How to Mobilise $2.8tr to Finance the Global Sharing Economy
There are many policies that governments could implement to raise the finances needed to reverse austerity measures, tackle climate change and prevent needless poverty-related deaths. But we cannot rely on governments to change the current world direction - the only hope is a huge groundswell of popular support in favour of global sharing.
Today, governments around the world are implementing programs of austerity that are reversing the social protections that people have fought for over many generations. By dramatically cutting public spending on social welfare and essential services, austerity measures are undermining human rights and threatening to unravel the basic fabric of society and community. But is there really no alternative to these unjust economic policies, as we are being led to believe?
In a world that is already highly unequal, neglecting polices that redistribute income and wealth has resulted in what can only be described as a global emergency. Amidst the many crises we face - from the food, environmental and financial crises to the global systemic crisis - hundreds of millions of people across the world are facing extreme deprivation and dying needlessly from a lack of access to the essentials, whether as a consequence of extreme poverty, climate change or natural disasters. Even in the richest countries, policies of economic austerity are inflicting unnecessary hardship on millions of families, many of whom now struggle to afford basic food or healthcare.
As the countless protesters across diverse continents are declaring, it doesn't have to be this way. Although addressing the underlying causes of the world's interrelated crises will necessitate structural reforms on a scale never before attempted by the international community, we don't have to wait for these transformative changes to take place in order to prevent people suffering from extreme hardship and avoidable poverty-related disability.
There is plenty of research available that demonstrates how governments could harness more than enough money to reverse policies of economic austerity, prevent life-threatening deprivation and mitigate the human impacts of climate change. By utilising just the policy options summarised below, governments could mobilise over $2.8 trillion every year to scale up and strengthen the ‘sharing economy' - systems of welfare and redistribution that have been progressively established across the world to protect the poor and vulnerable.
This colossal sum amounts to approximately 4% of global GDP - twice as much as required for securing a basic level of social protection for all the world's poor, according to calculations by the United Nations. It also underlines how the international community could do much more to scale up sharing between nations as well as within them, in order to help poorer countries meet the basic needs of their citizens and strengthen domestic systems of social protection.
Many of these policy measures would be hugely beneficial in their own right by helping to establish a world with less military spending, less corporate welfare, a greener economy, a fairer international trade regime, and more progressive and effective forms of taxation. Achieving these long-standing and widely championed goals would be an enormous step in the right direction for the world as a whole, signalling a triumph for millions of people working towards progressive change, and paving the way for more transformative reforms to the world's economic and political systems that must urgently follow.
10 policies to finance the global sharing economy
1. Tax financial speculation - $650bn
Speculation in financial markets is increasingly disconnected from the ‘real' economy (concerned with actually producing goods and services) and has destabilised economies all over the world. The main beneficiaries of speculation are a minority elite of traders, investment banks, hedge funds and other companies that can reap huge profits from market volatility. A financial transaction tax (FTT) could help regulate markets by disincentivising the most destabilising trading practices. If implemented globally, an FTT could raise as much as $650bn a year for governments to tackle poverty, reverse austerity measures and address climate change.
2. End fossil fuels subsidies - $531bn
The burning of fossil fuels is the main contributor to global warming and is largely responsible for carbon emissions reaching a record high last year. It will be impossible to keep CO2 emissions to safe levels if governments continue to encourage the overuse of ‘dirty energy' through the massive subsidies it provides to the producers and consumers of fossil fuels. Governments could raise up to $531bn a year if all forms of biofuel and fossil fuel subsidies are progressively phased out by 2020. This colossal sum of money is sufficient to secure universal access to energy, leverage a significant investment in renewables on a global scale, and finance programs that can help countries mitigate and adapt to climate change.
3. Divert military spending - $434.5bn
Military spending by governments worldwide has risen by more than 50% since 2001, reaching over $1.7tn in 2011 - equivalent to around $250 annually for each person in the world. As a first step toward ending armed conflict and war, it is crucial that governments introduce substantial reductions to their military budgets. Diverting only a quarter of current global military expenditure would free up $434.5bn annually that could instead be used to save lives, prevent extreme deprivation and strengthen United Nations peacekeeping efforts.
4. Stop tax avoidance - $349bn
Strengthening tax systems in countries around the world remains the most pragmatic way for nations to share their financial resources more equitably and protect the poor and vulnerable. Tax avoidance by wealthy individuals and multinational corporations means governments often miss out on huge amounts of additional public revenue. Facilitated by a global network of highly secretive tax havens and ‘legitimised' by national and international tax rules, tax avoidance is big business. As a minimum step toward ending all forms of global tax avoidance, clamping down on tax havens and preventing corporate tax abuse could raise more than $349bn each year.
5. Increase international aid - $297.5bn
Official Development Assistance (ODA) is the main way in which the international community currently finances the global sharing economy. But foreign aid is severely compromised by the self-interest of donor countries and dwarfed by the net flow of money from developing countries to rich industrialised nations. Although an end to poverty will require extensive restructuring of the world economy to share wealth and power more equally between and within nations, increasing ODA to 1% of gross national income (GNI) in the short term could raise an additional $297.5bn per year - a sum much more in line with the urgent needs of poorer countries.
6. End support for agribusiness - $187bn
Agricultural subsidies are a foremost example of how governments support an environmentally destructive and socially unjust model of agriculture and trade. Redirecting these perverse subsidies is an urgent priority if the world is serious about addressing the global food crisis, reducing hunger and protecting the environment. Eliminating inappropriate and wasteful subsidies that are geared to supporting wealthy farmers and powerful agri-corporations could raise $187bn each year - money that could instead be used to tackle poverty and increase food security in the Global South. Remaining subsidies should be re-oriented to support small-scale producers and agro-ecological farming practices, in accordance with the principles of food sovereignty.
7. Harness IMF resources - $115.5bn
The powerful influence exerted by the International Monetary Fund (IMF) over economic policy decisions made across the world has earned it a deeply controversial reputation. Many civil society groups and millions of citizens throughout the Global South see the IMF and its market-driven policies as a threat to social and economic justice. Nonetheless, the Fund has the ability to raise and redistribute vast quantities of additional finance for poverty eradication and climate finance purposes. Expanding the IMF's Special Drawing Rights facility (SDRs) could raise $100bn annually, and progressively selling off the IMF's substantial gold reserves could raise an additional $15.5bn over a period of 10 years.
8. Tax dirty fuels - $108bn
Campaigners have long argued that the price of using fossil fuels does not accurately reflect the actual cost of its environmental, social or economic impacts. The artificially low price of burning oil, gas and coal has also encouraged overreliance on them, exacerbated climate change and prevented the development of alternative forms of energy. Taxing the carbon emissions from fossil fuels could raise $108bn each year in additional government revenues. The tax would also provide an incentive to use fossil fuels more efficiently, help encourage the transition towards low-carbon energy technology, and raise significdirant funding for international climate finance.
9. Cancel unjust debt - $81bn
The unconditional cancellation of all unjust and unpayable developing country debts is essential to achieve a more equitable distribution of the world's financial resources. Developing countries are indebted to the tune of over $4tr and spend more than $1.4bn every day repaying these debts - 400% more than they receive in aid. These funds should instead be spent on social welfare and public services that many of these countries urgently need. Cancelling illegitimate ‘dictator debts' alone - currently estimated at $735bn - could free up $81bn a year for public spending in developing countries.
10. Protect import tariffs - $63.4bn
Rich nations and global institutions must stop forcing poor countries to adhere to unjust trade rules. Income from taxes placed on imported goods is an important source of government revenue for developing countries, but they are increasingly being forced to reduce these import tariffs as a condition of free trade agreements (FTAs) or in return for financial assistance. If the current round of world trade negotiations is concluded, poor countries could lose $63.4bn from reductions in import tariffs - more than four times what they are estimated to gain from increased trade. In addition, many FTAs currently being negotiated between rich and poor nations will further reduce tariff revenues for governments throughout the Global South.
Total potential revenue of all 10 policies: $2.8 trillion every year.
The policies above highlight the many ways in which governments can mobilise hundreds of billions of dollars without creating more national debts or enacting austerity measures. Furthermore, using this money to reinforce the global sharing economy and prevent needless poverty-related deaths in poor countries could save the lives of around 15 million people every year and enable many millions more to contribute to the social, economic, political and cultural life of their nation. This makes sound economic sense at a time when economies across the world are contracting and unemployment is rising. In an interdependent world where trade and financial relationships span the globe, this massive investment in the sharing economy could stimulate demand, kick-start growth, create employment opportunities and substantially increase government revenues.
Reversing austerity measures across Europe and North America could also have a significant impact on economies by reducing unemployment and increasing the health, wellbeing and disposable income of citizens in these economically advanced regions. Similarly, investing heavily in renewable energy and green infrastructure projects as part of a ‘green new deal' on a national and global scale could create even more jobs, pave the way to a low carbon economy and significantly reduce greenhouse gas emissions.
Together these measures could help stimulate economic activity and increase government income, helping nations to plug the hole in public finances and reverse the big cuts in government spending. These ‘stimulus policies' are widely regarded as being more effective than the programs of austerity meted out by many indebted governments today, especially in times of recession or exceptionally high deficits. Although a profound transformation of the entire global economic structure is necessary to resolve the deepening financial crisis, in the meantime there is no excuse for undermining the sharing economy through government cutbacks in welfare and essential services.
These proposals may be relatively modest when compared to the scale of the crises confronting humanity, but they will clearly require massive public support if they are to stand a hope of being realised. As we move ever closer to social, economic and environmental tipping points, it is clear that we can no longer rely on governments alone to create the future we want. The responsibility to take a stand falls squarely on the shoulders of ordinary people, not just the usual campaigners and NGOs. But as the widespread mobilisation of people power around the world has begun to demonstrate, a united and informed global public opinion is ultimately stronger than the private interests that obstruct progressive change from taking place.
If public support for all the campaigns and policy priorities highlighted above continues to grow, the possibility of mobilising public opinion on an international scale and transforming governmental policy fast becomes a reality. For this to occur, everyone who seeks a fairer and more peaceful world - especially those who are new to these issues - must add their weight to the global call for sharing and justice.
This article was based on the report ‘Financing the global sharing economy'. For references, further resources and to read the full report, visit: www.stwr.org/financing-the-global-sharing-economy