David Bach, Rio Tinto Chair in Stakeholder Engagement and Professor of Strategy and Political Economy, International Institute for Management Development (IMD)

Chinese leader Xi Jinping’s recent speech to the Communist Party Congress could be one of the most consequential of the decade. He told the audience – and the world – that his economic growth-crushing zero-COVID policy is here to stay, and that Beijing is more determined than ever to reunify with Taiwan, peacefully if possible and by force if necessary.

We are living in a moment of deep geopolitical rifts and extraordinary economic uncertainty, epitomised by Xi’s pronouncements. The world is clearly not reverting to some pre-COVID status quo. Instead, a combination of underlying forces has upended the previous world order and ushered in a period of profound disorder.

I want to look at four of these forces – the deterioration in US-China relations, Russia’s war in Ukraine, populism and inflation – to construct some political-economic scenarios for the next two to five years. Any list of destabilising global forces is necessarily incomplete. I won’t consider climate change or biodiversity loss (arguably the greatest challenges facing humanity), a possible COVID resurgence, the impact of artificial intelligence and other disruptive technologies, or the role of rogue regimes from Iran to North Korea.

Instead, I’m focusing on the areas that I believe will have the greatest impact on global business over the next several years – particularly because of their expected interaction.

1. Russia’s war in Ukraine

Not only did Russian troops fail to subdue Kyiv quickly as both the Kremlin and many western observers had assumed, Russia looks increasingly likely to lose the war – the mobilisation of reservists and nuclear sabre-rattling notwithstanding.

There are three reasons for this. First, the extraordinary poise and courage of the Ukrainian people, armed forces and leaders. Second, utter chaos on the Russian side. And third, the remarkable unity across the west that has provided Ukraine’s troops with sophisticated weapons, training and intelligence while slowly crippling Russia’s economy via boycotts and sanctions. Western businesses made important contributions as hundreds pulled out of Russia, stranding assets and foregoing profits.

Western unity faces its greatest test this winter if gas supplies in Europe run low and sky-high energy prices accelerate an expected slide into recession. Individual European governments may well waver over Ukraine if confronted by angry and cold voters.

Of course, Europe’s dependence on Russian gas is self-inflicted. As recently as 2014, only about 20% of EU gas was Russian. By early 2022, it was almost 40%. Despite loud warnings from Washington, Germany, the continent’s largest economy, actually increased its dependence after Putin’s illegal annexation of Crimea.

Berlin viewed Russian gas as cheaper and more sustainable than alternatives. Greater reliance also fitted a German foreign policy doctrine vis-a-vis the Soviet Union/Russia dating back five decades called wandel durch handel: change through trade. While dangerously naive in hindsight, a similar philosophy informed US policy toward China until recently, creating dependencies that are not vastly different.

2. US-China relations

For four decades following then US president Richard Nixon’s groundbreaking trip to China in 1972, the US sought better relations with Beijing via closer economic integration. Things began to change during Barack Obama’s second term, in response to Xi Jinping’s muscular posture at home and abroad, before subsequently rupturing with Donald Trump’s trade war.

If anything, the Biden administration has accelerated the switch from cooperation to confrontation via beefed up security alliances in the region with countries like Australia, export controls for advanced technologies such as microprocessors, and de facto defence commitments to Taiwan.

A day after Xi’s speech at the Party Congress, the US secretary of state, Antony Blinken, told an audience at Stanford University that in relation to strategically important Taiwan, Beijing was now “determined to pursue reunification on a much faster timeline” than previously.

Over the past several months, I have spoken with hundreds of mainly European senior executives about the current geopolitical panorama. Many described the difficult decision to withdraw from Russia. Yet, for most, Russia represents less than 5% of their business. When asked what they would do if the Taiwan situation escalates, the silence was deafening. With massive dependence on – and exposure to – both the American and Chinese markets, leaders from industries including automobiles and consumer and luxury goods readily admit they have no playbook.

3. Populism

One reason why US policy toward Beijing is unlikely to soften is that China is one of few things the highly polarised US electorate agrees on. In 2011, only 36% of Americans viewed China unfavourably, with 51% having a favourable view. By 2022, a stunning 82% were unfavourable – a level only exceeded in Sweden, Japan and Australia.

Voters across western democracies also increasingly distrust globalisation. Fuelled by growing economic inequality, a majority across 28 leading economies told research firm Edelman in 2017 that “globalisation is taking us in the wrong direction”. Alarmingly, Edelman found in 2019 that only 18% of respondents across developed economies affirmed that “the system is working for me”, with 34% being unsure and 48% outright declaring the system is failing them.

Support for democracy has weakened in parallel, especially among the young. Political scientists Yascha Mounk and Roberto Stefan Foa, respectively of John Hopkins and Cambridge universities, found in 2017 that whereas 75% of Americans born in the 1930s agreed it is “essential to live in a democracy”, the figure was just 28% among millennials.

Similar trends can be observed in many other countries. This has helped into power populists from Hungary’s Viktor Orban and Brazil’s Jair Bolsonaro to Donald Trump and, most recently, Giorgia Meloni – Italy’s most right-wing leader since Mussolini. Note that Italy had the world’s second-highest dissatisfaction rates with democracy in a 2021 survey, topped only by Greece.

4. Inflation

This deep discontent with the prevailing political-economic order was before inflation reached levels not seen in four decades. By hiking benchmark interest rates in response, the US Federal Reserve and European Central Bank accept they may trigger a recession. Most analysts now expect one on both sides of the Atlantic in 2023.

Meanwhile, China’s zero-COVID policy continues to weaken the world’s second-largest economy while its struggling property sector threatens to engulf the global financial system. Pierre Olivier Gourinchas, the IMF’s chief economist, did not mince words about the world economy at the organisation’s annual meeting in early October, warning that the “darkest hours” are still ahead and calling the outlook “very painful”.

But an even greater fear is stagflation – interest rate hikes that crush growth, send unemployment soaring and fail to meaningfully reduce inflation. The interaction of such economic dynamics with anti-establishment populism would surely be profoundly destabilising for an already shaky global order.

Four scenarios

Drawing on the forces described above, I have been urging business leaders from across sectors to contemplate four scenarios. Scenarios are not about predicting the future. They are about preparing for the future amidst uncertainty.

I locate the possibilities along two dimensions – one economic and one geopolitical. On the economic dimension, the best case is that central banks and policymakers quickly bring inflation under control, recessions in major markets are short lived, and a global economic recovery begins in the second half of 2023 and accelerates in 2024. At the other extreme, aggressive interest rate hikes might surface and exacerbate structural weaknesses in the global economy, leading to a period of prolonged stagflation.

Similarly with geopolitics, Vladimir Putin might discover a face-saving retreat from Ukraine while Xi, with his third term secured, could dial back his rhetoric regarding Taiwan. Or more pessimistically, Ukraine could worsen sharply, for example, if Putin chooses to use tactical nuclear weapons or Nato is directly drawn into the conflict. Meanwhile, nationalist fervour might lead Xi to issue Taiwan an ultimatum, or an accidental use of force by either side could trigger a broader conflict.

By combining these different possibilities, I create my four scenarios. For illustrative purpose, I associate each with a decade of the 20th century – not because history will repeat itself, but to crystallise what is at stake and how much the possible futures differ.

When the pandemic’s end seemed in sight, several observers predicted a return of the “roaring twenties”. The original roaring twenties occurred after the first world war when the League of Nations ushered in a short period of international cooperation, global trade resumed and economies recovered. A latter-day equivalent certainly remains possible if global tensions ease and the economy recovers quickly.

Alternatively, we can imagine an economic recovery without easing global tensions. The early 1980s come to mind, when decisive action by the chairman of the US Federal Reserve, Paul Volcker, reduced inflation and after a short recession, growth resumed and the stock market boomed. Internationally, however, things were less rosy. The US-Soviet 1970s detente came to an end with respective boycotts of the 1980 and 1984 Olympics, a proxy war in Afghanistan and a renewed nuclear arms race.

The 1970s are my third scenario. They are frequently invoked as the exemplar of stagflation, with soaring prices, stubbornly high unemployment and plenty of labour strife. However, global tensions had eased, at least between the superpowers. The Spy Who Loved Me captured the zeitgeist as James Bond teamed up with a Soviet agent to save the world.

Compare this to the 1930s, another decade in the 20th century characterised by high unemployment, low growth and economic turmoil. Fascism swept away nascent democracies, global tensions escalated and the world experienced a catastrophe that remains singular in human history.

The world today is very different from the decades in these scenarios. Technology has ushered in unprecedented connectedness, stakeholders have become far more powerful, and global supply chains and financial systems have vastly increased economic interdependence. One hopes the horrors of the 20th century combined with the unimaginable destructiveness of modern weaponry limit potential conflict escalation.

Yet the contrast between the decades highlights how changes in just two variables might distinguish a scenario that is great from one that is good, one that is bad, and one that is truly terrible. Asking which is the most likely is the wrong question. It is more important for business leaders, governments and individuals to recognise that the previous world order is gone.

The most resilient organisations will be the ones that make decisions on the basis of a clear sense of purpose and strong values, not rigid strategies or action plans. Globalisation will not suddenly end, but firms will increasingly make decisions that go beyond looking for the cheapest supplier or the biggest new market.

The next few years are probably also not the best time for businesses to strive for maximum efficiency. Cash will be king, slack good and flexibility vital. Also, it will be critical for business leaders to proactively convey what they stand for – ideally before they get asked about the future of their China business, how they might handle labour unrest, or whether they believe in free and fair elections.

This period of disorder could be short or long, and the impact on organisations and societies could range from minor to dramatic, with considerable variation across industries and regions. Zeroing in on the underlying dynamics and contemplating their potential impact on business, government and society is something we should all do to effectively navigate the rapids ahead.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Charles Telfair Centre is an independent nonpartisan not for profit organisation and does not take specific positions. All views, positions, and conclusions expressed in our publications are solely those of the author(s).

Carl Manlan, Vice President of Inclusive Impact and Sustainability at Visa CEMEA.

DUBAI – The last Sustainable Development Goal is, in some ways, the most important. Recognizing that all other SDGs can be met only through collaboration, SDG17 includes targets such as the mobilization of financial resources for developing countries from multiple sources and the promotion of partnerships among public, private, and other stakeholders. But, less than eight years from the SDGs’ 2030 deadline, official development assistance continues to dominate the narrative about structural economic transformation.

In 2021, net ODA by members of the Development Assistance Committee of the OECD totaled just under $179 billion. That is less than 4.5% of the $4.2 trillion shortfall in financing required to support the achievement of the SDGs. And while countries agreed in 2015, when the SDGs were adopted, to raise ODA to 0.7% of gross national income by 2030, they remain far from reaching that target. Meanwhile, more than $100 trillion in assets under management worldwide can be leveraged to accelerate development.

Beyond the difference in scale, the public and private sectors tend to target different aspects of the development continuum. For example, ODA might be channeled toward improving health outcomes, whereas investment is more likely to spur growth in a particular sector, such as agriculture.

Achieving the SDGs by 2030 is improbable, but if corporations reimagine and deepen their community impact, we can make great strides toward sustainable development. Key to this process will be support for small and medium-size enterprises (SMEs), which in developing and developed countries alike generate employment, drive income growth, and advance poverty reduction. In emerging economies, SMEs account for seven out of ten jobs, and formal SMEs contribute up to 40% of GDP, with the figure rising much higher if one also includes informal businesses.

Women-led SMEs play a particularly important role. Companies like Koolboks in Nigeria and Hoa Nang in Vietnam hire talented young people, help reduce gender disparities, and reinvest the wealth they generate in their communities. Such firms – and SMEs more broadly – form the backbone of sustainable and resilient development, rooted in communities and offering ample opportunities to connect to global value chains. By acquiring talent and devising innovative solutions to existing problems, businesses that start small can grow into dynamic and influential economic actors that create more wealth for communities, not least by providing better employment opportunities to more workers.

Here, it is worth noting that an estimated 500 million jobs will be needed by 2030 to absorb the growing global workforce. But, to create so many jobs, SMEs need capital to grow and become more resilient. As it stands, they often struggle to access financing.

There is a role for ODA here. But donor governments around the world are confronting intensifying fiscal headwinds in the wake of the COVID-19 pandemic and, more recently, the energy and food crises triggered by the war in Ukraine. The private sector must take a leading role in providing the necessary financing.

This implies a paradigm shift, whereby capital (and aid) allocation drives development through investment in employment and wealth creation. Special attention must be paid to women-run businesses, which currently account for 40% of SMEs in Africa, but receive just 1% of venture capital funds.

Some progress already is being made on this front. For example, the Nigeria-based Aruwa Capital Management, founded and led by women, invests in rapidly growing companies that either provide essential goods and services to the “female economy” or businesses that are founded or co-founded by women or have gender-diverse teams. And the Corporate Impact Investing Initiative can unlock more capital for SMEs, especially those led by women.

Such efforts can help to create a new generation of “Nana Benz” women – who controlled at least 40% of informal-sector business in Togo from 1976 to 1984 – but on a much larger scale. Investing in SMEs in fast-growing markets, such as the African Continental Free Trade Area, will accelerate the pace of transformation.

This is not charity; such investment will bring major financial returns. Studies show that purpose-driven companies outperform their peers, not least because young people – who overwhelmingly believe that social issues, from racial justice to the environment, must shape corporate decision-making – are more likely to support them.

At the same time, we must recognize that the most profitable investments are often long-term – even intergenerational – ventures. We might not enjoy the fruits in our lifetimes, but we must cultivate them anyway, in order to nourish our descendants and provide the seeds for future prosperity.

Copyright: Project Syndicate, 2022.
www.project-syndicate.org

Main Photo by Tima Miroshnichenko on Pexels.

Charles Telfair Centre is an independent nonpartisan not for profit organisation and does not take specific positions. All views, positions, and conclusions expressed in our publications are solely those of the author(s).

Landry Signé, Professor and Executive Director at Thunderbird School of Global Management at Arizona State University in Washington, DC, Senior Fellow at the Brookings Institution, and Distinguished Fellow at Stanford University.

WASHINGTON, DC – Africa is on the cusp of an economic transformation. By 2050, consumer and business spending on the continent is expected to reach roughly $16.1 trillion. The coming boom offers tremendous opportunities for global businesses – especially US companies looking for new markets. But unless African policymakers remove existing barriers to regional trade and investment, the continent’s economy will struggle to reach its true potential.

Two major trade agreements – the African Growth and Opportunity Act (AGOA) and the African Continental Free Trade Area (AfCFTA) – will make it easier for African countries to trade with one another, and with the United States. Together, the agreements promise to remove longstanding impediments to industrialization.

AGOA, passed by the US Congress in 2000, gives countries in Sub-Saharan Africa preferential trade access, allowing them to export tariff-free products to the US. Although it will expire in 2025, US President Joe Biden’s Sub-Saharan Africa strategy, unveiled in August, highlights its positive impact and promises to work with Congress on ways to proceed after AGOA lapses.

AfCFTA, on the other hand, is an intra-African trade agreement with no expiration date. Established in 2018, its goal is to deepen trade ties between African countries by removing tariff and non-tariff barriers.

Although these agreements’ scope, focus, beneficiaries, and structure differ significantly from each other, they are essential to strengthening African regional integration. Rather than viewing them as separate or competing agreements, policymakers and investors should recognize how they can complement each other in creating, sustaining, and transforming value chains across the continent.

Value creation is critical to Africa’s economic transformation. In 2014, manufactured goods accounted for about 41.9% of the trade between African countries, compared to 14.8% of their exports to the rest of the world. Greater regional integration will provide Africa with a larger supply market, which will accelerate manufacturing specialization and make African producers more competitive globally. More robust manufacturing industries will provide jobs for low-skilled workers – particularly those not currently integrated into the formal economy. This, in turn, will increase average household incomes, boost domestic demand, spur innovation and diversification, and help protect local economies against external shocks.

AGOA has already created some opportunities for cross-border value chains. Yet despite some success stories like Madagascar’s apparel industry, which relies on an extensive regional supply chain, such opportunities remain limited. While integration has improved since AGOA’s implementation, particularly since 2015, it remains somewhat superficial: less than 17% of Africa’s commercial value is currently generated through intra-African trade.

The real game changer is the AfCFTA. By removing tariffs for a wide range of products across the continent, it will lower production costs and shift foreign direct investment toward manufactured goods, while also reducing transit costs and shortening supply chains – major benefits in a globalized economy.

The International Monetary Fund projects that, under the AfCFTA, Africa’s expanded goods and labor markets will become more efficient, driving a significant increase in African countries’ competitiveness. By creating a true continental market that increases intra-African trade and impels African countries to participate in “production sharing” at a higher rate, the AfCFTA will likely provide a further incentive to US-based multinationals, which will be able to access a larger market and establish a major global hub. AGOA has already spurred many companies to invest in Africa, and the successful implementation of the AfCFTA will strengthen this trend.

The challenge for policymakers is to accelerate this process and ensure that the two programs complement each other. One way to do this is to deepen and broaden communication channels between Africa and the US, making it easier for investors interested in doing business in Africa to be better prepared for the expected growth in demand for regionally-sourced products. Supporting individual countries in implementing the AfCFTA would also help streamline the process.

A key problem that remains to be addressed is AGOA’s eligibility criteria, which are set on a country-by-country basis. These criteria can be detrimental to regional integration, as one country’s removal could affect another country’s supply inputs, thereby creating a ripple effect. For example, when Madagascar was removed from the AGOA-eligible list in 2010 following a coup d’état, the five African countries from which it had been sourcing apparel inputs were also punished. Considering the broader effect of country-specific sanctions will help prevent unintended investor risk.

Effective regional integration is essential for Africa. Without it, the continent will continue to be overlooked and outpaced globally in manufacturing, information technologies, and agriculture. When considering the future configuration of both AGOA and the AfCFTA, policymakers should regard them as complementary mechanisms for ensuring Africa’s long-term economic development.

Copyright: Project Syndicate, 2022.
www.project-syndicate.org

Main Photo by Tom Fisk on Pexels.

Charles Telfair Centre is an independent nonpartisan not for profit organisation and does not take specific positions. All views, positions, and conclusions expressed in our publications are solely those of the author(s).

Eoin McLaughlin, Professor in Economics, University College Cork, Ireland

Cristián Ducoing, Senior lecturer at Sustainability transformations over time and space, Lund University, Sweden

Les Oxley, Professor in Economics, University of Waikato, New Zealand

In the midst of today’s cost of living crisis, many people who are critical of the idea of economic growth see an opportunity. In their recent book The Future is Degrowth, for example, prominent advocates Matthias Schmelzer, Aaron Vansintjan and Andrea Vetter argue that the post-Covid inflation has predominantly been caused by the inherent instability in the capitalist system.

This came in the form of problems with global supply chains and the asset price inflation which stemmed from government action in response to the pandemic. Since the same system is, in their view, also responsible for causing climate change, moving away from it and curbing the economic growth on which it turns will help kill two birds with one stone.

Arguments like these recall and are directly influenced by a famous scientific report from 50 years ago called Limits to Growth. Written by a group of researchers commissioned by the Club of Rome think tank, it warned of an “overshoot and collapse” of the global economy within 100 years.

The researchers forecast that this decline would be caused by exponential growth in populations, industrialisation, pollution, food production and resource depletion. The answer, they said, was to move to a state of economic and ecological stability that would be sustainable far into the future.

When the oil crisis of October 1973 to March 1974 saw oil prices quadrupling, it was seen as vindicating the report’s prediction of a dramatic surge in the price of oil. A famous Newsweek edition from late 1973 ran with the headline “Running out of everything”, next to a picture of Uncle Sam looking into an empty cornucopia.

Yet contrary to the predictions in the Limits report, the oil shock was not caused by resource scarcity but by geopolitics. The Saudis and oil-supplier cartel Opec had imposed an oil embargo on the west to protest the US arming Israel in its wars against Syria and Egypt.

A similar misapprehension lies at the heart of the arguments by today’s degrowthers over the cost of living crisis. The oil and gas shortages causing soaring prices are mainly due to the Ukraine war and a fall in supplies due to the majors investing less in production because of the net zero agenda.

Wrongheaded economics

Not only did the writers of the Limits report predict a spike in oil prices for the wrong reasons, they also failed to consider how the market would respond. Higher prices reduced demand and incentivised energy efficient investment and oil exploration, with major new reserves being identified.

Growth has not (yet) been constrained by a lack of resources, partly because technological advances enable us to generate more from less, and partly because of market forces. When a product or commodity becomes more expensive, people either use less of it or switch to an alternative.

So the reality is that inflation may well subside over time, depending of course on what central banks do with monetary policy. Equally, pursuing degrowth could be inflationary or deflationary. It depends on whether the supply of goods and services falls further than the demand.

Both in the 1970s and today, one of the main issues is a fundamental misunderstanding of what economic growth is and what drives it. It is seen as being quantity driven, in the sense that degrowthers think there is an insatiable demand for more of the same, which will eventually have “devastating consequences for the living world”.

But economic growth is more about quality than quantity. It’s not just about producing more cars, for example, but about making them more fuel efficient or electric. This in turn creates demand for different resources, such as lithium for batteries.

Or to give another example of how economists view growth, one important study looked at how the price of a unit of light fell over time. This was because as technology shifted from candles to modern light bulbs, the cost of production in terms of hours worked fell dramatically.

Yet in another respect, the degrowthers are entirely right. Again, it’s worth looking back at the Limits report to understand this. To test their base case, the researchers looked at various alternative scenarios for how the future might pan out.

In one, they assumed that the world’s stock of available non-renewable resources doubled. This meant that scarcity was less of a problem than in their base case. But they predicted that, rather than averting catastrophe, this would instead cause damaging increases in pollution associated with economic activity.

Pollution has indeed become a bigger issue than resource constraints. For example, Limits predicted that CO₂ concentration in the atmosphere would reach 435 parts per million (ppm) by 2022 if trends in fossil fuel consumption continued unabated. It is currently 421ppm, so they were fairly close. It is this linkage between environmental harm and the economy that is the report’s most important legacy.

Managing the wealth of nations

After the Limits thesis, economists began incorporating the idea of finite resources more explicitly into models of economic growth. This formed the basis of the economic approach to sustainable development, which says that you achieve intergenerational equity by reinvesting the proceeds from finite resources into other assets like buildings, machines or tools.

For example, if US$1 of oil is extracted from the ground, US$1 should be reinvested elsewhere. Though still far from universally adopted, some oil-producing nations such as Norway do this.

A related idea is that we should move away from thinking about growth of national income and instead focus on managing national wealth. Wealth in this context refers to all assets from which people obtain wellbeing, and changes in wealth per capita – referred to in the field as “genuine saving” – are indicators of whether development is sustainable.

The key is to put the right price on different types of assets, including taking into account damage from pollution. For example carbon is clearly very important when valuing changes in wealth.

Rather than encouraging degrowth, it is now accepted by most environmental economists that this measure of human wealth is a useful complement to GDP. This is being taken increasingly seriously by governments. For example, the US recently announced it would start accounting for its natural assets.

But if we are to win the argument about changing the basis on which we measure human progress, it is vital that we are clear about the reasons for doing so. Believing that economic growth is inherently bad is not helpful.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Charles Telfair Centre is an independent nonpartisan not for profit organisation and does not take specific positions. All views, positions, and conclusions expressed in our publications are solely those of the author(s).

Julien Gourdon, Economiste, Agence française de développement (AFD)

Jean-Baptiste Pétigny, Coordinateur, Facilité française d’Assistance Technique auprès de l’Union africaine, Expertise France, Agence française de développement (AFD)

Avec l’essor mondial de géant comme Amazon, Facebook ou encore Netflix, les importations de services numériques ont considérablement augmenté en Afrique ces dernières années. Dans les États membres de l’Union africaine (UA), celles-ci sont ainsi passées d’un montant d’environ 19 milliards de dollars en 2007 à 37 milliards de dollars en 2017.

Cependant, les recettes fiscales prélevées sur leurs activités restent faibles. En effet, les entreprises numériques bénéficient de l’absence d’obligation directe de payer des impôts dans les pays où elles ne sont pas résidentes. Face à ce problème de déperdition fiscale, certains États mettent en œuvre des taxes directes sur les bénéfices de ces sociétés (dite taxe GAFA). En Afrique, le Nigeria, le Kenya et le Zimbabwe disposent désormais d’une législation qui impose directement les opérations numériques des multinationales non résidentes (entre 3 % et 6 %).

1,3 milliard à récupérer

Afin de proposer un cadre international harmonisé, le projet relatif à l’érosion de la base d’imposition et au transfert des bénéfices (BEPS), réalisé sous l’égide de Organisation de coopération et de développement économiques (OCDE) et du G20, a permis d’approuver, en octobre 2021, un cadre inclusif reposant sur deux piliers pour relever les défis fiscaux soulevés par la numérisation de l’économie :

• Le premier pilier se concentre sur l’assiette d’imposition et a pour objectif la réaffectation des droits d’imposition vers la juridiction du marché concerné, indépendamment de la présence physique, et concerne de nombreuses entreprises du numérique (les industries extractives et services financiers réglementés sont exclus).
• Le deuxième pilier se concentre quant à lui sur le taux d’imposition et la création de règles coordonnées répondant aux risques actuels provenant de montages financiers qui permettent aux multinationales de transférer des bénéfices vers des juridictions à faible imposition. Il propose ainsi l’adoption d’un taux d’imposition minimum de 15 % et aura peu d’impact sur les économies du continent qui ont déjà des taux supérieurs et peu de siège d’entreprises multinationales. Cependant, le rapport mondial sur l’investissement note qu’en relavant le taux minimum à 15 % cela rendra relativement toutes les juridictions avec un taux supérieurs plus attractives.

Sur les 25 pays africains membres du Cadre inclusif OCDE/G20 sur le BEPS, 23 sont signataires de la déclaration d’octobre 2021 approuvant cette solution à deux piliers (Kenya et Nigeria ne l’ont pas encore signée, ils devront abandonner leur taxe unilatérale s’ils participent).

En s’appuyant sur la proposition du BEPS et en utilisant les données entreprises Orbis, il est possible de modéliser les scénarios du pilier 1 pour les services numériques. Selon les estimations, les recettes fiscales potentielles pour les 55 États membres de l’Union africaine (EMUA) sont de 1,3 milliard dollars américains par an, soit 0,05 % du PIB.

Comparativement, il s’agit d’un montant supérieur aux recettes qui seraient tirées d’une éventuelle taxe directe sur les services numériques fixée à 3 % des recettes brutes (800 millions de dollars). Il faudrait que celle-ci soit relevée à environ 5 % pour obtenir un montant proche.

Il convient de noter qu’actuellement, certaines importations de services numériques peuvent déjà être taxées de manière indirecte dans le cadre de taxes à la consommation. Dix-huit des EMUA ont ainsi proposé (ou mettent déjà en œuvre) une taxe indirecte sur les opérations numériques des multinationales (de 12 à 20 %).

Un pilier très large

Cependant, si on appliquait les taux TVA et autres taxes à la consommation existantes dans les 55 pays au commerce de service numérique, en moyenne les recettes potentielles pour les EMUA auraient été de 0,22 % du PIB (en 2017) si les recettes étaient effectivement collectées. Les estimations indiquent que les revenus seraient donc nettement supérieurs ceux générés par une taxe directe proposée par le pilier 1 de la déclaration.

Si la mise en œuvre complète et effective de la collecte transfrontalière des taxes à la consommation existante sur les importations de service numérique pourrait théoriquement générer des recettes fiscales plus élevées que celles du pilier 1 du programme BEPS, il convient de noter que les propositions du premier pilier du BEPS vont au-delà des seules sociétés de services numériques et généreront probablement des revenus substantiels. En effet, ce piler 1 intègre en plus de ses sociétés numériques toutes les EMN dès lors qu’elles utilisent des canaux numériques de distribution.

Comment expliquer cet écart ? Le pilier 1 stipule qu’afin d’être éligibles à ce droit de taxation, les pays doivent recevoir au moins 1 million d’euros de recettes par multinationale concernée, ce qui exclut de facto les économies africaines de ce modèle d’allocation des recettes fiscales, à l’exception des 12 plus grandes économies du continent en termes de PIB (Soudan, Côte d’Ivoire, Tanzanie, Ghana, Kenya, Éthiopie, Maroc, Angola, Algérie, Égypte, Afrique du Sud et Nigeria).

Ceci dit, le cadre inclusif prévoit une exception pour les économies dont le PIB est inférieur à 40 milliards d’euros, en leur attribuant un droit d’imposition à partir d’un seuil de 250 000 euros.

Une centaine des 500 plus grandes entreprises concernées

En dépit de cet élargissement du périmètre, l’OCDE estime que la réattribution des bénéfices au titre du pilier 1 s’appliquera à seulement une centaine de multinationales enviro. Il s’agit certes des plus importantes mais la disposition prévoit d’étendre le champ d’application à d’autres EMN qu’au bout de sept ans. Cependant, cela représente la tout de même la majorité des IDE dans le monde.

Toutes les grandes sociétés de services numériques ont des marges bénéficiaires avant impôt comprises entre 13 % (Netflix) et 39 % (Facebook), et allant jusqu’à 70 % pour Amazon, ce qui impliquerait donc des bénéfices réaffectés au niveau mondial (25 % du bénéfice résiduel). Les montants imposables diffèrent toutefois considérablement, Netflix, Adobe et PayPal se situant au bas de l’échelle ; et Meta, Alphabet (anciennement Google), Amazon, Microsoft et Apple se positionnant en haut de cette échelle.

La part qui est allouée aux économies africaines dans le cadre des nouvelles règles du pilier 1 semble a priori minime et il faudra attendre encore 7 ans avant une éventuelle extension du champ d’application de cette règle pour y inclure davantage de multinationales.

Il est donc primordial qu’un nombre plus important de pays du continent participe au cadre inclusif du BEPS, auquel 23 États ont jusqu’alors adhéré, les actions multilatérales étant plus propices à des résultats probants dans une économie mondialisée. D’autant que, les difficultés éprouvées par les pays du G20 lors de ces négociations montrent par analogie à quel point la capacité de négociation des EMUA seuls face aux géants du secteur serait réduite. En parallèle, les pays doivent travailler a mieux collecter les taxes indirectes sur les services numériques afin de maximiser l’ensemble de revenus (directs et indirects) potentiels.

Nicolas Köhler-Suzuki, directeur d’International Trade Intelligence, et Rutendo Tavengerwei, conseillère en politique commerciale spécialisée dans l’Afrique ont participé à la rédaction de cet article, qui s’appuie sur l’étude publiée le 9 septembre par l’Agence française de développement (AFD) dans la collection « Questions de développement ».

Cet article est republié à partir de The Conversation sous licence Creative Commons. Lire l’article original.

Main Photo by Magnus Mueller Tracy Le Blanc on Pexels.

Charles Telfair Centre is an independent nonpartisan not for profit organisation and does not take specific positions. All views, positions, and conclusions expressed in our publications are solely those of the author(s).

Ozayr Patel, Digital Editor, The Conversation

The “Fourth Industrial Revolution” is a term coined in 2016 by German economist Klaus Schwab. It’s used to describe the technology revolution that the world is going through. But there is growing criticism, particularly in the global south, of how it’s framed. Many are questioning whether it should be considered a revolution at all.

The Fourth Industrial Revolution, according to one view, is a very simplistic narrative that advances a distinct political agenda. It is a kind of exploitation that is being sold as progress. The narrative is being advanced to achieve a specific economic outcome – at the expense of many people in the global south.

Many innovations are happening in the digital technological space. But do they reorganise production and social relations, or do they just entrench past forms of inequality?

Consider the case of the ride-hailing app Uber. It may sound like enticing work for drivers, but there’s more to it. Drivers may face bad working conditions, penalties and other challenges without the security of human resources behind them.

In this episode of Pasha, Ruth Castel-Branco, manager of the Future of Work(ers) research project at the University of the Witwatersrand, joins Nanjala Nyabola, a storyteller and political analyst, in taking us through the seductive idea of the Fourth Industrial Revolution.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Main photo byPete Linforth on Pixabay.

Photo “A smartphone attached to the dash on a vent holder in a moving Uber car. The Uber App shows the route in Cape Town map.” by maurodopereira, found on Shutterstock.

Music “Happy African Village” by John Bartmann, found on FreeMusicArchive.org licensed under CC0 1.

“African Moon” by John Bartmann, found on FreeMusicArchive.org licensed under CC0 1.

Charles Telfair Centre is an independent nonpartisan not for profit organisation and does not take specific positions. All views, positions, and conclusions expressed in our publications are solely those of the author(s).

Anthea Roberts, Professor in the School of Regulation and Global Governance and Director of the Centre for International Governance and Justice at the Australian National University.

Jensen Sass, Fellow in the School of Regulation and Global Governance at the Australian National University.

CANBERRA – When the world changes, policy paradigms change, too – or at least they should. Harvard economist Dani Rodrik recently argued that, instead of globalism, financialization, and consumption – the principles undergirding the declining neoliberal paradigm that has dominated global economic policymaking for the past 40 years – a framework that emphasizes production, jobs, and localism is needed. Rodrik calls this nascent paradigm “productivism.”

At a time when political polarization is increasing throughout the developed world, the core features of the productivist paradigm have found support on both the right and the left. But there is more to this paradigm shift than Rodrik’s narrative allows. Productivism is only one part of a broader, more profound transition away from neoliberalism’s preoccupation with efficiency toward a new paradigm that puts systemic resilience first.

To understand why a particular paradigm becomes ascendant, we need to identify the policy problems it must address. Neoliberalism’s assumptions regarding the ability of individuals and communities to adjust to trade shocks proved to be wildly unrealistic; the doctrine’s exponents were oblivious to its unintended consequences.

Trade liberalization was a boon to GDP, but most of the gains in developed countries went to the rich, while losses were borne disproportionately by already vulnerable groups. Simmering grievances in those communities went unnoticed in policy circles for many years before finding expression in populist movements. This anger is central to the growing bipartisan support for the pro-worker agenda that Rodrik describes.

Economic globalization reduced inequality between the developed and developing world, but it also increased geostrategic competition, particularly between China and the United States. Interdependence can be weaponized, but the neoliberal paradigm provides little guidance on how to address security concerns like economic coercion and supply-chain fragility. As a result, governments are now hastily trying to create anti-coercion tools and to reshore semiconductor manufacturing.

The neoliberal paradigm may have increased wealth, but it also increased carbon emissions, contributing to the current climate crisis. Its adherents couldn’t grasp that efficiency is desirable only up to a point. Short-term efficiency that maximizes wealth but undermines the environment is not sustainable – and it magnifies the shocks that individuals and communities are likely to face.

The world has become riskier and more uncertain, partly owing to neoliberal policies that exacerbated social, political, economic, and environmental vulnerabilities and are ill-equipped to respond to the crises they helped cause. Any new paradigm must enable policymakers to tackle domestic distributional and political conflicts as well as protracted global instability and uncertainty.

While productivism may help to address some of these challenges, it falls short of providing an overarching intellectual framework that can match neoliberalism’s emphasis on efficiency. Productivism is most concerned with the social inequities and attendant resentments generated by pro-market policies. Reshoring production and rebuilding infrastructure represent ways to manage some of the risks generated by economic interdependence and climate change.

But a paradigm that places resilience at its center would respond to all these problems more deeply and would have wider applications. Whether the focus is on communities, economies, or the environment, resilience represents a more important systemic value than efficiency or production.

Many define resilience as the ability to absorb shocks and adapt in order to carry on functioning. But it is also a systems concept – something that can be measured and designed. It shifts the focus of policy analysis away from decisions taken individually toward their effect over time on the system as a whole. As such, it discourages excessive attention to a single metric, such as GDP, or short-term returns. And it encourages a balance between diversification and concentration, and between independence and interdependence. Efficiency may contribute to resilience by increasing returns and adaptability, but not when pushed to the extreme of creating systemic fragility.

Much like productivism, it is too early to envision a fully-realized policy paradigm based on resilience. But the concept already possesses considerable intellectual clout, developed across numerous disciplines and applied in various policy areas. It is central to climate-change adaptation, disaster management, and sustainable development. Urban planners apply it to design cities that are better able to withstand climatic instability. Development specialists use it to consider how at-risk communities might respond to disasters. Resilience also appeals to many in national security and international business circles who anticipate disruption of critical supplies or critical infrastructure by extreme weather events or hostile actions.

Today’s turbulent world calls for prosperity that can withstand shocks and does not degrade the foundations of our societies. Economic growth must be inclusive enough to empower individuals and communities to flourish, without stirring polarization and backlash. We need an approach to globalization that enables countries to feel secure, even in the midst of growing ecological risks and geostrategic competition.

Whatever the next policy paradigm is, reconciling these demands would be its defining challenge. Productivism gets us part of the way; resilience promises to take us further.

Copyright: Project Syndicate, 2022.
www.project-syndicate.org

 Main Photo by Alicia Mary Smith on Unsplash.

 Charles Telfair Centre is an independent nonpartisan not for profit organisation and does not take specific positions. All views, positions, and conclusions expressed in our publications are solely those of the author(s).

Danny Bradlow, SARCHI Professor of International Development Law and African Economic Relations, University of Pretoria

In most rich countries the news that a mission from the International Monetary Fund (IMF) is coming to visit is met with indifference. But, in most African countries the news can cause great consternation.

Why the difference?

History has a lot to do with it. The citizens of many African countries have suffered through their governments, under IMF pressure, cutting subsidies and social spending, firing public sector workers and increasing taxes. For example, a 2021 Oxfam study, found that the IMF encouraged 33 African countries to adopt austerity policies in the wake of the COVID pandemic.

On the other hand, with a few exceptions, such as Greece, citizens of rich countries have not experienced the IMF having any direct impact on their lives.

Another important reason is lack of knowledge. Usually, when the IMF comes to town, the public gets little information about the purpose of the IMF’s visit – or its likely outcomes. In other cases, people are concerned that they have limited ability to influence the outcome of the visit or its impact on their lives.

This article seeks to remove some of the mystery surrounding IMF visits to a country. It explains the two basic reasons for the IMF sending its staff on “missions” to a country. And what can be expected in each case.

The IMF’s remit

According to its Articles of Agreement, the IMF’s purposes include promoting monetary cooperation among its 190 member states so that they can more sustainably manage their macroeconomic situations and their international financial relations. This should help them promote and maintain high levels of employment and real income and develop their productive resources.

The IMF also provides financing to countries that do not have sufficient foreign exchange to meet all their needs and obligations so they do not have to resort to measures that are destructive of “national or international prosperity”.

To fulfil these responsibilities, the IMF sends its staff on two basic types of missions to member countries.

Surveillance missions

The first are surveillance missions. Article IV says that the IMF should exercise “firm surveillance” over the efforts of its member states to try and direct their economic and financial policies towards the objective of fostering orderly economic growth with reasonable price stability.

Thus, the IMF regularly – usually annually – sends a staff team to assess the state of each country’s macro economy, the risks it faces and its capacity to continue evolving in a sustainable way. This team usually meets with officials in each country’s ministry of finance and central bank. In addition, they can ask to meet other government officials. For example, during COVID, the IMF might have been interested in meeting with health department officials.

The IMF staff will also normally meet with members of parliament and with representatives of business and labour. They may also meet with representatives of civil society.

There are four important points to note about these missions.

First, while the IMF provides some guidance to its staff, it does not require them to follow any particular procedures for informing interested parties that it is visiting the country. The result is that it’s difficult for anybody interested in the visit to learn how they might engage with the mission or provide it with information.

Second, in principle, there is no limit on what issues the IMF can focus on during its mission. Consequently, IMF staff can raise any issue and request whatever information they think is relevant to assessing the state of the country’s macroeconomic situation. This has led to a gradual expansion in the range of issues the IMF may raise in these missions. They now range from fiscal policy, inflation and unemployment rates, and balance of payments deficits to issues about how the country is dealing with climate change, gender discrimination, public health and wealth inequality.

Third, the outcome of the mission is a report prepared by the staff that is discussed by the IMF’s Board of Executive Directors. The report is usually made public after the discussion, together with a press release.

The IMF also uses the information in preparing its reports on the global economy.

Fourth, the IMF can make recommendations to the government on actions that it should take to deal with any challenges that have been identified.

These recommendations are purely advisory. In principle, the country is free to ignore them. This may be the case if the country is confident that it will not need IMF financing in the future. This is the reason that the citizens of rich countries do not usually care that an IMF mission is visiting their countries. However, this is a luxury that a country cannot afford if it thinks it may need IMF financial support. Or that its access to international financial markets may be influenced by the IMF’s view. This, of course, is the case for most African countries.

Financing missions

The second type of mission is initiated by requests for IMF financing.

Their purpose is to assess the country’s need for financial support. And to negotiate the terms on which it will be provided.

The IMF effectively acts as a lender of last resort. Consequently, governments are reluctant to ask for IMF financing unless they cannot get enough foreign exchange from other sources.

The IMF provides the financing on an unsecured basis. It tries to ensure that it will be repaid by making the financing subject to policy conditions, known as conditionalities. The premise of these conditionalities is that the country is essentially living beyond its means and must reduce its expenditures to the level of its income, including the funds contributed by the IMF. In short, the IMF is demanding that the country makes sacrifices.

This means, inevitably, that the terms of IMF financing are controversial. First, the scale of the sacrifices necessary to restore a country to macroeconomic health are not easily determined. They depend on perceptions of the causes of the country’s crisis, assumptions about future economic developments and the capacity of the government to implement policy changes and the public to accept and absorb these changes. Reasonable people can, of course, have different views on these issues.

Second, the scope, terms and number of conditionalities the IMF chooses to attach to its financing can be very broad, or quite specific. For example, it can merely state the size of budget cuts that the country must make or the amount of additional revenues it must raise and then leave it up to the country to decide how to meet these conditions. Alternatively, it can specify which budget items should be cut, which taxes should be increased, and which structural reforms must be implemented in order to get IMF financing.

This effectively means that the conditionalities are matters for negotiation between the government and the IMF and that they depend on the balance of bargaining power between them. This means that the IMF is effectively a player in the domestic economic policy making process of countries that need its financing.

However, the IMF is not subject to the same legal requirements regarding participation or transparency as other players in this process. It is also less accountable to those who will be affected by its policy choices than the government itself.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Main photo by  Simone D. McCourtie / World Bank on Flickr.    

Charles Telfair Centre is an independent nonpartisan not for profit organisation and does not take specific positions. All views, positions, and conclusions expressed in our publications are solely those of the author(s).