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. 

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By Hazel Henderson
ST. AUGUSTINE, Florida, Nov 4 2013 (Columnist Service)

It is time to move the global policy debate beyond the binary options of “austerity” versus “stimulus.” Both these macroeconomic policies have caused untold harm to millions and produced dangerous policy stalemates in Europe and the U.S., Japan and other countries.

The experiments in Europe to impose austerity have not only caused unemployment, falling growth rates and quality of life but also rising extremism and political polarisation.

Europeans have learned that debts can’t be paid by more borrowing. And the U.S. Congress is succumbing to mob rule by 50 Republicans who shut down the government. These self-inflicted crises are damaging U.S. credibility and its currency.

The lessons of stimulus are equally dire. Monetary expansion loses effectiveness with each new round of money-printing, whether as bond-buying by the European Central Bank or “quantitative easing” – QEs I, II and III – by the U.S. Federal Reserve.

Hazel Henderson

Pumping up stock markets on the textbook theory that this financial prosperity will trickle down to the real economies of “Main Street” becomes less and less effective. Asset bubbles reappear, along with angry retirees and savers, rising inequality, extremist political parties and legislative deadlock.

Central bankers in emerging markets complain that all this monetary stimulus destabilises their own currencies and economies. Chinese officials plan to launch their renminbi as a global currency and have inked an agreement with Britain to make London its trading centre.

Meanwhile, fiscal stimulus causes predictable conflicts about where funds will be directed, who will win and who will lose. Popular tax cuts rarely target those whose needs assure spending their funds into the economy and often end up in more saving by rich recipients. Spending on public services and infrastructure is a larger multiplier, but is too often spent on roads or bridges to nowhere.

The question arises: are austerity or stimulus the only two options, as macroeconomic theories insist? Increasingly, leaders who claim “there is no alternative” are in disrepute.

Even the grandees of the economics profession, including those of the George Soros-backed think tank INET, are now looking for alternatives, some even pronouncing macroeconomics as defunct.

A new view from Mariana Mazzucato in her The Entrepreneurial State (2013) cuts through this narrow debate within the conventional box of economics, forcing us to look at the bigger picture through wider lenses of science policy and the evolution of technologies in the real world.

As a former science-policy wonk at the U.S. Office of Technology Assessment, the National Academy of Engineering, I enjoyed Mazzucato’s slaying of so many defunct sacred cows of macroeconomics. She begins by debunking the narrow public vs. private sector framework, exposing the myth that private business and entrepreneurs are smarter and more successful than governments in the key process of innovation.

The embarrassing truth is that economics has studied the innovation process since Robert Solow’s attempt in 1957. No coherent theory has yet emerged. Engineering and technology often precede science and theory, challenging many sacred cows of tax policy and that it and research and development (R&D) funds and investments are drivers of innovation, which is a systemic product of many social, historical, geographical and cultural factors.

Another myth is that venture capital (VC) is risk-taking. Evidence shows governments in many countries are the primary risk-takers with VCs surfing the waves created by tax-payers, often providing two to eight times more venture funding than VCs.

Even Apple obtained early help with a 500,000-dollar loan from the U.S. government’s Small Business Investment Company. And every one of the 12 key technologies in its iPhone was funded by government research grants, as was the internet itself.

Not to pick on Apple, Mazzucato shows that the Fast Fourier Transform algorithm (FFT), the basis of Google’s success, was also funded by government research. In fact, the entire myth of Silicon Valley’s entrepreneurship and brilliance was based on military funding and Cold War R&D which continues to this day.

I called out special pleaders like the American Energy Innovation Council of which Bill Gates of MicroSoft is a member in my “Advice for Bill Gates”. They began calling in 2010 for tripling government funds for clean energy – about which Silicon Valley is demonstrably ignorant.

All this upends the economics of stimulus versus austerity and its deeper basis on the myth that governments are bureaucratic and stupid at “picking winners” while the private sector is smart and creates the innovation engine that produces our jobs and economic growth.

Over 20 million jobs in the U.S. are created by governments at all levels. Starving government does not help economies recover, as shown in Europe, or lead in the U.S. to the “magic of marketplace” recoveries.

All these economic bromides are nonsense, and it is time to go beyond economics and look at the real processes of technological and social innovation through new spectacles.

In my The Politics of the Solar Age, I reviewed the evolution of human societies from the age of agriculture, the use of energy from wood and waterwheels to whale oil, fossil fuels to the next stage of innovation: the green economies of today’s emerging Solar Age.

Green technologies are the next great wave of human innovation. To fully exploit all these vast new opportunities, we must drop old economic categories and see the world anew. This can end the current gridlocks endlessly fighting over how to allocate resources to incumbent 20th century industries like fossil fuels and between competing legacy interests groups.

More austerity or stimulus simply deflates or inflates the decaying old pie! Human development requires investing in the technologies of the future, not bailing out old industries and past mistakes.

China, Germany, South Korea and Denmark have used government risk-taking policies to invest in the rapid growth of their green sectors and companies providing insights into their paradigms beyond economics. U.S. market fundamentalism leads to political gridlock, shutting down government services, mindless “sequestration” and loss of international prestige and competitiveness.

A clearer vision of our next human stage of development and policies articulating goals to achieve them is now vital – particularly in the U.S.

All this attests to the bankruptcy of economics, its cognitive biases toward individualism, zero sum games and against collective win-win action – even on our small, polluted plane.

The phrase “survival of the fittest” was coined by Herbert Spencer in The Economist in1864, spawning the ugly philosophy of Social Darwinism. Charles Darwin’s actual thesis saw the human species’ survival through bonding and cooperating rather than competing.

We can now take in all the new scientific information available from NASA’s 12 geosynchronous satellites for better knowledge of our planet, deeper due diligence and more accurate metrics and risk management, as I describe in my “Mapping the Global Transition to the Solar Age”.

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