1 Income inequality killing capitalism (Robert Skidelsky in The Guardian) It
is generally agreed that the crisis of 2008-2009 was caused by excessive bank
lending, and that the failure to recover adequately from it stems from banks'
refusal to lend, owing to their "broken" balance sheets. The problem
now appears to be one of re-starting bank lending. Impaired banks that do not
want to lend must somehow be "made whole." This has been the purpose
of the vast bank bailouts in the US and Europe, followed by several rounds of
"quantitative easing," by which central banks print money and pump it
into the banking system through a variety of unorthodox channels.
But one can take another view, which is that demand for credit, rather than supply, is the crucial economic driver. After all, banks are bound to lend on adequate collateral; and, in the run-up to the crisis, rising house prices provided it. The supply of credit, in other words, resulted from the demand for credit. This puts the question of the origins of the crisis in a somewhat different light. It was not so much predatory lenders as it was imprudent, or deluded, borrowers, who bear the blame. So the question arises: Why did people want to borrow so much?
Let us agree that people are greedy, and that they always want more than they can afford. Why, then, did this "greed" manifest itself so manically? To answer that, we must look at what was happening to the distribution of income. The world was getting steadily richer, but the income distribution within countries was becoming steadily more unequal. Median incomes have been stagnant or even falling for the last 30 years, even as per capita GDP has grown. This means that the rich have been creaming off a giant share of productivity growth.
If governments, with their already high level of indebtedness, believe that they cannot borrow any more from the public, they should borrow from their central banks and spend the extra money themselves on public works and infrastructure projects. But, beyond this, we cannot carry on with a system that allows so much of the national income and wealth to pile up in so few hands. Concerted redistribution of wealth and income has frequently been essential to the long-term survival of capitalism. We are about to learn that lesson again.
3 Fear of Like in India (The Wall Street Journal) The Indian state of
Maharashtra ground to a halt last weekend following the death of extremist Hindu
politician Bal Thackeray. But medical student Shaheen Dhada thought the fuss
unwarranted. Being a typical 21-year-old, she wrote as much on Facebook:
"Today, Mumbai shuts down due to fear, not due to respect." Her
friend Renu Srinavasan "liked" the comment.
A day later, both women were arrested by local police and charged with hate speech at the behest of Thackeray's Shiv Sena party—a response that should be recognized as depressingly typical of a country that's losing its regard for freedom of expression. India has always placed more qualifications on the right to free speech than most other democracies. The government uses this leeway, it says, to prevent inflammatory statements inciting communal violence. In August, for instance, it censored websites and social networking streams to quell protests over attacks in Assam state.
But in the online sphere, the blurry line between preserving the peace and political intimidation disappeared altogether upon passage of the 2008 Information Technology Act. It criminalized "grossly offensive" communications and gave officials new tools to stifle speech and punish dissenters.
But one can take another view, which is that demand for credit, rather than supply, is the crucial economic driver. After all, banks are bound to lend on adequate collateral; and, in the run-up to the crisis, rising house prices provided it. The supply of credit, in other words, resulted from the demand for credit. This puts the question of the origins of the crisis in a somewhat different light. It was not so much predatory lenders as it was imprudent, or deluded, borrowers, who bear the blame. So the question arises: Why did people want to borrow so much?
Let us agree that people are greedy, and that they always want more than they can afford. Why, then, did this "greed" manifest itself so manically? To answer that, we must look at what was happening to the distribution of income. The world was getting steadily richer, but the income distribution within countries was becoming steadily more unequal. Median incomes have been stagnant or even falling for the last 30 years, even as per capita GDP has grown. This means that the rich have been creaming off a giant share of productivity growth.
If governments, with their already high level of indebtedness, believe that they cannot borrow any more from the public, they should borrow from their central banks and spend the extra money themselves on public works and infrastructure projects. But, beyond this, we cannot carry on with a system that allows so much of the national income and wealth to pile up in so few hands. Concerted redistribution of wealth and income has frequently been essential to the long-term survival of capitalism. We are about to learn that lesson again.
2 Eurozone output shrinks again (BBC) Business activity
in the eurozone continued to contract in November, a survey suggests. The
Markit eurozone Purchasing Managers' Output Index was little changed from
October, up to 45.8 from 45.7. A reading below 50 indicates contraction. The
survey also warned of a 0.5% drop in GDP in the fourth quarter.
Official
figures released earlier this month showed that the eurozone economy contracted
by 0.1% in the third quarter, between July and September. "The PMI
suggests that the downturn is set to gather pace significantly in the fourth
quarter. The final three months of the year could see GDP fall by as much as
0.5%," Chris Williamson, chief economist at Markit said. Firms also
continued to cut employment at the second-fastest rate since January 2010.
A day later, both women were arrested by local police and charged with hate speech at the behest of Thackeray's Shiv Sena party—a response that should be recognized as depressingly typical of a country that's losing its regard for freedom of expression. India has always placed more qualifications on the right to free speech than most other democracies. The government uses this leeway, it says, to prevent inflammatory statements inciting communal violence. In August, for instance, it censored websites and social networking streams to quell protests over attacks in Assam state.
But in the online sphere, the blurry line between preserving the peace and political intimidation disappeared altogether upon passage of the 2008 Information Technology Act. It criminalized "grossly offensive" communications and gave officials new tools to stifle speech and punish dissenters.
Last year, Kapil Sibal, India's telecommunications minister, called in Facebook
representatives and demanded that they take down a page he found insulting to
Congress Party chief Sonia Gandhi. April saw the jailing of West Bengal
professor Ambikesh Mahapatra, who had emailed a cartoon mocking state leader
Mamata Banerjee. Five months later, Mumbai police charged anticorruption
cartoonist Aseem Trivedi with sedition and violation of the IT law for his
work. The charges against both men were dropped. But the threat to speech
remains.
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