The Nobel Banerjee: « inequalities in the world to the historic highs, the only solution is to tax the rich »

Much of the American leadership « derives from the excellence of the academic system. The cuts at universities risk costing very dear to the United States ». The Nobel Prize ABHIJIT BANERJEE, professor of economics at the Massachusetts Institute of Technology, does not hide the concern about the attack of the Trump administration in search. As for the possibility that Europe attracts talents fleeing the USA underlines: « On the innovation front it is far behind, to recover the gap it must do more ».
Banerjee, who won the Nobel for the economy in 2019 with his wife Esther Duflo and Michael Kremer for their experimental approach in the fight against poverty, on May 6 was a guest of the Next Milan Forum promoted by Inspire, OECD and Bocconi universities with Deloitte’s partnership. The day before he met the students of the Milanese universities at the Internizzi Foundation. Banerjee and Duflo in their essay a good economy for difficult times highlight that both in rich countries and in the developing ones, an explosion of inequalities is observed.

Professor Banerjee, she claims that the level of inequalities in the world has never been so high. What happened?
«Many countries are more unequal than they have ever been since we have data. In Italy and the United Kingdom, which in the past have had very numerous aristocracies, the level of current inequalities is the highest that has ever been seen from the Second World War.
This is due to the strong demand for brand goods: today names are sold. A restricted group of companies that control those brands makes enormous profits and the market structure favors these companies. The result is an excessive concentration of wealth in the hands of a few. And nothing is being done to prevent it from being like that. The rich are taxed too little. Warren Buffett admits it. And it doesn’t do it out of generosity but because he is a reasonable person. The need to tax the rich is unavoidable, I believe that Trump is also aware of this. If you do not intervene, there are not enough resources to redistribute: it is a question of budget ».

A global minimum tax on multinationals would be a first step, but Trump has denied the OECD agreement. What should Europe do?
«Trump’s reverse does not prevent Europe from moving forward on the taxation of multinationals, which derive great benefits from the European market. The EU commercial surplus, whose president complains, is balanced by the US service surplus. And the EU has the right to say: « If you want our market, pay our taxes ». Since the United States showed poor respect for Europe’s opinions, I don’t see why hesitate ».

Some believe that to encourage an agreement on duties it is necessary to loosen the narrow on Big Tech.
«Europe appears weak and confused and is not an asset from a negotiating point of view. The disparity with the USA in terms of innovation damages the old continent and it is necessary to fill this gap. I believe that Europe has much to offer and seem more optimistic and determined would guarantee them the right negotiating force. If the United States will then offer better conditions, it will be right to treat. But being ready to yield does not help. It would be easier if there was more clarity, so I understand the fears. But the EU has cards to play ».

Do Trump’s duties mark the end of the era of globalization? What are the greatest risks of this commercial war?
“I can’t say if it’s the end of globalization. I think nobody knows where Trump intends to arrive. It is not at all obvious that the United States manage to restore an internal manufacturing production such as to guarantee self -sufficiency. The American economy is in crisis and even the government does not deny that there could be a recession. As far as other countries are concerned, even more than rates, the problem are the conditions that the US administration poses to avoid duties. For example, Trump asks India to remove tariffs on wheat. This would be a big problem for farmers. In addition, with the duties against China, many low -cost Chinese products will be diverted to India, Europe and other countries and this can have heavy consequences for some sectors. At the same time, the Chinese were clear in saying that they want an agreement with the EU. For now, Europe remains waiting, for fear of Trump’s reaction, but has the opportunity to take the initiative ».

The USA administration dismantled Usaid: what are the consequences of the consequences for developing countries?
«There are African countries where USIID aid were very important and others for whom they represented only a part of the overall help. The worst thing, perhaps, was the cancellation of the DIV program that financed the development of effective social innovations.
And innovation, generally, is very slow in the public sector. So it’s a great loss. But I believe that international aid can still exist and be effective, it is time for other countries to go on ».

With his studies he has shown that there are many false myths about poverty. What is the worst?
«The biggest mistake that tends to make is to think that it is a single problem. There are many forms of poverty that need different solutions. There was a moment, which fortunately passed, in which it was thought to solve everything with the microcredit, including HIV. But that’s not the case. Microcredit can work if there is a problem of access to credit, but it is not the panacea of ​​all evils ».

There is a lot of discussion of the impact that artificial intelligence will have on inequalities: some claim that they will increase, others think that it can contribute to reducing them. What is your point of view?
« On the basis of the evidence we are finding so far, which are not many because we are at the beginning, it seems that it is destined to expand the inequalities. It will not be the poor to suffer the heaviest consequences of this transformation, but the middle class. The jobs that AI will replace are above all the intermediate level technical professions. Those in which, in countries like India, most of the middle class is used, whose real wages have halved over the past ten years. And this will be a problem ».

He wrote that « the economy is too important to be left only to economists », what does it mean?
«If we think of immigration, part of the negative reactions we see derive from an incorrect understanding of the economy. Some think: « They steal my job. » The data instead tell us the opposite. We economists are talking like oracles, instead we should explain more and better. We need a shared language ».