The underlying problem in Greece and Italy is their tax systems. Both leak like a sieve. By admission almost one in three people in Italy works outside the tax system. Some say that the situation in Greece is worse. In recent interviews the "haves" in Italy are not prepared to subsidize the "have nots". This is not so much because of fairness but because so many do not pay any taxes at all. In Greece the problem is worse because of padded social programs that have to be funded out of general revenues. Soon the money runs out.
Israel faced that problem in the 1970s where the largest marginal tax rate rose to 80%. However, one in two Israelis had a second job that was "off the books". This was so endemic that the government allowed businesses to take deductions for expenses where the recipient was not on the tax roll. The problem was exacerbated by the Israeli government printing money when it ran out. This resulted in inflation at over 40% per month! The Israelis solved the problem in a characteristically innovative way. First, they changed the money. On a given day the "old" money would not purchase value. Old money exchanged for new money at a bank had to be reported and many taxpayers, formerly off the rolls, were reluctantly reinstated. Secondly, they reformed the system by lowering tax rates so that beating the system was less cost effective. Thirdly, and most important, they instituted a value added tax, or VAT. that levied tax at point of purchase. The underground economy, while never completely eradicated, was seriously reduced.
Which leads me to Greece and Italy. The VAT tax in Italy is 20% with some items being taxed at a reduced rate of between 4-10%. In Greece the proposed VAT is 23% up from 13%. The rate rise has yet to be approved by Parliament. Income tax rates range from 18% to 45% for incomes over 100,000 Euros. The problem is that very few people pay income tax. Those with government jobs are punished because their income taxes are deducted at source. Small business and small craft business pay little or no income tax. The tax situation in Italy is only marginally better.
I have posed, on many occasions, that the most efficient tax is a point of purchase tax that allows everyone below the ultimate purchaser to recover tax paid against taxes owing. For example if you charged $100 in HST and paid $50 in HST your tax liability would be only $50. The ultimate purchaser would not deduct for taxes paid. Therefore the HST (really a VAT) is paid on the highest price. Low income taxpayers can be granted rebates depending on level of income. This also causes all taxpayer to register within the system in order to reap the benefits. There is ease of collection and hiding is very difficult. Those who are more wealthy usually consume more and therefore the tax is somewhat progressive. The tax also catches foreign visitors who, in theory, can get a refund of the tax but experience has shown that these refunds are rarely claimed.
The main knock on the VAT is that it adversely effects pricing. It is true because a consumer has to pay the price out of current income. However, imagine ti increase to your take home pay if tax deductions at source were eliminated or seriously curtailed. You would have more disposable income to fund the tax at point of purchase.
In most western countries the tax legislation has gotten completely out of hand. Compliance is difficult without paid tax preparers. Simplifying the tax base is difficult because so many of the tax programs are interactive in that changing one provision affects many more provisions. Consequential changes are now tracked by computer but a reduction in complexity of one provision usually adds complexity to others. A single rate tax is no less complex because it's the tax base that is complicated not the rate. A consumption tax does not take into account the tax base because it's only the value of the goods purchased that determines the tax. There is some evidence that a comprehensive VAT at 20% could eliminate the personal (not corporate) tax in Canada.
Tax is a complicated tool. Paying tax is an implicit agreement with government that your payment will give you value. In Canada a higher personal tax rate was implicitly exchanged for a reduced cost of education and free medical services. This kind of reciprocity does not exist in Greece and barely exists in Italy. Greece has, until recently, bloated social programs that it could not fund on the existing tax base. Increasing taxes and eliminating social programs is bound to fail. Increasing taxes without some kind of social contract is like putting a bandaid on a gaping wound.
It is for this reason that outside pressure from EU countries to reform tax systems and collection is bound to fail. The pressure must come from within. This recently happened in Ireland with good results. What we need is a social reordering in Greece and Italy and that's hard to do.
Bernie.
Thursday, 10 November 2011
Wednesday, 9 November 2011
The Gay Village
Lest you think that I am homophobic, I am far from that. I worked with the gay community years before they were accepted in polite and not so polite company. The sad truth is that every last one of them is dead, a victim of HIV-AIDS.
Having said that, my post today deals with the recent decision to designate a specific area on Bank Street, in Ottawa, as a gay community. If I were gay I would be offended. Until recently gays, lesbians and trans gendered folk were segregated--if not physically, then socially--by society. Most down trodden communities are sequestered into their own communities. Jewish ghettos come to mind. Segregated areas in San Francisco come to mine. While there was a great deal of interaction between Jews and the rest of the community on a work level there was little or no interaction on a social level. Jews who wanted to leave the ghetto were almost always converted to Christianity. This is not an option for a gay, lesbian or transgendered person. The idea was that a small area on one street in Ottawa reflects the acceptance--or maybe the lack of acceptance--of gays, lesbians and transgendered people. Most of the gays that I know lead normal lives and integrate into a community that has no business in anyone's bedroom. They do not march in parades and flaunt their sexuality. They are embarrassed by it as would be any straight person who saw straight people flaunting their sexuality. I am equally uncomfortable with religious fanatics who flaunt their religiosity. But that's another story.
You see, I think that segregating gays into their own part of Ottawa, be it for trade or for places where they can feel "comfortable", sends the wrong message. I can only imagine the stress that accompanies any teen in coming out not only to his or parents but to his or her friends. No one "comes out" to his or her parents when that person has a girl or boyfriend of the opposite gender. Does one "come out" to his or her parents because they left handed? Why put this pressure on gays? The answer is that we still see gays as people who are out of the mainstream. The dedication of a small block on Bank street perpetuates the notion that gays are freaks. I'm sorry but as a straight person I am offended. Take the bloody signs down as lets treat everyone with the respect that is their due.
Bernie.
Having said that, my post today deals with the recent decision to designate a specific area on Bank Street, in Ottawa, as a gay community. If I were gay I would be offended. Until recently gays, lesbians and trans gendered folk were segregated--if not physically, then socially--by society. Most down trodden communities are sequestered into their own communities. Jewish ghettos come to mind. Segregated areas in San Francisco come to mine. While there was a great deal of interaction between Jews and the rest of the community on a work level there was little or no interaction on a social level. Jews who wanted to leave the ghetto were almost always converted to Christianity. This is not an option for a gay, lesbian or transgendered person. The idea was that a small area on one street in Ottawa reflects the acceptance--or maybe the lack of acceptance--of gays, lesbians and transgendered people. Most of the gays that I know lead normal lives and integrate into a community that has no business in anyone's bedroom. They do not march in parades and flaunt their sexuality. They are embarrassed by it as would be any straight person who saw straight people flaunting their sexuality. I am equally uncomfortable with religious fanatics who flaunt their religiosity. But that's another story.
You see, I think that segregating gays into their own part of Ottawa, be it for trade or for places where they can feel "comfortable", sends the wrong message. I can only imagine the stress that accompanies any teen in coming out not only to his or parents but to his or her friends. No one "comes out" to his or her parents when that person has a girl or boyfriend of the opposite gender. Does one "come out" to his or her parents because they left handed? Why put this pressure on gays? The answer is that we still see gays as people who are out of the mainstream. The dedication of a small block on Bank street perpetuates the notion that gays are freaks. I'm sorry but as a straight person I am offended. Take the bloody signs down as lets treat everyone with the respect that is their due.
Bernie.
Wednesday, 2 November 2011
On Pensions
I recently heard an interview by a CBC reporter with a worker who had recently gone back to work after a lengthy strike. The strike was largely about pensions and whether or not new hires would be entitled to pension benefits. The settlement approved by existing workers did not extend pension benefits to new workers.
In theory, a pension should be a zero sum contract. The company contributes, the worker contributes, benefits are insured with annuity contracts and the pensioner knows what he or she will get during retirement. The fund is usually augmented by workers who leave before pensionable age and forfeit the company’s contribution. However, this only works in theory. The employer rarely has the cash to make its portion of the contributions. They pay as they go and, largely, governments have allowed them to do this. With disastrous effect. When the company runs out of money pensioners are left high and dry. Nortel is a good example of how not to run pension programs.
Add to this the problem of longevity. 40 years back, the usual pensionable age was 65 and the average death age was about 72 to 75. Therefore, the pension account was burdened to pay the pensioner for, at best, 10 years. As people lived longer the pension accounts ran out and employers were put to augmenting the fund to pay pensioners who, in some cases, were retired longer than they had worked for the employer. The only agency that can get away with that is the government who funds retirement benefit out of current taxation. The charge on automobiles made by the “big three” that represented pension benefits was about $3,500 per auto. This made US and Canadian made autos largely either non-competitive or money losers. This problem got “solved” when GM went bankrupt (thereby cancelling all of its future pension obligations) or negotiated with the unions (Ford and Chrysler) to call off pension programs for new hires. What took its place in many contracts was a savings plan—that is the company would make payments to a savings plan and the employee would make payments to a savings plan but there was no guarantee or fixed benefit to the employee. This is what was being offered by Japanese and Korean automakers in the US and Canada and this has become the industry standard. In some other companies there is no pension benefit of whatever kind offered. Workers will have to rely on RRSPs in Canada and IRAs in the US as their main source of retirement income.
This will have profound effect on the next generation of workers. The savings rate in North America is very low. Workers have not gotten a significant wage increase—beyond inflation—for many years. Workers are falling behind and there is good evidence that even modest savings can survive the financial impact of the expenses of a growing family. That means that, other than government workers, the future looks very bleak. Take that together with people living longer and the future looks even bleaker. Giving workers the opportunity to save larger sums of money in a tax-sheltered account makes the mistaken assumption that those workers have money to save. Paying workers more for the same work makes domestic goods less affordable and exported goods less competitive.
There are political forces both in Canada and the United States that call for governments to be less involved in the affairs of the nation. Both of these are conservative movements that have the blessing of the 2% of the population that don’t have to worry about retirement. The Scandinavian countries have solved this problem—to a large extent—through high taxation in return for significant benefits over the taxpayer’s life. These include healthcare, education and, yes, retirement. A Dane or Swede can retire comfortably because he paid into the system over his or her lifetime and is now reaping the benefit. Because 100% of the electorate is funding the pension obligation those who die early, leave the country or otherwise don’t make a claim on the fund provide a cushion for those who do. It works.
There are two camps of political and social theorists. One holds that the market is pure and impartial when it judges human economic behavior thereby optimizing the most efficient course of action. While, in theory, that may be true, the other camp holds that in practice the market is severely imperfect and government intervention is needed to hedge these imperfections. At the present time the free market theorists seem to be at the helm—at least in Canada—and knocking at the door in the US. What has resulted in the US is a serious disconnect between those who have sufficient funds for retirement and those who have no way to obtain them. Add to this the fact that, in the US, the home was the major store of value. Homes in the US have fallen in value and this will contribute to a lack of capital for retirement. So, the poor will get poorer at the expense of those who don’t pay their share. Social security in the United States is in serious trouble because no one wants to increase contributions and no one wants to die young. In Canada CPP and other assistance programs provide only subsistence support. There is a need, in both countries, to look at a long term solution to these problems and there appears to be few is any politicians who will lead the way.
Bernie.
Wednesday, 26 October 2011
What Greece Really Means
It is clear from the events in Libya (where a declaration of freedom has just been proclaimed) and Tunisia (where free elections are being held--the first in living memory) that there is some kind of essntial change that is happening in the region. As stated in an earlier post there is little evidence that these fragile events will produce anything like a working democracy. But having said that, it has become apparent that the forces of the masses--peaceful in Egypt (well mostly peaceful) and Tunisia and bloody in Libya have given hope to the thousands in the region. Some, like Syria, are still a work in progress but I believe that is now a matter of time rather than of substance.
For any meaningful government to take hold there must be a social contract that is entered into between the electorate and those that represent them. There must be an open forum where policies are debated and actions taken that are consistent with the general ethos of the population. That process of trust between the population and their elected representatives may take years (in English democratic terms, almost 800 years) to develop. Too much say by a fragmented electorate leads to the kind of factionalism that is killing Israel. Too little say leads to a disconnect between the electorate and their elected leaders. New democracies don't much like transparency--the internal care and feeding of a democracy may be too much for an electorate to accept. So the fragility continues until either the electorate or their representatives win out. If the electorate gets too frisky their representatives declare that the population is ungovernable and a strongman--or woman--takes over.
And now on to Greece. For a long time there has been a disconnect between Greece's politicos and the population. It reminds me of the old Russian joke about workers who are standing around drinking vodka. When asked why they were not working they said, "They pretend that they are paying us and we pretend that we are working". In Greece the government paid for programs with money they didn't have. This gave rise to a level of expectations that kept rising until the money ran out. Now the population is left with their expectations and the politicians can only respond with harsh measures. No amount of money will fill the void. And to make matters worse, whatever money there is comes in the form of Euros given, largely by the Germans. At some point you have to admit that you are broke. Governments have defaulted on debt before and will do so in the future. Start with a new slate rather than piling up debt, the interest on which will leave Greece in penury for generations. Someone--and not the old guard--has to tell the king that he has no clothes. It might as well be now. Any course of action is likely to give rise to more civil unrest and, until the country comes to believe that it has to practice restraint and rebuild its future, no near term resolution of the problem can even begin.
The same problem exists for the United States. They are now borrowing more than 75% of GDP. For many years interest on the debt--and particularly if interest rates rise--will consume much of the working capital that the government needs to address any reasonable domestic agenda that it puts forward. Technically speaking, the US is broke. What is more, it went broke on the backs of largely middle class people. The banks were preserved. The auto companies were preserved. The people--ordinary people-- shouldered the brunt of the collapse. When citizens complain that the profits are made by business and the losses are sustained by the middle and lower classes, this is not far from the truth. The Occupy Wall Street is just the tip of the iceberg. Politicians are gridlocked--locked in their ivory tower with the inability to do anything meaningful to aid those most in need. It is shameful that 48 million Americans are on food stamps and 10 million homes--representing more than 20 million people--are in foreclosure. Those populations who were disadvantaged before the collapse are now mired in the mud. There is no social program money to be had. States and municipalities are broke. It's only a matter of time.
The OWS gang is misdirected. Banks are easy to blame. What appears more to have happened is that government is to blame. For not acting sooner. For not acting in a meaningful way when most of the economy was in distress. President Obama spent his political capital on healthcare--a worthy cause. But it should have been spent on job creation. He had a majority in both Houses of Congress and could not even get his Public Option through. The recent initiatives on mortgage financing is too little too late. The country needs a moratorium on mortgage foreclosures. An occupied house is worth more than a vacant and vandalized one. Banks should eat their losses and get help with liquidity. And let's get on with rebuilding the housing sector. These kinds of initiatives should be undertaken by a Democrat-Republican coalition where nobody takes the blame and nobody takes the credit. It won't happen. Until government is forced into some kind of action. The upcoming election makes it unlikely that such far sighted action with be undertaken. So the clock is ticking.
How it will come and from where it will come is unknown. Islam has already wrecked the American economy on 9-11. Islam could have a hand in fostering unrest in America. That was part of Bin Laden's plan. It could come from the inner cities where people without hope have little to lose. It could come from the middle classes many of whom are hopeless and living on benefits that are sure to run out. But it will come. Believe me.
Bernie.
For any meaningful government to take hold there must be a social contract that is entered into between the electorate and those that represent them. There must be an open forum where policies are debated and actions taken that are consistent with the general ethos of the population. That process of trust between the population and their elected representatives may take years (in English democratic terms, almost 800 years) to develop. Too much say by a fragmented electorate leads to the kind of factionalism that is killing Israel. Too little say leads to a disconnect between the electorate and their elected leaders. New democracies don't much like transparency--the internal care and feeding of a democracy may be too much for an electorate to accept. So the fragility continues until either the electorate or their representatives win out. If the electorate gets too frisky their representatives declare that the population is ungovernable and a strongman--or woman--takes over.
And now on to Greece. For a long time there has been a disconnect between Greece's politicos and the population. It reminds me of the old Russian joke about workers who are standing around drinking vodka. When asked why they were not working they said, "They pretend that they are paying us and we pretend that we are working". In Greece the government paid for programs with money they didn't have. This gave rise to a level of expectations that kept rising until the money ran out. Now the population is left with their expectations and the politicians can only respond with harsh measures. No amount of money will fill the void. And to make matters worse, whatever money there is comes in the form of Euros given, largely by the Germans. At some point you have to admit that you are broke. Governments have defaulted on debt before and will do so in the future. Start with a new slate rather than piling up debt, the interest on which will leave Greece in penury for generations. Someone--and not the old guard--has to tell the king that he has no clothes. It might as well be now. Any course of action is likely to give rise to more civil unrest and, until the country comes to believe that it has to practice restraint and rebuild its future, no near term resolution of the problem can even begin.
The same problem exists for the United States. They are now borrowing more than 75% of GDP. For many years interest on the debt--and particularly if interest rates rise--will consume much of the working capital that the government needs to address any reasonable domestic agenda that it puts forward. Technically speaking, the US is broke. What is more, it went broke on the backs of largely middle class people. The banks were preserved. The auto companies were preserved. The people--ordinary people-- shouldered the brunt of the collapse. When citizens complain that the profits are made by business and the losses are sustained by the middle and lower classes, this is not far from the truth. The Occupy Wall Street is just the tip of the iceberg. Politicians are gridlocked--locked in their ivory tower with the inability to do anything meaningful to aid those most in need. It is shameful that 48 million Americans are on food stamps and 10 million homes--representing more than 20 million people--are in foreclosure. Those populations who were disadvantaged before the collapse are now mired in the mud. There is no social program money to be had. States and municipalities are broke. It's only a matter of time.
The OWS gang is misdirected. Banks are easy to blame. What appears more to have happened is that government is to blame. For not acting sooner. For not acting in a meaningful way when most of the economy was in distress. President Obama spent his political capital on healthcare--a worthy cause. But it should have been spent on job creation. He had a majority in both Houses of Congress and could not even get his Public Option through. The recent initiatives on mortgage financing is too little too late. The country needs a moratorium on mortgage foreclosures. An occupied house is worth more than a vacant and vandalized one. Banks should eat their losses and get help with liquidity. And let's get on with rebuilding the housing sector. These kinds of initiatives should be undertaken by a Democrat-Republican coalition where nobody takes the blame and nobody takes the credit. It won't happen. Until government is forced into some kind of action. The upcoming election makes it unlikely that such far sighted action with be undertaken. So the clock is ticking.
How it will come and from where it will come is unknown. Islam has already wrecked the American economy on 9-11. Islam could have a hand in fostering unrest in America. That was part of Bin Laden's plan. It could come from the inner cities where people without hope have little to lose. It could come from the middle classes many of whom are hopeless and living on benefits that are sure to run out. But it will come. Believe me.
Bernie.
Friday, 21 October 2011
The Death of a Tyrant
I guess you have to live long enough. In my lifetime I have seen the death of a myriad number of tyrants. From Hitler to Gadhaffi tyrants seem to come and go with little or no long term effect on the world. It seems that we have collective memory lapses when it comes to the grand injustices. Armenians seethe about the genocide inflicted by Turks, Jews seethe about the genocide inflicted by Hitler and so it goes. I distinctly remember the hope with which the death of Nasser was received by the world. Egypt was to emerge as an exemplary democracy that was going to galvanize the region. Never happened. Sadat took over. More wars were fought. The death of Hussain in Iraq resulted in years of bloodshed giving birth to a dysfunctional government. The death of Bin Laden has had little effect on the government of Afghanistan (even if you believe that Al Qaeda and Afghanistan were separate entities). Eventually the Taliban will prevail and the country will fall into the same kind of tyranny that was there before the Nato forces arrived History has an imperfect memory and history teachers blend into the past with little to show for their efforts. Why is that?
On the one hand you can say that mankind (with apologies to my women readers) is a fundamentally fractious bunch that is territorially and clan challenged. From the very first dawn of time clans had to be cohesive in order to survive and territories had to be defended lest game and later arable land be lost to raiders. But, you would have thought that the institution of agriculture and a relatively sedentary population would have seen that aggression was wasteful of both human and emotional resources. The Bible is redolent with acts of aggression by which the Children of Israel conquered Canaan. This in the name of God. In Biblical times the Israeli clan was quite open to integration with outsiders but in recent times outside integration through intermarriage is seen as lethal to the prospects of Judaism long term. History has taught us that relatively heterogenous populations survive better than inbred ones. Interbreeding results in strength. Darwinian theory applies as much to nations as to turtles. The strength of the United States is largely the product of the best that newcomers brought to the table. England is a polyglot of aboriginals, Saxons and French. Germany is a polyglot of northern tribes that eventually overtook the more gentrified southern Europe. Hitler was highly focused on the "purity" of race in a country whose very origins were very muddied with many clans and factions.
One theme that runs through the history of tyrants is greed. Whether greed of material things or greed of territory it seems that tyrants can't seem to get enough of them. However, history should have taught these tyrants that the shroud has no pockets and "you can't take it with you". Far flung territories was the undoing of the Romans. The Greeks (even today) could not keep it together. Smaller territorial units did better but tyrants believed that if they were doing better at home, new territories were even better. They weren't.
Another theme that runs through history is the dehumanizing of the victim before his or her undoing. Every object of genocide has been dehumanized so as to make annihilation palatable to the rank and file doing the killing. Tyrants have also been known as gentle family men. Religious too. And yet orders went out to slaughter millions of Jews or Ethiopians or whoever seemed to be the flavour of the day. For Muslims to say that Jews are the devil is to dehumanize Jews so that they be destroyed. Same for the Tutsis. Same for the driver that cuts you off to whom you give the "finger". I would bet that you would never do that in polite society. The very act of bullying is one that is preceded by dehumanizing the victim. It's never Johnny but a "fag"--a nameless dehumanized form that is worthy of ill treatment in the eyes of the bully.
I have very little confidence that the African spring offensive will produce any fundamentally positive results. We in the West believe that democracies and self determinations are the hallmark of advanced societies. So did the Greeks of old. But we seem to forget that our democracies are about 900 years old and we still don't get it right most of the times. Democracies depend on the ability of a person to trust an elected official to do his and his neighbour's will. That trust is eroding in the United States and is the subject of the 99% who say politicians don't represent their needs. In fragile countries like those in the middle east trust is hard to come by. Eventually these movements peter out and a strongman emerges to put the country back together again. Tribal or religious factions emerge. The Christians in Egypt are suffering at the hands of the Muslims. The various factions of Islam can't seem to get along.
And so we are back at the beginning. Is mankind genetically encoded with fractiousness and ill will? Probably.
Bernie
On the one hand you can say that mankind (with apologies to my women readers) is a fundamentally fractious bunch that is territorially and clan challenged. From the very first dawn of time clans had to be cohesive in order to survive and territories had to be defended lest game and later arable land be lost to raiders. But, you would have thought that the institution of agriculture and a relatively sedentary population would have seen that aggression was wasteful of both human and emotional resources. The Bible is redolent with acts of aggression by which the Children of Israel conquered Canaan. This in the name of God. In Biblical times the Israeli clan was quite open to integration with outsiders but in recent times outside integration through intermarriage is seen as lethal to the prospects of Judaism long term. History has taught us that relatively heterogenous populations survive better than inbred ones. Interbreeding results in strength. Darwinian theory applies as much to nations as to turtles. The strength of the United States is largely the product of the best that newcomers brought to the table. England is a polyglot of aboriginals, Saxons and French. Germany is a polyglot of northern tribes that eventually overtook the more gentrified southern Europe. Hitler was highly focused on the "purity" of race in a country whose very origins were very muddied with many clans and factions.
One theme that runs through the history of tyrants is greed. Whether greed of material things or greed of territory it seems that tyrants can't seem to get enough of them. However, history should have taught these tyrants that the shroud has no pockets and "you can't take it with you". Far flung territories was the undoing of the Romans. The Greeks (even today) could not keep it together. Smaller territorial units did better but tyrants believed that if they were doing better at home, new territories were even better. They weren't.
Another theme that runs through history is the dehumanizing of the victim before his or her undoing. Every object of genocide has been dehumanized so as to make annihilation palatable to the rank and file doing the killing. Tyrants have also been known as gentle family men. Religious too. And yet orders went out to slaughter millions of Jews or Ethiopians or whoever seemed to be the flavour of the day. For Muslims to say that Jews are the devil is to dehumanize Jews so that they be destroyed. Same for the Tutsis. Same for the driver that cuts you off to whom you give the "finger". I would bet that you would never do that in polite society. The very act of bullying is one that is preceded by dehumanizing the victim. It's never Johnny but a "fag"--a nameless dehumanized form that is worthy of ill treatment in the eyes of the bully.
I have very little confidence that the African spring offensive will produce any fundamentally positive results. We in the West believe that democracies and self determinations are the hallmark of advanced societies. So did the Greeks of old. But we seem to forget that our democracies are about 900 years old and we still don't get it right most of the times. Democracies depend on the ability of a person to trust an elected official to do his and his neighbour's will. That trust is eroding in the United States and is the subject of the 99% who say politicians don't represent their needs. In fragile countries like those in the middle east trust is hard to come by. Eventually these movements peter out and a strongman emerges to put the country back together again. Tribal or religious factions emerge. The Christians in Egypt are suffering at the hands of the Muslims. The various factions of Islam can't seem to get along.
And so we are back at the beginning. Is mankind genetically encoded with fractiousness and ill will? Probably.
Bernie
Thursday, 13 October 2011
Something's Happening Here
In a recent column in the New York Times Thomas Friedman looks at many of the issues raised in my last post. Read his article at: http://www.nytimes.com/2011/10/12/opinion/theres-something-happening-here.html?_r=1&partner=rssnyt&emc=rss
Bernie
Bernie
Wednesday, 12 October 2011
The 99 Percent
It is fitting that the recent marches in New York and Canadian Thanksgiving should coincide. One of the things for which you can be thankful is that you don't live in the United States or some of the other countries that are experiencing genuine social action. However, there is another side to this story. I firmly believe that the March of the 99 Percent--or the have nots--is closely linked to the Arab spring. Both are examples of entitlement-whether political or social-denied. Not since the hunger marches of the dirty 30s has there been such a display of solidarity against what has become a significant imbalance in the socio-economic composition in the Western world. How did this happen?
To put these events in context the marches and civil disobedience associated with the Vietnam war were of a different character. These marches were the provence of either the hippies of the 1960s or college students. They had come to the conclusion that the government had lied to them and the "nobody over the age of 30 can be trusted". They marched and some of them died for the cause of making government more transparent. In this regard nothing has changed. The United States and in some regard Canada are fighting wars that do not advance the interests of the people at home. Government is unresponsive to its constituents and has become largely dysfunctional. Lunatic fringe parties can become operative because nobody believes that anyone in Washington will make a difference. Voting in elections is at an all time low in Ontario. Indifference is the hallmark of lost rights.
Let's go back to Margret Thatcher and Ronald Reagan. This was the beginning of "trickle down" economics that assumed that deregulation and support for the rich was a sure fire way to make the whole economy fatter. The truth was that the only ones that got fatter were the rich and the multinational corporations that were granted large tax subsidies. These conditions prevail today. Reagan's reaction to a homeless person was, "Why doesn't he get a job". The Conservative doctrine of the day was to shrink government (which never happened), reduce taxes and deregulate industries (which did happen) including the banking industries. The argument was that deregulation lead to better competition and lower prices. What happened in fact is well known: deregulation lead to an obscene and predatory chapter in economic history. And the poor got poorer.
Fast forward to the current younger generation. They were adolescents through boom times. When family income could not come up with the cash to subsidize extravagant lifestyles parents could always borrow against the pent up value of the home. Values were always going up so why worry. Unlike the the folks in the dirty 30s who were working class poor some of the the current down-and-outers are coming down from a lifestyle that was subsidized by easy money and instant gratification. When all that ends there is complete breakdown in the social structure. The marchers want jobs that are "fulfilling" and "relevant". They want to live at home until age 30+ and put off becoming a tax paying and contributing member of society. They want what they had as kids and it is unlikely that they will every return to the lifestyles of the past. Of course that is not true of all the displaced persons. Job erosion has hit all socio-economic classes. There are the hardworking folk who worked in car factories that no longer exist, in construction that has largely gone silent, and the banking system that is saddled with a raft of bad loans. They have lost their jobs and many have lost their homes. More that 48 million Americans receive food stamps. That is ore than 10% of the population.
There is no political help. Once a staunch supporter of President Obama I now have the feeling (along with many others) that he is lost; overwhelmed by events that he cannot correct. He has largely become disengaged with the House and the Senate and he sits, isolated, hoping that the Republicans field presidential candidates that are bizarre enough to insure his re-election. President Roosevelt, in similar circumstances, took the people into his confidence and offered the Americans the "New Deal". President Obama has no "New Deal". He doesn't even have an Old Deal. Instead he speaks to like minded Americans in a style that is reminiscent of electioneering or lectures his constituents in a manner that is completely unconvincing. His solution to a deadlocked Congress is to encourage write in emails. He is seen as having subsidized the banks and under assisted the common man who was saddled with a mortgage and a house that was financially "under water". His advisors appear to be policy wonks who tinker with solutions but won't tackle the root cause of the problem: jobs. Tackling the hard problems should have been undertaken early in his presidency--not know when he is virtually electioneering for re-election. Instead he took on Medicare--a problem that certainly needed fixing but not in priority to a job package. When he had both the House and the Senate he squandered his political capital. He could have gotten his tax on the rich when he had a majority. Instead he abdicated to Congress and watched, largely from the sidelines. His bad.
So, what are the marchers marching about? There is no doubt that there is a socio-economic disparity in the US as there is in many other Western countries. Nothing new there. But, in prior years, there has always been the hope that the American Dream--or the Canadian Dream or the European Dream would pay off. That pay off seems remote indeed. It is very unlikely that the present generation in Western societies will be better off then their parents. It is also likely that transfers of wealth through inheritance will suffer as many savings plans have been savaged by the stock market. Like the Egyptians and the Tunisians they want to be stakeholders. Unlike the Egyptians and the Tunisians the Americans were, formerly, stakeholders but appear to be losing their stake in unemployment and financial chaos. People who lose their stake take to the streets. People who lose their stake take up extreme positions (viz the Germans in the 1930s). It is no accident that hate crimes are on take rise.
All of this is reminiscent of the Chinese Curse: "May You Live in Interesting Times".
Bernie.
To put these events in context the marches and civil disobedience associated with the Vietnam war were of a different character. These marches were the provence of either the hippies of the 1960s or college students. They had come to the conclusion that the government had lied to them and the "nobody over the age of 30 can be trusted". They marched and some of them died for the cause of making government more transparent. In this regard nothing has changed. The United States and in some regard Canada are fighting wars that do not advance the interests of the people at home. Government is unresponsive to its constituents and has become largely dysfunctional. Lunatic fringe parties can become operative because nobody believes that anyone in Washington will make a difference. Voting in elections is at an all time low in Ontario. Indifference is the hallmark of lost rights.
Let's go back to Margret Thatcher and Ronald Reagan. This was the beginning of "trickle down" economics that assumed that deregulation and support for the rich was a sure fire way to make the whole economy fatter. The truth was that the only ones that got fatter were the rich and the multinational corporations that were granted large tax subsidies. These conditions prevail today. Reagan's reaction to a homeless person was, "Why doesn't he get a job". The Conservative doctrine of the day was to shrink government (which never happened), reduce taxes and deregulate industries (which did happen) including the banking industries. The argument was that deregulation lead to better competition and lower prices. What happened in fact is well known: deregulation lead to an obscene and predatory chapter in economic history. And the poor got poorer.
Fast forward to the current younger generation. They were adolescents through boom times. When family income could not come up with the cash to subsidize extravagant lifestyles parents could always borrow against the pent up value of the home. Values were always going up so why worry. Unlike the the folks in the dirty 30s who were working class poor some of the the current down-and-outers are coming down from a lifestyle that was subsidized by easy money and instant gratification. When all that ends there is complete breakdown in the social structure. The marchers want jobs that are "fulfilling" and "relevant". They want to live at home until age 30+ and put off becoming a tax paying and contributing member of society. They want what they had as kids and it is unlikely that they will every return to the lifestyles of the past. Of course that is not true of all the displaced persons. Job erosion has hit all socio-economic classes. There are the hardworking folk who worked in car factories that no longer exist, in construction that has largely gone silent, and the banking system that is saddled with a raft of bad loans. They have lost their jobs and many have lost their homes. More that 48 million Americans receive food stamps. That is ore than 10% of the population.
There is no political help. Once a staunch supporter of President Obama I now have the feeling (along with many others) that he is lost; overwhelmed by events that he cannot correct. He has largely become disengaged with the House and the Senate and he sits, isolated, hoping that the Republicans field presidential candidates that are bizarre enough to insure his re-election. President Roosevelt, in similar circumstances, took the people into his confidence and offered the Americans the "New Deal". President Obama has no "New Deal". He doesn't even have an Old Deal. Instead he speaks to like minded Americans in a style that is reminiscent of electioneering or lectures his constituents in a manner that is completely unconvincing. His solution to a deadlocked Congress is to encourage write in emails. He is seen as having subsidized the banks and under assisted the common man who was saddled with a mortgage and a house that was financially "under water". His advisors appear to be policy wonks who tinker with solutions but won't tackle the root cause of the problem: jobs. Tackling the hard problems should have been undertaken early in his presidency--not know when he is virtually electioneering for re-election. Instead he took on Medicare--a problem that certainly needed fixing but not in priority to a job package. When he had both the House and the Senate he squandered his political capital. He could have gotten his tax on the rich when he had a majority. Instead he abdicated to Congress and watched, largely from the sidelines. His bad.
So, what are the marchers marching about? There is no doubt that there is a socio-economic disparity in the US as there is in many other Western countries. Nothing new there. But, in prior years, there has always been the hope that the American Dream--or the Canadian Dream or the European Dream would pay off. That pay off seems remote indeed. It is very unlikely that the present generation in Western societies will be better off then their parents. It is also likely that transfers of wealth through inheritance will suffer as many savings plans have been savaged by the stock market. Like the Egyptians and the Tunisians they want to be stakeholders. Unlike the Egyptians and the Tunisians the Americans were, formerly, stakeholders but appear to be losing their stake in unemployment and financial chaos. People who lose their stake take to the streets. People who lose their stake take up extreme positions (viz the Germans in the 1930s). It is no accident that hate crimes are on take rise.
All of this is reminiscent of the Chinese Curse: "May You Live in Interesting Times".
Bernie.
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