The financial crisis of 2008 and the Great Recession that followed have raised anew the problem of how to address a growing inequality both between the rich and everybody else within countries, and between developed and developing countries. Both dimensions of inequality, the intra- and inter-country ones, have risen in this century, and the Great Recession has made both problems worse. The current rise of populism in both the US and in Europe, and the vehement reactions to a tide of migrants from poorer to richer countries, show how these two problems are intertwined.
Sixteen years ago, I wrote about the challenge that globalization and tax competition pose to the fiscal viability of the post-World War II welfare state. I pointed out that if tax evasion by rich individuals and tax avoidance by multinational corporations is allowed to undermine the ability of both developed and developing countries to provide adequate social insurance for their citizens, a violent reaction against globalization may ensue that risks ending this era of opening borders, just like World War I ended the previous era of globalization a century ago. In 2018, I worry that the lack of adequate response to the Great Recession is leading to the rise of violent anti-globalization sentiments on both the right and the left, embodied in the US by the success of Bernie Sanders and Donald Trump, and in Europe by an even more virulent rejection of the open border policies for which the EU stands.
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