Wednesday 19 October 2011

Sunday 16 October 2011

Sun Shines Over Half the World

Puerta del Sol, May 20, 2011 [1]

This is how Spain's El País reported (16-10-2011) the occupation of Puerta del Sol in Madrid:
"The Puerta del Sol [Sun's Gate] overcrowded; people together, excited, chanting against banks and politicians; the people, the euphoria. The 15-M [Spanish indignants: indignados] had yesterday a new historic day. And this is the third in its short existence, barely five months old. The movement born of outrage in the streets in Spain exported its protest to half the world: Tokyo, Sydney, Auckland, Kuala Lumpur, Buenos Aires, Santiago de Chile, Los Angeles, São Paulo. (...)
"In the crowded assembly of the Puerta del Sol it was released the figure of half a million attendees. In Barcelona, the authorities spoke of 60,000, while organizers claimed it was 400,000." (My translation. See here)
And this is what The Economist had to say (14-10-2011) about the Indignados:
"THERE was no rock-throwing or tear gas, but on July 9th Spain's polite 'indignant' protesters still chalked up a victory. After being endorsed as the ruling Socialist Party's candidate for prime minister in the election due by next March, Alfredo Pérez Rubalcaba used his acceptance speech to propose electoral reform. This might not sound much. But Mr Rubalcaba's call for Spain to adopt Germany's voting model, so as to install proportional representation but still let people choose their local deputies, was a direct sop to the movement that spontaneously occupied city squares in mid-May, claiming that the politicians 'don't represent us'." (See here)

Image Credits
[1] Puerta del Sol, Madrid. 20-05-2011. Wikipedia

Saturday 15 October 2011

Capitalism without Sugar Coating

A colourful outside: what's inside? [1]
A few days ago (October 11, 2011) the BBC published "Where Child Sacrifice is a Business", by Chris Rogers. BBC News, Kampala:
"The villages and farming communities that surround Uganda's capital, Kampala, are gripped by fear. (...)
"In playgrounds and on the roadside are posters warning of the danger of abduction by witch doctors for the purpose of child sacrifice.
"The ritual, which some believe brings wealth and good health
(...) has re-emerged, seemingly alongside a boom in the country's economy".
The idea is that a "customer", resolute to achieve business success and wealthy enough, pays the witch doctor his apparently considerable "fees", in exchange for his "consulting services":
" 'There are two ways of doing this,' he [Awali, i.e. the alleged witch doctor] said. 'We can bury the child alive on your construction site, or we cut them in different places and put their blood in a bottle of spiritual medicine.'
"Awali grabbed his throat. 'If it's a male, the whole head is cut off and his genitals. We will dig a hole at your construction site, and also bury the feet and the hands and put them all together in the hole'."
This is what the search for profit and business success looks like in Uganda.

Mind you, things are much different in developed nations, right?

Judge by yourself, after this passage, from last Monday's Four Corners ("Sex Slavery", by Sally Neighbour and Peter Cronau, 10-10-2011, joint investigation Fairfax Media/ABC Four Corners):
SALLY NEIGHBOUR [reporter]: "What about the men who pay to have sex with these women? Have you got a message for them?"
[Australian Federal Police, Human Trafficking Unit]: "I absolutely do have.
"They want to be careful, because if they knowingly go into these situations and knowingly use somebody who is subject to slavery, they can find themselves at the end of a criminal charge.
"And I would have no hesitation - and indeed would relish the opportunity - of locking anybody up that was actually involved in that knowingly. It's disgraceful.
"That's the market. That's where the profit is."
That's capitalism without sugar-coating. As Neighbour put:
SALLY NEIGHBOUR: "Like most businesses the flesh trade survives on consumer demand. A key reason why sex trafficking thrives is that customers want Asian women, who are reputed to be more submissive and more compliant with demands such as unsafe sex."


Further Information:
The Four Corners Sex Slavery report contains additional information (see bottom of the page). It links to abundant recent written coverage of the topic (largely by Fairfax Media), including the alleged murder of Australian citizen Abraham Papo, and to institutions focused on fighting slavery in general (apart from sexual slavery, there is labour slavery, not covered in this news item).
To report a suspected case of human trafficking, call the Australian Federal Police on 131 AFP (free call), or Crime Stoppers on 1800 333 000.
I don't know if there is something that can be done about the Ugandan murders.

Congratulations to the BBC Kampala bureau, Fairfax Media and the Four Corners team for their courageous reporting.

Image Credits:
[1] Multicolored chocolate buttons. Wikipedia.

Friday 14 October 2011

Occupy Sydney Day 1

Saturday October 15.

14:38 I arrived at Martin Place Train Station.

After a rain that lasted all night and continued through the morning, a magnificent Sydney springtime afternoon (22 C).

More people than I expected, to be honest.

At the lousy loudspeaker, a lady on a wheel chair. I couldn't quite catch her meaning, but she was speaking about Aboriginal issues.

Many attendants were quite young, with that nice middle-class kid and uni student look to them. Big smiles in their faces. It's hard to believe, but once I probably looked like that.

Mostly lefties (from all flavours: tiny groups, micro-groups. atomic-size groups), but some "libertarians", as well. You could tell them because they were more serious, as befitting Young Liberals, I guess.

But there were other people too. Some older, probably long-time left-wing militants; middle-aged migrants protesting the Iran regime, or supporting this cause or that; refugee supporters, working-class looking people, including Maritime Union members; young backpackers and other more adult tourists speaking German and some Scandinavian language; some young Asian tourists having great fun, raising their fists clenched and laughing; ordinary looking people, pushing prams.

The Maritime Union stocky guy spoke well, very articulate and with excellent pronunciation: he did not really need a loudspeaker.

No apparent Greens or mainstream parties representation. Many cameras, but not a single one seemed to be mainstream media. No TV network vans.

Plenty of police around, but without riot gear and a rather relaxed air to them. Some of them were smiling: the nice weather, I tell you.

A group of well-dressed Caucasian adults were seating along Macquarie Street, away from the crowd, when a lefty militant distributing fliers approached them. Suddenly, one of the well-dressed guys, overweight, fortish, started yelling at the lefty: "why don't you ask for airstrikes against Syria?".

His companions, perhaps a bit uncomfortable with the attention they were attracting, tried to calm him down, but fatso would not stop. Finally, they and the lefty militant left him seating there.

There were also some Lyndon LaRouche fans, at the edges of the crowd. After speaking with some ladies, the skinny, gray hair, middle-aged man, with evident reluctance, decided to speak to me (after all, the wog -yours truly, that is- was the only one who seemed interested).

It takes all sorts, I guess.

15:52 I left. I have to work tonight.

15-10-2011 Zuccotti Park Cleanup Canceled, Occupy Wall Street Protesters Claim Victory. ABC News (US)
16-10-2011 "Indignants all over the world" photo gallery. O Globo (Brazil)
Occupy protests live blog Aljazeera in English

Bloomberg vs OWS

A long overdue comment on Occupy Wall Street.

A few weeks ago NY City mayor, Michael Bloomberg, scored some points as a sensible man:
" 'We have a lot of kids graduating college, can't find jobs,' he said on his weekly radio show.
" 'That's what happened in Cairo. That's what happened in Madrid. You don't want those kinds of riots here.' "
(See here)
When the Occupy Wall Street movement started, the reaction in the US to the occupiers was a kind of amused disdain. Abroad, they did not rate even that: during its first week or ten days, the local media simply ignored the protests.

Gradually, as the protests spread within the US, international attention started to focus on them. And that's when local media began mentioning the movement. Apparently, it could no longer be ignored.

In Australia the local right-wing commentariat (see here, or here), as expected, did not wait to pour contempt and half-truths on the movement (surprisingly and probably accidentally, between his ideologically based sophistry, Berg did make some good points about which I may or may not comment later).

And now, once the protests start to gain momentum, mayor Bloomberg threatens to evict the protesters.

Given his September statement about social unrest, I can only assume Bloomberg is aware of the potential violence his decision risks to unleash.

In this case, I must conclude Bloomberg, deliberately or not, is testing the resolve of the protesters.

But now, unlike a few weeks ago, what happens in NY City will be followed all over the world. The way events turn out in NY City will be followed closely and may influence in one way or another similar protests in the US and abroad, including Australia.

The NY City mayor is playing a dangerous game.

" ‘Indignant’ protests to sweep across world
"MADRID — 'Indignant' activists, angered by a biting economic crisis they blame on politicians and bankers, vow to take to the streets worldwide on Saturday in a protest spanning 71 nations.
"It is the first global show of power by the movement, born May 15 when a rally in Madrid’s central square of Puerta del Sol sparked a protest that spread nationwide, then to other countries."
Agence France-Presse
See also 911 cities – 82 countries

Thursday 13 October 2011

The Writing's on the Wall

"25 And this is the writing that was written, MENE, MENE, TEKEL, UPHARSIN.
"26 This is the interpretation of the thing: MENE: God hath numbered thy kingdom, and finished it.
"27 TEKEL: Thou art weighed in the balances, and art found wanting.
28 PERES: Thy kingdom is divided, and given to the Medes and Persians.
"30 In that night was Belshazzar the king of the Chaldeans slain.
"31 And Darius the Median took the kingdom, being about threescore and two years old."
Daniel 5
Belshazzar's Feast, by Rembrandt. [1]
The painting at the right is called Belshazzar's Feast and illustrates the biblical passage motivating this post. In it Belshazzar, king of Babylon, his vassals, their wives and concubines are feasting, when a hand writing an undecipherable text interrupts them.

Rembrandt's 1660 self-portrait. [2]
Worried, Belshazzar called Daniel from the Jews and Daniel interpreted the text, as the biblical passage says.

The painting's author was Rembrandt Harmenszoon van Rijn. His self-portrait can be seen at the left.


Last week (03-10-2011) the Federal Court of Australia started hearing the class action initiated against S&P, ABN Amro (RBS, since 2010) and Local Government Financial Services (LGFS).

12 NSW councils are suing the three institutions for AU$ 16 million, for losses suffered by the councils with the Rembrandt CPDO, which was designed by ABN Amro, rated as AAA by S&P and acquired and resold by LGSF, at the same time financial advisor to the councils and Rembrandt reseller.

Michael West (Fairfax media) has a comprehensive background to the story:

"Although the likes of US pension funds have attempted to sue the agencies - indeed the Californian giant Calpers fund has been trying to get a case to trial for two years - this is the first case in the world to get to trial.
"In the US, the First Amendment protections for free speech have assisted the agencies in deflecting claims - so far at least. After all, they contend their ratings are 'just an opinion'.
"The importance of this lawsuit is that a successful claim could set a precedent for further actions for bogus ratings in Australia, and indeed worldwide."
(See here)

Image Credits:
[1] Belshazzar's Feast, by Rembrandt. Wikipedia.
[2] Rembrandt's 1660 self-portrait. Wikipedia.

Little Mercies

"The situation has remained terrible for so long that there is now a kind of defeatism that makes frustrated well-wishers eager to be thrilled by little mercies". Amartya Sen (see here)
Prof. Sen, in the quote above, is talking about Burmese politics.

Let's talk instead about unemployment in Australia, using the following two ABS charts (both coming directly from "Measures of Australia's Progress, 2010", ABS cat. no. 1370.0, here).

This chart tells a story quite familiar:
"For most of the last decade, the unemployment rate declined as a result of Australia's strong economic growth from a high of 6.8% in 2001 to a low of 4.2% in 2008. In the wake of the recent global financial crisis, the unemployment rate rose to 5.6% in 2009 before declining to 5.2% in 2010".
Not too bad, uh?

Let's now have a look at this other chart, from the very same ABS release:

Four things caught my eye in this chart:
  1. It includes older data (it starts in 1966);
  2. Unemployment during the first 6 years shown (the oldest data available) was under 2% (I kid you not: check by yourself!), and for the best part of first 12 years it was under 4%;
  3. It clearly shows that unemployment has a way of going up quick, but falling slow;
  4. The chart does not show the current fall in unemployment rate.
In fact, if the readers download Labour Force Historical Timeseries, Australia - Labour Force Status by Sex and Marital Status (ABS cat. no 6204), they'll find that it was only in February 1975 (well within the stagflation crisis of the 1970s) when unemployment reached 5.4% and thus became comparable with our current "relatively favorable" unemployment rates (5.6% average for 2009, 5.2% in 2010).

Interestingly, since 1975 the unemployment rate never returned to late 1960s/early 1970s levels.

This long-term picture isn't nearly as pretty.


One question comes to mind after seeing the second chart: if employment is the main source of income for a majority, what kind of effect should a higher unemployment have on incomes? A priori, it would be reasonable to assume that an increase in unemployment reduces incomes for the bottom 90% income earners.

Given that ABS does not provide much data on incomes (see here), I'll use information provided by the World Top Incomes Database (WTID, last year available: 2007). The flip side of the coin is that the database focuses on higher incomes: it does not provide details directly on lower income earners.

The following chart provides some insight on this, combining ABS unemployment rate data and bottom 90% average income, from WTID:

It might be an artifact of the data available, but from 1966 and until the first half of the 1970s is not clear that average annual employment rate and the bottom 90% income average move in different directions.

In fact, both average annual unemployment rate and the bottom 90% average income would seem to move together: one rises, the other rises; one falls, the other falls. In other words, both variables appear to be moving in the same direction.

However, from the second half of the 1970s on, both variables clearly move in opposite directions: increases in the average annual unemployment rate tend to be accompanied by falls in the bottom 90% average income; the inverse also holds: one observes falls in average annual unemployment rate tend to be accompanied by increases in the bottom 90% average income.

And here is a scatter plot showing these relationships:

The blue plus signs correspond to the average annual unemployment rate and bottom 90% income averages for the 1978-2007 time period; the red circles represent the same data, but for the 1966-1977 period. The blue dotted line is the second degree polynomial fitted to the 1978-2007 data; while the red discontinuous line is the same model, but fitted to the 1966-1977 data.

It should be noted that perhaps there are too few data points within the 1966-1977 data set, to conclude anything (as indicated by the low R^2). Therefore, the impression that income and unemployment move in the same direction during this period is not confirmed, although it seems evident that a different process underlies this data.

The fit for the 1977-2007 data set, however, seems much more conclusive: in effect, within the data range, it is clear that unemployment decreases incomes.

As can be seen, two apparently very different results.


Short-run data showing unemployment decreases only show improvements from a really bad starting point. That data is regularly released by the ABS (cat. Nos. 6291 and 6202, for instance).

These improvements overshadow the fact that unemployment remains at a much higher average level than it was during the 1960s. The 1960s data available also comes from ABS (cat. No. 6204).

However, short term changes get reported by the media, while the long-term picture, some academics excepted, is all but ignored. Thus, a fall of tenths of a percent in the unemployment rate tends to influence public opinion, even though the average level on unemployment is more than double what it could be.

This conclusion is reinforced by the fact that underemployment figures seldom receive any mention.

On a related matter: if the unemployment and income data available are reliable, something must have changed fundamentally in the Australian economy during the late 1970s and early 1980s to change the relationship between unemployment and incomes. From the data alone I cannot formulate any explicative hypothesis (any pertinent feedback is welcome)

However, given that currently unemployment and incomes move in opposite directions, the current higher unemployment figures (relative to the 1960s) lead to the conclusion that incomes for the bottom 90% income earners must have suffered, in comparison to what they could be.

In a previous post I showed how the top 1% average incomes diverged from the bottom 90% average incomes, pulling with it average incomes. The increase in inequality reported in that piece, which started in 1983 (at the beginning of the Hawke government), implies that average income is not an accurate indicator of economic well-being for the majority of Australians and that this systematic inaccuracy is increasing over time.

And this is particularly troubling, as average income is the main indicator of economic well-being in Australia, and income, with all its limitations, seems to have a relatively low priority within the ABS research agenda.

On the basis of these two observations, I must conclude that the ABS's Measures of Australia's Progress 2011 (see here) are of strictly limited value to assess the long-term improvement in living conditions for Australians, at least in what refers to income and employment.

Monday 10 October 2011

Tax Forum? D'oh!

Last Tuesday 04/10/2011, watching "our" ABC's 7:30, reporting on the Canberra Tax Forum summoned by the Federal Government, I've heard this:
"STEPHEN LONG [reporter]: There was indeed an extraordinary consensus at the Tax Forum, on the left and the right, that at least for the long-term jobless, the unemployment benefit is too low, and some of the comments would have been the last thing the Government expected.
"JUDITH SLOAN, ECONOMIST: I do think that issue about the gap between the Newstart Allowance and the other pensions is an enormous one.
"STEPHEN LONG: Professor Judith Sloan said the low payments hit older workers hard, as they're unemployed for three times longer than the average.
"JUDITH SLOAN: We have to understand that the dole, unemployment benefits, Newstart, was there as a short term transitional payment, but if people are unemployed for a long period of time, the issue of adequacy really becomes important - and, indeed, their ability to successfully find employment becomes important. There is going to have to be something done.
"STEPHEN LONG: Let's put those views in context. Professor Sloan's no bleeding heart. She's a prominent libertarian economist: free market leaning, dryer than dry, a champion of labour market deregulation. If she's saying the Newstart Allowance is inadequate, demeaning and doesn't help people get back to work, sit up and listen. Comrade Jeff Lawrence, president of the ACTU, was amazed by his unlikely bed fellow."
(See here).
I must admit, I was every bit as shocked as Mr. Long: don't get me wrong, the so-called Newstart Allowance (aka dole) had been kept at misery levels since forever: "If you had an unemployment payment and rent assistance, after you paid your rent you would have $16.50 a day for everything else and looking for work," said former OECD economist Peter Whiteford of the Social Policy Research Centre, UNSW. (See here)

So, that isn't really news. What surprised me is that experts like Prof. Sloan finally learnt of it.

But the surprise was short-lived: "Community Services minister Jenny Macklin said she understood the concerns but hoped delegates understood 'the budgetary issues that we face'."

That's the thing with tough Government decisions: these guys have such a hard time making your life shit. You've gotta understand her.

No More Mr. Nice Guy

So, Tuesday big business was so nice to ask loudly but not forcefully for a higher dole (and pushing quietly for corporate tax cuts), while the Government was taking tough decisions.

By Wednesday things changed a little:

"ANDREW ROBERSTON [reporter]: With debate today centring around personal taxes, Dr Henry [former Treasure secretary] said they should be fair. Business lobby groups that yesterday called for a cut in corporate tax rates today argued for a cut to personal income tax rates too.
"GREG EVANS, POLICY DIRECTOR, ACCI: 'Well, ACCI welcomes the proposed reduction in the company tax rate; it is a significant area of unfinished business that we need to more closely align the top marginal rate with the company tax rate'.
"ANDREW ROBERSTON: Unlike the company tax discussion, though, debate about personal tax wasn't completely along ideological lines. Investment banker Mark Carnegie argued strongly that the top 15 per cent of earners should pay 15 per cent more tax."
(See here)
Well, they didn't change, except for this:
"MARK CARNEGIE, MH CARNEGIE & CO: The number of individual winners in Australia is shrinking all the time. The economic rents of capitalism are shrinking to a smaller and smaller group of people. Unless those people are willing to stand up and say, 'We will shoulder some of the societal responsibility', we will be facing the sort of nightmare that Europe and the US has at the moment."
Who would have guessed, an investment banker talking about inequality is unusual enough. But talking about economic rents and on top warning about social unrest? Holy Mother of God! I am discombobulated, but I imagine Chris Berg must be speechless,

Then came the talk about the tax-free threshold (which I already mentioned here):

"The Treasurer, Wayne Swan, said the government's first priority was to lift the tax-free threshold to $21,000, which would deliver every wage earner a modest tax cut and free 1.2 million people from paying any tax. It would be worth about $500 for someone earning $60,000. [Not quite woo-hoo but better than nothing, you'd say].
"The threshold, now $6,000, was scheduled to rise to $18,200 next year and $19,400 by 2015 as part of the compensation arrangements associated with the carbon tax.
"Although Mr Swan said the increase to $21,000 would occur 'when we think it is affordable to do it', it is likely to be implemented before the next election.
(...) [D'oh!!] (See here)
And, there's a little detail: they will increase the tax-free threshold to $21K (eventually, you'll understand), but will also eliminate the low-income offset... Moda Fukami!!! (that's supposed to be Japanese for "d'oh". Don't ask me; I don't speak Japanese: Homer and Bart do).

And now we see how pressing those "budgetary issues that we face" really are:

"ANDREW ROBERSTON: The forum ended with the Treasurer announcing a working party to investigate reform of business taxes [aka tax cuts].
"WAYNE SWAN, TREASURER: The purpose of that business tax reform working group is to bring together business leaders, tax experts, unions. It will be supported by the Treasury."
(Emphasis added)
Mind you, the idea is to have experts and technocrats discussing serious matters, for the greater good, in a calm, cool and sober atmosphere, away from the prying eyes of those who, like us, have little to contribute to the discussion, and whose only role is to pay taxes.

But you understand, don't you?
Anyway, keep voting Labor or the Coalition: I'm sure they'll do the right thing... after they deal with those "budgetary issues that we face".