The huge inflows of Muslim refugees into Europe are fueling right-wing nationalistic agendas; countering this movement is the socialist ideology of the near bankrupted nations severely affected by the aftermath of the global financial crisis.
Can you blame the Germans, we will lend you an endless stream of money and you don't have to change anything. Our citizens are happy to subsidise your inefficient practices, your lack of work ethics, overblown bureaucracy and a national unwillingness to pay tax.
Yeah right, we will bail you out but you need to make the necessary structural changes required to support an efficient economy.
In Australia, we have a coalition government willing to adapt left-wing feel good policies instead of addressing the pressing issue of successive budget deficits and the increasing public debt after the disastrous two terms of the Rudd/Gillard/Rudd governments.
Beginning under the later years of the Howard government and greatly expanded by the Rudd and Gillard governments, the middle class welfare saw just over fourty percent of all of Australian taxpayers pay no net tax after rebates and family payments.
In their own Donald Trump moment, the Philippines people have elected their own self-described wannabe rapist. Riding a wave of misplaced nationalistic pride, Rodrigo Duterte is threatening to kick the Americans out of the country in a move that would certainly embolden Chinese claims to the Sprately Islands, apparently they can go it alone.
He has made a bunch of non-sense claims intent on drawing headlines and popularity to a nation still shackled with corruption and a vast poor uneducated sub-class. Then there is his vigilante groups bringing their own form of self-indulgent justice to the city of Davao.
And finally, there is The Donald claiming to make America great again. The business tycoon and property speculator seeks an isolationist view for the United States; but hey, wasn't it property speculation that got them to this point?
The majority of people blame governments for their plight, they are seeking poorly designed policies that are not grounded in economic theory where everyone receives benefits from the governments but nobody contributes, simplistic answers to complex problems consequently fail. Geez, what a mess.
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ReplyDelete"The majority of people blame governments for their plight, they are seeking poorly designed policies that are not grounded in economic theory where everyone receives benefits from the governments but nobody contributes, simplistic answers to complex problems consequently fail."
ReplyDeleteWhich specific economic theory are you advocating for here because despite the attempts by business departments to suggest otherwise there are actually many different economic theories with varying degrees of applicability. Please clarify what you mean by "grounded in economic theory."
Furthermore, this claim that the majority of people want policies "where everyone receives benefits from the governments but nobody contributes" will need to be substantiated before such a claim can be taken seriously. It sounds to me like you want only shareholders to receive benefits without contributing. It ignores some pretty fundamental contradictions that are inherent in capitalism and imagines that over time the conditions that are present in a winner take all economic paradigm won't present certain challenges. 1% own 99% of the world economy according to Oxfam. Does that not trouble you?
The opening paragraph clearly stated that the orthodox balance of either centre-left or centre-right governments are tending to turn to ultra-left or ultra-right policies driven mostly by disenchantment. Viewing a number of contemporary economic theories, Keynesian, or interventionist theory tends to suggest aggregate demand is dictated by government expenditure. Whilst classical economists believed in the notion of a self-correcting economy; the economic conditions facing Keynes indicated otherwise.
DeleteInterestingly, Keynes believed in a mixed market economy that was predominantly serviced by the private sector. However, Keynes argued inefficient private sector decisions led to poor macroeconomic outcomes. Instead Keynes advocated government intervention in markets by increased expenditures that pumped primed economic growth. This theory initially worked heralding the end of the great depression and was largely followed by mainstream governments until stagflation rendered Keynesian economics largely ineffective.
Contradicting such views, Friedman with monetarist views suggest inflation and recession are affected by the growth of money supply. The monetarist viewpoint of an unemployment and inflation equilibrium are influenced when government expansionary attempts exceeding the natural rate of unemployment. Monetarists actually suggest methodology to curb inflation is to induce a recession to lift unemployment above the equilibrium threshold. Paul Volker in 1979 and Paul Keating in 1991 spring to mind.
You will note that I targeted the Wall Street induced GFC that brought about the financial downfall of many countries. Notably, these were countries that were highly leveraged and already burdened with poor fiscal and monetary policies. Posting constant budget deficits by balance of payment issues does not lead to economic prosperity. Keynes advocated increasing spending by either reducing taxes increasing spending (or a combination of both) when aggregate demand falls; one hopes the increased spending targets infrastructure projects increasing economic output but that isn’t always the case.
But for a government to reduce taxes, it would tend to indicate they require a tax base to begin with and this has not been the case. I, along with many others had not heard of sub-prime loans and collateralised mortgages that were sold to financial institutions around the world until after the credit crunch hit. Interestingly, the GFC saw governments worldwide return to Keynesian policies with increased spending relative to GDP that has not improved economic outcomes. Generally, Keynesian policies tend to require increased taxation when economic conditions swing upwards as such deficit spending is not sustainable bringing us back to having a sustainable tax base.
I note with interest you mentioned shareholders receiving returns without contributing. This thinking is flawed as equity financing of business requires shareholders to supply capital to fund the business; in return, they receive a dividend on their capital that is usually a percentage of the profits. This is not without risk, shareholders may suffer a loss of some or all of their capital sitting well behind debt financiers. Likewise, if profits fall then the dividend is reduced or if a loss is made then no dividend is paid at all for the period.
You also mentioned Oxfam and the 1% of people who own 99% of the world economy. This isn’t entirely true, Oxfam’s claim uses Credit Suisse’s calculations to estimate the richest 62 people in the world hold as much wealth as the poorest half of the world population. In their calculations, they also suggest the top 10% require $68,000 USD to join the club and a net worth of $760,000 USD to become part of the 1% club.
DeleteWhat is also interesting is that Oxfam identified the value of money kept in tax havens as a key issue bringing us back to the taxation argument again. What they failed to mention is the cash economy that fails to raise taxation revenue for governments. Whilst the general population probably doesn’t invest in overseas tax havens, the amount of everyday people engaging in the black economy diminishes government revenue. My post also touched on the fact that many tax rebates see no net taxation flow to government accounts. I used Australia as an example with around 40% of the population paying no net tax after rebates and family benefits offset income tax payments.
Without taxation revenue, a government is unable to provide services and must either borrow money from overseas investors to pay pensions, build and run healthcare systems, maintain infrastructure such as roads, bridges and rail, education facilities and of course the general cost of government. You ask if I a worried about this - you bet I am.