The World Bank report on doing business globally says the US is a pretty easy place to work compared to most of the rest of the world. And coming from the World Bank, that is a hefty dose of medicine. The bank is not exactly a leftist patsy. Just ask any of the countries in the process of deleveraging who were hoping for a little help on the side.
So what are we to make of this? The mainstream media have consistently supported - or failed to contradict - those who claim the US is the regulatory equivalent of North Korea. One suspects that the overall economic decline of US business growth and profitability in the face of global re-balancing has much to do with it. Blaming an outside force is easier psychologically than having to face that you are no longer as competitive as you once were.
One also senses that the US has become dependent on tech 'miracles' that pull the rest of the economy along with them. But productivity numbers, shifting skill demands, ageing populaces in most of the world and declining household income suggest that there arent too many rabbits waiting to be pulled out of hats - and that if there were, they would have to be elephant sized to make a difference.
Whatever. This report simply adds to the evidence that the US has the skills, the innovative capacity and the business environment to prosper. It just needs to stop whining about victimization and get out of its own way. JL
Kenneth Rapoza reports in Forbes:
With the economies of the U.S. and Europe sputtering along on fumes, politicians are quick to blame regulation and taxation as the main cause of a lackluster business environment. Yet, according to the World Bank’s 212 page “Doing Business 2012″ report, released on Wednesday, there is less red tape for setting up shop in the U.S. than there is in all of Europe, Latin America, Africa and most of Asia The World Bank uses indicators such as time spent to set up a business to getting credit, among other things, in benchmarking the 183 countries it ranks in “Doing Business”.
The report measures and tracks changes in the regulations applied to domestic companies in 11 areas in their life cycle–such as investors rights, taxation, cross border transactions, legality and enforcement of contracts and bankruptcy law. A fundamental premise of doing business is that economic activity requires good rules that are transparent and accessible to all, not just big business. Such regulations should be efficient, the World Bank states, striking a balance between safeguarding some important aspects of the business environment and avoiding distortions that impose unreasonable costs on businesses. “Where business regulation is burdensome and competition limited, success depends more on whom you know than on what you can do. But where regulations are relatively easy to comply with and accessible to all who need to use them, anyone with talent and a good idea should be able to start and grow a business (legally),” the World Bank said.
Where does the supposed regulation and taxation crippled U.S. stand in the rankings? It is number four, trailing behind New Zealand (3), Hong Kong (2) and Singapore (1).
What it looks like from the research desks at one of the most powerful and elite multilateral institutions on the planet is a U.S. that does not have the government in its way, but a U.S. whose government is more out of the way than it is in every other major economy on earth, including mainland China.
An economy’s ranking on the ease of doing business does not tell the whole story about its business environment. The underlying indicators do not account for all factors important to doing business, such as macroeconomic conditions, market size, workforce skills and security,all factors where the U.S. would outperform the three countries that are ahead of it in the rankings.
What the rankings of the World Bank do examine are the key aspects of the regulatory and institutional environment that matter
for companies. The top 20 economies on the list have implemented effective, yet streamlined procedures for regulatory processes such as starting a business and dealing with construction permits as well as strong legal protections of property rights. They also periodically review and update business regulations as part of a broader competitiveness agenda and take advantage of new technologies through e-government initiatives, the World Bank says.
According to the study, the U.S. is No. 1 in large advanced economies for simple regulations and a general low cost of doing business, contrary to what many politicians say about what troubles the U.S. economy.
While taxation remains an issue, it is not enough to make the U.S. a difficult place to conduct business. The U.S. tax code is cumbersome and puts the U.S. behind most of its peers in the Organization of Economic Cooperation & Development, or OECD.
The data shows the average tax that a medium-size American company must pay or withhold in a given year, as well as measures of the administrative burden in paying taxes, equates to 46.7% of total profits in the U.S. compared with 42.7% in the OECD despite having less number of taxes to pay than its advanced economy rivals (11 for U.S. vs 13 different taxes for OECD). U.S. companies also spend more time preparing for taxes than its peers, averaging 187 hours compared to 186 hours. When it comes to paying taxes, the U.S. ranks with Taiwan, while Hong Kong and Singapore are in the top four. The U.S. ranked no. 13 in ease of starting a business, ahead of all the nations of Europe, but Hong Kong and Singapore again, as well as Canada, Australia and New Zealand.
Overall, however, the ease of doing business in the U.S. remained unchanged at No. 4 worldwide even as Washington complains that the regulatory and tax burden is making matters worse.
As an aside (and this is essentially a blog, so we’re allowed our own two cents from time to time), what troubles the U.S. economy is a decade long spending spree on behalf of our companies and citizens. We wanted to live like Madison Avenue, when we were really all a bunch of Mayberry locals. The deleveraging process is long, painful, and on going and every money manager from Tokyo to New York will say the same thing. They will all say that low interest rates are irrelevant to an economy that does not want to take risks. The Fed can force a bank to lower interest rates, but it cannot force a bank to make a loan to customers that do not want loans in the first place. The S&P can be trading at multiples below historic averages, but a P/E of 12 dropping to a P/E of 7 isn’t going to make Calpers and the Missouri Teachers Union allocate 70% of its retirees pension money into stocks; it’s going to put it into Treasury debt. The U.S. economy is suffering because of a combination of historic deleveraging, lackluster support from fiscal policy makers in Washington, and a general, yet pervasive, lack of business confidence. The U.S. economy is not suffering because of taxes, energy policy, or Obamacare as data and polls have shown consistently.
0 comments:
Post a Comment