Russia’s poor are in worst condition than 1990’s while the rich double thier wealth

Published in the Guardian

rish russian women shopping
The richest slice of Russian society has doubled its wealth in the past 20 years, while almost two-thirds of the population is no better off and the poor are barely half as wealthy as they were when the Soviet Union fell, according to researchers.

Experts at Moscow’s Higher School of Economics (HSE) found that the purchasing power of the average Russian has grown by 45% since the early 1990s, but income disparity is widening by the year. The report reinforces a widely held view that oligarchs got rich quick by snapping up the country’s choicest assets in the turbulent post-Soviet period.

Yevgeny Yasin, scientific director of HSE and a former economics minister, said: “The principal issue for Russia‘s economy and society today is the level of inequality. Only the best-off 20% of the population is successfully participating in the rise in prosperity which became possible as the result of creating a market economy.”

Food is slightly cheaper relative to income and simple pleasures have become more accessible. The average adult buys more vehicles and televisions and can afford more alcohol and cigarettes than at the beginning of the 1990s. “Drinking, smoking and burning around in a car have become a lot cheaper,” the report found.

But most Russians can only stare in envy at the super-wealthy with their Bentleys and dachas. According to the report, income inequality between the mid-1980s and the mid-2000s has increased eight times more than in Hungary, and five times more than in the Czech Republic. The huge gap between rich and poor “largely negates the economic and social achievements of recent years,” the HSE report said.

Yasin added that the study indicated there were “two Russias”. The wealthiest fifth of the population received a pay cheque equivalent to 198% of its value in 1991, while the poorest fifth made only 55% in real terms. In total, 60% of the population has the same real income or less than the average 20 years ago.  “Many things are required to change this,” said Vladimir Gimpelson, one of the authors.

“We need more political and market competition, enforcement of property rights, rule of law, systemic change in labour market institutions and stronger social protection for the needy.”  The widening gulf comes as the World Bank recorded an overall drop in poverty. A report by the bank published on Sunday found the percentage of people in Russia living below the poverty line – meaning those who earn less than 5,900 roubles (£130) per month – fell from 13.2% in 2009 to 12.7% last year. It attributed the fall to increased pensions, public sector wages and benefits for job seekers, and predicted that continuing economic growth would push the figure down to 11.2% this year and 10% next year.

However, the report repeated a past admonition that Russia must diversify its economy to reduce its reliance on oil and gas exports. Two prominent Russians much richer today than they were 20 years ago have published income declarations, showing their earnings dropped between 2009 and 2010. Prime minister Vladimir Putin declared £104,000, compared with President Dmitry Medvedev’s £70,000.

Sovereign Of the Week: Anna Hazare (Fasting against corruption)

Hunger striking Indian activist Anna Hazare has called for mass protests by his supporters against corruption. The 72-year-old campaigner is on the fourth day of a fast to push for stringent new anti-corruption laws. He wants his followers to “fill India’s jails” in a mass campaign of non-violent civil disobedience on 13 April.

Thousands of people have joined Mr Hazare’s protest. In recent months India has been rocked by a string of corruption scandals. On Thursday, the government agreed to include civil society members in a new panel which Mr Hazare is demanding be set up to draft tighter anti-corruption legislation. But differences remain over who will lead the panel and whether it will have legal powers.

Mr Hazare has said he wants the “jail bharo” (fill the prison) movement to take place across India. “But you should participate in the agitation keeping in mind Mahatma Gandhi. There should be no violence anywhere,” he told his supporters.

India’s governing Congress party leader Sonia Gandhi has urged Mr Hazare to give up his fast. She said his views would receive the government’s “full attention” in the fight against corruption. Doctors are checking Mr Hazare twice a day to monitor his health. The 72-year-old says he will refuse food until the government accedes to his demands.

There has been widespread support for Mr Hazare with protests and hunger strikes reported across India. Some 2,000 people have joined the activist at the historic Jantar Mantar observatory in Delhi, where he is conducting his fast. Correspondents say Mr Hazare has rallied people across the country disillusioned with the recent spate of scandals – he is highly respected as a social activist with an untarnished reputation.

Some of the recent corruption scandals to have angered Indians include a multi-billion dollar alleged telecoms scam, alleged financial malpractices in connection with the 2010 Delhi Commonwealth Games and allegations that houses for war widows were diverted to civil servants.

Last month the head of the country’s anti-corruption watchdog was forced to resign by the Supreme Court on the grounds that he himself faced corruption charges.

Charles Kenny- Dont Mess With Taxes

Published in Foreign Policy

Every spring, the Tax Foundation, a Washington-based advocacy group, announces Tax Freedom Day: the date by which the average employed American will have earned enough income to pay off his or her taxes for the year. This year, that day will be April 12. The Adam Smith Institute, a London-based, free-market think tank that makes a similar calculation for Britain, suggests that British taxpayers will have to work until around May 30 to pay off their own dues.

Tax Freedom Day is a clever-enough gimmick if your aim is to stir up ire over the government stealing income that rightfully belongs to the good people who have earned it through the toil of their labors. In an environment where Joe “the Plumber” Wurzelbacher is considered an expert on fiscal policy, it might even work. But it is worth remembering that, from a global perspective, how much we earn is actually 95 percent luck and maybe 5 percent toil. And it isn’t heavy-taxing big government that affects your income — it’s bad government.

The idea that anyone who works hard enough can become rich is a powerful one; for Americans, it’s not just appealing but central to national identity. The problem is that this vision of social mobility doesn’t hold true within the United States — and on a global scale, it’s just plain silly. The reason you earned as much as you did last year has far less to do with how hard you worked than with where and to whom you were born. In the United States, of those children born to parents in the bottom 10 percent of incomes, around one-third remain at the bottom as adults, and over half remain in the bottom 20 percent. Only one out of 77 children born into the bottom 10 percent of incomes reaches the top 10 percent as an adult, according to Samuel Bowles and Herbert Gintis writing in the Journal of Economic Perspectives.

But the advantages of being born rich rather than poor in America — large though they are — pale in comparison with the advantages of being born in a wealthy country rather than a developing one. The average rural Zambian will enjoy a lifetime income of about $10,000, compared with a lifetime income of around $4.5 million for the average resident of New York City. That’s not because Zambians are all soulless and corrupt. It’s because a Zambian with the same skills, intelligence, and drive earns a lot less in Zambia than she would in the United States — as is made abundantly clear every time a Zambian moves to the United States and starts earning a lot. The same people doing exactly the same job earn much, much more if they move from a poor to a rich country to do that job. In 1995, a construction carpenter’s wage in India was $42 a month. In Mexico, it was $125 a month. A South Korean carpenter, by contrast, made almost 10 times what his Mexican counterpart did; an American one made almost 20 times more.

For those of us lucky enough to be living in a rich country, are taxes really holding us back from a life of ease? In a word, no. Over the (not very) long term, it isn’t tax rates that decide how much money you take home — it is rates of economic growth. If a British person in 1984 paid no taxes at all, receiving as manna from heaven infrastructure, health care, education, policing, pensions, welfare benefits, and all the other services that the state provides, his or her take-home income (adjusted for inflation) would still be below that of post-tax Britons today. The same would be true of an American in 1988. People in the West are lucky enough to have been born in — or nearly as lucky to have moved to — countries that have seen a lot of economic growth over the past two centuries. That’s the reason they’re rich.

 Of course, an anti-tax advocate would respond that low taxes and a correspondingly small government are the secret to a country’s riches — an idea that is appealing, widespread, and very wrong. The last 100 years or so have seen the fastest rates of global economic growth in history; they’ve also seen the biggest governments of all time. From William Easterly and Sergio Rebelo writing for the National Bureau of Economic Research to Ross Levine and David Renelt in the American Economic Review (as well as numerous other analyses), economists have consistently failed to find robust cross-country evidence that a government’s size — measured by tax take or spending as a percentage of GDP — has any bearing, positive or negative, on its economic growth. Want further proof? Many developing countries see personal income tax receipts that would make a Tea Partier tip his tri-cornered hat in admiration, amounting to less than 2 percent of GDP. If a small income tax burden really was the determining factor in driving growth, those countries would all be richer than Luxembourg.

But while there isn’t a proven link between government size and economic growth, there is an important relationship between the quality of government and growth. If a government can’t ensure a basic level of security, stability, fair dealing, and public goods like infrastructure and education, whether it’s large or small is irrelevant — that country will be poor. If the government is providing those basic requirements, it doesn’t matter if it’s also blowing 10 percent of its GDP on bridges to nowhere, high-tech bombers for the last war, or corporate subsidies for ethanol production — that country will be rich. Better government equals richer people — it is as simple as that.

So why do rich people think it is all about effort rather than the luck of the draw? For one thing, there’s the oft-repeated finding from social psychology that people blame their own failures on circumstances beyond their control (“I was fired because the boss never liked me”) and the failures of others on personal flaws (“He was fired because he never did any work”). The reverse also holds: People take far more credit than they should for successful performance as part of a group, particularly if they do not know other group members personally. All of us — not only the rich — are just incredibly narcissistic by nature.

The second factor is that when we make comparisons it is usually to our peers, not the world as a whole. And our peers tend to have gone to the same type of school, work in the same field, and live in the same part of the world. Within these narrow groups, income differences — however small on a national or global scale — are more likely to be about ability and hard work. The fact that you earn more than your colleague who joined the firm at the same time as you did probably does have something to do with your different personal characteristics. The fact that you earn more than a peasant farmer in Lesotho doesn’t. At the same time, you rarely stop to care about how much a peasant farmer in Lesotho earns — despite the fact that the income gap between you and the farmer is many multiples larger than the gap between you and your colleague. However powerful our psychological foibles and narrow frames of reference may be, though, they are beside the point when it comes to public policy.

There are lots of reasons to hate current tax codes — not least because they are ridiculously complex and stuffed with loopholes for groups that can afford the best lobbyists. And governments the world over remain wasteful and spendthrift — including America’s, of course. Especially in poor countries, people ought to be focused on making government more efficient, equitable, and transparent — an effort that will entail lower government revenues in some cases and less government regulation in lots of cases. But the focus should be on better government, not smaller government. And the idea that taxation takes money that is rightfully ours alone, or that if only we managed to reduce the tax burden by a few percentage points we’d all be rich, is laughable. If you are in a wealthy country and it is tax time, be thankful you live somewhere where government works — and pay up.

Don Tapscott: The world’s unemployed youth: revolution in the air? (The Guardian)

youth unemployment rally
A common thread to the revolutions in Tunisia and Egypt and protests elsewhere in the Middle East and north Africa is the soul-crushing high rate of youth unemployment. Twenty-four percent of young people in the region cannot find jobs. To be sure, protesters were also agitating for democracy, but nonexistent employment opportunities were the powerful catalyst.

Youth unemployment is similarly dire in other parts of the world. In the UK, young people aged 16 to 24 account for about 40% of all unemployed, which means almost 1 million young adults are jobless. In Spain more than 40% of young people are unemployed. In France the rate is more than 20%, and in the US it’s 21%. In country after country, many young people have given up looking for work. A recent survey in the UK revealed that more than half of the 18- to 25-year-olds questioned said they were thinking of emigrating because of the lack of job prospects.

Unemployed young people comprised a large portion of the crowd that marched in London on March 26 to protest against the economic policies of the government. Fortunately, the protest was largely peaceful. But youth unemployment will continue to stay high, and the coalition’s austerity measures are not going to help. We’re deluding ourselves if we believe the young will simply continue to be stoical and deferential to authority.

Today’s society is failing to deliver on its promise to young people. We said that if they worked hard, stayed out of trouble, and attended school, they would have a prosperous and fulfilling life. It turns out we were inaccurate, if not dishonest. And then we rub salt in the wound by saying we’re in a “jobless recovery” – an oxymoron to tens of millions of young people who are having their hopes dashed.

Widespread youth unemployment is one facet of a deeper failure. The society we are passing to today’s young people is seriously damaged. Most of the institutions that have served us well for decades – even centuries – seem frozen and unable to move forward. The global economy, our financial services industry, governments, healthcare, the media and our institutions for solving global problems like the UN are all struggling. I’m convinced that the industrial age and its institutions are finally running out of gas. It is young people who are bearing the brunt of our failures.

Full of zeal and relatively free of responsibilities, youth are traditionally the generation most inclined to question the status quo and authority. Fifty years ago, babyboomers had access to information through the new marvel of television, and as they became university-age and delayed having families, many had time to challenge government policies and social norms. Youth radicalisation swept the world, culminating in explosive protests, violence and government crackdowns across Europe, Asia and North America.

In Paris in May 1968, protests that began as student sit-ins challenging the Charles de Gaulle government and the capitalist system culminated in a two-week general strike involving more than 11 million workers. Youth played a key role in the so-called Prague Spring in Czechoslovakia that same year. In West Germany, the student movement gained momentum in the late 60s. In the US, youth radicalisation began with the civil rights movement and extended into movements for women’s rights and other issues, and culminated in the Vietnam war protests.

Young people today have a demographic clout similar to that of their once-rebellious parents. In North America, the baby boom echo is larger than the boom itself. In South America the demographic bulge is huge and even bigger in Africa, the Middle East and Asia. A majority of people in the world are under the age of 30 and a whopping 27% under the age of 15.

The 60s baby boomer radicalisation was based on youthful hope and ideology. Protesters championed the opposition to war, a celebration of youth culture, and the possibilities for a new kind of social order. Today’s simmering youth radicalisation is much different. It is rooted not only in unemployment, but personal broken hopes, mistreatment, and injustice. Young people are alienated; witness the dropping young voter turnout for elections. They are turning their backs on the system.

Most worryingly, today’s youth have at their fingertips the internet, the most powerful tool ever for finding out what’s going on, informing others and organising collective responses. Internet-based digital tools such as Twitter, Facebook and YouTube were instrumental to the Tunisian and Egyptian revolutions.

We need to make the creation of new jobs a top priority. We need to reinvent our institutions, everything from the financial industry to our models of education and science to kickstart a new global economy. We need to engage today’s young people, not jack up tuition fees and cut back on retraining. We need to nurture their drive, passion and expertise. We need to help them take advantage of new web-based tools and become involved in making the world more prosperous, just and sustainable.

If we don’t take such measures, we run the risk of a generational conflict that could make the radicalisation of youth in Europe and North America in the 1960s pale in comparison.

New York Times Editorial: Government by the Week

Parents have begun arranging alternative child care for their preschoolers, uncertain whether their Head Start program will be there when they need it. The Social Security Administration is unable to open new hearing offices to handle a backlog of appeals. The Pentagon has had to delay equipment repairs. There is chaos throughout the federal government, as Robert Pear reported in The Times on Tuesday, because a riven Congress has forced agencies to operate on a week-by-week basis.

Yet on Tuesday, the House passed another short-term spending bill. This one keeps things going for all of three weeks. The Senate will almost certainly join in shortly to avoid an impending shutdown on Friday, the result of the stopgap bill from two weeks ago.

These slipshod exercises in governance were choreographed by House Republicans, who knew that neither the Senate nor President Obama would ever accept their original proposal to gut nonsecurity discretionary spending with $61 billion in cuts through September, including riders to end financing for Planned Parenthood and the health care law. They had hoped to use the pressure of a potential shutdown to achieve much of their goal, but so far, all they have accomplished is a cut of about $10 billion, mostly from earmarks or programs that the president himself proposed to cut. (The new bill cuts $6 billion.)

House Republican leaders, who say they do not want a government shutdown, have, so far, held off their more fanatical freshmen, who want to slash everything in sight. But the leadership cannot do so forever, and the evidence of that was clear on Tuesday. More than 50 Republicans refused to go along with the three-week resolution because it did not cut enough. Several specifically complained that it allowed financing for Planned Parenthood and the health care law to continue.

This is not a group that cares much for pragmatic compromise, and the three weeks are just a timeout. Representative Mike Pence of Indiana, a Republican who voted no on the new bill, spoke for many of his colleagues when he said the budget could not be resolved without a willingness to shut down government. “By giving liberals in the Senate another three weeks of negotiations,” he said, “we will only delay a confrontation that must come.”

He is absolutely right about that. If Democrats, including the president, do not draw a clear line soon, making their priorities and their limits unmistakable, they will be harried by these kinds of votes for years. Even in the unlikely case that an agreement is reached in three weeks to finance the government through September, a different vote will be necessary just a few weeks from now to raise the debt ceiling. Republicans have already vowed to vote that down — even though it could be financially disastrous — if they do not get their way. And then there is the vote for the fiscal 2012 budget, which begins Oct. 1, and then the year after that.

At some point, Mr. Pence will get his confrontation. If Republicans continue to press for cuts of tens of billions from discretionary spending, setting back the economic recovery largely for ideological purposes, Democrats will have to say no, even if that results in a short-term shutdown. The American people will be able to figure out who is at fault. Responsible governing means agreeing quickly to a deal to finish out the fiscal year, and then starting a serious talk about entitlement programs and taxes — the real causes of a soaring deficit.

Paul Krugman: Another Inside Job

Published in NY Times.

Count me among those who were glad to see the documentary “Inside Job” win an Oscar. The film reminded us that the financial crisis of 2008, whose aftereffects are still blighting the lives of millions of Americans, didn’t just happen — it was made possible by bad behavior on the part of bankers, regulators and, yes, economists.

What the film didn’t point out, however, is that the crisis has spawned a whole new set of abuses, many of them illegal as well as immoral. And leading political figures are, at long last, showing some outrage. Unfortunately, this outrage is directed, not at banking abuses, but at those trying to hold banks accountable for these abuses.

The immediate flashpoint is a proposed settlement between state attorneys general and the mortgage servicing industry. That settlement is a “shakedown,” says Senator Richard Shelby of Alabama. The money banks would be required to allot to mortgage modification would be “extorted,” declares The Wall Street Journal. And the bankers themselves warn that any action against them would place economic recovery at risk.

All of which goes to confirm that the rich are different from you and me: when they break the law, it’s the prosecutors who find themselves on trial.

 To get an idea of what we’re talking about here, look at the complaint filed by Nevada’s attorney general against Bank of America. The complaint charges the bank with luring families into its loan-modification program — supposedly to help them keep their homes — under false pretenses; with giving false information about the program’s requirements (for example, telling them that they had to default on their mortgages before receiving a modification); with stringing families along with promises of action, then “sending foreclosure notices, scheduling auction dates, and even selling consumers’ homes while they waited for decisions”; and, in general, with exploiting the program to enrich itself at those families’ expense.

The end result, the complaint charges, was that “many Nevada consumers continued to make mortgage payments they could not afford, running through their savings, their retirement funds, or their children’s education funds. Additionally, due to Bank of America’s misleading assurances, consumers deferred short-sales and passed on other attempts to mitigate their losses. And they waited anxiously, month after month, calling Bank of America and submitting their paperwork again and again, not knowing whether or when they would lose their homes.”

Still, things like this only happen to losers who can’t keep up their mortgage payments, right? Wrong. Recently Dana Milbank, the Washington Post columnist, wrote about his own experience: a routine mortgage refinance with Citibank somehow turned into a nightmare of misquoted rates, improper interest charges, and frozen bank accounts. And all the evidence suggests that Mr. Milbank’s experience wasn’t unusual.

Notice, by the way, that we’re not talking about the business practices of fly-by-night operators; we’re talking about two of our three largest financial companies, with roughly $2 trillion each in assets. Yet politicians would have you believe that any attempt to get these abusive banking giants to make modest restitution is a “shakedown.” The only real question is whether the proposed settlement lets them off far too lightly.

What about the argument that placing any demand on the banks would endanger the recovery? There’s a lot to be said about that argument, none of it good. But let me emphasize two points.

First, the proposed settlement only calls for loan modifications that would produce a greater “net present value” than foreclosure — that is, for offering deals that are in the interest of both homeowners and investors. The outrageous truth is that in many cases banks are blocking such mutually beneficial deals, so that they can continue to extract fees. How could ending this highway robbery be bad for the economy?

Second, the biggest obstacle to recovery isn’t the financial condition of major banks, which were bailed out once and are now profiting from the widespread perception that they’ll be bailed out again if anything goes wrong. It is, instead, the overhang of household debt combined with paralysis in the housing market. Getting banks to clear up mortgage debts — instead of stringing families along to extract a few more dollars — would help, not hurt, the economy.

In the days and weeks ahead, we’ll see pro-banker politicians denounce the proposed settlement, asserting that it’s all about defending the rule of law. But what they’re actually defending is the exact opposite — a system in which only the little people have to obey the law, while the rich, and bankers especially, can cheat and defraud without consequences.

The Guardian: Anonymous hackers release trove on Bank of America crimes

The hacker group Anonymous has released a cache of emails obtained from someone said to be a former Bank of America employee. The group alleges that the emails, dating from November 2010, detail improper lending practices at the bank, an allegation the bank denies. The leak comes as consumer groups have accused major US lenders of foreclosing on many homes without having proper documentation in place.

The emails detail correspondence between employees of Balboa Insurance, a Bank of America insurance unit, in which they appear to be discussing the removal of details from documents in loan files. The bank acquired Balboa when it bought Countrywide Financial in 2008. Countrywide was the US’s largest seller of sub-prime home loans. Last month Bank of America announced plans to sell Balboa.

The emails detail one loan related to GMAC, one of the largest mortgage lenders in the US. “The following GMAC DTN’s need to have the images removed from Tracksource/Rembrandt,” an operations team manager at Balboa wrote. DTN refers to document tracking number, and Tracksource/Rembrandt is an insurance tracking system.

In reply, the Balboa employee wrote: “I have spoken to my developer and she stated that we cannot remove the DTNs from Rembrandt, but she can remove the loan numbers, so the documents will not show as matched to those loans.”

According to the emails, approval was given to remove the loan numbers from the documents. Anonymous also released correspondence between the group and the former employee in which the ex-worker described the bank as a “cult” and said the company was now intent on destroying his career. “I’m well known throughout Bank of America. They saw to that when they showed everyone my picture and labelled me as a terrorist,” the former employee said in one email.

A representative of Anonymous told Reuters that the documents related to the issue of whether Bank of America has improperly foreclosed on homes. The bank was not immediately available for comment but a spokesman told Reuters that the documents had been stolen by a former Balboa employee, and were not tied to foreclosures. “We are confident that his extravagant assertions are untrue,” the spokesman said.

Anonymous has close ties to WikiLeaks, whose founder Julian Assange said last November that he planned a major leak about a bank, leading to speculation that Bank of America was the target. Last month Bank of America agreed to sell Balboa to QBE of Australia for $700m and liabilities of $1.2bn.

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Anonymous has attacked companies that withdrew their services from Wikileaks