Fantastic!! The Pope and the Productivity Commission have stirred two of Australia’s respected and seasoned political/economic commentators.
I read much of what Alan Kohler and Paul Sheehan produce. Not always, but more often than not, I find their writings right on the money. Today both have produced columns that are really important. These two have far more capacity to influence community and political thinking than most of us, so let’s take a look …
First, Alan Kohler Continue reading
The Pope’s “missive” has caused quite some reaction.
I enjoyed this informative post in the Wonkblog at the Washington Post. Pope Francis has a few thoughts about the global economy. We added these 13 charts.
It’s an excellent recital of the Pope’s main claims about the big current economic trends and about inequality. It then shows charts of evidence from all over the place about those claims. It’s quite a long post, but you can breeze through the charts quickly and get the gist if you are time poor. It’s information, not biased commentary. Continue reading
Last week the usually boring Australian Government Productivity Commission briefly made headlines.
Immediately the vested interests came out finding everything wrong with the policy recommendations in the Commission’s report “An Ageing Australia: Preparing for the Future“:
There seems little doubt that the primary reason Labor lost the last election was voters’ disgust with the tiresome leadership struggle. This ever present theme distracted from any real debate (on either side of politics) about the big issues, about what policy an incoming Government should build to address those issues.
Rudd, ever popular with the people, apparently had a leadership style that failed to bring his close team along: hence the 2010 “coup”. His reinstatement was just to “save the furniture”.
Gillard, apparently a smart thinker, negotiator, and leader of her close team, failed in her communication with the voters: in the end they just stopped listening. We only ever got a rare glimpse of the “real Julia”.
Abbott devoted all his energy to attack. He saw the political weakness created by the Rudd v Gillard struggle, and rode to victory by exploiting the electorate’s disgust.
And the real losers out of all this? Us. Continue reading
The referendum in Switzerland I wrote about last week went down 65% to 35%. The Swiss decided that top salaries in a corporation should NOT be limited to 12 times bottom salaries.
It probably failed because of the overreach of the ratio 12. Extreme views rarely get quick popular support, whichever side they come from. But I still think it is interesting that it will take just 15% of Swiss to change sides on this binary issue, and the extremely well paid elites will get whacked. Continue reading
The tabloid news cycle tends to be dominated by the latest house fire, car accident, murder, sex scandal, sports result, and so on. It’s all so predictable.
Even the serious traditional news media tends to be dominated by: Continue reading
I have commented before about the interesting democratic process in Switzerland. If 100,000 people get activated about a single issue they can petition for a country wide referendum. This is a way better concept that having politicians argue over ridiculous mandates after a general election …
Today Switzerland is going to the polls to decide if “fat cat” executive pay should be limited to 12 times the pay of their lowest paid employee. The Guardian has the background:
Long-standing rumblings about executive excess were fuelled by the banking crisis and the precarious position of the Swiss bank UBS. But the debate was supercharged this year when the Swiss drug group Novartis agreed to pay its outgoing chairman, Daniel Vasella, SFr72m (£49m). The payment, to persuade Vasella not to use his knowledge to help rival pharmaceuticals, was described as a “golden gag”.
There followed a huge public and political backlash, with the Swiss justice minister, Simonetta Sommaruga, saying the payoff was “a huge blow to the social cohesion in our country” and that payouts on such a scale “undermined public trust in the entire economy”.
Novartis was forced to cancel the payout. But serious damage was done, and in a referendum the following month more than two-thirds of Swiss voters backed a new rule to ban golden hellos and goodbyes.
That was step one. Now the campaign has moved to the regular remuneration of the highest paid:
“In recent years, we’ve seen high salaries get higher while other salaries have stayed at much the same level, especially in terms of ordinary people’s disposable income,” said David Roth, the organiser of the 1:12 campaign. “It has become obvious that something is wrong.” …
What no one disputes is that top executives’ salaries have skyrocketed. … the average salary among Swiss CEOs to the average wage [in] 1984 was six to one. By 2011, it had reached 43 to one.
What is more, said Roth: “The biggest salaries are in the same places as the biggest problems. Take UBS. The state has had to pour money into UBS because of problems caused by the very people who earned the highest salaries. Last year, the bank lost SFr2.5bn – and paid out SFr2.5bn in bonuses.“
UBS shareholders got stiffed. This is a familiar story. This trend has swept most western economies in the last generation. Particularly in the financial sector. ANZ Bank is a good Australian example.
Polls are predicting this Swiss referendum will go down. That’s probably because the 12 to 1 ratio is a significant over-reach. Some number between 30 and 40 might have been a better chance.
There is no doubt that some individuals deliver a significantly greater contribution than the the average. They should be rewarded for it. But if you go to any of the professions where the reward is genuinely for the personal skill, experience and brain-power of an individual, I’m willing to bet that the ratio between the elite and the average would be much lower than it is in big business and finance.
What about medicine, for example? Is it likely the world best surgeons earn more than 20-30 times the average young doctor, or 40-50 times the nurse that attends in their theatres? I’d be surprised.
So why should ratios often way over 200 in the business and finance sector be common? As individuals, many corporate leaders are pretty smart, but as a class they certainly aren’t smarter than top medicos. Not smarter, just greedier!
Why has this happened? The answer, I suspect, is that CEOs are being paid more simply because they can be. Their company boards are too weak, too greedy themselves, or too under the influence of group think to stop it.
It’s small wonder that Mr, Mrs and Miss Average are angry. The fat cats (particularly in finance and banking) really have taken greed to a new level. All in an era when huge numbers of people have lost savings, superannuation value, homes, and jobs.
It will be interesting to see if the Swiss start a reversal this weekend. But if they don’t, one will eventually come. This symptom of growing inequality is too big and too obvious to survive the correction.
Deforestation accounts for about 20% of global emissions of carbon dioxide.
So what do you make of this from the BBC: “Brazil says the rate of deforestation in the Amazon increased by 28% … after years of decline. … The provisional statistics from August 2012 to last July suggest that the area suffering deforestation was 5,843 sq km”. (It’s easiest to think of that as a square of about 76km on each side: that’s a lot of trees!)
At least it’s better than the worst year, 2004, when the forest destruction was nearly 5 times worse (27,000 sq km). But it’s the new reversal that is the concern. “Activists have blamed the increase in destruction on a controversial reform to Brazil’s forest protection law.”
So do you believe the Brazilian Environment Minister when she says: “The government is working to reverse this “crime””? … or is that just political spin?
But maybe here is some better news, again from the BBC:
Nations meeting in Warsaw at UN talks [over this last 2 weeks] have agreed … a package of decisions that will reduce emissions from deforestation and forest degradation plus pro-forest activities (known as Redd+). Among other things this “will give “results-based” payments to developing nations that cut carbon by leaving trees standing.”
Sounds good. But wait on … here’s … “The biggest issue … developed countries still need to ante up the $20-$35bn a year necessary for a global Redd+ programme.”
Hmmm … I wonder how well that will go?
I think we’ve got an idea how Tony Abbot will react, so so have others around the world. This titbit from the Warsaw conference:
“Several hundred environmental campaigners walked out en-masse from climate talks here in Warsaw saying they felt no progress was possible [and angry] over the slow pace of negotiations.
There was also annoyance among negotiators from developing countries about the attitude of Australia, which, under new prime minister Tony Abbott, has signalled a more sceptical approach to climate issues.
And, of course, we remember that Abbott also has the knife into the foreign aid budget. So again we have the all too familiar situation: talk is cheap, intentions sound good, but then it come down to finding the money!
We were discussing these matters over lunch today with my daughter visiting from Melbourne. She has 3 kids aged 11 to 14. I asked did the kids understand what was going on in the environment?
“Oh sure they do. They all understand that the planet has been %@*#^d”
“Where does that attitude come from?”
“Everywhere: school; friends; reading; news. For them it’s an unarguable truth. They get it. But they can’t do anything much about it.” “The youngest was half watching something on TV the other day and said, “it makes me so angry to see that going on””.
That’s certainly something 2 ponder …
Now here’s something completely different.
If this doesn’t make you shake your head in disbelief I’ll be surprised.
We’ve all heard about the Pentagon. Built during the Second World War, it is the largest public administration building in the world. Just the internal courtyard is 5 acres. More than 30,000 people work there. Here’s Google’s photo:
Now, do you know where the second largest public administration building in the world is?
No? … Neither did I …
Here it is. Courtesy of Google again (scale is the same). In Bucharest, Romania:
Built on the orders of the dictator Ceausescu, this “Palace of the People” is an extraordinary building. The Telegraph, newspaper from London has the story:
The construction, which began in June 1984, was a project akin to the pyramids. During the five years leading up to Ceaucescu’s execution one million Romanians, including military conscripts, political prisoners and a team of 700 architects, worked round the clock to put it up, painstakingly carving huge oak, elm and cherry doors and sculpting giant crystal chandeliers for marble rooms almost as big as athletics fields. Even nuns were forced to work, weaving acres of carpets and embroidering gold-threaded curtains. There were never fewer than 20,000 workers on site at any one time; deaths were common.
The project had a huge impact on the Romanian capital. Three historic districts in the centre of Bucharest — four square miles of the city — were demolished, along with 27 churches and synagogues. Around 40,000 people were given only two days to leave their homes, and some had no alternative but to leave behind their possessions for the bulldozers.
Elsewhere, two mountains were hacked down for the one million cubic metres of white and pink Transylvanian marble required, while entire forests were destroyed for panelling, floors, furniture and doors (Ceausescu insisted that all materials used should be native to the motherland). The cascading chandeliers alone accounted for 3,500 tonnes of crystal; the largest, measuring nine metres in diameter and weighing five tonnes, had 1,000 light bulbs.
By the time the palace was completed, it could burn more electricity in three hours than all of Bucharest’s two million inhabitants consumed in 24. Between 1984 and 1989, while the Romanian people were struggling to survive with limited heating and meagre rations, the building consumed 30 per cent of Romania’s national budget.
Unsurprisingly, I’ve never been into either of these buildings. (Closest was a drive past the Pentagon many years ago.) But like many of you, I suspect, I have been to Versailles. I was blown away by the scale of the place. So here, to give you some further perspective, is Versailles (again on the same scale, courtesy of Google):
Look how small the Palace looks …
There have certainly been some pretty spectacular “waste of money” undertakings in history. Some by people who “could afford it”… but this is certainly not one of those! Then, and to this day, Romania is among the poorest in the poor east of Europe.
What was old Nicholai thinking?
Last week saw the listing on the ASX of Freelancer Ltd
It caused some excitement in the business media because the 50 cents shares shot up to $2.60 when the shares first listed last Friday before settling back to $1.60 at the end of the day. Today the price is floating around $1.80.
Over 8 million shares changed hands that first day. Obviously quite a handsome profit for the stags and some of the insiders. But not for the likes of you and me, dear readers: you have to be inside the casino to make those sorts of cash profits!
My curiosity was aroused. What sort of company creates this scenario? After taking a look, two quite separate things seem worth pondering.
What the business does
Freelancer.com is a virtual market place for jobs. It brings together via the internet people who want work done (buyers), with people who want to do work (sellers). Think of it as eBay for jobs. The work falls into a very large range of of things that can be done remotely on PCs connected to the internet: data entry, programming, writing, data analysis, design, marketing tasks – you get the idea. Work is done, and then delivered via the web.
Like eBay, and other internet based marketplaces, the scope is global, and it’s built around competitive bidding.
Buyers (mostly from high wage countries) come to this marketplace (website) because they want things done cheaply. Most of the sellers are in low wage countries. India, Bangladesh, Eastern Europe for instance. Some of the workers make a full time living this way, many others are part-timers, students and so on. Most commonly, the sellers (of labour) bid for the jobs/projects put up on-line by the buyers (employers).
So what does this mean for getting this knowledge work done?
Freelancer Ltd looks like a good company. Great website, good technology, and what looks like a very good management team. Their listing prospectus reads well: good numbers; good growth; good potential benefits from scale; even a bit of a profit. Good luck to them: they are well equipped and free to have a go …
… But as an Australian company, is it producing a net benefit to the Australian economy? Probably not. And certainly not if you regard the real economic benefit to Australia as the sum of the economic benefits flowing to all Australians over the long haul. It just adds to the pressure on work opportunity and wages in an already un-competitive economy.
The ASX listing
Has the capital market lost all sense of company value? If this is a guide it has. It is a perfect example of the casino that veils itself in legitimacy – the crazy stock market.
Freelancer looks like a good company. But …
Now look at the figures …
But as I write, on the ASX it is valued at $774 million, more than 1600 times earnings!
That’s delusional … except if it’s just a bet in the casino that the next sucker will pay more than you paid.
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something 2 ponder 