Has poverty Really been reduced So much ?

As nations attempted to recover from two devastating world wars within 40 years the good and the great of the victorious countries applied their minds to the myriad problems facing them. The European continent was on its knees, physically, economically and monetarily and in other parts of the globe the levels of poverty in restless colonies was crying out to be addressed.
Firstly, national and international institutions were established to tackle these various challenging issues and to ensure that we did not sleepwalk our way into WW3.
It would be remiss not to recall that after WW1 the League of Nations was established, its goals included “ disarmament, preventing war through collective security, settling disputes between countries through negotiation, diplomacy and improving global welfare.” Very laudable but clearly unachieved goals but to be fair many believe that the seeds of WW2 were planted in the terms and conditions of the Treaty of Versailles.
Moving along to the years immediately following the end of WW2, many of the institutions established then are still with us and continue to operate with varying and questionable degrees of success. Those major institutions are United Nations {UN}, International Monetary Fund {IMF}, World Bank {WB} and World Health Organisation {WHO}.
In addition to assist in the orderly transactions of international trade and payments the Gold Standard was agreed upon with the price of gold pegged at $35 an ounce, an arrangement which continued until 1971 when the cost of the US involvement in Vietnam became an major issue for them and eventually everyone else!
In Harry Truman’s inaugural speech, the first ever on television, he raised the issue of world poverty, “more than half the people of the world are living in conditions approaching misery, their food is inadequate, they are victims of disease and their economic life is primitive and stagnant”. As the only member of the Allies to come out of WW2 with its economy booming and with an intact monetary system he confidently continued “we must embark on a brand new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas,,,,,,,,,,,,it must be a worldwide effort for the achievement of peace, plenty and freedom”. If I could add sound to this note I’d stop right now and play the American National Anthem.
Various presidents and other world leaders have echoed these sentiments over the last 60 years. Poverty reduction programs and targets have been set, Millennium Development Goals agreed at UN level and an army of economists and statisticians have produced a tsunami of data to measure progress over the years.
At the first UN Food Summit in 1974 US Secretary of State Henry Kissinger promised “world hunger would be eradicated within a decade”. Well we know that didn’t happen by 1984 and 45 years further on we know it still hasn’t happened.
Fast forward to 2015 when the UN published its Final Report on the Millennium Development Goals in which it boasted that the poverty rate had been halved since 1990. As with most reports and statistics the devil is in the detail which the authors can be fairly sure the majority of readers will not delve into too deeply. Most of the media in the developed world read this as a positive summary, condensed it into a warm and fuzzy headline and then moved on quickly to find a more digestible circulation boosting news piece.
Without getting into nitty gritty figures too much there are 3 main problems with the UN good news report.
1. The majority of poverty reduction was achieved in two areas China primarily, then India and East Asia whose economies had grown as they became the busy workshops producing cheap products for the developed world. EG. China has a world wide distribution network of 8,500 stores {5,400 in USA} provided by Walmart, and that’s only one company’s distribution network.
How about my old favourite? Inditex has 7,300 stores worldwide selling clothes made mainly by women earning peanuts so we can all have cheap disposable fashion. {Zara, Bershka, Massimo Dutti, Pull and Bear, Stradivarius, Oysho, Uterque and Zara Home}. Bangladesh has over 5,000 garment factories employing over 4 million workers who received a huge wage increase of 51% in Dec 2018 taking their monthly wage to $95! As I write this note tens of thousands of them are on strike asking for a liveable wage of at least $160. Working weeks can be 6 days of up to12 hours.

2. The MDGs (Millenium Development Goals), as the name suggests, were drawn up at the turn of the millennium so why was 1990 chosen as the start date to compare progress? Why not the logical date of 2000 or even 1980?

This diagram from the World Bank gives us a clue. 1990 is clearly the date which shows that developing countries were much worse off than in either 1970 or 1980.
Loans and interest in 1970 represented 55% of all debt, by 1980 this was 65% and by 1990 85%, thus leaving only 15% available for imports {often food} and reserves.
This diagram is from a World Bank Report, a later 2010 report shows the 1990 $281Bil figure to have ballooned out to 4 Trillion!! Repayments are $1.5 Bil per day.
Best advice from gurus at IMF and WB has been “tighten your belt”, the people in these most indebted countries cannot even afford a belt!

3. Perhaps the most questionable aspect of the WB, IMF and UN’s claims of success in reducing numbers living in poverty is that they are measuring the numbers living on $1.90 a day. The 2005 figure of $1.25 and eventually $1.50 was again upgraded to $1.90 in 2011 to reflect that one needed $1.90 in 2011 to buy the same basket of goods which could be bought for $1.50 in 2005.
Since most of us have travelled to and experienced life in developing countries we have a realistic idea of just how far $1.90 will take you. While you reflect on that, I’ll cut and paste a Paragraph from The Universal Declaration of Human Rights.
“Article 25.
(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
(2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.”

While the adjoining Chart is from 2005 it gives a general picture of how many in the world have to live on so little. Extensive research I have looked at suggests that at $5.00 a day close to 50% of the world could not experience the kind of life described in the above Article 25.

Posted in Odd Bits, Politics, USA | Leave a comment

A “Little talked about” Tax

Since less than 1% of estates in USA and less than 5% in UK pay any inheritance taxes one would expect that well over 90% of the general population would support having such a tax.
Strangely this does not seem to be the case; I believe that’s due to those with most power in our society (usually those with most money) carefully and cleverly promoting the notion that it is somehow basically an unfair tax involving “double taxation”.
Carnegie, the great Scottish philanthropist had it about right — ‘The parent who leaves his son enormous wealth generally deadens the talents and energies of the son and tempts him to lead a less useful and less worthy life than he otherwise would.’ A damper on the incentive to work hard? The majority of us have worked over the years because we needed the money, full stop.
If we hadn’t needed the money would we have worked as hard? I doubt if I would have, but I might have had more fun though.
Double Taxation is more an emotive than an accurate term when it is used with regard to Inheritance tax..
When your money is passed on, You will have paid tax on it once and since You´ll be dead you will not pay tax a 2nd time.
When the recipient receives it He/She will pay tax on it for the First time.
However in your life time you will be regularly subjected to double taxation and no big issue is normally made of it. You pay VAT/IVA on everything you buy using funds already taxed. When you fill the car there’s fuel tax, buy a property there’s Stamp duty etc, all instances of real double taxation.
A few other thoughts.
1) Where there are significant funds to inherit the chances are that the potential recipients have already been “ lucky winners in a sperm lottery”, they’ll have had a safe and secure home, a good diet, a good education, good healthcare and a fair range of beneficial life experiences.
2) Where there are a number of siblings is it always fair to split the inheritance equally?
If the kids have all worked diligently but some of them may just have done better, been lucky in their employment or “married well”, do they need as much help as one who, through no apparent fault of their own, has fallen on hard times and is clearly struggling to cope or bring up their own family.. a “a winner versus someone genuinely struggling” situation in which I believe parents should have the cajones to confront. An equal division can be a easy cop out.
Dividing up unearned wealth can also fertile ground for inter-sibling rivalry, and generally the more dosh involved the greater the potential rivalry.
3) In the case of large, probably inherited, land estates, a strong inheritance tax would help to bring that land or at least some of it on to the market and possibly achieve a more equitable distribution of a scarce finite resource.
4) Inheritance taxes are a source of Govt income; if denied this income they will have to make it up by raising current tax levels, eg. income and various other double taxing charges such as VAT, fuel tax etc Also the more collected from Inheritance taxes the less will be the tax burden on the current workers and wealth-creating entrepreneurs.
5) Just because the Very rich, such as Ratcliffe, Branson, Dyson etc can pay a Big Four to hugely minimise their inheritance tax payments is not a reason for doing away with it. I would argue the very opposite, we should legislate to make if much more difficult for them to avoid/evade it.
6) Where one really does not want have the beneficiaries pay any tax on this unearned income it is possible to gift funds to them and providing this is done at least 7 years before the donor falls off the perch there will be no inheritance tax. This kind of legal tax avoidance has the added benefit of getting currently available funds into the hands of recipients when they probably most need it (Mortgages, young families etc) and when they will most likely spend it, thus get it into circulation rather than it sitting, often unproductively but definitely earning low interest in a bank account.
I suspect there are other arguments in favour of Inheritance tax, I just can’t think of them at the moment.

Posted in Odd Bits, Politics | Leave a comment

PS. An opinion on Davos. {A.Chakrobortty, Guardian}

No natural force created this intense unfairness, the growing global inequality in wealth and incomes, the recent Oxfam report graphically highlights it.
The gulf between the super-rich and the rest of us did not gape wide open overnight. Rather, it has been decades in the widening and it was done deliberately.
The UK was the frontline of the war to create greater inequality: in her first two terms as prime minister, Margaret Thatcher “more than halved the top rate of income tax” paid by high earners. She broke the back of the trade unions. Over their 16 years in office, Thatcher and John Major flogged off more public assets than France, Italy, Spain, Germany, Australia and Canada put together.
Oh, shrug the Davos set, that’s ancient history. It is no such thing. Thatcher may be gone but her ideology keeps on taking cash out of your pay packets.
If workers today got the same share of national income as in the 70s, we would be far better off. According to calculations from the Foundational Economy collective of researchers, a full-time employee now on the median salary of £29,574 would get a pay rise of £5,471.
Meanwhile, FTSE bosses enjoy skyrocketing pay, precisely because bonus schemes give them part-ownership of the big companies they run. So Jeff Fairburn of the housebuilder Persimmon took £47m in 2018 before getting the boot, which works out at £882 for each £1 earned by an average worker at the firm.
Where Thatcher’s shock troops led, the rest of the west more or less followed. Political leaders across the spectrum gave the rich what they wanted. It didn’t matter whether you voted for Tony Blair or David Cameron, Bill Clinton or George W Bush, either way you got Davos man. They cut taxes for top earners and for businesses, they uprooted the public sector to create opportunities for private firms, and they struck trade deals negotiated in secret that gave big corporations as much as they could ever dream of.

Posted in Multinationals Activity, Politics | Leave a comment

Israel and Palestine.

The one word and one image which comes to mind every time I read of spates between these two peoples are “proportionality” and “David and Goliath”.
“Echoing his friend Donald Trump, Mr Netanyahu has told reporters that Israel can choose its leadership only at the ballot box and not through legal investigations, which are a “witch-hunt”.
Like the US president, the message from Mr Netanyahu is that democratic norms, those unwritten rules of toleration and restraint, are for the weak, not for the strong.
Yet without robust norms, constitutional checks and balances are less mainstays of democracy than a mirage.”

The Guardian view on Israel’s democracy: killing with impunity, lying without consequence? | Editorial


Posted in Odd Bits | Leave a comment

Davos, World Economic Forum. Jan 2019

This very week the good and the great {100 state leaders, and at least 1,000 business leaders and “special invitees”, {eg Prince William?  David Blaine illusionist and thrill seeking performer? and the odd film star} are gathering in Davos, at the World Economic Form, whose stated aims are “to make progress happen, to improve the state of the world by encouraging influential people to meet and work together”.
Looking at some of the numbers involved, to attend you have to be a member of the WEF, a “run of the mill member” costs $52,000 pa, an Industry Partner $260,000 pa and there are higher categories of Strategic Partners at crazy prices, in addition a ticket cost for the 4 day event itself costs another $28,000, of course then there’s travel, accommodation and drinkies!
For a Complete list of those attending

A little background. Davos refers to the Alpine village in which the World Economic Forum has been meeting for the last few years. The original gathering commenced in 1971, HQ Geneva and was the European Management Forum, the new title WEF was adopted in 1987. In addition to the aims stated above its PR blurb boasts that it has been “a catalyst for global initiatives historic shifts, industry breakthroughs, economic ideas and thousands of projects.”
Lets have a broad overview of where the WEF has helped us to get to in the 47 years since 1971. There are not many organisations who take a global view of the economic health of the world but two which I will use to provide reliable information are the UN, specifically UNHCR, its Commission for Refugees and Oxfam.
The UNHCR estimates that in 2018 the total number of displaced people in the world was about 68 Million, roughly the population of the UK. There is a multitude of reasons why so many are displaced but it will help you to understand the reasons if you use my old guidelines of 1. Follow the money and 2. Who are the Winners and Who are the Losers?

UNHCR. 2018 Displace People. 68 Milliom

Her World. Our World ?

Oxfam has just released its latest report which gives an up to date overview of how successful we have been in achieving widely agreed upon goals such as reducing poverty and hunger and establishing conditions in which people have a fair opportunity to live a healthy and fulfilling life.
Numbers living in absolute poverty have indeed fallen world wide, however this statement deserves closer examination. Most of the reduction happened in China and India and thats wonderful, however other areas of the world has got worse! EG. Nigeria whose population is 190 Million has 87 Million, almost 50%, living in extreme poverty. In the DRC 60 Mil, 72%, of its 83 Mil live in extreme poverty.
The other important caveat when analysing these poverty figures is, how is absolute poverty measured? A widely accepted figure is the numbers living on $1.25 or $2.00 a day. Realistically this level of income would hardly keep body and soul together.

If we accept a meaningful figure of $4 or $5 a day the numbers in poverty balloon by hundreds of millions. As a basis of some comparison, the 3.6 Mil garment workers in Bangladesh got their first negotiated pay increase since 2015 in December 2018. It was a 51% increase taking their monthly wage to $95. The best estimate of a living wage in Bangladesh is $160 a month. I cannot resist mentioning that Europe’s richest man is the owner of Inditex, its brands are Zara, Stradivarius, Berksha and a few others. Could we afford to give these Bangladeshi women a decent pay increase?
In another part of the world Mexico, recent calculations show that if Mexican garment workers had their wage doubled it would add less than 2% to the cost of a $100 garment in USA.

Reverting to the billionaires and heavy hitting millionaires of the world in Davos figuring out how to “steady the ship”, just as OXfam’s Report highlighted that the 26 wealthiest folk have more wealth than the bottom 3.8 Billion of the world, and in 2018, the wealth of billionaires in general {not just those 26} grew by 12% and to complete the story the above mentioned 3.8 Billion saw their store of wealth fall by 11%. If this 3.8 Billion and their supporters became restless I can imagine the ship could become fairly unsteady. Throughout 2018 a new Billionaire was created every 2 days, in the 10 years since the crisis their numbers doubled, in a decade of very low inflation.
This is not the first time I have tried to understand what Davos meetings achieve and it is now my considered opinion that it amounts to little more than the Champions League of networking events for Fat Cats, a socialising institution for the emerging global elite, globaliation’s ‘Mafiocracy’ of bankers, industrialists, oligarchs, technocrats and politicians.
“They promote common ideas, and serve common interests: their own”.
I morally support those who make the effort to demonstrate at its meetings, protesters who believe organisations like the Forum, the International Monetary Fund, the World Bank and the World Trade Organisation, exacerbate poverty and environmental destruction by promoting corporate interests and profit-driven business practices over humanitarian concerns.

Posted in Multinationals Activity, Politics | Leave a comment

Harvard University.

A little item I picked up regarding Harvard. We are talking about the richest University in the world, value of its investment bursary for financial year end 2017 was a whopping $37 Billion. These funds are managed through a Harvard investment group and the value of the bursary is now slightly higher than it was before the 2008 crash, so they have recovered well.

About 2 years ago Harvard launched a fund raising drive, quite separate to the activities of the management of their $37 Billion, a drive to raise additional funds. That drive is just about concluded and to date you may be surprised to learn, or even astonished as I was, that the total value of “gifts”[Harvards term] contributed by 155,000 wealthy families came to $9.4 Billion! I believe being charitable is a good thing Period.

I think its fair to refer to these families as wealthy, the average gift was just north of $60,000. These gifts are tax deductible, both at state and federal level, for these families, that’s the law. Depending on what level of state and federal taxes one counts,  the taxes saved equal between $2.5 and $3 Billion. As I’ve often said, where movement of funds is concerned always ask, Who are the winners and Who are the losers.

The Winners in this case are quite clear, firstly the richest University in the world,and one of the most exclusive, picks up $9.4 Billion. Secondly the 155,000 wealthy families save billions in taxes.

The Losers are the state and federal governments who will now have between $2.5 & $3 Billion less to spend on provision of services, educational facilities, infrastructure and various public works.

It is very much an individual value judgement as to whether it’s better for these families to save on average at least $15,000 each while helping Harvard or whether the state and federal authorities could have made better use of these funds.

Posted in Odd Bits, USA | 1 Comment

The Big Four Family Trees

An update on where they came from. Much of their growth has come from mergers and / or takeovers.

However they got to where they are, they have become way too dominant but there is a serious head of steam building up to have them broken up. Way overdue in my opinion.  I will add a blog soon on the sneaky way by which they moved from being Partnerships to being Limited Liability Partnerships.



Posted in The Big Four | Leave a comment