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Economist Shamubeel Eaqub on the many sides of Brexit, global politics, globalisation, internet piracy, the Olympic curse, Australia's election mess, Australia's Trump & more

Economist Shamubeel Eaqub on the many sides of Brexit, global politics, globalisation, internet piracy, the Olympic curse, Australia's election mess, Australia's Trump & more

Today's Top 10 is a guest post from economist Shamubeel Eaqub.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

1) Brexit demands a reform of business

Post GFC moves by governments and central banks further favoured the view and raised the angst of those left behind. Three academics write in The Conversation:

People then saw the government support business, while their working prospects diminished. Central banks cut interest rates to historically low levels in the name of stimulating the economy and encouraging investment. Numerous rounds of quantitative easing inflated asset prices (driving the price of a home further out of reach), in the hope that some of the gains would trickle down and benefit those without assets.

The shock of Brexit is an opportunity to make society fairer. This means reshaping the way that businesses are run to benefit not just their shareholders, but all employees and wider society.

The authors propose five ideas to change the status quo. In many ways it means winding back the rights given to corporations and make them accountable again.

1. Curtail the legal powers of shareholders

2. Involve employees in takeover deals

3. Control speculative takeovers

4. Make boards more accountable to employees

5. Protect companies and their assets

2) Brexit & more stimulus from the BoE

The Bank of England unleashed £150bn of stimulus, in the form of lending to households and businesses by easing lending rules for banks. The swift response to Brexit was well signalled by the BoE.

He first spoke on the morning the referendum result was announced, reassuring investors that the Bank would do what was necessary to keep markets stable. Last week he signalled that a cut to interest rates, already at a historic 0.5% low, might be imminent. The latest decision on interest rates will be taken by the Bank next week.

“The UK has entered a period of uncertainty and significant economic adjustment,” Carney said, as he stated it was the Bank’s role “to be straight with the British people” about risks to financial stability.

The RBNZ could take a lesson in being straight with the NZ people, communicating better and being swift with action. Sadly, the action in the UK is more of the same, more debt.

3) Global politics: rule of the jungle

There is little co-ordination in global politics. It is a mess of working groups and other well-meaning organisations. But there is a void in terms of responsibility, authority and co-ordination. It is not surprising that the Panama Papers have shown thousands using international tax regulation inconsistencies to circumvent domestic taxes.

Companies and individuals can act with impunity, mainly because of gaps in tax law. The Panama Papers show that the majority of tax avoidance is technically legal. The International Consortium of Investigative Journalists (ICIJ) state that Mossack Fonseca, the Panama-based firm at the center of the scandal, is hardly scorned by respectable society. ICIJ points out that the firm, “has worked closely with big banks and big law firms in places like the Netherlands, Mexico, the United States and Switzerland, helping clients move money or slash their tax bills,” adding, “More than 500 banks, their subsidiaries and branches have worked with Mossack Fonseca since the 1970s to help clients manage offshore companies. UBS set up more than 1,100 offshore companies through Mossack Fonseca. HSBC and its affiliates created more than 2,300.”

It is not surprising that increasingly voters prefer isolationism to unfettered and uncoordinated globalisation. Brexit, Trump, Pauline Hanson and Winston Peters will be bigger features of isolationist politics of the future. 

4) Internet piracy down

Turns out people don’t set out to steal intentionally. But when products and services are blocked by archaic rules, like those for video and music, block access to people based by geography, but unconstrained by the internet, things break down. When there are legal, convenient and cheap offerings like Netflix and Spotify, people prefer to use legitimate means:

…44pc of internet users are using exclusively legal means, up from 39pc at the end of 2015. The remaining 31pc did not download or stream any online content in the three-month period. The Minister for Intellectual Property, Baroness Neville Rolfe, said “consumers appear to be turning towards legitimate streaming en masse”.

5) Brexit impact will take years to unfold

Much has been written about the impact of Brexit on the UK economy. The reality is that we will not know the true impact for some time, and even then it will be a guess as we don’t know what could have been. A sharp fall in the Pound, sell-off in the share market and dip in confidence are signs that things are negative. But the real impact on economic activity and capital flows will take years to be seen and understood:

The earliest that economists reasonably believe this could happen would be in the final quarter of 2016, the data for which we would see on January 26. A Brexit-induced recession could take much longer to materialise, however.

Data on foreign direct investment into the UK is similarly lagged, published annually by UK Trade and Investment in the summer, covering investment during the preceding full calendar year.

Only decades after the referendum result will we be able to fully appreciate what Brexit has meant for the UK.

And one thing economists will never know is how the UK would have fared if it were to remain in the EU. Data for this counterfactual will never be available.

6) Australian election: A mess

2016 is already one of the most exciting years for politics in a number of countries. Australia is the same, with the current election in a limbo. When first called, it looked like the incumbent would romp home. But it has instead turned into a very close race.

The Australian election matters for two reasons:

  1. They are our biggest trading partner
  2. The election shows that if the masses vote, the opposition (in our case Labour, Greens and NZ First mostly) could be in closer contest at the next election than current polling suggests.

They are still counting and this is a very good resource updated daily to keep an eye on things:

7) Australia’s Trump

Pauline Hanson is back into the Australian Senate, possibly with another Senator. She is Australia’s Trump, actually much more racist.

The rallying cry echoes past demands: “Australia for Australians”. The party retains its focus on “illegal” and unwanted immigrants:

Australians have the right to a cohesive society and deny immigration to anyone who does not abide by our law, culture, democracy, flag or Christian way of life… We don’t want or need migrants bringing their problems, laws, culture and opposing religious beliefs on us.

The anti-immigration and anti-globalisation views that Hanson espouses are increasingly finding favour with voters. While it is still a minority, establishment politics has disregarded the fears, hopes and dreams of the disaffected. The authors ask if establishment politics can rise to the challenge:

Political leaders must contribute to the formation of public opinion, rather than simply respond to whatever emerges around them. Hanson’s return to national politics should push mainstream politicians to principled stands that value humanity over intolerance.

8) Olympic curse

The spectacle of the Olympic games is about to begin. For Brazil it has already been bitter sweet. The economy was soaring when they won the bid, now the economy and politics are in disarray. Olympic games are often like this – there is huge infrastructure built for a one-off event at great cost and a great influx of people for a short period. In Rio it's all that and more:

Public services are under enormous pressure from tighter budgets, public health issues and outbreaks of violent crime. The police and fire services' cars and helicopters have been parked indefinitely, to save money on fuel. Policemen and firefighters have gone on strike – some even occupied the arrival zones of airports in Rio de Janeiro, with banners bearing the message: “Welcome to the Hell”. Elsewhere, in the city centre, state employees are protesting about delayed pay packages and insufficient resources.

With just over one month until the city is due to host one of the biggest sporting events on the planet, tourists and teams from many countries have already started to arrive. Serious concerns have been raised regarding the safety of these visitors; not least, Brazilian football star Rivaldo Ferreira has urged people to stay away from the games, saying that attendees will be putting their lives at risk.

There is some hope:

…other host cities – including London and Sochi – experienced problems in the lead up to the games, yet they were still considered to be successful events.

9) What exactly is density?

Density means different things to different people. Some see forests of apartments and others see a range of homes in different parts of the city. In a useful summary of the ‘density’ conversation the authors suggest:

There is no single scale at which to measure urban density, but the larger the scale the lower the density. The best approach is to understand density as multi-scalar: for any location there is an internal density, a net density, a walkable density and a metropolitan density.

Density is a concept hijacked from physics that doesn’t work well in urban planning.

10) Stumbling on globalisation

Noah Smith’s excellent article on globalisation’s discontents is worth a read. He highlights that globalisation has reduced inequality across countries, but increased inequality within countries. Specifically:

…the global poor and the rich did extremely well, while the rich-country middle classes suffered and stagnated.

He rebukes both the left for their scaremongering that globalisation only benefits the rich and the right for their denial of the very real costs of globalisation:

…challenge to the blithe optimism of libertarians comes from the recent work of economists David Autor, David Dorn and Gordon Hanson, who found that Chinese competition severely damaged much of the American working class. That’s consistent with the story in the elephant graph, and it pokes a big hole in the right’s free-trade boosterism.

So the stories routinely told by intellectuals on both the left and the right have trouble explaining the fruits and failings of globalization. We need new ideas to fit the new facts, instead of relying on our old comfortable shibboleths.

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28 Comments

With #1 and 2 Shamubeel had me worried that he might be changing his colours, having in the past clearly signaled that he was a total fanatic on the "free market" principles of Milton Friedman. But then at the end of #3 he writes"..bigger features of isolationist politics of the future". Forget isolationist, and replace them with DEMOCRATIC principles, where the "free market" has as identified in #1 cost the common people their jobs, standard of living and significant future prospects. Shamubeel demonstrates that he sees the world in extremes - it is either fully free market of fully not! WAKE UP! Balanced Government regulation is required to balance the need for jobs and reasonable wages to produce a good standard of living against rampant greed reducing the majority to a modern form of subsistence slavery that has resulted in increasing numbers on part time jobs struggling to make a living, homelessness increasing, increased crime, more disenfranchised, increased radicalism and the list goes on! Why does he think the likes of Pauline Hanson and Trump are getting traction? The politicians who are supposed to represent the common people have instead betrayed them through self interest, greed and a lust for power. The only unfortunate thing about what has happened is that it took so long, and too many lives destroyed for this message to come out.

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In my view democracy means very long little unless it is accompanied by an economic policy that takes into account the needs of all the people. Just because you have the right to vote does not mean you live in a democracy. A very good example of that is America which is no more a democracy than China is. I do believe that basically all our ills can be tracked back to bad economic policies. And yes I agree Murray86, balanced government regulation is needed. Free Trade is not the answer. A country that has a fiat currency could have wonderful economic policies that benefited all its people but instead we have economic policies that are based on a view that somehow we are still tied to the gold standard. With Brexit, England now has a chance to model itself on the Scandavian Countries and try to look after its people. I live in hope.......

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I agree with the issues you have stated. I disagree that it is possible for government to fix it or that it is even their responsibility. Governments only follow the trend of the people, the thinking of the people. Until the majority of the people put aside their own self interests and see these issues as part of the bigger picture, nothing will change by choice. The common people are betraying themselves by thinking that it is up to others to fix the problems. They are betraying themselves by remaining ignorant and unaware of their own contribution to the problem. The common people have allowed themselves to be fed a load of bollocks about the "free market", competition, "wealth" and money in the first place. Until we all become aware of our own self interest, greed, apathy, ignorance and most of all fear, nothing will change voluntarily. It is we the people that must unite and cooperate to achieve a common goal.

Trump and Hanson are not viable alternatives but they are stepping into the void much like Hitler did.

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You are only partly correct. It can and will take Government to fix this but it must be global. For example if only one country did it it would create a degree of imbalance that in itself could be quite damaging. The shift back to balance will need to be progressive and gradual. The people cannot fix it. The market players have manipulated the market too much and currently control the market removing choice.

The void that Hitler stepped into was created by the Treaty of Versailles, and the situation tht it created has many similarities with what is happening today. The warning is clear.

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Re:# 2- Sadly, the action in the UK is more of the same, more debt.

And so the implicit regime of central bank authority which left questions about what central banks could actually do has given way to just those worst fears, an explicit regime of central bank action that has instead proven everything they can’t – which is pretty much everything. Read more

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There are a few very well known rules for density, but they conflict with developers trying to clip the ticket so won't be widely acknowledged. They also conflict with the motorcar era.

30-60 people per acre.
Mixed use.
Ability to walk to all essential needs. Work, shopping, school etc.
People won't walk more than 2.5-3 blocks.
The motor car is anti social, you don't find good places to congregate around them.
Public ownership of public spaces
Private ownership of businesses (no Westfield Malls or landlords for these last two)
Maximum of four stories. (mental illness rates go up incrementally above that)

A start point for some reading. https://architecture.mit.edu/publication/streets

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These globalists cannot think past global trade.

When was the last time you heard a globalist talk about heritage and culture - NEVER

This top ten is a perfect example, lots of praise for globalization but if you want to protect your culture and heritage you are a racist.

Shame on you

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You're wrong about having to wait to see the effects of brexit. One MAJOR change has taken place. Brexit signalled the end of ignoring the 'little guy'. If politicians want to remain in office/power/alive they will now have to ensure that their policies have something in them for main street. If they don't then where do you think this will all end? Crowds can move much quicker than you think.

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How long before we get a bit of violent direct-action here, I wonder? What's the critical mass of angry people with nothing to lose? If you're sleeping on the street, a jail term for rioting or firebombing is a step up. At least there's heating and they'll feed you.

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Solidarity forever?

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#7 I cannot see anything which to disagree with in the statement, the problem may be in implementation.

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#7

Shamubeel is simply being populist from afar, echoing the biased views formulated by others

You should study up on the case of Pauline Hanson and the Maroubra Muslim race riots, crime statistics and murders and the background of the perpetrators. Native born white Australians are less accepting than New Zealanders, inclined to quickly call a spade a spade.

I lived in Australia during the rise of Pauline Hanson and One Nation

When Hanson made her maiden speech in the senate, dealing with the wide open borders, allowing 300,000 migrants in annually when unemployment was 11%, John Howard applied the term racist, the news media latched on to it and ran with it constantly

Tony Abbot set up a $100,000 "dirty tricks" fund to sling mud at her and undermine her

When Howard lost power he admitted regretting the Hanson character assassination and apologised

Her manifesto is Australia for Australians and anyone who wants to migrate there, should adopt the country's values and language, and fit-in, and leave their prejudices and baggage back where they come from

By-the-way Shamubeel, the legislative power is in the Senate. It will be a weak parliament again

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Shamubeel is simply being populist from afar, echoing the biased views formulated by others

Australia’s Trump, actually much more racist.
How does one stop being played for a sucker. Read beyond the comic strip.

http://blog.dilbert.com/post/146945783646/the-crook-versus-the-racist

But while Trump has defined Clinton as crooked, the Clinton campaign has put together an impressive confirmation bias case that Trump is a racist. As I have described in prior posts, none of the “evidence” is real. Trump talks about other countries, illegal immigrants, and religion. He has no proposals about race. But the facts are not important to politics. Never have been, never will.
What matters is that the Clinton side – including parts of the media – have branded Trump a racist, and it is sticking.

http://blog.dilbert.com/post/146605145036/persuasion-update-clinton-vs-…

iconoclast, kudos for tackling the issue.

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Whenever you see a mainstream media article about GOP Presidential candidate, Donald Trump, it is often laden with the terms “bigot, racist and misogynist.” In our overtly politically correct society, people play race and bigot cards as a way to create a persona of being a victim.

Decades Old Lawsuit Reveals Trump’s TRUE Feelings For Blacks, Jews

https://truthkings.com/decades-old-lawsuit-reveals-trump-heroically-fou…

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While Hillary Clinton's friend & mentor was a KKK leader (Robert Byrd).

Hillary Clinton regards war criminal (Henry Kissinger) as a friend

Hillary Clinton admires racist feminist (Margaret Sanger) who references popular opinion that Aboriginal Australians, to her "the lowest known species of the human family, just a step higher than the chimpanzee in brain development".

Hillary Clinton supported Barry Goldwater in the 1960's who was anti-civil rights & called Black youth "superpredators" in 1996.

Hillary Clinton voted for the Iraq war.

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There may be more support for more targeted immigration than commentators think, e.g. Brexit.

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Make it even more simple, wear a cap that says, "Make NZ Great Again".

Unfortunately it is easier to point out the problem than create solutions that work in a real world.

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Oddly enough Robert Byrd voted against the Iraq war but was the only Senator to vote against the appointment of both Thurgood Marshall and Clarence Thomas to the Supreme Court.
He also endorsed Obama over Clinton in the Democratic Party Presidential Race.
He also personally filibustered against the 64 Civil Rights Act for 14 hours.
Strange man who went from an Exalted Cyclops in the KKK to a respected Senator.

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Pauline Hanson coming back to Australian Politics has come at a great time too. both the Coalition Government & Labor opposition have been caught hanging around a controversial Muslim Sheikh (Shady Alsuleiman) who has made very sexist,homophobic comments.

Pauline Hanson is a balance in my opinion to the major political correctness now infesting Australian politics & the media.

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Great Top 10 Shamubeel.

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Could I unpack the "Christian way of life" we hear Pauline seeks to foster. Jesus championed the poor, powerless, all the outsiders , the prostitutes and whoever else the religious and political powers and holy rollers of the time disdained. He'd be on the side of immigrants, gays and pretty much anyone else on the fringes and struggling, so if whatever else you call it, don't call bashing the underdog a Christian way of life. Although I do agree the Christian brand value has been damaged by some of the franchise holders though.

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On that subject, its been an endless source of amusement for me since I realised that the guy we call Christ was probably the original libertarian leftie yet those who worship him most fanatically seem to cluster together as right wing authoritarian conservatives.

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What would Jesus say about personal responsibility for birth control. The Pope has said people "don't have to breed like rabbits". What would he have said of the Wests responsibility to take people from overpopulated nations (such as Syria)? Other than the theology what code of behaviour did Jesus introduce that we couldn't elucidate for ourselves?

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Jesus would have told them they will always be poor (because there will always be bums) and to stop being prostitutes and to stop being gay (not one jot or one tittle ...from the law..)and to give to Caesar that which is Caesar's.

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What has government ever done for the people "NOTHING"
They are not even able to
cant stop wars
cant stop corruption
cant stop crony capitalism
cant stop tax havens
cant stop economic collapse
cant stop ballooning debt
cant stop asset bubbles
Cant do anything. As much use as tits are to a bull.

Of course they could do things if they really wanted to, but they don't want to, they are too corrupt.
Nothing will change until governments put their country and their people first before corporate control.

And you and your kind say "Brexit was a shock wake up call" No it was NOT a shock, you were too busy sleeping

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Pretty incredible, really, as they seem perfectly able to start each of them.

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Population Density Hmmm
Economics will never be a science they are too dense

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