Category: International

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International

Down, …. but out? Surely yes

Theresa May has finally come up with a Brexit plan agreed with the European lead negotiator, but as expected, it is of little value for Britain. Is this the final stroke that will end her disastrous term as prime minister?

 

Theresa May did not back the Brexit campaign. She was in favor of remaining in the  European Union, the worlds biggest economic block. But as David Cameron, the previous prime minister, resigned after the referendum, she put her hand up to lead the nation during these daunting times. She suddenly seemed hellbent on fulfilling the wishes of the population and lead the UK out of the European Union. Since she seemed to be the least bad choice, the Conservative Party voted for her to lead the party. But she never had the full backing of her own party. Mrs. May always seemed to want to please everybody in the party, even though they were bickering among themselves. She lacked a vision and clarity, and although she defined “red lines in the sand” they were hopelessly unrealistic. Throughout the whole process the prime minister vastly overestimated the UK attractiveness and economic power. When she finally presented her deal to her cabinet ministers, they were disappointed.

 

The United Kingdom has in the past produced some of the greatest leaders the world has ever seen, from the military, business and government. But just as they most need to put forward one of their greatest, they instead choose one of their weakest. Great leaders have charisma, they are decisive, have a loyal following, are flexible and able to adjust to changing circumstances and most of all – have a sincere enthusiasm for their cause. Mrs May has none of the above.

 

Predictably, the EU dictates the terms of the exit. Britain is not in a position to state demands, purely because it relies more on the EU than the EU does on Britain. And the EU wants to make it as hard as possible for member states to leave the union. This would act as a deterrent for any other populist politicians to promise paradise outside of the union. After famously stating that “no deal is better than a bad one” it is hard to see how this deal represents a good one for the Brexiteers. None of their promises in the campaign leading up to the referendum have been met.

 

I doubt that the prime minister will manage to convince her own party to back the deal, and that it would be voted down. This will leave Britain with a few options: leave the Union without a deal (disaster), try and hammer out a new deal under a new leadership (won’t happen, there is simply not enough time), call for new elections to get a clearer mandate from the electorate (even worse, because it would surly mean that the far-left socialist, Jeremy Corbyn, who in the past has had a soft spot for violent demonstrations to express his view – would become the prime minister). The last choice would be the only sensible one: hold a new referendum. After all, the first one was based on false promises made by populist self-promoting politicians. Now that the public has got the details of the actual divorce, they are far better informed on what a Brexit would actually entail.

 

That’s is if the public even cares. After two years of constant Brexit bombardment and posturing, they might just be so tired of the topic that they surrender. Besides, they would much rather like politicians to focus on running their communities, their cities and their country again.

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International

Democrats – targeting the boogieman

As the Americans go to the poll today to vote for a new house of representatives and a few senate seats, they have the chance to change the path of current politics. The Republicans have a slim majority in both houses. If the Democrats win either of them, their win would have been because of a rise in the “anti-Trump” vote, rather than a vote for the Democrats. These days Democrats are united because of a common boogieman, Donald Trump, rather than a common ideology.

 

Gone are the days of true liberal leaders who could unite the followers behind a shared vision on how a better future would look like. Leaders who don’t try and win votes by discrediting each other but by convincing you with their argument on how to build a society that you can be proud of. And with such a lack of clarity of what they stand for, it will be very hard to beat a showmaster like Trump. It would be even more difficult to come up with new policies that would convince the electorate to vote for them at the next elections.

 

We in South Africa have a similar scenario. With Zuma removed, the EFF and the DA are struggling to define themselves. Their political visions are confused, and their purpose faded. Who should the voters vote for if they don’t get a coherent message? Not one about removing an chauvinistic, polarizing and corrupt fool, but a idea about what you as a party would do different, to make the lives of your fellow citizens better. It seems like the only leaders in politics these days are populists who win on a message of fear and hate. What a sad state of affairs.

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International

The merits of Capital Gains Tax

Taxing a gain that wasn’t there

The idea behind the capital gains tax is simple: tax any gains on the increased value of capital, as the increase of capital was due to a better performing economy. Whether the capital is in the form of shares or property value, it has benefited from a growing economy, and therefor the value of the capital has risen. The taxes would fall disproportionately onto the rich because they have the excess capital to invest. That sounds like a just idea, but is it?

 

Like so many other countries, South Africa fell over their feet to implement capital gains tax. After all, it would raise more money, which the government could use to fund their social upliftment programs and infrastructure spending. They have raised over R100bl since it was introduced in 2001. During the boom years, there was not much pushback, as it only seemed fair that the capital, that was invested in the South African economy, benefited from the strong growth. As governments invest more into public goods, such as roads, schools and hospitals, private capital benefits by being in the vicinity of it.

 

But now in leaner years, one should question the merits of Capital Gains Tax. The problem is that it is calculated on the nominal value of the increase (the nominal value includes inflation). In countries like the USA or Europe, this is not much of a problem, because their inflation rate is about 1-2%. Our inflation rate is three times higher at about 6%, but our economic growth is much lower than that in the West. The increase is capital value is almost all due to inflation. Why should the investor pay a tax on a gain that has not really been a gain at a ll. In-fact, when there is a recession but high inflation, the capital value might go up, but in real terms the value of the investment has decreased. Yet, you would have to pay tax on that. Is that a fair system?