Profit? Yes! But Must be Clean

The Royal Commission Report into Misconduct in the Banking, Superannuation and Financial Services Industry will be released to the public this afternoon (4 February 2019). The Commission had already published an Interim Report in September 2018.

The Interim Report had hardly anything good to say about the industry. Rather, the Commission used the word “greed” to describe the industry’s behaviour and how the industry largely treated the ordinary customers. Otherwise, how can one explain fees charged for services not provided? Fees charged to dead people?

The Australian banking industry had been politically very successful for decades. In the post-GFC years, the industry used the excuse of  ‘rising costs of funds’ in international markets for raising their interest rates asynchronous to the RBA’s rate decisions. Nobody raised an eyebrow when the major four banks reported record profits year after year while still crying poor about rising costs of funds. The crux of the matter is the banking industry fell into a culture of profit at any cost and bank executives’ remunerations were linked to profit and revenue.  Thus, the bank executives in Australia all they cared for was whether they were contributing to the bank’s revenue and profit. Bank leaders did not care enough whether their employees were doing the right thing for their customers. If the bank management were thinking that they were more focused on creating shareholder wealth, shareholders thought differently.   ANZ, NAB,  and Westpac – all received a ‘first strike’  2018 under Australia’s ‘two strikes’ rule.  CBA  received a ‘first strike’ in 2016.

So, the bottom line is: yes, we want our banks to be profitable and financially strong. Yes, we need strong banks for a strong economy. But the profit must be clean.

IMF downgrades India’s growth forecast for 2020-2021

In the latest World Economic Outlook, the IMF makes the following observations on the Indian economy.

India’s growth is estimated at 4.8 percent in 2019, projected to improve to 5.8 percent in 2020 and 6.5 percent in 2021 (1.2 and 0.9 percentage point lower than in the October WEO), supported by monetary and fiscal stimulus as well as subdued oil prices.

A world without work

Oxford economist Daniel Susskind paints a dystopian future of a world without work as a result of the relentless onslaught of new technology. This, critics might proclaim, is an old argument evoking new fears. But, according to a reviewer, Susskind has a compelling story to tell that entails a judicious juxtaposition of innovative analysis and novel evidence. Susskind does not merely document the promises, pitfalls, and perils of new technology. He argues that the private sector is unlikely to redress the challenges of a world without work. Such responsibility lies with the government and its ability to design appropriate and effective policies of redistribution.

Bushfires and the Australian economy

The calamitous bushfires that have engulfed Australia are most likely to have an adverse impact on the Australian economy. The upfront cost is projected to be in excess of A$ four billion. Beyond this headline figure, a painful period of adjustment lies ahead. A piece in the New York Times offers a poignant portrayal of such a challenge facing policymakers and politicians across both sides of the political divide. A good read….

Floating farms of Bangladesh: a home-grown strategy to adapt to climate change


Bangladesh is highly vulnerable to climate change. Flooding regularly affects about 1 million people. One prediction is that by 2050 about 20 percent of the available land will be permanently submerged under water.

More than 100,000 people are forced to move regularly as villages and livelihoods succumb to rising water levels during the monsoon season. Such enforced migration, in turn, enlarges the urban informal economy.

During the monsoon season, much of the farmland in Southern Bangladesh goes underwater and remains water-logged for about 7 to 8 months severely restricting the capacity of local farming communities to earn a living. Local resilience and innovative zeal to adapt to changing climatic conditions led some farming communities to revive an age-old technique of building ‘floating farms’.  The ensuing discussion is based on the following sources which can be found here,  here, here and here.

Floating farms – or gardens – which are usually 8 to 10 metres long and a few metres wide are constructed using water hyacinth. This is an abundantly available invasive species but can serve as a robust base for the floating gardens which are in turn covered with soil and cow dung. A variety of cash crops can be planted on them. They serve the needs of local communities while the surplus generated becomes a new form of income-generating activity. This farming technique is productive because the cropping and harvesting cycle is significantly shorter than crops grown on dryland. At the same time, it promotes agricultural diversification by encouraging the cultivation of diverse crops throughout the year. Moreover, the products are organic and that in turn enhances their appeal to local traders who can sell them at a premium price.

The floating farms must be built every year, but the debris that is left behind are used as fertilizer during the dry season.  Today, about 50,000 farmers are involved in the floating farm sector.

What role have different actors played in the revival and expansion of floating farms which are now recognised as one of 21 examples across the world of ‘globally important heritage agriculture’ (as designated by FAO)? Clearly, the innovative capacity of local farming communities was essential, but in the mid-2000s they benefited from the activism and support of local and international non-governmental organizations (NGOs). In 2005, and again in 2009, the Bangladesh government recognized the importance of floating farms as part of its climate change adaptation strategy. In 2013, the government approved a USD 1.6 million project under the Bangladesh Government Climate Change Trust (BCCTF)to promote floating farms for climate change adaptation and has targeted close to 50 localities across the country. This suggests that scaling up of the floating farm sector is contingent on appropriate support from the government.