Hunt for a new world governance model

climatechange

Multiple studies published in peer-reviewed scientific journals show that 97 percent or more of actively publishing climate scientists agree: Climate-warming trends over the past century are extremely likely due to human activities. Climate change is only one of the boundaries which human activities might have already crossed beyond repair. A group of scientists led by Johan Rockstom and including James Hansen has come out with a total of 9 planetary boundaries, each of which if crossed may lead to driving the earth system into a much inhospitable state, driven by human activities. Climate change is just one of the four boundaries that scientists believe has already been crossed – the others being – loss of biosphere integrity, land-system change and altered biogeochemical cycles (Nitrogen and Phosphorus). Hence it is clear climate change is mere beginning of the human ecological global problem.

Coupled with the global threshold of climate change and other similar natural boundaries crossing of which should be prohibited for human action (through an effective world governance), there are other current and emerging global challenges which need to be addressed by a new shape of world governance. Although debatable, current shape of the world governance chiefly administered through Bretton Woods Institutions (UN, IMF, IBRD & WTO) is ineffective or have failed. Role of entrepreneurs, capitalists or ruling class in solving these urgent problems is questionable. So it is time for all the inhabitants of the planet from different sections of the society to at least think of a new shape of world governance which can effectively guide human action away from self destruction or advance bills for the coming generations.

I invite all to share their views on the subject on what is your ideas for a new model of world governance which may either replace or complement the existing system of governance. You may like to join me on this group I have created for the purpose – https://www.linkedin.com/groups/10324713

If you have any idea to share do join the above group and share it.

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Big brothers looking for equal partners for trade

donald-trump-make-america-great

The colour of world trade is changing. And it is changing fast. From colonial era’s mercantilism to Porter’s diamond model, no economist has ever contested the benefits of free trade among equals or among not so equal. And world trade has been shaped around these principles in letter and spirit. The world should salute the minds of the people of US and UK the strongest of the proponents of a free world. When the world had seen enough of destruction in World War II, all the countries of the world, sat in Breton Woods to invent the likes of UN, IMF, IBRD (World bank) and the ITO (subsequently emerged as WTO). Such efforts have been always led by US and UK and their uncontested belief in a freer world, based on economic interdependence and free flow of ideas. Decades have been spent on these principles to give the world a longest period of ‘peace’ in the recent human history, that was dreamed of at Breton Woods in US. Consequently world tolerated the defiance and opposition of these ideas by ‘Russia and others’ till they decided to budge in 1991 and joined these institutions advocating the ideas of a free world led by US and UK. In fact a lot of fuss have been made of the real benefits of these Breton Woods institutions  for the world as a whole and to US and UK individually. There is no denying the fact that whole world has embraced these ideas for a fairly long time i.e. more than 65 years. Memberships to these organisations have increased exponentially in these many decades. ITO took its reincarnation into WTO and was established exactly after 47 years of its imagination but has made substantial difference to the way world trade is done in this fairly free world. The world has therefore accepted the contribution of the so called big brothers US and UK of creating this world order. A long time has gone into making and shaping this world order under the umbrella of ideas generated from US and UK. The world has become used to this order and look forward to better times for all. China and India are at the cusp of benefiting from such institutions like never before. In fact India was the biggest beneficiary of the largess offered by IMF when its economy almost dwindled in 1991. India is among very few countries which have shown impressive progress from these ideas of a free world and globalisation. Moreover India has now become almost self sufficient in terms of its food production apart from moving towards a dynamic economic force.,

This world order is surely changing if we notice the two major events of 2016. First is the Brexit and the second is the emergence of DTrumpism in USA. Both events speak volumes of a changing mind and direction of foreign policies of US and UK, after a really long time of work on the present order. Both events indicate emergence of the belief in a new theory that a free trade of the type being practised in this world is skewed in favour of poor countries rather than to rich nations. Even it seems to signify that a free world and free trade of the Breton Woods type ensures poor countries benefit at the cost of rich countries like US and UK. If that is true, the two big brothers need to now focus their attention to having free trade with only equally rich nations. This is the reason while Donald Trump despises Mexico for many of the ills America faces today especially in terms of vanishing US jobs in manufacturing, rather than Canada, both being partners of US in NAFTA agreement. The blue collared manufacturing workers and a similarly thinking majority has helped Donald Trump to enter the While House with a belief that a free trade of the present type has done unprecedented damage to America and its manufacturing set up which must be changed now. Similarly Britain is now unwilling to be part of a larger Europe crowded by poor countries looking for a better life style at the cost of the life style and incomes of its own people.

If indeed the two most important countries are now looking for equals to trade with, then the colour of the world trade is changing drastically. The message is that the international trade theories which assume free trade among all nations need to be redrafted to mention that these benefit only when the free trade is among equally rich countries. Probably the future of world trade has to adjust to these drastic changes in economic thinking and emerging realities around the world trade of today. These changes would also spell new changes into foreign policies and foreign relations of US and UK. The time is running fast disfavouring outsourcing of jobs from US and UK, and free entry of cheaper goods into these countries from the developing world. Need India be too optimistic about the new found Indo-US flavour? It remains to be debated.

Towards a ‘Tax Free’ India

One of Thomas Friedman’s thesis states that individual countries must sacrifice some degrees of economic sovereignty to global institutions such as capital markets and multinational corporations for high performance, a situation he termed as ‘golden straitjacket’. Most ‘miracle countries’ like Singapore, UAE and others have done it commendably by making their economies resilient, free of corruption, most ease of doing business and most importantly ‘light on taxes’ to the individuals and corporations. The situation make sure that the world takes notice of such countries and prioritise their business interests around them.

Lee Kuan of Singapore showed the world how brilliantly it can be done. It is now said that another Lee Kuan is born in India in the form of Narender Modi, who seems to be bent upon replicating the Singapore type experiments on mass scale in a larger economy like India. By taking an unprecedented decision to curb black money in India a few days ago, he seems to take more radical measures to eventually make India a pleasantly  tax free country, thereby taking India’s ‘ease of doing business’ to decisively attractive levels for the world capital markets and the multinational companies. Imagine a country like India with vast land, labour and market resources, offering an ease of doing business like that offered by  Singapore. There could not be a matching opportunity of this type of situation anywhere in the world for international investors – short term or long term. By bringing India’s entire monetary system online and over the board, wiping away the parallel black economy, the biggest opportunity for India would be to also make it totally tax collection free (except import duties). Before the last few days only 20% of the estimated daily average transactions of 2.7 lakh crore (around 40 billion USD) is taking place via banks- says Anil Bokil of Arthkranti, a Pune based financial think tank. The think tank also propagates the idea of doing away with all high denomination currency notes in India and force the country to use visible and legal methods of transacting like- payment gateways, mobile payment apps, online payments and similar. By having a single banking system to collect revenue for the government which can be done in the form of a nominal transaction tax on daily transactions, it is possible for the government to stop collecting any direct or indirect taxes.

What does a tax free India signify anyway?

No country in this world as large and as populous as India has been able to offer a tax free environment for doing business till date. In fact this situation itself is one of the barriers to making India a tax free country. Traditionally India has not experimented with new ideas untried anywhere in the world, as we have consistently shied away from entering into an unknown territory with respect to policy of governance. Electoral reasons for a large democracy like India could be one of the reasons for India being a follower of the ideas of governance more so in the case of economic governance. However in last few days, we have seen our prime minister demonstrating that India is ready to enter unknown territories by experimenting with untried ideas elsewhere. 

However what does a tax free India signify to its future? It can do a lot to make India a truly dynamic and reasonably rich country with less corruption and most sought after destination for business and tourism. A tax free India means a larger number of activities happenning here in terms of businesses, manufacturing, infrastructure and tourism. A better ease of doing business would ensure that big global operations are designed to be wound around what is on offer in India in terms of land, food, raw material, labour, engineers, managers, simplicity of business policy environment and a corruption free interaction with regulators. Add to these is a very large emerging market for new products and services in India. A tax free India also means simplicity in revenue collection for the government thereby ensuring reduced salary bill for government staff and bureaucracy. A tax free India encourages enterprise, innovation, hard work and incentive to produce quality in services and goods. After all, only the best can fetch a premium.

A tax free India also makes it mandatory for all players to comply with important rules and regulations in the country to govern the society, while taking care of the environment and resources available. A tax free environment encourages, tourism, increased shopping, and better entertainment for the world. It also have the potential to bring necessary cultural changes in the Indian society for example potentially a reduced ‘power distance’ which is quite high in Indian culture at present. A tax free India would also make India an apex economy in today’s world, if not the top most economy. We would definitely be able to better the example of China.