Keynesianism 1945/1979 & Neoliberalism 1980/2020

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Everyone improving their lot.

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60% going nowhere, 5% galloping ahead

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Fairly inevitable result !

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Confirmation of what we know

 

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Keynesianism 1945/1979. Neoliberalism 1980/2019

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There “were” good old days!

As one of the Baby Boomer generation (1945/1964) I can confirm that the following generations X (1965/1976) and Y (1977/1995) never had it as good as we did, “the Boomers”.
Boomer Normality.
1) As growing children our health was looked after by a young enthusiastic NHS.
2) Our parents had security of employment, as we did when we entered the work force, unemployment averaged less than 2%, yes two %, until the mid 1970s.
3) Newly weds had the choice of one or both parties working; one income in the household was sufficient to pay affordable rents with lifetime security of tenure in widely available council housing.
4) Mortgages could be handled by a single breadwinner since house prices varied between 2.5 & 3 times the average wage.Two years after graduating I bought a semi-d in a good Nottingham suburb, 3,300 on a salary of 1,500, multiple 2.2.
5) We had free secondary & third level education plus “non-replayable” maintenance grants where needed.
6)  Academic ability alone determined access to the expanding number of 3rd level places as the number of Universities doubled to 43 through the 1960s.
7) With a little forward financial planning international air travel became possible for average wage earners, my father & I visited the World Fair, NYC in 1963.
8) The normality of being able to find employment (remember unemployment less than 2%) gave one a certain degree of confidence which enabled some of our generation to voluntarilyemigrate with a stress-free belief that we would find work in our adopted country.
My comments above refer to Ireland North and South, London, Nottingham, Scotland and Australia where I have lived and worked. I emigrated to Australia 1973.
The  2 page PDF file, to follow, is my best attempt to understand how from the 1980s we started down a slippery slope.
The X & Y generations grew up being virtually force fed the doctrine of neoliberalism to the extent that it was considered entirely normal by them, as one PM said “there is no alternative”.
(The Boomers were subjected to the same propaganda but since most were busy paying off mortgages and raising families and generally “doing ok” little critical assessment of it took place.) It meant, minimal Government; low regulations especially in the financial sphere; low personal and corporation tax; privatisation of public resources & services built on the questionable narrative of private enterprise always being more efficient than public;  individual success to supersede society wellbeing based on the “free hand of the market” doctrine that if we all choose what is best for us individually the summation of these efforts would give us the best societal outcome; finally the value of just about everything was reduced to its market price.
There will always be inequality of outcome in societies even where strenuous efforts are made to achieve equality of opportunity, it’s the extent of the inequality which is the major issue. The current levels of inequality have become gross and unacceptable and from extensive research we know that societies with greatest levels of inequality perform less well and the general well-being of the large majority of its citizens suffer. Particularly well documented in The Spirit Level & its  follow up The Inner Level.
Should those of us who acknowledge that we have a growing problem be doing more to rectify the situation? We absolutely should; however we need to have some knowledge of the extent of the problem and an understanding as to how it came about. My attachment has helped me to more clearly understand the latter. What we do individually and/or collectively to resolve the former is more difficult.
Books referenced and recommended reading.
The Spirit Level, (2010) & The Inner Level (2018) R. Wilkinson & K. Pickett.
The Wealth of Nations. (2017) G Zucman
The Establishment. (2014) O Jones.
Treasure Islands. (2012) N Shaxman
The Great Tax Robbery. (2008) R Brooks
Why we can’t afford the rich. (2016) A Sayer
Injustice (2010) & The Equality Effect (2017) D Dorling
Capital (2014) R Piketty.
The Ragged Trousered Philanthropists (1914) R.Tressell (UK based)
The Jungle (1906) U Sinclair (USA based

 

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USA and China

USA and China. How do they compare economically?
Firstly let’s take a quick glance at the background of the two countries.
Most of us have a reasonably informed knowledge of the last 150 years of USA history from the conclusion of its civil war in 1865 when it agreed, at least in theory, to abandon slavery, through theRoaring Twenties into the Great Depression and subsequently F.D. Roosevelt’s introduction of the New Deal.
USA manufacturing boomed during and after WW2 and since none of these hostilities nor Vietnam War took place on American mainland their economy continued to boom throughout the 20th century. The extent to which it is continuing to boom during the first 2 decades of the 21st century is debatable and worthy of a separate essay.
Unfortunately the history most of us were taught was European centred with a sprinkling of the British Empire’s role around the world but with little Chinese content. Hence a little research was required.
While China never became a colony of any European power it was none the less almost treated like one. When Britain needed funds to finance the growing demand for tea from India it raised these funds by taking opium grown in India and aggressively selling it into China.
Eventually the Chinese decided this was not in the best interest of their people and tried to curtail the importation of the drug. This led to two Opium Wars 1839/42 and 1856/60 fought by China against Britain and France.
China not only lost both these wars but in the ensuing treaties (known as The Unequal Treaties) it lost various coastal territories and was forced to agree to commercial concessions which included the continuation of the importation of opium.
Not surprisingly the colonialist attitude of European countries towards China coupled with droughts and crop failures gave rise to much unrest finally resulting in a rebellion in 1899 led by a number of Chinese martial arts groups, which became known as the Boxer Rebellion.
The Boxers laid siege to an area of Beijing in which there were mainly foreigners and Chinese Christians. The commercial interest in China had grown to such an extent since the Opium Wars that an alliance of eight nations(America, Austro-Hungary, Britain, France, Italy, Germany, Japan and Russia) provided a force of 20,000 which not only lifted the siege but plundered the city and environs, executed suspected Boxers and government officials who may have supported them and extracted further concessions from China. Some of the conditions in the Boxer Protocol were that foreign troops were entitled to remain and China was required to compensate the eight nations for the “inconvenience” caused by paying them a total of 450 “taels” of silver, in 2018 prices about $10 Billion, over the next 39 years
Eventually the Chinese Qing dynasty was overthrown in 1911 and coincidently for the next 40 years Europe was embroiled in two World Wars and a variety of insurrections among their many colonies. This gave China a free reign to get on with its own troubled domestic affairs. In a civil war the Nationalists under Chiang Kai-shek (heavily supported by the USA) lost out to Mae Zedong and the Communist Party. This resulted in 1949 in the formation of the People´s Republic of China.
The Nationalist Government which retreated to the Chinese island of Taiwan continued to be recognised by the USA as the o cial government! It took 30 years until 1979 until they finally relented and President Jimmy Carter recognised the communist party government of the People´s Republic of China.
Fast forward to 21st century.
China’s extraordinary growth to become the 2nd largest economy in the world has been remarkable. Population-wise it is 4 times the size of America but more importantly over the last 30 years it has achieved GDP growth of between 6% and 9% compared with between 2% and 3% for the USA. It is only a matter of a couple more years until it easily becomes the world’s largest economy.
Deng Xiaoping who led China from 1978 to 1992 was committed to reforming the economy. His approach can be gauged from the famous comment he made, “it doesn’t matter if the cat is black or white as long as it catches mice”.
In order to maximise China’s advantage of having a growing abundance of cheap labour who were keen to leave the land and find work they decided 1) to become a low cost production facility for the rest of the world and 2) to offer companies from outside opportunities to set up in China and have access to their massive home market.
The deal was just too good for US companies to pass up, they could smell the increased profits which would come from access to such a huge growing market. Furthermore any mounting pressure for wages increases at home could be avoided by exporting jobs to low waged China. In reality American workers were now competing wage-wise with Chinese workers; there was ever only going to be one winner!
To somehow compensate American workers for their loss of jobs and for their zero real wage increases they would now have available cheap consumer goods from China. Walmart, Target and other companies became “Nationwide Distribution Centres” for Chinese factories.
Foreign companies were allowed, even encouraged, to set up business in China with two conditions,1) they must be in partnership with a Chinese company, be it a state entreprise, a private company or a hybrid combination of both. 2) they must share their technology. In return they had full access to a low paid willing workforce and to the Chinese domestic market.
Importantly the purchasing power of the Chinese market was growing in two ways, population growth and real wage growth, whereas in the US population growth, apart from immigrants, was minimal and more importantly real wages in USA were straight lining. While the purchasing power of US workers wages has stagnated for the last 30 years, real wages in the same period have quadrupled in China. Granted they were starting from a low base, but there’s a certain “feel good factor” when your wages increase year on year.
The current relationship between these two huge trading economies has been likened to a bad marriage without divorce as an option. While the Communist Party still rules the roost there has been a steady growth in new enterprises, some huge infrastructural projects nationally managed, others decentralised to the provinces and many small private companies. Interestingly if one considers capitalism to be a situation in which a small number of people at the top of an organisation control and make decisions regrading how it is run and managed and the large majority of the people work for a weekly wage, then there is a lot capitalist activity in China.
Back to the bad marriage analogy.
Over the years the scales have constantly tipped in favour of one party, China. Not only have they have taken millions of their people out of rural poverty, but they have acquired and developed technology and built up a massive manufacturing base.
America on the other hand have lost their once vibrant manufacturing base, poverty has not been significantly reduced and personal debt levels have ballooned as workers on stagnating wages borrowed to cope with increasing prices.
China is investing heavily in 3rd level eduction whereas every State in the Union bar one (N Dakota) has reduced support for public universities which account for 75% of USgraduates.
It gets worse.
China’s exports to USA have been consistently greater that their imports from the US. In American speak, a very negative trade balance. The imbalance in favour of China in 2018 was $379 Billion, there has never been a balance in USA’s favour since 1987.
The elephant in this dysfunctional family’s living room corner is… What does China do with their huge annual surplus of US dollars? Simple, who needs dollars? The USA. The Communist Party’s People’s Republic of China is currently a massive lender to the USA through its purchase of US Treasuries, known in Europe as Government Bonds. As with many a bad marriage the financial imbalance makes a split between USA and China well nigh impossible.
Trumps idea that America will benefit by the imposition of tariffs on Chinese imports is difficult to understand. A tariff is just another tax on an imported item. For example if an imported $10 shirt ffhas a 25% tari applied it will now cost the American consumer at least $2.50 more. Assuming the importer eventually imports less shirts this will hurt Chinese shirt factories, but will there be such a shortage of shirts as to cause an American company to get into shirt manufacturing? Fairly unlikely since folks who were used to buying the cheap imports are unlikely to pay the much higher cost of a locally make shirt.
The only obvious benefit to the USA is that the $2.50 tariff will generate additional income for the Federal Government. As I understand it the tariffs are China specific so what about the lots of other countries who will be very happy to offer cheap $10 shirts, such as Bangladesh, Vietnam, Cambodia, India etc. etc.
The greatest boost in the 2020 presidential elections that Trump could have would be a military victory; it’s sure not going to happen in Afghanistan; and he won’t take on the Chinese whom he has strongly criticised for their build-up in the South China Sea; hopefully he won’t start a war with Iran which Saudi Arabia is encouraging him to do. So perhaps he’s hoping for a Trade War victory

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A New Kitchen for 50 Euro !

I am promoting as widely as possible a Rocket Stove kitchen upgrade.
These 3 stone fires are normal family kitchens
This picture shows how 90% of rural Gambians cook on a daily basis.
1) It uses a lot of wood which has to be gathered on a very regular basis from surrounding forests.
2) It is very smokey since recently cut timber has a fair amount of sap in it.
3) In the 3 month wet season, it gets worse and exposure to the smoke & inhalation of it is greater since the fire is positioned under some kind of shelter from the rains. Lungs and eyes are badly effected by this toxic smoke.
4) The continual gathering of wood and deforestation means going greater distances to collect it and carry it back to their home.
5) A less talked about issue; since cooking is a female responsibility they also have the job of sourcing the wood which exposes them to the not unheard of problem of “being interfered with” while out alone in the forest.

A Rocket Stove positively addresses All of the above issues.
This picture shows such a stove which I built in our garden to prove the theory to myself.
1) It uses at least 80% Less wood.
2) The wood used is twigs and small branches thus avoiding cutting down large branches or whole trees. Gathering time is less and usually closer to the village.
3) Reduction in deforestation
4) There is NO Smoke (there is a tiny amount during the starting of the fire). Fire without smoke is a difficult concept to sell in rural Africa!
5) The temperatures are higher so cooking times are reduced.

Note the brick with the holes upon which the sticks are resting. This is its very secondary purpose, Its main and very critical purpose is to facilitate air being sucked in under the sticks.
As the updraft in the chimney area increases the intake of air increases and since the air comes in under the fire, as it rises up through the flames it is heated and causes the particles immediately above the flames to combust. These particles in a normal fire are the smoke, hence their combustion eliminates the smoke with the added benefit that when they combust the temperature they produce is significantly higher than the temperature of the flame itself !

It’s a no brainer but has been difficult to introduce, a possible lacking of my salesmanship. But this week I made significant progress.
Samba, of Bafaluto village finally took an interest in it.
Part of my problem in the past has been that anything and everything to do with cooking is the women’s responsibility and since building a Rocket Stove means acquiring (or making) bricks and doing very basic cementing, this type of work was not in the domain of the women.
My friend Samba bit the bullet and carefully built this Rocket Stove for his wife. She is delighted with it.

It took a while to convince him that the pot did Not need to be in contact with the flames (as it is in the 3 stone arrangement), but that in fact it needed to be above the flames to get the benefit of the extra heat from the combustion of the particles/smoke.
It’s now the talk of the village. My target this year is to get the Whole village, about 200 families, converted to Rocket Stoves

Diagram of the technology.

Samba is employed on a temporary basis as gardener at Banjul Airport earning 3,000 Dalasis per month, 55 Euro. The family´s stable diet of rice costs at least 1000 Dalasis per month, 19 Euro.
From personal knowledge of The Gambia, this is barely a subsistence wage, therefore I funded the costs of the 52 bricks & a small bag of cement for his Rocket Stove, just under 50 Euro. Great value for money!
Anyone want to treat another family or two to a kitchen upgrade?
Donations can be made via http://www.pingcharity.co.uk website

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Good News bits. One Irish, the other Worldwide

One person´s solution to Irelands housing, lack of housing, crisis.
A former soldier in Ireland has given his three-bedroom home to a young family who were on the waiting list for a new home for seven years.
Paddy Phelan gave up his social housing home to Kieran Ritchie and fiancee Lauren, and their two children who were living in a much smaller home.
Phelan, who lives in Abbeyleix, Co Laois, decided to leave the three-bedroom house he called home for 12 years and downsize to a one bedroom residence as he was “sick of seeing the amount of houses lying idle and families struggling.”
Phelan told The Independent: “I was hearing through the media about families crying out for houses and I was thinking to myself well here I am. I’m in a three-bedroom house and I think the right thing to do would be to downsize to a smaller house.
 
I’ll never forget the look on all their faces and to see how happy the children were. I’m happy for them and I can only wish them well. Please god it would send out a message to other people to consider.”
Phelan is encouraging others who are living in houses with unused bedrooms to consider downsizing, too.
“It’s a crying shame that these houses are lying basically idle,” he said. “People should seriously consider their position and accommodate a family if they can.”
_______________________________________________________
NASA Confirms Earth Is Greener Today Than 20 Years Ago
March 1, 2019
The world is a greener place than it was 20 years ago, and China and India can take a majority of the credit.

A new study from NASA shows that the two countries with the world’s biggest populations are leading the increase in greening on land. The effect stems mainly from ambitious tree planting programs in China and intensive agriculture in both countries.
This new insight was made possible by a 20-year-long data record from a NASA instrument (MODIS) orbiting the Earth on two satellites.
There are now more than two million square miles of extra green leaf area per year, compared to the early 2000s – a 5% increase

“China and India account for one-third of the greening, but contain only 9% of the planet’s land area covered in vegetation – a surprising finding, considering the general notion of land degradation in populous countries from overexploitation,” said Chi Chen of the Department of Earth and Environment at Boston University, in Massachusetts, and lead author of the study.
“When the greening of the Earth was first observed, we thought it was due to a warmer, wetter climate and fertilization from the added carbon dioxide in the atmosphere, leading to more leaf growth in northern forests, for instance,” said Rama Nemani, a research scientist at NASA’s Ames Research Center, and a co-author of the study. “Now, with the MODIS data that lets us understand the phenomenon at really small scales, we see that humans are also contributing.”

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Little by little changes Are coming.

If you’re stuck for time just jump to the short YouTube at the bottom for a good summary.

Back in 2005/06 few people were paying any attention to the role of tax havens in the looting of poor countries by kleptocrats and their assistants, and tax was a dirty word in most policy circles.
Tax Justice Network travelled extensively and listened to African tax officials regarding their biggest concerns.
1. Tax competition, and the dirty, corrupt tax deals that ministers were signing with big mining companies, in Burkina Faso, in Mali, in Niger, and across all of the world’s poorest countries.
2. Tax audit capacity. The [African revenue officials] were telling us, ‘We get these brilliant bright officials, we train them – and then they go and join the enemy. When we are up against these gigantic companies, we are totally outgunned by their legal teams.’ And of course the accountants too.
3. You might find a junior auditor with only three or four years of experience of complex transfer pricing issues going up against global companies with half a dozen top tax lawyers and accountants in their team. David against Goliath stuff.

How things are slowly changing; in the last week off Feb 2019 The Economist, hardly a left wing publication (major shareholders, Schroder,Investment Mgt. Cadbury owned by Kraft. Rothschild, Banking etc. Agnelli Family “The Kennedys of Italy”.) is running an article about a fairly new body called Tax Inspectors Without Borders (TIWB), a programme backed by the OECD and the UN Development Programme (UNDP) to provide tax assistance to hard-pressed revenue authorities in poorer countries, whose underpaid officials struggle to match the awesome legal and accounting firepower of the world’s multinationals.
This is a vast issue:
IMF research estimates that global profit-shifting by multinationals cheats the world’s treasuries out of around $600 billion a year, while the Tax Justice Network estimates $500 billion annually. Although high-income countries are the biggest losers in absolute terms, it is lower-income countries that are taking the biggest hit in terms of the share of lost revenue – which means that the likely human cost is highest in these places.

Clearly for things to genuinely change it will require international legal and accounting firms (Limited Liability Partnerships) to put “doing the right thing” if not above at least on the same footing as maximising fees and partners income. (Turkeys voting for Thanksgiving or Christmas keeps flashing across my screen).
In addition national governments in the developed world must take a more pro-active role in repatriating stolen billions to the the mainly 3rd world countries from which the funds were stolen. For an up to date account of international kleptomania I recommend.

The almost amusing little YouTube clip.

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