Party for the Middle Classes

The middle class pétition contre la réforme du collège

2015-04-12T12:10:00.000+02:00

I don't know who started this petition, but here goes.

First, a word of explaination that collège in france is not university but middle-school. In France, middle school concerns classes 6, 5, 4 and 3. This is equivalent to Indian classes 6, 7, 8 and 9.

After many years of living in Dijon, we finally found some bilingual classes so that our kids could be internationally communicative and more globally at home. Guess what? The "réforme de collèg"e wants to clone all our kids into a standardized mould, and to stop these bilingual classes.

I think this kind of standardization can be done by the private sector. (In France, the private sector in education is often just public curricula outsourced). But to provide the kind of excellence in diversed education that we need to be globally competitive, we need the State to pool in public resources to offer the diversified offerings in many differerent regions: at least one per department. This would provide some amount of economies of scale, which private education cannot provide.

Of course, there may be a role for truly private education and for NGOs to fill in this void. But the cost for most people would be huge. I think the reform therefore is quite elitist and caste-ish. Rich people who can afford the kind of private education to make their kids bilingual get a big edge over the middle classes who are being forced to join the ranks of those whose kids are being limited to one language.

But this kind of protection for the existing rich does not mean that their kids will actually be competitive. Far from it: with the forces of globalization, they will actually suffer from the lack of local competition which the middle class could have provided them. Instead of levelling down education for the bright, perhaps France should have thought of increasing the level for all.

Anyway, I invite you all to join this petition so that our last kid also manages to get some notions of English early in life.
https://www.facebook.com/pages/P%C3%A9tition-contre-la-r%C3%A9forme-du-coll%C3%A8ge/1591757194374194?fref=ts

Arvind Ashta

War or Peace for the middle classes

2014-09-18T00:58:00.001+02:00

So much has been written on the impact of war, so many tragedies told, so many tears shed, yet we begin business as usual. We are middle class.

There are parents losing children and children losing parents, yet we are planning on how we can make money on reconstruction after destruction. We are middle class.

There are wives losing husbands and women raped, yet we are patiently planning on how we should grow great. We are middle class.

There are those exalting in power in taking away a life, yet we are powerless to perform anything more than our selfish strife. We are middle class.

We can read about war on a daily basis till we are numbed by the numbers, and we can piously pretend that it will never happen here. We are middle class.

Turn the other cheek, look away, its none of your business. What is a disaster can be profitable to someone. Just turn the page of your paper. After all, you’re only middle class.

You didn’t pay to read this, you don’t need to ever come back. Just quietly go back to your search for more information indigestion. It is the lot of the middle class.

What can we do, what could possibly be done? The answer is sitting in your heart. But can you listen? Can you be proud to be middle class?

Slow down, work less.

Share your work with someone else.

Give him an identity

Let him make money

And join in the pride of the middle class.

A.A.

The middle class tourist in Venice

2014-08-18T14:50:00.004+02:00

One of the most romantic cities of the world, Venice, is a city composed of 118 islets interconnected by bridges. The population of Venice city itself is only 60,000 but another 170,000 on the mainland also consider themselves Venitians. The city has been known to be a source of refuge from the power of Rome. And, perhaps, it is true even now, for we do not see beggars in great numbers. Probably, the city is still insulated from the despair of Italy, protected by its tourists.

And these tourists flock to Venice in ever greater numbers: "Maybe there are more tourists, says a waitress, but they certainly don't seem to be spending money. There are more and more Chinese and Indians". In this she echoes tourism statistics which show that Chinese tourists to Europe have increased by 25% and Indian tourists by 15%. Even if France with its 85 million tourists leads the world, followed by the USA (70 million) and Spain (60 million), Italy cannot be far behind. Venice alone has 3 million tourists a year. "Although we can see that many of the Chinese tourists do have purchasing power, the Indians are low-cost tourists, very careful on what they spend their money", says a salesman from a souvenir shop.

Nevertheless, at an average of a little less than one week per tourist, this comes to about 18 million tourist nights, which corresponds to statistics that indicate that there is an average of 50,000 tourists per day. There is a tax of 4 Euros per night. This means that the local taxes are already about 72 million Euros. Since most establishments insist that local taxes be paid in cash, we can assume that a corresponding amount is escaping tax! In fact, a lot of restaurants and shops in Italy accept only cash, indicating that the parallel economy is strong.

Of course, Venice is the hometown not only of Murano glassware, of which there is plenty, but also of Antonio Vivaldi. Fortunate to discover that a concert of the Four Seasons was scheduled for the evening, we found tickets easily available. At 36 Euros and 26 Euros, evidently Vivaldi is too expensive for the middle class tourists. And the 26 Euros section was full while the 36 Euros section was half empty. Why, asked my son, don't they just make a smaller section for rich people? Because, it takes years of observation to accept that the people no longer have to power to pay. The rich patrons are much fewer.

Not that there aren't people who can afford drinks and dinner at restaurants where an expresso costs 10 Euros, on the Piazza San Marco, where musicians play instrumental music from Evita or My Fair Lady, among others. But lots of chocolate for a few rich to eat, while the middle classes stand around to overhear the music and provide applause for the musicians and admiration for the rich who may sit down at the restaurant. A sign is put up saying that sitting on the ground in public places is illegal. So, the middle classes must stand and wait. It is also illegal to sit and eat in public places. But don't cry for me, Argentina, because the place is so beautiful that we are willing to pay. Its just that we'll spend three nights instead of a week.

These laws are probably outdated, as is the premium strategy being adopted by the restaurants. Market Research may show that an outer-ring of cheap seats with reasonably priced café or ice-cream, may attract business from the middle class tourists. So, instead of serving by standing and waiting, they could contribute financially by sitting and paying. There is nothing new in this suggestion: the high priests of the next-door San Marco church have long realized this. Tourists form a long queue to see the beautiful church, but to see special sections inside, one has to pay 2 Euros here, 3 Euros there, 5 Euros to go up, and so on. Thus, they are able to tap the consumer surplus of the middle classes to the extent possible.

There are other outlets for paying. Money flows out constantly. The rents, the pizzas, the transport are all far more expensive that Ravenna or Verona, both within a couple of hours drive. Even the cooperative store is 20% more expensive than on the mainland because goods have to be carried physically and manually form the port to the shop. And manpower costs. The best Pizzas are certainly not in Venice, at least not in the middle class price range.

What about the middle-classes serving the tourists? They come from the mainland, taking an average of an hour to reach work, because they cannot afford the rents on the island(s). In any case, many of the homes are now owned by foreigners, further limiting supply. The local population of the historical city was 120,000 in 1980 and only 60,000 today. The others had to move out. There are about 20,000 students at the Ca’ Foscari University of Venice who also live on the island. Most of the houses are residences for the tourists, explains a Gondolier.

About 400 Gondoliers are plying their Gondolas on the canals. The license is controlled by a guild, to avoid overcrowding but also to permit a minimum of profitability. After all, each Gondola is hand-made and costs about 35,000 Euros, as much as a beautiful taxi.

What seems to be perfectly legal is the army of South Asian salesmen selling roses and toys on all the prestigious tourist sites. These toys are no different from the ones that can be bought in India Gate in New Delhi. So, if they are selling, surely there must be middle class tourists coming from countries other than India. "Yes, thank God for the Germans… they at least come and drink beer".

The workers have to carry goods across bridges and have to wade through the tourists who create bottlenecks. There are signs requesting the tourist not to stand on the bridges because people have to get to work. Tough…. Too much of a good thing?

The Regulation Approach and the Middle Classes

2014-07-24T00:28:00.001+02:00

I have just read an old paper of Alain Lipietz (1988) in order to understand what the Regulation Approach was all about. The paper is an English translation of a lecture by Alain Lipietz in Denmark, given in 1984!

Apart from the pleasure of reading Marxist vocabulary which I had more or less ignored since my college days (1979-80), I was amazed that the Regulation School had more or less identified the same problems and come to the same solutions that are mentioned elsewhere in this blog. The regulation approach is concerned with the way in which social relations are maintained and reproduced despite and through their conflictual character. In any social relations, there are sub-groups who are dominant and those who are not, and the latter would like to change the rules of the game. The social procedures and authority structures for the linked modification of norms are called forms of regulation.

An example of the regulatory approach would be to ask why the librarians of the University of Burgundy keep accepting their working conditions (see previous blog) and don't revolt.

1. Managers are suffering more: the conditions are worse on the floor where the managers sit. As a result, the people at the bottom, on other floors, relativize their own situation and have a sentiment that nothing can be done or at least, their own lot should be acceptable.

2. There is no syndicate leader who is strong enough to make an issue of it.

3. The managers have the sentiment that it is public money which is perhaps better rationed for other things.

4. Any revolution or strike may stop the current benefits of a regular salary

5. The threat of not having a future promotion

6. Most of the workers being women may also play a role since women have a legacy of suffering.

Thus, accept for point 2, which we may also need study, the discourse and reasoning which lead to acceptance of conditions of being dominated, of having to accept conditions, which many in the rest of France do not have to bear, would form the subject of the Regulation Approach. There is a French law which allows people to stop work if the inside temperature falls to below 12°C. Therefore, there is a limit placed. But there is no French law on the maximum temperatures which have to be supported.

Coming back to Alain Lipietz, here is a summary of his overview of the problems of the developed world (I'll skip the terminology sections). Remember, he is in 1984 !!!!

The Fordist model worked well for the thirty Glorious years (1945-75) because productivity increases were matched by wage increases which in turn led to consumption demand increases and profitability, which led to capital accumulation and investments. Thus, a balance had been found in the growth of returns to capital and to labor.

The cause of the Fordist crisis was that productivity growth was reduced. This reduced profitability. This reduced investments. This reduced employment. This reduced consumption.

One way out was to internationalize and increase exports by setting up free trade zones such as the EU. But this internationalization led to pressure on the wage rate. The constraints on growth of wages meant that consumption of domestic goods fell (if imports went up). If all countries do the same, in the hope of recovering from exports, it means all over EU wages are not keeping up with productivity. This means inadequate consumption at the EU level.

A second way out was to export the Fordist model to other countries (NICs). They could then manufacture according to Fordist models and import OECD capital goods. This Peripheral Fordism meant that the problem was postponed by issuing Euro dollars: the Americans continued to consume thanks to credit. There were minor gains in productivity in the US and slowdown of capital accumulations. When credit stopped, the crisis emerged because the NIC were no longer able to pay the high interest rates. So monetarism was finally rejected and Reagan went back to Keynes: tax and defense spending to bring the economy back. Household consumption went up.

A third hope is whether technology and new innovation (in electronics) be able to raise productivity and profitability and solve this problem? The problem is that profitability alone is not enough. It has to be accompanied by mass consumption growth. This growth requires employment and wage increases. Otherwise, the increased productivity will lead to some well-paid skilled labor, others stagnant wage earners and increase in unemployment.

This means that consumption will not increase and recession will continue. One way would be to reduce the working hours massively and modify the wage relation.

Lipietz, A. 1988. 'Accumulation, Crises, and Ways Out.' International Journal of Political Economy, 18:2, 10-43. (English translation of a 1984 lecture).

Management lessons:

Can I say more? What it means is that if you have good workers who are demonstrating productivity increases, and you are not increasing their salaries, you are digging your own grave. Whether you distribute the wage increases specifically to the person who performs or generally to all your employees may involve other questions of motivation and management, but if you keep the increased profit for yourself, you are undermining your own long-term viability.

Another reminder of Marx, remember the Communist manifesto… this time its 1848 …..

"The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own grave-diggers."

No concern for the middle-classes revealed in architectural failures / Pas d'inquiétude pour les classes moyennes révélées des échecs architecturaux

2014-06-12T10:24:00.001+02:00

No concern for the middle-classes revealed in architectural failures	Pas d'inquiétude pour les classes moyennes révélées des échecs architecturaux
20 years ago, in the University of Burgundy, they erected a tall library. A white elephant to signal the importance of learning even within the university. Glass panes adorn the walls.	Il y a 20 ans, à l'Université de Bourgogne, ils ont érigé une grande bibliothèque. Un éléphant blanc pour signaler l'importance de l'apprentissage au sein même de l'université. Des vitres ornent les murs.
In summer, the building is an oven, in winter it is a freezer. On the average, the politicians feel, all is well. However, for those working in the building, two seasons out of four are unbearable. But who cares? Is there anyone out there?	En été, le bâtiment est un four, en hiver, il est un congélateur. En moyenne, les hommes politiques considèrent, tout va bien. Cependant, pour ceux qui travaillent dans le bâtiment, deux saisons sur quatre sont insupportables. Mais qui s'en soucie? Est-ce qu'il y a quelqu'un?
What an architectural failure, one would think. But no, the architect had visualized that the building would be air-conditioned in the summer and heated in the winter. A reasonable assumption in one of the world's leading economies of that time.	Quel échec architectural, on pourrait penser. Mais non, l'architecte avait visualisé que le bâtiment serait climatisé en été et chauffé en hiver. Une hypothèse raisonnable dans l'une des principales économies du monde de l'époque.
Except that some president of the university felt that the money could be better used elsewhere. Therefore, no heating in the winter, no air-conditioning in the summer. The architecture of course was not modified.	Sauf que certains présidents de l'université ont estimé que l'argent pourrait être mieux utilisé ailleurs. Par conséquent, pas de chauffage en hiver, pas de climatisation en été. L'architecture de cours n'a pas été modifiée.
The result is clear and inhuman, but the president is elected by professors who probably don't ever visit the library since they rely mostly on electronic documents.	Le résultat est clair et inhumain, mais le président est élu par les professeurs qui probablement ne visitent jamais la bibliothèque car ils reposent essentiellement sur des documents électroniques.
The price in discomfort is paid by the librarians and the students who actually use the library. The impact of working conditions on productivity is clearly unimportant.	Le prix de l'inconfort est payé par les bibliothécaires et les étudiants qui utilisent effectivement la bibliothèque. L'impact des conditions de travail sur la productivité est nettement sans importance.
Is this case the only exception where the elites live in comfort and the middle classes plod on without even a mention of their pain?	Est-ce cas, la seule exception où les élites vivent dans le confort et les classes moyennes continuent sans même une mention de leur douleur?

Ministers, Deputies and Senators: How top heavy can you get?

2014-04-13T19:13:00.003+02:00

France has 577 deputies and 348 senators, making a total of 925 jobs. Add to this 16 ministers, 14 State secretaries, a prime minister and a president and we are at 957 people.

Deputies usually earn 7100 Euros a month, but get allowances of 5770, making a total of 12870 Euros per month, about 150,000 Euros a year. They are also entitled to expense reimbursements of about 9550 Euros per month or 115,000 Euros per year. Each deputy therefore costs about 265,000 Euros or a quarter or a million. This is in terms of gross salaries without taking into account their payroll taxes, probably another 60,000 Euros.

Senators seem to earn a little less: their salaries are 7100 Euros, but they get allowances of 6240 Euros, making a total of 13340 Euros. But their expense reimbursement is a little less at 7550 Euros. So, they cost about 20900 Euros per month or 252,000 Euros per year. Again with their payroll taxes we can say about 300,000 Euros.

With about a 1000 jobs paid like this, the expense is about 300 million Euros.

Of course, each minister and delegated minister has his cabinet and support staff. In 2013, there were 565 cabinet members and 2471 support staff, making a total of 3036 people. This costs about 26 million Euros in additional charges. Additional because some of these people are getting a salary elsewhere in the bureaucracy.

All this to serve a population of 65 million people.

Of course, we also have regional councilors, departmental councilors and the mayor's office. But in this note we are looking only at the top State level.

Just for comparison,in the USA for example, there are only 435 deputies and 100 senators, making a total of 535. Add the President and his State Secretaries and you are still at 60% of the French level. This is for a population of 315 million people, which is about 6 times bigger than France.

Certainly, this is only at the federal level and the US has 50 States which have their own parliaments.

It would be great to get comparisons with other countries.

This is not to say that we would like to create unemployment in France. Less highly paid politicians will probably reduce the prestige of political science schools who rival business studies schools such as the one I teach in to attract the best of French talent (just to show my personal interest).

But certainly, some of these people can work part-time and share the jobs with others. In a 28 hour week, each of these people would work 3.5 days and we could hire others for 3.5 days. More jobs, less work, more sharing. And sharing is caring, even at the top.

Arvind Ashta

François Brugère, Microfinance, the Capabilities Approach to the human doing: will the middle class benefit? Lecture notes on the first few chapters of "La Politique de l'individu".

2014-01-20T01:33:00.003+01:00

Microfinance started with providing credit to enable poor people to start their own enterprises. The experience with microcredit shows that it may lead to empowerment, but that it's difficult to prove impact. Different studies do claim positive impact, but consistent results across studies are difficult to find. Researchers are usually cautious in their interpretations and do not find significant impact.

If microcredit does not create positive impact, it does create temporary palliatives and provide an opportunity. However, the poor may not be in a position to make use of these opportunities since they lack complementary resources such as human and social capital. Moreover, short-term palliatives may lead to long-term stress as the poor get over-indebted easily: their debt servicing capacity being limited by their poverty.

One approach to make up for the deficiency of microcredit has been to offer other financial products such as savings, insurance and transfers. Elsewhere, I have often argued that the poor entrepreneurs need equity capital more than anything else.

Another approach has been the capabilities approach. This approach says that the poor need capacity-building services. These take the form of mentoring and guiding entrepreneurs. The French word "accompaniement" is far richer as it includes providing company to end the entrepreneur's isolation. All in all, these approaches require the mentor to share his human capital and social capital to help the poor entrepreneur succeed, without taking over the agency. The responsibility for action should remain with the individual, so that he can appreciate his own success.

If this kind of coaching can help the poor entrepreneur, can it not help everyone? Why should coaching be the privilege of the poor? We know that in the private sector, many managers have mentors and coaches. These mentors and coaches help keep the individual on the path to his goals. Fabienne Brugère, a French philosopher is now asking for the right to coaching (she calls it "soutien" or support) as a third basic right. The first basic right, for her, is property rights. The second basic right is social security rights. She now wants to include individualized mentoring as the third right.

The problem with a purely economic approach, neoliberalism, is that mounting inequalities lead to the collapse of the system: once someone has all the property it is evident that no one else will have buying power. Therefore, property sharing is required. Similarly, social security certainly helps to break the fall, but it may keep people in poverty traps. I have argued (probably orally, but check my "microfinance and suicides" paper) that financial mechanisms of social security coming through the State are not sufficient because they lack a human element. In the older systems still prevalent in poorer countries, social security is provided by the family. As the State takes over this function, people certainly become more independent and confident, but they also become more isolated. This is explicitly recognized by Fabienne Brugère, as she argues for a personalized human aid. This would have the benefit of placing humanity back in the system and provided recognition as people perform better.

This individualized attention is not to be reserved for the poor, but should be available to anyone who needs it; including those who may fear losing their jobs. She even hints it would go further: it should be made available to anyone who feels he is underperforming and feels that he needs guidance to go further. I agree that asking for help requires a lot of humility, but it may be easier to ask for this if it is given as a right.

Undoubtedly, this will mean a bigger role for the State which serves the socialist cause and her desire to bring the individual back into the political system. The question is who pays? Certainly, the middle classes will benefit if it is a universal right. However, if they are the ones who are going to pay, and if only the "winners" are going to win more as a result, the back of the camel may break from this fresh set of rights.

The question then is whether the rights have to be provided within the market? Or should it be the responsibility of each person to provide such a service to his neighbor? Again, some people undoubtedly do this better than others, enjoy providing guidance more than others, and perhaps some do not have the time to do this. Therefore, we would come back to providing social mentoring as a paid public service.

If free treatment through psychiatrists and psychology can be provided to those who are suffering from mental ills, the provision of coaching can be considered one step away: it will be provided so that we function better mentally, physically, and professionally. For the moment, it may be useful if it is labor intensive. But it is possible that people will soon write software which may become more expert than many human coaches. The humanity would then again have to be found elsewhere.

Perhaps the main criticism of this capabilities approach is that it is centered on welfare being a function of doing rather than being. This is strange for the French translation of welfare is "bien-être". Thus welfare requires being well.

Of course, the spiritually advanced "being" may not need social recognition and may be able to differentiate from action rightly performed and action rightly renounced.

Undoubtedly, this blog would have been better if I had the time to read the rest of her short book, but the weekend is over….

Arvind Ashta

The caste system and the middle classes

2014-01-02T09:52:00.002+01:00

The caste system already existed in India before the Bhagawad Gita, the celestial song, was sung by Lord Krishna.

"The fourfold caste has been created by Me according to the differentiation of Guna and Karma; though I am the author thereof, know Me as the non-doer and immutable."

As we can see, it was not meant to lead to inequalities, but to a differentiation of work (karma) according to nature (Guna). This equality between castes and even with those who are outcastes or other living creatures comes out in another verse.

"Sages look with an equal eye on a Brahmin endowed with learning and humility, on a cow, on an elephant, and even on a dog and an outcaste."

The need of a (flat) caste system probably lies in the simplicity of reproduction or replication of a social model. When the pressure on land became too much, some people had to leave a village and move on. To recreate a harmonious social model, every occupation had to be represented in the new village. Thus, a farmer's son would be the farmer, the teacher's son would be a teacher, the potter's son a potter, and so on. In short, an entire ecosystem would be transplanted into the new village and this was to ensure its survival. Of course, there was nothing stopping a potter's son from being a carpenter, but someone would have to agree to be a potter.

This notion of balanced ecosystem is essential. What would happen if all except the farmers leave? Imagine if farmland productivity went up and the old farmer could provide the food to the new village and his son did not move. Obviously, in the new village, there would be one person less to buy the potter's pots, the carpenter's cots, the tailor's togs. There would therefore be a lack of effective demand to enable all the others to live comfortably.

Not that increased productivity is bad. Evidently, if the farmer's son went to the new village and imported their pots, beds, clothes for this requirement, then the ecosystem remained balanced. But would he travel to obtain, with his father's money, what he could get in his old village if someone worked a bit more. The price mechanism and greed in the old village would therefore lead to lack of effective demand in the new village and that ecosystem would not survive.

One way to overcome the increased productivity is redistribution, implicit in the above paragraph. This redistribution is from the productive farmer to his unemployed son. But as we have seen, unless this redistribution leads to increased demand for other people's products, and not making those in the existing village work even more, the new ecosystem collapses, creating a lot of unemployment. Long term unemployment leads to becoming outcastes of a society. And this outcaste status may then be reproduced by their offsprings since their parents can guide them less.

This is the inherent basics of a community approach to economics. The community does not need to be a village: it can be a town, a region, a country or even the whole world. But unless there is a willingness to share, arising from the recognition that the people in the next ecosystem are our own children and that demand for their products will arise only if we produce less, there will be people who will be unemployed.

This sharing of work, therefore, is what is essential for the creation of effective demand. Of course, if one greedy person wants to produce all, the entire extra revenue needs to be gifted away to those who do not have work. These people can then effectively consume the greedy person's products.

This relationship between producers and consumers, between producers and producers, and between consumers and consumers, is often lost in modern day economics and politics with their "we are the best" growth based mantra.

Again, this is not to say that productivity increase is bad: it is only to say that the increased productivity should be tempered by working less so that total production does not lead to lower production by someone else. Alternatively, the revenue from increased productivity needs to be gifted away to those who could consume it.

The community model allows for new innovations making new things and meeting the unmet needs of people: thus every community may have its own webmaster or computer maker. However, the balance between what is produced and earned and what can possibly be consumed needs to be maintained for the ecosystems to survive: all the ecosystems and not that of our community alone.

The "eye that is equal" means that everyone finds an equal place in such a society, whether he be a priest or a president. To each his duty is prescribed.

Would our middle class theory require total equality between all people in every aspect of life? Evidently, this is not possible: we are diverse by our nature. But we should all be able to think beyond our immediate enrichment to see whether we can sustain not only ourselves, but also our children and our neighbours. Sometimes, this means doing less, and not necessarily creating charities. Perhaps this is best caught in the last line of great English poet John Milton's (1608-74) poem (on his blindness): "they also serve who only stand and wait". Let me reproduce it since it is so beautiful.

When I consider how my light is spent
Ere half my days in this dark world and wide,
And that one Talent which is death to hide
Lodged with me useless, though my soul more bent
To serve therewith my Maker, and present
My true account, lest He returning chide,
"Doth God exact day-labour, light denied?"
I fondly ask. But Patience, to prevent
That murmur, soon replies, "God doth not need
Either man's work or his own gifts. Who best
Bear his mild yoke, they serve him best. His state
Is kingly: thousands at his bidding speed,
And post o'er land and ocean without rest;
They also serve who only stand and wait.

In this light, the handicapped and those less productive also serve even if they don't produce because they are able and willing to consume. Therefore, the taxes we pay, the charities we create, or the investments we make are just, because they create a balance in the ecosystem created by an inability to refrain from unnecessary action.

Once again, it is not the price mechanism which is faulty. This invisible hand is very useful to provide information on what needs to be produced and what not. It is better than any visible central planning system.

What is missing are courses on responsibility and spirituality, even in the limited sense of recognizing our true place in the world and allowing other humans and other forms of life to exist before they have to shout for help or before we destroy ourselves by destroying them.

Certainly, with the focus on the right education at an early age, this realization will come to our children faster than to some of our peers. Perhaps they will find a middle way to accepting being middle class and enabling others to become middle class. The party will be on.

Arvind Ashta

Diplomatic Slavery of the Middle classes

2013-12-23T11:07:00.002+01:00

Devyani Khobragade, an Indian diplomat, hired Sangeeta Richards as domestic help and took her to the US. There, she was arrested, handcuffed, strip searched for paying her servant less than the US minimum wage, while clearly paying more than the Indian minimum wage. This issue has raised a major conflict between the US and India, and between Indians on what the primary focus of the incident should be.

The hue and cry is on three issues: one on diplomatic immunity and the US treatment of individuals who are detained. This is the power of the State issue! Can absolute power be abused and to what extent? On this first issue, we have no comment to make for it concerns not only the middle classes, but also the poor and even the fallen mighty like our own French Dominique Strauss-Kahn with his brilliant mind, extraordinary virility and incompetence of the former to control the latter. Perhaps, the US laws and procedures are meant as deterrents; perhaps they are part of the perquisites of being a police person: to be able to discover intimate details of others' cavities and insides. With today's radar and scanning technologies, where is the need for such search procedures, Obviously, this is the sex and peeping tom angle which is raising passions in one part of media readership. However, for those who have been following the rape cases in India, there is more: any insertion into a woman's orifices now amounts to rape in India. So, by an Indian defintion, the American police are indulging in rape. Moreover, another Indian news complicates things further. Homosexuality is against the Indian constitution: at least anal sex (so male only?). Which means that same sex searches with sexual penetration may be considered more undignified than heterosexual searches. Therefore, deep interrogations in public and private international law are at stake.

The second issue is whether anyone who pays someone less than the minimum wage in US, is a criminal. And whether international law would and should decide the application of Indian laws or American laws for diplomats on State service in the USA with regard to their use of domestic help hired in India. Conversely, should US diplomats abroad, pay their domestic workers according to Indian minimum wage rates or American minimum wage rates? This is the business angle because it reminds you of Nike and other US companies who used child labour abroad and were punished not by the US legislator but by public opinion.

The third issue is whether anyone should hire full-time help. It is the use of full-time, which is creating the most problems. How full is full-time? If it is 24 hours, it is clearly slavery and may lead to murder. But what about 16 hours? Duly allowing a person to sleep a minimum and take time to do the essentials? How long can people work on such a regime: three days a week or seven? What if we reduce this to 12 hours or 9 hours? How many days a week is acceptable? How many hours a week? 9*7=63? Or 35 as in France? Indeed, why can't life be sorted out so that no one needs to work more than 35 hours a week, or, as I have often maintained, 28 hours (32 could be a compromise). This would allow unemployed people the world over to get employment. This diplomatic incident only brings us back to the point.

But, matters are sometimes more complicated. At the time when a similar slavery issue took place in Paris a few years ago (maybe 10), I talked to a couple of diplomats. What they told me is that the amount of entertainment they are required to do, means that they are virtually using their spouses as the first full time domestic worker. The maids are in turn helping their spouses.

The entertainment which I mentioned above includes looking after all the VVIPs who decide to come to Paris and as VVIPs feel they deserve to either reside at our friends' places after finding appropriate connections or being at least invited for dinner, lunch and other meals. And of course, they need to be taken out to cultural events at State expense (Indian taxpayer). As a result, the social and cultural agenda of these diplomats is full, leaving them little time for their own kids and families. Of course, it's a two way street: the connections to these VVIPs can pay off later when they are back in India...

Diplomatic services' payscales are such that wives do not get paid for their labour and that the maids are not hired on a diplomatic contract. Perhaps having the Indian Foreign Service employ their own maids and butlers would be a solution, but then the taxpayer must ante up... basically the middle classes. But tax being a dirty burdensome word, the middle classes and the rich prefer to focus on the first two issues than the main issue of who pays for the social system.

To this slavery of underpaid domestic workers, we are now raising the question of slavery of unpaid spouses. They must be getting rewarded is some other way… oh! What a Sweet surrender. Certainly, a lot remains to be done.

The middle class party, as I have said, is on. It’s a party to discussing what are the rights and obligations of middle class people to each other. It’s a party to understand the examples we need to sort out the diverse claims. Certainly, no one person is expected to be perfect in all respects, but having standards, at least lets one know when one's performance is going haywire. A few rich people are outliers and the millions of poor people cannot possibly be expected to perform according to the same standards.

This discussion needs to include the elite. In France, elite women have come out in favor of prostitution. While reading Indian history (after Gandhi), I discover that already 65 years ago, elite Indian women were against reservations and quotas for women. Evidently, there are people who are able to go beyond the obvious and look deeper at social issues. People who discuss with their neighbours and get deeper understanding of why people do what they do.

Arvind Ashta

Unemployment up in France: Have to change the policy equation

2013-12-07T21:05:00.001+01:00

Yet again, dismal news. French unemployment is up to 10.5% or 3.2 million people. This is the official statistics of people who are officially looking for a job.

It does not count people who have given up looking for jobs. It does not count people who are taking some traning course to improve themselves to increase their chances of finding a job. Total unemployment if we include all this may be twice as much, but who is counting?

Youth unemployment has risen to 25%. This includes people less than 25 years old. Evidently, these people do not have work experience and no one wants to employ them. There is a paradox: if no one employs them, then how will they get any experience?

Lack of growth, but stagnation. So unemployment should also be stagnant. But its increasing. An obvious explanation is that productivity has increased too. So, some people are working harder to retain their jobs, thus exacerbating the problems of those who would like to find a job.

A second explanation is that employers are continuing to increase investments in new technology and therefore increasing the capital intensivity of their firms. Evidently, the low interest rates may lead to this. The increase in capital intensivity means less labour is required. So, unemployment increases.

A third explanation is that French population has increased in precisely the segment of 20-25 year olds (this would suggest a lot of human productivity occurred in the late eighties). Or a lot of new young immigrants have entered in this age group recently. Perhaps from Europe with the opening out to new countries or from existing EU countries which are doing worse than France.

Evidently, we need to re-look at our relationship with technology and go back to notions of appropriate technology: technology which permits everyone to participate in society. Technological innovation should benefit the middle classes: not throw people out of the middle class into poverty.

Evidently, we need to look at interest rates and their impact not only on growth which should boost employment but also on investments and the kind of unemployment it can create.

Finally, we need to understand that beggar-thy-neighbour policies may lead to beggars coming into your country. The cost of creating walls to keep them out or hiring planes to deport them may be more than making appropriate economic and political chocies of redistribution and competitiveness.

Arvind Ashta

Micro-payments, Major impact on banking, unemployment, education and the middle classes

2013-11-25T22:43:00.000+01:00

British Bank Barclays will be removing 1700 jobs from their branch network. These include personal bankers, cashiers, operational specialists, assistants and branch managers. See http://tiny.cc/xkj36w. The major reason is that mobile payment technologies are no longer requiring such personal interactions as consumers reduce their transaction costs of commuting to banks and waiting in queues.

The growth of the mobile payment industry has been talked about for quite some time. Although the impact on developed economies may be new http://tiny.cc/wej36w, we know that mobile payments are making a major impact on transaction costs in developing countries where distances travelled for making remittances can be huge and unsafe.

The impact of this news is certainly known to bankers. However, educational institutes would do well to start preparing for a change in the nature of jobs that bank managers will be required to undertake. There is probably a greater need for accountants reconciling millions of tiny payments and less for operational managers. Evidently, software for bank reconciliations will find a growing use.

Creative destruction à la Schumpeter is certainly good news for those who believe in capitalism. Certainly, new kinds of jobs will be created in developing, maintaining, and perhaps even hacking competitor payment sites. Jobs in website security are therefore another new area of developement. However, the changeover from one kind of technology to another may have a time lag as far as unemployment is concerned. The soon to be unemployed bankers would need training and education. But to do what?

In today's world, it is easy to keep a watch on jobs which are threatened. It is far more difficult to predict and prepare for new opportunities which will reflect tomorrow's needs.

Since the bankers who are laid off are likely to be from the middle classes, and since the unemployment may not be temporary, it is possible that these people will fall into poverty.

Cooperative Group Limited: An image tarnished

2013-11-21T09:56:00.000+01:00

The Rochdale Society, one of the earliest experiments in cooperatives in the 1840s, fawned many cooperatives either directly or indirectly. In the last few decades, we have been watching the merger of many of these cooperatives in Britain. A reading of these mergers reminds one of the external acquisitions for growth necessary for the continuing survival of worldcom and other catastrophes. There is no reason why cooperatives cannot be badly managed, and it is evident that they can easily grow astray. Bigger players may wreck greater havoc.

Is big bad? The Cooperative Group Limited in Britain has sales and other income of over £ 12 billion to over 7 million members. Its businesses include food, travel, banking, funerals and many other businesses. It has a profit of £ 180 million pounds, just 1.5% margin on sales. This is about 27 pounds per member.

The businesses of the cooperatives includes banking. Cooperative banking laid the foundations of the microfinance movement. While customer satisfaction with cooperative banks seems to be high, the rating agencies have been downgrading the Cooperative Group's bank because of inadequate capital. This comes from having absorbed an over-leveraged cooperative bank a few years ago. A lack of due diligence means one bad apple can spoil the barrel. Mergers and acquisitions often lead to poor returns, and they often hide the fact that one, perhaps both the firms, need to merge to hide past failures, including the failure to generate internal growth, a mantra which justifies high salaries.

The CEO of the Cooperative Group Limited may earn over a million pounds a year, while other top executives earn closer to £360,000 per year. Certainly, managing large cooperatives pays as well as managing large businesses of any kind. The competition to get these jobs and the kind of people they attract may also be similar to those running any other kind of company. Undoubtedly, these top executives are the political organs reflecting cooperative beliefs. If they are earning 28 times the minimum wage which is paid to many of the 100,000 employees, they must be believing more! The table below shows the calculations and assumption.

Hours per month	Minimum wage	Minimum wage per month	Minimum wage per year	A Salary of £360,000 compared to minium wage	A Salary of £1,000,000 compared to minium wage
Hours	£	£	£	Times	Times
170	6.31	1073	12872	28	78

The Cooperative Group Limited is also linked to the Cooperative Party, one of the largest supporters of the Labour Party. Business and politics are closely intertwined. Big players in business can have a lot of influence on how we shape our society. Their beliefs and image are therefore crucial to the belief in cooperation.

The recent scandal of a top executive of the Cooperative Group buying crack is similar to the Mayor of Toronto buying crack. Therefore, at the least we can say that top executives and politicians are as human as anyone else. Should they therefore earn thirty to seventy times the minimum wage? Or should there be a ceiling to reflect that they are imposing risks, which greater potential downsides than those of people earning less because the image of the co-operator is at stake.

EU interest rate cuts: Impact on the middle classes

2013-11-13T11:45:00.001+01:00

The EU Central Bank has decided to cut interest rates.

The European Central Bank (ECB) has cut its benchmark interest rate to a record low of 0.25%, down from 0.5%. The move came as a surprise to many analysts.

Why? We know that in the USA, they want to increase them. Why? What do interest rates do? Here is a simple, perhaps simplistic, response.

Interest rates determine whether you should invest or not. For most projects, interest rates are a cost that projects must cover. If your project is getting more than the interest cost, it's worth investing. Obviously, if interest rates are high, only very highly profitable projects will be taken up. So, investment will be very limited and therefore growth and new employment would be limited.

When interest rates are decreased, it is hoped that less lucrative investments are now worth investing in. So, more projects materialize. As investments increase, it is hoped that there will be growth and increase in employment.

Now, here is the catch. If there are bottlenecks, then instead of increasing employment, interest rate cuts cause inflation.

So, low interest rates can lead to high employment and high inflation.

High interest rates should lead to lower employment and lower inflation, even deflation.

The question in each country is what the employment situation is. If it's close to full employment, it's advisable to keep interest rates up to keep inflation in check.

If there is a lot of unemployment, it is advisable to lower interest rates because there is less risk of inflation.

Therefore, one can assume that if the US is increasing interest rates, it's because they feel either that unemployment is not a problem or that inflation is the greater of the two threats.

In the EU, with its vast unemployment in most countries, it is clear that there is little risk of inflation. In fact, the news reports say that the Central bank is afraid that inflation is less than 1% and we may go in for deflation, thus hurting growth prospects. In other words, the European Central bank is reducing interest rates to raise prices.

ECB president Mario Draghi said the decision to cut rates reflected an outlook of low inflation and economic weakness in the eurozone. Inflation in the eurozone fell to 0.7% in October - its lowest level since January 2010, stoking concerns of deflation in some countries.

This obviously merits further analysis.

Why do people not like inflation? Why should it be controlled? This is because it distorts the meaning of money. Partly. Partly also that it's a tax on fixed income workers and retired pensioners. Inflation erodes their purchasing power. Business people are able to raise prices and therefore profits. So, in fact, inflation usually takes away wealth from fixed income people, usually middle class and poor, and provides it to richer business income people.

The ECB's target is to keep inflation just below 2% - seen as a healthy level for economic growth.

To some extent, minimum wages and doles are increased in periods of inflation. However, very few countries have adequate indexation for inflation. And what indexation does occur, follows with a time lag of a year or six months.

This lowering of purchasing power eventually leads to strikes, protests and loss of valuable time and lower economic growth. So, inflation is not a tool that governments like. Yet with the growth mantra being so important to the rich (they always want more), when they find they cannot tax any more the middle classes, they try to usher in inflation.

Having understood that monetary policy is a risky tool, and there is no certainty of what it will really achieve, the task becomes even tough in federal country where different States have different levels of deficit financing. It becomes even more arduous in an economic union where each country has even less synchronization of economic policies.

Prices in Greece – one of the urozone members worst hit by the economic crisis – have not risen since July. Some economists are also worried about deflation in Spain.

What is clear is that the lack of price increase is probably a source of solace for those in the middle classes who still have jobs, and so too for those on the dole.

Note : all italics are quotes from BBC, 7 November 2013

S & P downgrades France: What François Holland needs to do now

2013-11-12T11:33:00.001+01:00

In a bid to raise French deficits, the rating agency, Standard's and Poor's has reduced France's rating to AA. The impact of this is that interest on government debt will rise, especially that taken at variable interest rates. This rise in interest payment will offset any reduction in public spending that the Finance Minister, Pierre Moscovici could have proposed. Such deficits and increased interest rates are pleasing to those who earn more money as a result (guess who gives loans to the government?).

The key French problems highlighted by S & P (with our comments in brackets) are

1. Too high taxes already and unwillingness to pay more (don't we agree?)

2. Too much unemployment (it's a social choice: some relax so that others can work…)

3. Too much debt: over 80% of GDP (unnecessary political handouts)

4. Lack of reforms in product, services, and labor markets (unclear vision of the future, present)

5. Lack of medium term growth prospects (this is S & P's obsession, not ours)

6. A trade deficit of $ 5.8 million (poor tax choices).

Besides reducing social security charges on employers, the Holland government seems to be clueless on what to do.

Should we give them advice or should we let them sink? Being realistic, we do not think that our party can be in a position to make changes directly today. And if these changes are not made, it may be a bit late.

A simple first lot of suggestions for Mr. Holland would be to do the following. These suggestions could also be taken by the Greeks, the Spanish, the Portuguese and any others who may want them.

1. Increase the VAT on manufactured goods to 25% and VAT on services to be reduced to 15%.

a. Services are provided locally and this boosts employment

b. Goods are often imported and this will finance the reduction on VAT on services.

c. Note, Scandinavian countries are on a 25% VAT and doing quite well.
d. Germany, who for decades was on a 15% VAT finally got wise and increased its VAT to 19% a few years ago.

2. Alternative/ variant of above would be to increase the VAT on manufactured goods to finance the reduction on social security charges of employers.

a. Again, following the Scandinavian model

b. You are welcome to have your own model, but if it doesn't work, try copying someone who is respectable.

c. There is nothing wrong with French productivity: its just the wrong taxes which are making the French seem less productive.
d. Note when Germany increased its VAT rate to 19%, it used a part of the increased taxes to reduce social security charges on employers.

3. Reduce / eliminate all subsidies to business. Yes, including subsidized employment

a. These subsidies are only postponing the problem.

b. Solve these problems today.

4. Share work: reduce the working week to 32 hours (4 days of 8 hours each).

a. With seven working days, this provides a half-day overlap on each side for people to communicate to each other. Otherwise, with six working days, there can be a two day overlap (one on each side).

b. To set an example, François Holland needs a co-President. And this should go all the way to the bottom, for every minister in the country.

c. When everyone has jobs, effective demand will go up, public destruction will go down, the spirit of solidarity would increase.

d. Managers who cannot manage people in a 32 hour week should be made redundant and replaced by managers who can. Appropriate training courses can be provided by schools such as the Burgundy School of Business to redundant managers.

5. Postpone retirement: If France has insufficient people, retirement age should be increased unilaterally to 65 with no obligation to retire till 70.

a. An opt out could be allowed for health reasons.

b. The retirement age increase works only if there are enough jobs. So, it has to be part of the integrated 32 our week.

6. Exclude Germany and Scandinavia from European Union or form a closer circle of Social European Union with similar legislation on minimum wages.

a. Germany and Scandinavia, with no minimum wage, do not have the same social democratic concerns as the rest of Europe. If they don't care about their own poor, they certainly won't give two hoots for Greeks, Spanish or French. (Note: these countries do not have a national minimum wage, but they have sectoral agreements; but not everyone is covered by sectoral agreements).

b. The alternative would be to scrap France's own minimum wage and behave like Germans. I don't think the French are ready for this, despite Standard and Poor's desires.

c. The German trade surplus and lower prices in Germany for French goods, clearly indicate that lack of minimum wages are what is keeping German industries competitive. (The Germans are indeed talking of introducing a minimum wage of 8.5 Euros per hour, significantly lower than in France, but then again one doesn't know when the talk will lead to a walk).

7. Scrap all subsidies to illegal immigrants. France has immigration laws on one hand and it provides subsidies to those who violate these laws. Either change the laws or stop providing incentives to violate the laws.

8. Encourage micro and small scale local industries by providing infrastructure necessary for them to succeed.

The problem with François Holland is that he will promise these for his second mandate rather than do this for 1^st of January 2014. By then, he may be captain of a ship that has already sunk.If the Spanish, Greek or Portuguese react faster, they may give him lessons which he may not be willing to take from us directly.

Difficulties at FagorBrandt: Even cooperatives can go astray the hubris way

2013-11-11T20:02:00.000+01:00

Since June 2005, Fagor Group - one of 270 entities Spanish Mondragon Cooperative Group - is the sole shareholder of FagorBrandt. By acquiring the Brandt Group in 2005, Fagor hoped to consolidate a market. It became the number 5 on the European market.

Fagor Group became the number 1 appliance manufacturer in France (14.5% market share) and No. 2 in Spain in 2011 with brands like Fabor, Brandt, de Dietrich, Sauter, Ocean and others. It now has nearly 6,641 employees , achieved a turnover of 1.3 billion euros in 2011 and has 14 production sites in six countries (Spain, France , Italy, Morocco , Poland and China).

Fagor Group is one of the entities of the Mondragón Cooperative Group (83 569 people , 270 businesses generated sales of 13.696 billion euros for the year 2011). The Mondragon Cooperative Group consists of three divisions : banking, retail, and industrial. In the latter, Fagor is the largest company.

Today, Fagor-Brandt is on the brink of bankruptcy. Very little financial information is available on its website. Without this, it certainly can't get any advice. So much for cooperative transparency. It seems that Mondragón has been subsidizing Fagor for years and it can no longer afford to continue to do so. Figures north of 300 million Euros have been put forward as estimates of subidies given by Mondragón. The total debt of Fagor-Brandt is 800 millions Euros and it is clear that the parent cooperative does not want to throw in any more money.

Is the problem hubris? We know that most mergers and acquisitions do not succeed. Did Fagor's CEO, Pablo Mongelos, have too much hubris when he took over Brandt from Elco, an Israeli company for about 165 million Euros? Of was the takeover a desperate attempt for an already ailing Fagor?

Fagor group itself consists of many cooperatives which are so interwoven that probably only a very specialized person can make out the bad apple which is spoiling the whole barrel.

The French minister of Industrial Renewal, Arnaud Montebourg is desperately tying to save the 1800 odd jobs which are being lost in France. Jobs which have survived by taking more and more debt and subisidies.

A good strategy for Mr. Montebourg would be to stop looking at the microeconomics of all the individual cases which seem to be overwhelming him at this minute, but to start looking at the macroeconomic policies which are keeping France under-competitive. After all, he is going to ask the middle-classes to foot the bill of the macro mess. So we should be concerned.

Nay, as a start, he should go one step backward and try to question the growth mantra which is keeping French policies aiming for targets and inducing policies which are not economically desired by French people. As a result, effective demand is not going to go up. Once he and his leader François Holland get the vision and mission right, perhaps they will have a better chance to devise appropriate strategies based on appropriate technologies and structures.

Logo designed by Victor Chukwuka

2013-11-09T18:52:00.001+01:00

This is a great day in the life of the party. We have received a very happy logo designed by the artist from Sierra Leone, Victor Chukwuka.

I am sure the logo will provide pleasure to all the party members.

Victor has promised more options. Stay tuned, as we try them out one by one and ask for your opinion.

9 million poor people in France

2013-11-07T20:52:00.003+01:00

According to the news tonight, there are 9 million poor people in France earning (or receiving) less than 977 Euros a month. This is equivalent to 11,724 Euros per year or Euros 33 per day.

In some countries, poverty is less than 2 dollars a day. Poverty is relative.

France has 8.8 million poor in 2011 according to INSEE data. How is it possible, in one of the richest countries in the world?

Since 2008, the French statistics body INSEE uses the European definition of poverty. Earlier it used 50% of median income (and not average per capita income which is influenced upwards by a few very rich people). Now, it uses 60% of the median income.

Note that the monthly median income in France is 1,628 Euros, much less than the average per capita income of 2,583 Euros per month. Annually, the median translates to about 19,500 Euros as opposed to an annual average per capita income of about 31,000 Euros.

50% of the median income is 814 Euros, while 60% (as used by Europe) is 977 Euros per month (for a single person). This makes the number of persons concerned rise from 4.9 million to 8.8 million. That is, instead of 8% of the French population, 14.3% of the French population is poor. Clearly, the poverty debate is all about statistics!

Number of poor people in thoursands
	Threshold at 50%	Threshold at 60%
1970	6 500	9 187
1975	5836	9020
1979	4898	7918
1984	4667	7685
1990	4214	8337
1996	4550	8179
2000	4165	7838
2005	4270	7766
2010	4677	8520
2011	4856	8729
Source: INSEE

No matter which threshold you take, the number of poor has remained constant between 4 and 5 million (at 50%) or between 8 and 9 million (at 60%) over a period of 40 years. However, population has increased and there may be some marginal gains out of poverty.

At these levels of life, the poverty line is about twice the dole (or RSA): € 492 for a single person. The poverty threshold is equivalent today - once adjusted for inflation - to the median of the 1970s. Today's poor at the threshold therefore have almost the standard of living as the middle class of that time.

What does poverty mean in a rich country? In France, 7% of households cannot maintain their housing at the right temperature, 10% cannot receive friends, 11% live in a noisy home ...

Obviously, the French social model needs a change. But who should pay for this change? Should it continue to be the middle classes or should the rich make an effort?

In any case 65 million population minus 9 million, leaves us with 56 million middle class and rich people. Assuming that a million are rich, we are still 55 million middle class or about 85% of the population. Surely, some party should be looking at our rights and not just our obligations.

Most of the statistics and facts for this paper have been translated and adapted from http://www.inegalites.fr/spip.php?article936 ... great website

The French Eco Tax suspension: Gifting away French middle class money to Italy?

2013-11-07T12:34:00.002+01:00

The French Eco Tax suspension: Gifting away French middle class money to Italy?

The Ecotaxe in France is supposed to raise about 1140 million Euros (didn't find this figure anywhare in the finance bill plf 2014, but different financial media provide this figure). Now, we are considering suspending them. Obviously, this is being done to destroy the environment and save today's economy.

But will it save the economy? The company which collects the tax and takes a 250 million Euro cut is called Ecomouv. It has invested in sensors on the highways which allow it to assess the tax. If one suspends the tax, its investment will go down the drain. This is called business risk.

But no, they were smart. Obviously, because an Italian company owns 70% of Ecomouv. They have a contract saying that if the ecotax is annulled, the French government owes them 800 million Euros. This is 0.8 billion Euros!

Let's put this in perspective. The French GDP is about 2,000 billion Euros. Total tax receipts from all the taxes in France are 300 billion Euros. Almost 1 full billion of these Euros is likely to be gifted away by cancelling the tax. Besides the loss in revenue, another 1 billion Euros.

Agriculture Minister Stéphane Le Foll might understand that the government is bound by the contract signed by the previous government. But François Holland prefers to leap before looking at the outcomes, confident that he will be able to light a fire to interest the French public, and then diffuse it, and come out as a hero. He has suspended the ecotax, not cancelled it. Maybe a sine die suspension is the way of getting out of an annulation. Delay is the highest form of denial.

Ecomouv is a French company, whose registered capital is 70% owned by Autostrade per l'Italia, an Italian motorway company. The other shareholders are French: Thales ( 11%), SNCF (10%), SFR ( 6%) and Steria ( 3%). Their total investment will probably be about 600 million Euros when all the equipment is put in place (various media provide this estimation). The logic of the 800 million Euros is not really clear.

Quote for the future: A rich man doesn't count his pennies: if Warren Buffet was to count his pennies, he would probably have to spend his whole life doing only this.

However, if the 30 million middle class Frenchmen and Frenchwomen don't watch some of the public pennies each year: the government may gift them away.

The same maybe true of other countries.

Are the middle classes closer to the rich or the poor?

2013-11-06T01:33:00.003+01:00

If we need to create a just society, we need to promote equity. But that does not mean equality. Evidently, those who work more or are more gifted should be allowed to earn more? Also those who have sacrificed their childhood to make a career should earn more. This is what vertical equity is all about.

But how much more? This is the question which is now bothering French people. Some say three times more, some say five times, even ten times. But is there anyone saying hundred times?

To appreciate French reality, here is an idea of some differences between the payment of top managers and workers. This comes from manipulating figures from the Finance bill for 2014 (its not a law yet).

More and more French workers earn the minimum wage which in January 2013 was 9.43 Euros per hour or 1,430 Euros per month. After taking out social security charges and some minimal taxes, the monthly net minimum wage works out to 1,120 Euros a month or 13,440 Euros a year.

There are at least a 1000 people, according the finance bill for 2014, who earn more than a million Euros net per year. This is about 75 times what people on the minimum wage are earning. But of course they are earning more than a million and not just a million. To appreciate how much more, here are some rudimentary calculations.

The French government expects to get 260 million Euros by taxing the cmopanies who pay them at 50%. This is 260,000 Euros per person (since there are 1,000 of them).

This means that the tax base must by 520 million Euros or 520,000 Euros per person

.However, this new tax will apply only to the revenue over a million Euros.

This means that the average taxable income of these people must be 1,520,000 Euros.

This is about 113 times what a person on the minimum wage takes away.

Now, this is only income of the top managers. These thousand managers take away 1.52 billion Euros of French income. With a GDP of 2000 billion, these people earn about 0.76 % of total income. However they comprise only 0.0015 % of the French population of 65 million people.

Of course, we have compared the richest with the lowest of the middle classes. The average French income, if we divide 2000 billion by 65 million, works out to about 31,000 Euros per year. People earning 1,520,000 Euros are therefore earning about 50 times the middle classes.

Income inequalities in France	Number of people	total income in millions	Annual Income per person Euros	Monthly income	Times minimum wage
CEOs of top 120 enterprises	120	336	2 800 000	233 333	208.3
Others in top 1000	880	1 184	1 345 455	112 121	100.1
Average of top 1000	1 000	1 520	1 520 000	126 667	113.1
French population	65 000 000	2 000 000	30 769	2 564	2.3
Minimum wage			13440	1 120	1.0
Source: Diverse media with my own approximations

Evidently, all the multiples are exaggerated since we are working with pre-tax figures and not post-tax. With progressive taxation, the difference should be a little less. But if the super-rich get a lot of tax cuts from their investments, this may not be evidently so. In any case, it gives you an idea. Already, for this new tax for solidarity, the rate has been reduced from 75% talked about by François Holland to 50%. Moreover, it is not being paid by the rich but by the enterprises. So much for solidarity even within the borders of a country!

Lets go one step further. This tax is an expense for the company and reduces the profits. As a result, one-third of the solidarity tax reduces the corporate tax. Therefore for firms the solidarity tax is only 50%-17%= 33%: the same as the tax on corporate profits.

Middle classes are certainly earning more than the poor. Maybe three to ten times more. The rich are earning about fifty times more that the middle of the middle classes.

Tilly-Sabco chickens out of the world market…fallout for the French middle classes

2013-11-04T21:20:00.001+01:00

The news tonight started with about a thousand jobs lost. In other words, a thousand less middle class people in France if they all become unemployed and are unlikely to find a job.

A first level analysis of the problem is very simple. These people were employed because their industry was subsidized by the EU. As EU takes away the subsidy, the French chicken produced in Brittany by Tilly-Sabco can no longer compete against the Brazilian chicken. So, evidently, lucky people to have been employed for so long, thanks to their European compatriots.

A second level analysis indicates that it’s the strong Euro and the weak Brazilian real which is creating this problem. Once again, France and/or someone in the EU must be exporting many other things to keep the Euro strong. So, it's obvious that if they are not competitive in the chicken market, they must be competitive elsewhere. If total French exports fall and Brazilian exports rise, slowly the currency parity will change. But it may also be only a sectorial difficulty.

A third level analysis is therefore required: does it make a difference? For this we have to see what we are exporting and what we are importing. If we are exporting capital intensive goods and importing labor intensive ones, then the net result is going to be unemployment. This translates into less middle classes, less taxes, less capacity to provide subsidies and more need for doles, without which these people will one day start questioning what French ministers are doing to earn their living.

To start with, what is French minister for Agriculture, Stéphane Le Foll, doing? After all, the Chicken crisis is not the only crisis in Brittany. We've already seen crisis in pork and fish. Let us assume that he postpones the day or reckoning by giving subsidies of 200,000 Euros per enterprise. This permits ten full time jobs at the minimum wage, or many more if it is disguised unemployment we are talking about. Or he may further postpone the ecotax? But this is not entirely in his hands alone.

Obviously, if these middle class jobs are lost and if doles are to be provided, then the capital-intensive goods which are being exported need to pay higher taxes or social security charges. But, these exports may be in a country different from the ones where jobs are being lost. So, without a good fiscal federalism policy, we will soon have the Greek problem in France! Either all the countries in the EU should then compete in the capital goods manufacturing markets or the ones who want to be competitive should finance the others. Sounds like common sense, but solidarity still doesn't cross borders!

The problem also requires understanding what kind of chicken we are talking about. If these are mass produced industrial chickens, and if this market can be attacked by the Brazilians successfully, should we go back to the old biological chicken, which is three to four times as expensive and far more tasty. The problem is that at three times the price, it is not sure that the middle classes can afford it. Will they move from tax and subsidy based nationalism to bio local producer based nationalism, just to protect jobs?

Not that there is anything wrong with protecting your neighbor's jobs. A busy neighbor is a good neighbor. Gandhian economics being learnt the hard way. Schumpeterian ecology being slowly ushered in. Perhaps the lesson needs to be repeated till it is learnt. Slow food, slow money may be the answers for tomorrow. Slow management…M. le Foll. We are organizing a conference in French on the 11^th of December 2013, in Dijon. Like to attend?

Microfinance Quarterly-Conference: Le mercredi 11 Décembre, 2013: La Transition en Marche: Slow Management, Slow Money & Dynamiques Locales

Nigloland: Amusement Park for the Middle Classes

2013-11-02T23:26:00.002+01:00

With Disneyland being so fantasy, partly because of its price, where are the middle classes to go? In France, one answer is Nigloland. Nigloland was founded by two brothers who used to organize fairs: Patrice and Philippe Gélis in 1989. Niglo means hedgehog in the language of gypsies.

The price of an entry ticket to Nigloland varies from 22 to 24 Euros depending on whether you are a kid or not. This is about 40% cheaper than Disneyland Paris which charges about 40 Euros. Clearly, the positioning is different. So, while Disneyland gets the international tourists and the upper classes, Nigloland is totally focused on the French. There are no signs in English or German anywhere in the park.

It has all kinds of rides catering to the very young as well as to strong sensation seeking teenagers. The food can be reasonably priced, depending on what you decide to eat.

500,000 visitors per year. Multiply it by 22 Euros and you have a turnover of 11 million Euros just from ticket sales. Of course, there are also restaurants and shops and doubling this would provide 22 million Euros of turnover. All this in a season of less than eight months for it is closed in winter.

It is a far cry from the 15 million visitors to Disneyland Europe. And the turonver of Disnelyland is not just the 600 million Euros from tickets, but closer to 1.3 billion Euros, after including shopping, restaurants and all else. Clearly, proximity to Paris and international airports and access to the high speed trains, all help. As opposed to this, Nigloland requires a car or a tourist bus.

There is a train station at Bar-sur-Aube which is connected to both Paris (gare de l'Est), Chaumont and there is even a direct train to Dijon (capital of Burgundy). The questions is what to do for the last few miles from Bar-sur-Aube to Nigloland. Fortunately, there is hope because there are a few buses, four a day, from Troyes to Nigloland. Some of these also go to Bar-sur-Aube? But of course you have to get to Troyes or Bar-sur-Aube. With 500,000 French middle class people concerned and if the Nigloland Park is open 250 days in a year, it provides us about 2,000 people per day, more on weekends and children's holiday periods and less for the rest of the period. Four packed buses should be able to transport 200 provided no one wants to go anywhere else. Just to put things in perspective.

A good thing about being in a park for middle classes is that people are very well behaved and they do not lose their good manners. So, you don't get stressed by little incidents of beating the line. Nor do you see any signs warning you of pickpockets.

Being middleclass can be amusing.

Note: all statistics, extrapolations and errors are mine based on information found on the internet and assumptions made to simplify mental calculations.

Reconciling Indian middle class statistics with the polarization debate

2013-10-31T07:17:00.000+01:00

India has a population of about 1250 million people. According to the BBC (May 23, 2013), it is expected that the middle class will grow to 200 million people in 2020. So, perhaps it is only 125 million now? About 10%. Even if it is 199 million now, it's only 16% of the population. So, let's say 10% to 16%. Evidently, in a poor country, people would be happy to be middle class.

The problem created by a small middle class is that it doesn't have any political power. As a result, policies are set either for the poor or the rich. But, the recent debate in India, based on studies by famous economists, shows that economic development has bypassed any social gains for the poor. So, clearly, policies are set for the rich.

But wait a minute. If the poor have not seen any gains, then how is it that the middle classes will grow as the BBC claims? Evidently, population increase could be one answer. But do the middle classes really produce so many babies? Aren't they the educated ones who have one child or two?

Perhaps some rich people may face business failure and slide back into middle class, allowing it to grow. This could be rich farmers who sell their land and don't realize that if they don't invest in anything except BMWs, they will soon spend all of it and now be without land and without income. (Of course, the BMW could become a taxi).

Evidently, most of the swelling of the ranks of the middle classes has to come from the poor. So, there has been economic trickling down to the poor. However, the poor have large family sizes. So, even if a few million move up to middle class, the lower classes are the one that are swelling in number. And for these, perhaps, there have been few social gains as suggested by the different studies.

Microfinance and the middle class consumer

2013-10-27T08:12:00.003+01:00

How can you link microfinance to middle classes? After all isn't microfinance so micro that its only for the poor?
Well, microfinance has often been targetted to the near-poor, either because it is the only sustainable strategy or because profits from these people will be used to cross-subsidize lending to the really poor. Not that the near poor are middle class.
But extending this logic means that that microfinance may target even the middle classes (or at least the lower middle class) in a bid to cross-subsidize the poor.
Again, some forms of microfinance may require complementary capital such as education of internet access or smart phones, which are available only to middle classes.

A case in point is micro-payments. These are very small payments, often made on the mobile telephone. The mobile payment market is estimated in trillions of dollars.

One operator who is into micro-payments (as well as much larger ones) is paypal. Check out this report on paypal on Reuters.com

http://www.reuters.com/article/2013/10/25/kenya-equity-paypal-idUSL5N0IF12I20131025

If paypal is interested in the middle class, surely other businesses are too. And this means that the middle classes are of interest to business, and even to big business, as consumers.

So, don't sell yourself short: you are not just taxpayers and redistributors. You also contribute because you consume. The profits made from your consumption, earned by big business, should also be used for redistribution.

Not even a trickle flowing down for the middle classes

2013-10-26T10:48:00.001+02:00

Whoever thought I would not only be reading Bloomberg Business Week, but also citing it? One of my intellectual colleagues reads everything right of whatever mark he sets for himself. After that, he passes it on to me, hoping he can save my mind by some miracle.

Guess what, even this Business Week has realized that the trickle down is no longer trickling. At least not this week, not this month, not this year, not this decade, not this ......

Read it for yourself before you continue further.

http://www.resourcecenter.businessweek.com/reviews/the-trickle-down-has-all-but-dried-up

So, the growth mantra works for the rich. It may even work for throwing a few lollipops to the poor. But for the middle classes there is nothing.

Have you ever wondered who you are voting for? Why?

Do you have your own party? Are you being represented? Is there a party for the middle classes?

If not, one suddenly understand the choice made by some to opt out. But opting out means opting out of the votes as well as the economy. Suddenly, the parallel economy starts making sense. It is no longer about legality or illegality, it's about legitimacy or illegitimacy.

Legitmacy requires representation.

Its not about right or left, its about in or out.

An election without a vision

2012-06-10T19:28:00.001+02:00

As we go to legislative elections, one wonders who to vote for. The political question is being relegated to alternative short term strategies, without a careful consideration of a long term vision. Perhaps the greens have one. Perhaps. Yes, I want to minimize energy use, but do I want to live without heating? What about air-conditioning? Do I want Gandhism and go back a century? These are trade-offs which need to be debated. They cannot be debated if one political party offers only one set and not the other. The question is what proportion of each? For this, a vision of a future world is required even before a mission or a route plan.

The problem is that any vision requires a world vision and not a domestic one-country vision nor an EU-only vision. And most politicians are offering domestic electors what is economically and socially interesting to them today.

A world vision requires participating in the world and permitting all our people to participate in the world and all the people of the world to participate in our country: visiting it, studying in it, living in it.

It also means that any security and fraternity we provide to our geographically close neighbor, we also provide to more distant people. To some of these distant people, we may be closer virtually.

In a world where human productivity is rising faster than population increases, especially if it is rising in poorer countries, evidently we don’t need to work so much. So, much of the solidarity is about sharing limited jobs. We take unemployment here to boost employment there. We share unemployment here, so that everyone has the bare necessities.

These bare necessities include opportunities not only for food, clothing and shelter, but alos for education, transport and communication. Why shouldn't wifi be free and available all over the world?

Unless we can think of new services to offer, why should we work so much? And if these services are required by people who don’t have them, we need to go out and find the poor people in whose service we can find our joy and, perhaps, salvation. Otherwise, we need to find new objectives in life!

It is the search of these future objectives that need to be defined. Just like the mantra of economic growth has exhausted itself, the mantra of happiness will also reach its plateau as we search for more emotions in life than one.

So, what is this vision? Share your views.