International Headlines: Economy


Greek Reform Plan Criticized
June 22, 2015 — The Guardian
The Greek government has come under fire over the compromise proposal it submitted to its lenders June 22nd, amid warnings that it will hurt growth and cost jobs. Syriza spokesman Gavriel Sakellerides says that Greece’s plan will create “breathing space” to support the recovery and spare the country from plunging out of its bailout programme within days. The plan will squeeze €8 billion out of the Greek economy in the next 18 months through a series of measures, including higher VAT taxes, higher corporation taxes, and raising pension contributions, in addition to phasing out some early retirement schemes. Greece sent the proposal in yesterday morning, having spent months trying in vain to persuade lenders to accept less onerous budget surplus targets, and thus fewer cuts and tax rises. The plan has triggered a backlash in Athens, with government and opposition MPs criticizing the plan and the time it has taken to reach a potential agreement. Pensioners are due to begin protesting the evening of June 23rd, having been hit hard since the crisis first began. Nearly 45% of Greece’s 2.5 million retirees now live on incomes of less than €665 a month, below the EU’s poverty line. Over half that number fell below the threshold at the start of the economic crisis in 2009. Eurozone finance ministers are to meet on Wednesday night at 7pm, to have one last attempt to agree on Greece’s economic reform proposals. Greece and its creditors have just days to reach an agreement that will unlock bailout funds before June 30th, when Greece is due to repay €1.6 billion to the International Monetary Fund.

California Labor Commission Ruling Deals Uber a Potentially Huge Setback
June 20, 2015 — Independent Journal Review
According to a ruling by the California Labor Commission, transportation service company Uber must treat its drivers as employees, not independent contractors. This could have a significant impact on the company, now valued at $40 billion, and its operations and finances. Uber has argued that it is merely a matching service between drivers and passengers and that drivers are “independent contractors,” not employees - so, therefore, it does not have to pay drivers benefits, reimburse them for expenses, or pay employer taxes. The regulator determined however that Uber’s involvement in the process, from evaluating drivers, setting rates, and coordinating communications, means that they are actual employers. Although the ruling applies only to California, it may inspire similar lawsuits and rulings nationwide.

IMF Study Says Inequality Is Hurting Growth, Calls For Wealth Redistribution
June 16, 2015 — International Business Times
The International Monetary Fund (IMF) announced in a new report that income inequality is harming economies around the world, calling it the “defining challenge of our time.” The study drew attention to global inequality, dismissed “trickle-down” economics, and urged governments to target the bottom 20% of citizens in their policies. The study surveyed advanced emerging and developing economies from 1980 to 2012, and found that inequality was exacerbated by technological progress, weakened labor groups, globalization, and regressive tax policies. When the income share of the richest 20% increased by 1%, GDP growth dropped by 0.08 on average in the ensuing five years. In contrast, when the income share of the poorest 20% of a country’s population increased by 1%, it resulted in a 0.38% increase in GDP growth. The report recommended eliminating tax cuts on profits in order to increase equity and allow tax cuts on income in some countries.

Why Is HSBC Leaving Brazil and Turkey?
June 11, 2015 — Foreign Policy
British multinational bank Hong Kong and Shanghai Banking Corporation (HSBC) advertises itself as “the world’s local bank.” Yet it’s about to get a little less local, trimming branches in major markets and selling off entire operations in emerging ones, particularly Brazil and Turkey. It isn’t just slow growth rates in these countries but their lack of a growing income inequality that is driving HSBC out. Brazil has been one of the few countries able to globalize without increasing inequality; income inequality in Turkey is also lower than it was when HSBC made its acquisitions. While there are more potential customers for the company, they’re not the most lucrative ones. Most banks would prefer to manage one account worth $100,000 than 100 accounts worth $1,000 since it’s more profitable; but people just starting to climb the economic ladder in Brazil and Turkey don’t need special services, and their savings are relatively small. Instead, HSBC will refocus on Hong Kong, China, Singapore, and Malaysia, where growth is steady, interest rates are low, and inequality is high - and may still be rising. Instead, Chinese banks may be the ones to scoop up HSBC’s assets in emerging economies; the Chinese government is willing to wait longer for a payoff, and it allows China to continue spreading its influence.

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At Fight for $15 Convention, A Call from Clinton but Little Talk of Union
June 7, 2015 — Al Jazeera America
Back in 2012, when a handful of McDonald’s and other franchise employees in New York City launched a one-day strike, the movement’s two demands — $15 and a union — seemed equally improbable. Since then, there’s been substantial progress towards the first goal in many major cities. The second goal, a union, remains distant. Fight for $15 lacks a definable membership, collective bargaining agreement or dues-paying structure. It instead proceeds in the style of worker centers: neighborhood-based, nonprofit labor groups that use street actions and media to assist low-wage laborers. Since wages and other employment laws differ by city and state, a fast-food-workers union could take many shapes, such as regional contracts that establish a basic compensation structure, benefits and freedom from arbitrary firing or, more ambitiously, a national framework agreement that binds franchisees as well as corporate headquarters. Yet currently, the movement lacks the democratic structure needed to bargain at a nationwide level; as one organizer noted, “If McDonald’s were to make an offer tomorrow, who would decide whether to accept?”