Proposal - Mandatory Countervailing Tip

2012-08-07 / All Blog posts

World inequity between countries and ethnicities exploits individuals who are the primary producers and harms the individuals and societies that contain the primary consumers; it only benefits international traders. Over 99% of the world is exploited to serve less than the top 1%. This imbalance threatens world stability, as well as national, regional and local stability.

This proposal is designed to create US jobs, indeed jobs in every country where the trade balance is negative, and is intended to reverse the exploitation of individuals in producing countries. I propose a Mandatory Countervailing Tip (MCT). It’s like a tip that you might offer someone who provides service, and whose wages are not sufficient to justify their employment. Waiters, waitresses, bellhops and musicians are paid tips for this reason. This proposal is unlike a countervailing tax, because the consuming country does not keep the surcharge; instead, it would provide money directly to individuals in producing regions. The exact mechanism(s) for disbursing funds locally is not addressed in this proposal.

The MCT would be levied at the point of purchase, like a sales tax, and would be disbursed directly to residents at the point(s) of origin of the goods who created the product. This would serve to improve the lives of all parties involved in the transaction, except the international trader.

The MCT would be calculated such that exploited individuals themselves in the producing nation would directly receive enough money to raise their standard of living to within 25% of the standard of living for the middle 80% of the consuming region in the producing country. The money would be collected by the same government departments that collect sales tax and would be remitted every 30 days to a new agency in the UN. The entire staff of the UN agency would be required to be replaced every 2 years, and working committees and task forces in the agency would be comprised of residents of primary producers and consumers, as well as enough individuals from neutral countries so as to ensure impartiality and honesty. The states collecting the sales tax would be entitled to 1% of the funds collected for administrative overhead. The UN agency would be entitled to an additional 2%. The UN would be responsible for computing the MCT for every category of product sold, for every producing / consuming country.

The sums involved would be enormous, so the potential for fraud is also enormous. To counteract this, unprecedented transparency must be implemented; this is possible because of modern computer and communications technology. Access to the data should be made public to the world at large. No sign-in should be required in order to download data concerning anonymized transactions and aggregated statistics. No data about individuals in producers or consumers must be available without security clearance.

Transactions and queries requiring authorization must be audited, and auditors must be selected from presumably hostile countries and regions. For example, given that India and China are fierce competitors, they should provide the personnel to audit each other’s transactions. Those auditors would be paid from 0.002% of the total receipts. Auditors must also be reassigned every year, and may not ever be reassigned to the same region.

Implementation need not require world-wide agreement; only one country need to decide that it wants to go ahead, and rough estimates of economic disparity would suffice to start. The first country to implement will be the first country to enjoy the benefits of a local economic resurgence. This can be done before the UN is ready, by setting up a temporary agency.

This proposal is intended to greatly reduce the disparity between rich and poor throughout the world. It is fair because it is based on consumption, and the degree of equalization applied is proportional to the disparity between the standards of living between producer and consumer. This should greatly decrease the suicide rate of the indentured slaves who build iPads in China, while providing an opportunity for manufacturing to resurge in the US. Think of it as a regulated fair trade for world stability, prosperity and peace.

Colonialism is based on exploitation, but capitalism does not require it. One might argue that a certain amount of exploitation is healthy, because without some measure of economic disparity, undeveloped regions would not have a cost advantage and therefore never develop. This is probably true, so the question then becomes: how much economic disparity is healthy? I don’t know the answer, but a legislated policy on whatever that figure needs to be is preferable to uncontrolled exploitation. I doubt that the figure would need to be in excess of 50%, and probably should be less. Current figures are in the range of 1% to 5%.

The MCT is an example of how local, regional, national and world government can provide for the greater good. The only parties who have reason to oppose this type of proposal are those who benefit in some way from exploitation. Think of the goodwill that the recipients will feel towards their end users, and the countries that they live in.

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