Apuntes international economy. (2016)Apunte Inglés
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22/01/2016 3.1.- Concept and characteristics of regional economic integration.
The world is becoming smaller and characterized by intra-industrial or intra-firm trade, and by a strong movement of people.
In Europe, the need to agree on how to divide and use the Marshall Plan back in 1947, make the European countries to work together and towards a common objective. As a result, the European Community was created in 1957 with six founding countries, along with other 2 European organization at that time, with the same members.
09/05/1950: Schuman Declaration, which was the starting point of the process of regional integration in Europe and in the world, as the rest looked at Europe.
One of the results of what we are building is regional integration, being the European the most advanced one, although problems are arising. However, regional integration eventually happens anywhere.
10/02/2016 4.7.1.- Limits to movement/settlement of people outside their countries of origin.
A visa is a permit that allows to travel to a given country, and does not permit to work in that country. In order for you to work, you will need a work permit. Inside the Schengen area, a work permit does not work for the whole area, but just for the country giving it.
4.7.2.- The new air transport hubs.
A hub depends upon a company that establishes that hub, so an airport not so important can become important if a big company establishes its hub in it. The main airport today is Atlanta, which has 8 terminals and is the hub of Delta.
Raking of European airports: 1.
Charles de Gaulle (Paris).
Importance of Latin American flights 12/02/2016 3.3.- Economic and monetary integration in Europe.
As a result of the French Revolution, the concept of nation appeared, as Renan defined it: “a body of citizens whose collective sovereignty constituted them into a state which was their political expression”.
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The starting point to regional integration is a group of countries that share something. Example: Europe in 1948 had to agree on how to share and use the Marshall Plan, so they created an international organization, especially after the Schuman Declaration of 1950.
26/07/2012: Reassurance of the role of the European Central Bank as the guardian of the Euro. It establishes the monetary and exchange mechanisms.
Countries of the EU that are not part of the Euro: Poland, Romania, Hungary, Czech Republic, Sweden, UK, and Croatia. However, there are two groups of countries: 1. Those that do not want to be part of it, so they are out upon their will, as United Kingdom and Sweden.
2. Those who have to be part once they meet the requirements to be a part of it, as Poland.
3. There are other countries that, although not part of the EU, use the Euro as their currency.
However, they have no right on decisions taken by the European Central Bank, as is the case of Montenegro.
Monetary sign (coin, bank notes, how we see the currency) vs. currency (what the law says).
The case of the CFA Franc. Agreement since 1998 by which some countries formerly part of the French empire now share a currency. The monetary sign is the CFA Franc, but the currency the Euro. This monetary sign if supported by the Treasury of France.
Most of the world today works as a monetary union, as with credit cards you can pay almost everywhere, although in some cases you could be charged with a small fee or the exchange rate will be applied. So the world is divided in two sectors: a) Those countries where it is possible to use credit cards and you will be charged in your own currency (plastic money).
b) Those countries where it is not possible.
Free trade area vs. customs union.
In the case of the free trade area, we have two countries, A and B, with A having a protection of 20% of customs and B having a protection of 10% customs. Between them there are no customs, but their different outside customs keep working. So for a foreigner, it is better to import through B and then move the products to A, thus only paying 10% customs. However, this does not work in the long run, as at the end A would realize and want to change its 20% customs.
In the case of the customs union, both A and B dismantle each ones’ protection and create a common customs for the entrance of foreign products. Thus, whether a foreigner enters his products through A or B, he will pay the same customs, and no problems arise between A and B. This is normally used for goods and services. In this model, each country specializes in which he does the best, and it allows to expand the market and create economies of scale.
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24/02/2016 4.1- Origins of globalization. XVI century: the Manila Galleon.
1565. First year of globalization.
http://www.galeondemanila.org/index.php/component/content/article/49/134 Before this date we cannot talk about globalization.
Globalization comes from trade, and we cannot talk about trade if there is no global trade.
Trade routes have been established since the beginning of mankind.
The first real global trade was established in 1565, with the first travel of the Manila Galleon, which departed from Manila and arrived to Acapulco. After a few months there, it went back to the Philippines through the island of Guam. Since then we have a transpacific route from Manila to Acapulco. This route was discovered by Fray Andres de Urdaneta. Before this date there was no transpacific route. That's why we cannot say that there was a global trade before this date.
Manila became the capital of the Pacific.
In Mexico it was called La Nao de China, as most of its merchandise came from China.
From 10 to 15 percent of its merchandise was changed in Mexico and boated again from Veracruz to the port of Seville in Spain. From there, the merchandise was sent to the rest of Spain/Europe.
Trade has to work in both directions (each side has something to offer). From Acapulco to Manila the galleon went full of silver, which was very appreciated by the Chinese.
02/03/2016 Youtube: Rafael del Pino Cordeiro – watch it, take notes and study them.
4.9- Effects of taxation in the global movement of human capital.
In countries of Western Europe, about one third of the population pay taxes in excess of 50% (summing up all the taxes we pay. For those who earn more, the level of real taxation increases (a pilot may be paying around 70% taxes). There is a part of society that just pays indirect taxes.
Progressive term/taxation: the more you earn, the higher the percentage that is applied on you (the higher the percentage you pay). It is in force in most of Western Europe. It is done in order to maintain the welfare state, which provides services to the population as a whole, only having to pay a little bit for some determined services. It is very expensive, but we request our governments to provide these services by free or almost free.
The final income can be higher in some countries, although in others your net salary could be more. That difference is made by taxation. So people think in their final income, then moving to countries where taxation is lower and they pay more. Then the welfare state is losing an important source of income.
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04/03/2016 Taxation and its effects in many aspects of international economy.
30 years ago people made their lives in their countries of origin, maybe migrating just once. Now this has changed. With people moving to other countries and paying taxes there, we lose revenues from taxes and work force. That's why there are movements in Europe trying to establish the same taxation in order to prevent this from happening.
Tax havens. Necessary to distinguish criminal cases from others. Necessary to see how to deal with national sovereignty, because we cannot impose our taxation policy on others.
Different solutions to avoid the situation created by different taxes, because if not it will increase in the coming years: 1. Prevent our people from leaving our country, obliging them to work here. Stop freedom of movement.
2. Approve a law in which citizens should pay taxes in their country of origin, regardless of where they are living.
3. Allow to leave, but what you have to pay for that you have received freely or for a small amount (university education).
The US taxes all its citizens regardless of where they live. Some citizens with double nationality are giving up their American nationality because they do not consider it fair, as they would be using the welfare system of the other state, and not the American, so they would be paying for nothing.
Ireland is the European country with more foreign firms. Why? Most of the population speaks English as first language, special area for clearing US customs and migration (does not take so much time), taxation (real reason), etc.
To attract firms we have to have clear and fixed taxations, not something changing each time there are elections.
Madrid as a transfer airport has suffered a lot during the crisis, losing a lot of passengers, especially after the increasing in the landing taxes, making connections in Madrid more expensive than in other airports.
Two years ago they reduced taxes, increasing the number of passengers again.
Taxation is a very important issue when deciding whether to establish in one place or another, especially as a firm.
4.10- Towards a way to measure the “new globality”: the “globality index” (IG4).
One of the measures is GDP. Because of the difference of prices between countries, the GDP would not be the same even if they produced the same quantity of the same goods. So we use the total GDP in nominal terms, without correction (PPP); we do not change prices in order to be able to compare them. Not use GDP per capita. Direct terms. 25%.
In order to be global in terms of population you need a large quantity. You can be global in other terms, but if we see it in absolute terms you need a large population. The difference between 4 International economics.
young and old population is not taken into account here, nor the level of education. Key factor.
Logarithm terms. 25%.
Extension is also important. Small countries cannot be global countries. It does not take into account whether the extension is useful for making normal life or not. Logarithm terms. 25%.
Expenditure in the army, which is the way of measuring the political importance of a country. Not the amount of people that are military, but the amount of expenditure (money) in the arm forces.
You can have a lot of people, but without technology they would be unprotected, so you need to expend in military. The more you spend in the army, the more powerful you are. We take this into account because it is objective; soft power is not. Direct terms. 25%.
Mixing these variables, we get an index that allows to realize what has been the evolution of countries.
What has been the evolution of the world/countries in the last 20 years? Importance of neutral/objective variables and easy to use. The first country (100) has been the US for the past 20 years. The methodology only gives the value of 100 to the top, so we will always have other values to compare. In the index it is possible to see that 4 countries of Europe 20 years ago were among the top ten. Today, not a single country of Europe was among the ten first ones. China has developed a lot. Emerging countries have reached top-ten positions.
What has changed year after year is GDP and military expenditure because territory does not change and population does not change that fast.
For a country to be considered a superpower, it has to be among the top-ten at least twice.
Denmark is the biggest country of Europe because of Greenland, although it is not part of the European Union. However, there is more population in the part of Denmark in Europe than in Greenland.
Google: Javier Wrana- superpotencias y paises emergentes, cajamar (pdf).
09/03/2016 4.5- A new phenomenon: global cities.
We have, at least, two different groups of cities: global and non-global cities.
Global cities: London, New York, etc. Have much in common between them than between them and others in the same country. They are inhabited by people from many countries, each of them using his mother language, although formal communication is usually made in one language, say English. Their connection with other cities in other countries is most of the time better than between cities of the same country.
4.8- Global movements of goods and services.
Today we can divide the world in two parts, part A and part B. Part A is integrated and part B is not integrated, with countries been mostly isolated from one another. The link between any given country of part B is more important with any country of part A than with countries of part B, but the relationship is not balanced. In part A trade is more or less balanced and in this trade, the main point today is to study the case of intra-firm trade (trade among firms in order to get a final product, for example aircrafts). Trade especially happens among part A of the world, which depends on the degree of openness of the countries and whether they decide to be integrated in this part of the world.
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Intra-firm trade is the cause of most of the trade in the part A of the world. In these processes we see that most of it is done within countries of category A. A big part of trade today depends upon intra-firm trade, this new trade is because each part of the production process is better done in different parts of the world and it is not anymore the reason we had trade before.
11/03/2016 3.2.- Areas of monetary and economic integration in the world.
Asia-Pacific Economic Cooperation: headquarters in Singapore. Building a dynamic economic community.
Forum for discussion.
Asian Clearing Union: headquarters in Tehran, Iran. Objective promote trade.
Asian Development Bank: social development, reduction of poverty, regional integration, climate change.
Headquarters in Philippines.
South Asian Association for Regional Cooperation: integration in the area.
NAFTA: different commissions for the elimination of trade barriers.
Organization of American States: 69 states for territorial integrity and the strengthening of collaboration.
Pacific Alliance: Latin-American trade block for further integration.
Union of South American Nations: 12 states, headquarters in Quito (administrative) and Bolivia.
Latin American Integration Association: economic growth, increase in inter-trade.
Caribbean Community: 15 states, full employment of labour, sustainable development and cooperation.
Bolivarian Alliance for the Peoples of our America: social, political aiming.
Community of Latin America and Caribbean States: headquarters in Uruguay, regulation of reciprocal trade.
Organization of Eastern Caribbean States: headquarters in Saint Lucia, objective economic integration, protection of human and legal rights.
East African Community: headquarters in Tanzania. Fastest growing economic block in the world.
Common market in 2010.
Community of Sahel-Saharan States: headquarters in Tripoli, Libya. Objective economic union.
Common market for Eastern and Southern Africa: headquarters in Zambia.
Economic Community for Central African States: promotion of trade, common market, and solidarity.
Intergovernmental Authority on Development: founded in 1996, headquarters in Djibouti.
Southern African Development Community: headquarters in Gaborone, Botswana. Objective regional integration through democratic principles.
Commonwealth of Independent States: former Soviet states. Aiming at further economic integration.
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16/03/2016 4.3.- Financial World and globalizing dizziness. Similarities and differences between currency markets and casinos.
1997 crisis in Indonesia. The rupiah was overvalued. Vacuum of power, prices doubled a couple of times.
Salaries did not increase in the same way, governments collapsed, islands asked for independence including East Timor two years later. It took them 15 years to recover.
Do finances add any value to our lives or not? Do currency markets add something to our daily life or not? There is no agreement over these points.
Currency is something that we use, and there is an implicit agreement when we us currency as it is what we use to pay. But can it be considered as any other good, if we take into account that it affects the lives of a lot of people on a daily basis? Case of Indonesia with the currency crisis. It took it 15 years to recover from that turbulences that happened in 1997.
Today central banks are very important, being simple operators in the monetary market. The value of a currency does not depend only on the will of a central bank that issues that currency; it depends on many more factors. The will of the central bank/national government is just one factor, in many cases not being even an important factor.
One tool central banks have is to stablish the interest rate at which it will borrow money.
The European countries belonging to the Eurozone have a network of commercial banks among them (interbank system). Every commercial bank has a credit line towards the other banks that make up the system. The important thing is the limit on the credit line each bank has over the others Systemic banks. It depends upon the development of the financial system of every country, the amount of banks that are considered systemic banks. In the E, every country has two interbank systems: the internal interbank system and its participation in the EU network of systemic banks. At least one per country. They make up the European inter-bank system. Each has a credit line towards the other banks making up the systemic bank. The interest rate they use is called EURIBOR (EURo InterBank Offer Rate), and is applied between them. The EURIBOR is used as an index: for outer borrows the interest rate is EURIBOR plus a percentage. Through the influence of this index they can bolster credit and produce more.
In 1992-1993 there was a crisis in Europe. As there were different currencies, the less powerful currencies reduced their exchange rates in order to be more competitive.
If the value of a currency increases hugely in a short amount of time, the country, market and productive system do not have time to accommodate and a crisis begin. This provokes a strong disruption.
Could we solve this problem by creating one single central bank? What is clear is that in Europe we have not had the same problems we had in 1992 since the implementation of the Euro.
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4.4.- Global monetary integration as a counterpoint to the harmful effects of the operation of the foreign exchange market? (Important question) If we have a common currency with a global central bank, problems such as the European and Indonesia crisis of 1992 and 1997 would not happen, or would not have these effects. If we had one single central bank and currency for the whole world the problem of disruption will not happen, but others may arise.
Since the Euro we have not seen crisis of this type as there haven not been any fluctuation in the value of our currency.
Nigeria's currency is very weak, as it is issued by only one government, and it depends upon the confidence of the people in this government. But the countries that surround it use the CFA Franc, which is a strong currency not by itself, but because it is as strong as the Euro, so if it is strong, the CFA Franc is strong. Its value depends on 2 main factors: the decisions of monetary authorities that use the CFA Franc, and the European Central Bank through the Treasury of France, so it cannot be easily changed.
If we create the perception that the expansion of credit we are creating is real, then it can work.
www.bis.org it includes every central bank of the world. Place to discuss for central bankers, although not all of them.
Currency basket. It is the union of some different currencies that together allow for the measurement of another currency not part of the basket. The use of currency baskets creates something more stable along the time. Why should we use the currency of one single country instead of currencies of the most important countries? That's the second reason.
Example: basket X= A + 2B. As A= 3B, basket X= 5B. As B= 1/3A, basket X= 5/3A. If A=B, A has lost two thirds of its value in terms of B. So now X= 3B, or X= 3A.
Special drawing rights. It is composed of 31% Euro, 41,7% USD, 8,33% Japanese Yen, 8,1% GB Pound, and 11% Chinese Yuan. It acts as a currency unit that kind of work as a currency.
The IMF is a dead institution, as they are trying to apply solutions that were valid 30 years ago, but not today. The people in there is not aware of what is happening today in most cases. Most of the more valid people have left the IMF. They are still giving a lot of importance to the central banks, while they are not the ones establishing the value of a currency nowadays, as there are other factors influencing this value.
The main source of the value of a currency today is its performance in the market of currencies. When the currency market pays a lot of attention to a given currency, the central bank of that currency has almost no power over its value.
What is decided in currency markets has a real effect on me as a user of this currency. What the government or the central banks decide do not affect me that much.
The European Central Bank is dependent on the European Parliament. We can somehow influence the actions of the European Central Bank, but we cannot have any influence in the currency market.
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Main points of annex II. 15 questions from the document we sent him, and 5 from those topics that were not sent to him and/or those that were incomplete. Oil and Nigeria very good.
Chinese colonization of Africa: yes, no problems with human rights as both have low standards.
Conflict between Western Sahara and Morocco: not to centre so much on what happened before the conflict. Focus on arguments.
Senegal: more focus on territorial integrity. Region of Casamance.
Relationship Rwanda, Burundi and Uganda: insist on who is in power in each country, go deeper on it.
Bolivia: go deeper.
Oil price: oil is becoming irrelevant. Problem= countries that depend on oil in some years will not be able to depend on it. That's why nowadays they are selling it so cheap. The importance of countries depending on oil will decrease heavily.
Economic globalization and transportation: go deeper.
Mediterranean state= states without an exit to the sea.
08/04/2016 3.7.- Discussion: regional integration as a prerequisite for global integration? No, because both happen at the same time, although at different rhythms.
For being integrated at the global level, it is not necessary to be regionally integrated.
Yes, because we have to relate to our neighbours in order to be able t o relate with others.
First countries need to focus on their own situation rather than going into regional integration because of the economic problems we are suffering. Some countries would not go into regional integration because they have difficulties for being a developed country. Organizations that do not work may turn some countries into a path different from that of integration (case of Venezuela).
Lack of good infrastructures (roads, railways) between African countries, thus complicating their integration. Real integration between some countries of South Africa with goods infrastructures between them.
Yes, in many cases it is even better to be connected to the world trend because it creates bigger opportunities for you as a country, than trying to establish connection with your bordering countries (North Korea's relation with South Korea). The Dominican Republic and Haiti share a border, but they are very different with The Dominican Republic being 20 times wealthier than Haiti, and having more connections with Spain or the US than with Haiti, which is its neighbour and share a border. This fact cannot prevent you to realize that there are some African organizations working properly.
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The case of Europe is the most advanced case of regional integration of the world. You have to fulfil the rules you agreed to when you entered. In order to be accepted you have to have something to give to the others, as it is a reciprocal relations from which both parties should benefit. The case of Greece last year, trying the Union to pay its debts. But this was not fair, as there is no taxes common to all countries, and as each country has its own expenditures, budget, etc. So it would not be fair for the rest to pay for the other,; it would only be fair and would work in case of a catastrophe, but blackmailing is not the solution, as Greece tried to do. You need to offer things, and not claim and ask the others every time. There is a need for balance.
People think in the EU as a way of getting funds. However, these funds only cover some percentage of a small part of the project, not a percentage of all the project, as we use to think. If the EU finances some project totally, the receiving country has to agree to do something in exchange. Example: case of the bridge between Romania and Bulgaria. I finance the whole bridge project, but you improve the roads going to that bridge.
Trade is what makes the wealthiest partners willing to give some money to those less rich in order to develop and improve their infrastructures. Besides, by the competence provided by common trade and market, companies are obliged to improve in order to be able to face the competition coming from other countries. In fact, trade barriers were reduced in eight years, reducing a 12% each year, thus giving the companies time to improve, as they were forced to do it now or in the future. And by doing it step by step, they felt the process as something inherent to their companies, and not as something imposed on them.
More market for all companies, creating a bigger concurrence. It does not depend on budget, but on the deleting of barriers in trade. In that way it worked, proving it to be a successful way of doing it. That is the success and appealing of the EU. Win-win situation, making possible to deal with other facts.
Conclusion: to be part of the EU (solidarity a key, as well as transfer of wealth from country to country), the real point of interest is that it is a win-win situation. Firms improve their ways of production thanks to freedom of trade.
Real seed of the EU (why they signed the Rome Treaty, etc.), its main reason: the United States, because it was clear that the US needed a good partner across the Atlantic, and for that they created a fund to help Europe to recover from war, but it would open the fund to flow into the countries, only after European countries were able to reach an agreement on how to share this fund, so it forced Europeans to reach an agreement, and created an organization to discuss over the agreement, which was known as OECE (Organisation Européenne for Coopération Economique). This organization then evolved into the OCDE (Organisation de Coopération et de Développement Economiques), with its headquarters in Paris.
The intellectual elites of France and Germany worked on the agreement, deciding going further and not just stopping in the agreement to receive the money from the US.
Memories of Jean Monet.
Madrid had the third largest and better developed subway network of the world.
4.11.- Discussion: limits to globalization? Terrorism as one of the main difficulties globalization has to overcome, as it stops our willing to get to know others, of accepting companies from other countries, closing our borders and making us to fear the others and not to want to travel.
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Pandemic diseases also limit globalization.
Sovereignty. States do not want to give it up, although it limits the possibilities for cooperation, being the most important limit to globalization, along with nationalism, which go with protectionist measures. It provokes rivalries between states. For example: division of Cyprus, with Northern Cyprus feeling no link with the people in the South, as if they were very different from each other.
It is not clear that tensions between nationalist movements have to clash. It depends on how you treat them.
We have more in common with people of our age from Laos, for example, than with our parents or grandparents, although we are from the same country. It is a new phenomenon, happening from the last 20 years on (at the end of the 1980s, and not before except for the elites). It is a growing and deepening process. A new cultural world or world culture is being created among people of new generations, with no one able to stop the process. When you cross the border of Europe and maybe Mediterranean states, you do not see European cars. European cars are more expensive, but we compensate it by imposing high barriers to cars coming from other places of the world.
Not all African countries are yet integrated in the globalization we are suffering in the rest of the world.
The existence of nation-states disappears when counties start to sell their citizenship to anyone willing to pay the established amount. This leads us to a loss of value of citizenship, thus asking for new requirements to travel, establish, etc. in other countries. It is not easy to prevent people from going from one point to the world to other, so we have that no one is able to stop the integration process.
27/04/2016 5.6.- Human Development Index (HDI).
What is it? A summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and have a decent standard of living.
Uses: to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone economic growth is a mean to that process, but is not an end by itself.
It can also be used to question national policy choices, asking how two countries with the same GDP Dimensions: long and healthy life, knowledge, and a decent standard of living.
Dimension index: life expectancy index, education index, and GNI index.
How to calculate it.
Step 1. Creating the dimension indices: set maximum and minimum values (0-1), transform indicators into 0-1 indices, and calculate dimension indices. This is done for each one of the indices, that is, the life expectancy index, the education index, and the GNI index.
Dimension index= (actual value – minimum value) / (maximum value – minimum value) General standards: 11 International economics.
Health: 20 (minimum) – 85 (maximum) Education: 0 (minimum) – 18 or 15 (maximum, depending on the generation) GNI: 100 (minimum) – 75000 (maximum) Step 2. Aggregating the dimensional indices to produce the Human Development Index. The HDI is the geometric mean of the three dimensional indices: HDI= (I. Health * I. Education * I. Income) 1/3 Step 3. Country groupings. We classify the countries according to their results into: very high human development 0.800, high human development 0.700-0.799, medium human development 0.550-0.699, and low human development below 0.550 Commentaries by the professor.
An index cannot measure the quality of education. If you want to measure something for as many countries as possible, you have to get comparable information, although it is not always provided. If you go further, you cannot obtain the same information with the same quality for all countries, so the quality of somethings cannot be measured. In the case of education, the quality would be more important at university levels, as primary education has more or less the same quality throughout the world.
We usually give the value of 0 to the minimum in a given subject, instead of using the real figure, thus simplifying the process.
Comments on the readings for final exam.
Important to understand the difference between the concepts of gambling and investing.
We have to know all the areas of regional integration of the world (they were presented in class).
Importance of the case of the ASEAN. The countries forming it are to become the most integrated area of the world after the EU, especially taken into account that not a single country of ASEAN has more than the 30% of commerce of the area, thus deleting any possibility of one overpowering the others. Know their projects, in which point of the customs union they are, the basic information (population, economy, etc.). Understand how they have achieved such a deep union if compared with the one they had a few years before. (buscar en Google: “ASEAN at a glance”). “General view on ASEAN countries” The attempt at customs union in Southern Africa cannot be taken as a serious customs union, as South Africa is the strongest country in the area, controlling the rest, and amounting more than 30% of commerce in the area.
MERCOSUR is not properly creating a customs union, even if it formally is a customs union. However, customs are still in force, something that does not happen in Europe (Gibraltar is not part of the European customs union).
Real customs union only exist within given countries, being the EU an exception to that, and ASEAN is trying to build another exception, although not all the countries are participating of that attempt.
However, there are countries that have customs within themselves, that is, different regions with different customs inside of a given country.
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International taxation. One of the hottest topics of international economy nowadays. Good concepts, well explained, study them. If your fiscal residence is in Spain, you have to pay taxes no matter where your income comes from. Tax on income usually is based on residence. However, if you are a US citizen, you will pay taxes in the US no matter where you live. This is important because taxation is different among the countries. Linear taxation versus progressive taxation.
Tax havens. Jurisdictions where taxation is different. Many people with a lot of assets transfer them to tax havens in order to lower the burden of taxes they pay in their home country. Every country has a taxation system, with a part being on income, on wealth, etc. After you are taxed on income, then you are taxed on wealth. Therefore, the wealth people in countries where wealth is taxed, they transfer their goods to tax havens in order to lower the taxes they pay. If you change your fiscal residence to another country, you cannot be charged with taxes in Spain, as your fiscal residence is not in Spain any longer. Not to mix avoiding taxes with doing something illegal.
Global cities. The webpage provides with an index. Methodology is important. Brussels is the number 12 because of its political engagement as the capital of the European Union.