Friday, July 19, 2013

Friday Morning Links

Miscellaneous material to end your week.

- Patrick Wintour and Simon Bowers discuss the G20's predictable finding that our global tax system isn't set up to address the problem of offshore tax evasion:
The long-awaited report, prepared for a meeting of the G20 finance ministers in Moscow this weekend, says a "bold move by policymakers" is necessary to prevent a worsening in the position. The OECD calls it "a turning point in the history of international co-operation on tax".

The action plan sets out 15 initiatives for arming tax authorities around the world with the tools to crack down on some of the areas international leaders agree are among the most widely exploited by multinational tax avoiders. These initiatives are to produce a range of recommendations for changes to the tax treaty rulebook, with deadlines ranging from 12 months to two and a half years.

Among the highlights are additional disclosures multinationals must make to all tax authorities, helping officials know where to look for the worst avoidance. There are proposals to require companies such as Amazon with extensive warehouse networks in a country to pay more local tax; multinationals posting high-value "intangible" assets, such as brands and intellectual property rights, to tax havens will also be targeted, as will tax breaks introduced by individual countries that are seen as predatory.

The report sets out 15 separate actions the international community needs to take to modernise a tax system established in the 1920s. It argues the tax system is outmoded and unequipped to deal with mobile multinational firms that have found innumerable ways of avoiding tax, often by shifting profits to low-tax countries.
- And the exploitation of loopholes and weak government goes a long way toward explaining why economic security seems to be sorely lacking even in the midst of the plenty discussed by Tom Streithorst:
On the one hand, technology has made us all much more productive than we were 30 years ago. On the other, jobs have evaporated. Steel that used to require hundreds of men to manufacture now can be made with a dozen. A small businessman no longer needs to hire a secretary or a bookkeeper. Inexpensive software and a personal computer lets him do their jobs in a fraction of the time all by himself. The internet puts specialist knowledge that used to be almost impossible to find instantaneously on our laptops. The personal computer is doing to the office worker what the internal combustion engine did to the horse a century ago, making him obsolete.

Most of us are working harder, for less money and with no job security. My father and I both worked at the same large corporation but there was a difference, a difference determined by our respective eras: he was staff, I was freelance. When he got sick, the company found him doctors, paid his salary, put considerable effort into his recovery. Had I ever gotten sick, they would have simply forgotten my name. He yelled at the CEO habitually without any fear of losing his job. I mouthed off once to a middle manager and was never hired again. He had a defined benefit pension paid for by the corporation, the government gave me a tax break should I choose to save for my own retirement. The company had legal and moral responsibilities to him, which both he and they viewed as sacrosanct. All they owed me was a day’s pay for a day’s work. His generation gave their youth to a corporation, and the corporation took care of them in their old age. Today loyalty, if it exists at all, goes just one way.
The interaction between falling house prices, mortgage-backed securities, and third party repo agreements was the trigger of this disaster, but the larger lesson is that we are in this mess today because our post-scarcity world economy cannot produce sufficient effective demand required to keep everybody employed. From 1938 to 1945, war created that demand. From 1945 to 1973, prosperity, rising wages, and advertising created that demand. From 1982 to 2007, debt fuelled consumption financed by ever rising asset prices created that demand. In 2007, as fear roiled the markets, banks stopped lending, and when we could no longer spend beyond our means, the economy collapsed.

The most important thing to remember about the faux-prosperity of the last 30 years is that it was manufactured on the basis of paper profits. If my house was worth £3000 in 1973 and £1.5 million in 2012, it is still essentially the same house and gives me the same pleasure to live in. If we could manufacture demand by making bombs and if we could manufacture demand by making houses quadruple in price, then we can manufacture demand in other ways, perhaps more satisfying ways as well.
- Jim Stanford and Angella MacEwen both debunk the "jobs without people" myth being pushed by Jason Kenney, while Rebecca Lindell notes that the Cons are also operating outside the reality-based community when it comes to employers exploiting temporary foreign workers.

- And Paul Krugman highlights the real effect of the "flexibility" demanded by anti-worker groups - as applied universally, it creates lower wages and a more sluggish economy for everybody.

- Finally, Oliver Wright reports on private-sector operators gaming the system to make profits off of outsourced public services without actually meeting the needs of the programs involved. And we should have reason to doubt that any corporation with a similar chance to bilk the public would do differently when given the chance to skim the cream off the top.

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