61 FIGURE 3.1 | RATES OF TAXATION AND POVERTY RATES AMONG INDUSTRIALIZED COUNTRIES 50 40 30 20 10 Cultural values are often reflected in public policy, such as taxation. This graph compares poverty rates (the percentage of the population living in poverty, defined as those in households earning less than half the median household income) with taxation rates (as measured by tax revenues as a percentage of gross domestic product, or GDP, which represents the value of all the goods and services produced in a country) for most of the world's industrialized economies. In general, the lower the tax rate, the higher the poverty rate. The United States, with among the lowest tax rates, has one of the highest poverty rates. In contrast, Denmark, with nearly double the tax rate of the United States, has one of the lowest poverty rates. What might account for the apparent, significant differences in Danish and U.S. cultural attitudes toward taxation and poverty? Source: Organization for Economic Cooperation and Development Factbook 2013. tradition, the government had made a policy of keeping the price of basic food items affordable to help ensure their widespread availability. In recent years, however, Niger, like many other developing nations, has absorbed Western cultural values emphasizing individualism and deregulated free markets. This cultural change was partly a response to requirements by international institutions, such as the World Bank, that governments eliminate price controls and other market interventions in order to qualify for loans. In Niger, the government abandoned its commitment to price controls. At the same time, the traditional commitment to charity weakened. As Malan Hassane, a local religious leader, commented at the time, “There is nothing like generosity now. Selfi shness is gaining ground” (Timberg 2005). When the country suffered a food shortage in 2005, this shift in values from an emphasis on collective responsibility and mutual aid to an emphasis on individual economic success in competitive markets proved Values can translate into public policy. For example, the relatively low rate of taxation in the United States refl ects more than an aversion to taxes; it refl ects popular support for the principle of small government (though major social programs such as Medicare and Social Security have widespread support). However, the relatively low tax rates in the United States also correlate with a relatively high rate of poverty. In contrast, in most other industrialized nations, individualism is less valued, tax rates are much higher, and the poverty rate is far lower. Figure 3.1 shows the relationship between tax rates and poverty rates for 30 industrialized countries. The link between cultural values and public policy can sometimes have dramatic—even deadly—consequences, as illustrated by the recent experience of Niger, a poor African country beset by periodic food shortages. Niger has long relied on a culture of generosity based on Muslim traditions of charity and communal support to provide for the poor during these shortages (Timberg 2005). Building on this Tax revenue as percentage of GDP, 2010 0 Poverty rate, late 2000s Denmark Sweden Belgium Italy France Norway Finland Austria Netherlands Hungary Luxembourg Germany Iceland United Kingdom Czech Republic Poland Spain New Zealand Portugal Canada Greece Switzerland Slovak Republic Ireland Japan Turkey Australia Korea United States Mexico Percent The Elements of Culture
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