Sunday, October 05, 2014

Sunday Morning Links

Assorted content for your Sunday reading.

- Andrew Jackson takes a look at some dire predictions about the continued spread of inequality, and notes that we need to act now in order to reverse the trend. And UN Special Rapporteur Magdalena SepĂșlveda Carmona discusses how more progressive tax policies - including a focus on maximizing revenue - are needed to support both greater equality and the effective exercise of human rights:
States must realize the full potential of tax collection as a tool to generate revenue for the fulfilment of human rights obligations and to redress discrimination and inequality. Human rights principles regarding participation, transparency, accountability and non-discrimination should be followed throughout the whole revenue-raising cycle. For this purpose, States should:

(a) Seek to increase tax revenue in a manner compatible with their human rights obligations of non-discrimination and equality, and increase the allocation of revenues collected to budget areas that contribute to the enjoyment of human rights;
(i) Take strict measures to tackle tax abuse, in particular by corporations and high net-worth individuals;
(l) Ensure that extractive industries are subject to appropriate tax rates and export duties, and that the human rights of affected communities and future generations are protected in the exploitation of natural resources;
(n) Ensure the public revenue raised from the financial sector is commensurate to the sector’s profitability and the risks it generates; implement a financial transaction tax, and consider allocating the revenues specifically to expenditure that can contribute to the realization of human rights;

(o) Implement regulations that prevent the role played by the financial sector in aiding tax evasion and profit-shifting.
- Meanwhile, Tom Sandborn highlights the role of unions in pushing us toward greater equality and social health. Sherri Torjman and Ken Battle criticize the Cons' determination to go in exactly the wrong direction by dumping piles of free money on wealthy, one-income households while ignoring social needs.

- Nicholas Keung exposes the policy of "medical repatriation" under which employers exploit migrant workers in Canada until they become ill or injured, then fire them and send them home to be somebody else's problem. In related news, Lord Everyman Conrad Black is convinced that every worker is protected to the point where there's no need for organized labour.

- Mariana Mazzucato discusses how public investment is needed to support economic progress based on research and development rather than exploitation and rent-seeking:
Silicon Valley is a result of massive direct public investments (not subsidies) along the entire innovation chain—from basic and applied research to late stage commercialization. While venture capitalists, mythologized by Renzi, pursue short-run profits, focusing on an early ‘exit’ through either an IPO or a buyout, the US government has proved to be the patient public financier, providing (through a decentralized network of state agencies) patient high risk finance to companies like Compaq, Intel and Apple. And today is supplying the same kind of finance to green companies like successful Tesla, which recently received a $465 million guaranteed loan, and less successful Solyndra which received a $500 million loan: in the innovation game you win some lose some.
Pretending instead that innovation will come to Italy by simply lowering tax, and reducing regulations—especially around the labor market of course (the usual easy target)— ignores this history. Ironically Renzi is selectively copying only one thing from the US: the much criticized 2012 Jumpstart Our Businesses Act (JOBS Act). And it is no surprise he got such a welcome in the City this week given that it is precisely these kind of policies that create one of the most dysfunctional aspects of modern day capitalism: socialization of risks, privatization of rewards. The US JOBS Act attempted to provide risk averse venture capitalists with even less investment risk, by relaxing financial disclosure requirements for smaller firms (those with less than $1 billion in annual revenue). It also legalized ‘crowd funding’, meaning that VCs can recruit a wider range of investors (and individuals) when taking firms public. How this can generate actual job growth – when it seems tailored to ensure that VC investors can reap massive returns on small firms touting government technologies – is difficult to know.   Indeed there is an increasing army of small firms that complain about how they lose out from VC’s speculation and short-termism.

If Renzi wants to bring innovation and dynamism to Italy he must yes make Italy more efficient, but also move beyond the sole focus on ‘rigidities’. The discussion should move towards a debate on the types of long-term investments that are needed, by the public and private sector alike, and to crucially ask Italian business and finance to step up to the game. Don’t suck up to the City (and Italian finance) but ask the financial sector to stop lobbying for lower capital gains, which is only making them more short-term, and to actually co-invest with you in the long-term areas that smart innovation led growth requires. Ask Italian business to stop asking for subsidies and handouts, stop complaining about red tape and decide to co-invest alongside government in the opportunities which will shape Italy’s innovative future. And when told by conservative economists that all he needs to do is to cut tax, he should be picky and focus on reducing taxes on hiring labor—not on capital gains—and then remind them that the tax rate paid by the top earners was close to 90% under President Eisenhower, a US Republican and ex military general—hardly a communist—who reigned in the USA in an era in which some of the most important investments in innovation were made
- Finally, Haroon Siddiqui recognizes that Stephen Harper is always up for whatever war is on offer, making it impossible to believe his claim that every single time the push for military action is based on a unique or genuine threate. Boris points out that the best-case scenario in getting involved in Iraq now is to be stuck in an indefinite containment and suppression mission. And Peggy Mason argues that the consistent choice to pursue war over engagement in the Middle East only figures to make matters worse.

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