Posts Tagged ‘economy’
Global economy is not run by sheer ingenuity of some intrepid souls whose motto is not excellence but profits. Their dynamic leadership as some segments of capitalistic society make out, does not take finance of nations still higher. Gordon Gekko of Wall Street is a pathetic lost soul who represents a part of global consciousness to enrich themselves. Isn’t it a good thing? The answer depends on the state of our existence. We have chosen to be materialistic at the risk of losing our keen eye and ears for finer things in life. We have become crass and arrogant in the many number of weaker people we have pushed to the gutter in order to prop up consumer market. It is like the curate’s egg which is good in parts and rotten in the other.
The economic value of crime and its profits are not confined to global finance. It also makes a difference on the ground. Take jobs and living standards. From the 1980s onwards, real wages in OECD countries have declined for those in unskilled and semi-skilled occupations, that is, a good majority of the labour market. If wage stagnation was the order of the day in the West, you can imagine that developing states were hardly lands of milk and honey for ordinary workers.
Take Mexico following the signing of the NAFTA agreement in 1994; this ushered in privatisation by the back, front and side doors. By 1996, if you were not one of Mexico’s 8m unemployed, you worked legitimately in the maquiladoras sweatshop assembly plants or in the informal economy. Poverty became endemic. Fast-forward to 2012 and a banner appears above a highway in Monterey, placed there by one of the countries “big four” cartels:
Operating Group ‘Los Zetas’ wants you … We offer a good salary, food, and we care for your family. Do not suffer bad treatment … We will not feed you Maruchan (noodle) soups. Do not hesitate to call 8671687423.
To Mexico’s legion of economically disenfranchised, Los Zetos are really making an offer they cannot refuse. And the available figures prove as such: the drug industry employs around half a million people – the fifth largest employer in Mexico. Those employed in the drug trade are required to possess a unique skillset – the ability to variously murder, torture, kidnap, mutilate and rape. But this is not the whole story.
The illicit narco economy creates a virtuous commercial circle of sorts. The narcoeconomy not only employs directly but sustains a network of existing or new support industries and business ventures: banking and finance, IT, logistics, farming and transportation, pharmaceuticals, industries which have transformed backwater towns.
Britain maybe some way from being a fully-fledged narcoeconomy but we should not underestimate the economic contribution of illicit markets and their criminal agents. Take the City of London, international citadel of high finance and favoured port of call for international criminals and organisations looking to wash their dirty or corrupt cash.
According to David Clarke, City of London’s police fraud investigator, London is attractive haven for crime money as checks and balances on those setting up businesses or investing are flexible. Possibly this is why London remains an island of prosperity whilst the rest of the UK economy is in a state of austerity stagnation.
Further down the laundering food chain, there are betting shops and high volume fixed odds betting terminals widely used by drug dealers and gangs to wash their profits. In fact, these digital betting terminals now account for half the profits of bookmakers’ profits. However, the chancellor plans to plunder a good deal of this revenue by raising the duty on betting terminals. William Hill, the UK’s largest high street bookmaker, responded by announcing the closure of 109 betting shops at a projected cost of 420 jobs.
To consider the possible macro-economic benefits of illicit markets is not in any way to justify or celebrate crime. Far from it. The intention has been to consider the growing interdependence between crime and the legitimate economy. In fact, a growing body of research evidence suggests that criminal organisations and illicit markets increasingly form part of the mainstream economy. The boundary between the wider legitimate economy and the illicit economy is increasingly blurred.
A recent scandal when horsemeat was discovered in many “beef” burgers sold in UK supermarkets is case in point. A government commissioned review “clearly showed criminal activity in the global food chain”; a process aided and abetted by the aggressive pursuit by supermarkets of margins in a cutthroat commercial environment. The problem, it seems, is not so much organised crime but a crime-organised economy.”
(quote from The Conversation- article: When crooks get rich the whole economy benefits- Mike Marinetto, Lecturer in Business Ethics at Cardiff university/20 May,2014)
It was Goldman Sach’s paper “Dreaming With BRICs” predicted that China’s gross domestic product would overtake the U.S.’s sometime in the 2020s. Now the World Bank study in April,2014 said this for certain by end of this year. Such predictions however coming from knowledgable circles ought to be taken with a pinch of salt.
Take the magic Three P’s: Purchase Power Parity
This yardstick takes into account that a dollar buys a lot more in Beijing than in Bethesda, Maryland. According to the Big Mac index for instance, the McDonald’s hamburger costs 40 percent more stateside than in the Middle Kingdom. Labor is cheap in China. Hire and Fire in Beijing under one party rule is same as in America but no American labor will waste on such low pay. Or take a haircut in Palo Alto, California, sets you back $25; the average in Shanghai is five bucks. An American customer may want to have a crewcut with some graffiti thrown in. Or a pancake style. Whereas in Hunan it may be a peasant hair cut would only need a rice-bowl to keep the line and anyone with a pair of scissors snip away the superflous hair and call himself a barber.
So the three P’s don’t reflect real power.
One dollar is a giant in comparison with yuan. When China imports technology from the U.S. or high-tech weaponry from Israel, it has to pay in dollars. Ditto when it gobbles up African mines or buys the loyalty of developing countries with foreign aid. Tuition for Chinese students at Stanford University is also billed in dollars. What little we do not see between the lines is dollar’s clout as International currency has a drawback when US batch of peanut butter sold through retail throws a scare of botulism at home. Compensation is paid in dollars not to mention the killing legal costs. In China melamine laced milk products are paid in yuan and at the worst is the fellows responsible for negligence are shot to appease the irate public.
As early as 1984, China’s growth peaked at 15 percent. Now, the rate is down to one-half that. The sluggish world economy plays a part, but the underlying reasons are structural. There is housing market bubble in the big cities in China. It will break just as it did in the USA in 2008. When it happens all those villagers who were thrown out of their ancestral homes and those who have been made paupers in land speculation can put themselves into the labor pool. Ample low-wage labor will not cut any ice by shipping them to Europe or the US. They have their own unemployment to grapple with.
Spectacular growth is always easy when on paper. It was thus credit agencies gave Greece Cyprus, Iceland such high reports. China has her own problems and growing threats from ethnic minorities and any race for a global economic power do not carry prosperity with it.(ack: Josef Joffe/bloomberg.net)
I am a war child, in a manner of speaking. When I came to this world, there was a world war inexorably grinding down to its bitter end. Short of everything that made life easier, the wartime austerity left its scars on me as with all others of my generation. At home a meal was not just a meal without being told we ought to be thankful whatever was ladled out to us. ‘Consider the millions who are orphans elsewhere and you ought to be thankful..’ while the spinach and rice were served, leftovers warmed for the occasion. The parents prided on their duty and knowledge they did it with their sweat of blood. It was thus our meal-time, it was tantamount to a moral issue every time. A clean plate at the end equated with a clean conscience.
Now that I am on my own (I for one eat indifferently) while my siblings and I have learned to put our ghosts behind us. We have no excuses and we dribble a little with our conscience when we splurge on food we have brought from far corners of the earth. Did we not filch with our colossal capital reserves from those who are economically less endowed? We call it free enterprise that they must deliver at our terms. Africa, Asia and Far East we know as country of origin when we survey the overstocked shelves in our supermarkets. Fishes from their rivers feed us and their grains we import wholesale, in cereals, crispies cookies and what not. We supply the cunning to make their produce palatable, We bar code their sweat to make it sell. Moral issues are dismissed with the click of cash register. When we cart our weekly grocery we are only conscious of the parking place and not of some rain forests cleared for biofuel. We of our generation have distanced from the burden of our parent who made both ends with hard cash while we do it on credit. Our families were raised on future promises by living beyond our means. Plastic credit cards opened doors at High Street shops and our children knew branded items gave their childhood pleasures a shine. A pair of Reebok shoes made them forget the boredom of walking to the school bus. Our consumerism dulled our conscience from harsh realities of global trade and commerce unduly. Children learned to appease theirs.
Moral issue of now is made more abstract, since our children have no time to listen to us anyway. They are all into the sweet life of virtual reality, of their consumables and privacy of their own den. We are made to feel more as intruders at home since our economic clout is becoming fainter and less constructive to be providers for all. Of course children have their own means of which we are least in the know. We have our own worries: issues of pension funds to sort out than of children whose worlds are on fast tracks. Our world wherein we lashed ourselves to work ethics and burnt incense before family gods for prosperity is gone; those corporate heads whose appeasement was chief concern also have gone; and so are pension funds.
Coming to think of it we have only ourselves to blame.
The statutory U.S. corporate income tax rate is 35 percent, one of the highest in the world, but over the 2008-2010 period thirty large companies while their profits were good avoided to pay their dues.
The average effective tax rate for the companies over the period was 18.5 percent, said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both think tanks.
Their report also listed General Electric Co, Paccar Inc, PG&E Corp, Computer Sciences Corp and NiSource Inc as among the 30 that paid no taxes. All 280 corporations examined were profitable over the period. Pepco Holdings, a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 percent, among the 280 Fortune 500 companies studied. Corporations will say rightly that the loopholes that let them slash their taxes were perfectly legal, the report said.
“But that does not mean that low-tax corporations bear no responsibility … The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support,” the report said.
As Congress and the Obama administration struggle with a sluggish economy and high deficits, corporations are pressing Capitol Hill for more tax breaks, including one that would let them bring home overseas profits at a reduced tax rate.
The congressional “super committee” tasked with finding at least $1.2 trillion in additional budget savings by November 23 is so far deadlocked across a familiar divide — Republicans refusing any tax hikes, Democrats defending social programs.
On Tuesday, a panel of budget experts warned super committee members that they would fail the country if they do not meet their goal. Financial markets have been waiting for many months for signs that Washington can get its financial house in order, but few have been forthcoming.
Patriots all of them, but talk of paying their tax see how they behave? These are the very epitome of American Capitalism while the old, young and the veterans are thrown to the gutter to fend for themselves. Bill of Rights was penned by an archangel but tax loopholes are the work of Mammon. The same horned Beast also keeps 1% of the nation to enjoy the best fruits of other’s labor and luxuries they don’t really need but money can buy. Did I hear at some quarters the following cry, ‘Occupy the Wall Street is Un-American?’
I am afraid this life in the bubble of corporate greed is a phenomenon, which shall soon be a thing of the past. How long can man’s indifference to fellow man endure?
The euro zone has been looking to China play a role in supporting its rescue fund by investing some of its $3.2 trillion in foreign exchange reserves — the world’s largest. China cannot barge in and flash wads of money and say, ‘help yourself, folks’ So Hu Jintao has to play a subtle game. In politics a Good Samaritan has one hand extended to pick you from gutter and with the other to chain you forever play second fiddle to his whims. Morality of the parable and hard reality of politics are altogether different. When the Chines finance minister announces ‘China has always supported Europe’s response to the international financial crisis and its economic recovery efforts,” already there are fellows back in Beijing toting up for how much Europe has to pay for China’s help.
Europe can sit back and think of the adage.’Beware of the Geeks bearing gifts.’ EU member Greece has tossed its problem into the lap of Euro block and is now the crisis of eurozone. China has to make moves carefully. If Europe is bruised and cannot afford its melamine laced milk, cough syrup cereals, meat products and toys with deadly paints where would it dump all the shoddy goods? Africa is one place where it can but there is still surplus that must be got rid of. Perhaps Europe? Sure China has now made some sounds tuttutting its sympathy at Europe’s crisis. Let us watch how a nation with poor record of human rights will crack its bullwhip.
It is worthwhile to study how superpowers go out in ignominy or watch the pretensions of a nation in a hurry. China has the USA for a debtor. Now Europe. Here is a chance to score a point where Europe is bending backwards to come up with some solution.
PS. Italy Portugal,and Spain are now watching how they shall make their crisis the crisis of Eurozone.These also shall come. A global economic meltdown seems to be in the cards. Am I being pessimistic? Only time will tell.