terça-feira, 19 de abril de 2016

A Escolha do STF.....

Em votações sobre temas controversos, que dificilmente seriam aprovados pelo Parlamento, o STF arrogou pra si o papel de corte constitucional em defesa de direitos de acordo com que considerou ser o espirito da constituição de 1988. Foi muito além do que se espera de uma corte constitucional e avançou no pantanoso terreno da judicialização da política. Pra varios analistas ela cumpria uma função civilizatoria em um pais extremamente conservador onde o liberalismo politico nunca floresceu.

 A questao que agora se coloca é se o STF , diante desse passado recente, podera se negar a discutir a constitucionalidade do impedimento da Presidente Dilma. Ao não se pronunciar confirmara a visão, de alguns, que a posição progressista adotada nos temas controversos eram simplesmente expressão de populismo judiciario. O pronunciamento, por outro lado, poderia ser visto como o coroamento da judicialização da política.

 É uma situação delicada, haja vista a derrota esmagadora da Presidente na Camara Baixa, mas do STF se espera a defesa da Constituição e não juntar-se a turba. Isto requer homens e mulheres virtuosas, cientes de seu papel constitucional. Ficar impassivel diante de um verdadeiro inchamento da constituição não é nada virtuoso.

segunda-feira, 18 de abril de 2016

Connections, not armies, make countries powerful

During the cold war, military might and economic clout were the measures of power that mattered. Today — in an increasingly interdependent world, among states where use of direct force against one another is all but unthinkable — connections are equally important. The most connected states, wielding influence and controlling information flows, are more useful for making things happen in the world than those that simply possess enormous armies.
Global flows of goods, services, finance, people and data “play an ever-larger role in determining the fate of nations, companies and individuals”, according to the McKinsey consultancy, which measures these factors in its “connectedness” index. “To be unconnected is to fall behind.” Singapore, a small, open economy at the heart of global shipping and finance flows, comes top of the list — the
Energy still plays a big part in determining connectedness. As long as specific Middle Eastern countries are at the centre of the world’s energy flows, they exercise power over other nations vastly disproportionate to their geographical size or military and economic weight. The Opec countries proved this point in the 1970s, when energy production was much more concentrated. Today, Saudi Arabia is refusing to allow a deal to freeze oil production unless its regional rival, Iran, agrees to sign up.
In the next decade, however, influence over global digital flows will grow far more important. We will see the development of sophisticated tools to impose digital sanctions, blocking some commerce, information and communication but allowing the rest.
Meanwhile, the lens of connectedness offers a useful perspective on the debate over British membership of the EU. Brexit advocates want to make Britain an island on the edge of the union once more — close enough to claim the benefits of connectedness but with sufficient autonomy to be truly sovereign. In fact, the connectedness index shows that the status quo provides highly beneficial codependence for both parties.
When the scores of all the member states are combined, the EU as a whole ranks third in the connectedness index, behind Singapore and the US. Without Britain the EU27 ranks fourth; Britain without the EU ranks third.
The reason is that so many of the EU27’s flows are within the union: 45 per cent of goods trade; 52 per cent of services trade; 62 per cent of foreign direct investment flows; 72 per cent of people flows; and 77 per cent of data flows. The UK presents almost the opposite profile: 70 per cent of UK trade flows are with the rest of the world, outside the EU; 86 per cent of services trade; 63 per cent of FDI flows; and 62 per cent of people flows. So membership allows Britain to participate fully in the intra-union flows that create the world’s largest economy; and provides the EU27 with a vital link to the rest of the world.
The picture is much the same in diplomacy. As US President Barack Obama explained in his recent interview with The Atlantic, much of his foreign policy has been aimed at substituting diplomacy for force as the principal tool for getting things done in the world. His engagement, for example, has prevented Iran acquiring nuclear weapons.
Diplomacy is social capital; it depends on the density and reach of a nation’s diplomatic contacts. The Global Diplomacy Index, just published by Australia’s Lowy Institute for International Policy, ranks nations by the number of embassies, consulates and missions they have. The US comes first, then France, China and Russia — then the UK, ahead of the other EU states.
As part of Europe, Britain has the benefit of consulates and missions in many cities where it is not now represented. Given that the Foreign Office budget has fallen by almost 20 per cent in the past five years, tapping into this network matters. Once again, however, the EU would suffer from a British exit, losing the benefit of some of the world’s most talented diplomats.
In sum, if connectedness is indeed a critical measure of 21st-century power, Britain and the EU would both lose substantially from Brexit. John Donne knew this 400 years ago. Everyone knows the line, “No man is an island”. Few remember the next words from his Devotions Upon Emergent Occasions. “Every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less.”
If British membership of the EU be washed away, the clod and the continent will both be diminished. Joined together, and connected to the rest of the world, they are mighty.

Anne-Marie Slaughter is president of New America, a think-tank, and professor emerita of politics and international affairs at Princeton

terça-feira, 12 de abril de 2016

Boris Johnson, David Cameron and the day after Brexit

It is the morning of June 24. Britain has just voted narrowly to leave the EU. Jubilant pro-Brexit campaigners wave Union Jacks in Trafalgar Square.

A shattered-looking David Cameron appears outside 10 Downing Street to say that he respects the verdict of the British people and that he intends to carry on as prime minister.

The atmosphere of crisis is compounded by a stock market plunge across Europe. The French and German governments issue a joint statement saying that it is imperative that the EU now make decisive steps towards political union and promise an “economic government” for Europe.

In Edinburgh, Nicola Sturgeon, Scotland’s first minister, points out that Scots have voted to stay inside the EU — and announces that she will now press for a second referendum on Scottish independence.

In the days that follow, the Conservative government is consumed by infighting. It becomes clear that the prime minister’s authority is too badly damaged for him to carry on.

Mr Cameron announces that he will resign, and the Tories call a leadership election. On the second ballot, Boris Johnson defeats George Osborne — and is invited to form a government. On the steps of Downing Street, the new prime minister amuses the press by speaking in Latin, before entering his new home, appearing to stumble over the doorstep as he enters.

Once inside Number 10, Boris is served a cup of tea and then ushered into the Cabinet Room for a meeting with Sir Jeremy Heywood, the cabinet secretary and the head of Britain’s civil service.

Sir Jeremy, who is known to have privately opposed Brexit, is polite but firm. With the markets in turmoil, he tells the new prime minister that it is imperative that he introduce some clarity into the Brexit process.

The Leave campaign, fronted by Mr Johnson, had made two key pledges. It had promised to control immigration by withdrawing Britain from the EU’s laws on the “free movement of persons”. And it had also promised that Britain would continue to enjoy free trade with the EU.

Sir Jeremy politely points out that these two promises are incompatible. He reminds Boris that the EU’s internal market is based on the free movement of goods, capital, services and people.

Under EU law, these four freedoms are inseparable. Countries such as Switzerland and Norway — that are not part of the EU but still want unfettered access to the EU market — have had to accept free movement of labour. So which is it to be? Controls on immigration or full access to the internal market?

During the campaign, Boris has managed to shrug off this choice by repeating a favourite joke: “My policy on cake is pro having it, and pro eating it.”

As he toys with a piece of Victoria sponge in the Cabinet Room, however, the new prime minister finally has to confront the cake problem. His instinct tells him that free trade matters a lot more than immigration controls.

As mayor of London, he saw that Britain’s capital relied on the flow of labour from Europe. But he also knows that immigration was the issue that delivered victory for the Brexit campaign.

A Norwegian-style deal — in which Britain accepted all EU laws, including free movement of people, in return for access to the single market — will not be acceptable to his own party, which is demanding controls on immigration and a restoration of parliamentary sovereignty.

Looking up from his cake, Boris asks, “How about Canada?” Sir Jeremy has been expecting this. With a mixture of sorrow and sadism, he begins to lay out the limitations of the EU-Canada free-trade deal as a model for Britain.

First, there is the question of time. Once Britain triggers Article 50 of the Lisbon Treaty and announces that it intends to leave the EU, it will have just two years to negotiate a new trade deal with the EU. But negotiations on the EU-Canada deal began in 2009.

Here Sir Jeremy adopts the Wodehousian language that Boris favours, and adds: “And I’m afraid to tell you, prime minister, that the bally thing still hasn’t been ratified.”

Boris looks momentarily crestfallen, so Sir Jeremy presses on.

The second problem with the Canadian model is that while it abolishes tariffs on manufactured goods, it does not secure true free trade in services. But, Sir Jeremy murmurs, the prime minister might recall from his period as London’s mayor that services — and in particular, financial services — are rather important to the UK economy.

Boris decides that there is nothing for it. He must fly to Germany and woo the true leader of Europe. In Berlin, he is pleasantly surprised by the warmth of his reception by Angela Merkel.

The German chancellor says that while she regrets Britain’s decision she will do her best to help secure a fair deal for the UK.

The British prime minister returns to Downing Street encouraged. But for weeks, nothing further is heard from Berlin. Finally, the phone rings. It is Aunt Angela.

She sounds regretful. She says that Germany would like to give Britain enhanced access to the single market, without the need for full free movement of labour. But the European Commission says that this is illegal, the European Parliament will not hear of it, and as for the French . . . 

Boris is about to put the phone down and pour himself a stiff one, when Ms Merkel adds: “There is one thing that might help.” There is a long pause. “Would you consider accepting 200,000 Syrian refugees?”

Gideon Rachman

Fonte: FT

terça-feira, 5 de abril de 2016

Panama is only one head of the tax haven Hydra

Oddly, given that it indicates the staggering reach of tax havens, from Iceland to Pyongyang, the leak of client data from a Panamanian offshore law firm has come at an opportune moment for the OECD.

The Paris-based club of mostly rich nations is developing a global transparency initiative to crack down on tax haven secrecy. Most havens have agreed to participate and from 2017 will start to share financial data automatically so that each can tax its taxpayers appropriately. But there are recalcitrants. Panama is refusing to participate seriously. Pascal Saint-Amans, the OECD tax chief, calls it a jurisdiction “that welcomes crooks and money launderers”.

The nation has for years sold secrecy. It has turned a blind eye to the laws of other jurisdictions and allowed firms such as Mossack Fonseca to flout its own weak official safeguards against financial crime. The client leaks point to links with drugs lords, Mafiosi, terrorists, arms companies and rogue states. The fact that Mossack Fonseca can state that it has never been accused or charged in connection with criminal wrongdoing shows that Panama’s financial regulators, police, judiciary and political system have been part of the system — corrupted or influenced by the lucrative flows from the dirty-money machine.

There will be intense pressure for Panama to clean up. But it is vital not to lose sight of the bigger picture. It is hard to crack down on the sprawling and many-layered system of tax havens and offshore secrecy. Any efforts will be undermined by armies of offshore enablers looking for loopholes: accounting firms, offshore company formation agents and trust companies and banks. In this case, the law firm in question has worked with some of the world’s biggest banks including HSBC, Société Générale, Credit Suisse, UBS and Commerzbank to set up thousands of offshore companies that foxed tax and law enforcement authorities worldwide.
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So action beyond the OECD’s is needed. David Cameron, UK prime minister, hosts an anti-corruption conference in May. He should announce steps to force the UK’s Overseas Territories and Crown Dependencies to create publicly accessible registries of the beneficial ownership of companies, and open trusts and foundations to scrutiny.

There are many ways to put pressure on the private infrastructure of enablers. One of the most potent brings into focus one of the biggest offshore operators: the US. America has its own anti-tax haven programme, the Foreign Account Tax Compliance Act, which does a decent job of cracking down on American tax cheats. Fatca has a big stick: it imposes a 30 per cent tax on payments originating in the US to any financial institution that does not comply. Financial institutions do not want to be shut out of US markets so they put pressure on other countries to let them share data — becoming in the process lobbyists for reform.

Though the OECD scheme is modelled on Fatca, the US will not participate directly. Instead, it promises to share data with other countries through bilateral agreements related to Fatca. However, US Congress has not approved the reciprocal promise contained in these agreements — and this means the US will in practice end up providing very little information to others. America is fast becoming a tax haven of choice. The OECD knows this but has not been brave enough to call for action.

The only other body with the clout to confront Washington is the EU. It should summon the courage to impose a withholding tax on payments originating in the union to non-compliant jurisdictions such as the US, copying Fatca’s big stick. That would unblock arguably the most powerful guardian of financial secrecy in the system.

Nicholas Shaxson is the author of ‘Treasure Islands: Tax Havens and the Men who Stole the World’

Fonte: FT

The Panama Papers and the concealed wealth of nations

“A man, a plan, a canal: Panama.” So, at least, runs the British schoolchild’s palindrome, but it is, in truth, some time since the Central American country confined itself to the trade of maritime navigation devised for it by the French engineer, Ferdinand de Lesseps.

The most lucrative of Panama’s “offshore” activities have long taken place on dry land, amid the soaring offices of its business district. The state’s willingness to play host to foreign companies and individuals on a few-taxes and nearly-no-questions-answered basis has allowed it to build an international business of enviable financial reward — if uncertain reputability. And it is some of these transactions that are now rightly coming under scrutiny following the leak of 11.5m internal records from the prominent Panamanian law firm Mossack Fonseca.

As with past leaks of the client lists of Swiss banks, the disclosures are likely to provoke red faces and furious denials. Hundreds of politicians, business and sports people, including 72 current or former heads of state, have been implicated. According to findings published by the International Consortium of Investigative Journalists, the records include at least 33 people and companies blacklisted by the US because of evidence of proscribed activities, such as dealings with Mexican drug lords, terrorist groups and sanctioned states including North Korea and Iran.

It is, of course, true that possession of a Panamanian corporate identity does not itself equate to evil intent. But the mini-state has done more than most “light touch” jurisdictions to make it easy to keep a dark secret. Not only does corporate ownership remain highly opaque; it is also the most significant financial centre to hold out against a global transparency initiative led by the OECD. Only Bahrain, Vanuatu and Nauru have similarly spurned the rules, which provide for tax data to be automatically exchanged.

The disclosures will undermine the territory’s secretive selling proposition. The tax authorities in Australia, New Zealand and the UK have said they will follow up allegations of tax evasion and money laundering resulting from the leak. Some politicians named in the files, especially those dependent for power on democratic whim, may face challenges to their positions. Iceland’s prime minister, Sigmundur David Gunnlaugsson, must fight a vote of no-confidence after disclosure of offshore holdings linked to him and his wife.

Just as the Swiss disclosures punched holes in that country’s traditions of secrecy, the Panamanian leaks should prompt further pressure on tax havens. Reputational risk may give some companies and individuals pause before entrusting their fortunes to a Panamanian intermediary. But the business of these centres, profiting by helping people move money out of high tax jurisdictions, will not be so easily stopped.

The impetus must come from investors as in the case of some tax havens such as the hedge fund friendly Cayman Islands, or from other governments. This should be forthcoming now that austerity policies have made it politically hard to tolerate tax avoidance or illegal tax evasion. The years since the financial crisis have shown that power still resides where wealth is created. US toughness towards Swiss banks forced Switzerland to lift the veils that previously shrouded its banks in legally mandated secrecy.

Until now the business and tax benefits from industries linked to the havens has seemed to nurture an unholy tolerance in some bigger states, including the UK. The more their citizens learn from disclosures such as these, the more they will ask why more is not done.

Editorial do FT

segunda-feira, 4 de abril de 2016

Saudi’s friendships show American influence waning

After King Salman of Saudi Arabia came to the throne in 2015 and allowed his favourite son and deputy crown prince, Mohammed bin Salman, to seize the main reins of power in the kingdom, the country has embarked on an assertive foreign and regional policy. The ageing and frail king’s son has upstaged the crown prince and next in line of succession, interior minister Mohammed bin Nayef. That much everyone agrees.

Prince Mohammed bin Salman has accumulated surprising power, in a system where the ruling family normally seeks a careful balance between factions. MbS, as he is known in diplomatic shorthand, aged only 30 in a regime long run by men in their 70s and 80s, is defence minister and economic tsar, as well as overlord of the closely tied areas of foreign and oil policy.

A linear summary of foreign and defence policy in his first year would probably highlight: the Saudi-led air war against Iran-backed Houthi rebels in Yemen launched last March; increased support for Sunni Islamist rebels fighting Bashar al-Assad’s regime in Syria, which is backed by Iran, Hizbollah, the Lebanese Shia paramilitaries and Russia; the break-off of diplomatic relations between Riyadh and Tehran; and, in recent weeks, severing ties with Saudi political, military and media allies in Lebanon.

What it might skip over is the budding detente between the kingdom and Vladimir Putin’s Russia, ally to all that Saudi Arabia most detests in the region — Iran, Hizbollah, and the Assad regime.

Alliances of convenience are hardly new to the Middle East. The will to power of entrenched regimes often coexists with pragmatism, making strange bedfellows of sworn enemies. But the present situation has reached unusual heights of visceral and violent antagonism in the proxy wars between Sunni Saudi Arabia and Shia Iran across the region, above all in Syria. But, first, what has Saudi Arabia been up to?

Riyadh is signalling a pullback from the war in Yemen. Saudi officials say they have destroyed a missile threat to the kingdom from their unruly southern neighbour. To many other eyes, it looks as if MbS bit off more than he could chew. Despite Riyadh unveiling an alliance of more than 30 Sunni nations to confront Iran’s designs, Egypt and Pakistan, which have the biggest armies, conspicuously declined to provide ground forces for the Saudi air war. In Syria, a Saudi threat to send in troops to support Sunni rebels proved empty.

The diplomatic break with Iran, and rupture with Lebanon, came after the Saudi execution in January of Sheikh Nimr al-Nimr, a dissident Shia cleric. Riyadh reacted after the Saudi embassy in Tehran and consulate in Mashhad were attacked by mobs. Lebanon’s foreign minister, a Hizbollah-aligned Christian, declined to condemn the events — acting as more papist than the Pope given that the Iranian government itself did so. The Saudis have cancelled $3bn in aid to Lebanon’s army, stopped paying local Sunni allies and associated media, and closed the Beirut office of Al Arabiya, a TV network owned by members of the royal family.

Yet, at the same time, Prince Mohammed bin Salman has forged what Arab officials describe as a “functional and substantive” relationship with President Putin, covering Syria, possible Saudi arms purchases from and investment in Russia , and joint attempts to stabilise oil prices by freezing output.

On Syria, US- and Russia-led peace efforts are still stymied by Moscow’s insistence that President Assad must be part of any transition out of war — which Washington and Riyadh are ostensibly resisting. But when MbS met Mr Putin last October at the Russian Grand Prix at Sochi, he told him: “We do not care about the Assads, we care about Iran,” according to an Arab official in contact with the deputy crown prince. Sergei Lavrov, Russia’s foreign minister, said afterwards: “We now have a much clearer vision of how to move along the path of political settlement.”

No such settlement is likely when talks on peace resume next week in Geneva. Despite Mr Putin’s partial withdrawal from Syria last month, Russia-backed Assad forces are still on the offensive — not just against Saudi-backed rebels but now also against the jihadis of Isis, from whom they recaptured the city of Palmyra last week.

Some Arab sources say the Russian leader even informed MbS about his new Syrian policy before he told Mr Assad.

Mr Putin may be signalling to Mr Assad that, unless he engages with evolving plans to end Syria’s war, Moscow could dump him. Russia, at the head of the Iran-backed axis in Syria and Iraq, is also now intersecting with the US-led coalition against Isis. Both coalitions are backing Syrian Kurdish militia fighting Isis across northern Syria. Russia’s ally Iran is de facto co-
operating with the US in Iraq.

But Saudi Arabia’s warming ties with Russia surely speak of the waning regional influence of the US, with which the kingdom has been closely allied for 70 years. After Barack Obama started a thaw in US relations with Iran through last year’s nuclear deal, and Mr Putin stormed into a Syrian war the US president has sought to avoid, the Saudis seem to have decided to work with Moscow, in the belief that it can influence Tehran. Syria, in all its gore, is the cockpit of the current Middle East.

David Gardner

Fonte: FT

sexta-feira, 1 de abril de 2016

Argentina’s deal with the holdouts is a mixed blessing

The Argentine government obtained an overwhelming victory in the early hours of Thursday, when senators approved the proposed agreement with recalcitrant creditors who had rejected the renegotiations of the country’s debt in 2005 and 2010. With this, the legal fight between Buenos Aires and its “holdout” creditors is almost resolved.

This battle has cast a shadow over the international sovereign debt market — and its resolution creates a paradox. While the outcome is positive for Argentina, it sets a precedent and has some alarming implications for the administration of debt renegotiations.

In the absence of a multilateral framework, what is convenient for an individual country could have negative consequences for the international system as a whole.

For example, the outcome of the Argentine dispute clearly overturns the accepted view that creditors can do little to recover their full investment in a sovereign default — a view that underpins the concept of differential “country risk”. The accord reached between Argentina and the holdouts undermines that concept since it is based on the country’s agreement to pay an amount equivalent to 100 per cent of the principal.

Moreover Thomas Griesa, the US judge in the case, made an interpretation of the pari passu clause in Argentina’s debt — a traditional feature of sovereign bonds that ranks creditors equally — that favoured the holdouts. This put unusual pressure on the country. It also encouraged a perception that it is feasible for a minority of bondholders to isolate a government from broader credit markets, leaving it with no alternative but to pay claims held by a minority of litigants in full.
In this case, inequality among creditors caused maximum economic harm. It underlines the need for a sovereign debt restructuring mechanism

The reason the legal tussle between Argentina and its creditors took so long is that the assets involved did not include “collective action clauses”, which would have required minority creditors to accept a settlement if the majority agreed. But Argentina is not an isolated case in this respect: 20 per cent of the outstanding $900bn of sovereign debt has no CACs attached. For other countries in this position, the Argentine agreement sets a dangerous precedent.

The obstinate bondholders who faced Argentina down were able to convince the judge and secure an extraordinarily high return. This has raised the likelihood that a variety of “creative” holdout strategies will be developed, reducing overall efficiency and increasing the long-term transaction costs of credit.

Buenos Aires’ drawn-out battle with its creditors reflects the incompleteness of the international financial system. There is no bankruptcy procedure in place to kick in when a government cannot meet its obligations. The Argentine experience is proof that some such arrangement is needed.

Recalcitrant creditors bought Argentine paper at rock-bottom prices and their strategy was vindicated. They profited and the creditors who settled promptly did not. This is not fair and is also inefficient. Standard bankruptcy procedures treat creditors equitably, minimising economic damage by resolving things fast. In this case, inequality among creditors caused maximum economic harm. It underlines the need for a sovereign debt restructuring mechanism.

Yet, for all this, the readmission of Argentina to the international financial market must be counted as an important success. The new reformist government of Mauricio Macri deserves credit for its focus and effective negotiating tactics.

Some credit in this saga is also due, however, to Cristina Fernández, the former president. She argued vigorously for the creation of a formal mechanism governing the restructuring of sovereign debt. Recognising this could lead to a happier and more lasting outcome.

Mario Blejer is deputy chairman of Banco Hipotecario

Fonte: FT

The welfare state is a piggy bank for life

How is the “welfare state” to be justified? The usual answer is that it is a way for the well-off to help the less well-off. But this is not its only role.It is also a “piggy bank”, as Nicholas Barr of the London School of Economics has argued. More precisely, it is a substitute for markets that the private sector does not offer.

Put aside spending on services, such as education or health; focus on benefits paid to individuals, such as housing benefits, tax credits paid to those in work and pensions. In the UK, such benefits amount to a huge sum: 33 per cent of current spending (and 12.5 per cent of gross domestic product) in 2014-15.

In the short run, spending on benefits is largely redistributive. This role of the state is undoubtedly important at all times. But it is particularly significant in the aftermath of a crisis that has left the economy as a whole far smaller than everybody had expected. The Institute for Fiscal Studies, a London-based think-tank, has concluded that changes in taxes and benefits between May 2015 and April 2019 will fall proportionately most heavily on the poorest parts the population. The relatively well-off could have borne more of this burden. The government chose otherwise. Everybody should decide for themselves whether they think this was right.

Such decisions can themselves have significant long-term implications. If, for example, a cut in benefits were to re­duce parents’ ability to support their children, the longer-term economic and social impacts could be highly damaging. But it is when one looks at the welfare state’s impact over the course of a life that something perhaps even more profound emerges: its role is, it seems, as much about distribution of income over lifetimes as among people.

Evidence for this comes from another IFS study, published last year. This examined the effects of the tax and benefit systems on people born between 1945 and 1954 — the baby boomers. It reached four big conclusions.

First, income is far less unequal over lifetimes than in any given year. This is because a big proportion of inequality is temporary, a result either of changing needs as people age or transitory shocks.

Second, largely as a result, more than half of the redistribution achieved by taxes and benefits is over lifetimes rather than among different people,

Third, in the course of adult life, only 7 per cent of individuals receive more in benefits than they pay in taxes, even though 36 per cent of people receive more in benefits than they pay in taxes in any given year.

Finally, in-work benefits are just as good as out-of-work benefits at helping people who remain poor throughout their lives but they do less damage to incentives to work. Higher rates of income tax, meanwhile, target the “lifetime rich” relatively well because mobility at the top is relatively modest.

The finding that taxes and benefits distribute incomes over individuals’ lifetimes even more than among individuals should be seen not as a bug but as a feature of the welfare state.

The argument here is that a necessary condition for economic efficiency is “complete markets”: that is, a market for every asset in all possible states. Evidently — because of pervasive uncertainty, asymmetric information, transaction costs and so forth — complete markets do not and cannot exist. This is not some theoretical curiosity. As a result of these failings, private insurance against unemployment or big temporary loss of income, and borrowing against earnings in the distant future, are difficult if not impossible.

The state is in a good position to rectify these failings, partly because it can monitor behaviour and avoid adverse selection (that is, ending up stuck with only bad risks) by insisting that everyone joins the insurance pool. Of course, the state may design such programmes very badly. Insurance also creates “moral hazard”. But one can limit such damage while helping people through temporary difficulties or the exceptional demands of some stages of life.

The 2015 IFS study suggests this is precisely what the UK’s tax and benefit system does. Publicly financed education and health services strongly reinforce such effects: people gain the biggest benefits from the former when young and from the latter when old.

In designing the structure of taxes and benefits, such lifetime effects are at least as important as those at any moment. These effects include the role of the welfare state as both insurer and bank. Government plays these roles in all high-income nations, including even the US. It is a desirable one. Yet careful design is also needed. The starting point must be with greater awareness of this truth.

Martin Wolf

Fonte: FT