This is the reason why his recent arrest in Japan has come as a surprise to many. Carlos Ghosn, who has been the poster boy of the automotive industry, has suddenly fallen from grace. People are having a hard time believing that the maverick, whom they considered to be a genius all this time, is actually an unethical, fraudulent person.

In this article, we will have a closer look at the Carlos Ghosn case in order to better understand executive pay in legal as well as in a cultural context.

Who Is Carlos Ghosn?

As already mentioned in the article, Carlos Ghosn was the CEO of Mitsubishi, Renault as well as Nissan. All these three companies, in a way, form one single entity. The French government owns a 15% stake in Renault. Renault, on the other hand, owns a 45% stake in Nissan. Nissan further holds a major stake in Mitsubishi. Hence, they are all, in effect, owned by the same company.

However, since mergers do not tend to go well in the automobile industry, the companies have not been merged. Drawing lessons from the Diamler Chrysler merger, this entity decided to operate as three separate companies. This creates a curious situation where Carlos Ghosn is the CEO of all the three companies. These three companies combined make a formidable force within the automobile industry.

Why Has He Been Arrested?

Carlos Ghosn has been arrested by the Japanese police in Tokyo. He was arrested because he allegedly underreported his compensation as the CEO of three major companies. The details of his arrest are as follows:

• Firstly Carlos Ghosn is said to have misreported his compensation to the Tokyo Stock Exchange. He is said to have underreported his compensation by 5 billion Yen over the course of 5 years. Firstly, the amounts are pretty significant. Secondly, anything reported to a stock exchange is a legal filing. Hence, underreporting these expenses amounts to financial fraud which is the reason why Carlos Ghosn has been arrested. However, Ghosn’s lawyers have been saying that out of the 5 billion, 4 billion yen were not cash payments. Instead, this compensation was being paid in the form of stock. Hence, it was difficult to value and also Mr. Ghosn had discretion regarding whether or not he wanted to disclose this income.
• Secondly, it is also believed that Carlos Ghosn used company money to buy luxury homes in several places. He had more than six luxurious homes in cities like New York and Paris. The problem is that the money purchased to buy these houses was paid for from company accounts. Later, the houses were simply passed over to Carlos without any payment. Also, since Carlos Ghosn was personally involved in selecting the houses and negotiating the deal, it seems like he purchased the houses for himself but used company money to settle his personal bills.
• There have also been allegations that Carlos Ghosn has used company money to go on personal vacations. The cost of his family vacations often running into hundreds of thousands of dollars was paid for by the company.

It needs to be understood that all the above claims are mere allegations and none of them have been proven to be true until now.

The Cultural Conundrum about Carlos Ghosn’s Pay

To many people, Carlos Ghosn seems to have fallen prey to a cultural stereotype. This is because even though he was drawing CEO level salaries from all the three companies that he worked for, his pay was not extraordinary. His pay was exactly in the range that other car companies such as Ford and General Motors were paying their CEO’s.

Big CEO packages are easily accepted in America. However, Japanese companies tend to pay smaller pay packages to their leaders. Carlos Ghosn tried to change this. He tried to bring a meritocratic system in companies where promotions were generally given based on seniority and tenure.

Many experts believe that Carlos Ghosn tried to convince Japanese investors to pay him a big paycheck and failed. This arrest is part of a plan. It may even be a set up to get rid of him because Nissan immediately fired Carlos Ghosn as soon as he was arrested. Mitsubishi has publicly declared that it will also follow suit. Only, Renault, the French company, is going to wait to see evidence of whether or not, Carlos Ghosn was guilty.

Claims about a conspiracy against Ghosn are also emboldened by the fact that Nissan share prices have plunged after his arrest. If a fraudulent leader was being removed from the company, there would be no reason for investors to get jittery. Many believe that if there was any truth to the allegations being made against Carlos Ghosn, the stocks would have risen instead of falling.

The election of President Trump represents the cusp of the current wave of protectionism and populism that emerged in the aftermath of the Global Financial Crisis of 2008.

As the Brexit vote and the emergence of populist leaders such as Vladimir Putin in Russia showed, the disaffection and dissatisfaction among the masses against globalization and free trade as well as outsourcing have boiled over leading to the current wave of protectionism and populism in the United States and Europe.

Indeed, even the developing economies have been affected by nationalism and a revolt against the liberal order as can be seen in India and other Asian countries.

Revolt against the Establishment

The reasons for the emergence of these leaders and trends is that the average person viewed globalization and free trade as benefiting “a few instead and at the expense of many”.

Further, with the loss of manufacturing jobs due to outsourcing and the falling wages due to globalization which led to poor immigrants working for below the normal wages, the people who lost out in this process had every reason to be aggrieved and unhappy leading to them voting “with their feet”.

Retreat of Globalization? Not So Fast!

So, the slogans of America First, Make in India, and Take Back Control which are the campaign promises of Trump, Modi, and the Brexit proponents mean that globalization would take a back seat and instead, we would witness a closed-door West and a protectionist India?

The answer is not so easy or straightforward because globalization has progressed and evolved to such an extent that while it might have temporary setbacks, the intertwined and integrated global economy is resilient to withstand such shocks.

Moreover, given the fact that many globalized economies are still encouraging the financial aspects of globalization mean that the process is definitely not turned back.

Causes of People’s Anger must be Addressed

Having said that, one must also consider the fact that if the present wave of populism and protectionism continues and picks up speed, we would not be able to predict either the direction or the speed at which it would “collide” with the waves of globalization.

Indeed, the fact that there is much resentment against the bankers and globalists after the Great Recession of 2008 means that unless such grievances and anger are addressed, populism will gain strength and protectionism would gain support which can undermine free trade and globalization.

This is the crux of the matter and the fact that as of now, the revolt against the elites has not been addressed or the causes solved means that populist anger and protectionist rhetoric might well turn into a fully fledged war against the establishment.

Moreover, the fact that the White Working Class in the United States continues to suffer stagnant wages and loss of jobs due to automation means that it is indeed urgent to address and redress those concerns.

In other words, whether globalists or the populists abate such anger, the fact that such concerns have some basis to them means that time is running out before the situation gets ugly and there is an open revolt against free trade and globalization.

Need for Dialogue and Conversation

This can result in attacks on immigrants, mass uprisings, and public revolt and agitations that can implode the system.

Thus, we contend that both the proponents as well as opponents of globalization come to a common understanding of what needs to be done to not lose the gains that have accrued due to globalization.

Despite its many flaws and contradictions, globalization and free trade have indeed benefited large swathes of people worldwide, and hence, it is better if we improve globalization and address the imbalances in trade for mutual benefit.

Future of Globalization might lie in the East

Having said that, one must also consider the fact that while the United States and Europe are turning inwards, China is opening up to the world and gaining influence and prestige on the world stage by courting African and Latin American countries in need of assistance thereby opening a new front in the globalization process.

Indeed, it can be said that the future of globalization might very well lie in the East rather than in the West which taken together with a growing India that is also opening up to the world, means that there would be a rebalancing in the global economy.

Competing and Colliding Waves

Thus, what we have is the present process where financial globalization has gained strength and trade led globalization has weakened. This is again a recipe for disaster since it was precisely the former that led to the Global Financial Crisis.

Pay close attention to the above sentence, and you would realize that global finance is as strong or perhaps, stronger than before, whereas trade and outsourcing, as well as immigration, are being threatened.

So, the obvious inference here is that we are no better at solving the problems of speculation and excessive financialization that led to the Crisis and hence, we contend that the status quo is simply unsustainable.

Conclusion: Make Free Trade Fairer and Globalization More Equitable

Lastly, the point to be noted here that just as globalization became an elite-driven and elite benefiting process, protectionism and populism too can become mere slogans that do not benefit the victims of the former.

Thus, the urgent need is to make free trade fairer and globalization more equitable.

To conclude, while we cannot predict what happens next with all these competing waves crashing into each other, we can at least state that unless there are some dialogue and conversation about these aspects by the global policymakers and influencers, we might stumble into another crisis.

Tax evasion and tax avoidance are often used interchangeably. However, there is a huge difference between the two terms. Tax evasion is a criminal activity. In most countries, tax evasion would attract a jail term.

Evasion is usually done by not reporting income or overstating expenses. However, tax avoidance is not a criminal activity. Tax laws tend to be complex and lengthy. Hence, people with knowledge of these laws can end up paying significantly less tax than others. It is for this reason that the big four accounting firms hire tax experts. These tax experts help multinational corporations legally minimize their tax bill. However, over a period of time, the thin line between legal and illegal is being blurred. Several policies suggested by these tax experts are downright unethical and bordering on illegal.

The Problem with Tax Avoidance

Tax avoidance may be legal. However, it has a negative impact on the economy of the nation. Firstly, it creates public anger. People tend to realize that companies are paying significantly fewer taxes than they should. This leads to a culture of tax avoidance wherein everybody tried to avoid paying any tax at all. Also, companies that can lower their tax bills using these loopholes have significant cost advantages. They are able to simply price the competition out of the market. Hence, tax avoidance ends up skewing the entire industrial structure in an economy.

Steps To Overcome Tax Avoidance

There are many countries that are facing this problem of tax avoidance. Although it feels like they are helpless, this is not the case. Here are some of the steps that can be taken to solve the problem of tax avoidance.

• Lower Tax Rates: It is important for the countries to realize that a higher tax rate does not mean more tax collection. In fact, it may mean the exact opposite. People tend to hide their incomes when tax rates increase. A very high tax rate may discourage people from undertaking productive economic activity.

  The Laffer curve explains that beyond a certain point an increased tax rate leads to lower collections. The government needs to find out the optimal tax rate and implement it. President Donald Trump of the United States has realized this problem and as a result, has lowered tax rates significantly to increase tax compliance.

• Forcing Errant Sovereign Nations to Act: There are a handful of errant jurisdictions which do not provide information about tax avoidance. These countries are typically known as tax havens. These countries include Monaco, Luxemburg, Switzerland, and Bahamas, etc.

  Countries like the United States and the United Kingdom must blacklist these nations. This means that if a company is incorporated in these locations, they will not be allowed to trade in the local markets. The idea is not to infringe on the sovereignty of other nations. However, at the same time, these nations and associated multinational corporations should not be allowed to steal tax revenue with impunity.

• Exit Taxes: Countries like the United States and the United Kingdom can set up exit taxes. This means that if a company wants to move their business overseas, they should pay a tax to the government. The objective is to induce companies to produce locally. However, this model should only be implemented if the tax rates are already reasonably low. Otherwise, companies will simply shut down their operations in the country.

• Territorial Taxation: A lot of tax avoidance occurs because taxation is not territorial. This means that if Amazon sells goods in the United Kingdom, they can avoid paying taxes. They can do so by incorporating in Ireland and ensuring that the goods move across national borders. This strange tax regime has encouraged companies to incorporate in countries with low tax rates.

  Also, countries like Ireland and Luxemburg are involved in a tax war wherein they are lowering the tax rates and causing losses to their respective exchequers. At the same time, multinational companies are playing them off and reaping the benefits. New laws must be introduced which ensure that if the good or service is being delivered in the United Kingdom, it must be taxed as per local laws.

• Limit Intercompany Charges: Countries like the United States and the United Kingdom should ensure that they have strict laws which regulate transfer pricing.

  Many companies have been using transfer pricing as a mechanism to move profits to subsidiaries abroad which have lower tax rates. Instead of letting companies decide, what the appropriate price for a product or service is, countries must have strict transfer pricing laws which apply evenly to all companies.

• Dutiful Declaration: The United States should pass a law which makes it mandatory for every company to disclose all the offshore accounts belonging to them or their related parties. The auditors must be given the responsibility to guarantee compliance with this law. If the auditors are found to be working in connivance with corrupt multinational corporations, their licenses must be canceled.

To sum it up, tax avoidance has become a menace. Countries have lost a total of $3.4 trillion in 2017 due to tax avoidance. It is high time that the seriousness of this situation is understood and measures are taken to stop this menace once and for all.

Impact on the Technology Sector

The technology sector can be divided into three sectors viz. hardware, software, and IT services. The impact of COVID-19 on each of these three sectors has been described below:

• Hardware Sector: The hardware sector is going to face the negative financial impact of the COVID-19 crisis in the short run. However, in the long run, the sector is going to gain because of this crisis.

• This is because right now, the entire global supply chain of tech products has been disrupted because of the COVID-19 crisis. Computers, routers, and such other technological equipment have not been classified as essential in most countries of the world. As a result, the supply chains of these products have been disrupted. There is almost no production happening. Hence, in the short run, the sales of these products will be very less.

  The big technology companies are already aware of this fact. This is the reason that they have delayed the launch of their products, such as smartphones. Companies do not have the logistics to manage the supply side even if the demand for these products does exist. The raw materials such as copper, aluminum, etc. are in short supply, and companies will not be able to get their hands on the products at least in the next quarter.

• The future of the industry is going to be bright. As soon as operations resume to normal, companies are going to start spending huge sums of money on upgrading their information technology infrastructure.

  Organizations, as well as people, will buy hardware products in huge quantities. This is because they would want to develop business continuity practices, which would allow them to operate unhindered even if such a crisis were to strike again.

  Private organizations such as schools and small businesses will also invest heavily in hardware products that allow fast and effective work from home.

• Software Sector: The software industry is already witnessing a boom ever since the COVID-19 crisis began. This is because multinational companies have now been forced to let their work from home. This requires the usage of certain types of software.

  For instance, a company called Zoom, which provides software that allows teleconferencing for up to a hundred participants, has seen the number of downloads skyrocket. As a result, Zoom has seen its shares skyrocket, even as the entire stock market is plummeting.

  Zoom currently has a valuation of over $19 billion, which is more than the valuation of big airlines such as Delta Airlines and United Airlines. Unlike the hardware industry, software companies are facing fewer supply-side hurdles, which is why they are able to take advantage of this crisis.

• The future of the software industry is also bright. This is because bigger corporations will now try to build work from home capabilities, which would allow companies to operate from home for extended periods of time. As a result, there will be demand for a lot of software products that allow for companies to allow employees who use sensitive data such as bank details to work from home without any hassles.

• IT Services Sector: IT services sector will witness a fall in demand in the near future. This will be because the business of many multinational companies is adversely affected. Since these companies are not earning any revenue from the customers, it is likely that they will not pay much to their support partners. Any implementations of new software and enhancements of existing ones will be halted in the near future.

• IT services will be at the bottom of the priority lists of many companies. Hence, this sector may take some time to recover. However, this fall in demand will be for a short period of time, possibly till the recession ends. Once the recession ends and the demand comes to normal, companies will start spending on IT services once again.

• IT services are largely provided by outsourced firms who bring in some employees on temporary visas. In the post coronavirus world, it is unlikely that governments will allow free movements of people across countries. The visa restrictions are likely to be tightened. This will also have a negative impact on the IT services industry. Hence, it would be fair to say that the outlook for IT services is not going to be very bright in the future.

The bottom line is that technology is one of the few sectors which is poised to gain from the COVID-19 crisis. Some companies with the sector will gain, whereas others will lose. However, the sector is a whole is going to face a positive impact because of this crisis.

In this article, we will have a closer look at the events that led to the crackdown. Also, we will try and find out what the effects of this crackdown have been.

Events That Lead To the Crackdown

Infrastructure Leasing and Financial Services (IL&FS) was a major player in the financial services industry in India. This company would borrow money by issuing bonds. Then, the money so raised would be invested in long-term infrastructure assets. Most Indians trusted this company and would regularly invest their savings in the bonds issued by them.

One of the major reasons behind this trust was that the company enjoyed AAA ratings by almost all credit agencies. Cracks started appearing in the company s financials in October 2018. This is when the credit rating agencies made a slew of changes and quickly downgraded the debt issued by IL&FS to junk grade. The problem is that the credit rating agency should have seen this financial crisis coming.

Hence, the rating for IL&FS should have been lower a long time ago. The changes made by the rating agencies were made in retrospect. Hence, instead of proactively warning the investors, these companies were retroactively warning them. Such sharp changes in the opinion of credit rating agencies end up creating panic. This panic leads to tremendous loss of investor wealth.

Since a lot of Indian investors lost a lot of money in this crisis, SEBI was forced to act. The result is that SEBI has tightened the screws over Indian credit rating agencies.

Some of the changes made by SEBI have been listed in this article.

Changed Made By SEBI

• Firstly, SEBI has decided to create more competition amongst the credit rating agencies. This is being done by preventing cross-shareholding. SEBI has announced that no credit rating agency can hold more than 10% share in another credit rating agency. Also, new rules have been created to prevent the officials of one credit rating agency from being on the board of another. This is being done to ensure that credit rating agencies act on their individual accord and not in tandem. If each agency acts individually, there is a greater likelihood that at least one of these agencies will be able to spot financial problems and report it to the investors.
• Earlier credit rating agencies would just provide their opinion about the liquidity position of a company. However, now these companies are required to disclose more details. Credit rating agencies need to disclose the amount of cash that the company has on hands. Also, access to unutilized credit lines needs to be mentioned in the report.

  If the credit rating agency is assuming that a third party will provide the money to a given firm, they have to specify that assumption. SEBI has created precise rules to ensure that the liquidity position of any company is correctly reported and that investors are no longer in for a shock.

• Rating agencies have now also been given the responsibility of ensuring that investors are made aware of deteriorating cash or debt situation at any firm. They are now supposed to notice that the financials of a company are undergoing sudden change and are also supposed to report the same to the investors.

Who Will Rate The Rating Agencies?

The new measures planned by SEBI are likely to be effective. However, they will not be able to solve the problem from the root cause. This is because the problem really is about who will rate the rating agencies! SEBI needs to come up with an internal department which keeps track of the ratings being issued by these agencies.

Agencies themselves should be rated based on the accuracy of the ratings given out by them. This will help investors to understand the quality of research that has been put in order to arrive at these ratings.

The bottom line is that rating agencies will now have to run a tight ship. SEBI has been embarrassed by their performance many times before. If the agencies continue to behave in an irresponsible manner, then SEBI might be forced to come out with more stringent rules.

More rules increase the compliance costs that rating agencies have to bear. Hence, it is in their interest to start giving more accurate ratings since this will help them to avoid all costs.

Both Ocasio-Cortez and Sanders have introduced legislation which tries to cap the interest rates being charged by credit card companies at 15%.

Financial analysts do not think that this proposal would become a reality as long as Donald Trump is in power. This is because, in 2018, credit card companies earned over $113 billion in fees and interest combined.

Trump, being a capitalist, would not want to change that. However, they do believe that this issue could become a major talking point for the 2020 elections since close to 90% of the consumers are unhappy about the high-interest rates which are charged to them on credit cards.

In this article, we will have a critical look at the proposal floated by Bernie Sanders and Alexandria Ocasio Cortez.

The Current Interest Rate Situation

The Democrats are of the opinion that the interest rates being charged by banks, credit card companies and payday loans are simply horrendous. This is because these companies themselves borrow money from the Federal Reserve at about 2% interest. However, when they lend the same money to the consumers, they charge an average of 17% interest rate to all consumers. This is the average interest rate when all consumers are considered (prime and subprime). The interest rates for subprime consumers are in the range of 24% per annum!

The Democrats claim that this is usury and must be stopped. They also claim that capping of interest rates is nothing new and has been traditionally done in America. It is only recently that the banks have used corruption and lobbying to change the rules, which now allows them to have a free run while charging interest.

This is the reason why Sanders and Ocasio-Cortez want to create a system wherein the federal government will make it illegal to charge more than 15% interest in America. Also, the individual state governments will have the right to reduce this interest rate further.

Why do Credit Card Companies Charge High-Interest Rates?

To understand whether the measures proposed by the Democrats will be successful, we first need to understand why credit card companies charge such high-interest rates in the first place.

It would be incorrect to say that the credit card companies have formed a cartel and are not allowing the interest rates to be lowered. If that is the case, then America must use its anti-trust laws to break up these companies.

However, the creation of a worldwide cartel is impossible since there are many players in this game, and all of them charge high-interest rates. It is, therefore, likely that the cost of giving out credit cards is inherently high. This is not hard to believe since credit card loans are basically unsecured and the customers could also claim bankruptcy.

Hence, there will always be a certain percentage of loans which will not be paid back. Higher interest rates are therefore required to offset the risk of defaults and enable the businesses to make money still.

What will Happen if the Plan is Implemented?

It is important to understand that the proposal being floated by the Democrats may sound good on moral grounds. However, the reality is that there is very little economic backing to their idea. Some of the economic criticisms have been listed below:

• Credit Shortage: The forced ceiling on the interest rates would work as a price ceiling. Economists around the world know that when price ceilings are imposed, the obvious repercussions are shortages and black marketing. This same story is likely to repeat itself in the credit markets as well.

  If the artificial interest rate ceiling is imposed, banks will no longer find it viable to lend to subprime borrowers. They will only issue credit cards to prime borrowers. All the cards and loans outstanding to subprime borrowers will be called in. This would lead to a wave of defaults.

  Also, since the subprime borrowers will have an unmet need, they will have to resort to illegal moneylenders. The law will make money lending even more expensive, and the policy will end up hurting the very people it was meant to protect. Also, this law will create a syndicate of dangerous and violent loan sharks almost overnight.

• Post Office Bankruptcy: Sanders and Ocasio Cortez have suggested that the United States Post Office should be utilized to provide short term payday loans to poor Americans. This is an absurd suggestion by any means.

  The post office is already struggling financially. Converting it into the biggest sub-prime lender overnight will only worsen its problems and make its path to bankruptcy shorter.

• Economic Downturn: It is important to realize that a lot of purchases are made with credit cards. Hence, if a large number of people suddenly did not have credit cards, the economy will slow down considerably.

  Fixing a ceiling on the interest rate being charged will force the banks to withdraw their existing credit cards. This will reduce the purchasing power of the people and end up having a negative effect on the economy in general.

The bottom line is that the proposal to cap the interest rates is actually a Trojan horse. It may seem like the morally correct thing to do. However, it is the economically incorrect step to take if the problem actually needs to be solved.

For a long time, the United States was seen as the Land of Milk and Honey where anyone and everyone with some talent, lots of hard work, sheer grit, and dogged determination could make a career for themselves and raise a family and whose children would similarly move up the social ladder in due course in the footsteps of their parents.

Indeed, for much of the decades following the Second World War, the United States was synonymous with rising prosperity, higher social mobility, and a world beating way of living where want and need were promptly answered by the consumerist culture.

This was not only true for Americans but also for immigrants from all over the world who flocked to its shores in the hope of making a life for themselves in such dream conditions.

As waves and waves of immigrants from all over the world, including India, made a name for themselves in the United States, it seemed like there was no end to the good times.

The American Dream spurred great inventions, numerous advances in science and technology and made the country the superpower that it became in due course.

Is the American Dream Over and how it became a Nightmare for the Many?

So, if the United States is indeed the beacon of prosperity and liberty, one might very well ask, why should anyone be asking Whether the American Dream is over?

After all, its economy is booming and there are enough indications that the rising prosperity is back again.

However, a closer look at the macroeconomic and microeconomic trends since the 1970s and a deep investigation into the wealth patterns and consumption levels tell their own stories about how the gains from growth have gone to a few and the many have been impoverished.

In other words, since the 1970s, the real incomes of middle class and lower class Americans have been stagnating whereas the incomes of the upper class and the rich have been going up.

Moreover, inequality has increased as the economic pie has been divvied into most of the gains going to the Top 1% and the rest simply muddling through.

Further, rising healthcare costs, decline of unionization, high student debt, and reducing social security have all made one question whether the American Dream is only for the Rich whereas for the rest, it is a Nightmare.

For the first time, the middle class can no longer expect its offspring to do well than them and thus, there is no dream to look forward to.

How This Situation Came to Pass and Why Both Republicans and Democrats Are to Blame

Some experts believe that this situation did not come about by accident but by design wherein since the 1970s, the economic orthodoxy of the Chicago School of Economics led by the Late Milton Friedman, influenced the macroeconomic policies through what was known as Neoliberalism.

Under this doctrine, government was supposed to be as insignificant as possible as far as welfare and social nets are concerned and as favourable to business as possible as far as spurring economic growth was concerned.

Moreover, Neoliberalism also preached that capitalism works best when unfettered and hence, there should be no impediments to its workings.

Thus, with this thought processes, the remaining vestiges of social safety nets and welfare schemes were soon whittled down leading to the creation of an angry White Middle Class.

In addition, with globalization leading to loss of manufacturing jobs and automation driving the proverbial Last Nail in the Coffin of the Poor, there was nothing to look forward to for the lower and the upper middle classes.

Mind you, this situation happened not only by the Republicans who preached Neoliberalism but also by the Democrats who espoused Globalization.

Trump, 2020, and the Future of the US

Thus, the combination of all these trends brought about the Demise of the American Dream. As is happening worldwide, when you have an electorate of angry, frustrated, and disappointed voters, then phenomenon such as Brexit, and the election of Trump are inevitable.

While the campaign of Trump was driven by rhetoric against the elites and a sense of taking revenge on the establishment, his subsequent actions prove that he is in fact more of the same or a Return to the Status Quo and Business as Usual.

Which means that sooner or later, the anger felt by the working classes would soon turn to soft targets such as the Immigrants which are the case with the US right now?

Looking ahead, unless there is a truly transformative President and a Progressive Administration along with a Cooperative Legislature and Judiciary, there is nothing to hope for as far as the US is concerned.

Going by current trends, the 2020 election is turning out to be quite a key and consequential one and hence, there is still some chance that voters would finally make the right choice and not be swayed by Fascists and Populists who take advantage of their Distorted Sense of Reality.

Conclusion

Lastly, it also needs to be mentioned that the US is no longer welcoming for Immigrants and hence, if you are from any country that sees many migrating to it, you better look for alternatives such as Australia, Canada, and New Zealand, where there are better chances of making it big than in the United States.

The acceleration of the trends discussed above means that the Die has been cast and it would take much effort to restore the American Dream and to conclude, the Nightmare might well continue.

Insurance companies have been able to help people mitigate risks for centuries now. However, the products that they offer to mitigate agricultural risks are substandard to say the least. In this article, we will first understand what crop insurance is and why it is still unable to provide relief to the members of the agricultural community.

What is Crop Insurance ?

Crop insurance is an insurance product that is meant to protect farmers from risks that arise in due course of the business of agriculture. The risks must be beyond the control of farmers. Crop insurance includes clearly identified risks such as lack of rainfall. The adverse outcome of such risk factors must necessarily lead to an adverse economic impact. Also, the relationship between the risks and the loss must be clear and irrefutable.

For instance, if crop insurance is taken to protect against the adverse effects of rainfall, then it must be possible to ascertain whether the fall in yield is because of a drop in rainfall or whether there are other factors at play as well.

Low Frequency High Severity

Insurance risk factors can be classified into several types. Most risk factors pertaining to crop insurance have a low chance of occurring. In places where drought and floods are common, insurance companies will typically not offer these products at all!

However, if the risk factors do occur, they have a huge impact on the lives of the farmers. Hence, people who purchase crop insurance expect speedy settlement of claims.

Concept of Reference Yield

The whole concept of crop insurance is tacitly based on the concept of reference yield. Let’s understand how this works with the help of an example. All farms in one particular geographical area are considered to be homogenous. The data pertaining to historical yields of these farms is collected. Statistical processes are run on this data to arrive at an average yield. This is the benchmark number based on which the sum to be paid out as insurance claims is calculated.

Deviation From Reference Yield

Farmer’s loss is defined as a deviation from the reference yield. Suppose the reference yield was 5 kgs per hectare and a farmer has an actual yield of 3 kgs per hectare, then they have incurred a loss of the balance 2 kgs. Insurance companies will pay the minimum sales price that has been set by the government for the lost 2 kgs per hectare. This loss is derived on the basis of deviation from an assumed yield.

Risks Inherent in Crop Insurance

1. Basis Risk: Basis risk refers to the possibility that the insured person may not receive any payout even though they have faced a loss. Alternatively it could also refer to the possibility that a farmer who has not suffered any loss will receive a payout. Therefore, basis risk refers to the errors made by the insurance company.

2. Spatial Risk: Crop insurance is prone to spatial risk. This is because one farm in every particular area is considered to be the reference farm. Hence, there might be spatial differences in the weather conditions in the reference farm as compared to the actual farm. This leads to wrong interpretation of the yields at the ground level and leads to the two incorrect possibilities as mentioned in basis risk.

3. Design Risk: Every insurance company has a cause effect relationship which has been mapped between identified causal factors and crop yield. For instance, rainfall may be considered a risk factor. Therefore a variation in the level of rainfall should ideally have a 100% correlation to the crop yield. Well, sometimes it does not. Hence even if the rainfall was poor, there may be a good crop or vice versa. Such scenarios are covered in design risk.

4. Other Factors Ignored: Crop insurance considers all farms in a given area to be homogenous units. In reality, this is not the case. The yield would widely differ from farm to farm even if there were no human interference. This difference would be caused by an differences in the availability of irrigation, the soil type of the farm etc.

Future of Crop Insurance

Crop insurance has a lot of scope to grow and develop. At the moment, only a fraction of farmers in developing countries opt for crop insurance because of its irregular payouts. New techniques need to be developed so that crop insurance becomes a regular business practice. A bad crop should just be a normal part of business. It shouldn’t be a life threatening event causing mass farmer suicides.

There is a surge of protectionism and populism worldwide. From President Trump’s Protectionist Rhetoric and his America First and Make America Great Again slogans to the rise of Anti Immigrant sentiment in Brexit Britain and the latent hyper nationalism in other countries around the world, there is a backlash against globalization.

Considering the fact that global corporations base their business model on Free Trade and Globalization, these trends are worrying for them. Indeed, if anti globalist sentiment picks up pace, soon global corporations have to think about ways and means to workaround or simply retool their business models.

Having said that, it is also the case that global corporations for now have are managing to survive and reorient their strategies accordingly. This has taken the form of localization where global corporations are increasingly reverting to purely local hiring and national cultural and market based dynamics so that they are in tune with the popular mood in those countries.

Indeed, we have come a long way from purely global strategies to hybrid Glocal strategies to purely local ones. Thus, it can be said that the wheel is coming full circle as far as such strategies are concerned.

How Corporates are Responding

The localization strategies that are being implemented can take many forms. For instance, Indian IT (Information Technology) firms such as TCS (Tata Consultancy Services), Infosys, and Wipro are ramping up hiring of local candidates in the United States in response to the protectionist sentiments.

With H1B visas being hard to get as well as a general crackdown on immigration, these firms hope that by embracing localization, they can be in the good books of both their clients and the government.

Of course, their clients remain global in dispersion and hence, despite anti globalist rhetoric, the existing arraignments are going to stay in place.

Moreover, the anti globalist sentiment has not yet affected financial services and the equity and bond markets as can be seen from the surging FDI (Foreign Direct Investment) into markets worldwide.

In purely ideological terms, this does not make sense since protectionism cannot hut the very workers who are supposed to be the beneficiaries whereas the other layers and especially the topmost beneficiaries are left untouched.

How Students and Working Professionals can Plan for Their Future

The reason for mentioning this is to highlight how you, the reader, who can be an aspiring or working professional would be affected by these trends.

For instance, if you are dreaming of working in a foreign country after a few years in your career or are wishing to go abroad for higher studies, the present protectionism would indeed hurt you. Starting with the application process and the visa process, chances are that you need to be prepared for rejections or at least difficulties in obtaining the same.

Further, you might need to pay more as a premium in terms of fees and housing. On the other hand, if you are a working professional, you need to base your aspirations of a foreign stint accordingly.

In other words, be as realistic as possible when evaluating your chances of a foreign degree or assignment.

It also helps if you choose countries other than the United States for your studies or work. Indeed, Canada is welcoming to immigrants and though Australia has somewhat tightened the screws, it is still accepting foreign students and workers.

Having said that, another problem that you might encounter is the very real racism and prejudice towards foreigners which means that you need to be careful when you choose the regions or the cities for your careers and studies. Thus, by diligent planning and evaluation, you can still prosper abroad.

Impact of Protectionism on Exporters

The increasing protectionism worldwide has an effect on exporters and importers of goods and services. For instance, Indian and Chinese exporters are now facing large tariffs for their goods in the United States.

In addition, outsourcing of services has also dipped which means that not only large corporates but also individuals such as Freelancers, lawyers working for global law firms based in India on outsourced legal projects, and even Medical Transcriptionists all have to contend with the changing rules and regulations as a result of protectionism.

Thus, the fluid situation is increasing uncertainty and complexity for anyone, whether a corporate, professional, student, or a freelancer who depends on global business models. Given the fact that this is likely to continue for some time to come, a lot depends on how well all stakeholders respond to fast changing market dynamics.

The Global to Glocal to Local Movement

As mentioned earlier, we have moved from global to Glocal to local all within a few decades. Thus, given the pace of these changes, it would not be surprising if more drastic changes come our way.

Corporates are responding by being global, Glocal, and local at the same time. Exporters are responding by scouring for alternative markets. Individuals are responding by being realistic about their chances.

The bottom line here is adaptability and flexibility. Indeed, even the Indian and Chinese governments are encouraging alternatives to the United States and Europe as markets for goods and services.

Already, there is a tendency to be as multilateral as possible in terms of treaties and trade agreements. This is in response to the US pulling out of multilateral treaties and insisting on bilateral ones. This indicates a multi polar world where the US is no longer the dominant player. To conclude, protectionism is here to stay and all of us should be prepared for it.

Health and Education are social sectors that need governmental support and funding. This is especially the case in developing countries where a vast majority of the people do not have the means to afford expensive and prohibitive medical care. This is the reason why many developing countries have governmental provided healthcare that is subsidized and is social welfare oriented. Of course, the developed west also has state provided healthcare that is the norm in the UK and in Europe.

Of particular note is the healthcare system in Cuba that is a model for all developing countries in the manner in which the state provides world-class medical services to its citizens.

In contrast, the healthcare systems in India and South Asia despite governmental support have seen erosion in public perception because of which many people turn to private medical services that are efficient but also expensive.

The United States till recently was offering a privatized healthcare system that has been overhauled in 2010 with the passage of the Health Care Reform Act which is also known as Obamacare. Despite severe opposition from the Republican Party and many private healthcare providers, President Obama managed to get the health care bill passed which is seen as the first step towards actualizing the kind of social welfare oriented healthcare systems in the Scandinavian countries.

The Role of the Government in Providing Healthcare

As mentioned in the introduction, healthcare is a sector where the government has a leading role to play since it concerns the public welfare and social justice aspects. This is the reason why almost all countries in the world take it upon themselves to mandate governmental support for healthcare.

Despite this, the healthcare systems in many countries across the world are in a mess because of a variety of reasons.

These include overburdening of the healthcare systems like what is happening with the NHS or the National Health Service in the United Kingdom where the sheer numbers of patients and the scarcity of medical personnel has made the NHS go from being one of the most efficient healthcare systems in the world to being one of the worst.

Apart from this, the United States is another example (before the Healthcare reform bill was passed) where the poor and the needy were at the mercy of corporate healthcare providers for whom the ability to pay matters more than the social welfare aspects. This is the reason why many social scientists and healthcare experts often comment on the fact that healthcare must not be privatized and instead, the government must take over the healthcare systems.

What Happens when Healthcare is Privatized

In India, the healthcare system like many other social welfare sectors started off as a good example of how government can play an enabling role in providing social services that promote social welfare and social justice.

However, thanks to successive governments neglecting the sector and the steady privatization of many social sectors, the healthcare system in India is now largely in private hands where the poor and the needy are left to fend for themselves. To redress this imbalance, many state governments are providing the less privileged with access to subsidized healthcare and this is a positive trend that must be encouraged and nurtured.

Concluding Thoughts

Given the fact that staying healthy means a more productive workforce, it is in the interest of the corporate sector to ensure that healthcare is made available to the workforce and this is the reason why many public and private companies often pay for the treatment of their employees and their immediate family members.

Finally, healthcare is too critical a sector to be left to the private sector and hence, the contention or the key argument here is that the government must play a proactive and enabling role in promoting social welfare and social justice.