Sunday, 13 September 2009

Global Taxes

A question that has recently emerged from somewhat surprising quarters is the possibility of global taxes. The current leader of the German SPD floated the notion of a global finance tax recently, in the wake of similar ruminations by Lord Adair Turner, current head of the Financial Services Authority in the UK. These discussions have acquired a new relevance in the wake of the financial difficulties of the last 12 months, difficulties arguably brought about by the wave of financial deregulation that took off globally from the mid-1980s.

The feasibility of global finance taxes has been much debated since the floating of the idea  in 1972 by Nobel Laureate James Tobin. The other major area in which global taxes are recurrently proposed concern carbon emissions with suggestions for a carbon tax, a notion that appears to be attracting renewed attention in the EU. Both the notion of a global finance tax and the idea of a global carbon tax have the quality of being "Pigovian taxes", named such after the economist A.C. Pigou, meaning that they are intended to create disincentives for certain kinds of behaviour. The rationale for them is that certain activities have costs that are greater than the prices levied on them by markets.

Not all the forms of global tax proposed have this "Pigovian" bent since some, by contrast, are aimed at affirming certain ends rather than trying to limit activities. One form of such an affirmative global tax measure is Thomas Pogge's notion of a Global Resource Dividend intended to ensure that wealthy nations come together to collect means to alleviate poverty in the developing world. The details of Pogge's proposal and the problems alleged with it have been subjects dealt with at some length in a number of places but the basic conception of the Dividend has been widely influential.

Despite the widespread nature of the campaigns for global taxes there are some curious features of the discussion of the taxes. Firstly, in the absence of a global taxation authority, it remains the case that the imposition, collection and distribution of any such proposed taxes will tend to remain at the national level (though a federal EU could in principle also act in this way). Second, the suggestion of such taxes is widely recognized to have implications concerning redistribution, not all of which are evidently benign. 

Thirdly, whilst one of Pogge's central arguments concerns the view that the poverty of many in the world today is a legacy of the activities of those in the wealthy countries this is, to say the least, arguable. Since poor governance in a developing country acts to forestall the countries growth independently of its relation to developed countries the promotion of means within the developing country to produce better internal governance has arguably more valence for its future development than would receipt of donations from developed countries. Fourthly, the imposition of global taxes in the absence of a central global authority ensures that the taxes in question are imposed on a group of citizens by their public authority for the benefit of some beyond the remit of that authority. To put that another way, citizens are taxed for the exclusive benefit of non-citizens, something not clearly part of the social contract.

The curious features of these taxes apply less to carbon taxes given the evident global effect of environmental policies and the detrimental effect on all of the pursuit of poor policy in these areas. Even here the question of redistribution raises some difficult questions since many poorer countries will have worse environmental records. So the arguments for global taxes have to be assessed as at present unproven though the activism in favour of them indicates a growing awareness of a need for an expansive sense of cosmopolitan right, a notion that has been signally important in Neo-Kantian IR theory as will be discussed in more detail in later postings.


Tim Waligore said...

Pogge has, at least, 3 possible arguments for the Global Resource Dividend tax, any one of which he views as sufficient on its own. Perhaps the historic injustice argument you spoke of does not work. But Pogge also discusses how compensation maybe owed for harm done to the global poor as a result of their exclusion from natural resources. Pogge speaks of Locke. However, we also cite Kant's idea that originally we all have common ownership of the earth, such that originally no one had a right to a particular place. Unilateral claims to have acquired territory or property must, at least at some point, be justified. This logic comes, essentially, from Kant's theory of property in the Metaphysics of Morals. (Pogge might argue taxes can compensate for unjust exclusion from natural resources)

Gary Banham said...

Interesting response this. Could you indicate where these separate arguments are discussed?
As it stands the compensation for harm argument has more in it, at least prima facie but still has to contend with the point I was suggesting about greater valence attaching to the promotion of internal good governance.
The problem with appealing to original common ownership is that the institution of private property has since obviated this condition and created a different situation. I think an appeal to the state of nature between states has more chance as a potential argument for a provisional duty of assistance.

Timothy said...

I'm not sure what is meant by a "provisional duty of assistance" as opposed to provisional right. Is it like Rawls's duty of assistance? Why call it provisional?

You say the situation is different because of the institution of private property. But the original possession in common of the earth is a rational idea. It is not an historic condition. How does private property cause it go away? Indeed, it is only through this idea that anyone can rightfully use a place on the earth. And so, it sets limits for use. Cosmopolitan Right expresses the limits of that use -- e.g. you can't destroy visitors. That is, you can't unilaterally claim others have a moral duty to stay off a portion of the earth which you claim as your own, if this results in the (further) deprivation of their freedom.

Also, I don't think cosmopolitan right is just about states (it is also about peoples, including non-state peoples, such as indigenous peoples). The original possession in common of the earth has a lot of interesting facets that haven't been explored.

Timothy said...

I think a crucial disagreement between you and I concerns this passage: "To put that another way, citizens are taxed for the exclusive benefit of non-citizens, something not clearly part of the social contract."

According to Kant, it only through the idea of the original possession in common of the earth that a people can claim a territory as their own and thereby exclude others. Only if we in some sense possession in common an item (or all items, e.g. the earth), can we rightfully claim to exclude others from it. Private use of an item possessed in common = a condition for acquisition of property. The lex permissiva for property also may apply not only between individuals but also (though Kant is not explicit) between states and/or peoples on the international/cosmopolitan scene.

Individuals only gain the favor of a permissive law (allowing them to continue possession before there is a civil condition) in certain conditions -- that is, roughly when they look forward to a civil condition, and their possession is compatible with it. Similarly, it might be said that states of people have a permissive law to use their territory, but only under certain conditions. (Which might include looking toward a global civil condition, and also might include limits on use of territory such as hospitality to visitors)

Timothy said...

One of Pogge's basic responses to the internal good governance is this:

1. Even if internal good governance matters so much, internal governance is affected by global factors as well as local factors. For example, external actors bribe local officials, contributing a culture of corruption, and there have even been tax write offs for bribes in Western countries based on this (at least in the past).

2. How does the global institutional order harm countries? pogge often concentrates on two institutions: the resource privilege and the borrowing privilege. Also, the resource privilege allows anyone who successfully takes control of a government (through a coup, etc.) to not only de facto use natural resources within a country, but also to legally sell them abroad, so that purchasers become owners. This also creates an incentive for generals to take power. Also, the borrower priviledge allows even dictators to borrow in the people's name and a future (even democratic) government will have to pay it back, if it wants to participate in global institutions.

3. Pogge says that even local factors explain why a certain party occupies a wealthy slot within an order, the order itself may limit the number of parties that can be in that wealthy slot. Pogge suggests that the path taken by the asian tigers would not have been possible if everyone took it. So the global order does not make it a possibility for everyone, or even nearly everyone, to succeed if they just changed changed their internal governance.
Discussing this, Pogge uses the analogy of a classroom. What grades a particular student gets can be determined in part by how much effort that student puts in. But the professors has some control about 'global' factors, including how well he teaches. (Indeed, Pogge doesn't say this, but if the professor grades on a steep curve, then not everyone can do really well. if the professor doesn't grade on any curve, but on standards he keeps from term to term, then some classes may do really poorly overall in the term, why other classes may do really well overall in the term-- and this may be due not simply to the students, but also how well the professor taught, etc. that term-- or to the overall environment the students created as a class as a whole that was conducive to learning or not.

Gary Banham said...

These are interesting responses. Taking them in turn:

1. Certainly it is correct to claim internal governance is affected by global factors. The question I want to raise by response is the ways in which internal governance can either positively be developed to interact in a more productive way with those factors on the one hand or how such global factors could relate more positively to internal governance on the other. Either way, internal governance would remain the key question.

2. The two privileges in question are real, granted. The problem of how to alter the situation whereby any existent government possesses them is enhanced however by the willingness of other governments to keep them in place whatever the actions of better intentioned governments.

3. I find this argument and this analogy unpersuasive as given. The number of states that could, in an appreciable way, benefit their citizens more if possessed of the appropriate internal governance does not appear to me determined.

Gary Banham said...

Concerning the citation you give from my original posting about taxation:

My general point here is one that, I think, does, at least at present, constitute a difference between us. You point back to the question of original possession in common and seem to be arguing that, given this, states only have a permissive right to their general possessions and, given this, a future cosmopolitan law could over-ride it. The problem with this claim is that Kant speaks of states as existent moral persons and one of the differences between the state of nature between states and that between individuals is that the constitution of the state as a moral person relies on the fact that it is a constituted state of right. Given that it is there are specific problems with over-riding states' claims that do not apply to the claims of individuals in the state of nature. Putting this another way, to over-ride the citizenry's expectation that taxes raised are to be spent on the welfare of those taxed would surely to be undercut the basis of the claimed consent of the citizens to said taxes?

Gary Banham said...

"Provisional duty of assistance": this was a formulation I coined without thinking it through sufficiently. I'd have to look at Rawls again to see the relationship between his notion of assistance and the one I meant. First, why is it provisional? Well, it is provisional since it applies in the state of nature that exists between states and in so applying is something that we would wish, should such a state of nature be superseded, to overcome.
Second, the relationship between private property and the original possession in common in the Doctrine of Right is to the effect that on the basis of this original claim it is possible to initiate private property. However, once private property is actually existent in states then you have constituted states of right. As mentioned in a previous reply this strikes me as creating a new moral situation such that states vis-a-vis each other are not in the same type of state of nature as individuals are vis-a-vis each other.
Your point about indigenous peoples raises a different question and here I can see the locus of your concern which seems to concentrate on peoples who are not in a state wondering how to relate them as peoples, not as individuals, to states. I agree this needs some specific work but this is surely different to the argument concerning Pogge's Global Resource Dividend?

Timothy said...


While the issue of indigenous peoples does not have direct bearing on the GRD and the debate here, it does in the following sense. You're arguments rely to a great degree on the idea of a state as a moral person. However, in cosmopolitan right, Kant seems to accord some sort of respect to non-state peoples. For example, he says that consent is required to settle on land used by native peoples; if they use large tracts for hunting, these lands are included. So is cosmopolitan right concerned about more than states (and individuals)? I suspect so.

Timothy said...

On taxes and whether they have to benefit other citizens:

I think you're neglecting what Kant says in private right: Private property can only be private use of something possessed in common (section 10 of the metaphysics of morals). Otherwise, you do not have an intellectual relationship of possession/ownership.

So how can a state or people possess a territory, and the resources on it? If we were just dealing with de facto control, we could refer to physical possession. But since we're talking here about creating legal entitlement to resources (which can be sold etc.), we are talking about intellectual possession/ownership. This requires an international institution.

Pogge's GRD does not tax undeveloped resources; it does not even tax resources that circulate within the country of origin. So even if you're right that citizens have to expect taxes will go to benefit them, that is not at issue here. Why? Because the institution in question is not a purely domestic one. The institution (not the tax) is that resources solds *abroad* will treated giving legal ownership. If a foreigners buys a barrel of oil from Saudi Arabia, the foreigner doesn't just have a right against his seller (as in the state of nature in itself), but a right against everyone to it. the foreigner really owns it. The citizens of the state can avoid this any global tax so long as they do not depend on international legal institutions (directly).

So I'm not speaking of some future cosmopolitan law. Just of attaching a rider/tax to an existing transnational law. If citizens want to depend entirely on their own state in legal terms, Pogge's GRD wouldn't matter.

going further, how can a state possess its territory against all others in the world, such that they have a duty to respect it? It was a unilateral act of will that the state or a people said this territory, or these resources, are ours or mine. Like individuals, they can claim possession based on a permissive law, perhaps. But I think you miss the cosmopolitan aspect of Kant (see 43 MM). Another suggestion: any basis for taxing indviduals at the state level suggests some global taxation may be allowed. Indidividual citizens can be taxed in a state because, in part, they are dependent on the supreme proprietor of the land (the sovereign) for having this land. Similarly, a people or state can claim territory only through their original acquisition of a piece of land, which must be done in accordance with the three steps in section 10, which include reference to a general will in idea. If citizens of a state want to have secure possession against outsiders, they need to realize the provisionality of their ownership with respect to outsiders.

You might save this by saying the state is a moral person and is a whole that can't be disturbed without violation. So we can't come in and tax its resources. This would be like taxing a person's internal talents. It involves unwarrented instrusions. Even if that is right, it doesn't apply in Pogge's case, since his GRD no makes demand that "talents" be used, only that they are taxed when used; moreover, they are taxed only when they go outsider the "body" of the nation.

Gary Banham said...

Your point about indigenous peoples is very interesting and I'd have to think more about this: let me take a rain-check on it and come back to it in subsequent postings.

Gary Banham said...

This long comment brings up a lot of issues Tim. Section 10 of the Doctrine of Right presents a very difficult argument so again I want to return to this elsewhere. I think you are summarizing the argument and its consequences hastily. Certainly we are talking about institutions but, notably, this is part of the argument prior to the establishment of the state and concerns a state of nature different to that between states so I would like to look at the differences.

I'll come back to you on Pogge after reading more of him: its not useful to reply just yet. Expect a posting on him soon after I've read more.

Your reference to paragraph 43 is more immediately interesting since here Kant ties the right of a state directly to a need for cosmopolitan right, a relation that appears different to that given in *Perpetual Peace*. The distinct accounts of cosmopolitan right need to be related to each other, distinguished, and reasons given for preferring one to the other.

You are right to anticipate my reply concerning the moral person of the state but, again, please wait for further on Pogge.