Author Archives: Andi Howe

Is a National Basis Income Around the Corner?

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Is national basis income the answer?  FInland may become a laboratory test of the idea.

The Finnish government is currently drawing up plans to introduce a national basic income. A final proposal won’t be presented until November 2016, but if all goes to schedule, Finland will scrap all existing benefits and instead hand out 800 euros per month—to everyone.

It sounds far-fetched, but it’s looking likely that Finland will carry through with the idea. Whereas several Dutch cities will introduce basic income next year and Switzerland is holding a referendum on the subject, there is strongest political and public support for the idea in Finland.

A poll commissioned by the government agency planning the proposal, the Finnish Social Insurance Institution or KELA, showed that 69% support (link in Finnish) a basic income plan. Prime minister Juha Sipilä is in favor of the idea and he’s backed by most of the major political parties.

 

Equalizing?

Lagarde to Dubai for Global Women’s Forum

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Christine Lagarde will be featured among the keynote speakers at Global Women’s Forum Dubai 2016, taking place on 23rd-24th February at the Madinat Jumeirah in Dubai, under the patronage of Vice President and Prime Minister and Ruler of Dubai, His Highness Sheikh Mohammed Bin Rashid Al Maktoum and led by Sheikha Manal Bint Mohammed Bin Rashid Al Maktoum, President of the UAE Gender Balance Council, President of Dubai Women Establishment and wife of Sheikh Mansour Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs.

Lagarde joined the French government in 2005 as the Minister of Foreign Trade, and became the first woman to hold the post of Finance and Economy Minister of a G-7 country in 2007.

In 2011, Lagarde became the first woman to assume the role of Managing Director of the International Monetary Fund, an organisation of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Ranking sixth on the latest Forbes list of the ‘World’s 100 Most Powerful Women,’ Lagarde has championed efforts to increase the participation of women in the workforce as a means of reducing poverty and inequality. In a recent interview, she urged governments to implement policies to improve the education levels of girls and women, pointing to recent IMF data, which demonstrates how countries can increase GDP as a direct result of allowing young girls to access education.

Mona Ghanem Al Marri, Chairperson of the Board of Dubai Women Establishment, DWE, and Vice President of the UAE Gender Balance Council, said, “Christine Lagarde has always been a powerful advocate and voice for enhancing female engagement and participation in the workforce, highlighting the major role that women’s empowerment plays in boosting economic growth. Over the past few decades, the UAE has made great strides in strengthening the influence of Emirati women and achieving gender parity, paving the way for women to play their part in the progress and development of our nation. As we continue on our journey towards achieving gender balance and equality, there is much that we can learn from female leaders such as Christine, and we look forward to welcoming her to Dubai in 2016.”

Global Women’s Forum Dubai 2016, co-organised by the Women’s Forum for the Economy and Society and the Dubai Women Establishment, brings together leaders from around the world, women and men, representing business, government, academia as well as art and culture. The event will highlight new perspectives for today and tomorrow, creating a powerful, global network capable of boosting the influence of women throughout the world, conceiving innovative and concrete action plans to encourage women’s contribution to society, and promoting diversity in the business world.

Building on the theme of innovation, Global Women’s Forum Dubai will move beyond the usual expectations for and reservations about technology to address the sustainable role of women as well as the role tradition can play in innovation. The agenda streams for Global Women’s Forum Dubai fall under five pillars: Achieving, Creating, Giving, Energizing and Sustaining. Each pillar will serve to orient sessions to show how the development of innovative ideas and practices can benefit women, society or the economy. The Discovery, the renowned creativity space at Women’s Forum meetings, will be among the highlights of Global Women’s Forum Dubai 2016.

The Discovery will feature a wide variety of ‘hubs’ presenting complementary workshops and enlightening exhibits to expand upon the numerous concepts discussed during the main panel discussions. CEO Champions, a Women’s Forum initiative launched in 2010 to drive progress and accountability for women’s advancement in the private and public sectors, will also be part of Global Women’s Forum Dubai 2016, in addition to key Women’s Forum initiatives such as Rising Talents, Women in Media, and the Cartier Women’s Initiative Awards.

Christine Lagarde

EU Slapping Tax Evasion Specialists Like Luxembourg

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The Rocky Road to Globalization:  Tax codes vary widely from country to country.  International businesses are faced with a conundrum: In order to compete they must level their tax burden across the globe.  This has led to the location of all American companies like Caterpillar and Starbucks in Switzerland.  Luxembourg has been an attractive host to international companies. McDonalds and Fiat are now getting the heat.
Luxembourg is appealing a European Union decision that it made illegal fiscal deals with a Fiat Chrysler Automobiles NV unit, vowing to show that the bloc’s antitrust regulator failed to establish any illegal state aid.

It’s the first challenge to reach the EU courts since the European Commission’s precedent-setting decisions in October that the Italian carmaker and Starbucks Corp. benefited from favorable tax deals by Luxembourg and the Netherlands. Each company was ordered to pay as much as 30 million euros ($32.8 million) in back taxes.

The European Commission “used unprecedented criteria” for its decision that a tax ruling for Fiat in Luxembourg violated state aid rules and put “into jeopardy the principle of legal certainty,” the nation’s finance ministry said in an e-mailed statement Friday. “The commission has not established in any way that Fiat received selective advantages.”

The Grand-Duchy’s decision to appeal comes a day after the Brussels-based watchdog opened a probe into whether McDonald’s Corp. unfairly exploited a fiscal deal with Luxembourg to avoid tax on hundreds of millions of euros in profits for more than half a decade. The McDonald’s case is the third to focus on Luxembourg, adding to the Fiat case and an ongoing probe into tax rulings obtained by Amazon.com Inc.

Luxembourg and the fiscal deals that international companies have received over the years there came out into the open last year, when hundreds of documents were leaked showing that more than 340 companies such as PepsiCo Inc., Ikea Group and FedEx Corp. transferred profits to the country through tax arrangements.

“The vast majority of EU member states use tax rulings to provide legal certainty for the taxpayer,” the finance ministry said, adding it “is strongly committed to tax transparency and the fight against harmful tax avoidance.”

Luxembourg

Entreprenuer Alert: Privacy in the Social Media

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Europeans are concerned about privacy and particularly young people in the US tend not to be.  Providing security on the internet is a good and growing global business.

Facebook will stop tracking browsers of Facebook pages in Belgium who are not signed into a Facebook account, seeking to comply with a court ruling last month ordering it to do so or face daily fines.

The company’s action means Belgians will have to log into Facebook before they can see Facebook pages, forcing them to create and sign into an account if they want to view the pages or related content.

Previously non-users could view public Facebook pages from sports teams, celebrities, tourist attractions and businesses without needing to log into Facebook. As a result of the changes registered Facebook users in Belgium who attempt to log in from an unrecognised web browser will be forced to comply with some added security steps, the company said.

At issue is Facebook’s use of a so-called “datr” cookie, which it places on users’ browsers when they visit Facebook or click a Facebook “Like” button on other sites, allowing it to track the activities of that browser.

Facebook says the tiny bit of software code only identifies browsers, not individuals, and helps Facebook to distinguish legitimate visits from those by attackers.

“(Removing the cookie) will cause a marginal privacy hit. That will decrease the privacy of Belgian users,” Facebook chief security officer Alex Stamos said last month.

Facebook is appealing the ruling.

Belgium’s data protection regulator took the US company to court in June, accusing it of trampling on EU privacy law by tracking people without a Facebook account without their consent.

Facebook plans to appeal against the court ruling but, in complying with the order, expects it will no longer face a €250,000 (£177,000) daily fine.

The company has argued that Belgium has no authority on this issue, since it has its European headquarters in Ireland and as such should be policed solely by regulators there.

Belgium’s privacy regulator said the fact that the Brussels court had ruled meant it had jurisdiction over the company. The changes will be implemented as soon as the regulator serves Facebook with the order, expected sometime this week.

Social Media Privacy

Response to Terrorism in the US

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Terrorism in the US.  Reports that San Bernadino shootings involved people with terrorist contacts.  Here is a letter from an agency in Northern California which has a similar mission to the San Bernadino agency:

It is with a very heavy heart I reach out to all of you in response to the horrific events that have unfolded and continue to unfold around the senseless shootings that happened today at the Inland Regional Center in San Bernadino, CA.

At this very early stage of this awful news we don’t know much more than what we see on television news and on the Internet.

But what we do know is hard to imagine and very hard to understand.

By 3 p.m., police were reporting that three armed men attacked the facility earlier today and killed at least 14 people and injured another 17. How many more people may have been hurt we do not know. At the time of this posting, the situation in San Bernardino was fluid. News reports said police located the suspect vehicle and a gun battle ensued. One suspect was reported shot and killed, another was wounded and the third escaped and remained at large. A police officer also was injured in the shooting but his injuries were reported not life threatening.

As we hold those directly impacted by this tragedy in our thoughts and prayers, we all know that there is a larger and deeper ripple effect then what could ever be conveyed in news coverage.

The Board of Directors and your Leadership team are committed to providing the safest environment possible for each of you and the individuals we serve.  If you have questions or find yourself or those individuals we serve in need of extra support during this time, please contact myself or your direct supervisor.

Our thoughts and prayers go out to the victims of today’s tragedy and their families and all of our colleagues in San Bernardino with whom we share a commitment to helping people with disabilities live rewarding and independent lives.

Wives Earn More than Husbands?

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How many wives earn more than their husbands in the US?

Back in 1987, only 17.8 percent of American wives outearned their husbands, according to data from the Bureau of Labor Statistics. Even though the situation is gradually improving, it quite rare to find a wife that takes home more money than her husband. In 2013, 29.3 percent of American wives were the main breadwinners in US families (where both wives and husbands have earnings).

This chart shows the % of US wives earning more than their husbands from 1987 to 2013.

Wives Earn More than Husbands?

Can We Kickstart Stagnation by Investing in Clean Energy?

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Can we kickstart economic stagnation with investments in clean energy?

Dean Baker writes:   As the world prepares for another round of climate negotiations in Paris starting Nov. 30, it is worth repeating a few simple points.

It is becoming increasingly obvious that the world is already paying a substantial price for global warming. Sure, extreme weather events will never come with a stamp that says “caused by global warming.” But we know that global warming will change weather patterns in ways that are not entirely predictable. That means that we will see unusual weather events where global warming was likely a factor, but we can never know for certain.

One of the leading candidates in this respect is the extreme drought that afflicted Syria in the last decade, destroying much of its agriculture and leading to a mass migration to its cities. This migration was likely a factor in the unrest that led the country’s civil war starting in 2011. Syria’s conflict in turn has led to hundreds of thousands of deaths, the displacement of millions, and of course the rise of the Islamic State in Iraq and the Levant (ISIL).

It is likely that we will see, or are already seeing, other weather disruptions with comparable human consequences. Unfortunately, there has been much attention to low-lying and relatively sparsely populated islands as the main victims of global warming. In fact, there will almost certainly be hundreds of times more victims in relatively densely populated areas facing droughts or countries such as Bangladesh, which could be hit by devastating floods.

The time has long since passed for arguing about whether global warming is happening or whether the consequences will be serious. The question is what we are prepared to do about it. Here also, we have seen reality largely turned on its head.

Most countries are still suffering from the fallout of the Great Recession. They are struggling to contain budget deficits even as their economies remain well below full employment. This creates a situation where the leaders planning to meet in Paris are looking to address climate change on the cheap.

This logic is 100 percent backwards. The economic problem that the United States, most of Europe, Japan and even China now face is secular stagnation. This is a prolonged period of inadequate demand. The constraint on further output in all of these places is not the limit of the economy’s ability to produce goods and services, but rather of the demand for goods and services.

We should be paying for India and other developing countries to build out a modern electric grid that is based on clean energy.

This is a problem for which measures to confront climate change present an obvious solution. We know that reducing greenhouse gases (GHG) to acceptable levels is a massive undertaking. It will take an enormous amount of capital and labor to make our homes and businesses more energy efficient, and to convert them to clean sources of energy as quickly as possible. The same applies to our transportation network: We have to promote mass transit and make all of our transportation vehicles cleaner.

This can be done, though it costs money. But the story that is missed is that secular stagnation means we have the money. The resources are the unemployed and underemployed workers who could be employed in this massive undertaking. In terms of money, contrary to the whining of the deficit hawks, there are no practical limits to how much the United States, Europe and Japan can borrow right now. We hit limits on our ability to borrow when the economy is near full employment, not when there are still large numbers of unemployed workers.

It’s not necessary to take my word on this issue; the financial markets are saying the same thing. Long-term interest rates in the United States remain at extraordinarily low levels. The major European countries face long-term interest rates of less than 1.0 percent. And that debt-ridden basket case Japan has to pay a tiny 0.3 percent interest rate on its long-term debt. These markets are telling us that we can borrow hundreds of billions more each year to address global warming or other major needs.

There is one other point that is worth noting in this context. We should want to reduce GHG emissions at the lowest possible cost. Since it doesn’t matter for the environment whether the GHG comes from the U.S. or India, it would make sense to reduce emissions in the places where we get the greatest reductions per dollar.

That would mean having the U.S. and other wealthy countries pay developing countries to reduce their GHG emissions. We should be paying for India and other developing countries to build out a modern electric grid that is based on clean energy. That would be enormously beneficial to these countries, since they desperately need more energy, but it would also be beneficial to the wealthy countries, since we could avoid an enormous amount of coal usage. And paying India to develop clean energy should even help create jobs in the U.S., although the route is a bit circuitous.

Anyhow, this would be an obvious case where we could do something that would be very good for people in the developing world and for the U.S. economy today, and hugely important for all of our children and grandchildren in the years to come. Unfortunately, when we have a Congress controlled by people who doubt evolution or question whether global warming is happening because they are not scientists, we may not make much progress along.

118 Years to Cure Gender Pay Gap?

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Will it take 118 years to close the women’s pay gap?

A recent report from the World Economic Forum suggests this time frame.

It says progress on closing the gap has stalled in recent years at a time when more women are entering the workplace.

In fact, nearly a quarter of a billion more women are in the global workforce today than a decade ago.

In several countries, more women are now going to university than men but – crucially – this is not necessarily translating into more women occupying skilled roles or leadership positions.

The WEF report looks at whether men and women have the same rights and opportunities in each country in four areas: health, education, economic participation and political empowerment.

Gender Pay Gap

South Africa Needs to Play Catchup

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Acha Leke and Michael Katz write:  A paradox of Sub-Saharan Africa’s rapid economic expansion is the fact that the region’s most sophisticated economy seems not to be part of it. Since 2008, South Africa has recorded average annual GDP growth of just 1.8%, less than half the rate of the previous five years. Sub-Saharan Africa is porjected to grow at a rate of close to 5% next year, but South Africa is projected at about 1% growth. More worrying still, the country’s 25% unemployment rate  is one of the highest in the world.

Countries across the continent are constructing the roads, ports, power stations, schools, and hospitals.  They need to sustain their growth and meet the needs of their fast-growing and urbanizing populations.  They need most of all is expertise.

But while South Africa has highly capable architecture, construction, and engineering sectors, its current share of foreign-built projects in Sub-Saharan Africa stands at only 7%, compared to 32% for China.

The opportunities are not limited to the construction industry. South Africa has the know-how to meet Africa’s burgeoning need for a wide range of services, from banking and insurance to retail and transport. The country currently provides only 2% of Sub-Saharan Africa’s service imports – a market worth some $40 billion annually.

South Africa is home to several well-established, innovative banks that are well placed to offer low-cost, digital services to millions of currently unbanked African households and businesses. Indeed, South African banks already command a 12% share of Sub-Saharan Africa’s banking market.

South Africa has a highly developed insurance sector, with a long history of creating products for every demographic and income level. It is ideally placed to provide insurance to the rest of Sub-Saharan Africa, where just 1% of households have insurance of any kind.

South Africa also has been punching below its weight in merchandise trade.

The key to reigniting South Africa’s economic growth is an ambitious regional strategy driven by government and business leaders working in partnership. A massive scale-up of vocational education is particularly important, as this will provide young South Africans with the technical skills needed to support the expansion of export industries. Putting in place infrastructure to support growth – notably power generation, which currently lags demand – will also be crucial.

South Africa’s economic transformation since its transition to democracy two decades ago has been remarkable. But its renaissance is in danger of running out of steam. Only by boldly seizing the initiative can South Africa put itself at the core of Africa’s economic renewal, and only by embracing its role as regional leader can it revitalize its own prospects.

African growth?

 

Encouraging Ponzi Borrowing with Low Interest Rates?

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Daniel Gros writes:   Stubbornly low inflation has the European Central Bank worried. But its response – essentially just more quantitative easing – could backfire, exacerbating imbalances and generating serious financial instability.

As it stands, the headline consumer price index in the eurozone hovers around zero, and even core inflation remains below 1%.

Instead of rethinking its strategy, the ECB is considering doubling down: buying even more bonds and lowering its benchmark interest rate even further into negative territory.

Easier credit conditions and lower interest rates are supposed to boost growth by stimulating investment and consumption demand. But in the core of the eurozone – countries like Germany and the Netherlands – credit has been plentiful, and interest rates have been close to zero for some time, so there was never much chance that bond purchases would have a significant impact there.

Of course, in the highly indebted peripheral countries, there was room for interest rates to fall and for credit supply to grow – and they have, leading governments and households to increase their spending. While the asymmetrical impact of the ECB’s policy is appropriate in principle, recovery supported by the least solvent economies is not sustainable.

Back in 1986, Hyman Minsky warned about the longer-term dangers to financial stability if “Ponzi” borrowers – those who can service their debt only with new debt – become the main pillar of the economy. A zero-interest-rate environment is of course ideal for such borrowers, because there is nothing to provide an indication of solvency; borrowers can just roll over their debt.

The standard response to Minsky’s concern – that the spenders can’t afford it and the savers aren’t spending – is that monetary policy should focus on ensuring price stability, while macroprudential policy aims to safeguard financial stability by limiting borrowing by highly indebted agents.

After the 2001 recession in the US, although the Federal Reserve kept interest rates low for a protracted period, the corporate sector did not increase its investment. The recovery was ultimately fueled by so-called “subprime” mortgages: home-purchase loans extended to borrowers with lower credit ratings. The result, as we know, was a mega-bubble that triggered the 2008 financial crisis.

In the eurozone’s case, the risk is compounded by the ineffectiveness of its key macroprudential limiting countries’ spending, as lower interest rates give debtor countries leeway to spend more. Public debt as a share of GDP is on the rise in Italy and Spain, even though both countries, with their eurozone partners, have committed to reducing the debt ratio.

In short, monetary policy is perpetuating the disequilibrium between creditor and debtor economies in the eurozone, and macroprudential policy is doing nothing to stop it. When interest rates normalize, this could generate serious financial instability. But – and this is the conundrum – the ECB has few options for stimulating demand among the eurozone’s more solvent agents, and thus supporting a sustainable recovery..

A recovery has already begun in the eurozone. It should be left to run its course. An even more expansionary monetary-policy stance might strengthen the recovery marginally, but at the cost of increasing the eurozone’s already-dangerous imbalances.

Uncle-Sam-Running-on-Zero-Percent-Interest-Rates-cartoon