Viewpoint by Manish Uprety F.R.A.S. and Ritesh Tandon
Manish Uprety F.R.A.S. is an ex-diplomat and Ritesh Tandon is the Republican Party candidate for the US Congress from California’s 17th District. Any views or opinions expressed are solely those of the authors and do not necessarily represent those of IDN-InDepth News.
CALIFORNIA (IDN) – President Donald Trump is nominated for the 2021 Nobel Peace Prize for the recent Peace Deal between Israel and the United Arab Emirates. In fact, his pursuit for peace as an official US policy found manifestation earlier in his efforts not to lead US into any war, and to bring reconciliation to North and South Korea.
The nomination comes at a time when the world is wobbling because of COVID-19, conflicts in many parts of the world, institutions like the European Union taking their last breath, and the US, the world’s oldest democracy preparing for elections in less than two months’ time.
Prosperity is an essential precursor to peace. And for prosperity, economic freedom and a priority for technology and innovation to secure development is the key.
A comparison between the two countries between 1970 and 2017 viz. Chile and Venezuela provides an important lesson. An increase in economic freedom increases income per capita substantially.
Chile saw its economic freedom go up by +123% resulting in an increase of +204% in income per capita whereas Venezuela witnessed a drop in economic freedom of -64% leading to a fall of -42% in income per capita.
It is interesting to see that the common trait which connects the countries that have been a focus area for President Trump’s efforts for peace and prosperity is a priority for economic freedom and innovation. Israel, UAE, and South Korea fall in the category.
When compared with the US, other countries like Israel, UAE, and South Korea are fairly new nations but a priority for technology and innovation to secure development is a common trait in all.
Other countries are also following the lead. In Sri Lanka, in order to establish a knowledge and technology-based society, and to make the country a global innovation hub, the new government of Prime Minister Mahinda Rajapaksa recently prioritized the ICT sector.
Innovation not only spurs employment but covers other aspects of development as well. The success of Ford’s T Model changed America forever and its direct and indirect benefits range from roads to increased attendance in schools.
The examples of MicroEnsure in Zimbabwe and Celtel in Africa, Indomie Noodles in Nigeria also fall in the category. Prosperity Paradox, a book by Clayton M Christensen explores how nations have eradicated the deadly poverty trap through innovation.
In Asia, India is emerging as the technology platform for global companies to drive innovation. In May 2020, the fundraising spree for Reliance’s Jio platforms valued it at $65 billion. It will allow investors to make India a base for future products and will also help the country’s startup ecosystem.
Innovation is playing a very important role in our economies. Recently India’s corporate profit stood at $ 65 billion with a market capitalization of $2 trillion which is more or less equal to Apple’s profit of $ 60 billion and its market capitalization of $2 trillion.
California is amongst the most innovative economies not only in the US but also in the world in the field of education, employment, infrastructure and investment connected to innovation.
It is the leader in terms of venture-capital spending per capita and is the top 10 for its share of technology companies; share of science, technology, engineering and mathematics (STEM) professionals; and projected STEM-job demand.
But one has to also realize that though innovation drives economic growth, it is also a fragile engine that can either be driven by tax incentives or made less efficient by heavy tax responsibilities.
President Ronald Regan made an interesting observation about the government’s view of the economy: if it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.
Can one risk making US another EU country or Britain? Though it would surprise many the poorest 20% of Americans are richer on average than most European Nations. If the “poor” of the US were a nation, it would be among the richest in the world.
The poorest 20 per cent of Americans consume more goods and services than the national averages for all people in most affluent countries including a majority of countries in the Organization for Economic Cooperation and Development (OECD), including its European members.
New technologies and constantly evolving systems are a cornerstone of California’s economy and global competitiveness. California’s performance on key innovation indicators has consistently ranked the state within the top nations in the world.
As the US emerges from the global recession and the challenges caused by COVID-19, there is a need to re-evaluate the state’s strengths in evolving areas like innovation and shore up areas of weakness.
Extraordinary moments require extraordinary responses. One cannot count on Keynesian economics because of its very poor track record. Japan is a case study which proves that if fiscal Keynesianism and monetary Keynesianism lead to any success, Japan’s economy would be booming.
Sardar Patel had said in 1945: “Give me just a week’s rule over Britain; I will create such disagreements that England, Wales and Scotland will fight one another forever.” However, it seems the economic policies of the incumbent British government would do the same equally effectively.
Both California and the US have to realize that permanent supply-side tax cuts encourage more prosperity, not temporary Keynesian-style tax cuts.
The private sector helps the government by paying its taxes and buying the burgeoning debt of the government. How can government spend if people and businesses don’t earn?
Therefore, it becomes imperative that the authorities need to understand the relationship between taxation and innovation to develop policies that benefit individuals and corporations.
In a widely cited 2018 paper titled “Taxation and Innovation in the 20th Century,” the researchers led by Akcigit found a direct correlation between innovation and economic growth.
The research team noted that high taxation in 20th-century Europe caused a “brain drain” into the U.S., inadvertently sending innovative individuals to American corporations.
But what was even more interesting was the finding that corporate and personal income taxation negatively affects the quantity, quality, and location of innovation at the individual, organizational, and state level.
California needs to realize that low taxes have a significant positive effect on innovation. Its economy is the cauldron in which innovation grows and manifests into tangible economic, social and technological benefits.
Soon next-generation technologies like 5G will start playing a key role in societies. Recently, India, U.S. and Israel announced a collaboration to develop a transparent, open, reliable and secure 5G communication network. This demands a sense of greater responsibility both from the authorities and other stakeholders.
The unfortunate incidents involving TRAI (Telcom Regulatory Authority of India) such as continual call drop or no sale of spectrum in the last five years are no great help either to customers or companies or innovation in general.
The situation is so abysmal that Prime Minister of India Narendra Modi had to express his grave concerns over the call drop issue publically in his interaction with top secretaries under the PRAGATI initiative.
Though the Supreme Court allowed telecom companies 10 years’ time to pay their adjusted gross revenue (AGR) dues to the government of India, operators like Vodafone continue to fleece their consumers such as in the case of 9711XXXX93.
It reminds one of Harry Browne who had said that government is good at one thing, it knows how to break your legs, and then hand you a crutch and say, ‘see if it weren’t for the government, you wouldn’t be able to walk.’
But innovation cannot be compromised in such manner as it is an area of particular concern. Therefore, it becomes imperative for the policymakers, politicians and businesses need to priortise it and look at the existing problems with a new lens.
Taxes should be looked at as an economic tool with significant costs rather than as a pure driver of government revenue. This necessitates lowering of taxes especially to foster innovation in California.
Not only playing a significant role in the global economy with a strong base in California, innovation is a key element in America’s ability to create local jobs but also to compete with lower wage labour in most of the rest of the world.
This demands a realization that innovation is the lifeblood of America’s high-tech economy which would be helpful, coupled with the need to align the incentives of businesses with the social value of innovation.
We have to realize that economic growth occurs only when we increase the quantity and/or quality of labour and capital. Smart investment in innovation is the need of the hour in the US coupled with lowering the taxes as it would conducive to promote a culture of innovation.
It is high time to acknowledge and focus on California’s competitive advantage, and harness innovation for the benefit of its peoples and society at large. [IDN-InDepthNews – 15 September 2020]
Photos (L to R): Manish Uprety F.R.A.S. and Ritesh Tandon. Credit: The authors.
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