My mandate requires me to address you “…….. on a topical issue relating to Sustainable Development Goals (SDGs) which would be beneficial to our members and guests. To also emphasise and build on the global strategic framework for companies to place sustainability at the heart of their operations from staff recruitment to product innovation and environmental management”.
However, much as I recognize the paramount importance of not straying beyond my brief, the glass ceiling has been shattered and the boundary devastated by an epochal event in Switzerland just a few weeks ago. Switzerland attempted to introduce an entirely new dimension to its political economy and governance – the somewhat exotic concept of Universal Basic Income [UBI] whereby the government would provide every citizen a guaranteed income. It sounds more like a pipe dream than serious government policy. The Swiss voted on it on June 5, 2016 but it was rejected – 77 per cent to 23 per cent.
However, its supporters claim that it is just the beginning of a transition as inevitable as the eight hour day once was. The central thrust of the proposal is that:
- The government will provide a basic income for all citizens.
- The basic income will allow the people to live in a dignified manner and participate in public life.
- Legislation will determine the funding for the system and the actual amount of the basic income.
The income proposed by the promoters of the referendum was about U.S.$30,000 (thirty thousand US/Swiss dollars) a year.
Of course, we cannot ignore the fact that universal basic income may trigger many undesirable features particularly “non-negligible disincentive to work”.
In addition, we have to contend with the imminent invasion of robots who are increasingly taking over the factories in an environment that is becoming increasingly dominated by artificial intelligence – even cars are now on the motorways/highways without drivers!!
Another dimension has been added to the looming apocalypse by the
front page headline of the “Financial Times” of 28th May 2016:
Headline: “Fresh critique on inequality caused by the ‘neoliberal agenda – from the IMF”
“The International Monetary Fund has long been berated by the left for its “neoliberal” policies that force debtor countries to open markets and adopt fiscal austerity. Now the critique has emanated from a surprising place: inside the IMF itself.
In an article published this week in its flagship magazine, three of the IMF’s top economists cautiously suggest that the “neoliberal agenda” may have been less successful than intended – and led to increased inequality.
Headlined “Neoliberalism: over-sold?”, the article is more a reflection of the vigorous debates under way inside the IMF than a takedown of the policies the fund has long advocated.
Even use of the term “neoliberalism” is provocative. It is normally used by critics of the free market economics advocated by Friedrich Hayek and Milton Friedman. As Britain’s Socialist Worker newspaper railed this week: “The IMF uses debt as a weapon to force vicious neoliberal reforms on to elected governments.”
The new IMF work examines two specific elements of the so-called neoliberal agenda: capital account liberalisation, or removing barriers to the flows of capital; and fiscal consolidation, or what is now more commonly called austerity.
“There is much to cheer in the neoliberal agenda,” its authors write. “However, there are aspects of the neoliberal agenda that have not delivered as expected”. Their work, they added, led to “disquieting conclusions” – including that such policies resulted in increased inequality that undermined economic growth.
The article quickly caused a stir among economists.
“What the hell is going on?” asked Dani Rodrik, a Turkish economist who teaches at Harvard University and is known for his questioning of globalisation’s benefits.
Fabio Ghironi, an Italian economist who teaches at the University of Washington, tweeted that the new paper amounted to a “disservice to many who’ve been working on other policies”.
Jonathan Ostry, deputy director of the IMF’s research department and the article’s lead author, said the article was not meant as an attack on “the entire neoliberal agenda or the Washington consensus”.
However, he hoped it would set the stage for a broader examination of “neoliberalism” that would come out this year.”
Added to the steamy cauldron are the issues raised by “Too big to fail” (Banks) and “too rusty to survive (Chartered Accountants).“Financial Times” of April 8, 2016.
As regards the “Too big to fail” threat/risk to the global (particularly United States of America) financial system, following the 2008 financial crisis, one of the most important aspects of the Dodd-Frank reforms is aimed at preventing another financial crisis with the prospects of systemic failure and consequential massive job losses. U.S. law requires big banks to draw up “living wills” – which are essentially plans which would detail how they could be wound down (or up!) in a crisis in an orderly manner, without having recourse to taxpayer bailouts. The responsibility is vested with two formidable watchdogs – Federal Reserve and the Federal Deposit Insurance Corporation.
As proof that this is a matter which is being addressed with the highest level of seriousness, the watchdogs have been barking furiously that so far only Citigroup had received a pass mark.
Both Bloomberg and CNN have given plenty of publicity to this critical issue. Indeed, Richard Quest devoted prime time to it on CNN’s “Quest Means Business”
Also, the “Financial Times” devoted its front page of April 14, 2016 to it under the headline: “US banks face sanctions after wind-up plans are rejected”
- Lenders ordered to fix “living wills”
- Big five groups given until October.
“Five big US banks including JPMorgan Chase and Bank of America have been warned by regulators to reform or face harsh sanctions after their plans to show how they could be wound up in a financial crisis were deemed inadequate.
The “living will” plans, a key part of post-crisis reforms, are intended to prevent more taxpayer bailouts of big institutions and the kind of chaos sparked by the 2008 collapse of Lehman Brothers.
In addition to their judgments on JPMorgan and Bank of America, the top US banking regulators said Wells Fargo, Bank of New York Mellon and State Street had also delivered plans that were “not credible or would not facilitate an orderly resolution” in a crisis.
The rulings come as the presidential election campaign has refocused debate on whether the US has achieved the post-crisis objective of ensuring no bank could be “too big to fail”.
The Federal Reserve and the Federal Deposit Insurance Corporation ordered the five banks to fix their plans by October 2016 or face more stringent regulations, including higher capital, leverage or liquidity requirements, and forced divestments of assets or operations.
Tom Hoening, FDIC vice-chairman, said: “[Each] plan has shortcomings or deficiencies, although some firms have made more progress than others. Most importantly, no firm yet shows itself capable of being resolved in an orderly fashion through bankruptcy.”
He added: “Thus, the goal to end too big to fail and protect the American taxpayer by ending bailouts remains just that: only a goal.”
Senior regulatory officials said the five banks should be capable of correcting the problems by the October deadline but added that doing so would involve some difficult choices.
(to be continued)
J.K. Randle
Being a speech delivered at The International Chamber of Commerce Nigeria Post AGM Talk Luncheon/Roundtable Talks
On Thursday July 21, 2016
At The Metropolitan Club, 15, KofoAbayomi Street Victoria Island, Lagos
