THE NEW FRENCH PRESIDENT HOPES TO IMPOSE A 75 PERCENT TAX ON FRANCE'S RICHEST CITIZENS

Sarah,

Francois Hollande, a socialist, has recently been elected president of France.  A European socialist equates to a very liberal Democrat in America.  Hollande is proposing a 75% tax on anyone making over a million Euros a year.  He claims it will help balance France’s budget.  Others claim this tax will reduce revenue because rich people will simply move out of the country and foreigners will be hesitant to invest.

Here are the top individual income tax rates by country:

France: 75% (proposed)

Sweden: 57%

Japan: 50%

Britain: 45%

Germany: 45%

Italy: 43%

United States: 35%

Canada: 29%

Russia: 13%

Bottom line: France is very different than America.  The current hysteria in America revolves around whether we should allow the Bush tax cuts to expire.  If they expire, taxes on the wealthiest Americans (those making $250,000 or more) will rise from 35% to 39.6%.

Source: “Indigestion for ‘les riches’”, New York Times, 8/8/2010

CHINA IS ABOUT TO CHANGE LEADERSHIP; HERE ARE SOME PROBLEMS CHINA FACES:

Sarah,

China has dominated the last decade economically.  However, China has problems too.  Here are some of them:

Drama Within The Communist Party:

China is ruled by top officials in the Communist Party.  Top officials become top officials by being promoted from within the party.

China’s top leadership has decided that Xi Jinping will succeed Hu Jintao as president of China.  The transition should go smoothly.  However, there have been several political hiccups in the last year.

First, Bo Xilai, the ex-governor of Chongqing, an absurdly large Chinese city, has recently been purged from the party.  This is significant because he was enormously popular and once thought to be in contention for a top leadership position.  The drama started when a British acquaintance of Mr. Bo named Neil Heywood was found dead in a hotel room.  Now, Mr. Bo’s wife is now on trial for murdering Mr. Heywood. (given China’s 98% conviction rate she will surely be imprisoned or executed.)   Additionally, Mr. Bo loudly campaigned against China's growing economic inequality and this caused a rift with other party members.  In a system that values consensus, his dramatic expulsion is a big deal.

Second, China’s military is seeking greater influence over political decision making.  Many generals are grumbling that China’s military should be more assertive.  For now, Mr. Hu (the current president) serves as chairman of the Military Commission and may continue to do so even after he steps down.  This may create tension between Mr. Hu and the incoming Mr. Xi once he is president.

Economic Slowdown:

China’s economy is slowing down.  Its property prices have fallen and local government debt has grown.  Imports and exports are down and the government is taking steps to encourage banks to extend more loans.  Does this mean anything?  Maybe, I don’t know, I’m not an economist.  I do know that the overall economy is still growing at around 7.5%, more than three times faster than America’s economy

Rising Discontent In The Middle Class:

In the past decade, the number of people in China’s middle class has exploded.  This group of people is now connected to the internet and they are starting to complain about food safety, product safety, pollution, and corruption.  Thus far, protests have been manageable, but they seem to be growing.

Migrant Workers In The Cities:

At least 225 million people have left China’s countryside to find work in China’s wealthier coastal cities. (the total population of the United States is 314 million)  These migrant workers are not afforded the same rights as permanent residents and struggle to find housing, medical care, and education for their children.  As a result, there is a widening wealth gap between incoming workers and China’s emerging middle class.  Over the last year, migrant workers have rioted several times.

An Aging Population:

In 1978, China adopted a one-child policy restricting married, urban couples to one child.  Although it is not universally enforced, the policy has slowed down the birth rate.  Accordingly the percentage of the population that is over 65 is rising rapidly.

Pollution:

There is a consequence to having most of the world's factories.  Air and water pollution in China is bordering on ridiculous.  This will catch up with them sooner or later.

Bottom line: China is still growing, but it is facing more problems.

PUTIN HAS BEEN DOMINATING RUSSIAN POLITICS FOR OVER TWELVE YEARS NOW

Sarah,

Vladimir Putin may be the most interesting world leader in office today.  He has dominated Russian politics since 2000 and has recently won Russia’s presidential election.  Here’s why:

The Crisis Of The 1990’s:

During the 1990’s, Russia endured a chaotic transition from communism (in which the state owns everything) to “liberal democracy”.  Connected government insiders bought all of Russia’s most valuable assets for bargain rates and many fled the country with their newly acquired wealth.  The value of Russia’s economy fell by 50% and lawlessness reigned.  While the economy deteriorated, Chechnya, a Russia province, declared independence.

Enter Putin:

In 1999, Russian president Boris Yeltsin resigned and left his post to his prime minister, Vladimir Putin.  Putin then won the presidential election in 2000 and violently suppressed the revolt in Chechnya.  The economy grew for eight straight years and Putin’s popularity exploded as relative stability returned to Russia.

How Did He Do It?

Putin basically struck a deal with a collection of oligarchs who had become fabulously wealthy during Russia’s chaotic transition.  With their support, he was able to reform Russia’s legal code, military, and police force.  Lastly, because Russia is rich in oil and gas, surging energy prices buoyed the Russian economy throughout most of his first term.

Increasing Authoritarianism:

Along with the corruption inherent in catering to the country’s elite, Putin showed a greater authoritarian streak in during his second presidential term.(2004 to 2008)  First, Putin criminally prosecuted the wealthiest man in Russia for tax evasion; a move thought to be punishment for the man’s financial support of Putin’s political rivals.  Second, Putin tightened his control over the Russian media.

The Medvedev Switch:

Putin’s third consecutive term was barred by term limits.  Accordingly he nominated his prime minister, Dmitry Medvedev, as president and reserved the role of prime minister for himself.  Towards the end of Medvedev’s term as president, he proposed that Putin stand for president again and Putin accepted.

The Last Election:

Putin’s reelection in 2012 did not go as smoothly as his previous triumphs.  By this point, it was glaringly obvious Putin intended to stay in power indefinitely.  Protests by both liberals and communists erupted in Moscow and Putin’s political party, United Russia, had an unusually poor showing in the parliamentary elections preceding his election.

It wasn’t enough.  Putin, with firm control over the media, responded by staging his own pro-Putin rallies to counter those of the opposition.  He retained strong support in Russia’s countryside and was able to rely on government workers under his employ.  Lastly, many of the opposing candidates may have been Putin supporters themselves, acting to promote the charade of democracy.  As a result, Putin won the election with 63% of the vote. 

Bottom Line: The West gets excited when it sees anti-Putin protests, but it is doubtful he is going anywhere soon.  By the end of his next term, Putin will have effectively ruled Russia for 16 years.