The time is running out for all the debt and deficit ridden countries.The public debt in G20 countries has risen to a humongous level of 82% of GDP in 2010 from 62% in 2007, the year prior to the crisis. The fiscal deficit would take another 5 years to come down from the present 7% to 1% that existed in 2007. Current account balance and foreign exchange reserves too are posing serious imbalances in the world economy.
Wealthy nations should address the present problem of debt and deficits through non- conventional revenue generation programme.
They should do what Nelson Mandela did in his first budget way back in 1994.The power was transferred from the whites to the blacks then. The transition resulted in transfer of political power. But on the economic front the blacks did not have enough resource to put the economy on course.Mr Key the finance minister and President Mandela did one thing that that wrote the future successful growth story of South Africa .
President Mandela and minister Key introduced through the budget a lump sum tax on the wealthiest whites at 5% of their wealth above a certain level. This worked wonders for South African economy to manage the transition successfully.
Many economies are facing a problem of transition. May be from the sub prime crisis or from a change to market economy from a socialist regime , from dictatorship to democracy etc. Leaders like Barak Obama sould do a Nelson Mandela. Tax the top 1% of the wealthy 5% on their wealth . If the Hedge Funds are managing $20 trillion this tax would fetch a revenue of $ 1 trillion that can help revive the economy sooner than the conventional tax programmes.
Since the wealthy benefited consequent to the manipulation of the financial market during the sub prime crisis , a small portion of their wealth if foregone for building a strong economy, the rich should welcome,. Such a tax wouldn’t affect the life style of the affluent rich. Only a small portion of their holdings will be taken away for the nation’s cause.
The Classical Economists advocated a voluntary wage cut of workers to revive a drowning economy. Lord Keynes advocated Pump Priming. Now amidst problems of plenty; of liquidity, inequality, impending food inflation etc a wealth cut of the rich should be right medicine for the ills of economy.It’s an idea whose time is now.
A 5% wealth cut of the top 1% of the wealthy in all the high debt and deficit ridden countries will put less pressure on the fiscal stimulus front to achieve growth with employment.
(to be continued)
News: Baba Ramdev to launch a political party in June.
Times Of India reports in its Sunday Times today, Rahat may get away with a big penalty and asks the reader to follow the story on Rahat Fateh Ali Khan’s attempted smuggling of Foreign currency, on Page 15. The story got lost on that page. But it was found after a search on page 11.
Another news on Yoga Guru Baba Ramdev being abused by a Congress MP of Arunachal got mixed up with the tiger and elephant carcasses found in a forest reserve, in the same edition from Times , on the same page 11. That’s TWO much on the same day !
