Thursday, April 24, 2014

Rich Get Richer not quite the Fairy tale of capitalism

It was a very pleasant surprised to read Mihir Shah's Fairy Tale Capitalism today after my entry just yesterday. For example,
In slowly growing economies, past wealth takes on a disproportionately higher importance. Inherited wealth grows faster than overall output and income.
Exponential growth has obvious limitations; so, the growth has to slow down.

Thomas Piketty is striking a chord :) Hopefully, the interest generated will result in political changes forcing the politicians to bite the hands which feed them

Wednesday, April 23, 2014

Create Sovereign Wealth using an Inheritance Transfer law

Income inequality is growing and is now considered as the most serious risk to global stability. Sovereign wealth may be a way to fund and manage the growing economic inequality especially in view of  jobless growth.

While countries with natural resources or surplus income may be able to create sovereign weath, how can a country like India create one?

One of the valuable taxation tool to reduce the obvious advantages of being born rich is the inheritance tax. India stopped the inheritance tax in 1985. It is easy to understand the implementation problems. Aside from estimating the value of the assets, how will the inheritors convert assets into cash so as to pay the government?

Current capabilities of technology and software make new options possible which would have been unthinkable using manual systems.

One way would be that a proportion of the assets as per the inheritance tax rate is transferred to the sovereign fund of Govt of India. Operational control of the assets may continue to remain with the legal heirs. However, the appropriate proportion of any income derived from the assets would belong to the sovereign fund.

For example, any residential property would continue to be in the possession of the heirs with no liabilities except when they sell it. Keeping all such records on the computers is trivial.

Such a mechanism would make it possible to have a law which is not riddled with exceptions to minimize unfairness.  Furthermore, as an asset it will provide long term income to the government rather than additional income which is likely to be wasted especially around elections.

Any  issues related to improper reporting of income are no worse than the current experiences and practices in collection of taxes.

If such steps are not taken, it seems inevitable that more and more wealth will be in the hands of increasingly fewer people.

Tuesday, April 15, 2014

Elections and Farce

It is both amusing and sad to read about dummy namesake candidates standing for elections and getting a kite as a symbol which may mislead voters.

Since India does not have a two party system, we should switch from the first past the post system.

I am impressed by the Grand Coalitions in Germany. The proportional system with a cutoff in Germany appears to compel parties to work together if the need arises. I cannot imagine such a scenario in India, US or UK. 

This is in remarkable contrast to the US gridlocks seen in Obama's terms. 

Saturday, April 12, 2014

The men who made us fat - What can we do in India

While watching The Men who Made us Fat on BBC World , I was happy to realise that we still have options for small helpings in India. However, there is a growing trend towards bundling and offers in fast food restaurants to encourage us to consume more calories.

Even while shopping, we do look at various sizes to see if we get "a better value" for buying larger packages. Among the middle and upper classes, we cannot avoid noticing excessive weight on many.

So, it is imperative that we encourage some regulation now on packaged food industry to prevent these trends from becoming epidemic.

The simplest fairness rule could be that the cost of food should be the same per unit regardless of the packaging size and mandate a minimum size based on calorie count. Eliminate the 'value for money' syndrome with an option to buy small.

The second option of a Fat tax is as in Europe is well worth emulating for ensuring that the heavy snacks are consumed moderately.

Leaving it up to market forces is to hope for a miracle.

Sunday, April 6, 2014

Future - A Very Convenient Society but without Jobs

I can't imagine a security guard who can hope to match the skills of even current robots, e.g. Knightscope's K5 beta. Such devices will replace security guards in, at least, high risk areas and soon.

Drones will deliver pizzas and our packages in case the delivery person is unreliable or expensive. The obvious implication is that such jobs cannot be anything other than low paying.

Robotic telemarketers may be a joke at present but reduction in the growth of call centers is inevitable. Call centers were probably the most important transformation in job market for the educated in India.

Who wouldn't like to see, at least, bad drivers replaced by driverless vehicles

Statistics as in "Unemployment in the Era of Jobless Growth" show that unemployment rate in India increases sharply as the level of education rises and is over 25% for graduates and above. It is not going to be cured by improvements in education. For example, I would expect that there is a far greater chance of some smart programmers replacing the need for programmers than most of the software engineering graduates being productive enough to be employable.

So, is any political party anywhere in the world talking about the needs of the society once a fair proportion of the society will be unemployable and a fair amount will work for low wages with little hope of improvement? We will need more government intervention and not less. Europe is probably better prepared for the future and India should emulate European welfare states rather than the US.

The bus protests in San Francisco may be just the beginning as the implications of a very convenient, tech driven society sink in.

We shop using computer programs, pay using computer programs. A computer program and a robot communicate and pack what we have ordered. A drone is informed of the delivery address and the package arrives at our doorstep!