Topic 9 - Example Of Global Policy Flashcards
What are HIPCs ?
HIPC stands for Heavily Indebted Poor Countries. There are 37 nations in this group, including Ghana, Ethiopia, Afghanistan and Senegal.
What are HIPC schemes ?
HIPC stands for Heavily Indebted Poor Countries. There are 37 nations in this group, including Ghana, Ethiopia, Afghanistan and Senegal.
HIPC schemes aim to make sure that no country faces an unmanageable debt burden (amount of debt).
Under HIPC schemes, countries must reduce poverty over time and meet other criteria. If they meet all of these criteria, then they may have all their external debt cancelled.
Chad achieved this in 2015.
Some people argue that SAPs and HIPCs mean the sovereignty of these nations is questionable - are they perhaps neo-colonial?
What are SAP schemes ?
SAP stands for Structural Adjustment Programmes. They are usually made up of loans from the IMF and World Bank.
SAPs have made countries that receive lending follow specific routes to development, such as privatisation.
(Basically western societies trying to get African countries (and other developing countries to become westernised) (basically a more free market global economy)
However
Africa Action, an NGO, is critical of SAPs, claiming that the assumption that the market leads to benefits for the rich and poor is flawed.
Ghana launched its structural adjustment plan in 1983. The IMF and World Bank say it is one of the most successful SAPs in Africa.
Following its entry into the EU, Greece had to reduce its fiscal deficit.
What are the ways it did this ?
Deficit reduction policy - Punished Tax avoidance/evasion
Estimates suggest that Greece’s black market economy was worth 25% of GDP.
Only 200 Greeks earned over €500,000 according to tax records.
Individuals were prosecuted for tax evasion.
Efforts were made to reduce corruption and bribery.
Reduce government spending
A program to reduce government spending by €41bn was introduced.
Reduce current spending (through Government employee salaries were cut by 7%.)
Increase tax revenues
VAT rose from 4.5% to 21% over a period of many years.
The indirect tax on petrol rose to 15%.
Taxes on imported cars rose from 10% up to 30% in some cases.
What was the issue with Greeces fiscal deficit when they joined the Euro ?
Greece joined the Euro and instead of borrowing money at 4.5%, the Greek government could now borrow at 3%.
Greece’s budget deficit rose from 4.1% of GDP in 2000 to 10.2% in 2008.
Train drivers working in a nationalised Greek rail industry were being paid over $50,000 in many cases.
Greece was forced to reduce its fiscal deficit by EU authorities.
What are ways to reduce poverty and inequality in response to global shocks?
Uk aid budget
There is inequality within a nation, but there is also inequality between nations.
A progressive income tax system sees the highest earners in the UK pay 45% tax.
The UK also contributes roughly 0.7% of GDP to international aid to help to reduce poverty and inequality nationally.
India and a minimum price on food
The Indian government has a policy of controlling food prices, whilst providing a minimum support price for farmers.
Keeping food prices low is a way to ensure that everyone can afford to eat and stay out of absolute poverty.
However, many farmers are poor, so depressing food prices could push poorer farmers into poverty.
This combination can help to avoid this issue.
What is a key cause of inequality in wealth ?
Housing
How is housing a key cause of inequality in wealth ?
Rising house prices can stop local residents from buying houses. This creates a disconnect between ‘renters’ and homeowners
How is the housing market distributed in uk and Spain ?
In many parts of London (including St John’s Wood, Knightsbridge and South Kensington), foreign buyers own a high percentage of the residential property.
French & Greek residents are particularly concentrated in South Kensington.
Similarly, many English retirees own property in the South of Spain.
This can impact the national identity and also create resentment towards migrants if this demand increases house prices and makes them unaffordable for locals.
For example, in 2013 the Financial Times reported that 82% of property deals in Central London involve foreign buyers.
What did New-Zealand do in 2018 to help their domestic housing market ?
Bans on property purchases
In 2018, New Zealand introduced a ban on the purchase of residential property by foreigners. This excluded foreigners from Australia and Singapore because of trade pacts that already existed.
Silicon Valley billionaires like Peter Thiel had purchases 400+ acre farms in New Zealand. Many think it is a doomsday backup plan to escape to New Zealand if there is a breakdown of society in the USA.
What are examples of nations getting stricter with foreign owners/investors buying property in their markets ?
In the cities of Toronto and Vancouver, foreign investors have to pay a 15% tax on the purchase.
In Australia, foreign purchasers pay a higher rate of stamp duty and need to receive ‘purchase approval’.
In Switzerland, foreign investors are only allowed to own one holiday home.
What’s an example of a country that’s government set the interest rates ?
Venezuela 2018
What happened to inflation in Venezuela in 2018 ?
In 2018, it is estimated that Venezuela suffered from 1 million % inflation.
Oil prices have fallen, but the government refused to reduce government spending.
The government printed money, increasing the money supply and this created hyperinflation.
Large increases in the money supply can lead to hyperinflation and the failure of an economy and its currency.
This also happened in Germany in the 1920s.
What type of tax is a tariff ?
Tariffs are effectively an ad valorem tax on the goods and services that are imported into a nation
When tariffs are set how do you find the value of the tax revenue ?
the change in price caused by the tariff multiplied by the number of imports.
