By Roberto Savio
ROME, Mar 12 2015 (IPS)

The world is clearly splitting into two parallel worlds, with each going their own way, in what we could call the ‘Acapulco paradox’.

Take the official version of the image of Acapulco – a splendid Mexican resort, with horse riding on the beaches, a place blessed by nature and enriched by beautiful villas, gourmet restaurants, a place of bliss and relaxation.

Roberto Savio

Now take the version of the people living there – a place torn by criminal gangs with several deaths every day, where locals live in fear and total insecurity.

In the same way, there are now two ways to look at global reality.

One is the macroeconomic approach based on global data and, according to which, Greece has been doing better along with Italy, Portugal and Spain. In those countries, macroeconomic data are improving. Spain is even being touted as the example of how a country, which went through the bitter pill of austerity, now has growth at the same level as Germany.

Then, speak with young people, among whom unemployment is close to 40 percent, or with pensioners, or with those working in the hospital and education sectors, and you get a totally different picture. According to Caritas, the number of people living in misery has doubled in the last seven years.

The alternative model is the United States, which invested in growth and not in austerity like Europe. Its growth is running at 2.4 percent against an anaemic 0.1 percent for Europe. Again, the positive macro data do not coincide with the people’s data.

“Take the official version of the image of Acapulco, a place of bliss and relaxation. Now take the version of the people living there, a place torn by criminal gangs, where locals live in fear and total insecurity. In the same way, there are now two ways to look at global reality”
Let us take the latest example of economic recovery: the decision of the Walmart retail chain, one of the largest employers in the United States to increase the hourly wage from 8.9 to 10 dollars. This looks like very positive news, but the fact is that 60 percent of Walmart staff do not work sufficient hours to make a living – some work just two days a week, and with 640 dollars a month you are still into poverty.

Maybe it is just a coincidence, but the suicide rate rose from 11 per 100,000 people in 2005 to 13 seven years later. In the time it takes to read this article, six Americans will have tried to kill themselves and in another ten minutes one will have succeeded. More than 40,000 Americans took their own lives in 2012, more than died in car crashes, says the American Association of Suicidology.

If you start looking into the macro data, things become clearer. Profits from the financial sector are now over 20 percent of the total, double the level from the Second World War to the 1970s, and since 1970 productivity has grown by less than half. What this means is that the real economy has grown by half that of finance.

It is now clear that it is growth of the finance industry which is really holding back the rest of the economy, and far fewer people are employed in the financial sectors than in production and services.

These data come from nothing less than the Bank of International Settlements, the Gotha of the banking world, which also reports that brilliant people are trying to move into the financial sector, to the detriment of other sectors of the economy.

Looking into the figures opens up fascinating analyses. One of them from Hong Kong, published in the New York Times in the first week of March, deals with the personal wealth of lawmakers from China and the United States.

The NYT reported that according to the Shanghai-based Hurun Report, of the 1,271 richest people in China – a record 203 – nearly 16 percent are in the Parliament or its advisory body. Their combined net worth is 463.8 billion dollars, which is more than the annual economic output of Austria.

By comparison, American lawmakers are poorer. Eighteen of the Chinese lawmakers have a net worth greater than the 535 members of the U.S. Congress, the nine members of the U.S. Supreme Court and U.S. President Barack Obama’s cabinet.

We should pity the U.S. lawmakers, the 22 richest members of whom have only an average of 124 million dollars (70 percent of the senators are millionaires anyhow) and make up only four percent of the Senate, while four percent of the richest Chinese lawmakers are the country’s 203 billionaires.

Statistics in Europe also open the way to illuminating reflections. Take Spain, for example, where billionaires are in decline. In the Forbes list of the richest men in the world, Spain now has 21, five less than last year. Their combined wealth is 116,300 million dollars, and they increased their wealth in a year by only 500 million dollars, against the 3,200 million dollars of the richest man in the world, Bill Gates.

Yet, 500 million dollars is the equivalent of 35,714 average yearly  salaries, close to the population of the sunny town of Teruel in eastern Spain (around 36,000), and 116,300 million dollars is the equivalent of 8.3 million yearly salaries, equal to the combined population of Andalusia, the largest Spanish region, and the Balearic Islands.

The problem is that those two worlds are supposed to meet and relate through political institutions: Parliament, which represents everybody, and Government, which is supposed to regulate society for the good of every citizen.

Well, a good case study comes again from Spain, where it is possible to become a Spanish resident without going to Spain. It is sufficient to buy two millions euros’ worth of the country’s public debt, or buy one million euros’ worth of shares, or buy a house that costs at least 500,000 euros plus taxes, to become a Spanish resident. Since September 2013, 530 foreigners have obtained that right.

It is probable that the experience of obtaining a Spanish residence permit of the tens of thousands who crossed the Mediterranean at risk of their lives (it is estimated that over 20,000 have died up to now) looks very different. And many European countries have taken a similar path, including the United Kingdom, Cyprus and Portugal

In the United Kingdom, there is now a debate on a law from 1914 which excludes “non-domiciled” residents (‘non-doms’) from paying taxes on their foreign income or assets. It is enough to have a domicile abroad, usually by declaring permanent home in a tax haven. The number of ‘non-doms’ surged by 22 percent between 2000 and 2008 (year of the last available date), to reach 130,000 people.

This is part of an effort to reduce taxation on rich people, by creating loopholes and new regulations, to attract as many rich people as possible. President François Hollande in France has learnt at his expense what it means to speak of taxing the rich and had to make a quick turnaround. Obama is doing the same, and the only ‘leader’ who is speaking about taxing the rich is now Pope Francis.

However, one of the best examples of the ‘Acapulco paradox’ comes from the City in London.

After all the popular uprising about the disproportionate salaries of bankers, with public declarations from the U.K. government, the Church of England and the Bank of England, the announcement of an improvement in the U.K. economy by the European authorities has been taken at face value.

Barclays, for example, is increasing salaries by 40 percent, and an increase in salaries of 25 percent is expected all over the City this year. A young financial analyst, just out of university, at entrance salary could expect to take home the equivalent of 100,000 dollars per year.

While this will be good for statistics on average incomes, the yearly incomes of the 10 percent poorest British citizens will keep them at survival level. It is likely that their view of economic recovery will be different from those in the City. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

The extent to which banking services are available freely between SADC states differs across the various products offered and the clients served by banks. Credit: Kristin Palitza/IPS

By John Fraser
JOHANNESBURG , Aug 14 2013 (IPS)

Leading bankers are concerned that the regulatory environment in some southern African states is preventing them from offering a full range of services to individuals and companies across the region.

Efficient and affordable financial services are crucial to both the development of businesses and infrastructure projects within the Southern African Development Community [SADC] – and in expanding the reach of banking to the millions who are currently outside the system.

The concerns are being raised ahead of the SADC heads of state and government meeting in Lilongwe, Malawi, on Aug. 17 and 18.

The group chief executive officer of BancABC Douglas Munatsi told IPS that, on the surface, the banking rules in SADC states are similar, as they all stem from the Basel guidelines, an international regulatory framework for banks.

“However, the reality is that some regulators don’t apply the rules the same way, on issues such as the minimum capitalisation of a bank,” he said.

“Sometimes the process is not as transparent as it should be. A country may have very positive investment rules, but labour laws can be very rigid, such as those covering expatriates in Botswana.”

The group chief executive officer of BancABC Douglas Munatsi said that banking rules in SADC states are similar on the surface. But in reality all regulators did not apply the same rules. Credit: John Fraser/IPS

He said that if a bank extended its reach across the region, it needs to be able to deploy people into new territories, but this is not always easy.

“This affects us, as we find limited skills in some places, but we are only allowed to move in a certain number of staff,” he said. “The regulatory environment in some countries is still relatively weak...Political uncertainty in countries like Zimbabwe is another matter of concern.” -- Cas Coovadia, the managing director of the Banking Association of South Africa

Mike Brown, the chief executive officer of Nedbank, one of South Africa’s biggest banks, agreed that there are inconsistencies.

“The extent to which banking services are available freely between SADC states differs across the various products offered and the clients served by banks,” he told IPS.

“In wholesale banking [bank services for companies] for example, the growing trade between SADC countries has resulted in banks developing trade finance solutions to facilitate the ease of intra-regional trade.”

Brown noted that there has been “more limited” progress in providing banking services to ordinary customers because of a failure to harmonise regulations across SADC. He also cited exchange controls as an obstacle to expansion.

Brown said that migrant workers, such as miners from neighbouring countries who work in South Africa, need to be able to send funds across borders to support their families back home.

“Companies have emerged that provide cross border money remittance solutions. These include mobile operators and money remitting companies [such as Western Union and Moneygram]. The cost of these services is still, however, high and prohibitive for many people – and not highly utilised,” he warned.

And in some cases banks are not open to providing services for rural women.

Forty-year-old Vivian Zivira, an agro-dealer from Nyanga in Zimbabwe’s Manicaland province says many women like her with communal land face significant challenges to secure loans to start income-generating programmes.

She says that this is because Zimbabwean banks take too long to process their applications, and charge high interest rates.

“It took me about six months to access my first loan because the banks wanted collateral, which I eventually provided through my husband. They gave me 5,000 dollars with 25 percent interest. Despite a very good repayment record, the bank could not increase the second loan,” Zivira told IPS.

But Cas Coovadia, the managing director of the Banking Association of South Africa, said he believed there were no major issues affecting the offering of banking services between states.

“The SADC Banking Association has been working with the SADC Committee of Central Bank Governors to develop an integrated payments and settlement system, which will improve banking across states substantially,” he told IPS.

However, he did warn that “the regulatory environment in some countries is still relatively weak. Infrastructure is another issue, particularly telecommunications. Political uncertainty in countries like Zimbabwe is another matter of concern.”

The chief operating officer of First National Bank Africa, Leonard Haynes, agreed that sound infrastructure plays a big part in a bank’s ability to make its services available, and he highlighted the importance of telecommunications and stable electricity.

He also suggested that the unavailability in some places “of personal identity documents or similar reliable forms of identification makes it a challenge to comply with ‘know your customer’ requirements.”

“Credit bureaus in some of these countries are generally not in existence, or are not reliable yet as a reference point, to provide customer information on which credit decisions can be based,” he told IPS.

Brown said that the different regulatory environments in different states “present a challenge in managing regional operations, by limiting the economies of scale that can be achieved across the border.

“For example, some countries require banking technological systems to be located in that particular country. This results in the need to duplicate infrastructure across a number of countries and increases the operating costs and eventual costs to customers,” Brown said.

He noted that some countries are changing their regulatory rules, and that this can provide both challenges and opportunities.

“For instance, Zimbabwe and Zambia have increased the minimum capital requirements for banks. An unpredictable regulatory environment contributes to the complexity of managing operations in multiple countries, particularly if this is combined with an unclear level of indigenisation.”

He said that one would expect that as the ease of doing business in the various countries improves, and the operating environment is harmonised, this would result in greater investment across the borders and more substantive regional strategies.

* Additional reporting from Michelle Chifamba in Harare.