Inequality Post author By Philip Lane Post date January 22, 2014 The WSJ has a long piece covering recent contributions to the economics literature on income and wealth inquality – here. Categories In Uncategorized 73 Comments on Inequality ← Davos → Weidmann Interview 73 replies on “Inequality” and Davos is all about it. Reminds me of a australian colleague who has a hilarious story of a black tie dinner bank high above Jakatra where poverty was on the agenda as the finest crustaceans were washed down with the best of the crop from Rheims and Chaumont Inequality is built into the system http://www.youtube.com/watch?v=cOeKidp-iWo There is no ‘what should be,’ there is only what is.” ― Lenny Bruce Niamh Hourigan in her book “Understanding Limerick” says media focus on individual cases rather than the big picture pins responsibility for poverty and dysfunction on individual scumbags rather than the system that produces the conditions in which scumbags flourish. It’s also easy to focus public anger on hate figures such as child abusers than on what’s really going on system-wise and taken for granted as “natural”. Is Grumpy around? Mo has left PIMCO http://im.ft-static.com/content/images/645383e2-82ed-11e3-9d7e-00144feab7de.pdf @Philip Lane Looking around, on this blog, methinks one may observe an increase, albeit modest, in zenophobic, stereotypical, and racist language. This is perhaps reflective of Hibernian society at large as it becomes somewhat more ‘cosmopolitan’. ‘Gurrier’ is an Irish example, specifically a Dublineze term [hence the ‘Gurrier Award’]; and the most blatant examples refer to references to Irish Travellers …. [the group that has had more ‘austerity cuts to services’ than any other group. In terms of ‘inequality’ a good piece in today’s IT from Shane O’Curry who is the director of Enar Ireland, the European Network Against Racism in Ireland. Enar Ireland manages iReport.ie, Ireland’s independent racist incident reporting mechanism on behalf of a national network of civil society organisations: http://www.irishtimes.com/news/social-affairs/language-can-so-easily-be-used-to-dehumanise-other-ethnic-groups-1.1663197 Language can so easily be used to dehumanise other ethnic groups Opinion: Now we have been upgraded economically, we might think of how we rate globally in terms of tolerance. [Let’s not have this blog recorded on http://www.iReport.ie ] from the WSJ piece [great graphic] Branko Milanovic, a former World Bank economist now with the City University of New York, says data from household surveys show that, from 1988 to 2008, real incomes of the poorest 50% in the U.S. grew just 23%. Their counterparts in the bottom 50% in Germany and Japan fared worse, the poorest Japanese seeing their real incomes fall by 2% in real terms. Meanwhile, incomes of the top 1% of Americans grew 113%, a figure that other studies suggest may be an underestimate. “National inequalities, almost everywhere except Latin America, have gone up,” Mr. Milanovic says. Globally though, the new working and middle classes of emerging economies such as China, India and Brazil have emerged as big beneficiaries of the last 20 years. The biggest losers are the world’s poorest 5%, many in Africa.” ………. As noted recently on this blog re. Germany [previous thread] – as the unemployment rate had gone down the poverty rate has gone up! With such stats ‘time’ and ‘context’ matter. “Gareth Broooks” is coming to Croker sometime in the future. This Giftgrub piece is a VERY good summary of “the Irish economy” since Gareth was last in Ireland Meanwhile back in the real world, unemployment in the UK has had a record drop, down to 7.1% now – more great news for Gideon et al. Borrowing figures also very encouraging. http://www.telegraph.co.uk/finance/economics/10589052/UK-unemployment-drops-to-7.1pc.html With migration a sub-theme of that WSJ article, it might also be worth linking to Paul Collier — http://www.nytimes.com/2013/11/30/opinion/migration-hurts-the-homeland.html @ JF Also in the real world. http://www.ft.com/intl/cms/s/0/68cbcb64-834c-11e3-aa65-00144feab7de.html#axzz2qyD1tDai http://blogs.wsj.com/brussels/2014/01/21/as-banking-union-stalls-schauble-makes-flying-visit-to-brussels/?mod=WSJBlog I can’t read this piece as it is gated, but my guess is that it refers to the recent work by the likes of Thomas Piketty and Emmanuel Saez. Piketty has written a mammoth volume on this, the English version of which is due out in March. However, you can get a good idea of what is in it via this review by Branko Milanovich http://mpra.ub.uni-muenchen.de/52384/ . Speaking of the ‘real world’ http://www.irishtimes.com/news/politics/the-state-should-not-abdicate-its-duty-to-care-for-our-citizens-to-charities-1.1663212 @David Madden Ta. @David Madden Pop title into google; pop in the back door. “Everyone but an idiot knows that the lower classes must be kept poor or they will never be industrious,” Arthur Young (1741-1820). “A house may be large or small; as long as the neighbouring houses are likewise small, it satisfies all social requirement for a residence. But let there arise next to the little house a palace, and the little house shrinks to a hut,” Karl Marx (1818-1883). There will always be relative inequality but absolute inequality has grown in recent decades. The labour share, or the share of labour compensation (wage, salaries and benefits) in the total national income, has been declining in almost all OECD countries. The median labour share dropped to 61.7% in the late 2000s, from 66.1% in the early 1990s and in some countries this decline began over 30 years ago. The OECD says that on average, the wage income share of the top 1% of income earners increased by 20% in the countries for which data are available over the past two decades. By contrast, despite rising employment at the bottom end of the skill ladder, the wage share of the lowest educated slumped. This suggests that the position of certain workers, notably the least educated, in the income distribution worsened over the period. This trend where real median household income in the US in 2012 was below the 1989 level, will trigger a reaction, as it did in the US in the early years of the last century. What should be viewed as remarkable is the current international coalition against aggressive tax avoidance and Australia holding the presidency of the G-20, with a new conservative government, has put its weight behind efforts to tackle the issue. The modern robber barons will not always be in the driving seat. Data out today shows that 300 listed private non-financial global firms have cash on hand of about $2.8tn while the top 5 are tech companies and have $338bn with Apple in the lead. Apple’s foreign revenues are at about 60% of the total and its foreign tax is 2%. @Michael Per JPM as reported in the FT there is 11tn hanging around in cash in the States waiting to join the Great Rotation. Like whenever that happens. Presumably the top 0.01% will take their usual share of dumb money but at some stage surely Dick and Jane will join the dots. @ All Some pertinent extracts. “Branko Milanovic, a former World Bank economist now with the City University of New York, says data from household surveys show that, from 1988 to 2008, real incomes of the poorest 50% in the U.S. grew just 23%. Their counterparts in the bottom 50% in Germany and Japan fared worse, the poorest Japanese seeing their real incomes fall by 2% in real terms. Meanwhile, incomes of the top 1% of Americans grew 113%, a figure that other studies suggest may be an underestimate. “National inequalities, almost everywhere except Latin America, have gone up,” Mr. Milanovic says.” And Piketty’s view! “But he believes policy makers will sooner or later be forced to address the issue of wealth concentration, probably through the taxation of the richest. That would be very divisive politically, but to be effective it would also require an unprecedented amount of international cooperation to stop capital flight to the lowest tax destinations. By advocating taxation, he’s says he’s not pursuing an egalitarian society. Such taxation may be necessary, he says, to ensure there is broad access to wealth in order for “a modern democracy to work.” “This is a fragile state of affairs. If you take the trend of the past decade or so and continue it for 20 and 30 years from now, it’s a bit frightening,” he says. There is what Mr. Milanovic, the former World Bank economist, calls a “soft spot” in Mr. Piketty’s vision: the assumption that returns on capital will continue to exceed economic growth over long periods. But Mr. Piketty argues there is no evidence in history or in economic theory—except as outlined by Karl Marx —that suggests returns on capital will fall to zero over time.” Such a view of the action to be taken is Utopian and effectively “drowns the fish”, as the French say, by pulling its head out of a sea of debate which distracts attention from what democratically elected governments must do i.e. see that the national cake for which they are responsible is more equitably divided, including taking action to curb the access of tax exiles to any identification with the country whose taxes they have fled. However, it constitutes an ideal approach for Davos! @ MH The score of inter-governmental cooperation in relation to aligning societal behaviour at a national level to an international norm is, to all intents and purposes, zero. This suggests that there is something inherent in the method that leads to that result, the most likely reason being the requirement to decide by consensus i.e. giving each individual participating country a veto. The only exception in terms of international organisations is the EU through the decision-making procedures in its constituent institutions. The member states were careful, however, to ensure in the founding treaties that they signed up to that in matters of taxation, unanimity should remain the rule. @ MH cf. the legal attempt by the UK to give itself the required veto on intervention in the financial markets by an EU body and the decision by the ECJ. http://curia.europa.eu/jcms/upload/docs/application/pdf/2014-01/cp140007en.pdf Interesting times. Big potential change coming in the markets. Equities ahead c. 15pc in 1HJan…..all large funds winning…..Big re-think has begun among the major institutional investors and funds, certainly here in NY. The talk has now turned to the need /not to hedge, etc…..Very VERY different to the last months of 2013. Capital Allocation……definitely the new theme. If there is a stampede for protection, watch out! IMF warnings recently about EM capital outflows is only the tip of the iceberg. There is a building ‘thought leadership” momentum building…..happening among senior individuals at present. Globalisation will end in a bang not a whimper. It will take economic collapse a la 1929 or war a la 1914. But it will end I am firmly convinced. The Italian civil war 1943-45 is covered in a snap shot in the movie La Notte di San Lorenzo. The couple of weeks between German withdrawal and Allied advance is covered. Of particular note is the civilian predicament and the Italian National Socialist Army (in black). The 15 yr old youngster running around with a gun is much like what happened during our own civil war. Also known as The Night of the Shooting Stars, sub titled from the usual places. The Italians do very good human interest movies. Our sister organisation in the UK, Positive Money, has a great section on the systemic inevitability of extreme inequality on their website at: http://www.positivemoney.org/issues/inequality/ The gist of it being that huge amounts of interest are owed on all the temporary money which the banks create when they advance loans. This constantly redistributes money towards the financial sector and away from the real economy. From George’s miracle economy (rated very efficient by McAdoo consulting) http://www.cashgenerator.co.uk/about-cash-generator Cash for gold, pawnbroking,buyback, western Union, cheque cashing About Cash Generator Quite simply, Cash Generator is a buy, sell and loan discount retailer. Established in 1994, we sell quality, top brand, pre-owned, graded and new products at affordable prices. We also offer great deals on pre-owned products from customers that simply have no need for the product anymore, or who wish to raise cash quickly. Regarded by many as the high street equivalent to the globally successful brand eBay, we offer a straightforward bricks and mortar business and are committed to delivering deals that are fair, simple and transparent. With more than 220 stores throughout the UK, we are a household name on the High Street. With the addition of our retail website we provide customers access to tens of thousands of bargains that include new and pre-owned branded products. Most products that are available in-store can now be purchased online including second hand laptops, cameras, mobile phones and televisions. We accept most credit and debit cards as methods of payment via our secure payment gateway. All products are covered by our service policy so you can shop with complete peace of mind of a fair deal guaranteed. If you do have any problems, we’ll find a remedy for you. If you need instant cash you can also sell to us, we’ll offer you great deals on your unwanted goods, we also give you the option to buy back your goods within 28 days. We aim to be your first choice when selling your unwanted items and offer hassle free instant cash at our in-store buying departments. If you are short of cash, we also offer a wide range of reliable, easy financial services guaranteed to get you money the same day both in-store and online. All our loans are backed by our fair deal charter to ensure fair and transparent deals on all our financial services and make sure they’re simple to understand with no hidden surprises. No matter how successful Cash Generator has become, we’re not about to put our feet up and rest on our laurels – far from it. We have a large number of store openings, both corporate and franchise, planned for 2013. The future of Cash Generator is very exciting indeed. I cant access that article, so maybe it mentions it, but Thomas Pickettys is pretty interesting on this http://ideas.repec.org/e/ppi17.html http://equitablegrowth.org/blog Oh… http://www.imf.org/external/pubs/ft/weo/2014/update/01/pdf/infographic.pdf The current protests by housing activists in San Francisco against ‘luxury’ buses fitted with Wi-Fi and A/C that are used to ferry the perceived ‘tech elite’ to jobs in places like Google and Apple, is an example of what could be ahead but fears of a world war is being a bit alarmist. In Silicon Valley itself, as manufacturing jobs were outsourced overseas, the ratio of white and Asian males in tech firms grew. Joseph Nye says: “Today’s world is different from the world of 1914 in several important ways. One is that nuclear weapons give political leaders the equivalent of a crystal ball that shows what their world would look like after escalation. Perhaps if the Emperor, the Kaiser, and the Czar had had a crystal ball showing their empires destroyed and their thrones lost in 1918, they would have been more prudent in 1914. Certainly, the crystal-ball effect had a strong influence on US and Soviet leaders during the Cuban missile crisis. It would likely have a similar influence on US and Chinese leaders today.” @ DOCM The WTO system has worked reasonably well during the crisis even though countries introduced some protections. The European Commission hasn’t got a direct role in the development of new international tax rules, for obvious reasons. The snout that’s in the trough stays in the trough, seems to be the Irish motto, in relation to inequality. I would not be looking to the Irish government or Irish State to make anything other than token noises about inequality. In recent years, as evidenced by Irish Water and the CRC, we have State / State quango retirees getting bonanza payouts and then moving seamlessly on to the next quango. The snout that’s in the trough stays in the trough. @ MH I referred to “inter-governmental cooperation in relation to aligning societal behaviour at a national level to an international norm”. Reciprocal trade agreements, and the resolution of disputes mechanisms associated with them, do not qualify under this definition. There are thousands of bilateral reciprocal tax agreements but they do not seem to have made any major impact on the problem of tax avoidance/evasion. The reality is that, in matters of taxation, inter-governmental agreements lack the means to become effective. “There are thousands of bilateral reciprocal tax agreements but they do not seem to have made any major impact on the problem of tax avoidance/evasion” Tax avoidance is a beggar my neighbor phenomenon, DOCM. Apple can play Ireland off against France, for example. Vodafone courted chief UK tax wallah Dave Harnett for years , with a little help from the Big 4 accounting firms. If you have enough money they’ll make you a bespoke tax structure. The argument is they’ll go somewhere else if Governments don’t comply. They had the usual spin in the FT just before Chstistmas . http://www.ft.com/cms/s/0/4dbb27cc-63fb-11e3-b70d-00144feabdc0.html “The telecoms company targeted by protesters at the start of the public backlash against tax avoidance has said businesses must open up their affairs to more public scrutiny. John Connors, group tax director of Vodafone, said “responsible” businesses had nothing to fear from revealing more information about their payments. He said: “Ultimately, it will be in the public domain whether by accident or design.” High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email firstname.lastname@example.org to buy additional rights. http://www.ft.com/cms/s/0/4dbb27cc-63fb-11e3-b70d-00144feabdc0.html#ixzz2rD9RigxQ Businesses have fought against demands for mandatory public disclosure, arguing that the information would be misused by their critics. The CBI business lobby has opposed publication of country-by-country profits and tax, on the grounds that “rather than improving transparency it risks reducing public understanding of the tax debate by swamping people in highly complex data with no context”. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email email@example.com to buy additional rights. http://www.ft.com/cms/s/0/4dbb27cc-63fb-11e3-b70d-00144feabdc0.html#ixzz2rD9ZnSSZ Vodafone said it had opted for a “proactive approach” to address misunderstandings and enhance its reputation.It has set out its side of the argument concerning its dispute with the Indian tax authority, its controversial 2010 settlement with HM Revenue & Customs and its role in lobbying governments over tax policy. Mr Connors said critics should take heed of the information. “Let’s have a more reasoned and informed debate.” It’s laughable Private Eye no 1357 notes that “the Eye’s favourite tax dodger likes to lump together all those taxes that are hard to avoid – national insurance contributions on pay, for example- and then claim huge credit for paying them…. Loans of 427bn to the group’s US operations (soon to be sold) at interest of around 9% transfer 42.4 bn a year of group profits into the Luxembourg company (Vodafone Luxembourg SARL in the Grand Duchy where it doesn’t sell a single phone) Once the 27bn has been parked in a cubby hole passing for a finance branch in Bern, CH, for a few days to dodge Luxembourg wealth tax, the company is left with an annual tax bill of around 0.01%. This makes Vodafonew Luxembourg SARL the groups’ most profitable single company by a mile. When an Eye hack posed as a financial journalist and rang the Lux office last yea asking to speak to somebody representing this impressive undertaking, a man whose Linked In CV shows him to be a lowly “assistant company secretary” at an entirely different Luxembourg company answered “Yes, well, that could be me actually before laughing nervously and refusing to say any more” . Voila “In response to political scandal and public outrage, official Washington repeatedly uses the same well-worn tactic. It is the one that has been hauled out over decades in response to many of America’s most significant political scandals. Predictably, it is the same one that shaped President Obama’s much-heralded Friday speech to announce his proposals for “reforming” the National Security Agency in the wake of seven months of intense worldwide controversy. The crux of this tactic is that US political leaders pretend to validate and even channel public anger by acknowledging that there are “serious questions that have been raised”. They vow changes to fix the system and ensure these problems never happen again. And they then set out, with their actions, to do exactly the opposite: to make the system prettier and more politically palatable with empty, cosmetic “reforms” so as to placate public anger while leaving the system fundamentally unchanged, even more immune than before to serious challenge.” Same crap everywhere. 1. “There are thousands of bilateral reciprocal tax agreements but they do not seem to have made any major impact on the problem of tax avoidance/evasion” Tax avoidance is a beggar my neighbor phenomenon, DOCM. Apple can play Ireland off against France, for example. Vodafone courted chief UK tax wallah Dave Harnett for years , with a little help from the Big 4 accounting firms. If you have enough money they’ll make you a bespoke tax structure. The argument is they’ll go somewhere else if Governments don’t comply. They had the usual spin in the FT just before Chstistmas http://www.ft.com/cms/s/0/4dbb27cc-63fb-11e3-b70d-00144feabdc0.html “The telecoms company targeted by protesters at the start of the public backlash against tax avoidance has said businesses must open up their affairs to more public scrutiny. John Connors, group tax director of Vodafone, said “responsible” businesses had nothing to fear from revealing more information about their payments. He said: “Ultimately, it will be in the public domain whether by accident or design. Businesses have fought against demands for mandatory public disclosure, arguing that the information would be misused by their critics. The CBI business lobby has opposed publication of country-by-country profits and tax, on the grounds that “rather than improving transparency it risks reducing public understanding of the tax debate by swamping people in highly complex data with no context”. Vodafone said it had opted for a “proactive approach” to address misunderstandings and enhance its reputation.It has set out its side of the argument concerning its dispute with the Indian tax authority, its controversial 2010 settlement with HM Revenue & Customs and its role in lobbying governments over tax policy. Mr Connors said critics should take heed of the information. “Let’s have a more reasoned and informed debate.”” It’s laughable Private Eye no 1357 notes that “the Eye’s favourite tax dodger likes to lump together all those taxes that are hard to avoid – national insurance contributions on pay, for example- and then claim huge credit for paying them…. Loans of 427bn to the group’s US operations (soon to be sold) at interest of around 9% transfer 42.4 bn a year of group profits into the Luxembourg company (Vodafone Luxembourg SARL in the Grand Duchy where it doesn’t sell a single phone) Once the 27bn has been parked in a cubby hole passing for a finance branch in Bern, CH, for a few days to dodge Luxembourg wealth tax, the company is left with an annual tax bill of around 0.01%. This makes Vodafonew Luxembourg SARL the groups’ most profitable single company by a mile. When an Eye hack posed as a financial journalist and rang the Lux office last yea asking to speak to somebody representing this impressive undertaking, a man whose Linked In CV shows him to be a lowly “assistant company secretary” at an entirely different Luxembourg company answered “Yes, well, that could be me actually before laughing nervously and refusing to say any more” . Voila “In response to political scandal and public outrage, official Washington repeatedly uses the same well-worn tactic. It is the one that has been hauled out over decades in response to many of America’s most significant political scandals. Predictably, it is the same one that shaped President Obama’s much-heralded Friday speech to announce his proposals for “reforming” the National Security Agency in the wake of seven months of intense worldwide controversy. The crux of this tactic is that US political leaders pretend to validate and even channel public anger by acknowledging that there are “serious questions that have been raised”. They vow changes to fix the system and ensure these problems never happen again. And they then set out, with their actions, to do exactly the opposite: to make the system prettier and more politically palatable with empty, cosmetic “reforms” so as to placate public anger while leaving the system fundamentally unchanged, even more immune than before to serious challenge.” Same power logic everywhere. @ Seafóid Indeed! But in some instances, the EU being the most notable one, there is an institutional structure which allows “power logic” to be directed towards achieving a result. On Vodafone- tax avoidance is existential for some of these behemoths because they are not really going anywhere – they have to cannibalise functioning parts of the real economy to generate growth – and they still are way off where they were in 1999 …. http://uk.finance.yahoo.com/echarts?s=VOD.L#symbol=vod.l;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; Same goes for the Big 4 – they’ll do anything to generate fee income @ DOCM It was the UK, France and Germany who pushed G-20 finance ministers in early 2013 to put corporate tax avoidance on the group’s agenda. The OECD, which has been involved with international tax issues for decades was asked to propose changes in existing rules. It was a good move to get the 19 leading developed and emerging economies of the world involved. As EU members have divergent interests, what would be the point of trying to agree on a common position absent a framework? Most EU members are in the OECD, which enables them to lobby if they wish. Individual EU countries will implement proposals that are likely to be informally agreed without invoking the threat of a veto. from the Milanovich review linked above by David Madden: a few illustrative snippets – “Piketty’s unstated objective is nothing less than the unification of the theory of economic growth with the theories of functional and personal income distributions, and thus a quasi complete description of the functioning of a capitalist economy. […] Capital, as the title suggests, is at the center of the book. […] this 950-pages long book is accompanied by an enormous online technical annex ( http://piketty.pse.ens.fr/fr/capital21c ) which contains all the underlying data used in the book, tables, graphs, references and the summary of the essential points. […] Like Ricardo, Malthus and Marx, Piketty builds a simple “machine” which encapsulates the key features of a capitalist economy. […] The Thatcher-Reagan revolution was driven, Piketty writes (Chapter 2, p. 164), by the factually correct idea that the US (and to a lesser extent UK) preeminence was being eroded. But this fact was wrongly interpreted as being due to the bloated welfare state rather than to the general catch-up of the war-ravaged capitalist economies of Europe. In other words, the Thatcher-Reagan revolution changed capitalism but failed to raise the rate of growth which was its ostensible motivation in the first place. […] Note that long-term growth is given exogenously by the technological progress and population growth. The problem is that this new rate g is low and will inevitably be less than the rate of return to capital. It is the distributional effects of the latter (that is, of the r>g inequality) which are deleterious for the society as a whole: they favor property-owners over labor, not working over working, make mockery of equal opportunity and meritocracy, and undermine democracy as the rich use their money to buy policies they like. […] He does not think that the marginal product of bankers and top managers can be determined with any certainty: their high wages are the product of a collusive agreement between themselves and the boards (Chapter 9). […] In a nutshell, societies where the K/Y ratio is high, and the rate of return on capital exceeds the rate of growth of the economy, will always tend to convert entrepreneurs into “rentiers.” In such societies “the idea that free competition will put an end to a heritage-dominated society and will lead to an ever more meritocratic world is a dangerous illusion” (Chapter 11, p. 675). Read on: http://www.irisheconomy.ie/index.php/2014/01/22/inequality/#comments Note: this is a ‘working’ review. @Kevin O’Rourke Any comment? Piketty says it clearly (Chapter 9, p. 533): “lowering of top tax rates leads to an explosion of high salaries which in turn increases political influence—through funding of political parties, pressure groups and think tanks—of the social group that has most interest in maintaining such low rates.” Quite! Useful Idiots anyone? Look around. who let Robin Hood out,lots mobility among the 1%:) h/t wonkblog. https://publications.credit-suisse.com/tasks/render/file/?fileID=BCDB1364-A105-0560-1332EC9100FF5C83 fyi the International Labour Organization (ILO) have just released their much anticipated report “Global Employment Trends 2014”. The report calls for a switch to more employment-friendly policies and an improvement in labour incomes to boost economic growth and job creation. Despite a weak economic recovery, labour markets continued to stall last year as the global number of unemployed reached 202 million. Corporate profits are up and equity markets are looking strong, but that hasn’t translated into better long-term employment prospects. http://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/documents/publication/wcms_233953.pdf [h/t Social Europe Journal] @Barney Curley Nice one! @John Gallaher Following an EGM, and in the spirit of global cosmopolitanism, both your good self and Prudent Hans are due a bonus: Enjoy the “joint” ‘Gurrier of the Month Award’ with ‘Fig Leaf’. Keep up the good work! @ MH I will believe it when I see it! I am not in any way denying the fact that the OECD has “been involved with international tax issues for decades” but that this involvement has been largely ineffectual because of the inter-governmental nature of the organisation. (This is what the EU would have amounted to had it gone down the same road). Ah I didnt notice David Madden had mentioned Pikettys book. Thanks for the link to Milanovic’s article. Interesting stuff some good links,the buke is out in early March stateside,interview too. http://www.hup.harvard.edu/catalog.php?isbn=9780674430006 income inequality has gone ‘mainstream’ with the POTUS giving a speech before xmas on it,pope too,the state of the union is Tuesday its gonna be a major part off it,only solution proposed appears to be increase the min. wage,but thats a whole other thread… some Pew research. http://www.people-press.org/2014/01/23/most-see-inequality-growing-but-partisans-differ-over-solutions/ This Economist blog post makes the point that I made earlier; dealing with inequality is a national issue first and foremost. http://www.economist.com/blogs/freeexchange/2014/01/inequality-0 If the cake is bigger, dividing it up fairly is,, it seems not necessarily easier. However, if it is getting smaller, one would imagine that the task is even harder. France is increasingly emerging clearly as the laggard in this respect. http://uk.reuters.com/article/2014/01/23/uk-poll-euro-zone-pmi-idUKBREA0M0GD20140123 @DOCM re: http://uk.reuters.com/article/2014/01/23/uk-poll-euro-zone-pmi-idUKBREA0M0GD20140123 That poll does not reflect what is happening in construction related business in Ireland right now. Anecdotal evidence suggests that January has been very slow, and that after a definite uplift in the final quarter of 2013, business has flattened back to levels of January 2012 or January 2011. Part of the uneven economic activity seems to be that govt departments and local government tighten the purse strings early in the year and then spend like hell towards the end of the year, fearing that if they don’t spend the full allocation, they will get a lesser amount the following year. It could be too that the many well off recent retirees, often on the public purse, decamp the country during the miserable month of January, and confer the benefits of the State largesse to other jurisdictions. It is early days. @ Joseph Ryan Indeed! Philip Stephens has a brilliant analysis of the feet of clay of both Hollande and Cameron, squabbling while Germany outflanks them both. http://www.ft.com/intl/cms/s/0/53b1fadc-82ac-11e3-9d7e-00144feab7de.html?siteedition=intl#axzz2qyD1tDai @Joseph Ryan Interesting. I’m hearing the same thing about retail. It’s almost like there is a seasonal effect involved. DOCM Says: “This Economist blog post makes the point that I made earlier; dealing with inequality is a national issue first and foremost.” Tax Avoidance is an international issue. DOCM Beggar my neighbor always is. http://lexpansion.lexpress.fr/entreprise/mcdo-dans-le-viseur-du-fisc-francais-pour-une-evasion-de-2-2-milliards-d-euros_424781.html @ seafóid You are missing the point that I am trying to make but JG with his link confirms it i.e. there is clearly an international dimension to tax evasion/avoidance but dealing with the consequences, as matters stand, is a national responsibility. The only exception is the EU because the issue is folded, to some extent, into the possibility of a shared supranational action i.e. in a federal sense. Even in that context – the two best examples being the CCCTB and the FTT – progress has been minimal because “unanimity rules OK”. Inequality – of which tax evasion/avoidance is but an aspect – and its consequences can only be dealt with at the level where political responsibility currently lies; the nation state. For the rest, the billionaire’s club in Davos can blather about the issue and predict the end of poverty. @David O’Donnell “re: @Barney Curley Nice one!” Not really, David. The people who were ‘done’ here were not only only the bookies, but the innocents who turned up at the races and had a few quid on a horse, believing that the sport was not fully crooked. But of course it is crooked. As crooked as bedamned. We had a ‘coup’ here a few years ago, when a ‘well-known’ person ran a neverwasser in Kilbeggan. I doubt the Irish Racing Board ever held an investigation as to why a neverwasser suddenly cantered to victory. http://www.westmeathexaminer.ie/news/aroundthecounty/articles/2010/06/30/3998194-the-kilbeggan-gambling-coup/ Look up Phoenix mag for a little more recent detail. And a very successful horse called Final Approach. These people are the last thing the industry needs. The bookies would be stupid to pay out and every punter that went to those races should look for a refund, or simply stop going to the races. Im not sure what the Barney Curley reference is, but from my stint with the horses back in the day it was well known the smaller races.. can I continue this and not fear legal consequences ? I know I could google it, and did. Any way come on, why feel sorry for the punter? someone won , someone else didnt. Thats the way it always is. It probably evens out in terms of total happiness gained/lost Anybody who attends these low level race meetings with the intention of making money by betting needs their head examined. It is the sort of activity that only consenting adults should engage in. Fair play to Barney, if it was him, for showing an old fashioned coup can still be pulled off in this high tec age. Getting the 4 broken down nags to the start was some training feat, getting them all to win was little short of a miracle. I believe the late Joe Coral was an Auxiliary and he is supposed to have told MVOB after some coup in the 1950s that he should have shot him when he had a chance in 1920. You gotta love turf accountants. Spanish royalty in the cross hairs. The Spaniards are starting at the top. http://www.nytimes.com/2014/01/23/opinion/the-king-and-the-elephant.html?_r=0 Argentine Peso collapses on both the official and black markets. Do we really want to leave the EZ? economia.elpais.com/economia/2014/01/23/actualidad/1390499979_171497.html Cristina Fernandez Kirchner “Isolated and Angry” . 18 to 24 yr olds not working, not studying get approx Euro 60 per month, a desperation move no doubt. http://www.clarin.com/politica/Gobierno-hablan-Cristina-aisladay-enojada_0_1071492858.html Clarin is right of centre and privately owned. Also very careful as criticizing the Argentine gov’t is not risk free. The pew research-link above-was discussed on NPR. http://www.npr.org/2014/01/23/265358297/what-do-americans-think-about-income-inequality Al Jazeera America,has some outstanding work,great opinion piece at the news/opinion area by. “David Cay Johnston, an investigative reporter who won a Pulitzer Prize while at The New York Times, is a best-selling author who teaches the business, tax and property law of the ancient world at Syracuse University College of Law.” “Inequality may spark unrest, Davos elites worry” http://america.aljazeera.com/watch/shows/real-money-with-alivelshi/2014/1/narrowing-the-gap.html @ DOCM I guess the view from the Swiss finance ministry is not as sanguine on the immutability of international tax regimes. It’s certainly a scary time for 300 private banks and at a personal level for bankers when a former senior official of Switzerland’s biggest bank arrives in Bologna for a weekend with his wife but spends a month in an Italian police cell, followed by an appearance in a prison jumpsuit in Florida: http://www.businessinsider.com/raoul-weil-case-update-2014-1 Images of the fate of another banker in ‘The Shawshank Redemption’ must be a little sobering. On the corporate side, it’s at least a teeny-weeny advance when the conservative prime minister of Australia and the socialist president of France are saying similar things on international tax avoidance. Michael Taft in the ‘Irish Left Review’ ‘The Inexorable Rise of the Wealthy Class’ http://www.irishleftreview.org/author/michael-taft/ Nobody wants to hear about that, Gavin. They know apodictically that anything said or published by a lefty (and a trade unionist!) is of no consequence and can only be motivated by begrudgery. Race to the Bottom and/or Bust! @Ernie Ball,did Michael write an autobiography ? @Gavin,so 125,000 puts you in the top 10% in Irl,makes a nice ceiling for oh say trade union officials,charity workers,public sector…. @ jg: “Inequality may spark unrest, Davos elites worry” Of course they don’t “worry”. Their world is so wonderful! It abides! Look at all those nice cops keeping their streets clear of litter – and such-like. So we have TWO economics sites! This one, and that ‘other’ one. And that’s good? Its truly pathetic. Ok, so economics is actually Political Economy. Fair enough. But the historical concept of socialist v conservative politics is like the Dodo: a stuffed artifact in a taxidermist’s display cabinet. The ‘Right’ saw the light, grabbed it and have exited stage ‘Left’! Brilliant? No, the Left simply lay down and are now being pi**ed on. But then its psychologically more satisfying to be able to displace (externalize) the cause of your own situation. Duh! I ceased visiting that ‘other’ site when one of the contributors allowed as how ‘Left statistics’ was correct, whereas ‘Right statistics’ was incorrect. Un-believable. You could hardly make it up. john, Ernie: Its the ‘ball’! The ball! @BWSnr,morning Brian keep an eye on Argentina and Puerto Rico,the links provided above are hardly right wing propaganda,NPR,Al Jaz,Pew,Brad Delong.. Snooped around looking for Michaels wedge,no luck appears hard to find,anyone got a link or skinny bet he’s in the top 10%… Brian,Ernie can’t be bothered reading the links he’s already made his mind up,oh the AMG comes after Merc,as in I’m driving a Merc..AMG not other way.I should know its one the cars i drive:) So come on Ernie let’s be having you it’s only a buck and a quarter to be in the top 10% bet you well clear that … Myself,top 1% emigrated with a student loan,lots upward mobility stateside. http://america.aljazeera.com/opinions/2014/1/davos-inequalityeconomicsinstability.html @ jg: Ta for the link. I will get to it – sometime. I have a pile of reading across the desk – and that is before I attempt to get my ‘writing’ (or should that be scribbling?) into order. Nice ‘wet’ day outside. But that’s the easy bit. My eldest grandson is pestering me to buy him a pair of Jordan’s Best NIKE basketball boots! His teenage subbie for a motor. He did mention that he was seriously considering a Bentley Continental Coupe! I kid you not! Dreams are good! What’s with this Argi thing? That sounds a bit ominous. Keep an eye on Gold: the metal, not the paper. Premiums for former. Latter is to wipe arse with. @BWSnr,oh no not the Jordan’s they out date,driving the Bentley is like have a yacht on land,too cumbersome,the youth of today:) Yep,few dollars heading out off Argi,lifted capital controls last night or first thing.Did notice gold futures yesterday,could be fun today just heading in. http://m.bbc.co.uk/news/business-25877391 “It follows that people who have access to capital will see their incomes increase at a faster rate than people whose incomes depend on the growth of the economy—the average working Joe. Income and wealth will therefore over time become more concentrated.” But that’s why we have taxes, to counter this natural tending towards monopoly. It is why it is imperative that those with more wealth and income should be taxed more not just in absolute but % terms. It is also why this new flat tax movement that seems to be developing in this country needs to be nipped in the bud. Maybe some of them don’t realise it (though I suspect most do) but what they are suggesting is just plain evil. The best books on this topic are The Spirit level and ‘The price of inequality’ by Joe Stiglitz. This is not complicated. As Warren Buffet puts it “There is a class was going on and my class are winning” I would be happy to wager that the vast majority of people in Ireland that have experienced wage growth in the last 5 years were already in the top quartile for earnings. We are heading full steam ahead towards the American, winners and losers, accompanied by destruction of social solidarity model and no body is saying stop. @ john gallaher Let he who has not sinned, cast the first stone! The moral of the story of private and public excess including dodgy accounting to conceal top-ups, is that people who are in a position grab big slices of the cake do so irrespective of their capacity. The Irish Times reported in 2009: Seven out of the 16 trade unions contacted refused to disclose the pay levels of their general secretaries. John Carr of the INTO has a salary of €172,000 while Peter McLoone of Impact has a salary of €171,313. Impact salaries are linked to public sector grades and Mr McLoone’s salary is the equivalent of that of the Cork County Manager. The INTO has 35,000 members. Impact has 65,000 members, about half of whom are in the health sector, and a third in local government. The general secretary of the Irish Congress of Trade Unions, David Begg, has a salary of €137,400. He earns an additional €27,700 from his work as a director of the Central Bank and as a Governor of the Irish Times trust. This work is done in his personal capacity, a spokesman said. The general secretary of the Association of Secondary Teachers in Ireland, John White, has a salary of €144,000 while the general secretary of the Teachers’ Union of Ireland, Peter MacMenamin, is paid according to a grade system linked to Civil Service grades that sets his salary at between €131,748 and €150,712. The unions have 18,400 and 15,000 members respectively. Jack O’Connor of Siptu was earning €125,000. Ibec/ Danny McCoy refused to disclose his salary – the culture of secrecy is not easily changed. @Michael Hennigan,thanks Michael the mickey d’s tax investigation in france will have implications:) oh look a small little island with too much debt and a funky tax strategy….. “Puerto Rico’s modern growth began in the mid-1970s. As the island struggled with soaring oil prices and high unemployment, the US Congress decided to throw its territory a lifeline. It granted a special status that allowed American companies to expand their manufacturing operations on the island without being taxed on the profits earned there. The plan worked: manufacturers flocked to Puerto Rico. By the 1980s it had become a hub for pharmaceutical companies, including Schering-Plough, Abbott Laboratories, Eli Lilly, Merck, Pfizer, and Johnson & Johnson. Thousands of jobs were created. But by 2006 the incentives were phased out. Some companies scaled back. And while many multinationals have stayed, the end of the tax breaks made Puerto Rico less competitive – a situation not helped by rising costs such as water and electricity. The financial crisis in the US only added more pressure, sending the territory into recession as unemployment climbed and debt ballooned.” http://www.ft.com/intl/cms/s/0/cefd9c14-834c-11e3-86c9-00144feab7de.html#axzz2rKEnbyio Multi’s do not ‘AVOID’ tax – they ‘EVADE’ tax…tax haven inflows bear witness… Stephen King’s novel ‘The Stand’ is an apt allegory for the ‘flowing upwards’ version of capitalism now dominant…. Wonder did anyone sneeze in ‘Davos’ this week….? @ eamonn moran +1 @Vinny Tax Evasion is a criminal offence in most countries. Tax avoidance when done according to the law of the land is legal. Software ownership can be transferred to a subsidiary and the subsidiary can be located anywhere on earth except a few countries, North Korea for example. When profits are repatriated from the subsidiary they are subject to US tax minus the tax paid in the country of origin. American companies are the main players in Ireland but there are others. @Mickey Hickey I am well aware of the ‘difference’ between ‘avoidance’ and ‘evasion’ of taxes and that ‘difference’ when it comes to the accounting practices of multi’s or ‘transnationals,’ as they are called, those lines or differences between avoidance/evasion become very blurry – often with the help of taxation systems throughout the world, whether assistance in taxation matters is intended or not…. Massive companies and the 1%’ers with their huge lobbying and direct influences on law making and job creation policies and incentives while, at the same time, sitting on huge cash piles(Apple and others) or ‘resting’ them in tax havens are treading the ‘blurry line’ referred to -and bring the current style of capitalism into focus as a potential cause of major social upheaval.. @ Gavin Re ‘The Inexorable Rise of the Wealthy Class’ I think “inexorable” implies unalterable. Maybe “execrable” would have been a better choice Comments are closed.