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Distributive�by Design

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This deck is part of Doughnut Economics for University Courses,

developed by DEAL in collaboration with Rethinking Economics – Version 1.0 November 2024

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Note to lecturers

These slides seek to provide an introductory analysis of income and wealth inequalities, within nations and globally, and to explore how economies can become far more distributive by design.

The aim is for students to be able to recognize and analyze many different types of inequality, and to explore many possible approaches that are proposed for addressing these.

The full deck is not intended to be presented as one continuous lecture: it is divided into short topic sections, which you can draw on and integrate into your own teaching materials.

The speaker notes for each slide give more, relevant sources, and suggested activities or questions for discussion.

Given that many of the concepts and sources underpinning Doughnut Economics are based in the intellectual traditions of the Global North, you may wish to complement these with sources, perspectives and case studies that reflect your own or other cultural and regional contexts.

DEAL is sharing these slides under a creative commons licence, CC-BY-SA 4.0 and we ask that you follow DEAL’s principles and guidelines when using them.

We have aimed to accurately credit all concepts and images – please let us know if any are missing or incorrect and we will rectify.

If you have any feedback on, or suggestions for improving, these slides please share your comments with us at doughnuteconomics.org/university-courses

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Content

In 90 seconds…

A short history of debates about distribution

Inequality: why it matters and how it is measured

National & regional trends in income & wealth inequalities

Exploring (pre)distributive design

Redistributive and pre-distributive policies

Cities and places: distributive by design

Technology: the potential of distributive design

Global trends in income and wealth inequalities

Addressing global inequalities

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In 90 seconds…

Watch the animation

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5. Distributive by Design

A short history�of debates about distribution

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diverge!

Karl Marx

Trends in inequality?

Capital

Profit

Chivalry

converge!

Alfred Marshall

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Adapted excerpt from Doughnut Economics, pp. 165

Inequality was a topic of great interest to many of the founding fathers of economics, but their views differed widely over how income would be distributed between labour, landlords and capitalists as market economies grew. While Karl Marx argued that incomes would tend to diverge, with the rich getting richer while workers were kept poor (in systems-thinking terms: the ‘success to the successful dynamic), Alfred Marshall claimed the opposite: that incomes across society would tend to converge as the economy expanded. He argued that, as economies get richer, they deliver higher living standards for all (rising tide lifts all boats) and the wealthy would become more benevolent, willing to sacrifice for others. He called this ‘economic chivalry’. ��We can use a causal loop diagram (introduced in the previous section on systems thinking) to represent a stylized summary of their different positions. �

Further detail on Marshall’s view:

�An optimistic Victorian, Marshall thought that rising per capita output and income would go a long way toward attaining higher living standards for the poor and working classes is—a sort of rising tide raises all boats argument. (Bradley 1992) He was also optimistic that individuals would become more socially motivated and benevolent as their incomes rose, so that the rich would provide more support for the poor voluntarily. He shared Mill’s views on investments in education and human capital, as well as progressive taxation.

Like Smith and Mill, Marshall was optimistic that economic growth and rising average incomes would go a long way toward alleviating or eliminating poverty with minimal government redistribution policies. In testimony before a Royal Commission on the Aged Poor in 1893 he predicted that “...with greater wealth, knowledge, and social activity a hope is arising that not only paupers but all the very poor may be improved away.” (Marshall (1893), p. 199)

Marshall argued that since the beginning of the industrial revolution in the 18th century in England, people had become ...more unselfish, and more inclined to work and save in order to secure a future provision for his family; and there are already faint signs of a brighter time to come, in which there will be a greater willingness to work and save in order to increase the stores of public wealth and of public opportunities for leading a higher life. (Principles of Economics, vol. I, p. 93)

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Vilfredo Pareto

80/ 20 - deal with it

population

income

0%

100%

0%

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In the 1890s, however, the Italian engineer-turned-economist Vilfredo Pareto stepped back from theoretical debate and searched for a pattern in the data. Having gathered income and tax records from England and from German states, from Paris and Italian towns, he plotted them on a graph and saw a curiously striking pattern emerge. In each case, he found, around 80% of national income was in the hands of just 20% of people, while the remaining 20% of income was spread among 80% of people. Pareto was delighted: he appeared to have discovered an economic law, which is still known today as Pareto’s 80–20 rule. What’s more, he argued, the steep ‘social pyramid’ that his data had repeatedly revealed must be a fixed fact of human nature, making attempts at redistribution counterproductive. The way to help the worst off was to expand the economy, he concluded, and the wealthy were best placed to make that happen.

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‘5% empirical information, 95% speculation, some of it possibly tainted by wishful thinking…’

Simon Kuznets

‘perilously close

to pure guesswork’

No ‘unwarranted

dogmatic generalisations’

‘The relative distribution of income has been moving towards equality’

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Adapted excerpt from Doughnut Economics: ��Converging, diverging, or ever-fixed? Debates over the likely path of income inequality raged on, but in 1955 the story took a crucial turn, quite literally. When Simon Kuznets – the brilliant inventor of national income accounting – gathered together long-run trend data on incomes in the US, UK and Germany, he was taken aback by what he found. In all three countries, income inequality measured before tax had been falling at least since the 1920s, and even possibly before the First World War. Contrary to Pareto’s static social pyramid, Kuznets believed he had uncovered a different law: a social rollercoaster ride on which income inequality first rose, then levelled out, and eventually fell again, all while the economy grew.

It was an intriguing finding, but it jarred with his intuitive understanding of the Success to the Successful trap. Since the wealthy have higher savings and since savings generate more wealth, he reasoned, inequality should tend to rise over time, not fall – so what was going on? He offered up a possible explanation: the process of rural to urban migration. In the early stages of economic development, Kuznets suggested, as workers are drawn into cities, they leave behind low-paid but fairly egalitarian rural life to earn higher but more unequal urban wages, and so inequality increases as industrialisation gets under way. At a certain point, however, once enough workers are earning those higher urban wages, and they start demanding better pay for the low-waged among them, inequality begins to fall again, resulting in both a more prosperous and more equal society.

It was a clever theory but it was wrong, not least because rural incomes were in fact far from egalitarian – a false assumption, for which Kuznets privately admitted he had ‘no evidence whatsoever’. But to his credit, he was cautious when publishing his conjectures, noting that the ‘scant’ data he drew on were specific to a particular historical context and should not be used for making ‘unwarranted dogmatic generalisations’. He openly admitted that his explanations came ‘perilously close to pure guesswork’, thus making his conclusion, ‘5 per cent empirical information and 95 per cent speculation, some of it possibly tainted by wishful thinking’.

RESOURCES:��Kuznets’ 1955 paper, Economic growth and income distribution, available at http://piketty.pse.ens.fr/files/Kuznets1955.pdf

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The Kuznets Curve

Simon Kuznets

“Growth

will even things up again”

Trickle-down economics

A rising tide lifts all boats

Austerity:

no pain no gain

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So much for the caveats and warnings. His underlying message – that rising inequality is an inevitable stage on the journey towards economic success for all – was too good a story to doubt. The image that Kuznets had already sketched in every economist’s mind was soon drawn on to the economist’s page and named ‘the Kuznets Curve’. With income per person on the x axis and a measure of national income inequality on the y axis, the curve – shaped like an upside-down U – appeared to present an economic law of motion. And it whispered a powerful message: if you want progress, inequality is inevitable. It’s got to get worse before it can get better, and growth will make it better. Or, as Arnold Schwarzenegger would say, ‘No pain, no gain’.

The inverted‑U rapidly became an iconic economic diagram, especially in the nascent field of development economics, where it bolstered the theory that poor countries should concentrate income in the hands of the wealthy since only they would save and invest enough of it to kick-start GDP growth. In the blunt words of the field’s founding theorist, W. Arthur Lewis, ‘development must be inegalitarian’.8 In the 1970s, both Kuznets and Lewis won the Nobel-Memorial prize in economics for their respective theories on growth and inequality, while the World Bank treated the curve as an economic law and used it to publish projections of how long it would take for poverty levels to start falling in low-and middle-income countries.

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Simon Kuznets

Thomas Piketty

Pre

WWI

Post

WWII

war losses

public investment

health

education

housing

The Kuznets Curve

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Adapted extract from Doughnut Economics, pp. 168-169

It was, however, the economist Thomas Piketty’s 2014 long view of the dynamics of distribution under capitalism that made the underlying story plain to see. By asking not just who earns what but also who owns what, he distinguished between two kinds of households: those that own capital – such as land, housing, and financial assets which generate rent, dividends and interest – and those households that own only their labour, which generates only wages. He then scoured old tax records from Europe and the US to compare the growth trend of these different sources of income and concluded that Western economies – and others like them – are on track for dangerous levels of inequality. Why? Because the returns to capital have tended to grow faster than the economy as a whole, leading wealth to become ever more concentrated. That dynamic is then reinforced through political influence – from corporate lobbying to campaign financing – that further promotes the interests of the already wealthy.

Kuznets, it turns out, had been partially right: income inequality – and even wealth inequality – did fall in the US and Europe in the first half of the twentieth century. But what Piketty’s analysis revealed was that Kuznets had conducted his study in the midst of an exceptional economic era. The equalising trend that he had ascribed to the inherent logic of capitalist development was actually due to the capital-depleting impacts of two world wars and the Great Depression, combined with unprecedented post- war public investment in education, healthcare and social security, all funded through progressive taxation. Kuznets’s first intuition had in fact been right: when wealth is concentrated in few hands – and when the returns to capital are growing faster than the economy itself – inequality does indeed tend to rise. Success to the Successful rules after all, unless governments take action to offset it.

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Thomas Piketty

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What do you think have been the Kuznets Curve’s

most significant economic, political & social effects?

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5. Distributive by Design

Inequality: how it is measured and why it matters

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Gini coefficient =

�

A / (A+B)

�

Gini coefficient

= A / (A+B)

Measuring inequality:

The Gini coefficient

One person has all the income: Gini = 1

All people have equal income: Gini = 0

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Measuring inequality:

The Palma Ratio

�Responds to extremes in inequality

Intuitive and easy to understand

Sometimes also measured as

top 10% / bottom 50%

Cobham and Sumner 2015

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Gini coefficient =

�

A / (A+B)

�

Views on inequality

There are some people who say that they're concerned only with poverty but not inequality. But I don't think that is a sustainable thought.

A lot of poverty is, in fact, inequality because of the connection between income and capability of having adequate resources to take part in the life of the community. So you have to be interested in inequality. The issue of inequality and that of poverty are not separable.

We need to ask the moral questions: Do I have a right to be rich? And do I have a right to be content living in a world with so much poverty and inequality?

These questions motivate us to view the issue of inequality as central to human living. Ultimately, the whole Socratic question "How should I live?" has to include a very strong component of awareness and response to inequality.

Amartya Sen�2011

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Gini coefficient =

�

A / (A+B)

�

Views on inequality

The problems in rich countries are not caused by the society not being rich enough (or even being too rich), but by the material differences between people within each society being too big. What matters is where we stand in relation to others in our own society.

Inequality, not surprisingly, is a powerful social divider, perhaps because we all tend to use differences in living standards as markers of status differences. We tend to choose our friends from among our near equals and have little to do with those much richer or much poorer…

The importance of community, social cohesion, and solidarity to human well-being has been demonstrated repeatedly in research showing how beneficial friendship and involvement in community life are to health. Equality comes into the picture as a precondition for getting the other two right. Not only do large inequalities produce problems associated with social differences and the divisive class prejudices that go with them, but they also weaken community life, reduce trust, and increase violence.

Richard Wilkinson

and Kate Pickett

2009

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Gini coefficient =

�

A / (A+B)

�

Views on inequality

Greater equality leads to healthier and more cohesive societies, argue Wilkinson and Pickett

Wilkinson & Pickett 2009

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Gini coefficient =

�

A / (A+B)

�

Views on inequality

We need inequality. Perfect equality, everybody having the same income, doesn't exist anywhere, nor has it. Obviously some countries - maybe China during the cultural revolution - came relatively close, but some inequality has always existed.

Without inequality you lack incentives to do practically anything – to work, to invent new things or to invest. Nobody is going to do things for nothing and we know that monetary rewards are really crucial, so this is the good part of inequality. We should not forget that inequality is indispensible for the development of a society.

�…(but) if the gaps keep on increasing as they've increased in the last 20 years, you would end up with two types of societies within a single country. If there is no sufficient middle class and if the poor really are very far from the rich, then you really cannot speak of a single society.

We could end up with a kind of a global plutocracy, this global one per cent or even half a per cent that are very similar among themselves, but really belong to different nations.

Branko Milanovic

2016

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Discussing perspectives on inequality

What is your view on equality and how much of it society should allow, encourage or prevent?

What different kinds of in/equality are at stake here?

How might your view be influenced by your own national and social context?

What would it take to persuade you to change your view?

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5. Distributive by Design

National & regional trends in income & wealth inequalities

The graphs in the following section are all drawn from the World Inequality Report 2022

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Global income distribution 2021

World Inequality Report 2022

By geographic region

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Geographic breakdown of global income groups, 2021

World Inequality Report 2022

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Trends in national income inequalities

World Inequality Database

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The extreme concentration of capital

World Inequality Report 2022

Wealth inequality across the world, 2021

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Rising private wealth, declining public

wealth

World Inequality Report 2022

Trends in high-income countries, 1970-2020

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Exploring national income inequalities

World Inequality Database

Look up your own nation, or compare two nations, and explore trends in income and wealth inequalities.

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Where do you stand in your nation’s distribution?

Enter your own data on household income and wealth to understand your relative position

wid.world

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5. Distributive by Design

Exploring (pre)distributive�design

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Who owns the sources of wealth creation?

Political-economic systems are largely defined by the way property is owned and controlled

Gar Alperovitz

So consider who owns the…

COMPANIES

TECHNOLOGY

INTELLECTUAL �PROPERTY

HOUSING

LAND

POWER TO �CREATE MONEY

UTILITIES

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Excerpt from Doughnut Economics, p. 177-178.

Redistributive policies can be life-changing for those who benefit from them. But they still may not get to the root of economic inequalities, because they focus on redistributing income, not the

wealth that generates it. Tackling inequality at root calls for democratising the ownership of wealth, argues the historian and economist Gar Alperovitz, because ‘political-economic systems are largely defined by the way property is owned and controlled’. So in addition to redistributing income, the economist’s focus shifts towards redistributing sources of wealth too. If that sounds entirely unfeasible, a foolish pipe dream, then read on. Distributive design has an unprecedented opportunity this century to transform the dynamics of wealth ownership, including in reshaping who controls land and housing, companies, technology, IP, and the power to create money.

The following slides give a few examples for students to reflect upon.

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Industry as capital, accruing surplus value from labour

�Capital is dead labour, that, vampire-like, only lives by sucking living labour, and lives the more, the more labour it sucks - Karl Marx, 1867

There are many kinds of capital – with many ways of accruing financial value

Land as capital, accruing rental income

Landlords grow richer, as it were in their sleep, without working, risking, or economising - John Stuart Mill, 1848

Finance as capital, accruing interest and dividends

Just as landlords were the archetypal rentiers of their agricultural societies, so investors, financiers and bankers are in the largest rentier sector of today’s financialized economies - Michael Hudson, 2012

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Rockford, Illinois, 1914

Henry George 1879

Tax land

ownership!

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Excerpt from Doughnut Economics, pp. 178-180��As populations and economies grow, the price of land rises, but no more of it can be supplied and so that shortage generates ever-higher rents for landowners. Mark Twain had his eye on this trend in nineteenth-century America: ‘Buy land,’ he quipped. ‘They’re not making it anymore.’

His contemporary Henry George was struck by the inequity inherent in this set‑up, which he witnessed first hand on his travels around America in the 1870s. But instead of encouraging his fellow citizens to buy land, he called on the state to tax it. On what grounds? Because much of land’s value comes not from what is built on the plot but from nature’s gift of water or minerals that may lie beneath its surface, or from the communally created value of its surroundings: nearby roads and railways; a thriving economy, a friendly neighbourhood; good local schools and hospitals. That certainly explains the real estate agent’s timeless mantra: What determines house value? Location, location, location.

In 1914, one of George’s supporters, Fay Lewis, decided to make this point with what today would be called political performance art. He bought up an empty lot on a street in his home town of Rockford, Illinois and left it derelict, erecting only a giant billboard to explain why. He even turned it into a postcard to spread the message far and wide.

George’s proposal for a land-value tax – an annual levy on underlying land values as a fair means of generating public revenue – echoed John Stuart Mill’s earlier call to tax ‘rentier landlords’ who ‘grow richer, as it were in their sleep, without working, risking, or economising’.

Inspired by such reasoning, land-value taxes are now in use – albeit in diluted form – from Denmark and Kenya to the US, Hong Kong and Australia. But taxation to George was essentially a substitute for a more systemic fix: land, he believed, should be owned in common by a community, rather than by landowners. ‘The equal right of all men to the use of land,’ he wrote, ‘is as clear as their equal right to breathe the air.’

Image: New York Public Library

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Who owns

the housing?

And so who gains from rising rents & house prices?

Market: private rental

Households: individual home ownership

Commons: co-housing initiatives

State: social housing provision

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Who owns the capacity

to generate electricity?

And so who gains from the income?

Market: solar company, US

Household: home solar, Germany

Commons: community solar, UK

State: public energy, Sweden

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Who owns the companies?

and so who gains from the profits?

Market: Walmart, US

Household: sole trader, UK

Commons: Drupal software, Belgium

State: Vattenfall, Sweden

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Explore the code of capital

In these seven 20 min videos, Katharina Pistor breaks down the history, process, institutions, and participants involved in the legal coding of capital – showing how private actors have harnessed social resources to accumulate wealth, generating not only economic inequality, but inequality in law.�.

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5. Distributive by Design

Redistributive &�pre-distributive�policies

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Divisive

Capturing opportunity and�value in the hands of a few

Distributive

Sharing opportunity and value with all who co-create it

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Policies for addressing national inequalities

REDISTRIBUTION reducing post-tax inequalities	PREDISTRIBUTION reducing pre-tax inequalities
Redistributing income	Pre-distributing income
Taxes and transfers Income tax Value-added tax Social & welfare payments	Public transfers Universal basic income	Public policies Minimum wages Labour rights Equal pay policies Rent control
Redistributing wealth	Pre-distributing wealth
Taxes and transfers Inheritance tax Property tax Capital gains tax	Public investment in universal basic services Education Healthcare Childcare�Social housing	Policies enabling distributed ownership Cooperatives & worker-owned businesses Community-owned energy Community-owned housing

An illustrative set of redistributive and pre-distributive policies. Many others are possible and in use.

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World Inequality Report 2022

2018-2021

The uneven impact of redistribution on inequality

Insight:

regions with better pre-distribution (lower right-hand bars) tend to achieve greater redistribution (lower left-hand bars).

Income inequality before and after taxes

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Source: https://wir2022.wid.world/

Figure 1.9a

From World Inequality Report 2022, p. 36��The complementarity between predistribution and redistribution

Another way to look at redistribution across the world’s regions is to plot the degree of inequality before taxes on the horizontal axis, and the degree of inequality reduction on the vertical axis. We do this in Figure 1.9b. The lower the inequality before taxes, the higher the level of redistribution. In regions where market inequality levels are relatively low (i.e. where pre-distribution is relatively high), there tend to be more social forces pushing for higher redistribution as well. Conversely, when the institutional and policy set-up does little to reduce inequality in the first place, there are fewer mechanisms to reduce inequality after taxes as well. An important conclusion from this global observation is that high levels of redistribution are difficult to attain with low levels of pre-distribution. These two forms of inequality reduction go hand in hand. In economics speak, they are complements rather than substitutes.

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Income inequality before and after taxes

World Inequality Report 2022

2018-2021

Top 10% / Bottom 50% income gap

Insight:

regions with better pre-distribution

(x axis) tend to achieve greater redistribution

(y axis).

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Source: https://wir2022.wid.world/

Figure 1.9b

From World Inequality Report 2022, p. 36��The complementarity between predistribution and redistribution

Another way to look at redistribution across the world’s regions is to plot the degree of inequality before taxes on the horizontal axis, and the degree of inequality reduction on the vertical axis. We do this in Figure 1.9b. The lower the inequality before taxes, the higher the level of redistribution. In regions where market inequality levels are relatively low (i.e. where pre-distribution is relatively high), there tend to be more social forces pushing for higher redistribution as well. Conversely, when the institutional and policy set-up does little to reduce inequality in the first place, there are fewer mechanisms to reduce inequality after taxes as well. An important conclusion from this global observation is that high levels of redistribution are difficult to attain with low levels of pre-distribution. These two forms of inequality reduction go hand in hand. In economics speak, they are complements rather than substitutes.

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5. Distributive by Design

Cities and places: distributive by design

The following slides show examples of a range of initiatives that serve to share value and opportunity, and create greater equality, through urban design and service provision

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Distributive public transit infrastructure

Dedicated bus lanes: Curitiba

Cycling infrastructure: Xiamen

Free public transport: Tallinn

First cycle lanes: Addis Ababa

Providing access to fast, clean, affordable public transit for all

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Distributive public space

100 Utopias, Mexico City

Superblocks, Barcelona

From parking to plaza, New York

Riverside beach, Paris

Creating ‘public luxury’ and expanding the urban commons

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Distributive housing

Community-led redevelopment: Bangkok

Community-owned housing: Leeds

City-owned social housing: Vienna

Half houses: Chile

Providing affordable housing, through the market, state and commons

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Community wealth-building

Anchor institutions - Preston

Recruiting employees locally – Ohio

Democratic ownership - Mississippi

Community Land Trusts

creating distributive economies that generate value and opportunity with and for the local community

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Sources:

What is community wealth building? A brief summary by Preston City Council�https://www.preston.gov.uk/article/1335/What-is-Community-Wealth-Building�

Investing in Employees: Step Up, University Hospitals, Cleveland Ohio�http://momsfirst.org/events/2018/11/20/university-hospitals-step-up-program-informational-session�Image credit: Cleveland University Hospitals

�The role of anchor institutions using the power of their procurement – Preston�https://letschangetherules.org/map/preston-community-wealth-building

Image credit: Preston City Council

�Democratic ownership – Cooperation Jackson, Mississippi

https://cooperationjackson.org/�Image credit: Cooperation Jackson��Community Land Trusts – community-owned housing: �https://www.communitylandtrusts.org.uk/�Economic democracy: supporting cooperatives and employee ownership �Image credit: Oakland CLT

�

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5. Distributive by Design

Technology: the potential of distributive design

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Energy

Manufacturing

Communications

Knowledge

How might distributive technologies

transform the future of ownership?

Distributive

Centralizing

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All industrial systems depend upon technologies to provide four essential factors: a supply of energy, a means of production, a form of communications and a store of knowledge. ��The 20th century was dominated by technologies that, due to their design, tended towards centralisation and thus concentrated the ownership of such technologies:��Energy: provided through large-scale capital investment in oil rigs, gas pipelines, coal mines and processing.

Manufacturing: designed around the mass-production methods of Fordist factories, bringing thousands of waged workers in daily

Communications: every phone call passing through a centralised switchboard

Knowledge: controlled through patents and copyrights

The 21^st century has seen the rise of far more distributive technologies that have the possibility of creating a very different future:

Energy: generated through distributed and micro-grid networks, owned by household and communities and local organisations

Manufacturing: decentralised through the rise of distributed manufacturing in maker spaces such as Fab Labs – reuniting workers with the means of production

Communications: through a distributed near zero-marginal-cost digital network which reaches billions of users

Knowledge: creative commons licencing, open source software and hardware – sharing and stewarding intellectual property

What is the potential of bringing these technologies together? ��REFLECTION: invite students to compare and contrast the social, ecological and distributional implications of centralising vs distributive technologies, focusing on a range of common goods and services such as: housing, education, medical equipment, furniture.

Image credits:�oil rig: unknown�factory: unknown�switch board: unknown�Solar: UNESCO�3D print: All3DP.pro�mobiles: Reuters�

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Fab lab tools (© Frosti Gíslason/Saethor Vido/Neil Gershenfeld)

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Dar es Salaam

Barcelona

Kamakura

Kerala

Fab Labs,�Maker

Spaces,

Micro

factories

‘We share the recipes of how to construct our world’

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PITO

Product In Trash Out

DIDO

Data In Data Out

Cosmolocal production

Globalized production

fab.city

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Source: fab.city

The Fab City movement highlights the concept of Cosmolocal production, which arises out of the possibilities of distributive technology design.�The goal of the Fab City movement is ‘for cities to produce (almost) everything they consume.’

Through the perspective of cities, they contrast PITO and DIDO worlds.��In the PITO world of globalized production, long global supply chains create high volumes of input and waste, with high costs ($ and CO2) of transport.�From the perspective of the city, products come in, trash goes out.

In the DIDO world of cosmolocal production, the principle is that atoms are heavy so circulate locally, while (digital) bits are light so information circulates globally. �Manufacturing is designed around a network of local SMEs and fablabs. These provide production on demand to city and regional scale communities. And the knowledge generated in shared globally through the creative commons.

From the perspective of the city, data comes in, data goes out – materials are recirculated (reused, repaired, refurbished, repurposed) locally.

ACTIVITY / REFLECTION:�Consider the manufacturing required for several essential goods – such as housing, clothing, furniture, agricultural systems – and imagine what it would take to provide this through cosmolocal production. What might be the opportunities of such a system, and what challenges)��How do both the appeal of, and the barriers to, cosmolocal production change by global region or nation? ��Which industries seem best placed to be disrupted by such a transformation in production systems? ��What might be the social and ecological consequences of such a shift, in a particlural industry and country? ��What are some of the scale and coordination challenges of shifting from globalised to cosmolocal production? ��For greater detail, see: https://fab.city/documents/whitepaper.pdf��Source website: https://fab.city/

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Wikihouse

A modular building system for designing and manufacturing low-carbon, low-material impact and high-performance buildings.��Open source design blueprints.

�Manufactured by a global network of local fabricators.

Assembled anywhere.

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5. Distributive by Design

Global trends in income & wealth inequalities

The graphs in the following section are all drawn from the World Inequality Report 2022, which contains many more insightful graphics and excellent analysis

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Trends in global income inequality

1820-2020

World Inequality Report 2022

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Global income

& wealth inequality 2021

World Inequality Report 2022

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Wealth inequality

in the world

2021

World Inequality Report 2022

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Whose wealth

has been growing?

World Inequality Report 2022

Annual average wealth growth rate, 1995-2021

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Global carbon inequality 2019

World Inequality Report 2022

Income group contribution to

world emissions

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Understand your position within the global distribution

Enter your own data on household income and wealth to understand your position relative to the rest of the world

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5. Distributive by Design

Addressing global inequalities

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If these directions suggest the future of global thriving…

Meeting the needs of all people

Within the means of the living planet

RISE

REORIENT

REDUCE

based on Fanning et al 2022

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Meeting the needs of all people

Within the means of the living planet

REBALANCE

based on Fanning et al 2022

What policy initiatives could start to ‘rebalance’ global inequalities?

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RISE

REORIENT

REDUCE

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Meeting the needs of all people

Within the means of the living planet

REBALANCE

based on Fanning et al 2022

Tackle

tax havens

Debt

Justice

Global

billionaire

tax

Democratize

global

institutions

Compensation

for excessive

CO₂ emissions

The following slides explore initiatives proposing diverse approaches to reducing global inequalities.

What policy initiatives could start to ‘rebalance’ global inequalities?

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Corporate

Tax Haven Index 2021

Every second the world loses the equivalent of one nurse’s yearly salary to a tax haven…so where is it going?

Check out the website and see the role in tax havens played by your country.

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Tackling

tax havens

Tax Justice Network

Six solutions proposed by the Tax Justice Network, collectively aiming to prioritize equality in tax regimes internationally

How feasible are these aims? Who will be the beneficiaries?

1. Automatic exchange of information – to prevent individuals abusing their overseas bank accounts to pay less tax at home

2. Beneficial ownership registration – to make visible the real person who receives profits from a company

3. Country by country reporting – to expose multinational corporations (MNCs) that shift profits to tax havens in order to pay less tax

4. Unitary taxation – taxing MNCs based on where they employ staff, produce, and sell goods and services.

5. Equip tax collectors to do their job – to make sure the most powerful corporations pay the right amount of tax, like everybody else.

6. UN tax convention – to hold countries to legally binding, equitable standards on corporate taxation, financial transparency and tax justice.

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Global tax on billionaires

The world’s tax systems do not effectively tax the wealthiest individuals today. Pioneering research shows a pattern: all taxes included, the super-rich pay less than ordinary workers

- Gabriel Zucman

Zucman 2024

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Zucman’s commentary for these slides comes from a thread shared on x.com: https://x.com/gabriel_zucman/status/1805603448857182708

Note accompanying the graphic: This figure reports estimates of effective tax rates by pre-tax income groups and for U.S. dollar billionaires in France, the Netherlands, Italy, and the United States. These estimates include all taxes paid at all levels of government and are expressed as a percent of pre-tax income. P0-10 denotes the 10% of adults at the bottom of the pre-tax income distribution, P10-20 the next decile, etc. Pre-tax income includes all national income (measured following standard national account definitions) before taxes and transfers and after the operation of the pension system. Sources and methodology: see Appendix A.

Full report: https://gabriel-zucman.eu/files/report-g20.pdf�

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Global tax on billionaires

Why? In a nutshell, because income taxes fail to effectively tax them.

By using holding companies, and other techniques, they can easily report little — or even no — taxable income

- Gabriel Zucman

Zucman 2024

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Zucman’s commentary for these slides comes from a thread shared on x.com: https://x.com/gabriel_zucman/status/1805603448857182708

Note accompanying the graphic: This figure reports estimates of effective income tax rates by pre-tax income groups and for billionaires in France, the Netherlands, and the United States. These estimates include all individual income taxes (and equivalent levies) paid at all levels of government and are expressed as a percent of pre-tax income. P0-10 denotes the 10% of adults at the bottom of the pre-tax income distribution, P10-20 the next decile, etc. Pre-tax income includes all national income (measured following standard national account definitions) before taxes and transfers and after the operation of the pension system. Sources and methodology: see Appendix A.

Zucman 2024 - full report: https://gabriel-zucman.eu/files/report-g20.pdf�

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Global tax on billionaires

This leads to sizable loss of revenue for governments. And it fuels inequality.

The wealth of global billionaires has increased from 3% of world GDP in 1987 to nearly 14% today.

- Gabriel Zucman

Zucman 2024

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Zucman’s commentary for these slides comes from a thread shared on x.com: https://x.com/gabriel_zucman/status/1805603448857182708

Note accompanying the graphic:

This figure reports the evolution of the wealth owned by the top 0.0001% wealthiest households globally, expressed as a fraction of world GDP. In 2024, the top 0.0001% (1 household out of 1 million) includes about 3,000 households, which corresponds broadly to the number of dollar billionaires according to Forbes; hence in 2024 the wealth of the top 0.0001% is nearly equal to the wealth of global billionaires ($14.4 trillion according to Forbes, or 13% of world GDP). In earlier years, the top 0.0001% includes households with less than $1 billion; their wealth (not reported by Forbes, which focuses on dollar billionaires) is estimated using Pareto-interpolation techniques. Growth of global income per adult is taken from the World Bank; growth of global wealth per adult is estimated by assuming a rise in the global wealth/income ratio from 300% in 1987 to 600% in 2024, in line with available evidence (e.g., Chancel et al., 2022).

Zucman 2024 - full report: https://gabriel-zucman.eu/files/report-g20.pdf�

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Global tax on billionaires

The best way to address this failure would be with a common minimum standard. Billionaires should pay in tax the equivalent of at least 2% of their wealth each year (instead of the ~0.3% they pay today). This would erase regressivity at the very top.

- Gabriel Zucman

Zucman 2024

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Zucman’s commentary for these slides comes from a thread shared on x.com: https://x.com/gabriel_zucman/status/1805603448857182708

Note accompanying the graphic: This figure reports estimates of current effective tax rates by pre-tax income groups and for U.S. dollar billionaires in high-income countries, and in the scenario of a 2% minimum tax on billionaires. These estimates include all taxes paid at all levels of government and are expressed as a percent of pre-tax income. P0-50 denotes the 50% of adults at the bottom of the pre-tax income distribution, P50-90 the next four deciles, etc. Pre-tax income includes all national income (measured following standard national account definitions) before taxes and transfers and after the operation of the pension system. Sources and methodology: see Appendix B.

Zucman 2024 - full report: https://gabriel-zucman.eu/files/report-g20.pdf�

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Global tax on billionaires

2% on billionaires is the baseline proposal; other rates and thresholds are possible, all raising significant revenue.

This international standard would not substitute for domestic progressive tax policies, instead it would support them.

- Gabriel Zucman

Zucman 2024

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Global tax on billionaires

July 2024: Former presidents and prime ministers sent an open letter to current leaders of the world's 20 largest economies urging support for a global tax on billionaires.

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Compensation for excessive CO₂ emissions

Wealthy nations of the global North are responsible for 90% of excessive levels of CO₂ emissions, and could be liable to pay a total of $170 trillion in compensation or reparations to ensure climate change targets are met by 2050

- Fanning and Hickel

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Compensation for excessive CO₂ emissions

Using these interactive charts online, alter the start year to see the changing proportions between global South and global North.

Fanning and Hickel, Nature Sustainability 2023

Cumulative emissions with respect to fair shares of global carbon budgets

(1.5^oC fair share = 1)

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Fanning and Hickel, Nature Sustainability 2023

Compensation for excessive CO₂ emissions

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Debt justice

In the early 2020s, 93% of countries most vulnerable to the climate crisis are in debt distress or at significant risk of debt distress

- ActionAid

ActionAid 2023

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Debt justice

UNCTAD 2024

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Debt justice

What causes the vicious circle of indebtedness and climate crises?

What are some possible responses to break it?

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Debt justice

Mia Motley, Prime Minister of Barbados, addressing the United Nations on the inequity of debt.

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Watch the video

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Climate reparations

Download the Rethinking Economics teaching pack - including readings, resources, slide decks and activities - on addressing climate reparations.

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Democratizing global

institutions

The International Bank for Reconstruction and Development is the World Bank branch that lends to low-income nations.

�Due to IBRD voting rights, a G7 citizen has 23 x greater representation than a South Asian.

Mohseni-Cheraghlou 2022

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Mohseni-Cheraghlou 2022

Democratizing global

institutions

What principles for allocating voting rights amongst member nations would be fair and just?

What arguments would be most effective in making this case?

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Democratizing global

institutions

The 2021 Global Assembly on the Climate and Ecological Crisis brought together 100 randomly chosen people from around the world to deliberate on the topic: ‘how can humanity address the climate and ecological crisis in a fair and effective way?’

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The ISWE Foundation

The Assembly consisted of a 100-person core, chosen by lottery in a way that reflects the demographic makeup of the global population.

60% of participants came from Asia and 17% from Africa. 50% were women, and 70% earned $10 a day or less.

Could this one-off experiment lead to the creation of a permanent global citizens’ assembly?

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Democratizing global

institutions

What role could a global citizens assembly play in bringing democratic voice to global institutions?

What might be the caveats and how to overcome them?

The growing need for citizen participation:

Demographic shifts are creating a larger and increasingly connected global citizenry

A failure to engage with citizens risks eroding the foundations for collective action

Governments need public support for international action

Proposition for a Global Citizens’ Assembly for People and Planet:

A core assembly of 300 – 1,000 people selected by lottery and representative of the global population

Community assemblies in which anyone can participate on the same topic

A network of organizations that support and amplify the Assembly’s outcomes internationally

A cultural wave of artists and influencers embedding the Assembly in global public consciousness

Coalition for a Global Citizens’ Assembly 2024

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Doughnut Economics for University Courses

5. Distributive by Design

Version 1.0 November 2024