The IMFBlog on May 28, 2019, is about a world phenomenon that seems to still be present in all walk of life throughout the world. The Costs of Corruption running deep in the MENA, have been amplified by the hydrocarbon-related rentier economies to a point where only a defossilisation of the respective economies could somehow reduce their extent. In the meantime, costs of corruption running deep in the MENA seem to go unattended to. Anyway here is this IMFBlog article.
The costs of corruption run deep. Your
taxpayer dollars are lost in different ways, siphoned off from schools, roads,
and hospitals to line the pockets of people up to no good.
Equally damaging is the way it corrodes the
government’s ability to help grow the economy in a way that benefits all
And no country is immune to corruption. Our
Chart of the Week from the Fiscal Monitor
analyzes more than 180 countries and finds that more corrupt countries collect
fewer taxes, as people pay bribes to avoid them, including through tax
loopholes designed in exchange for kickbacks. Also, when taxpayers believe
their governments are corrupt, they are more likely to evade paying taxes.
The chart shows that overall, the least corrupt governments collect 4 percent of GDP more in tax revenues than countries at the same level of economic development with the highest levels of corruption.
A few countries’ reforms generated even higher
revenues. Georgia, for example, reduced corruption significantly and tax
revenues more than doubled, rising by 13 percentage points of GDP between 2003
and 2008. Rwanda’s reforms to fight corruption since the mid-1990s bore fruit,
and tax revenues increased by 6 percentage points of GDP.
These are just two examples that demonstrate that
political will to build strong and transparent institutions can turn the tide
against corruption. The Fiscal Monitor
shines a light on fiscal institutions and policies, like tax administration or
procurement practices, and show how they can fight corruption.
costs of corruption run deep.
Where there is political will, there is a way
Fighting corruption requires political will to
create strong fiscal institutions that promote integrity and accountability
throughout the public sector.
Based on the research, here are some lessons for
countries to help them build effective institutions that curb vulnerabilities
Invest in high levels of transparency and
independent external scrutiny.
This allows audit agencies and the public at large to provide effective
oversight. For example, Colombia, Costa Rica, and Paraguay are using an online
platform that allows citizens to monitor the physical and financial progress of
investment projects. Norway has developed a high standard of transparency to
manage its natural resources. Our analysis also shows that a free press enhances
the benefits of fiscal transparency. In Brazil, the results of audits impacted
the reelection prospects of officials suspected of misuse of public money, but
the impact was greater in areas with local radio stations.
Reform institutions. The chances for success are greater when
countries design reforms to tackle corruption from all angles. For example,
reforms to tax administration will have a greater payoff if tax laws are
simpler and they reduce officials’ scope for discretion. To help countries, the
IMF has built comprehensive diagnostics on the quality of fiscal institutions,
investment management, revenue administration, and fiscal transparency.
Build a professional civil service. Transparent, merit-based hiring and pay reduce
the opportunities for corruption. The heads of agencies, ministries, and public
enterprises must promote ethical behavior by setting a clear tone at the top.
Keep pace with new challenges as technology and
opportunities for wrongdoing evolve.
Focus on areas of higher risk—such as procurement, revenue administration, and
management of natural resources—as well as effective internal controls. In
Chile and Korea, for example, electronic procurement systems have been powerful
tools to curtail corruption by promoting transparency and improving
More cooperation to fight corruption. Countries can also join efforts to make it harder
for corruption to cross borders. For example, more than 40 countries have
already made it a crime for their companies to pay bribes to gain business
abroad under the OECD
anti-corruption convention. Countries can also aggressively pursue
anti–money laundering activities and reduce transnational opportunities to hide
corrupt money in opaque financial centers.
Curbing corruption is a challenge that requires persevering on many fronts, but one that pays huge dividends. It starts with political will, continuously strengthening institutions to promote integrity and accountability, and global cooperation.
The International Monetary Fund (IMF), keeps on pressing on all economic and policy issues of the day in every country. Doing so for all these years, it has, in the end, amassed such knowledge and experience that enabled it to have a worldwide view of the latest trends. Tackling corruption in government could save $1 trillion in taxes, but not only that as we were recently told, it could also resolve many of the plethora of all related issues throughout all regions in the developing and developed world alike. A point in case is elaborated on this particular article that is republished here for its obvious importance, especially for those developing countries of the MENA region.
No country is immune to corruption. The abuse of public office for private gain erodes people’s trust in government and institutions, makes public policies less effective and fair, and siphons taxpayers’ money away from schools, roads, and hospitals.
While the wasted money is important, the cost is about much more. Corruption corrodes the government’s ability to help grow the economy in a way that benefits all citizens.
But the political will to build strong and transparent institutions can turn the tide against corruption. In our new Fiscal Monitor, we shine a light on fiscal institutions and policies, like tax administration or procurement practices, and show how they can fight corruption.
Political will can turn the tide against corruption.
Corruption helps evade taxes
We analyze more than 180 countries and find that more corrupt countries collect fewer taxes, as people pay bribes to avoid them, including through tax loopholes designed in exchange for kickbacks. Also, when taxpayers believe their governments are corrupt, they are more likely to evade paying taxes.
We show that overall, the least corrupt governments collect 4 percent of GDP more in tax revenues than countries at the same level of economic development with the highest levels of corruption.
A few countries’ reforms generated even higher revenues. Georgia, for example, reduced corruption significantly and tax revenues more than doubled, rising by 13 percentage points of GDP between 2003 and 2008. Rwanda’s reforms to fight corruption since the mid-1990s bore fruit, and tax revenues increased by 6 percentage points of GDP.
Corruption also prevents people from benefiting fully from the wealth created by their country’s natural resources. Because the exploration of oil or mining generates huge profits, it creates strong incentives for corruption. Our research shows that resource-rich countries, on average, have weaker institutions and higher corruption.
Corruption wastes taxpayers’ money
The Fiscal Monitor shows that countries with lower levels of perceived corruption have significantly less waste in public investment projects. We estimate that the most corrupt emerging market economies waste twice as much money as the least corrupt ones.
Governments waste taxpayers’ money when they spend it on cost overruns due to kickbacks or bid rigging in public procurement. So, when a country is less corrupt, it invests money more efficiently and fairly.
Corruption also distorts government priorities. For example, among low-income countries, the share of the budget dedicated to education and health is one-third lower in more corrupt countries. It also impacts the effectiveness of social spending. In more corrupt countries school-age students have lower test scores.
Corruption is also a problem in state-owned enterprises, such as some countries’ oil companies, and public utilities like electric and water companies. Our analysis suggests that these enterprises are less efficient in countries with high levels of corruption.
Where there is political will, there is a way
Fighting corruption requires political will to create strong fiscal institutions that promote integrity and accountability throughout the public sector.
Based on the research, here are some lessons for countries to help them build effective institutions that curb vulnerabilities to corruption:
Invest in high levels of transparency and independent external scrutiny. This allows audit agencies and the public at large to provide effective oversight. For example, Colombia, Costa Rica, and Paraguay are using an online platform that allows citizens to monitor the physical and financial progress of investment projects. Norway has developed a high standard of transparency to manage its natural resources. Our analysis also shows that a free press enhances the benefits of fiscal transparency. In Brazil, the results of audits impacted the reelection prospects of officials suspected of misuse of public money, but the impact was greater in areas with local radio stations.
Reform institutions. The chances for success are greater when countries design reforms to tackle corruption from all angles. For example, reforms to tax administration will have a greater payoff if tax laws are simpler and they reduce officials’ scope for discretion. To help countries, the IMF has built comprehensive diagnostics on the quality of fiscal institutions, including public investment management, revenue administration, and fiscal transparency.
Build a professional civil service. Transparent, merit-based hiring and pay reduce the opportunities for corruption. The heads of agencies, ministries, and public enterprises must promote ethical behavior by setting a clear tone at the top.
Keep pace with new challenges as technology and opportunities for wrongdoing evolve. Focus on areas of higher risk—such as procurement, revenue administration, and management of natural resources—as well as effective internal controls. In Chile and Korea, for example, electronic procurement systems have been powerful tools to curtail corruption by promoting transparency and improving competition.
More cooperation to fight corruption. Countries can also join efforts to make it harder for corruption to cross borders. For example, more than 40 countries have already made it a crime for their companies to pay bribes to gain business abroad under the OECD anti-corruption convention. Countries can also aggressively pursue anti–money laundering activities and reduce transnational opportunities to hide corrupt money in opaque financial centers.
Curbing corruption is a challenge that requires persevering on many fronts, but one that pays huge dividends. It starts with political will, continuously strengthening institutions to promote integrity and accountability, and global cooperation.
Governments in the Middle East are becoming more
receptive to growing private sector involvement in their economies because
public sector debt in many markets is ballooning, an official from the World
Bank’s International Finance Corporation (IFC) has said.
Speaking on an investors’ panel debate at the
Global Financial Forum in Dubai on Monday, the IFC’s Middle East and North
Africa (MENA) director, Mouayed Makhlouf, said: “For the first time,
because of the massive rise in public debt across the region, we see a
difference. Our narrative with these governments has changed. Now, they are coming to us and they are saying
‘can you help us with the reforms?'”
Makhlouf said that the MENA region needs to create
300 million new jobs – “basically, double the population” by 2050 due
to the burgeoning youth population in the region, and that Egypt alone needs to
create around 700,000 jobs per year, although he said it is MENA’s fastest
growing economy currently, with GDP growth of 5.3 percent, compared with a
regional average of around 2-3 percent.
“The social contract in MENA is as such where
most of the services (are) provided by the public sector. But what you have ended up with… is a huge
public debt that has been rising for the past few years,” he said, adding
that debt-to-GDP ratios stand at around 96 percent in Egypt, 97-98 percent in
Jordan and 150 percent in Lebanon.
“For us, the main thing we need to find in
this region are… growth and jobs. And
I really believe both of these things can only come through a larger private
sector participation,” Makhlouf said.
In a separate panel on the outlook for the region’s
banking sector, JP Morgan‘s Asif Raza said that the decline in oil prices
that began in 2014 had created opportunities for
international banks to advise governments that are looking to
diversify on how to embark on “monetisation and privatisation” of
Kamal, MENA head of corporate banking at Citi, said that governments had run up deficits as oil
revenues fell, and had financed these through “various instruments where
banks have been involved”.
“And we expect to see that continue over the
next 2-3 years.”
Although total GCC fixed income issuance declined
by 16 percent year-on-year to $145.3 billion in 2018 as oil prices rallied,
according to Kamco Research, JP Morgan’s Raza said the current pipeline is
A faster flow
Raza said that at this stage last year, “over
$15.4 billion worth of issuance was done in the MENA region – this year, it’s
He added that in 2018, “the loan market
was (at an) all-time high in this region”. Figures published earlier this month from
Acuris showed that syndicated loan activity in the MENA region last year
outstripped bond issuance – with $133 billion of syndicated loans issued,
compared to $89.5 billion in bonds.
Raza said that at the top end of the corporate
banking market, “there’s lots of activity still happening”.
“There’s still quite a decent pipeline of
financing and refinancing,” he said.
However, Citi’s Kamal argued that the market has
been much tougher for SMEs in recent years.
“I believe that there is room for improvement
for all countries in the region as far as creating the right balance for SMEs
(is concerned),” he said.
He said that “time and again” in tougher
economic times large corporates, government-related entities and even government
departments have delayed payments to SMEs, which causes cashflow problems and
affects their ability to repay creditors.
“And some of the legal framework that
surrounds the corporate sector – we all know about bounced cheques and the
consequences of that. In summary, what
happens is SMEs can’t stay back in a number of cases (to) fight through these
cycles. So, we see skips, people leave
and that does not leave a very strong impact as far as consumer confidence is
Yet funding shortages for private sector firms can
also create opportunities – not least for the region’s private equity sector,
according to Karim El-Solh.
Speaking on the investment panel, El-Solh said that
his firm’s pipeline “has increased dramatically as a result of a lack of
availability of funding for businesses elsewhere.
“The IPO market is not open; the bank
liquidity has dried up so for us it’s an opportunity to come and be a provider
of growth capital. We are seeing more
companies, better quality companies, we’re acquiring controlling stakes at
lower valuations,” he said.
Makhlouf said more opportunities need to be created
for the private sector, stating that levels of private sector involvement in
the economy in the region lag behind other emerging markets.
“MENA region is only one-fifth in terms of
private sector participation compared to Latin America,” he said.
The number of millionaires in the UAE increased
last year and this trend will continue over the next five years as growing
investment opportunities will generate more millionaires locally as well as
political and economic stability will also woo rich individuals and families
from foreign countries, say researchers and analysts.
According to the latest report released by global
consultancy Knight Frank, the number of millionaires, or high net worth
individuals, in the UAE expanded 3 per cent to 53,798 last year from 52,344 in
the previous year. The numbers are projected to grow 14 per cent to 61,292 by
2023. Similarly, the number of ultra-high net worth individuals (UHNWIs) – who
own more than $30-million wealth – in the UAE grew from 672 in 2017 to 693 last
year and will reach 799 by 2023.
The study predicted that the number of UHNWIs in
Dubai and Abu Dhabi will increase from 440 last year to 511 in 2023 and from
192 to 223, respectively.
Issam Kassabieh, senior financial analyst at
Menacorp, believes that the ultra-rich will continue to flock to the UAE in
“At the moment, Dubai is attractive for
foreigners. Now, it is a place not just for good investments returns but also
to stay for long term. Government is focusing on key sector so that the cash
comes in and stays in the country through different measures such as longer
visas and ease of doing business initiatives,” Kassabieh said.
“The UAE is an attractive place for foreign
investors – financial markets are at an early stage and have a long way to go.
Real estate was the first to anchor the economy and that brought foreign
investors here. Going forward, the focus will be on more diverse sectors. Also,
the ease of doing business chart shows the UAE is first in the region and also
competitive globally,” he added.
“Dubai offers a full package – good quality of
life, healthcare, education and investment opportunities. All these complement
each other and attracts high net worth individuals to this country. In addition
to that, diversity of population plays a big role in this,” said
Knight Frank data revealed that Dubai and Abu Dhabi
will witness higher growth in UNHWIs as compared to Manama and Riyadh.
Raju Menon, chairman and managing partner, Kreston
Menon, said the number of millionaires will undoubtedly continue growing in the
UAE in coming years.
“Whatever the business challenges or revenue
decline the companies are facing today, it is temporary. We need to look at
long-term of 5 to 10 years. Millionaires should grow here in the UAE because
money is available here so the investment avenues will be opened. The UAE’s
economy offer big opportunities,” he said.
Menon believes that most of the new millionaires
will be homegrown mainly in retail, trading, healthcare, real estate, services
and shipping sectors.
Iyad Abu Hweij, Managing Director of Allied
Investment Partners, said the UAE, home to over 9.4 million residents, remains
an attractive destination for HNWIs in the region.
With investor and business friendly policies, world
class infrastructure and a stable outlook, HNWIs are expected to continue to
grow in numbers in the country over the next coming years. Such policies and
initiatives have played an important role in bolstering the confidence of
investors and attracting Foreign Direct Investments in the UAE, which in turn
creates jobs for a highly talented workforce,” Abu Hweij said
Additionally, the UAE, viewed as a regional startup
hub and a digital leader, continues to boast more startups than any other
country in the region. Naturally, such startups attract more venture capital
and private equity investments locally than anywhere else regionally, he added.
“The UAE continues to provide solid investment
opportunities for investors locally and globally, which, along with a rapidly
developing financial services sector, has played a catalyst like role for the
growth of HNWIs in the country.”
The number of millionaires in the Middle East with
wealth below $30 million grew three per cent from 446,384 in 2017 to 459,937
last year. The number is projected to grow 18 per cent to 541,311 by 2023.
Similarly, the ultra-high net worth individuals with more than $30m assets grew
four per cent year-on-year to 8,301 last year. It’s estimated that the number
will grow 20 per cent over the next five years to 9,997.
According to Knight Frank forecast, the number of
billionaires in the region will grow from 89 last year to 99 by 2023.
Globally, the number of millionaires with less than
$30 million assets are projected to expand from 19.6 million in 2018 to 23.4
million by 2023, an increase of 19 per cent. While ultra rich will increase 22
per cent during 2018 to 2023 from 198,342 to 241,053.
These are the findings of a new World Economic
Forum study which shows the world’s sovereign wealth funds collectively
own $8 trillion
Global decarbonisation could turn fossil fuel-reliant
economies into ‘stranded nations’ unable to unlock the value of carbon-based
assets and infrastructure.
These are the findings of a new World Economic
Forum study, which shows the world’s sovereign wealth funds collectively
own $8 trillion (£6.1tn) in assets but currently invest just
0.19% of this figure in green energy.
It says economies that are heavily dependent on
fossil fuel resources with more than 10% of their total wealth based in carbon
assets could become “stranded” – it says they must act now to develop the
“human capital and economic diversification” to continue to thrive.
The report acknowledges some fossil fuel-dependent
countries have already begun to diversify their economies for impending energy changes but
notes progress is slow.
It says this could pose a serious problem because
as much as three-quarters of energy is expected to come from green sources by
Maha Eltobgy, Head of Shaping the Future of
Long-Term Investing, Infrastructure and Development at the WEF, said: “To protect their economic futures,
countries whose economies rely on fossil fuels need to prepare now for the impending global shift away
from these resources.
“The resource dependent, fossil-fuel-rich nations
that have diligently-built large sovereign wealth funds to manage the economic
challenges of the Age of Oil must now consider how to use this vast wealth to
prepare for the Age of Green Energy.”
Arab Bank’s Radwan Shaban said oil exporting nations provide 80 percent of region’s GDP
The Middle East and North Africa region is unlikely to escape the impact of a trade war, with the biggest potential impact coming from a decline in oil prices, according to the chief economist of Jordan’s Arab Bank.
Speaking on a panel debate on the global outlook for the MENA region, Arab Bank’s chief economist Radwan Shaban said that falling oil demand from China and other nations, as the result of a prolonged trade dispute, would be “a negative for the region”.
“This is a region in which, yes, we have oil exporting and oil importing countries, but in terms of numbers, oil exporting countries account for 80 percent of GDP of this region in 2018,” Shaban said. “Even the welfare of oil-importing countries is closely tied to oil-exporting countries through trade, tourism, FDI, foreign assistance – a whole bunch of factors.”
He said that oil importing countries such as Jordan witness lower trade, lower investment levels and lower assistance with Gulf neighbours if oil prices decline, which “translates into lower economic growth”.
Monica Malik, chief economist with Abu Dhabi Commercial Bank (ADCB), said that with oil prices maintaining a level above $70 per barrel since the second quarter of this year, “we are more optimistic” of the region’s prospects for growth.
She anticipates that higher revenues from oil will mean the government will enjoy a fiscal surplus in 2018, while Saudi Arabia will “substantially reduce” its deficit to under 5 percent of gross domestic product (GDP), although other nations such as Bahrain, Kuwait and Oman had been less progressive with their reforms.
“But I think with the GCC [Gulf Cooperation Council] support packages to Bahrain, we expect the pace of reforms there to accelerate. We’ve already had parliament approve their VAT law,” Malik said.
Both the United Arab Emirates and Saudi Arabia have shifted fiscal policy from consolidation towards growth, Malik said, and had given indications that they intend to continue doing so throughout next year.
In the UAE, she said the country has benefited from “a number of stimulus packages and support measures which aren’t just for short-term growth support but also to improve the business environment, to bring capital inflight, to bring foreign direct investment.”
“I think the critical driver of economic activity, non-oil activity, in the Gulf is government activity still. So, I think focused growth, supported by investments that will really improve the medium-term environment, will be positive for the private sector, though at this point it’s still weak and tightening monetary policy is one of the key headwinds.”
James McCormack, global head of sovereign and supranational ratings at Fitch Ratings, was less positive about Saudi Arabia’s fortunes.
“If you dig around the numbers a little bit, you see a big increase in oil revenues, which has been matched largely by increases in spending. And the concern there is the increases in spending are in current spending, not capital, so (it’s) a little bit more difficult to bring those back down when oil prices maybe come down,” he argued.
A widening gap
He said that the balance of the non-oil economy as a proportion of GDP was worsening.
“The deficit is getting bigger. So, this is really an oil story in terms of the fiscal recovery that we’re seeing in Saudi Arabia,” McCormack argued.
McCormack also said that he feared the trade dispute between the United States and China could be a prolonged one.
“I think it (dispute) is going to last longer, in part because of the fact that the U.S. has moved the goalposts – in fact, widened the goalposts a couple of times,” McCormack said.
He argued that some of the demands being made by the U.S. are considered to be “non-negotiable” by the Chinese government.
“I don’t see how we’re going to have a discussion that’s going to satisfy both sides. This has the potential to turn into something meaningful from a global macro sense,” McCormack argued.
Shaban said that a slowdown in global trade would hit the region in other ways. For instance, he said that Morocco is a significant supplier to Europe’s automotive sector, while in Egypt revenues from ships passing through the Suez Canal provide the country with an important source of foreign currency revenues.
“As global trade slows, that will affect the Suez Canal activity,” Shaban said.
(Reporting by Michael Fahy; Editing by Shane McGinley)
The most recent economic results in Morocco show a deceleration from last year. The north African country grew by 2.4% in the second quarter of 2018, down from 4.5% in the same period last year, according to the High Commission for Planning. The agriculture sector has been cited as the main reason for the decline; its output slowed from just over 18% last year to around 3%.
Oxford Business Group published this article dated October 29th, 2018, written by Jaime Perez-Seoane de Zunzunegui, Regional Editor for North Africa and The Americas.
The bigger picture looks fairly stable, though. The central bank expects the country to end 2018 with growth of 3.5%, a substantial figure despite having registered 4.1% in 2017. Figures remain strong enough to keep up optimism, as indicated by the local business community in Oxford Business Group’s latest Business Barometer: Morocco CEO Survey.
Of the 106 CEOs surveyed between November 2017 and September 2018, almost three-quarters say they have positive or very positive expectations of local business conditions in the coming 12 months.
This sentiment is further strengthened by the number of business leaders indicating the likelihood of future investments: 77% say it is likely or very likely that their company will make a significant capital investment within the next 12 months.
Obstacles to becoming a regional hub
Of course, challenges to economic expansion remain. In fact, they are inevitable when a country is working to maintain considerable growth levels. There are a number of responses to the question of Morocco’s economic slowdown. Undoubtedly, diversification of productive sectors and partnering markets will be key, and government efforts to transform Morocco into a regional hub have long been under way.
In order to consolidate its position as a regional power, one area Morocco could enhance is its tax environment. With individual income tax capped at 38% and corporate tax at a maximum of 31%, coupled with a relatively complex local and national tax system, Morocco ranks 109th out of 137 countries in the total tax rate competitiveness category of the World Economic Forum’s Global Competitiveness Index 2017-18. Accordingly, 55% of survey respondents say that Morocco’s current tax environment (business and personal) is uncompetitive or very uncompetitive on a global scale.
In addition, access to credit remains challenging, at least for some companies. While 40% of business leaders characterise the ease of access to credit as easy or very easy, 38% find it difficult or very difficult. Opinions on financing are always difficult to capture in surveys, as each firm’s profile – including its size, expertise, access to market and needs – influences its response.
A third challenge worth mentioning – and one that is largely acknowledged by CEOs in our survey – is the lack of leadership. Leadership is identified by 47% of respondents as the type of skill in greatest need in Morocco. I’ve met with many business leaders during my visits to the country, and the absence of soft skills among the country’s institutions seems to be affecting the public and private sectors; nobody knows that better than the men and women running companies on a daily basis.
Estimates for 2019 forecast Morocco will grow less than in 2018, which is a reasonable prediction given the country’s recent performance. However, if trade with old and new partners continues to develop, opportunities are expected to be generated for local investors and companies. Determination from Morocco’s business leaders is there, and the challenges have been identified, which is an important first step to tackling them.
Why do the richest 1% of Americans take 20% of national income, but the richest 1% of Danes only 6%? Why have affluent British people seen their share of national income double since 1980, while over the same period, the income share of wealthy Dutch hasn’t budged?
Technological change and globalisation act as powerful forces for income distribution, but these market processes cannot alone account for the continued range in top income inequality in different countries. After all, some of the most technologically advanced and globalised countries, such as Denmark and the Netherlands, are the ones that are the most equal.
To explain why some advanced capitalist countries are more unequal than others, we need to look beyond the market and explore the role of politics and power in shaping distributive outcomes.
Want to have a more equal society? In a critical review of recent research, I’ve found that the formula is surprisingly simple: tax the rich, vote for left-wing parties, implement electoral systems of proportional representation, and empower trade unions.
1. Tax levels
One key political factor is government policy, especially taxation. Countries that have made the biggest reductions to their top rates of income tax have seen the largest increases in top income shares. For example, in more equal France, the top rate in 2010 was only 10% lower than it was in 1950. Meanwhile, in the more unequal US it was 50% lower. At the company level, CEO pay tends to be much higher when the top income tax bracket is lower.
Tax policy plays a pivotal role in explaining top-end income inequality. But policies do not emerge out of thin air. These variations in the policies that influence distributive outcomes at the top result from social power relations, which have been shown to shape the evolution of top-end income inequality over time.
The formal political arena is one site where these power relations unfold. A recent study by Evelyne Huber, Jingjing Huo, and John Stephens studied the income share of the top 1% in postindustrial democracies from 1960 to 2012. They found that centre and right-wing governments in rich countries are consistently associated with increases in top income shares. Meanwhile, policies of left-wing governments generally reduce inequality at the top end.
The institutional design of the political system also matters. Electoral systems of proportional representation tend to favour left-wing parties, while systems that are led by majority rule favour right-wing ones. Certain institutional features, such as having presidents and bicameral legislatures encourage gridlock and empower special interests to block progressive policy reforms.
There are questions about the extent to which the institutional story can be generalised, but as Jacob Hacker and Paul Pierson show, it is crucial in explaining the spectacular rise of the super-rich in the US.
3. Trade unions
In addition to left-wing parties, strong trade unions act as a power check on top income shares. Unions can align with left-wing parties and push for egalitarian policies. Within the firm, unions can bargain to increase their wages and reduce the amount of revenue going to executive compensation and shareholder dividends.
One academic study found that unionisation decreased the compensation of top US executives by 12%. Another found that in US industries with higher levels of union membership, the gap between executive and non-executive pay was narrower. In the numerous cross-national statistical studies that I surveyed the rate of unionisation is one of the few variables consistently associated with lower top income shares.
Prompted in many ways by the pioneering efforts of Thomas Piketty and his collaborators, the study of top incomes has made remarkable progress in the past decade. But there is still room for further exploration.
Given the compelling evidence that living in highly unequal societies destroys our minds, our bodies, our relationships, our communities, and our planet, this is something we should all take seriously. The better the grasp we have of the causes of top-end income concentration in different countries, the more effective we will be in assessing what, if anything, can be done to slow or even reverse it.
The World Economic Forum latest views in The Arab World Competitiveness Report 2018 explores as it is noted, the MENA region’s trends, challenges and opportunities for its so called Arab countries. It explains how:
The Arab World is at a critical juncture, and while it has ambitious economic and social reforms meant all to bring significant economic change for the better to the area, it has failed mainly because of the apparent persisting inequalities that can potentially erode social cohesion.
Much was written about the economies of the MENA countries, and these as it is well known, have potential economic and political development in the region. Furthermore and despite the high rate of growth in the petrodollar economies and their collateral, i.e. their fallout on their neighbouring countries in terms of remittances and other gains and earnings, the populations above all the youth segments of these remained exposed to a prevailing general underdevelopment. With a skewed age distribution towards the young in all Arab countries, their respective governments appeared to be leading towards a significant economic, social and political burden with severe consequences for the stability of the region.
Yachts are seen at a dock at the Dubai Marina, surrounded by high towers of hotels, banks and office buildings, in Dubai, United Arab Emirates December 11, 2017. REUTERS/Amr Abdallah Dalsh – RC1D41223EB0
The United Arab Emirates is the Arab world’s most competitive economy, according to a new report by the World Economic Forum and the World Bank Group.
The UAE was ranked 17th on the latest Global Competitiveness Index (GCI) putting it ahead of Qatar (25th) and Saudi Arabia (30th) among regional economies.
A mixed picture
A handful of countries in the region have made efforts to reform and increase investments to improve competitiveness. However, in many respects the region continues to lag.
Overall competitiveness in Arab world economies has not changed significantly over the past decade and it remains less competitive than East Asia and Europe.
It’s important to note though that the region contains a hugely diverse set of economies – from some of the world’s richest countries, to countries devastated by conflict. Indeed, data couldn’t be collected in countries such as Iraq, Syria and Libya because of fragility, conflict and violence.
High youth unemployment, low levels of female labour force participation and social frustration are key challenges for economies in the Arab world. Diversification and the development of entrepreneurial freedom to increase opportunities for young people are urgently needed to prepare the region for the Fourth Industrial Revolution.
“The Middle East and North Africa region is brimming with talented young people, especially in technology,” said Philippe Le Houérou, IFC’s Chief Executive Officer. “By helping entrepreneurs to reach their potential, governments can support the creation of good jobs and drive technological innovation, making the lives of everyday people better.”
The top 10
The UAE, Qatar and Saudi Arabia take the top 3 spots, reflecting a general trend of resource-rich countries unaffected by conflict ranking much higher on the GCI.
United Arab Emirates
The UAE has improved its absolute assessment but fell one place in the most recent GCI because of larger gains by other countries.
The improvement highlights the resilience of the UAE economy, in part thanks to diversification. But the report flags that, to improve competitiveness, the country needs to speed up progress on spreading the latest digital tech and upgrading education.
Qatar remains in second place, despite falling in the global rankings from 18th to 25th. A drop-in oil and gas prices was largely behind the slide, as this had a significant impact on its fiscal situation. From 2015 to 2016, public debt increased from 35.8% to 47.6% of GDP, while a fiscal surplus of 10.3% was replaced by a deficit of 4.07% over the same period.
However, infrastructure facilities and an efficient goods market remain areas of strengths.
Note: Both the survey and statistical data reflect the situation prior to the diplomatic crisis.
Saudi Arabia’s performance has remained relatively steady – slipping one position. Stable institutions, good-quality infrastructure and a large market (the largest in the Arab world) are all areas of strength.
Saudi executives name restrictive labour regulations as the most problematic factor for doing business, while advancing the equality of education is another area for improvement.
The country has improved on a number of indicators in the last year, including technological readiness and the macroeconomic environment – although persistent challenges remain here. Other challenges include a large fiscal deficit, security, innovation and market size.
Kuwait has dropped to 52nd overall – down 20 places from 2016-17 – largely as a result of a deterioration in the macroeconomic environment. A revision of indicators published by the International Telecommunication Union also sees a fall in technological readiness.
Investments in higher education and training would increase its innovation capacity.
Oman moves up four places to 62nd. Improvements in its macroeconomic environment and higher education and training are reasons for this rise. It also has strong institutions and infrastructure.
However, work is still needed to improve education and training systems as well as reforms to its labour markets.
A stable and efficient institutional system and relatively good infrastructure, innovation and business sophistication are areas of strength for Jordan. The large influx of Syrian refugees has put the country’s fiscal situation and macroeconomic environment under strain, but the government has worked to consolidate both of these.
Morocco places 71st in the Global Competitiveness Index, with the same score as the previous three years.
It scores well on its institutions but sits 120th for labour market efficiency and 101st for higher education and training.
Algeria has risen nearly 25 places in the GCI since 2012-13. Its market size is a particular area of strength, however it scores poorly for labour market efficiency and financial market development.
Tunisia completes the top 10, coming 95th in the GCI with the same score as the previous two years. However, its overall score and place has fallen since 2013-14.
It scores well, relatively, in the health and primary education pillar, but poorly for labour market efficiency and macroeconomic environment.
For more on all the countries, you can read the country profiles contained within the report.
Ten years of change
Six countries have seen their competitiveness score improve over the last 10 years, while six have seen their score fall back.
Investments in infrastructure and connectivity have turned some countries into global leaders for technological adoption in the last decade. However, the report argues that for progress to continue, and competitiveness to increase, societies in the region will need to update their social and economic models.
A piece of BREAKING news of the BBC was about what exactly is Bitcoin Revolution ? It elaborately explains that Bitcoin Revolution is a financial technology with the plan to redistribute world wealth that basically takes from the top 0.1% and give back to 99.9%.
Microsoft Founder- Bill Gates revealed his £500 million dollar investment in Bitcoin Revolution today and is expecting to double the value of his investment in under a year. If you haven’t heard of bitcoin yet, then this is something for you –Bitcoin Revolution.
Before we go into details of Bitcoin Revolution, let us explain who Bill Gates exactly is. Bill Gates is a known billionaire in the tech industry, most famous for founding Microsoft. Some call him the smartest entrepreneur of our century. He’s a large personality as well and his businesses have amassed him a net worth of over $9.2 billion USD. He has made it his agenda to nosedive into the technical sector diversifying his businesses. Whilst being a founder of Microsoft, he has found his passion in a unique industry, a new one powered by Financial Technology. Bitcoin Revolution is his latest project. ”I want people to acheive financial independence and not be slaves of economy crises” Bill Gates announced in TEDx talk.
But now, Bill Gates has decided to invest hundreds of millions of dollars in order to literally take over the bitcoin market. He’s teamed up with Richard Branson change the definition of money. That’s why they acquired Bitcoin Revolution.
What exactly is Bitcoin Revolution? Bitcoin Revolution is a financial technology with the plan to redistribute world wealth. Basically – take from the top 0.1% and give back to 99.9%. Bill Gates believes wealth is not distributed well in our age, and although there always will be someone richer and someone poorer, the current situation is not acceptable, where top 0.1% controls almost 90% of world wealth. Bill Gates believes he can cut that down to around 20% without causing world-wide financial crisis, Pratt goes even further. So what exactly does that mean to you, the regular middle or lower class person? This means you will become 2 – 3 times wealthier, and no one except the super-wealthy will take a hit. Sounds amazing, doesn’t it?
Ok, the theory is there, but how will it work you might ask? Overall, the idea is easy. The top 0.1% keep their wealth invested in stocks, and Wall Street brokers trade these stocks for them. The idea is to beat the Wall Street traders in their own game – make winning trades so Wall Street with their hoards of wealth slowly but surely starts losing money. Just like a poker game, where a new player comes along on the high-stakes table and starts winning.
In order to do this, you would need a better stock movement predictions than the Wall Street has. That is Where Bitcoin comes in. With the help of cloud computing, it can be done, and it’s actually being done now as Bitcoin Revolution has showed! This is exactly the reason why Bill Gates and Branson jumped on this technology as soon as he heard about it. It’s revolutionary.
We interviewed Bitcoin Revolution CTO Dan Marconi so he can better explain exactly how Bitcoin Revolution operates.
Can you tell us how Bitcoin Revolution works?
Bitcoin Revolution works like a team of spies. We have millions of automated robots that go on social media and gather real-time data – posts, images, text, videos and anything else people are publicly saying. Then we analyze all this data, looking for topics related to any publicly traded companies. Once we have a certain trending topic related to a big company, we analyze if the trend is Positive or Negative. If the trend is positive, we bet on the stock to rise, if the trend is negative – we bet on the stock to fall. It’s that simple.
How often does Bitcoin Revolution make a mistake?
Not that often at all. What people are saying on Social media is real, it’s there and it’s true, so we rarely make a mistake. We are still in Beta stage of our software, but it’s already showing over 87% successful trades. This means that out of 100 trades Bitcoin Revolution makes automatically, 87 will be profitable.
How much money can a regular user of Bitcoin Revolution make?
It depends a lot on the money they invest and the broker they work with. Let’s take the regular user who starts with 500 and bets 20 per trade. Over 24 hours Bitcoin Revolution will make around 200 trades based on trends on Social media. Around 174 of the trades will be profitable, and 26 will not. This means user will win approximately 3,480 and lose around 520. Evening out to 2,960 profit in a single day. There are some small commissions added by the broker, but it’s usually less than 2%.
Has any user actually lost his investment?
No, we have never had a user who had lost his invested money. Even the worst cases we have had were always profitable in the end.
What improvements are you working on right now?
Right now, we can only access information that people are publicly sharing on social media. Once we go out of Beta and make the Bitcoin Revolution available for anyone, we will ask our users permission to access their individual Newsfeeds. This will give us even more data to work with, making Bitcoin Revolution more accurate.
Individual Newsfeeds? Is it safe to give access to that?
It’s 100% safe. We simply ask for access monitor the newsfeed using automated systems. There is no risk of us posting anything or your behalf. And besides that, no real human will be reading your Newsfeed. It’s all just algorithms looking for keywords. We take privacy very seriously and will never take any risks to harm our users.
How much will it cost to use Bitcoin Revolution automated system?
We don’t know yet. But first 1,000 spots will be free. After that, for regular users, we are thinking of charging 10,000.00 monthly and a hundred times as much for trading firms who wish to use Bitcoin Revolution. We do not want to disrupt the stock market too much so spots will be limited to 1,000 trading firms and 1,000,000 regular users.
When will Bitcoin Revolution be available?
Very soon. We are just adding finishing touches and first members will be welcome very soon. First, we will open the doors for small traders – regular people, and only later for big trading firms. Again, first 1,000 people will get a lifetime membership for free.
After the interview Dan showed us Bitcoin Revolution in action. It was like seeing a real miracle for the first time. Dans software was making money on autopilot. Dan was so confident in his Software that he offered to give us one free membership, so we can run our own independent tests, and so we did.
Alex Woods, 24
We took one of our intern students Alex Woods and told him to sign up, following each step.
The first step was fairly easy – he needed to fill in some details like name, last name, email and phone number. After the form was completed and submitted, he was taken to Bitcoin Revolution dashboard. Everything seemed pretty easy over there.
The next step was to fund the trading account with a trusted broker. The broker Bitcoin Revolution selected for Alex was BinaryTilt. As we were navigating to the deposit page, Alex received a phone call from BinaryTilt. It was his personal account manager wanting to assist funding process. With the help of account manager, funding process didn’t take long, as all major Credit Cards like VISA, MasterCard and American Express are accepted. Alex went ahead and deposited 250. Once funded, we navigated to the “Auto Trader” section of software, set the trade amount to recommended 20 and enabled it.
Bitcoin Revolution started making trades automatically in front of our eyes, winning most of them. We left it active for 23 hours and once we came back, Alex already had 2,592.37 in his account.
Alex wasn’t convinced. To make sure this was all real and not just some phoney numbers on the screen he requested a withdrawal of 2,500.00 to his bank account. This was a fast and easy process as BinaryTilt is a thrusted broker. After 2 hours money was in his bank account! At this point Alex and we knew that it’s real.
We can’t wait for the software to go live. This will change lives of millions of people. Sometimes the things that seem too good to be true, are actually true.
The incredible has happened. Dan has just notified us that Bitcoin Revolution is live! They are accepting first 1,000 members free of charge for life. As of writing this, there are 937 spots left, but it won’t be long before all the spots are filled up with this once in a lifetime opportunity, so hurry up. Click the link below to sign up now.
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