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George Papandreou: ‘Extreme inequality is socially unjust and politically dangerous’

George Papandreou is president of the Socialist International and a former prime minister of Greece.

ERIC VIDAL/REUTERS

George Papandreou will argue for the motion: Be it resolved tax the rich (more) at the Munk Debates in Toronto on May 30. Watch it live at 7 p.m. ET.

As a teenager, growing up in political exile – in Sweden, here in Canada, and later in the U.S. – I came to understand the importance of a strong social contract: the idea that everybody must pay their fair share in order to secure equal rights and economic opportunities for all.

Today, in much of the advanced world, that social contract has been revised, rewritten or even discarded. The result – an alarmingly high level of income inequality – is not only weakening our economies, it is undermining our democracies and destabilizing our societies.

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By embracing a model of crony capitalism, we have allowed wealth and power to consolidate at the top. In doing so, we have deprived the middle and lower classes of the social programs and participation that have empowered and enriched our societies as a whole.

Our current course is not sustainable in the long-term. Extreme inequality is socially unjust and politically dangerous. But it's not viable economically either. While the ultrarich have increased their wealth exponentially over the past decades, the middle-income earners have not.

A struggling middle class means a sputtering economic engine. The longer we permit a transfer of national wealth from the bottom 99 per cent to the top 1 per cent – where it is seldom reinvested into society – the weaker our economies will be.

In countries that are adjusting through deep cuts and austerity, rising inequality is eroding any sense of a just sharing of the burdens. Public trust in democratic institutions is waning. We cannot ask the middle and lower classes to accept painful cuts and sacrifices, without providing a tradeoff: social justice and equal opportunities.

Tax evasion is costing countries, like Greece, with youth unemployment as high as 60 per cent. This also means billions in lost productivity and welfare subsidies, with untold social and political costs down the line.

Is it acceptable for the ultrarich – through loopholes and accounting tricks – to pay a much lower tax rate than the average taxpayer? How can you ask citizens to contribute to a system that prioritizes special interests over their own interests? We must level the playing field. We need a new social contract.

A progressive tax system would go a long way to restoring the balance between the 99 per cent and the 1 per cent, and promoting social cohesion. This means higher tax rates for those at the very top and relief for those who need it. This is not a question of class warfare; this is about funding programs and policies that can sustain a vibrant middle class and benefit our nations' prosperity.

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Tax increases will ultimately fall short if the ultrarich continue to stash their cash out of the reach of national tax authorities. Similarly, corporate tax revenues will continuously decline as long as we tacitly endorse complex legal schemes of tax avoidance – via networks of shell companies and offshore financial hubs.

Tax evasion can only be solved with joint action and political will on the global level. Until recently, both have been in short supply. Now there is a critical momentum building – in the U.S., in Europe, and around the world – that must be sustained.

Finally, the political imperative of a new social contract is to spend tax revenues wisely, investing in highly productive programs and institutions that can sustain growth and make our economies competitive over the long run. Investments in green energy, modernized infrastructure, and education are three such priorities.

We don't need more government, and we don't need less government: We need good government. And when the public sector is able to efficiently and effectively provide quality services for all its citizens, those citizens will be willing to pay for them.

George Papandreou is president of the Socialist International and former prime minister of Greece, 2009 to 2011.

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