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Trust

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It’s all a matter of trust, and, frankly, the people don’t trust you. “You” refers to the government, big business and the media. The lack of trust applies to a huge assortment of entities.

It starts with the present federal government administration, including the President and his vast assortment of gurus. It continues with congress and the judiciary, state and local governments. It extends to big business concerns such as the defunct Enron company, some auto and oil industry firms, numerous banks, several Wall Street investment brokerages, behemoths including AIG, and specific claim-dodging insurance companies. The list goes on ad infinitum.

Government officials of all stripes, Chief Executive Officers (CEOs), their business executives and media moguls better wake up and change their ways. Past history has caught up with them. It’s a history reeking from failures, lack of oversight, corruption, fraud, greed, lies, shams, gimmicks and outright incompetence. The people grow weary of it all and are becoming angry. A restive populace indicates a desire for change, but this time people want the right kind of change.

Things folks would like to change run the gamut from the simple through the complex to the sublime. Let’s consider a few examples starting with a simple one like a typical ad offering a product on sale for $19.95. Why not say it like it is? The people know that the item is not really on sale in the first place, and that it is actually rounded off at an out-of-pocket cost of $20.00. They are not impressed with the ploys and gimmickry employed with slick sales tactics. In fact, they find these rather tedious and disgusting. Again, a newspaper subscription promotion offering the Sunday paper for $1.00 a copy per month for a full year sounds good, right? The catch is that one must pay for the subscription by allowing the newspaper to debit your credit card for payment. Otherwise the price increases from $4.00 to $6.25 per month. Of course, the promoter does not divulge this information until the potential customer is asked for their credit card information. Then the subterfuge becomes clear, and the client exhibits a degree of irritability at having been temporarily duped. It all ends in a waste of time, effort and no sale. Now some people would call these shrewd business tactics, gimmicks or ploys; others would label them as they are – deceit or outright lies.

There are other simple business gimmicks (let’s call them little lies) that people would like to change as well. The favorite deceptions of the business community are the rebate versus a straightforward, simple discount; the “plus postage and handling” ploy; and the usurious interest rates and excessive overdraft fees on credit cards by banks. We have all encountered these odious practices and have acquired a built-in aversion to them. The business community should reconsider these gimmicks and eliminate them. The majority of their potential customers have already done so in their own minds.

Some of the more complex things that folks would like to change might be exemplified in   the many pork barrel projects inserted into numerous hand bills passed by our politicians at the various levels of government. As any past president or governor can testify, the line item veto is needed here in order to defeat the pork barrel riders attached to valid legislation without vetoing the entire hand bill. Does the “bridge to nowhere in Alaska” or the “$600 toilet housing with seat” for U.S. Air Force aircraft ring a bell with anyone? Of course, our elected politicians would never consider allowing the line item veto to become law. That would ruin their pork barrel tactics; it would take the cover off their deceit and wholesale hypocrisy. Ah, but there is always the next election at which the electorate can level the playing field by eliminating those politicians deserving of censure and rebuke for their misdeeds. The hypocrites involved in such shenanigans seem to forget that they will ultimately pay the price. Admittedly, however, too many of them get away with their deceptions for too long a time before justice catches up with them, if it ever does.

Government is not the only culprit. What of the oil industry’s artificially inflated gasoline and oil prices, especially as a prelude to seasonal climate changes, long weekends and traditional holidays – are these prices possibly manipulated by oil company executives just as they are by the oil producing nations? This manufactured price inflation is only superseded by the outright greed exhibited at annual bonus or retirement times by industry CEOs.  

One of the things people would like to change that has been getting a lot of attention lately is the health care program. This issue and attempts to resolve it border on the sublime. Yes, all agree that health care reform is needed and that no one solution will satisfy all of the people. Yet we must ensure that in trying to correct the ills of the past, we don’t incur even greater flaws in the future program. Formerly, the insurance companies controlled too much; at present they still do; in future they better not. Additionally, hospital and doctor fees have been outrageously high and must be tempered and moderated. The people, too, must be educated to impose self-discipline so as not to abuse the new system that will eventually be established. And most important of all is that oversight must be established and enforced to keep everyone relatively honest.

The Obama Administration and Congressional Health Care Proposals all claim that their respective plans will be paid for out of savings from the current health care program, primarily MEDICARE. This is indeed a wild assumption, and there is no reason to believe that it will be so. Fraud, waste and abuse have not been stopped over all the past years of the currently existing program and won’t be stopped by implementing any new health plan. Why is this the case? Corruption, waste and abuse will continue because of human nature. Even if strict oversight is established, people in government, business and citizens-at-large will find ways to defeat the system and continue their wasteful, abusive and corrupt ways. Wherever people and money are involved, fraud, waste and abuse will follow. The best we can hope for is to keep some modicum of discipline and preventive control.

Equally sublime are unsubstantiated assertions of racial discrimination, liberal claims of conservative obstructionism, and conservative claims of democratic socialism regarding the health care issue. These are all balderdash. The liberal and conservative entities are simply pursuing their separate agendas rather than searching for ways to compromise and come to agreement. The liberals promote their relative agenda of universal health care for everyone and include a public option, complete coverage for abortion, contraception, sterilization, human embryonic stem cell therapy, euthanasia and assisted suicide. The conservatives want universal coverage as well but oppose the public option for economic reasons and all of the other dubious and controversial coverages on moral grounds. They do not want tax dollars used to promote those efforts which they consider to be morally wrong and intrinsically evil. The quest for compromise and agreement continues on the health care issue, as does polarization of liberal and conservative political and business positions. Sooner or later a solution will be reached through compromise. Hopefully, the compromise will overcome all the sublime arguments and will result in an improved, economical and morally acceptable health care plan for all with adequate oversight to prevent, or at least subdue, fraud, waste and abuse.

Now let’s get back to the primary issue of trust. It is not so much the President and CEOs that cause our disbelief, although they are not exempt. It is, rather, all the President’s men and corporate business executives in general that contribute to the public’s mistrust. It is the President’s corps of operatives and gurus with their past extremely liberal or even radical histories and their present hidden agendas that contribute to the public’s suspicions as to the administration’s true motives and goals. As a consequence, those same suspicions apply to President Obama himself, since he appointed his cabinet and collection of gurus. As for business in general, we the people have always been wary of its hypocrisy and sleazy, deceptive practices. Where else did the warnings “buyer beware” and “get it in writing and signed” originate? “By their works you shall know them.” Therein lies a clue to the people’s mistrust. A greater degree of transparency by all concerned would help to reduce or eliminate that mistrust.

In an effort to be transparent, the President tries to explain and clarify his position on each important issue facing the nation with frequent media events and public speeches. Yet these are unconvincing; they amount to overexposure and information overload. He is trying too hard. If his positions on the issues are so good for the people and the country, why aren’t they obviously so? Why does he feel that he must convince us of their worth? Why is it that half of this nation’s people don’t believe him?

They don’t believe him because it is a matter of trust. The people are suspicious and lacking in trust of President Obama’s administration, and he who leads it, because the final results of the administration’s initiated actions on the important issues are still pending. President Barack Obama talks a good story, but words are cheap. Shakespeare expresses it best: “. . . truth hath better deeds than words to grace it.” Earning the people’s trust depends on achieving positive results on critical problems such as health care, the economy, jobs, trade, the housing and credit markets, the deficit, and successful handling of the Afghan and Iraqi Wars, for example. These issues and their outcome will determine whether the people’s trust will be bestowed or withheld. All of these matters, and more, are currently unresolved. We shall have to wait and see how things work out regarding the critical issues of the day. Meanwhile, doubt and mistrust prevail.

Despite all the suspicion, fear and anxiety, the President and his administration, congress and the judiciary, CEOs, their corporate executives and the media must be given the benefit of a doubt – at least temporarily. They must be given time to prove that they are worthy of trust, once again. After all of the debacles and misfires of the past several years, this will be a monumental task. We wish them well in pursuit of their goals and the people’s trust, all the while keeping in mind the biblical admonition – “By their actions you shall know them.”

Amidst all the turmoil and doubt, one might be prompted to consider two possible prophecies – that of a young man pursuing his liberal vision, or one of an old man dreaming his conservative dream. Whichever prophecy is realized, we must not sell our souls to the devil, yet all must take a stand and abide by it. We, the people, must choose wisely. We must caution our government, big business, and the media to take heed lest past and present foul deeds incur the people’s wrath and lead to anarchy. The powers that be must beware of what changes they institute lest they reap the whirlwind. And reap it they will if they do not regain the people’s trust. They must remember the prophet Jonah’s warning to Nineveh to repent. Armageddon draws near.

Economy

Are We Heading Toward Another Lost Decade for Latin America?

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According to World Bank data, between 2000 and 2019,  average annual growth in the Latin American and Caribbean region was 1.6%. That level of growth is clearly unacceptable both if we compare it with growth in other regions – East Asia (4.8%), Europe and Central Asia (1.9%), the Middle East (2.9%), South (6.5%) and Sub-Saharan Africa (3.5%) –  as well as if we put it in per capita terms, where the rate would be 0.56%, insufficient to rapidly improve living standards for the population.

It should come as no surprise then that the decade ended with protests in several Latin American countries, especially if we view these protests as an expression of the discontent with an economy that does not grow fast enough to satisfy society’s demands and expectations and with an inequality gap that remains too high, although it has decreased over the past decade (this region has the highest level of regional inequality in the world).

Thus, it appears that the reasons behind the unrest largely remain. If this situation is not addressed, there is risk that nothing will change and the next decade will be equally challenging in the region.  We have already experienced the first year of that future. Governments of the region need to make urgent, serious efforts to implement an agenda of inclusive growth. It is time to leave behind the cycle of disillusionment and simply building on the many conquests of the past to now respond to the needs of our societies, which are raising the bar with their demands. Recognizing this as a priority is the first step in transforming what seems like a challenge today into an opportunity for progress.

The region’s sluggish growth has different causes, both internal and external. Analyzing them is crucial. The World Bank has just presented its Global Economic Prospects (GEP) report, a semi-annual flagship publication analyzing the global economic situation, including economic growth estimates for 2019 and the outlook for 2020. The GEP can be taken as a thermometer that measures the health of the economy at the local, regional and global levels. Reviewing global trends can help put the economic situation of Latin America in context. Today that context is telling us that, for now, the cold snap will continue.

According to the GEP, the global situation remains fragile. Annual global growth for 2019 (2.4%) is the lowest since the 2008-2009 financial and economic crisis. While economic growth in 2020 is expected to improve (2.5%), this recovery will be modest. Anemic international trade and investment and a slowdown in productivity explain this fragility, among other reasons.

Latin American Winter

How does this global scenario affect the region? In the Latin American context, economic growth also cooled in 2019. Excluding Venezuela – where the economy contracted by an estimated 35% – the region grew just 0.8% last year as a result of weak investment and private consumption.

The slowdown was quite consistent both because it affected most Latin American countries and because it occurred in nearly all economic sectors. Currently, we expect growth to reach 1.8%. Clearly, this growth rate will not help close the per capita income gap between Latin American countries and more advanced nations. Once again, there is a fear that if history is not rewritten, it will repeat itself within the decade.

Beyond growth

It is well known that moderate growth limits economic opportunities for the population. If this occurs, we must be aware of the risks given the social tensions in several countries in 2019.  

But we also know that the ongoing issues of Latin America go well beyond those of economic growth. They are associated with structural problems that must be resolved, such as persistent inequality or the need to build the necessary consensus to support growth and social inclusion in government policies, based on a long-term vision.

We are talking about reforms that contribute to improving the business climate to attract private investment, which in Latin America is strikingly low.

And we are talking about improving governance to help enhance legal security.

These reforms are not easy for several reasons. Often, the business climate suffers because many established firms fail to see the positive side of implementing reforms that facilitate the market entry of new firms, which may threaten their dominant position. In the field of education, besides the need to persevere for many years to have a positive impact, implementing the economic policy of the reforms to improve education quality is exceedingly difficult. Additionally, we cannot ignore the problems that even the most reformist government will encounter when addressing deficient governance issues.

We could look at these deficits as elements of an inalterable reality and the seeds of future disappointments – or we could view them as the starting point for an in-depth discussion to forge the necessary agreements.

I choose this last option. I believe that the challenge of achieving broad consensus on government policy, with the involvement of all sectors of our societies, in an open, participatory dialogue in which all voices are heard, offers us the opportunity today to make social pacts that are the bases for more robust, inclusive growth in our region.

It is not an easy task, for sure. That dialogue must involve politicians, members of the business community, workers, civil society organizations and the many other sectors of our societies. Yet there is no other possible path if we want to avoid looking back in 10 years and being horrified by our wasted efforts. The discontent of the region’s societies in recent months is a call to action. We should capitalize on this opportunity to ensure that the recurring history of disillusionment does not repeat itself in Latin America and the Caribbean.

Source: World Bank/ El País

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Economy

Principal Trends in the Development of Eurasian Integration

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The development of the Eurasian Economic Union in 2019 was once again marked by deepening integration and the expansion of global trade and economic relations. Emerging trends include the improved quality of integration and the shaping of the Union as a pragmatic and responsible partner involved in international relations as an independent actor.

The EAEU is improving its institutions and mechanisms for regulating trade and economic cooperation, reducing the number of barriers to ensure the complete freedom of movement of goods, services, labour resources and capital within the single customs space of the member states.

The following regulatory instruments have been amended and improved in 2019:

-electronic customs declarations have been put into use; these declarations are connected to the unified information platforms currently being developed in all EAEU states;

-the procedure for offsetting customs duties using a system of advance payments has been modified (it will significantly speed up paperwork flow and reduce customs clearance times);

-the rules for calculating and collecting compensatory and anti-dumping duties have been streamlined;

-the terms and powers of state agencies have been specified; the areas of influence and regulatory control of the Eurasian Economic Commission (hereinafter the EEC) have been expanded in matters relating to the supervision and implementation of the EAEU anti-monopoly rules both on cross-border markets and throughout the EAEU in general;

-international treaties have been amended in the part pertaining to the distribution of customs duties collected between the treasuries of the member states (the following ratio has been stipulated: Armenia – 1.22 per cent; Belarus – 4.86 per cent; Kazakhstan – 6.955 per cent; Kyrgyzstan – 1.9 per cent; Russia – 85.065 per cent).

Emphasizing the “Digital” Aspect

In 2019, the EAEU actively developed and improved the digital agenda in various segments of the common market. Projects for implementing a digitalization programme have been developed and approved. The programme stipulates the procedure for implementing digitalization projects through the consolidated efforts of all EAEU members.

In particular, in order to simplify the paperwork flow, speed up customs proceedings, and make it easier to do business in the Union, the EAEU adopted the decision to streamline the rules and functioning of the “one window” system. For all the members of the EAEU market, this could serve as a platform for an electronic information exchange system for all EAEU market participants regardless of their country of origin, as well as a venue for interacting with the licensing and regulatory system.

The EAEU also adopted the Concept of Cross-Border Information Interaction, which lays down the legal framework for the exchange of information among EAEU market participants and can be used as a platform for the development of the information services market in the future.

The digital agenda programme also extends to the real sector of the economy, which is provided for by the project for industrial cooperation, sub-contracting and technology transfer. The project entails developing a system of e-contracts between industrial enterprises. The advisory body, the Industrial Policy Council, has been tasked with managing the implementation of this project.

Single Sectoral Markets

2019 saw the adoption of the Concept for the Creation of a Common Financial Market of the Eurasian Economic Union, which entails free mutual access to national markets for banking and insurance institutions (regulating the process of streamlining and aligning the rules and mechanism for issuing licenses and their mutual recognition). The Concept will boost competition on the banking services and insurance markets, expand the range of available financial services, and stimulate investment and capital mobility.

The complexity and scale of reforms necessary to create common banking, insurance and securities markets require a lengthy preparatory period in order to coordinate, streamline and aligning macroeconomic criteria, standardize indicators to ensure the stability of the financial and insurance sectors, as well as the legislative framework, by 2025. A transitional model of the common financial market will subsequently be launched.

Energy is Key

The transitional model of the EAEU common energy market has been launched. An important detail in the concepts of energy market integration is the fact that, when negotiations on the Union Treaty were in progress, the objective of creating a single common market for all types of energy sources was abolished in favour of creating the common market format (CEM) as a target objective for the integration of the energy sector.

The EAEU CEM entails free pricing on energy and energy transmission using the following mechanisms: long-term contracts between independent companies use agreed prices set with due account of the equilibrium price of the common market that has been written into contracts, and exchanges operate with free pricing.

Trade is organized with the use of an e-system for swap contracts, forwards and futures, and with the use of the Single Information System (SIS) accessible for all wholesale market participants. However, only authorized organizations are authorized to conclude long-term transactions and determine the volumes of surplus energy offered for bidding.

Before launching the gas market, the upper and lower price limits for surplus electricity and service tariffs are to be regulated within internal prices. This means that the “freedom” of pricing for energy and services is from the very outset established in accordance with the terms and conditions and within the limits of the manufacturing, resource, technical and technological potential of national natural monopolies, and the common market only adjusts pricing depending on the current supply and demand at a specific moment in time.

This is a transitional format for the functioning of the EAEU CEM, and it fits perfectly into the integrational model of cross-border trade cooperation, which entails achieving the objectives set for the common market by increasing trade volumes and ensuring equal access to the services and infrastructure of national monopolists.

Consequently, the development of Eurasian integration made it possible to preserve the growth of the positive influence that integration has on the stability of the macroeconomic situation in member states and on the degree of macroeconomic convergence in the EAEU in 2019. As a result of applying the single customs tariff of the Customs Code of the EAEU and expanding the list of technical regulations implemented by all states, conditions on the commodities markets are becoming streamlined at a rapid pace, and equal competition conditions are being created for all actors on the EAEU common market. These developments make it possible to stem the drop in growth rates that were predicted for the global market at the beginning of 2019.

Streamlining the rules governing trade in goods and services on the common EAEU market in 2019 made it possible to ensure a smaller drop in mutual trade in monetary terms within the Union compared to the decline in foreign trade with third countries. The decrease in bilateral trade in January–September 2019 was 1.3 per cent, compared to the 2018 trade decline of 2.5 per cent with third countries.

Armenia (6.4 per cent) and Belarus (3.5 per cent) demonstrated positive growth in mutual trade, while the other states demonstrated a decrease in trade turnover of approximately 3 per cent on average. As in previous years, minerals (26 per cent of the total mutual trade in the EAEU), machinery, equipment and vehicles (20 per cent, with Russia and Belarus remaining the principal suppliers), agricultural raw materials (15 per cent), metals and metal goods (13 per cent), and chemicals (12 per cent) remained the principal drivers of growth.

The EEC estimates that the dynamics of mutual trade in comparable prices (calculated using the physical volume of supplies index) demonstrate stable trade volumes, remaining at the 2018 level, and a drop in prices of 1.5 times, which led to a decrease in the cost indicator of mutual trade volumes. Consequently, the Eurasian integration factor retains its positive effects and can be bolstered by stepping up integration processes.

The potential of expanding trade cooperation can be realized by expanding the circle of partners in the preferential regime of economic cooperation. In 2019, the EAEU continued its work to develop international cooperation. One example of this is the Agreement on Trade and Economic Cooperation between the Eurasian Economic Union and the People’s Republic of China, which went into force in 2019. Cooperation agreements were signed with Serbia and Singapore, memorandums on cooperation were signed with Indonesia, and a partnership declaration was signed with the Pacific Alliance. In addition, negotiations were launched on agreeing on the terms and conditions of partnership agreements based on previously signed memorandums of cooperation with the African Union, Bangladesh, Argentina, the United Nations Economic and Social Commission for Asia and the Pacific, the World Intellectual Property Organization and the Global Medical Device Nomenclature Agency.

The EAEU’s activity in the international arena is testimony to its great development.

From our partner RIAC

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Economy

WEF 2020: A Blank Check on Climate Change Costs

Naseem Javed

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At the WEF Davos 2020, is there already a blank check issued from stakeholder capitalists to Greta Thunberg to go and fix global climate damages? If not, too bad…just relax full payment may be coming.

First some facts; big and small governments have no money, big businesses have no money, what disappears in heavenly bushes of the paradise-accounting always stays there. The world is basically broke to fix this monumental problem; broke it’s mentally and crushed morally, broke is also the global populace, exhausted and restless, unless their survival on sustenance, equality and social justice not addressed at much faster rate over populism mobs may appear.

The Blank Check: Enters the five million small medium businesses of the world; a super economic force to reckon with on platform economy.

In broader strokes, as a simple example, The United States Business Administration, the SBA has some 13 million small medium size enterprises as members. Now imagine, if five million of such enterprises, already doing USD$2-5 million in annual turnover were placed on national mobilization of entrepreneurialism to boost special skills on innovative excellence to produce exportable quality. Now imagine if each one added only one-million in additional revenue to their current operations what will happen, basic math. Five million small enterprises times one million new revenue each equals 5,000,000 x 1,000,000 = 1,000,000,000,000 or one trillion.

Now imagine, if there were 25 million such enterprises scattered across the world, each adding two million dollars as a base per year that will be 50 trillion dollars… or 10 five times the revenue of the world’s five largest and most powerful technology companies. This is a wake-up call to exhausted economies. These operations are less new funding dependant they are execution hungry and deployment starved.

There are some 100 million SME in such mix around the world; if mobilized on national entrepreneurial platforms would have enough strength to help and fix local community issues, as entrepreneurs by their DNA are cause centric and will take care of such global climate issues, unlike short term shareholders on money schemes. The lack of discussion on SME revival are main reason, such silence proves lack of vision and global-age knowledge on entrepreneurial transformation and most importantly about global consumption and how to create real value creation. The spotlight on hedge funded value manipulations take all the attention and systematically the entrepreneurial talent of SME suppressed for not being glamorous enough on talk shows over earth shattering robotic technologies.

Fact: The world can easily absorb unlimited exportable ideas in unlimited vertical markets. Fact: The well-designed innovative ideas are worthy of such quadrupled volumes. Fact: The entrepreneurial and dormant talents of a nation are capable of such tasks. Fact: The new global age skills, knowledge and execution are now the missing links

The world is changing fast; this is no longer a cliché, now a serious warning: You can always tryout a change and start with some 500 small and medium enterprises in your own local region on national mobilization of entrepreneurialism protocols and measure the impact of innovative excellence on the local grassroots prosperity. Currently there are already 11,000 Chamber of Commerce in the world with combined membership of 45 million, somewhere here in lack of digital platforms are 25 million enterprises eager and ready to boost their revenues by million each. The art and science of global showcasing of its members with global bounce is a solid start on export strategy. Bold and open debates will streamline the fears of missing skills at the top to tackle such large scale deployments.

The rest is easy

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