For part of what passes for the chattering class in the UK, the idea that having “too much” wealth is so ingrained that it comes as a shock when the right to own as much property as one can in a free society is asserted. For example, I’d be willing to bet that most “liberals” these days (I use that word in its corrupted, American sense) take it as a given that the “rich” (chose your definition) should be taxed far more heavily, proportionately, than everyone else, in order to redistribute gains that, they assume, are in some way unjustly acquired. (The fixed wealth fallacy, as our own Brian Micklethwait pointed out many years ago.)
Recently, there have been signs of dissent at the idea of heavy tax burdens on the rich. London Mayor Boris Johnson recently had a pop at high tax rates, and others have done so. This appears to have got up the nose of Richard Godwin, who writes a column for London’s Evening Standard newspaper. In a model of superciliousness, bad logic and general asshattery, Godwin lets rip:
I’m considering jacking it all in to become an entrepreneur. I reckon I’ve got what it takes. Most of my thinking falls into the blue sky category. Box-wise, I’m generally outside. People ask me to give 100 per cent, I’m like: “How about 110 per cent?” They say it’s mathematically impossible to give 110 per cent. I say: “Impossible is not in my vocabulary.”
Okay matey, we get it. You are good at taking the piss. I’m impressed.
The only barrier between “me” and “entrepreneurship” is my salary. It’s currently under £150,000. I’m working on that, 110 per cent! But I wouldn’t be affected by Labour’s proposed 50p tax rate and, as I understand it, it’s only “entrepreneurs” who come in for such persecution.
You wouldn’t be affected by the tax rate. Maybe not directly; but the point is, if you generally let it be known that anyone who has the effrontery to be paid “too much” gets at least half his/her earnings confiscated at source, that has an impact. Look beyond your own little mental universe, Mr Godwin.
No sooner did Ed Balls announce his plans to increase the levy on the richest percentile than a familiar chorus began. “What did the wealth creators do to deserve this?” pleaded the CEOs of FTSE-listed companies and the inheritors of family wealth. “Won’t someone think of the entrepreneurs?” thundered Boris Johnson, calling for the top rate to be cut to 40p. For it seems the word “entrepreneur” has changed its definition. Even the Duke of York outed himself as one recently. Before the crash, it meant someone who started an enterprise, deriving from the French verb “to undertake”. It has come to mean something like “deserving rich”. It’s how the over-£150,000s reassure themselves that their wealth is the product of their genius and graft as opposed to a specific set of social and economic conditions.
Okay, sometimes terms get used loosely, but the underlying logic is nonetheless sound: if you hit high earners with high taxes, it means the point of taking big risks is blunted. Maybe not extinguished, but nonetheless, the impact is real. Mr Godwin might as well deny that as deny that the Earth orbits the Sun.
Now, I know quite a few people who fit the old definition of entrepreneur, who have “dreamt of a new product, or a new market, and then struggled to make it happen,” as Johnson put it. When they started their businesses, they had neither the means nor the inclination to withdraw a six-figure salary for themselves. They preferred to reinvest. Some of their companies have since become very successful. However, of all the complaints I have ever heard, income tax is not one of them. The banks’ reluctance to lend is a far more pressing concern.
Nope. First, a lot of businessmen and women don’t draw a big annual salary; their income stream is highly volatile: famine one year, feast the next. If, after several lean years of building up a business, they suddenly come good, and say, half of the rewards are confiscated in tax, then the preceding risk-taking and general graft looks less worthwhile than it might have done in a lower tax environment. Time-horizons come in to play here. To increase the willingess of people to invest long term, not just in financial terms, but in terms of time and effort, the logical approach is to reduce taxes overall.
By definition, those who pay the top rate are life’s winners already.
He’s got it the wrong way round. If you have high taxes, then the chances of becoming a winner are made worse; the point of taking risks to be a winner is blunted. In any event, people who earn high salaries typically make a lot of sacrifices to get there, in my experience.
That great enemy of entrepreneurship, Margaret Thatcher, set the top rate at 60p. As successive governments have cut that, the economy hasn’t magically grown. All that has happened is that fewer people have benefited from the growth. That’s not entrepreneurship — it’s self-interest.
She set it at 60 after cutting it from a crazy level of almost outright confiscation; towards the end of her time in office, it fell further to 40 per cent, as Mr Godwin should know. He’s trying to imply that Maggie was quite happy to see the top rate at 60p in the pound. She plainly wasn’t. And the economy has grown as the top rate came down; nothing magic about it. Despite the problems of the past few years, Britain is in many ways a more entrepreneurial country than it was when Mrs Thatcher gained power in 1979.
Last night, I was half listening, not watching, a repeat of the TV comedy quizz show “8 Out Of 10 Cats” on some late night digital channel like E4 or Pick TV or some such thing. And I heard a comedian called John Richardson having a go at Nick Clegg, the leader of Britain’s Liberal Democrat Party.
Richardson was sneering at the Lib Dem Conference of whatever year it was when this show first went out, because so many of the things said at it, said Richardson, were boring and banal and obvious.
As an example, Richardson cited a pronouncement proclaimed with great solemnity by Nick Clegg which went something like this:
“It is not enough for governments and politicians to stop bad things. We must do good things.”
Richardson’s complaint about this pronouncement was that it was banal and boring, but banal and boring because so obviously true.
But both Clegg and Richardson are wrong. The idea itself, as stated with such admirable clarity by Clegg, is anything but banal and boring. It is very, very bad. It is banal only in the sense that badness often is. And Richardson was wrong in objecting to it in the way that he did.
If governments and politicians the world over were to switch over to only stopping bad things and to abandon all attempts to do good things, the world would quickly – although admittedly only after a period of angry readjustment – become a massively better place.
Dominic Frisby, like John Richardson, is also a comedian, among other things. I especially like this rendition of the Twelve Days of Christmas. And I could have imagined it, but I think I also heard Frisby’s voice last night doing a pre-sell in between programmes, for some future BBC programme involving Business Dragons. Frisby’s career as an entertainer and performer, in other words, is motoring along nicely.
But guess what. Politically, Dominic Frisby does not sail with the prevailing comedic wind.
I have been reading Frisby’s recently published book called Life After The State, which I learned about earlier this week when I attended at talk given by Frisby at the Institute of Economic Affairs. As I later discovered when I began reading his book, Frisby’s talk was pretty much a spoken version of the book’s Prologue , which you can read here.
The next chapter in Life After The State, immediately after that Prologue, tells the sad story of Glasgow’s decline from world super-city to basket case. Glasgow, Frisby makes clear, has been a continuous and epicentric maelstrom of government attempting to do good things, year after year, decade after decade, to try to reverse Glasgow’s decline from economic and industrial glory to drug-addled welfare-dependency. And Glasgow’s problems have just kept on getting worse and worse. “And”, because to everyone who has been paying proper attention to the last century and more of human history, this would not be a surprise. Much of of the rest of Britain has followed Glasgow’s lead, if that is the right word.
Says Frisby, in the concluding sentence of this chapter:
The best way for government to help people is not to.
Ok, it is Friday, so how about this item on “How Technology Is Transforming the Wine Trade”.
Tech has not, yet, transformed the subsequent hangovers from excess, however.
Whenever you hear of businesses or others carping about the lack of financing for this or that preferred cause, and demand that the State (ie, you, the taxpayer) steps in to fill the gap, it is worth bearing in mind that one of the glories of capitalism is in coming up with ever more inventive ways of putting those who want capital in touch with those who have it. This is the thrust of an article in the magazine Reason by Greg Beato (February 2014 edition):
Traditionally, the wealthiest members of society have had little trouble leveraging their resources. Those resources are highly concentrated and thus easy to strategically deploy when necessary. For the 99 percent, government provided a way to accomplish this too. Everyone pays taxes, and as a result, we get streetlights and Yellowstone National Park.
But taxation is a pretty crude form of crowdfunding. You don’t get to choose the size of your contribution. You can’t directly specify its intended use. And even though our tax system lacks the functionality of Kickstarter, participation is mandatory. When some senator-of-a-friend-of-a-friend decides he wants to follow his bliss and finally build that $2.2 billion dream dam he’s been talking about all these years, you’ve got to chip in whether you like it or not.
Crowdfunding, in contrast, privileges hands-on, voluntary democracy. If you think the United States needs more solar infrastructure sooner rather than later, crowdfund it. If you think that service-sector jobs that pay livable wages are the key to widespread prosperity, crowdfund businesses that pay such wages.
For the allegedly disenfranchised 99 percent, it has never been easier to seek common cause with like-minded souls, to pool your resources, and to exert influence in strategic and tangible ways. You might even call this a shining age of middle-class empowerment. If anyone ever decides to make a documentary about it, the financing should be fairly easy to swing.
As I sometimes note, while Hollywood, for instance, often produces films that slag off capitalism, (Michael Moore being the most egregious case) or smaller independent film producers do the same, the irony is that they make use of the innovation in fund-raising that modern capitalism constantly throws up.
A related area of capital provision that bypasses banks – and their current, often stringent capital rules – is what is known as “peer-to-peer” lending. And needless to say, the UK financial regulator is getting concerned about this, fearful that people who lend money might make mistakes or, horrors, those who borrow might not fully understand the risks. Rob Fisher of this blog wrote on the topic last year.
All this flowering of capital-raising is not really all that new, if you think about it. The idea of equities and other securities has been around for a long time; what is new is that the internet has put both sides to the transaction in touch much more easily, reducing barriers and the frictional costs associated with it. That’s surely an example of the “long tail” effect at work.
I keep saying that if you care about poor people, you should be a libertarian.
The Institute for Fiscal Studies is pointing out that while poorer people are paying more for food and fuel, richer people are enjoying low interest rates. So government spending and borrowing and the artificially low interest rates that go along with that are harmful to poor people, as are taxes on fuel, and income tax on minimum wage earners, and countless other instances of state meddling.
Real money and a small state lead to high growth which makes everyone richer.
If you want to know what the British – the educated British – thought of the Germans in 1914 here’s your answer:
The chief importance of the Zabern incidents, of the Strassburg trials, and of the exhibition of reactionary and particularist passion which has followed them in Prussia, is not in themselves. It lies in their significance as symptoms of the obstacles which still impede the moral unity of Germany. They reveal the persistence of not only of a profound division between the conquered provinces and Prussia, but of such a division between the whole legal and constitutional conceptions of South Germany and those that prevail amongst the Prussian aristocracy. These divisions are not new. They go back to the annexation of Alsace-Lorraine and to the establishment of modern States and the introduction of modern ideas by NAPOLEON in the south…
But the feudal nobility, and especially the nobility beyond the Elbe, have always set their faces against it and striven to shut their eyes to the change… Their devotion to the Throne and to the country, their lofty sense of public duty, their zeal, and their professional attainments are undoubted. But many of them inherit also the narrowness and the arrogance of a military caste.
Is it accurate? I think so, primarily because it explains the Zabern Incident so well.
Was it the cause of the war? It was certainly a cause. It wouldn’t be the first time that an unpopular regime that found itself cornered attempted to prop itself by starting a war. Milosevic’s Yugoslavia springs to mind as another example.
What it doesn’t explain is how such a divided nation was able to keep going for so long.
The Times 29 January 1914 p9
A feature of British reporting on American affairs is that even newspapers that sell themselves as right wing or too grand to take a side in US politics take their tone straight from the Democratic party. For instance, this Times report of the State of the Union address appears in the news section, not the opinion pages, yet in this paragraph
Offering a shopping list of practical plans to speed up growth and give people new ladders of opportunity into the middle class, he told members of Congress: “I’m eager to work with all of you”.
the writer, David Taylor, takes it for granted that President Obama’s plans are “practical” and indubitably will “give people new ladders of opportunity”. Was there not room for a little “intended to” anywhere in that line, Mr Taylor?
Again, this report from Peter Foster in the supposedly right wing Telegraph takes one look at Obama performing the standard politician’s trick of admitting to the fault of excessive reasonableness, and falls in love:
However, that optimism was tempered with a frank admission that America’s politics had become paralysed by the “rancorous argument over the proper size of the federal government”. The president wearily admitted that reversing the tides of decline “won’t happen right away, and we won’t agree on everything.”
We all understand where the problem lies: with the rancorous ones who argue about the proper size of government. If only they would stop doing that our weary hero could rest.
I am ready to be told in the comments that the Dems and the Repubs really are not that different. Allow me to agree in advance. It is just that the way that the Times and Telegraph maintain faithful station like Greyfriars Bobby long after their better paid friends in the Boston Globe and New York Times have noticed that the object of their devotion is politically dead is making a vein throb. Which reminds me, we were not always thus. As the great Malcom Tucker put put it during his visit to Washington (2 minutes 10 seconds into the clip):
“We burnt this tight-arsed city to the ground in 1814 and I’m all for doing it again.”
(Warning: occasional words in the compilation of scenes from In the Loop linked to above are not viciously obscene.)
I note with pride that two hundred years ago arguments about the proper size of the federal government were settled in a decisive yet still gentlemanly fashion. Wikipedia’s account of the burning of Washington says that “The British commander’s orders to burn only public buildings and strict discipline among the British troops are credited with preserving the city’s private buildings.” We even spared one of the more useful government buildings:
It is written that a loaded cannon was aimed at the Patent Office to destroy it. Thornton “put himself before the gun, and in a frenzy of excitement exclaimed: ‘Are you Englishmen or only Goths and Vandals? This is the Patent Office, a depository of the ingenuity of the American nation, in which the whole civilized world is interested. Would you destroy it? If so, fire away, and let the charge pass through my body.’ The effect is said to have been magical upon the soldiers, and to have saved the Patent Office from destruction.
Despite this lapse, Major General Robert Ross did burn to the ground the White House, both houses of Congress, the War Office, the State Department and the Treasury, although I gather someone has rebuilt them since.
I don’t think Cameron has conceded anything very much. The Lib Dems are not much farther to the left than he is personally and he would have a much harder time with his own party if he was not in a coalition. I think Cameron has done quite well by his own miserable standard.
Cable is just one of those people that think that the debate (was there one?) about the role of the state has been settled and that elections are just about replacing the management team.
– Samizdata commenter Peter T
… because his, er, ideology makes him in favour of more spending and more taxation.
Does he think his own views are not completely ideologically based as well?
A colleague of mine sent me this item, from the BBC:
Some HSBC customers have been prevented from withdrawing large amounts of cash because they could not provide evidence of why they wanted it, the BBC has learnt. Listeners have told Radio 4’s Money Box they were stopped from withdrawing amounts ranging from £5,000 to £10,000. HSBC admitted it has not informed customers of the change in policy, which was implemented in November. The bank says it has now changed its guidance to staff.
How jolly decent of them.
Mr Cotton cannot understand HSBC’s attitude: “I’ve been banking in that bank for 28 years. They all know me in there. You shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”
Well, he now knows differently. A person with a bank account does not own the cash contained by the bank and has total control over it. (I am not aware of any line in my bank contract saying as such.) A deposit is a credit to the bank, and under modern banking laws, with the system as it operates, a bank is not obliged to instantly hand that over, no questions asked. (Under fractional reserve banking, the only kind of guarantee is by deposit protection, but that is usually only up to a certain limit.) In a full free market of course, people could make whatever kind of agreements with banks that they wanted, even consenting in some cases, perhaps, to having to give information to a banker to prevent fraud. However, government regulations in the UK (and certain other nations) being what they are (such as controls to stop money laundering and tax dodging), banks are increasingly operating as proxies for government agencies.
According to HSBC, the issue is to combat financial crime. Maybe that is true but this is not the whole picture:
HSBC has said that following customer feedback, it was changing its policy: “We ask our customers about the purpose of large cash withdrawals when they are unusual and out of keeping with the normal running of their account. Since last November, in some instances we may have also asked these customers to show us evidence of what the cash is required for.”
“The reason being we have an obligation to protect our customers, and to minimise the opportunity for financial crime. However, following feedback, we are immediately updating guidance to our customer facing staff to reiterate that it is not mandatory for customers to provide documentary evidence for large cash withdrawals, and on its own, failure to show evidence is not a reason to refuse a withdrawal. We are writing to apologise to any customer who has been given incorrect information and inconvenienced.”
One of the ironies of the situation is that HSBC last year was hit by a massive fine for anti-money laundering offences (stuff to do with Iranian sanctions and drugs); hitting long-standing clients with this sort of intrusive crap will not do much for that bank’s brand reputation. It is right to stop fraudsters taking money out of accounts of clients, but perhaps the bank should be more frank with clients on why it makes these kind of demands and what is driving this situation. To a considerable extent, banks are no longer really part of any free market, capitalist system.
[The state of Oklahoma will] refuse material support, participation or assistance to any federal agency which claims the power, or with any federal law, rule, regulation or order which purports to authorize the collection of electronic data or metadata of any person pursuant to any action not based on a warrant…
– Draft Bill SB1252
[Nigel Farage] is a politician, so everything he says needs to be decoded. But licensing [of handguns] is vastly preferable to banning, not just a little bit preferable… more importantly he is doing the one thing you are not supposed to do in polite society, he is actually discussing the subject. Next thing you know people will be discussing the NHS and the phrase “envy of the world” will not be heard anywhere.
– Perry de Havilland