You might be thinking, after all this month's hurricane coverage, that New Orleans must be the most unequal urban jurisdiction in the entire United States. But that dishonor actually belongs elsewhere. We have more below.

On tap first this week: some unexpected egalitarian rumblings from one of the world's most important global economic institutions.

A Redistributionist World Bank?

Three weeks ago, in a dramatic new report, top economists at the United Nations warned that extreme poverty will be with us for years to come, unless the world's nations finally start confronting extreme inequality in their own internal distributions of income and wealth.

Two weeks ago, at a special session of the UN General Assembly, over 170 world leaders essentially ignored this warning.

Last week, economists and social scientists — this time from the World Bank, not the UN — tried again. In their own dramatic new report, the World Bank's top analysts explicitly acknowledged for the first-time ever, notes the BBC, “that redistribution — as well as economic growth — is needed to end world poverty.”

What's going on here? We are witnessing, in the UN and World Bank, a long overdue rethinking of economic reality. Top analysts at mainstream global institutions are actually challenging the “trickle-down” policy prescriptions that have dominated economic decision making for the past quarter-century.

Trickle-down policies all assume that everyone will benefit if we just hand the wealthy enough incentives to invest — and then get government out of the way. And lawmakers worldwide have been doing just that. They've lifted trade rules that protect local jobs. They've deregulated economies and privatized public services.

The results, says a new study from the Center for Economic and Policy Research, a progressive think tank in Washington, D.C., have triggered a plunge in the rate of progress toward higher global living standards.

The last 25 years, says the Center's new Scorecard on Development, “have seen a sharply slower rate of economic growth and reduced progress on social indicators for the vast majority of low- and middle-income countries.”

One case in point: If Brazil had continued to grow at its pre-1980 rate after 1980, the Scorecard on Development points out, Brazilians today would be enjoying “European living standards.”

“The outcome of the last 25 years,” conclude the authors of the new Scorecard on Development, “should have economists and policy-makers thinking about what has gone wrong.”

And that's what many of them seem to be doing.

A Conflicted World Bank

The World Bank's chief economist, François Bourguignon, led off the news conference last week that introduced the bank's new Equity and Development report. “Equity of opportunity,” he contended, nurtures both “fairer” and more economically “efficient” societies.

But nations can't offer equity of opportunity, stressed report co-author Francisco Ferreira, without first achieving a healthy measure of equity in distribution. That's because, Ferreira explained, “societies with extreme inequality in wealth generate also extreme inequality in power.”

Governments that reflect these extreme inequalities in power, the World Bank economist added, tend to govern not in the public interest, but in the interest of wealthy elites.

Ferreira's prime example: Brazil, a nation “very good at taxing people and redistributing only amongst the rich.”

Brazil has spent far more on higher education, and far less on primary education, than more equal nations, a policy that directly privileges the affluent at the expense of the poor.

“We subsidize rich people who have gone to private school and are now going to free public universities,” Ferreira pointed out, “as opposed to subsidizing the poor kids who are going to state schools.”

The World Bank, to be true to this insightful new analysis, ought to be working, at every opportunity, against the concentration of wealth. Unfortunately, as one international activist research group revealed last week, that's not what the World Bank has been doing.

The new “poverty reduction strategies” that the World Bank has been promoting, says the activist World Development Movement, represent no turn to enlightenment. Indeed, 90 percent of these strategy plans — plans that poor countries must adopt if they want aid and debt relief — demand that poor nations privatize public services.

Reporters at last week's at last week's news conference that released the new World Bank Equity and Development report pounced on this contradiction.

How could the World Bank insist on privatization and other policies designed to keep elite investors happy, asked reporter Sofia Hoffman, and, at the same time, insist that only an “enormous public intervention to redistribute income” can generate real equity of opportunity?

Does equity of opportunity, needled Hoffman, “not automatically mean a call for the need of greater income equality as well?”

Well, yes, answered the World Bank's Ferreira, to achieve equity of opportunity some current subsidies “will have to be taken away from elites.”

Will the World Bank ever seriously start pushing for those takings? That now becomes the question.

Has Katrina Blown Away Estate Tax Repeal?

The new World Bank report on ending global poverty generally shies away from any proposals that might generate conflict with elite interests. The report's tax chapter, for instance, includes vague platitudes about plugging tax “loopholes” and goes on to oppose, until all loopholes are plugged, the upping of income tax rates on high incomes.

Still, the World Bank's tax proposals do carry some redeeming social value. The World Bank is actually recommending that governments put in place inheritance taxes on grand fortunes.

Inheritance taxes, the World Bank report notes, may help prevent “extreme concentrations of wealth from being passed from generation to generation.”

The Bush administration, quite obviously, doesn't want to hear the World Bank talking like this. President Bush, ever since taking office, has been agitating for the repeal of the only tax on grand concentrations of wealth in the entire U.S. tax code, the estate tax.

The long-awaited Senate vote on estate tax repeal, originally scheduled for right after Labor Day, had to be postponed after Katrina hit the Gulf Coast. Now, after Rita, Senate fence-sitters on estate tax repeal seem even less likely to vote the President's way — and hand America's richest a $1 trillion tax break.

“We've got to get real,” as Republican Senator George Voinovich of Ohio noted last week. “The truth is, we need more money.”

The GOP Senate gang leading the charge for estate tax repeal, meanwhile, isn't giving up yet. Republican Jeff Sessions from Alabama announced last Tuesday that not repealing the estate tax would be “immoral.”

What exactly did Senator Sessions have in mind with that bizarre remark? Time magazine has suggested an answer. Time reported online that Sessions had been desperately maneuvering to exploit Hurricane Katrina for the estate tax repeal cause.

Sessions had actually called one of his former law professors and asked whether that prof knew any business owner who had died in the hurricane. The senator's search for dead entrepreneurs, Time observed, amounted to an act of “legislative ambulance chasing.”

Katrina's Reverse Robin Hoods

The coming reconstruction of the Gulf Coast, an effort some have begun calling “the most demanding act of government domestic investment since the New Deal,” could become an opportunity to narrow America's enormous gap between rich and poor.

The Bush administration, sadly but predictably, appears headed in the exact opposite direction.

The latest evidence: the Bush administration's rush to grant across-the-board tax credits to corporations knocked off stride by Katrina, a move almost certain to exacerbate post-Katrina Robin Hood-in-reverse.

Tax credits only benefit businesses that have profits they owe taxes on. Locally owned Gulf Coast businesses devastated by Katrina are not going to have much in the way of profits this year to report. But huge national businesses — like the “gaming” giants that run the coast casinos — make for a different story.

These national megacompanies will use the Bush administration's tax credits to offset their profits elsewhere in the country, a move that will hike their share prices and speed ever-greater windfalls into their executive suites.

“The survivors of Hurricane Katrina,” as Greg LeRoy, the director of the Washington, D.C.-based Good Jobs First, put it last week, “deserve better than a knee-jerk raft of tax breaks for big businesses that will ultimately shift the tax burden to small businesses and working families.”

What could be done to make Gulf recovery an equalizing force in American life? A host of community groups in New York City, all wise to the wiles of corporate welfare artists after four years of 9/11 recovery, last week sent their counterparts in New Orleans a gameplan for equality.

The basic advice from the New York community groups: Watch out or else wealthy special interests will hijack the recovery process. In New York, for instance, $8 billion in “Liberty Bonds” went overwhelmingly “to build luxury apartments rather than affordable housing.”

Stat of the Week

The most unequal urban political jurisdiction in the nation? No, that dishonor does not belong to New Orleans. The nation's urban center with the widest gap between top and bottom: Manhattan. This island's top fifth currently averages 52 times the income of its bottom fifth.

Village Voice, September 20, 2005

Quote of the Week

“How did America manage its World War II and Korean War debts, build a federal highway system, balance budgets and still establish an educational system that exceeded in excellence and size any ever known to the world?

“In great part by levying a highly progressive income tax that — please note — did not hinder growth as today advertised, but rather stimulated our nation's period of greatest economic growth.

“From 1951 until 1963, from Harry Truman through eight Eisenhower years to John F. Kennedy and Lyndon Johnson, the marginal income tax rate was 91 to 92 percent. The top rate applied only to taxable incomes in excess of $400,000, the pre-inflation equivalent of most CEO munificent incomes of today.”

Bill Roy, former member of Congress,
Topeka Capital-Journal, September 24, 2005

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