The IMF’s magazine Finance and Development published an article by J. Stiglitz on the problems of inequality and new economic challenges for the world community during the pandemic.
We offer several fragments of this article that are of particular importance for our country:
“The pandemic is likely to be with us for a while and its economic aftermath for a much longer time. It’s still not too late for such a change of course.
That’s why it’s a matter of self-interest – as well as a humanitarian concern –for the developed economies to provide the assistance the developing economies and emerging markets need.
The pandemic is likely to bring about a rash of debt crises. Low interest rates combined with financial markets in advanced economies pushing loans and profligate borrowing in emerging market and developing economies have left several countries with more debt than they can service, given the magnitude of the pandemic-induced downturn. International creditors, especially private creditors, should know by now that you can’t squeeze water out of stone. There will be a debt restructuring. The only question is whether it will be orderly or disorderly.
We need a comprehensive rewriting of the rules of the economy. For instance, we need monetary policies that focus more on ensuring full employment of all groups and not just on inflation; bankruptcy laws that are better balanced, replacing those that became too creditor-friendly and provided too little accountability for bankers who engaged in predatory lending.
The rules governing globalization must do more than just serve corporate interests; workers and the environment have to be protected. Labor legislation needs to do a better job of protecting workers and providing greater scope for collective action.
We will need to improve not just the market distribution of income but how we redistribute as well. Perversely, some countries with the highest degree of market income inequalities, like the United States, actually have regressive tax systems where top earners pay a smaller share of their income in taxes than workers lower down the ladder.
Unfortunately, in terms of personal income taxation, Ukraine is following the lead of the USA, applying a regressive system of tax collection. To remedy this situation, the Growford Institute will soon offer two research papers on the transformation of public finances and introduction of a wealth tax in Ukraine.
Tetiana Bogdan, Scientific Director of the Growford Institute.