 Good afternoon, everyone. And, Thierry, thank you for the privilege of continuing the conversation. Our topic this afternoon is Vast for 90 Minutes, Inequality and Globalization. And, indeed, it's a topic that Christine Lagarde and others have called one of the most important stories of our time. Unfortunately, Madame Lagarde finished her sentence by saying it was also casting a, quote, dark shadow on the global economy. She and others, everyone from Pope Francis to demonstrators in Venezuela have also begun to show us that there are societal implications, ethical implications, issues of inclusion, and then, of course, impact on economic growth. So, indeed, this afternoon the conversation is going to go to the economics, but also beyond. We'll look at policy and governance. We'll look at societal causes and consequences. And we'll also look at the ethical underpinnings or, on occasion, absence of ethical underpinnings to the decision-making that's landed us where we are. We're going to take a slightly different format from this morning, and we've all thought it might be better to shorten the introductory remarks to about six minutes. And we've organized this so that you have a foundation for more detailed discussion to come and also for your own questions and comments. So we're going to start out with two series of remarks with an institutional perspective. And for that, we have Mari Kivenyemi, as you all know, Deputy Secretary General of the OECD and former Prime Minister of Finland. And we also have Cheng Yongri, currently Director of the Asia and Pacific Department of the IMF and formerly Chief Economist and Development Bank. We'll then open it up to some more, digging into what inequality really means for analytical purposes. And for that, we have Harvard Professor Richard Cooper, who has also held an astonishing number of high-level positions in government and outside of government. So it will be both an academic and a real-world perspective. And then Dr. Ilse Kong, who as you, as this audience knows, is Chairman of the International Committee on Governance and also was former Finance Minister of Korea. And then finally, Jean-Pizani Ferry is going to wind up with some general remarks and the view from Europe. We are going to try to keep this positive. We're going to look at constructive ideas and policies for moving forward. So with that, would you like to get us started? Thank you, Mrs. Chair. And thank you for inviting me to this very important panel. I'm very happy that we are discussing this theme also today and in this conference because this is a very important and unfortunately growing issue. And I'm also glad to see that this hot topic has been increasingly studied and taken up by a broad range of actors, as Chair already referred to. But when it comes to the OECD, the need to tackle inequalities has really been on top of the OECD agenda for a long time. In 2008, we made a first wake-up call with a study named Growing Unequal. In 2011, it published Divided with Stand Why Inequality Keeps Rising. And actually, tomorrow, we are about to launch a new working paper titled Focus on Inequality and Growth, Does Income Inequality Heard Economic Growth? And this survey and paper provides evidence that not only inequality is rising, but also that it has an economic cost and affects growth. Income inequality in OECD countries is at its highest level for the past half-century. The average income of the rich is 10 percent, is now 9.5 times that of the poorest 10 percent, up from seven times 25 years ago. And that is the average when you look at particular countries among the OECD countries like Mexico, the ratio is 27 to 1. And then when you go to the Nordic countries, the ratio is approximately 7 or 6 to 1. And then when you go to 20 countries like Brazil, although declining, the ratio is 50 to 1. In South Africa, 100 to 1. Inequality rises also in more egalitarian countries like the Northern Europeans. And some of the most vulnerable groups such as youth and the poor continue to fall far behind everywhere. The gap between rich and poor has widened further since the crisis, largely because of large income losses suffered by the unemployed and underemployed. In fact, more than six years after the onset of the global financial crisis, the world still faces a large and persistent jobs gap. An estimated 102 million people remain unemployed in the G20, and many more are unemployed or underemployed in low-paid and precarious jobs around the world. The OECD countries altogether still almost, we have still almost 12 million unemployed more than before the crisis. So inequality in household income increased by as much in the three years following the crisis as in the previous 12 years. OECD analysis also reveals large inequalities along other dimensions of well-being with large gaps between people from different socio-economic backgrounds in health, education, strength of social connections, political engagement and sense of personal security. The result is an uneven economic patchwork where some social groups and regions within countries prosper while others fall farther behind. So what are the consequences? Growing inequality comes at an economic cost. Our research shows that when income inequality rises, economic growth falls. Inequality is not only bad socially, ethically, humanly, it is also bad economically. The analysis shows that if inequality increases at the same rate as of the last 30 years in the OECD, and that means 10%, this suggests a reduction of 7.5% in CDP per capita compared with a baseline scenario in OECD countries in the long run over the next 25 years. Another important finding of us is that income disparities at the bottom 40% of the income ladder in particular do hold back economic growth. And the main mechanism through which inequality affects growth is that it limits the ability of young people from poor socio-economic backgrounds to invest in the human capital and skills. It lowers their social mobility and hampers skills development, leaving aside the potential of this group to contribute to the society and economy. Indeed, as the title of today's session indicates, globalization is usually pointed as a useful suspect when it comes to inequality. But globalization itself does not directly influence inequality. Skill bias technological changes in employment patterns and working conditions and a weaker redistribution via the tax and benefit systems are actually the main culprits. But when setting this scene, the question is that how can we address this situation? What should be done? And the answer is that we should deliver inclusive growth. I would like to name some of the policy avenues that we at the OECD see key to fight inequality. First, invest in education, invest in human capital, and this really is fundamental. Governments should make sure to grant access to education for all, including children with the most disadvantaged socio-economic background. And same applies for job-related trainings and lifelong learning, which should also include low-skilled workers, long-term unemployed, and the needs of the so-called not-in-education employment training young people so that educational policies are really inclusive. And also what should be promoted is upskilling of the workforce, better training and education for the low-skilled and really lifelong learning. And with the help of these, we could be able to meet the challenges of the globalization. Second, governments should look at some other public policies. Reforming tax and benefit systems and government transfers in particular have an important role to play to safeguard low-income households. Antipoverty programs will not be enough. Other priorities should aim at improving the efficiency and access to public services, such as healthcare, to create greater equality of opportunities. And finally, governments should promote employment opportunities, which is why a proto-economic recovery is crucial. I think I have already used my six minutes. Thank you very much. Just before we go on, could you comment a little bit further? You've used the terms social connectedness, political engagement, ability to contribute to society. Could you just take it one step further and talk about then the impact on social order? So anything from what we see in Venezuela to the Occupy movements to, for that matter, what we're seeing in Ferguson, Missouri now? Yes, I think that is those are signs of inequality. When the society is not able to provide really the same opportunities to everyone, also to those young children and young adults whose background is not the best possible. So I think that really is the recipe number one, to make sure that everybody has access to education. Thank you. Thank you. It's my honor to be in this panel with my former boss and my colleagues here. As you mentioned, like OECD, at the fund, inequalities become a really, really, really important issue because we also found, like OECD, that excess inequality is very harmful for the economic growth. But to differentiate my presentation, let me focus more on the some stylized fact about the most recent rising inequality in Asia and then talk about a little bit more policy options. Before I mentioned the recent rising of inequality in Asia, let me first emphasize that in absolute terms, Asia is still better than other emerging economies in Latin America and Africa. In every Gini coefficient at this moment in Asia is around 38, which is well below the 54 in Latin America, for example. But what we are worrying about is the rising trend and the speed of the aggravation of inequality problems. In the last 20 years, many Asia in Asia, such as especially big country like China, India, Indonesia, all observing a really rapid increase in inequality, which is quite different pattern that Asia has experienced in 1960s and 70s. In 1960s and 70s, when Asia Tiger had a really rapid economic growth, at that time, economic growth came with at least same level of inequality, or we haven't seen the rising inequality at that time. But now, in the last 20 years, Asia had led global economic growth but with a very rapid increasing of inequality. And as my previous speaker mentioned, very ironically, we believe that the same factor which contributed to the rapid growth of in Asia, such as technological progress and globalization and market oriented reform, all contribute to the rising trend of inequality. Let me give an example. In the 60s and 70s, when Korea has developed our economic structure, we rely on manufacturing companies which highest many workers. So if you go to the car company, semi-conduct company around that time, we see many workers are working at the factory. But these days, if you go to China, they are doing lots of car industry, semi-conduct industry, but you don't see the people, you see the machines. The labor-saving technology is really one factor. And globalization has now introduced a new trend that the winner takes all, because it's all global competition. The best human capital will capture the benefit mostly. And then also market oriented reform and the globalization make, for example, in China, the coastal area is developing much more faster than the inland area. So our study shows that, to support this views, our study shows that if you look at the labor share of income in the last 20 years, in China, for example, labor share of the income in manufacturing sector declined from 48% to 42% in the 20 years. In India, the decrease much more drastic. So in India, labor share decreased from 36% to 21%. So labor share of the income is going down because of technology progress. And our study also shows that our study, this one is, to be fair, it's ADB study if I move to IMF. And so that if you break down the inequalities, educational differences, the so-called college wage premium, all these things account about 25 to 35% of the total inequalities. And special differences, for example, in China, special differences alone between the inland and coastal area can explain 50%, more than 50% of the rise in gene co-option in China. So basically the spatial, educational, combined with this technology really driving this trend, we believe, and that make the policy options really quite limited and very difficult. So in IMF recently has a paper about what kind of fiscal policy is effective for reducing the inequalities. And we are emphasizing, we generally agree with my previous speakers on the general issues. But our conclusion is that in general, the design matters. So we all agree on the principle of design matters. Let me give a few examples and we probably need to discuss further. For example, education wage gap is a big issue. So but if you look at the recent trend, it's a total education and very high education, whichever really rising in a premium. So maybe so far the education policy in developing institutions focus on the general universal education in primary and secondary school. But that may be very effective in reducing the poverty, but may not be effective in reducing the inequality. So maybe we may need to have some kind of educational policy which can support total education of the poor family. So that may be the one option. And then also in order to address the spatial, the inequalities, maybe our infrastructure investment from the public or the international organization may focus more on the connectivity of the center to the more remote area. And then maybe in case of China, the Hukou system and some constraint about the labor migration may be the major reason for these spatial differences. And if I make just one more examples, then how to address the declining labor share at the time of the technological progress. I can't prevent the, you know, you cannot slow down the technical progress. But on the other hand, our policy has some kind of lagging mentality. In the 60s and 70s, when we need more saving and capital investment, government introduced many capital favorable economic policies such as investment tax credit. The major objective was just increasing investment. Maybe from now on, maybe we have to probably introduce some policy which can favor for the employment. For instance, I do not mean that give a subsidy for the employment. I mean that there may be some distortion which favors capital over labor, and those can be rewinded. So there are, you know, many examples and probably the design and how we address these inequalities is very important. But let me conclude with one remark. When we say that the inequalities, we have to very carefully, it's not for the whole general inequality or it's more than inequality in opportunities. And the excess inequality is quite detrimental to the growth. But maybe for the low income countries, at this moment, there is some country which still some kind of inequalities are in natural consequences of economic development. That we have to, we should not undermine, downplay that trend too. Let me stop here. Thank you very much. A couple of follow-up questions. Do you have one particular policy initiative that you think is the most important or should be the top priority? And then here we are in one of the most technologically advanced countries with companies like Samsung, and you mentioned the downside of technology. Is there in Asia specifically an upside to the technology in terms of the inequality question? If you ask me what is our funds general institutional view of how to address these issues, I think we have some general conclusion is that maybe transfer policy is much more effective than tax policy. Tax policy can address many issues, but in general transfer policy is very more effective than taxation policy. And when you think about the policy, when you talk about how to address inequalities, the other objective is fiscal sustainability. You cannot just give over all the fiscal resources. So in order to address this issue, thinking about taxation together with expenditure size is very important. For example, if you look at the value-added tax as itself, value-added tax as itself is very, you know, not progressive. But if you, given some kind of lack of experience and ability to collect tax in many low-income countries, if you introduce value-added tax and use that as a redistrictive transfer, overall as a package, that may be more effective. So I would rather not to give more details, but you can go to our web and then you can see we have some paper on the fiscal policy and inequalities. I would recommend several, you know, the bench, you know, good practice of how to address these inequality issues from a first point of view. The second question I will talk later if I have more time. Okay, of course. Richard. It goes automatically. This is a very big topic to cover in six minutes. I have five points that I want to make. The first is a somewhat technical one concerning measurement of poverty. It's become very fashionable to use something called the Genie Coefficient to measure inequality. The Genie Coefficient is actually a very clever coefficient, but it is a single number and inequality is typically much more complicated than can be captured in a single number. Two countries may have the same Genie Coefficient that is to say the same degree of inequality measured in that particular way and yet be very, very different. For example, one may be traditional inequality by decile of income. The other may be a big urban rural divide with relatively equal incomes in the urban sector and in the rural sector, but enough of a rural sector so that the Genie Coefficient is in the first case. So just a warning beware of the measurements that we use. I was pleased that Mary did not rely on the Genie Coefficient but I've noticed it's become fashionable to do that. Second point, we live in very paradoxical times. It could be the case logically and it is almost the case empirically that inequality could be rising in every country and yet declining globally. How can that be? And the answer is really poor countries big poor countries like China and India are growing much more rapidly than the rich countries are so that if you take a global view inequality has actually been declining over the last 30 years even though as I say in most individual countries for which we have measurements inequality has actually been rising. Which do we care more about? Well we actually care about both. Both are of interest and significance but it suggests we need some refinement as we think about policy what it is actually our objectives are. Third point, I've noticed a tendency in public discourse to conflate inequality and poverty and I want to make the point quite different things. Poverty I'm talking about absolute poverty on the say the World Bank measurement of $1.25 a day or $2 a day and purchasing power parity. I haven't encountered anyone who's in favor of poverty. Poverty is something we all should want to eliminate so that people have real choices in life and for their children in life. Poverty is a much more complicated phenomenon than poverty is and we should analytically keep them separate. Fourth point, it's variant of what Mr. Reed just said whenever there's a big change in the policy regime in favor of greater growth think of the elimination of communism in Eastern Europe 20 odd years ago or the radical change in economic policy that took place in China I think that a growth and inequality inevitable is a strong word but I would say all but inevitable why is that? Because people, individuals are differently situated to take advantage of the opportunities that are now by assumption made available which were not available before they may not have a concrete talent they may have better political connections they may just be lucky to be in the right place at the right time and so my expectation would be that whenever you have a large change in policy regime in favor of a more market-oriented system that inequality will go up not forever but for a period that could be measured and I think that's and that of course is especially the case if the level of equality was much higher in the initial condition as it was in the communist countries of Eastern Europe for example now we all know that the reality was there was a tremendous amount of privilege in those countries under the communist regimes but they were not captured by our normal measures of inequality and the final point I want to make is goes to our values and I'm very much aware that different people have different values when it comes to inequality there are some people who think that inequality per se is a bad thing I am not such a person I think that there are some perfectly legitimate reasons for inequality and there are some quite illegitimate reasons for growth and inequality and I actually want to distinguish between those two in a market-oriented system we have celebrities of various kinds whether they're movie stars they're rock singers, they're opera singers or they're very skilled baseball players they earn their high incomes in the sense that thousands running into millions of people who are willing to pay to hear them or watch them so they've earned their incomes on the other hand we have people who are in the same degree of income or wealth who have gotten their wealth through political connections in a regulatory system in which political favoritism which may or may not involve corruption in the narrow sense of the term but political favoritism can lead to quite startling inequalities of income inheritance can lead to quite startling inequalities of income all of these things it seems to me are quite different reasons for inequality and I actually want to know the reasons and I want to frame my policy not around inequality per se but around the illegitimate sources of inequality so for me the reasons are all important thank you can we just drill down a little bit on this question of legitimate and illegitimate reasons whatever the classification of the reasons you still have the negative fallout of inequality the kinds of things we were just talking about on social order on inclusion so are you suggesting that as long as you're okay with the balance between legitimate and illegitimate or we've eliminated illegitimate reasons that we just leave the negative fallout as is are you suggesting that policy should then turn to addressing the negative fallout I think that the attributing the negative fallout to inequality per se is probably an analytical mistake I think that in many cases I don't want to be generalized too much in many cases the negative fallout has to do with the sense of unfairness and illegitimacy rather than the presence of inequality per se and so I, again I would want to make the distinction in analyzing what the consequences are and I suspect we're attributing some things to inequality because that's what we have measurements for whose origins are actually in some sense deeper than inequality and go to the notion of fairness which gets back to the legitimacy issue okay Doctor Sakal Yeah, thank you well already a lot has been spoken on this very big subject even then I would like to make a few general remarks on the global income and wealth inequality and then I may very briefly touch on the Korean situation as previous speakers have already pointed out the income inequality and income and wealth inequality has been rising throughout the world during the last three decades of Seoul particularly in the advanced economies I suppose one can single out or at least the identify some of underlying forces which contribute toward worsening the equality or income inequality first of all market based economic system itself has inherent inherent tendency to be putting about income inequality but that income inequality may be called as quote deserving inequality as a later Nobel laureate Gary Becker alluded to even then when inequality as it is today persistently increased at the higher level then it may become not only socio-political an ethical problem for any society but it can become economic problem as well and the other factor of course is globalization together with ever deepening knowledge based economy reinforce reinforces the systemic inequality tendency I emphasize this because globalization is not the main cause of inequality that's the point I would like to make and why then the inequality can become the gross inhibiting factor of course two economists mentioned some of the aspect of this issue previously for example if inequality affect productivity of the workforce of any nation in one way or the other for example by blocking certain segment of workforce to the access to quality education or decent health and Medicare services that affect productivity and therefore it will affect the economy performance and gross the worst thing is that it put inequality into a vicious circle and also it put in the intergenerational income inequity problem so we have to deal with this purely from economic point of view not just ethical or socio-political that's the point I would like to make now with regard to Korea as Chang Yong mentioned earlier Asia as a whole it is well known that the rapid gross period of 1960s and 70s and 80s Korea's income distribution was much more favorable than any other developing countries but since the early 1990s the Korea's income distribution started to be worsened interestingly enough immediately after the late 1990s Korean currency crisis or Asian financial crisis and the 2008 global the financial crisis the income distribution in terms of gene coefficient improved for a while however the level of income inequity now is much higher than the level we had in the early 1990s again I suppose you can think of many factors of course the global factors such as accelerating globalization together with deep knowledge based economies of course will contribute but I just want to bring your attention to the two structural factors for Korea one is educational sector and the other one is the labor market structure now educational sector and we all know that Korean households spend much more money for getting their children's private tutoring so what it does is that those children with richer parents would get better tutoring or quality tutoring and that would contribute to worse income distribution and intergenerational income inequity as well improving the public schooling is a very important measure which is implied by this another point I just want to bring your attention is Korea's labor market structure currently the proportion of temporary and part-time workers as compared to permanent the employees has been rather fast the increasing and the gap between the average wage gap between these two groups are getting wider and as of now I understand something like I only did the part-time and the temporary workers get only around 55% or 50% of the permanently employed and what makes this why I prefer to hire the temporary and part-time workers of course this economic structure structural changes of course affect that but because of usually talked about over protection of permanent workers can affect this and the currently the government is building the labor market and the wage gap between this permanently employed and the temporary employed as is why I think so these are some of the contributing factors for Korea's rising trend of inequality did I use all six minutes already? but I want to just throw out one more statistic which is very thought provoking to this audience that is about South Korea and North Korea of course because of data problem I don't think you anyone have seen the genie coefficient for North Korea but I just want to give you the simple fact that the North Korean boys aged between 13 and 18 are 13.5 cm shorter than South Korean peers girls 8.3 cm shorter weight again is on four male it's about 13.5 kg difference I wouldn't say female because South Korean girls would have a diet but in any case so this what I want to say is this is that Korea is genetically and ethnically very very homogeneous country for many many years but country was divided after World War II and adopted market-based capitalist system which has downside and the other one the communist system so what this shows is what the market economy can do to the well-being of the people as so loudly and succinctly so I just want to draw this statistic okay thank you I think we'll come back to the connection with the human rights and certainly your statistics are indicative of the importance of that issue Sean would you like to yeah thank you I'd like to make two points one on general point and one on Europe I think most people in this room have spent part of their time explaining to other people that globalization was not to equality because it could bring a reduction in global inequality the point made by Richard and at the same time that government had the means to address domestic consequences of globalization and the distribution of income they could use taxation to redistribute again from globalization I think the first point was correct and let me just quote one statistic that was published by the ILO a few days ago global wages last year in real terms rose by 2% if you exclude China they rose by 1% so half of the global increase in wages was due to China which indicates the magnitude of the phenomenon in terms of the emergence of a global middle class nevertheless I think on the on the consequences of globalization for within country inequality several mistakes were made I think we underestimated largely the correlation between globalization and tolerance to inequality indeed in theory a very open economy like Nordic economies they were both open economy and relatively egalitarian economies so the idea was that two could go together but at the same time the fact that globalization created the option to walk out an exit option for wealthy people these had profound consequences for the society's tolerance to inequality second point is that the the issue of tax avoidance has been underestimated for a very long time basically it was treated as a second order phenomenon now we have some statistics by researchers think that 8% of total world household wealth is held in tax havens this is an enormous amount if you just imagine that most people won't put their savings in a tax haven 8% this is enormous and this means that the avoidance and the consequences in terms of the ability of the tax system to reduce wealth and income has been greatly diminished even if it were less important quantitatively it's very important morally and I think it has undermined significantly the case for globalization and finally I think we have underestimated the correlation between globalization the type of technical progress technical progress on its own but also correlated with globalization perhaps it's a coincidence it's more than a coincidence has contributed to be biased in the direction of more inequality so I think that's sort of the serious issues we're discussing today now let me turn to Europe Europe in principle the EU could have been in a very different position because the WTO the IMF the institutions that were not established with a mandate to address issues of inequality or the OECD now we're seeing that these institutions are increasingly concerned about the inequality and paradoxically the EU which is a political institution with a mandate the treaties of improving the well-being of the whole of society has proved relatively indifferent to these issues of inequality so we have share value of accountability and at the same time we seem to be relatively indifferent why is it so I think there are a number of reasons essentially there is a constitutional reason which is that this was accepted from the start that the role of the EU was to deal with issues of inequalities across countries and across regions but not across individuals there was sort of division of labour inequality across individuals at the business of the member states and the EU has nothing to do with it that was the first reason the second reason is that the EU has been extraordinarily weak on taxation matters for reason has to do with an alliance that has emerged between those in favour of tax sovereignty so no discussion whatsoever on tax coordination because it's a matter of national sovereignty those in favour of tax competition who gain from being more lenient and playing even the role of a tax servant we heard recently about the lux leaks about the treatment of multinationals and then those in favour of tax reduction who are using tax competition as a way to reduce taxes at all and the EU has proved completely ineffective in this discussion about inequality and the role of taxation and we have this paradox that again the OECD or the IMF seem to be more concerned I think this is extraordinarily damaging politically for the EU also because the EU has been pushing for growth has been pushing for integration with as a implicit assumption, the assumption that growth essentially lifts all boats so everybody will benefit from growth now the nature of growth as it is now is much more divisive we know that growth does not lift all boats we know that growth creates extraordinary wealth to be pushing for growth to be pushing for integration without showing concern about the distributional consequence of that I think it is not a winning proposition in the time to come and there is need for some deep changes in this respect Thank you, let me just come back to your question or your point about tax avoidance we've heard obviously a lot and let's focus specifically for a moment on corporate tax we've heard everyone from Margaret Hodges in the UK House of Commons to the US leadership everybody's up in arms and saying that this is an ethical issue not a legal issue, in other words corporations have a moral obligation to pay more taxes than the law requires where do you come out from the standpoint of inequality is the right answer fix the tax law is the right answer whatever the tax law corporations do have a moral obligation to pay more it's not a moral issue it's becoming a major public finance issue if you take the US the effective tax incorporation that we've heard over the last 15 years by 10 percentage points two sort of which are apparently due to tax avoidance through the extensive use of tax havens so it's becoming a major public finance issue for all countries and I think that's why it's being addressed it's being called a moral issue though so is the right answer for you to fix the tax law or just to put the responsibility on corporations to pay more voluntarily oh I think, no it has to be done through bringing much more transparency and fixing the tax law I think you could speak about what the OECD is doing because the OECD has been at the forefront being pushed by the US in fact by creating more transparency and making sure that this profit shifting is not part of the rules of the game tax competition in terms of you know having a better tax system offering a different combination of public services and taxes that's part of the normal competition but just profit shifting to wherever the tax law is more favorable without any economic basis behind it that shouldn't be part of the normal rule of the game can I comment on that I think the direct answer to your question is it has to be done through law you cannot expect corporations to pay taxes that they're not legally bound to pay but two issues one is speaking of the United States I assume there's comparable authority in inland revenue and other tax authorities the IRS has lots of capacity for adjusting for transfer prices where corporations are avoiding taxes through their transfer pricing the IRS is systematically underfunded so it doesn't have the human resources in order to carry out what the authorities that it has and the underfunding is supported by corporations in their lobbying of Congress so this is actually quite a complicated issue I think the technical issue is you cannot expect corporations to go beyond the law when it comes to paying taxes but you can expect them to pay more and there I think the transparency is very important in their political position that they take on taxation including tax enforcement of existing law what is also needed is the international cooperation which has been done now at the OECD together with G20 when it comes to these multinational enterprises so that there won't be those cases where of course they try to avoid that they are paying too much taxes I mean to many countries but in many cases they have not been paying taxes at all so using the current legislation in a bad way and another dimension is then this that what is needed is transparency and that will come then via the automatic exchange of tax information which has been done also at the OECD but of course all the countries has to then agree and be part of the project so I'd like now to come back to my question to Changyong on the technology but before I do any quality is not a standalone risk it relates to a number of other major issues that we're seeing in the news and so I'd like you all to think about one other issue that's of particular interest for example Ebola perhaps the sharing economy so Uber, Airbnb and these can be risks or opportunities by the way as Thierry called it the so called Islamic State human trafficking or to pick up on some of the human rights relationship between inequality and one other issue and we'll come to each of you after Changyong you want to go back to the technology question first please this is a real dilemma you do not want to because of inequality concern you do not want to really make the technology progress be slower because there's a lot of benefit for the whole human society so I think this is the issue of the ex-ankta income versus poverty and poverty and poverty is the most if you look at the OECD countries before taxation and transfer they are much higher than Asia but after the correction of the transfer and taxation they are much lower than OECD I mean Asia so in general I think we need a system which actually give more incentive for the people to be more inclusive and also as Jean mentioned now maybe people's tolerance about inequality is much higher because of social network and other things so for social cohesion is another dimension so maybe we need some kind of redistricted policy which is consistent with more encouragement for the technology progress and exposed equality would anybody like to take up this? I would observe it's an obvious point but it's worth making we've recognized this particular trade-off for a long long time that's what patents and copyrights are all about we confer on successful inventors or on successful writers a temporary monopoly which raises their income as a result of their contribution it is judged on average and for patents go back to the actually in the U.S. Constitution it's an 18th century idea patents and copyrights and we've grappled with them sometimes more successfully sometimes less successfully my own view is that the current American copyright law is totally preposterous and much more than is required to incentivize writers to write so the copyright law in this case is protecting a particular business model of the music companies and the publishing houses that's an illegitimate use of copyright it's rent-seeking but that's runs through politics and democratic society and non-democratic society as well and those are the trade-offs that we have to make at a practical level Dr. Sikong Yeah from the supply side point of view I think these technological changes would call for drastic educational systemic reform and training and retraining particularly since the digital divide and the ability to utilize information makes the inequality far worse than otherwise and therefore so I think it is time for the all of us really give some thought this really four-year education system itself and how to educate a lifelong learning not just the lifelong learning taking the extensive the extent of the course during the evening but I mean it should be really lifelong learning institutional set up and then the academia and the industry should have very close cooperation of training and retraining program and so forth because technological changes are desirable thing and so we should take advantage of technological change but to minimize the downside of it Jean I want to emphasize this point I think we all wonder how to deal with the inequality coming from the extraordinary return on innovation and the fact that the technical progress has implied a multiplication of an ability of an individual with ideas to make a fortune out of these ideas and that's for society that's a really difficult problem to deal with because you want the innovation but you're concerned about the consequences. Now we should not forget that a large part of the problems we're dealing with are not those problems they're problems having to do with basic education they're problems having to do with the ability of the school system to correct to offset to correct inequalities of social background of ethnic background of spatial background of social mobility our systems do not perform in many countries the way they should be performing and that's a major public responsibility and whatever happens in the course of your life in terms of making a fortune or not because you're just a little bit brighter these issues remain and they remain fundamental and we're underperforming. I'd also actually like to challenge the notion that innovation is linked necessarily to technology it's something that is sellable and really question what kind of innovation could help this inequality problem that isn't just about another technological breakthrough or another product and certainly we're seeing a lot now in the social enterprise area where there's innovation and Howard for example delivering services so Chen Yong and then we'll open it up to all of your questions and comments please I just want to give you that example there are many so-called frugal innovation for people so innovation doesn't necessarily mean the big things for the others Thank you I think there are two different two different inequalities one is the inequalities between countries and globalization of course contributing to that a lot you cannot compare the situation in Africa to the situation in Europe globalization usually used by the rich and the good and the strong countries to use the sources of the poor countries without really paying them back enough so it's part of the inequalities generally there is of course inequality within the societies in every country which depend on different kinds what kind of education the people have what are the distribution of the money coming from the economy and so forth on this in my opinion there is things that government can do income taxes income tax which is a direct tax and it is progressive tax which means everybody pay according to his own earning you pay as much as you earn more you have to pay more if you earn less you don't have to pay in some countries like the United States and Israel there is even negative income tax which means in order to encourage people to work I think from them tax they pay them a grant if they are working in order to give them motivation to work this is direct tax which is much more justifying and progressive and there is indirect tax which is the VAT tax for example which everybody pays the same doesn't matter poor or rich they pay the same taxes I think the government can change the policy of taxes and raise the level of the indirect tax like the VAT in that case you helping a matter of fact the poor people because if you are speaking about food for example if a poor man go to buy one let's say a bread he pay exactly the same price including the tax like the rich man is buying it and if you want really to have poor people or people who are weak economically you have to change the relation between income tax and the VAT tax which are indirect tax so there is one the government can do on your last question of course things must be done by law not to buy any voluntary of the companies to pay more than they have to pay most of them are not if they do something they do in order to have a good image we can encourage it by doing something else except of putting laws of taxes by encouraging by for example creating a companies which make rating company responsibilities corporation responsibilities and to publish every year how much every corporation contribute to on the responsibility point of view to societies you have that they have corporate social responsibility reports and they have reports that help people if they want to give over the tax but the taxes should be done by law not by voluntarily they have to do it in the same way I have been asking the question for a long time and I expected that the debate on this question the first vision would be to ask ourselves if globalization to believe in inequalities and I asked myself the question if the real debate was not globalization in front of inequalities we are in a space of preoccupation of international relations of governance we all admit quite easily that there are a number of questions now that have taken so much and we are in demand of global governance that is an obvious and to explain myself I would like to mention a particular case where I have not only been an observer it is the Sahel file the Sahel file is now a crisis of security dimension and I have seen partners who suffered serious family problems of drought and who were in absolutely terrible systems and government and state organizations unable to manage so much so that the space has evolved so that the budgetary financial capacity of the countries goes a little to the tenth of what was the drug traffic which was installed in this space so what I want to say is that we have seen evolve a family file which has become a security file which means that we have a fundamental concern on the issues of inequality when they reach structural degrees like that that they threaten regions and they immediately transform security threats it is extremely difficult to convince but I am still with the integrity of our intellectual capacity of research and others when it is interpreted on financial issues or commercial fluidity we imagine a certain number of institutional mechanisms international to ensure to intervene the governance by the bill of the World Bank is concerned of political conditions we place a certain number of devices of responsibility for the integrity of these countries in particular of the region we invent the concept of solidarity when it comes to fighting terrorism or clandestine immigration and when it comes to... Your point is that we need to be more focused on global governance mechanisms not only I speak of course of these approaches but I speak of the notion to agree in the same way that we cannot perceive inequality simply inside national fabrics or fabric of a single society what I mean by inequality now we take our amplitude in an extremely important way and even in the international relationship and in the vision solidarity against terrorism solidarity against clandestine immigration must have a solidarity on structural issues poverty, health we start to admit on the environmental issue it is time we admit on inequality issues address that or we'll go to another question and just if we can please try to keep the interventions relatively succinct so we can give maximum number of people an opportunity to speak because we're running out of time for this thank you thank you dear speakers thank you for sharing with us very insightful given that the topic the focus of this session is on globalization and inequality in general about the relation between globalization and inequality for instance many critics have argued for instance from McBride report entitled one world many voices in the 1970s to 10 years away from British international communication cooperation to more currently MIT report published in 2007 on the bare hand the coverage of the third world from the first world has been dramatically declined either in terms of quality or in terms of content on the other hand the third world has much less space to define present and represent themselves since the 1970s in all so what do you think about regarding fighting inequality what do you think about the impact of globalization it's more good or more harm would you like to share your general opinion on this topic thank you Richard would you like to go and then follow I think that question illustrates the complexity of this topic of global inequality if one is talking about global inequality then I think the answer is unambiguous and without any question globalization has reduced global inequality why? because it permitted China to grow as rapidly as it did without globalization without tying into the world market China could never have taken off as rapidly as it did a large part of the global story is what's happened in China with over a billion people a tremendous reduction of poverty a tremendous increase of income of very low income people and that has reduced global inequality if you're talking about inequality in France and the impact of globalization on that that's a different question altogether so we have to refine what it is we're really considering actually I would like to try to answer these three questions which were raised by the public together because I think we are all here trying to figure out what is the best recipe for every single country in tackling inequality and as you have already heard there is no single recipe because every country has its own own recipe it depends so much on the level of development of the country which measures should be taken and also how big is the inequality but what should be in every case kind of is as prerequisite to equality is that the country is a democracy and also follows rule of law and is a secure state that kind of founds the basis for equality and then comes the policies which governments can implement when it comes to education system training system and other policies like social policy and transfers then to low income and poor people Well, during my brief remark I purposely referred to North Korea situation in comparison with South Korea I don't think North Koreans worry much about the risk of globalization but what is the outcome with the purchasing power parity base North Korean income is still below $2,000 South Korea is well over $30,000 maybe $30,000, $35,000 and so what made the difference was by the way as late as early 1960s North Korea had twice as high per capita income as South Korea and so as I said there is no genicoefficient but I think you can guess the genicoefficient there would be much worse than South Korea too because the dear leader previous leader used to drink $30,000 French wine so you can see what kind income distribution they might have so South Korea what South Korea did was, you know, they relied on globalization and market-based capitalistic system so what we are here to discuss is how to minimize the downside of globalization and some of the inherent undesirable tendency but I don't think we are talking about any alternative because it's so clear and the two Korean cases really you know, economics cannot put into a live situation but two Koreas almost like a live case so it is well illustrated and also China too, I think you know, after this globalization you made the efforts to join this Pascal Lime's WTO, you made 10 years effort and what do you achieve now so we have to deal with the inequality which is a challenge but that does not prevent so we go against their globalization if you if you look at the global income distribution across individuals and you look at the way it has been transformed over the years as Richard said it's difficult to summarize it in one coefficient but it's clear that you see the emergence of a global middle class one definition is people who have between 10 and 100 dollars to spend per day and on that account they were less than one billion 20 years ago most of which were in Europe and the US now we I think are two and a half and we would be three and a half in 15 years and this is a major absolutely major transformation so I think in terms of the historical relevance this dominates probably everything shouldn't make us less more tolerant vis-à-vis inequalities in our own countries there's no reason why we should be so I think we should be addressing both dimensions we should praise this evolution but at the same time find ways to address the rise of inequality within countries so this makes me I would like also to answer your point about taxation I mean direct taxation is a way obviously to redistribute it's not the only way and we have complex tax systems because we need to use both direct taxes and indirect taxes and through spending as well as through taxation so I think direct taxation is a major role to play but it's by far not the only instrument we have we are almost running out of time so I'm going to give you each about three minutes to make any final remarks if you could try to include in that sort of your highest priority policy initiative of course anything else you'd like to add that you haven't had a chance to note and if anybody's willing to take me up on my question about the relationship between inequality and poverty I'm going to give you all three minutes I'm giving you please go ahead Changgyeong, would you like to start? I think I have talked too much so I just addressed the last question you mentioned Ebola and human trafficking all these issues my personal opinion is that those problems can be addressed much better by reducing the poverty so I think that's a good question Thank you Changgyeong, would you like to go next? Yeah, perhaps going back to the two-dimension I addressed at the global level I think we should put the emphasis on transparency exchange of information all what makes it possible for our OECD level I would say this is not a done deal especially as they're not only the OECD countries in the world, the other countries and the other countries which may or may not participate in this exchange of information and Wales is extremely mobile and so this is an important thing we need to achieve the idea of a sort of global taxation I think it's not for the century although we are at the beginning of the century perhaps not for the next decades but the transparency and the change of information that something that has started that should continue now on Europe I think they need to go beyond I don't think of having a taxation of individuals but I think the thinking on the way we should be evolving in the way European policies should be addressing not only integration among nations and regional policies but also the consequences of this integration for individuals and the sort of set of core principles upon which this integration is built I think that's on the agenda for now I totally agree with Jean when it comes to this concerning multinational enterprises the taxation and also automatic exchange of tax information there's still a lot work to be done and the implementation is really not yet there and more countries are needed but that really is a major step forward compared to the present previous situation but actually I'd like to also answer the question concerning what effect the globalisation has to inequality and actually the OSCE survey says that it has no direct effect but of course very heavy indirect effect to inequality but to conclude I just want to reiterate that what I have earlier said when it comes to what should be done when tackling equality so I really think that we should be able to provide the people with better skills that really is needed if you want to create more inclusive growth and then we have to be able to deliver quality jobs and actually according to our survey it is possible to create more jobs and at the same time improve the quality of jobs so there is no trade-off between the amount and the quality according to our surveys Dr Sakal? Just a brief point I think we do agree on the fact that the appropriate measures redistributional measures and the social rail policies are necessary even from purely economic point of view OECD studies and IMF also support that and so the question is how we design it and also there are ways to the design, the package of redistributive policies measures and the social welfare policies so that it can be growth enhancing rather than growth inhibiting and education is one and the last point is that there are many cross-country data which show that the inequalities is inverse related to intergenerational the mobility and social mobility and from that perspective what is important is educational reform and the provide decent medical and the health services to poor society? Two observations, one concerns educational reform I'm an educator, it's hard to disagree with the desirability of improving the educational system but I live in Cambridge, Massachusetts which as you can imagine attaches high importance to education and I think of all of the school districts in the United States we probably spend more per capita, at least we're way up there per capita and I would evaluate the success of the Cambridge public school system as a B- it's done some good work but what I'm cautioning against is putting burdens on the school system which the school system cannot bear we cannot require the school system to correct all of the ills in society unless you're prepared to take children to parents at age one or one and a half and put them in institutional setups there's just a tremendous amount of inertia intergenerational inertia regardless of what the school system does so that's just a cautionary remark the other remark I'd like to make because it hasn't been mentioned except by me in passing it has to do with inheritance if we want to perpetuate and increasing inequality over time you allow low-tax or tax-free inheritance to take place from one generation to another Europe has settled this issue for right or wrong but this is an important issue in rapidly growing countries China faces it Korea faces it where incomes have grown very rapidly in one generation and that generation is still alive and that's what we do about passing that wealth to the next generation do we want to create a generation of rentiers people who don't have to work to make a living live off their investment income and that's another contribution to inequality which is a sensitive issue in any society but one that I think needs to be faced Thank you and please join me in thanking our distinguished panelists