Change the Conversation

A revamped wealth tax could fuel the Covid-19 recovery

With Covid-19 support schemes increasing governments’ debt burdens, countries are in search of tax receipts. Wealth taxes mean the rich are taxed on the assets they own rather than their earnings. A smart approach to wealth taxes could boost innovation and investment. Earlier this month, Millionaires for Humanity, a group comprising 83 of the world’s richest people, called on governments to increase their taxes in the wake of COVID’s economic fallout. The idea is promising but to be truly successful it must be implemented in such a way that gains broad support from the rich. Otherwise, it will simply incentivise them to take their capital – and their residency – elsewhere. Wealth taxes – where the rich are taxed on the assets they own rather than their earnings – represent one of the most popular new policy ideas in the last year. American senators Elizabeth Warren and Bernie Sanders both suggested the idea in their respective campaigns for the 2020 Democratic party primary. In the UK, the opposition Labour party has made a wealth tax one of its flagship policies, with public debt reaching record-breaking levels due to COVID-19 relief schemes. Despite strong arguments and some high-profile advocates for wealth taxes, many countries have in fact moved away from them recently. In 1990, 12 OECD countries had a wealth tax. By 2018, it was intact in only three countries. This is, in part, explained by poor economic returns from wealth taxes. French economist Eric Pichet estimated that France lost double the actual revenues they gained from their version of the wealth tax due to capital flight – it was abolished in 2017. It seems that the only effective wealth tax is a wealth tax “by consent”. Left-wing support for wealth taxes can create the impression that they are an attack on capitalism. But smart wealth taxes can […]

Abolish Silicon Valley: How to Liberate Technology from Capitalism

by Wendy Liu Former insider turned critic Wendy Liu busts the myths of the tech industry, and offers a galvanising argument for why and how we must reclaim technology’s potential for the public good. Innovation. Meritocracy. The possibility of overnight success. What’s not to love about Silicon Valley? These days, it’s hard to be unambiguously optimistic about the growth-at-all-costs ethos of the tech industry. Public opinion is souring in the wake of revelations about Cambridge Analytica, Theranos, and the workplace conditions of Amazon warehouse workers or Uber. We’re starting to see the cracks in the edifice, as we realise that the wealth that the tech industry is so good at creating is neither sustainable nor always desirable. Abolish Silicon Valley is both a heartfelt personal story about the wasteful inequality and unsubstantiated lies of Silicon Valley, and a rallying call to engage in the radical politics needed to upend the status quo. Going beyond the idiosyncrasies of the individual founders and companies that characterise the industry today, Liu delves into the structural factors of the economy that led to Silicon Valley in its current form, and links them to the economy at large. Ultimately, she proposes a more radical way of developing technology, where innovation is conducted for the benefit of society at large, and not merely to enrich a select few.

Media have helped create a crisis of democracy – now they must play a vital role in its revival

Denis Muller, Senior Research Fellow, Centre for Advancing Journalism, University of Melbourne. In May 2020, with the world still in the grip of the coronavirus pandemic, Margaret MacMillan, an historian at the University of Toronto, wrote an essay in The Economist about the possibilities for life after the pandemic had passed. On a scale of one to ten, where one was utter despair and ten was cautious hopefulness, it would have rated about six. Her thesis was that the future will be decided by a fundamental choice between reform and calamity. She saw the world as being at a turning point in history. It had arrived there as a result of the conjunction of two forces: growing unrest at economic inequality, and the crisis induced by the pandemic. It was at such times, she argued, that societies took stock and were open to change. Such a time, for example, was in the immediate aftermath of the second world war, which resulted in radical reforms to international political and economic frameworks. She was writing against a backdrop of a larger crisis – the crisis in democracy. The most spectacular symptoms of this were the election of Donald Trump as president of the United States and the Brexit referendum. Both occurred in 2016, and both appealed to populism largely based on issues of race and immigration. In the four years since, many books have been written on this crisis, among them Cass Sunstein’s #republic, Steven Levitsky and Daniel Ziblatt’s How Democracies Die, and A. C. Grayling’s Democracy and its Crisis. Then, somewhat surprisingly, in May 2020 a new spirit of what might be called “economic morality” announced itself. This came from within the Republican Party of the United States. It happened while Trump, that most amoral of Republican presidents, was in office, and reasserted some of the […]

Targeted: The Cambridge Analytica Whistleblower’s Inside Story

Full Title:Targeted: The Cambridge Analytica Whistleblower’s Inside Story of How Big Data, Trump, and Facebook Broke Democracy and How It Can Happen Again By Brittany Kaiser In this explosive memoir, a political consultant and technology whistleblower reveals the disturbing truth about the multi-billion-dollar data industry, revealing to the public how companies are getting richer using our personal information and exposing how Cambridge Analytica exploited weaknesses in privacy laws to help elect Donald Trump—and how this could easily happen again in the 2020 presidential election.When Brittany Kaiser joined Cambridge Analytica—the UK-based political consulting firm funded by conservative billionaire and Donald Trump patron Robert Mercer—she was an idealistic young professional working on her fourth degree in human rights law and international relations. A veteran of Barack Obama’s 2008 campaign, Kaiser’s goal was to utilise data for humanitarian purposes, most notably to prevent genocide and human rights abuses. But her experience inside Cambridge Analytica opened her eyes to the tremendous risks that this unregulated industry poses to privacy and democracy. Targeted is Kaiser’s eyewitness chronicle of the dramatic and disturbing story of the rise and fall of Cambridge Analytica. She reveals to the public how Facebook’s lax policies and lack of sufficient national laws allowed voters to be manipulated in both Britain and the United States, where personal data was weaponized to spread fake news and racist messaging during the Brexit vote and the 2016 election. But the damage isn’t done Kaiser warns; the 2020 election can be compromised as well if we continue to do nothing. In the aftermath of the U.S. election, as she became aware of the horrifying reality of what Cambridge Analytica had done in support of Donald Trump, Kaiser made the difficult choice to expose the truth. Risking her career, relationships, and personal safety, she told authorities about the […]

America can change direction

What a puzzling place America is. Full of great talent in the arts, music and creative in the world of technology and innovation. And yet, they are run by a man who does not inspire and is rapidly leading his country into disrepair. With an election due it is outrageous that Donald Trump can be re-elected. Will all the people who voted for him last time vote for him again? Can Americans be so disillusioned that this is the man for four more years in office? The world and America does not deserve this result. However, when you consider the Democratic alternative in Joe Biden you really wonder where the Obama, the Kennedy appeal is hiding? When the Democratic Party were choosing, searching for their candidate they had some with genuine potential…and yet they have ended up with a 70 year old, conservative white man without charisma. Maybe it is that America has never been truly and greatly led by only a few…the likes of Obama and Eisenhower. However it goes in November, we may well be experiencing the demise of the land of the free. There are so many complexities in their way of life, that cause inequality and bafflement. The biggest one is the irrational thinking of voters who elected Trump to office. If you are reading this in the USA, it seems that you can only vote for Joe Biden as the best of the two options. Good luck to you all! Next time choose a forty-something, charismatic leader who will inspire and lead with policies for a free and equal society, not one based on priviledge for a few, at the cost of the many.

Rebuilding fairly will be a global challenge

Since the Indian Ocean tsunami of 2004, disaster recovery plans are almost always framed with aspirational plans to “build back better”. It’s a fine sentiment – we all want to build better societies and economies. But, as the Cheshire Cat tells Alice when she is lost, where we ought to go depends very much on where we want to get to. The ambition to build back better therefore needs to be made explicit and transparent as countries slowly re-emerge from their COVID-19 cocoons. The Asian Development Bank attempted last year to define build-back-better aspirations more precisely and concretely. The bank described four criteria: build back safer, build back faster, build back potential and build back fairer. The first three are obvious. We clearly want our economies to recover fast, be safer and be more sustainable into the future. It’s the last objective – fairness – that will inevitably be the most challenging long-term goal at both the national and international level. Economic fallout from the pandemic is already being experienced disproportionately among poorer households, in poorer regions within countries, and in poorer countries in general. Some governments are aware of this and are trying to ameliorate this brewing inequality. At the same time, it is seen as politically unpalatable to engage in redistribution during a global crisis. Most governments are opting for broad-brush policies aimed at everyone, lest they appear to be encouraging class warfare and division or, in the case of New Zealand, electioneering. In fact, politicians’ typical focus on the next election aligns well with the public appetite for a fast recovery. We know that speedier recoveries are more complete, as delays dampen investment and people move away from economically depressed places. Speed is also linked to safety. As we know from other disasters, this recovery cannot be completed as long as the […]

How the gig economy can transform farms in the developing world

For truly modern agriculture, we need to look to the skies. Because that’s where drone technology will work its magic. Drones will have a particularly powerful impact in the developing world, whose mostly smallholder farmers face enormous challenges producing quality food and selling it for a decent price. The green shoots of this transformation are already sprouting. In the People’s Republic of China, farmers are using drones for crop-dusting. Affordable, locally manufactured drones can spray pesticides across huge areas, helping to cut labour and equipment maintenance costs. They also get the job done fast – over 500 acres per day. Developing countries in Asia should try to anticipate the future uses of drone technology. Drones make precision farming a reality. They can carry out surveys like infrared mapping to gather crucial information like crop condition, costing farmers as little as $5 per acre. With the survey data in hand, the farmer might be able to boost crop yields by 20%. The time spent doing the surveys is reduced from a couple of days to a couple of hours. Image: Nesta Drones are reshaping agriculture in developing countries. The farm sectoremploys most people in developing countries but is arguably the most difficult to transform. In these countries, agriculture doesn’t contribute as much as it should to gross domestic product because it’s typically not competitive. Most farms are small and unproductive. Young people are leaving in search of city jobs that provide higher salaries. Farms are being abandoned or left to the elderly who toil alone in the fields. Drones could make farming easier and more profitable for those who still work the land, and even attract youth back from the city. They can also be part of the solution to possible food shortages as more nimble, profitable smallholder farms produce more affordable […]

The last thing companies should be doing right now is paying dividends

The economic heart attack induced by COVID-19 has revealed an ugly truth – many very large companies have too little cash to ride out sharp downturns. Cash flow variability, and the inability to retain earnings to buffer that variability, is one of the most common reasons small businesses fail. Because large companies have raised large amounts of cash through public offers, and take in large amounts of cash in their ordinary operations, they ought to be more resilient. Yet even though the pandemic-inspired shutdowns are mere weeks old, many big companies such as Virgin Australia and listed childcare providers are already pleading for or receiving public guarantees and bailouts. Other companies such as Flight Centre and Cochlear are rushing to raise extra funds though discounted share placements. Bond and debt markets are experiencing severe problems, making it difficult for these companies to borrow. Why are big companies so vulnerable? Catastrophic declines in cash flow are only half the story. The other half is the three-decade focus on maximising shareholder returns. Companies have used four strategies to keep their share prices high and push them higher. First, they have paid out profits to shareholders in the form of dividends, leaving them with less to build cash buffers, pay higher wages and reinvest in the business. Reserve Bank research shows that over the past three decades dividend payouts have trended up over time to more than 80 cents of every dollar of corporate profits. In some companies dividends payouts exceed 100% of profits. Second, the same Reserve Bank research points to the increased use of share buy-backs and dividend reinvestment plans. The former boosts share prices by shrinking the stock of shares. The latter boosts demand for that stock. Third, to lock in these historically high dividend payout ratios, shareholders, including institutional shareholders such as superannuation funds, have demanded boards agree to dividend guarantees. […]

How do economic crises end?

The Issue We are now in the acute economic phase of a crisis that is unprecedented in modern times — a health crisis from the coronavirus pandemic that has sparked a follow-on economic crisis. The virus represents both a supply shock (as people are forced not to work and supply chains are disrupted by the need for social distancing) and a demand shock (as incomes plunge, people are unable to go out, and economic uncertainty surges). Moreover, these shocks have put severe strains on the financial system. Against this backdrop, the economic outlook has darkened considerably since the pandemic burst into public view, and many macro forecasters now expect a deep and painful recession as economic activity is abruptly curtailed. While much remains unknown about the spread and severity of the coronavirus crisis, and even though there are clear differences from the current situation, we can look at two past economic crises — the Financial Crisis and the Great Depression — to draw lessons. History suggests that two ingredients are needed to stanch the acute phase of an economic crisis; a transparent resolution of the underlying cause of the crisis and a dramatic economic policy response that both mitigates the economic damage and causes a shift in business and consumer sentiment. History suggests two ingredients are needed to stanch the acute phase of an economic crisis; a resolution of the underlying cause and a dramatic economic policy response that mitigates the economic damage and causes a shift in sentiment. The Facts: The Great Depression began with a financial panic that was ignited by the stock market collapse in October 1929. That panic quickly led to a run on banks and many bank failures. Indeed, the number of banks operating in the United States at the end of 1933 was down by almost half from its […]

The World: A Brief Introduction

An invaluable primer from Richard Haass, president of the US Council on Foreign Relations, that will help anyone, expert and non-expert alike, navigate a time in which many of our biggest challenges come from the world beyond our borders. Like it or not, we live in a global era, in which what happens thousands of miles away has the ability to affect our lives. This time, it is a Coronavirus known as Covid-19, which originated in a Chinese city many had never heard of but has spread to the corners of the earth. Next time it could well be another infectious disease from somewhere else. Twenty years ago it was a group of terrorists trained in Afghanistan and armed with box-cutters who commandeered four airplanes and flew them into buildings (and in one case a field) and claimed nearly three thousand lives. Next time it could be terrorists who use a truck bomb or gain access to a weapon of mass destruction. In 2016 hackers in a nondescript office building in Russia traveled virtually in cyberspace to manipulate America’s elections. Now they have burrowed into our political life. In recent years, severe hurricanes and large fires linked to climate change have ravaged parts of the earth; in the future we can anticipate even more serious natural disasters. In 2008, it was a global financial crisis caused by mortgage-backed securities in America, but one day it could well be a financial contagion originating in Europe, Asia, or Africa. This is the new normal of the 21st century. The World is designed to provide readers of any age and experience with the essential background and building blocks they need to make sense of this complicated and interconnected world. It will empower them to manage the flood of daily news. Readers will become more […]

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