Oxfam regularly releases new reports on inequality and keeps getting it wrong.

So let’s revisit an older report to show how the next one is likely to be flawed once again — in an effort to avoid another needless European Parliament debate on inequality. The EU cannot allow itself to get stuck in an endless loop of ill-informed discussion on this issue.

Oxfam’s 2018 report claimed that inequalities are staggering. This was not the first time that the activists who made up the British NGO have shown their real talent: twisting reality to feed their political ideology, in defiance of any scientific rigour. Therefore, the question that arises is why continue to give echo to such people, whose nonsense is not without consequences, since it feeds the mistrust of the French towards their leaders and companies?

Oxfam had produced a similar document on inequalities, absurd in terms of the method, since wealth was calculated according to net worth, i.e. people’s assets minus their liabilities. Reading these figures, the attentive reader is left wondering, as most countries with developed economies allow considerable debt. But large material fortunes also have a large obligation, since this is how they feed their investments.

Similarly, a young graduate who has just found a job starts out with a low income and a substantial debt, which is, in fact, an investment in his or her potential future earnings. Comparing his situation to that of a low-income Chinese farmer with limited assets but little or no debt, using Oxfam’s methodology, the rural farmer far outstrips this indebted university graduate.

Let’s take the case study of France.

Oxfam’s report on CAC 40 CEOs’ incomes is riddled with comparisons, shortcuts, amateurism, and out of context figures. This context, however, is essential to a proper understanding of the economic issues raised. First of all, let us remember that the overwhelming majority of companies are VSEs and SMEs. These small businesses represent 99.9% of French companies and 49% of salaried employment.

The key figure revealed by this new report is that the CEO of a CAC 40 company earns 257 times more than a person on minimum wage. It reads: “In 2016 the average remuneration of CAC 40 CEOs was 4,531,485 euros. According to INSEE, the gross minimum annual salary was estimated at 17,599 euros, a difference of 257: 4,531,485/17,599 = 257.

Oxfam uses the average income of CAC 40 CEOs instead of the more realistic median income. The organisation explains that it does not have the data, due to a lack of corporate transparency, but still seems quite willing to use the average income to make a splash, claiming that CAC 40 CEOs earn more than 250 times the minimum wage. The calculation of median income, on the other hand, is quite possible and gives a result below 250. If we do this calculation, we find that the median income of CAC 40 CEOs in 2016 was 3.745 million, so we arrive at 3,745,000/17,599 = 212. It should also be noted that this calculation does not take into account a differentiation in the hours worked by people paid at minimum wage. Is Oxfam asking us to compare a person who works part-time with a person who works overtime regularly? And why is Oxfam hiding the fact that fixed salaries for company executives represent only 12% of their total income, and that options, bonuses and shares (based on company performance) vary continuously? Assuming we had all the data on the median salary, we would only have 12% of total income, and certainly not a factor of 257.

Next, regarding the assertion that CAC 40 companies would have paid 67.4% of their profits to their shareholders in the form of dividends, it is essential to remember that these are paid according to the company’s added value and after salaries have been paid. However, as economist Jean-Marc Daniel notes, since 1985, 65% of a company’s added value has gone to wages and 35% to the gross operating surplus, which is either redistributed in the form of dividends and or profit-sharing or invested in the company’s productive apparatus. 

But we will be explained that these “small calculation errors” and this representation are not significant. After all, Oxfam is not here to do research but to lecture us. Need we remind you that Cécile Duflot, the former Minister of Housing, author of the catastrophic Loi Alur whose measures are still being felt in the building sector, has just taken over the reins of Oxfam’s French branch? Is she responsible for the appearance of a proposal for a new blacklist of tax havens at the end of the report? This list should include Belgium and Luxembourg, which are by no means tax-havens. Let us add that the CAC 40 companies that are singled out (LVMH, BNP Paris, Société Générale, Crédit Agricole and Total) are in countries that Oxfam considers as tax havens, not because they practice tax evasion (Oxfam concedes that it has no evidence to prove it), but because they have clients there. Removing their subsidiaries from all these countries would be tantamount to depriving themselves of a considerable part of their turnover.

Political and ideological NGO. Instead of recognising the achievements that the development has made of the free market, Oxfam wants to revive the stereotype of the operetta boss, a man in a suit smoking a cigar in his office while looking down from his canopy at his exploited employees. But this caricature, inspired by the Monopoly man, no longer has much to do with reality.

As Steven Pinker reminds us in his book Enlightenment Now, while 90% of the world’s population lived in extreme poverty in 1820, only 10% of it remains today, thanks to the market economy. In recent decades, China’s economic miracle has lifted 600 million people out of absolute poverty, halving the world’s extreme poverty levels. We live in the most materially prosperous times in history, which is not about to be reversed.

Oxfam is a political and ideological NGO. It will continue to release misleading reports to argue for broad redistribution that would harm our economic performance and, ultimately, those it purports to help. Helping the poorest means opposing this demagoguery. It also means, for the media, to stop relaying it massively.

Originally published here.

Trade is not a zero-sum game.

During his speech to the French on 14 June, President Emmanuel Macron outlined a recovery plan based, in part, on economic sovereignty on a national scale: “We must create new jobs by investing in our technological, digital, industrial and agricultural independence” he declared.

The French President’s protectionist turn is surprising. Opposed to Marine Le Pen in the second round of the 2017 presidential elections, Emmanuel Macron ran as the open society candidate. Here he is now defending protectionism! He made fun of trumpet populism, and now he promises to bring jobs home! But the most surprising thing is that he does not limit himself to advocating European sovereignty – as he has already done on several occasions – but national sovereignty, disregarding the principles governing the single market.

This “reinvention” is, unfortunately, not an innovation. On the contrary, Emmanuel Macron is resurrecting the old Ancien Régime fallacy according to which a nation’s wealth is not measured by the number of real goods and services at its disposal but by the amount of gold in its coffers. An ideology championed by Jean-Baptiste Colbert, a minister under Louis XIV.  “This country does not only flourish in itself, but also by the punishment it knows how to inflict on neighbouring nations”, such was his philosophy. But if Colbert is remembered as the Minister who was at the origin of the “greatness of France”, it is because history is more interested in the rich and powerful than in the little people. On the surface, France may have shone in Europe, but in reality France was “nothing more than a large and desolate hospital”, as Fénelon testified in a letter to King Louis XIV in 1694.

Behind the mercantilist ideology, such as the one Emmanuel Macron was inspired by when he spoke of a revival based on sovereignism, lies a misconception: that trade is a zero-sum game. But as the classical authors have subsequently shown, trade, by definition, is a positive-sum game. Forcing consumers to buy domestic goods rather than the imported goods they desire is not in their interest and, by extension, not in the interest of the nation. As Paul Krugman points out in a 1993 article, “What a country gets from trade is the ability to import the things it wants. France is therefore going to invest massively in certain technologies to “gain its sovereignty” when it could benefit from the experience and competence of its neighbours. An excellent way of wasting precious resources. 

Emmanuel Macron also said that the advantage of relocation was the creation of “new jobs”, but at what price? Examples of the economic war between China and the United States show the shortcomings of such a policy. A study by the American Enterprise Institute (AEI), for example, showed that the cost of the Chinese tyre tax set by the Obama administration was $900,000 per job. Moreover, since this $900,000 could have been spent elsewhere, the increase in tyres’ price has led to a drop in demand for other goods. Thus, the AEI estimates that the preservation of a single job in the tyre industry would have actually cost 3,700 jobs in other sectors. This phenomenon is not exceptional, examples abound. Another is the steel tariffs imposed by the Bush administration: while they have saved 3,500 steel jobs, economists estimate that these tariffs have led to the loss of between 12,000 and 43,000 jobs in steel-dependent industries! Krugman’s lesson still holds today: “Government support for an industry can help that industry to compete with foreign competition, but it also diverts resources from other domestic industries. 

These examples clearly show that the economy is too complicated for a President of the Republic,  to hope to administer it. The idea that an acceptable recovery policy would reduce unemployment is a pipe dream: it is entrepreneurs who create jobs, not bureaucrats. Outside of the crisis, about 10,000 jobs are created every day in a French economy that employs a total of about twenty-five million workers. Who can claim to be the direct source of so many jobs? At best, Emmanuel Macron may manage to create a few thousand jobs in the handful of sectors he has arbitrarily designated. Still, it will be to the detriment of tens of thousands of jobs which will disappear as a result.

Of course, what applies to France also applies to Europe: sovereignty is only legitimate when it is applied on a single scale, that of the consumer.

Originally published here.

Why is Europe struggling to create its own digital giants?

Why is Europe struggling to create its own digital giants? This is the million-euro question that obsesses the European Commission. In an op-ed published last July in Le Figaro, the European Commissioner for the Internal Market Thierry Breton warned of the urgent need to “ensure Europe’s digital sovereignty” in a context where the rivalry between the major powers is intensifying.  

The budget granted to the policy of sovereignty by the European Union has increased by “20% compared to the previous budget, and even 30% after the departure of the United Kingdom”, Thierry Breton was pleased to report in Les Echos. The new DigitalEurope programme, he continues, “will allow additional investments of more than 20 billion”. The initiative aims to ‘encourage’ and ‘support’ digital technology industries-as can be read on the official website.  

At the same time, the European Commission is continuing its war against the GAFA (Google, Apple, Facebook and Amazon) and is considering taxing the American digital giants to finance its recovery plan. To justify this new tax, which will inevitably reduce consumers’ purchasing power, the EU argues that GAFA pay “half as much” tax in Europe as other companies. However, as the Institut Economique Molinari has shown in a recent study, GAFA pay as much tax as large European companies. In the light of this fact, the GAFA tax appears most unfair. 

Subsidising domestic companies on the one hand and taxing international competitors on the other: the European Commission’s approach seems to be inspired by the doctrine of infant industries advocated by the 19th century economist Friedrich List. However, this strategy does not address the fundamental problem of the European digital market-as well as being extremely costly. 

As Luca Bertoletti and Ryan Khurana, authors of a policy note on the subject for the Consumer Choice Center (CCC), point out, if the European Union is at a disadvantage compared to the United States or China it is because it does not have a true single digital market. Only 15% of Europeans, for example, shop online on a site based in another EU country. 63% of websites don’t even let consumers buy a product from another EU country.

So Europe’s digital market is far from being a single market as it is in the US and China. This is problematic because it limits competition on a national scale and prevents Europe’s most successful firms from gaining market share and achieving significant economies of scale. The authors of the note for the Consumer Choice Center therefore recommend removing the remaining barriers to competition in the European digital market.

The fragmentation of the telecommunications sector is particularly striking. While Romanian and Finnish operators are among the best in the world, both in terms of quality and price competitiveness, telecommunications services in Spain and Ireland are often of poor quality and excessively expensive. 

Spanish and Irish consumers would greatly benefit from increased competition in this sector. In order to allow the best services to gain market share, the European Union should encourage the cross-border provision of telecommunications services and remove protections for incumbent operators. Competition law should also be adapted to allow the merger of different national telephone operators and to ensure that small countries are not put at a disadvantage. Shareholder states should partially withdraw from the merger to encourage private investment and thus promote competition. 

In a true digital single market, users should also not be discriminated against on the basis of their IP address or the location of their bank account. We should, therefore, introduce cross-border licensing of digital media and freeing the purchase of digital content from geographical constraints. Such measures would allow consumers to have access to a wider choice and thus intensify competition between providers.

We should also note that the regulatory environment is still too unfavourable to experimentation and innovation in Europe. This is one of the reasons why the most disruptive technologies are often imported from abroad and rarely developed in Europe. To remedy this, we should increase the number of “regulatory sandboxes” that allow companies to derogate from regulations in order to test new products in a controlled environment.

We should also draw attention to the European Commission’s decision to use Wifi as an infrastructure to accommodate autonomous cars. While it is true that Wifi is faster to implement and less expensive, 5G technology is much more promising. Car manufacturers have already expressed their concern on this subject. To choose 5G rather than Wifi is to fall behind a technology which will surely be the basis of the fourth industrial revolution to come.

The challenge for Europe today is to avoid making the same mistakes as in the past. If Europe wants to play in the same league as the United States and China, it will certainly have to make the necessary investments in the infrastructures of the future, but also – and above all – harmonise and liberalise its digital market. 

Originally published here.

The 2016 Donald Trump coalition was one for the ages.

These were far from typical Republican voters, made up of disaffected liberals, libertarians, nationalists, run-of-the-mill conservatives and skeptics of adventurous foreign policy.

Rhetoric on “dismantling” of the administrative state, promises of low taxes and cutting down on wars abroad convinced many moderates and libertarians who otherwise wouldn’t have backed a GOP candidate. In 2020, due to many reasons, that coalition didn’t deliver for Trump.

As President-elect Biden assembles his administration and evaluates the coalitions that brought him to power, he’d be wise to channel some libertarian ideas that made 2016 Trump somewhat appealing to these groups and perhaps pivot public policy in a freer direction.

To begin, the incoming Biden administration has an opportunity to return America to a humble foreign policy and reduce our involvement in endless wars, a sentiment shared by large majorities of the American people.

A August 2020 YouGov poll commissioned by the Charles Koch Institute found that 74 percent of Americans support bringing troops home from Iraq and 76 percent of Americans support bringing troops home from Afghanistan. The findings were nearly identical among Republicans and Democrats. A plurality (48 percent) of those polled believe we should be less militarily engaged in conflicts around the world.

If we remember the 2016 version of Trump, he was a standout in the GOP primary because he spoke to the voters who believed it was time to draw down America’s military presence overseas. Biden has proven to be a cheerleader for interventionism in the past, but the American electorate’s current tolerance for war is at an all-time low.

Beyond the wars themselves, Biden should also restore the balance of powers to restore Congress’ ability to decide war and peace. A 2018 survey by the Committee for Responsible Foreign Policy found that 64 percent of Americans disapproved of Congress’s lack of leadership on military matters.

It also found that 78.8 percent of respondents agreed that Congress should “require clearly defined goals to authorize military engagement overseas.”

That would help reduce the amount of armed conflict where we send our soldiers, and also keep Congress accountable to the people. Perhaps then, we wouldn’t still have troops in Afghanistan, Iraq, and countless other nations.

Here at home, Biden should continue Trump’s laudable criminal justice reform efforts, which are currently being led by Republican state legislators across the country. In 2018, Trump signed the First Step Act, earning praise from all political sides by enacting needed prison and sentencing reforms.

Over 3,000 inmates were released as a result of the law, and it will be a good start to future Biden efforts. A June 2020 Associated Press poll found that 94 percent of Americans support at least some changes to the criminal justice system, and it has become a key area of agreement between libertarians, progressives, and conservatives.

The social justice protests of the last few months will add plenty of heat to Biden’s team to hasten change.

When it comes to revitalizing our economy still in the thralls of COVID, one achievable policy area is occupational licensing reform, clearing the barriers for millions of Americans to achieve their entrepreneurial dreams without the red tape of government.

Reducing the number of occupations that need licenses overall, but also ensuring that licenses are valid nationally would help push the least well-off into the middle class. As the work of the Institute of Justice has proven, these restrictions most often harm the working poor.

In 2015, President Obama’s own Treasury Department issued a report arguing that “licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines.”

Democratic governors in Pennsylvania and Montana as well as Republican governors in Arizona and Utah have passed legislation enshrining reciprocity for occupational licenses, erasing the notion that a license obtained in one state should be invalid in another. Removing federal barriers would be the next key ingredient.

One of the more difficult areas for Biden’s administration’s outreach to Trump voters will be that of trade.

Economists from across the political spectrum overwhelmingly support free trade because they understand that international trade is not a zero-sum game, but a mutually beneficial exchange. It’s a free market applied globally. But that won’t convince the former factory worker in Ohio or Pennsylvania who checked Trump’s name at the ballot box.

Trump made his name as a stalwart against China, and it is true that there is a reason for concern, especially when it comes to intellectual property theft and the long arm of the Chinese Communist Party.

But the fact remains that Trump “Tariff Man” trade wars have been disastrous for all of us.

A 2019 report by the Brookings Institution estimated ongoing trade wars cost the U.S. hundreds of thousands of jobs and potentially billions in economic growth. Washer and dryers, for example, are now 12 percent more expensive now than before Trump waged his trade war.

Tariffs slapped on other countries, we should remember, are essentially taxes on American consumers. That message needs to be top of mind for Biden and his appointees if they want to restore prosperity.

Policies and ideas matter, and now is the time to contribute to that. Skeptics of governmental power will have all the reasons in the world to oppose and restrict Biden, but we should at least promote the ideas that we know will galvanize support across all of our society.

Originally published here.