of these kinds of transformations and they feel that potentially unless we get very practical and move beyond the more conceptual aspects of this debate that public support for smart pro-market types of policies may evaporate and we've got a trade minister sitting right here and this is partly what has happened in the trade field so they're very prepared just the last comment I'll make here is that I think they're prepared to take a more pragmatic view about the they understand as we discussed with them that you need a mix that's why this is a false choice you need a mix of some of the fiscal transfer and redistribution aspects of this and what you call the predistribution aspects countries will differ and the US actually the big problems are not so much on its tax system but it has very weak fiscal transfers and it has big problems it's 29th out of 29 advanced countries on perceptions of whether vested interests capture policy and perpetuate rents thank you yeah I'm going to if you could be very brief Joe because I'd quite like to get another couple of questions and we're going to run out of time so a weird minor point that a lot of the resourcing coming back won't solve the will undermine the growth the reduction in inequality across countries that will be but it won't help the inequality within the United States the resourcing will be a high tech apparel manufacturer of robots that's not going to create the jobs that are lost in South Carolina and Ricardo is absolutely right that manufacturing is relatively small can have still a big effect but the same kind of logic will apply for the surface sector where again that same kind of process will be going on another comment yes gentleman there and then there's one over there too Federico Rivas I'm a global shaper from the Sonsawder Hub Professor Houseman you mentioned that income inequality is really a difference in productivity and in a region like Latin America we all know what a $25 tablet with an app like Duolingo teaching English in a rural village does and can exponentially increment the productivity of an entire household so could you give us an example of how can a favorable policy that install input multipliers instead of redistributing wealth in order to gain more access to opportunities in a developing region like ours well I mean this is a an excellent point of what happens when technology is able to diffuse so that people can become more productive let me make a comment on the education story it's very easy to do actually you know we have for example in the US there is this lottery system for visas and you know people have gone and asked the question what happened to the people who won the lottery versus the people who lost the lottery with very similar characteristics and if you go to the US your income per capita goes up by multiples if you stay home it doesn't and it's your same person the same education what changed was not you it's the ecosystem you're plugged into so it's the ecosystem that's making you productive you know hermets are not productive so independent of their schooling so it is very important that we harness in these new technologies in these new possibilities the ability for people to connect to global opportunities by having what they need to be productive in their environment can you very briefly perhaps be concrete on what that implies because I think that was implicit in the question what are the concrete we all agree that that sounds wonderful concretely how do you do that well first of all for example do you auction cell phone bandwidth to the highest bidder or do you use those resources to make sure that everybody gets access to cell phone technology so is that rent to be shared so that everybody gets connected or is it just a source of income for the government to be spent lowering taxes to somebody else so in most of Latin America we put poor people to live in the cheapest land the cheapest is there is cheap because it's disconnected so we disconnect poor people through our housing policy right so and I can go on and on but essentially there are plenty of distributional issues which are in the way we organize society that allows for technology to deploy yeah just to support Ricardo you know when we construct infrastructure we don't connect poor people to the jobs so by the way we construct infrastructure we change opportunity and we take away opportunity from the people who are at the bottom baby on Rob nothing is written because it depends on the policies and it depends on how the policies react to the problem there's nothing that is automatic and one of the things we've been discussing in practice every one of the sessions equals or whatever panels whatever is this question of is tech a threat or is it an opportunity well again maybe it's a false dilemma but if tech allows skilling because it gives you a lot of the tools that you did not have before now now skilling allows to profit from the tech and then there you go again and that is what you need for the increase in productivity and I would agree with our friend here that in many of the developing countries in particular a little bit of tech well applied goes enormously enormously far in terms of how that will increase productivity it's like you know when the Chinese moved from the rural areas to the cities you had massive increases in productivity over a relatively long period of time with the steam engine and everything and so the question here is it's about productivity it is about and the productivity differences as Ricardo mentioned are the ones to explain if not all at least most of these differences and we've had now some concrete ways to address that now very very briefly because I'm a vote totally running out of time a gentleman there with a quick question and then I'm going to ask you all to vote again Hi I'm Tony Miller from PAG in Japan I'm based in Japan Japan certainly seems to have made a decision as a society to sacrifice growth and perhaps even productivity and in the last 20 years of lost decade has still never seen unemployment go above 5% today it's at 3.6% maybe you guys are being too easy on us maybe there really is a decision as a society to make that maybe we should be sacrificing some growth and some productivity you're saying that we can redistribute income and have a greater opportunity even if we have greater less inequality but maybe we should we should bite the bullet and actually accept less growth and less income in return for greater equality That is a bracing vote to end on you want to comment on that very very briefly can I have this can I just say I would like everyone to start voting because we are going to run out of time so the question is coming up again while you answer Joe it gives you guys a slight kill What I was going to say is it's a little bit mischaracterising where Japan is because Japan's working force has been declining and the difference between Japan's working force and the United States is one percentage point and if you correct for that Japan is towards the top of the OECD league it's not for the high skill too everyone can get all right Chris J you want to make a point too Quick final points three super quick final points I can't resist saying about Japan try equality for women that could be a big help Yeah yeah yeah yeah yeah yeah yeah We have a 50-50 cabinet where our prime minister is a feminist to Richard's point I think you made an incredibly important point about public support and I am a trade minister and I think we really have to realise that there's a very strong political aspect to everything we're talking about if we can't figure out how to make global capitalism work for ordinary people pretty soon they're going to start voting against global capitalism it's a big problem and then just finally a big trade minister and OECD solidarity point this point about base erosion is really essential and in a way when you made your point I felt like I should have erased everything else I said because we live in an age of global capital and national taxation and if we don't square that circle no one will have a tax base Now in the interest of fairness you two also get a very quick last word Riccardo I think that if redistribution or if progressive taxation is not in the context of inclusive growth it can lead to a fabulous disaster I come from Venezuela and I don't have to say more I'm proud Redistribution does not increase and produce wealth the first time around whereas equality opportunities will because it will have a direct impact on productivity and this is the reason why I think it should go first Thank you very much let's see where you will come out The suspense Well That was certainly a surprise I think I need to say no more Thank you all very much for a spirited discussion