Businesses and Jobs tend to move from Countries with High Regulatory Costs to ones with Low Regulatory Costs

Posted by PITHOCRATES - February 23rd, 2014

Week in Review

A business is an investment.  Business owners invest capital and labor to make money.  Just like people buy government bonds to make money.  Of course, investing in government bonds is safe but it doesn’t create any jobs.  So we prefer when investors invest in a business.  Because a business will create jobs.

So where would investors prefer to risk their money?   That depends on the expected return on investment.  Historically there was always more money to be made in a business.  But higher regulatory costs have reduced that return on investment.  Leading a lot of investors to turn to government bonds.  Or to move their businesses to another country.  One with a less costly regulatory environment (see The rich world needs to cut red tape to encourage business posted 2/22/2014 on The Economist).

Singapore has come out on top as the least burdensome for the past eight years (see chart 3), whereas many EU countries are bumping along near the bottom. Of the 148 countries surveyed in 2013, Spain was ranked 125th, France 130th, Portugal 132nd, Greece 144th and Italy 146th.

Americans who complain about the Obama administration’s unhelpfulness towards business will also note ruefully that over the past seven years their country has slipped from 23rd to 80th place…

Broadly speaking, in recent years emerging markets seem to have been cutting their red tape whereas the rich world has been strengthening its regulatory regime…

But not all labour laws are equally useful. In much of Europe the problem is that regulations designed to protect existing workers from unfair dismissal often make employers reluctant to take on new ones. One international executive recounts the tale of a French worker who had been with his employer for just three years but was entitled to five years’ compensation for dismissal. “We wouldn’t put anyone in France if we can possibly avoid it,” the executive said…

The danger is that, once European companies come to expand capacity again, they may do so outside the euro zone, where employment contracts are more flexible and wages and social costs are lower…

The EU not only has inflexible labour markets and high costs; it has slower growth prospects than most emerging markets. That will tempt many businesses to move elsewhere. “Western Europe is at a severe disadvantage because of the costs when you have to restructure your operations,” says Martin Sorrell, the boss of WPP. By contrast, Singapore has a low tax rate, a light regulatory regime and an enviable location at the heart of Asia. Sir Martin thinks some multinationals will eventually move their headquarters to the city-state.

The best way to protect workers is with a robust economy.  Not regulations.  If you lower the tax burden and regulatory costs the return on investment on businesses will soar past the return on investment from government bonds.  And investors would put their money into businesses to make more money.  This is how you help workers get better pay and benefits.  You create such economic activity that there are more jobs than people to fill them.  Forcing employers to offer higher wages and better benefits.  The way it was when the United States became the number one economy in the world.  Not the way it is currently in the EU.  Or the United States.  Where the Great Recession lingers on.  Thanks to an anti-business economic climate.  And the mother of all costly regulatory policies.  Obamacare.

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For Proof that President Obama’s Economic Policies are bad just look at Singapore

Posted by PITHOCRATES - March 30th, 2013

Week in Review

Singapore is one of the Four Asian Tigers.  The economy boomed in Hong Kong, South Korea, Taiwan and Singapore because of their business-friendly environments.  Free markets.  And free trade.  Which is why the Four Asian Tigers had some of the strongest economies in the world.  Because the government did not interfere with market forces.  Like they are doing more and more in the United States.  And if we compare the two economies we can see which system is better (see More than half of employees in Singapore planning to leave jobs: Survey by Cheng Jingjie posted 3/28/2013 on Breaking News Singapore).

More than one in two employees in Singapore are planning to leave their jobs within the next two years because of unsatisfactory compensation.

This isn’t a problem they’re having in the United States.  Americans may be unhappy in their jobs and dissatisfied with their compensation.  But all they do is complain.  They’re not leaving their jobs.  Because unlike in Singapore there are no other jobs to go to.  Because President Obama, unlike in Singapore, is trying to fix the economy with government spending.  And new regulations.  Making the current recovery the worst recovery since that following the Great Depression.  While Singapore’s economy hums along the United States have seen people disappear from the labor force since 2008.  Which is why no one is threatening to leave their jobs.  No.  In the United States their biggest concern is getting laid off.  No matter how unhappy or how poorly paid they are.

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Singapore going ‘Solyndra’ to find the next Mark Zuckerberg?

Posted by PITHOCRATES - January 26th, 2013

Week in Review

While public education teaches kids the fear of global warming, the evils of capitalism and the goodness of government Singapore is having their schools teach business and entrepreneurial skills.  The U.S. is suffering through the worst economic recovery since the Great Depression.  While Singapore is doing quite well.  And should continue to do well because they don’t teach kids the evils of capitalism in school (see Singapore Hunts for New Zuckerberg With Stanford-Style Dorm by Sharon Chen posted 1/25/13 on Bloomberg).

Singapore became Southeast Asia’s only advanced economy by moving up the technology ladder, turning a trading port into the region’s biggest banking center and a manufacturer of electronics, petrochemicals and pharmaceuticals. Now, the nation is looking to gain a bigger share of a software industry that raised $28 billion in initial share sales last year.

N-House, which opened in August 2011, is one strand of a five-year plan by the government that includes offering new technology companies grants of as much as S$500,000, supporting venture capital funds, and encouraging high schools to teach business and entrepreneurial skills, in an effort to groom the next Mark Zuckerberg, co-founder of Facebook Inc…

The island of 5 million people, ranked the easiest place to do business for seven straight years by the World Bank, is the second-easiest place in Asia after Hong Kong for entrepreneurs to gain access to capital, according to a study by the Milken Institute published in 2010.

Singapore is a success story because it’s an easy place to do business in.  Businesses like that.  So businesses do business in Singapore.  This is a lesson the United States could learn.  Making it easy for businesses to do business.  Detroit, the Motor City, birthplace of the automated assembly line, is a horrible place to do business.  Being the home of the Big Three (General Motors, Ford and Chrysler) you’d think they’d have an edge on manufacturing automobiles.  Yet not one new auto manufacturer has chosen Detroit.  Honda, Toyota, Nissan, Mercedes, BMW, Volkswagen, Hyundai, and Kia all built assembly plants in the United States.  But not one of them picked Detroit.  Because Detroit, the Motor City, is not an easy city to make automobiles in.

So Singapore knows a thing or two about how to do business.  Which, for the most part, is just leaving business the hell alone.  For a business is a lot like a dog having puppies.  They can do it without any help.  In fact, trying to help can actually do more harm to a business than good.  For when the government steps in and provides money the private sector won’t supply you can pretty much guarantee that the government is backing a bad investment.  Think Solyndra in the U.S.  And all those jobs of the future we were supposed to get with all those investments into green energy.  President Obama begins his second term with the worst recovery since the Great Depression.  Despite all that spending to invest into the jobs of the future.  Here’s a lesson Singapore can learn from the U.S.  Creating a business-friendly environment is good.  But trying to influence things in that environment, well, that rarely ends well.  Again, think Solyndra.

“Singapore has done the best job of any government to spawn an entrepreneurial ecosystem,” said Ressi, who travels to the city about three times a year to meet with government officials. “However, I think they’ve gone a little bit too far in making it easy. If they can’t actually raise money from people privately, they probably aren’t worthy of being in existence.”

There are venture capitalists out there with money burning holes in their pocket.  They want to invest it.  They want to groom the next Mark Zuckerberg.  And if these greedy bastards are NOT willing to bet their money on someone there’s a reason for it.  These people are in the business of finding entrepreneurs to back and groom.  And if they don’t invest in an entrepreneur they must have determined that the entrepreneur just doesn’t have what it takes.  So they keep looking for one who does have what it takes.  And if that person is out there the free market will find that entrepreneur.  While governments pour millions into other Solyndras.

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New Zealand, Denmark, Hong Kong, Singapore and Canada are the top 5 Countries for Business

Posted by PITHOCRATES - November 17th, 2012

Week in Review

Once upon a time the United States was the place to be if you wanted to go into business.  It was once so business-friendly in the United States that they overtook one of the world’s greatest empires.  The British Empire.  And caused great concern and consternation in Europe with their growing economic prowess.  As American became the world’s greatest economic power.

But those days are gone now.  When George W. Bush was president the US was still the best place in the world to run a business.  But in President Obama’s first year in office we slipped to the number two spot.  In 2010 we fell to number 10.  And in 2012 we slid even further to number 12.  And with President Obama winning a second term things aren’t likely to improve.  For President Obama is clearly not as good as George W. Bush.  Who kept America the number one place to do business in the world (see New Zealand Tops Our List Of The Best Countries For Business by Kurt Badenhausen posted 11/14/2012 on Forbes).

The U.S. continues to lose ground against other nations in Forbes’ annual look at the Best Countries for Business. The U.S. placed second in 2009, but it has been in a steady decline since. This year it ranks 12th, down from No. 10 last year. The U.S. trails fellow G-8 countries Canada (No. 5), United Kingdom (No. 10) and Australia (No. 11).

Corporate taxes continue to put a damper on American businesses…

It is not just the rate that hinders the U.S., but also the complexity of the tax code. The typical small or medium-size business requires 175 hours a year to comply with U.S. tax laws, according to the World Bank. Overall the U.S. ranks 55th out of the 141 countries we examined in terms of its tax regime. The world’s biggest economy at $15.1 trillion, it also scores poorly when it comes to trade freedom and monetary freedom.

New Zealand ranks first on our list of the Best Countries for Business, up from No. 2 last year, thanks to a transparent and stable business climate that encourages entrepreneurship. New Zealand is the smallest economy in our top 10 at $162 billion, but it ranks first in four of the 11 metrics we examined, including personal freedom and investor protection, as well as a lack of red tape and corruption…

We determined the Best Countries for Business by grading 141 nations on 11 different factors: property rights, innovation, taxes, technology, corruption, freedom (personal, trade and monetary), red tape, investor protection and stock market performance…

Ranking second on our list is Denmark, on the strength of its technology, trade freedom and property rights…

Hong Kong ranks third. Its economy, highly dependent on international trade and finance, remains one of the most vibrant in the world. Credit one of the world’s lowest tax burdens and a high level of monetary freedom…

Singapore comes in at No. 4, ranking in the top 20 in all but one of the 11 metrics we measured…

Canada slid from the top of the rankings in 2011 to No. 5 this year, losing ground on innovation and technology… However Canada remains among the best countries in the world when it comes to trade freedom, investor protection and the ease of starting a new business.

Congratulations New Zealand, Denmark, Hong Kong, Singapore and Canada.  You are the 5 best in the world.  Perhaps one day the US can emulate the great things you are doing.  For we have lost our way.  Let’s hope that you don’t, too.

If there was any further proof that we need to reform our tax code this is it.  Tax compliance costs are sucking capital out of our businesses.  And hindering economic growth.  As evidenced by one of the worst economic recoveries of all time.  There’s a reason for this.  It’s the tax code.  And costly regulatory compliance costs.  Which does not encourage entrepreneurship.  But kills it.  For with today’s red tape you need an army of tax accountants and tax lawyers to start up a business.  Which doesn’t exactly encourage someone with a great idea to spend their life’s savings to go into business.

With another 4 years of pushing America down the list expect one of the worst economic recoveries of all time become even worse.  For this is not a climate to create jobs.  Expect continued high levels of unemployment.  And a worsening of the economy.  For we ain’t seen anything yet.  As President Obama told Russian president Medvedev, “This is my last election. After my election, I have more flexibility.”  Which means he’ll be able to do what he really wants to do in the next four yours.  Which means the first four years were as good as it’s going to get.  And it probably won’t get that good again.

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It’s becoming Too Expensive to Raise a Family in Singapore so Fewer are Raising Families

Posted by PITHOCRATES - October 7th, 2012

Week in Review

Raising a family is expensive.  Once upon a time you could do it on one income.  But now with huge welfare states requiring heavy taxation one income rarely cuts it anymore.  It takes two.  Childcare.  And more cooperative employers.  For without all of this young people just won’t be able to afford to raise a family (see Survey: 50% couples not have babies because ‘Money No Enough’ posted 10/6/2012 on TR Emeritus).

According to a recent survey conducted by voluntary welfare organisation ‘I Love Children’, about 1 in 2 couples (50%) said not having enough finances is the main reason for not having children…

‘I Love Children’ is a voluntary welfare organization set up in September 2005 with a purpose of keeping Singapore young — by advocating a higher priority to having children, and promoting a society where children are loved and mainstreamed. It hopes to inculcate the value and importance of parenthood and family among Singaporeans, as well as encourage a children-friendly environment in Singapore.

To keep Singapore young.  All nations would like to keep their nations young.  To have an expanding population growth rate.  So they have more young workers entering the workforce than older workers leaving the workforce.  Why?  To avoid the financial crises they’re having in Europe.  Japan.  The U.S.  And like they will probably soon have in China.  Where all of these nations have an aging population.  Where more people are leaving the workforce while fewer are entering it to replace them.  So the tax base is shrinking.  As is tax revenue.  And this at a time when government spending on pensions and health care for the elderly is rising.  Which means fewer and fewer people will have to support more elderly people in their retirement.  As the tax base dwindles governments replace that lost revenue with more and more borrowing.  Leading to those financial crises.

At the dialogue session, 26-year-old Ms Gillian Neo, said, “Currently, infant care in Singapore is still quite expensive. Even the more affordable ones, after government subsidies, is still $700 a month…”

During the the dialogue session, young parents also said that flexi-work arrangements are a major incentive as that will enable them to spend more time with their children…

However, there is still a lot of resistance in the mentality of some of the management of companies towards this mode of working.

“I was offered a full-time work from home arrangement with my previous employer… Six months into it, it really fell flat on the ground. One of the reasons was my immediate supervisor was really not supportive of the arrangement,” said Mandy Loh, a freelance writer…

She said, “In fact, there have been studies done by the employers federation, for instance, to show that for every dollar spent on flexi-work options, the return is S$1.68.”

Madam Halimah also suggested that flexi-work arrangements could be used to attract people to work for SMEs [small and medium-sized enterprise], which are currently facing a labour crunch.

The problem is not lack of affordable childcare.  The problem is that a high level of taxation (often to support an aging population) requires two incomes to raise a family.  Children are not supposed to be a nuisance that we dump off at childcare while we go to work.  They should be raised in a loving family with a full time stay-at-home parent.  A role typically filled by the mother.  The CEO of the house.  While the husband works full time to pay the bills.  Parenting is a team.  It takes two to raise a family.  A mother and a father.  Not a childcare facility.  And, no, this isn’t discriminatory to women because they can’t have a career and be a mother.  It’s what’s best for the children.

The working mom also comes with some baggage.  Especially if she is a key person on a project.  Because a snow day may pull her out of the office when they call an emergency meeting.  If a child falls ill she may be out of the office for a few critical days of the project.  If a meeting runs long because of a crisis she will still have to leave at 4:00 PM to pick up her kids from daycare.  If a project requires an emergency trip to another state she will not be able to go.  School holidays and half-days will take her out of the office, too.  These aren’t hypotheticals.  Many of us have probably experienced this in the workplace.  This is why employers are reluctant to hire single moms or single dads.  And a little reluctant to hire a married mom with young kids.  Because it is often the mother and not the father that will miss work for the kids.  As the father’s career will be more established because of less time missed for the birth of their children.  It’s not unfair.  Men and women are just different.  Women give birth.  Men don’t.

Emphasizing a woman’s career over her children has put more women into the workforce.  Which has allowed greater government spending.  This is why governments want state-provided childcare.  Because they want to get women back into the workforce as quickly as possible so they can resume paying taxes.  Which governments can never seem to collect enough of with an aging population.  Making it ever more difficult for young people to have the children governments want them to have.  To bring new taxpayers into the workforce.  So bringing women into the workforce probably hurts in the long run more than it helps.  For it allows the government to spend more.  But it also discourages young people from raising families.  Leading to fewer children.  An aging population.  And a shrinking tax base.  Which will probably be made up with more government borrowing.  As more nations join those in Europe, Japan, the U.S. and probably China who are suffering from the pressure of aging populations.  And the financial crises they cause.

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Social Security is a Ponzi Scheme according to Economist Paul Samuelson who wrote the Book on Economics

Posted by PITHOCRATES - August 19th, 2012

Week in Review

While the Europeans, the Japanese and the Americans all struggle with an aging population and pension and health care systems approaching insolvency Singaporeans are enjoying comfortable retirements.  How?  Because they did something crazy.  They acted responsibly and saved for their retirement and their health care.  Instead of depending on the state (see Singapore’s got some good ideas posted 5/17/2012 on ctpost.com).

…Singapore makes no promises but instead requires all citizens to save up to 36 percent of their income for their own retirement and health care. The government invests the savings in stocks and bonds; the money is not used for current expenditures.

The result? Singaporeans have comfortable retirements. Their health-care system delivers better outcomes while costing 80 percent less than ours, according to 2010 findings from the World Health Organization, and all of it is financed without imposing debt on the next generation. Singapore even reported an uptick in medical tourism last year.

Now, compare Singapore’s system to our own. When Medicare was debated and enacted, Paul Samuelson was America’s most influential economist. He was an adviser to presidents Kennedy and Johnson, author of the nation’s best-selling economics textbook and a soon-to-be Nobel laureate. In 1967, Samuelson wrote in Newsweek about the funding mechanism for Medicare and Social Security: “The beauty about social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in. . . . Always there are more youths than old folks in a growing population. More important, with real incomes growing at some 3 per cent per year, the taxable base upon which benefits rest in any period are much greater than the taxes paid historically by the generation now retired. . . . A growing nation is the greatest Ponzi game ever contrived.”

Samuelson was right about social insurance being a Ponzi scheme even though he was wrong on his economics.  He was a Keynesian.  And it was Keynesian economics that is responsible for so many of our problems today.  Encouraging governments to intervene into the private economy.  And to tax, borrow and print money to spend.  Which has given Japan their Lost Decade.  Gave the U.S. (and the world) the subprime mortgage crisis.  And gave the Europeans their sovereign debt crisis.

So here is one of the Keynesians’ greatest and most admired economists admitting that social spending is what it is.  A Ponzi scheme.  Of course the fatal flaw in the Keynesian model was women’s liberation.  The world changed.  Women stopped having babies.  And when they did we went from having a young population (more people entering the workforce) to having an aging population (more people leaving the workforce).  A baby bust followed the baby boom.  Which smashed apart the Ponzi scheme.  Because there are now more old folks drawing benefits than there are youths entering the workforce to pay for them.  So governments are spending more than they collect in taxes.  And the rate of spending is growing greater than its population growth rate.  Which is a big problem.  As Mr. Samuelson pointed out in Newsweek.

Meanwhile those who are saving for retirement are not having the same problems as they are in Keynesian economies with state pensions and national health care.  Of course a Keynesian would never approve of this.  For savings is to a Keynesian what sunshine is to a vampire.  And they will do everything within their power to prevent people from saving.  Despite their incredible record of failure.  But they keep plugging along.  Why?  Because governments love them.  They keep hiring them.  And they keep listening to their advice.  For they give legitimacy to their irresponsible spending ways.

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Singapore and Great Britain affirm their Good Relations

Posted by PITHOCRATES - July 28th, 2012

Week in Review

Singapore is doing very well.  It has one of the strongest economies in the world.  And has one of the highest per capita wealth.  Not surprisingly it was one of the original Four Asian Tigers.  Along with Hong Kong.  South Korea.  And Taiwan.  Singapore and the United States have something in common.  Besides bustling economies (well, it was once bustling in the United States).  They were both once part of the British Empire.  And remain on good relations with Britain (see President Tony Tan underlines warmth of longstanding S’pore-UK ties posted 7/28/2012 on Channel News Asia).

President Tony Tan Keng Yam underlined the warmth of longstanding relations between the United Kingdom and Singapore, during a reception at Buckingham Palace hosted by Queen Elizabeth II on Friday.

Just something else to think about as you watch the 2012 Olympics in Great Britain.  Just how much Britain gave the world.  A lot of people like to pick on Britain.  But just look at some of the best places in the world in terms of individual liberty and the standard of living.  The United States of America.  Canada.  Australia.  Hong Kong.  And, of course, Singapore.  To name a few.  And what do they have in common?  They were all once part of the British Empire.  All achieved greatness in large part due to their British heritage.  And grew into nations based on the rule of law.  Representative government.  Free trade.  And free market capitalism.  Giving us our individual liberty.  And our high standards of living.  All in all not a bad trade for a little colonial imperialism.

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Scientists in Singapore have found the Wip1 Gene may be Responsible for Obesity, Heart Disease and Cancer

Posted by PITHOCRATES - July 8th, 2012

Week in Review

Businesses aren’t hiring in the U.S. because they have no idea what their labor will cost them under Obamacare.  They were hoping for a Supreme Court reprieve but their ruling went against them.  The Constitution.  And common sense.  They now look to the November elections as their last hope to remove this hiring obstacle.  But perhaps there is another way.  We can just stop being sick (see Singapore scientists discover control mechanism for obesity, cancer by Julia Ng posted 7/3/2012 on Channel News Asia).

A*STAR scientists in Singapore have made what is believed to be groundbreaking discovery of the mechanism that controls obesity, atherosclerosis and, potentially, cancer.

Scientists from the Institute of Molecular and Cell Biology (IMCB) and the Singapore Bioimaging Consortium (SBIC) said they have found a new signalling pathway that regulates both obesity and atherosclerosis.

The team showed, for the first time, that mice deficient in the Wip1 gene were resistant to weight gain and atherosclerosis via regulation of the Ataxia telangiectasia mutated gene (ATM) and its downstream signalling molecule mTor…

Obesity and atherosclerosis are accompanied by the accumulation of lipid droplets in fat cells and in foam cells respectively.

Foam cells can subsequently rupture, damaging blood vessels, and contributing to further progression of atherosclerosis.

The scientists discovered that Wip1 deficient mice, even when fed a high-fat diet, were resistant to obesity and atherosclerosis by preventing the accumulation of lipid droplets…

Together, these three pathological conditions — obesity, atherosclerosis and cancer — account for more than 70 per cent of mortality worldwide, making ATM-related pathways very attractive therapeutic targets.

Our friends in Singapore may have solved the Obamacare problem.  They may have found a way to prevent 70% of all illnesses.  Making a national health care system moot.  Imagine that.  Perhaps they and the pharmaceuticals can develop a pill therapy to remove the Wip1 gene from our bodies.  Allowing us to eat whatever we want to eat without any weight gain, heart disease or cancer.  Good for us.  Good for the over-burdened health care system.  But bad for the vegetable farmers that supply the salad industry.  Yes, salads can be yummy.  But so can a half-pound bacon cheeseburger.  And if both are just as good for you guess what people will be eating.

With such a pill there would be no reason NOT to repeal Obamacare.  Because with 70% of the stuff that kills us gone we’ll be able to afford the other 30%.  Cash out of pocket for the small stuff, perhaps via a medical savings account.  And a real insurance policy for the unexpected.  Like catching an infectious disease that requires hospitalization.  Health care problem solved.  And for far less that the trillion or so dollars Obamacare will cost us.

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