“I’m thinking of making T-Shirts for Guardian readers and Progressives. The first one would say: I GET MY OPINIONS FROM MILLIONAIRE ROCK STARS AND ACTORS.”
Taken from a comment by someone called Stuck-Record at Tim Worstall’s blog. Tim was describing how he left a comment on an article by the actor, Bill Nighy, in defence of a “Robin Hood Tax”; Tim’s comment – which he said was entirely civil - was deleted. The Comment is Free site of the Guardian clearly cannot take dissent from some pro-marketeers. (I expect Tim drives them mad with his dissection of their views on a daily basis.)
The red lights on the mental dashboard go on in my head when the words Robin Hood come out. The false assumption of the tax proponents is that you can tax an activity – such as bank trading – without the impact in any way being felt by us ordinary folk. More cynically, politicians might like the idea because the actual cost impact will not be easy to see (wider bid/offer spreads for exchanging money, lower returns to investors, cuts to service and jobs in banks, etc.)
Of course, not all actors and music folk have collectivist, interventionist views on things like economics, or other things. The US actor Rob Lowe seems pretty intelligent, ditto Clint Eastwood, Michael Caine, etc. I don’t have a problem as such with actors/others talking about such things – we should not fall into the ad hominem fallacy of saying that non-specialists on subject A cannot talk about it (democracy is based on such a position, is it not?). However, actors, singers or whatever who want to get into the arena cannot expect to be treated any more gently than an economist or other specialist in an area of controversy. Being a luvvie doesn’t get you special favours.
One commenter managed to get past the CiF “checkpoint Charlie” to leave what I thought was a pretty good point:
The whole flaw is laid bare in this one sentence – a tax can be tiny or it can raise billions, it is unlikely to do both. Those billions you claim can be raised are a powerful incentive for organisations to circumvent the tax; on something as ephemeral as financial transactions that’s quite easy to do. It would merely hand volume to New York, Hong Kong or Singapore.
Of course France, Germany et al are in favour of it. It would be a EU wide tax that would fall most heavily on the UK and you even point out that a whopping 50% of the money raised could be spent on domestic causes – oh fantastic, we adopt a tax that could be damaging to one of our major industries and get to spend half of the proceeds on our own country. Do you honestly believe that Germany would accept a similar deal in relation to a green tax on luxury motorcars or France on farming?
Well, for all his Marxist ideology, collectivist ruination of Zimbabwe’s once-strong agriculture sector and destruction of its currency, it appears that only the best of capitalist medicine will do for the bastard:
HARARE (Reuters) – President Robert Mugabe is in Singapore for an eye operation ahead of his 90th birthday on Friday, a spokesman said, maintaining a government denial that Zimbabwe’s long-serving ruler is suffering from prostate cancer.
George Charamba said Mugabe, Africa’s oldest president, left Harare on Monday and would be back in the country for birthday celebrations on Saturday.
“This is a routine check-up, a routine cataract operation for his left eye whose date was set down more than a year ago and the president has gone out to fulfil that appointment,” Charamba told Reuters on Tuesday.
“There is nothing more than that, nothing serious” he said, dismissing speculation that Mugabe is struggling with his health. “He had a right eye operation a couple of years ago and he is going to have the other attended to now.”
So if it is a routine matter, why does this man have to fly thousands of miles, churning out all that carbon, which as we know, is causing the planet to get so much warmer (stop the sarcasm, Ed.)?
Or maybe the fellow wants to do a bit of shopping down in Orchard Road?
“Company officials will be trapped in a catch-22. They can lay off as many people as they want because of Obamacare. But because they’ll have to swear to the IRS that their decisions had nothing to do with Obamacare, they can’t speak publicly about what’s happening. What a great way to silence the people who are on the front lines of dealing with Obamacare’s horrific effects.”
On the continuing delightful rollout of the Affordable Care Act in the US. Giving politically sensitive stuff to the Internal Revenue Service: what could possibly go wrong? Again, as many others have observed, the saga comes straight out of Ayn Rand’s Atlas Shrugged.
As for the way in which this whole disaster has progressed, perhaps one of the worst aspects has been how Obama has more or less junked any pretence at worrying about the rule of law to minimize the political damage to himself. But should any of this be surprising to anyone now? Tim Sandefur has some thoughts on the constitutional damage done by ACA, and Obama’s conduct before, during and since the passage of this legislation.
My reservation about the quote at the top is that surely any ban on stating why a person has been made redundant violates the First Amendment. It might be nice to see this issue tested. (Please try not to giggle at the back of the class.)
A few weeks ago, when the weather was crap – as it still is – and I knew I’d be spending some evenings at home, I opened a box-set of DVDs to watch that classic Sixties TV series, The Prisoner, starring Patrick McGoohan. Many things have been written about this series, which in my view represents one of the best such shows ever made. Chris R Tame , the late UK libertarian activist, mentor and friend of mine, wrote a fine essay about this show in the early 1970s and I agree with every word of it. The show is intelligent, profound, thought-provoking, and now thanks to the wonders of digital remastering, looks as fresh today as when it was first produced. (So much so that it seems almost better than if it were made now.) I was born in 1966, roughly time the show was conceived, written and shot. Some Sixties series can look very dated today, however much fun they are (like the old Avengers with Diana Rigg, etc) but The Prisoner doesn’t. And boy, is it on-target now. In the age of surveillance cameras, nanny statist health campaigns, the Leveson recommendations on state regulation of the UK press, unaccountable quangos, the NSA, and the like, much of what is lampooned in The Prisoner is all too believable.
Some time after he made The Prisoner, and had gone back to live in the US, the country of his birth (he spent a large amount of his adult life in the UK), McGoohan had these thoughts about the show and why he made it. I wonder what actors are as emphatic in stating such a viewpoint today:
“I tried first of all to create a first-class piece of entertainment. I hope it rings true because here, too, I was concerned with the preservation of individual history….If I have any kind of drum to beat in my life it is the drum of the individual. I believe that to be truly an individual, mentally clear and free, requires the greatest possible effort. And I seek this individuality in everything I do – in my work and in my private life. It is not easy.”
It isn’t. The other day, I had a bash at UK journalist and controvertialist Peter Oborne for his claim that a game such as cricket should not be primarily about people having a fun time, of doing something that makes them happy as individuals, but because it helps obliterate the self, that is about a “duty” to a nation, or some Other. I don’t know much about McGoohan’s explicit political views, but something tells me he would have regarded Oborne’s bullying anti-individualism about something like a ball game with bemusement, if not contempt.
Sometimes with journalists, the pressure to write a column, and extract some broader, or deeper meaning, from an event can lead the writer into places where, to be kind about it, does not work to their advantage. Let’s take the case of Peter Oborne, who writes about the recent melancholy state of the English cricket team (it was hammered 5-nil in the recent Ashes tour of Australia). One of the consequences of this has been the sacking of the England coach, and now, it seems, the dismissal of one of its most recognisable players, Kevin Pietersen. Pietersen, or KP as he is known, is one of a long line of players who were not actually born in the UK (he was born in South Africa) but, by various routes, got himself eligible to play for the English national side. (His mother was or is British, as far as I know).
KP is known for being both a flamboyant striker of a ball, a great run-getter, but also someone who is not, in some eyes, a perfect “team player”. Words like “selfish”, “maverick” and “egoistic” get thrown around a bit. (As a libertarian, none of these terms strike me as particularly bad, but they are usually thought of as terrible in polite society.)
Oborne muses about all this, and he has some credibility in writing about cricket. A few years ago, he produced a book about Basil D’oliveira, who played for England, was a non-white, and who, hence, had problems in trying to play in South Africa. His story is one of how sport and apartheid endured a particularly torrid relationship. So, in general, you’d think that Oborne would be above writing nationalistic, ugly stuff about sports and games. Well, what to make of this:
The early history of Test cricket runs parallel with the fall of empires and the rise of the modern nation state. Test matches started in the 19th century, the great age of nationalism. Sir Don Bradman, the greatest cricketer who ever lived, was the symbol of Australian self-assertion against the mother country.
Quite possibly. Although let’s not overdo it.
Sir Frank Worrell, the first permanent black captain of the West Indies, was a vital figure in the liberation movement that spread through the Caribbean in the post-war era. According to the historian Ramachundra Guha, “one can read the coming into being of the nation of Pakistan” through study of the life of the nation’s first Test captain, Abdul Hafeez Kardar. All of these great men saw cricket partly as a sport, but more importantly as a way of serving their country. Cricket as a means of making money did not come into it. For many of them it was also a system of ethics.
Maybe true, although “serving ones country” is not what playing a ball game is about for me. My terrible “selfish individualism”, I suppose.
At the heart of the game was a highly developed concept of fair play. Players were expected not to cheat – for instance to “walk” if they were out. The authority of the umpire was respected. It was axiomatic that the individual should subordinate himself and his talents to the team.
A golden age, truly it was.
This set of propositions was linked to a powerful vision of the social order. It was assumed that men and women of exceptional gifts would devote lives of service to their community rather than further their own interests. It was recognised that extraordinary talents came by the grace of God and were not a mark of individual virtue.
Your life is not your own. You must serve the Collective. Your talents aren’t yours – they belong to the Collective. Okay, our Peter’s just really warming up now. There’s more:
The underpinnings of this vision have weakened. Religion, with its essential teaching about the unimportance of self, is no longer the force it was. In economic terms, cricket at the top level has ceased to be a form of national service. It should be viewed as another branch of the global entertainment business, dependent for revenues on giant TV conglomerates such as Subhash Chandra’s Zee corporation and Rupert Murdoch’s News Corp.
Cricket was a form of national service. Ah, so it was like being made to wear a military uniform, being sent off to strange lands to kill people when you’d rather do all that selfish individualist, money-grubbing, Sun-reading stuff instead. It is now about evil entertainment, not the misery of standing in a hot field. Murdoch, corporations…….
Sir Frank Worrell, AH Kardar, Don Bradman and England’s Colin Cowdrey were all manifestations of the mid-20th-century nation state, and all the social and moral obligations that went with it. Kevin Pietersen is just as surely a manifestation of the unqualified victory of neo-liberal market economics over the past two or three decades. Neo-liberals have little time for social institutions, are contemptuous of national borders, and dogmatically advocate the free movements of capital and people. They regard community, place and nation as worthless superstitions. Above all, they place the individual first.
If you believe in liberty as many “neo” liberals are, then by definition, it is about the freedoms of individuals. That doesn’t mean that people cannot and do not voluntarily associate and create clubs, with rules and standards, and sometimes fall out with people whom they don’t like, such as KP. It not the case that liberals don’t understand or respect institutions so long as those institutions operate by consent and don’t use coercive force.
In so far as Kevin Pietersen has any nationality, he seems to be South African. He was born and bred in South Africa, speaks with a South African accent and made his first-class debut for a South African team. He emerged as a cricketer in the most wonderful moment in South African history, when apartheid had gone and the country was building a multi-racial national team. Pietersen wanted no part in this new world. He got out as soon as he could, claiming that the positive discrimination necessary to help black cricketers stood in his way. Lack of loyalty has been his hallmark in English cricket. He moved first to the county of Nottinghamshire, then Hampshire, now Surrey. In the England team he seems to have been the repeated cause of division and bitterness. Eighteen months ago, Pietersen shared a century partnership with James Taylor, a 22-year-old debutant, at Leeds. At the end of the session Pietersen walked off the field with the South African players, leaving Taylor on his own. It later emerged that Pietersen was sending text messages to his South African opponents. In these he is said to have mocked the England captain, Andrew Strauss. Strauss, and not Pietersen, quit in the wake of that episode – a black day for English cricket.
A right wanker, then. Should have stayed at home.
I would argue, therefore, that there are important lessons to be learnt from the Pietersen debacle. We can acknowledge that open borders and free movement of capital – the key conceptions of neo-liberalism – have brought great prosperity and a certain vitality to Britain over the past quarter century. There is no mainstream political party that would like to risk scaring away Goldman Sachs or Ford Motors.
Scaring away foreign investors? I dunno, maybe it might be a good thing to give up all that ghastly consumerism.
But the wealth brought by international capital can be intensely damaging. It drives up values of houses so that ordinary, hard-working people can be priced out of the market. The impact of globalisation, especially through immigration, can make some British citizens feel that they are living in communities that no longer belong to them in a political system that no longer listens to them.
Make your mind up Mr Oborne. So free trade/movement etc brings prosperity, but it also “intensely damaging”. All those foreigners with their funny accents and so on buying “our” homes. This is classic “fixed wealth fallacy” in action (there seems no awareness on his part that that argument might logically lead for calls for, say, a quarter of the UK population to be deported or killed so as to cut house prices).
What does it mean to be British? Who makes our laws? Who, indeed, do we want playing for our national sports teams? These are all very difficult and dangerous questions. Like most people, I am not confident about the answer. As someone who has followed and loved the England cricket team for nearly 50 years, one judgment is easy. The England selectors made exactly the right decision in dumping Pietersen for repeated selfishness and disloyalty this week.
Well, as far as Mr Oborne seems to be concerned, he doesn’t want anyone playing for England who hasn’t been born here, which I guess would have ruled out many a previous England player. They were clearly mercenaries, “neo-liberals” who failed to understand that playing a game of cricket should be seen in the same terms as, say, joining the Brigade of Guards.
These are all very” difficult and dangerous” questions. Oddly, by the logic of Mr Oborne’s argument, the hero of his book would not have been allowed to don an England cap or shirt, since, well, just how “British” was he?
Astute observations from the EconLog blog:
Now, lots of people find the rich tasteless–and perhaps with good reason. This happens very frequently to intellectuals, who (they think) have better taste than most people. To be fair, intellectuals find the great unwashed pretty tasteless too. In the Anticapitalist Mentality, Ludwig von Mises argued that they very often misinterpret capitalism for being responsible for the low taste of the masses, and thus become inveterate critics of the market system: “Capitalism could render the masses so prosperous that they buy books and magazines. But it could not imbue them with the discernment of Maecenas or Can Grande della Scala. It is not the fault of capitalism that the common man does not appreciate uncommon books.”
Those who criticize the low taste of the poor do not maintain that the poor do not deserve the money they make: but they criticize capitalism for brainwashing them to spend it on culturally worthless items (as “the poor” tend to prefer the collected works of Stan Lee to Marcel Proust). Those who criticize the low tastes of the rich do instead maintain they do not deserve the money they had, and they criticize capitalism for rewarding culturally worthless people.
I’d say this is an argument that has very little to do with “redistribution and inequality”, unless you believe redistribution should work from the tasteless to the tasteful. I am sure that Tamara Ecclestone’s wedding cake didn’t bake itself, that her new luxury Range Rover SUV did not assemble itself, and that “her large house in Kensington Palace Garden” did not refit itself either. The profligate spending by Tamara is a great opportunity for many to make their living. Her largess in using her freedom to choose, helps others in making use of their “freedom to be chosen”–i.e., it enables them to provide services, make money, grow their kids, buy a little nice summer house, and choose between spending a night at the opera or watching “A Night at the Opera”.
Personally, I’d go for watching the latter’s brilliant movie comedy the Marx brothers. That’s my low-brow side coming out.
My only caveat is about the final paragraph where the author defends the rich their spending by saying that this creates employment. I can see how a socialist/other might say that if we grab this money and redistribute it, this might also create jobs, etc. By all means point out how money circulates, but remember that utilitarian/consequentialist arguments for capitalism can get unstuck at times. In the end, if Lady Vulgar wants to spend her gazillions on flash cars, houses or whatnot, that is her business. End of story.
Milder than a year ago (and my heating bill is lower as a result, which is nice), the UK winter has been associated with a long period of rain. Parts of the UK have suffered heavy flooding such as in the southwest, as in Somerset. The floods again raise the issue of what ought to be the way we deal with them. Absent any kind of powerful government, I guess one obvious response would be that insurance premia would reflect the risks of living in a flood plain, and so this would prompt responses such as people building homes in different ways – such as a modern form of “stilt,” maybe – and moving to higher ground, or encouraging some sort of collective, but voluntary effort to abate flooding risks, such as creating funds to pay to put levees on rivers, or dredge them regularly, etc.
We are where we are, however. And if you think a government has certain very basic, narrow responsibilities, defence – one of the core functions – should perhaps include defence against certain types of natural catastrophe, albeit not an open-ended commitment; such a move should also incentivise local efforts, rather than prevent them. Which is where the UK Environment Agency’s recent behaviour comes in.
In the Spectator Coffee House blog, Charles Moore weighs in with an article that argues that much of the problem is that the EA has, over the past couple of decades or so, changed its approach to flood control to one where it seems to believe in benign neglect. It is possible to see a form of environmentalistic anti-modern civilisation mindset at work here. No more arrogant Victorian attempts to tame nature by dredging rivers, pumping out water systems and the like. And Moore cites the views of a recent head of the EA, which I think gets to the heart of the change:
The Environment Agency’s opposition to dredging is reported, but not explained. Poor Chris Smith, the current chairman, gurgles inarticulately as if the floods were closing over his head. The answer, as with so much in the management of the environment, is ideological. Especially under its former chief executive, Lady Young of Old Scone and New Labour (I have made only half of that title up), the EA has seen human activity as the enemy. Lady Young has been quoted in Parliament as saying that she would like to place limpet mines on all the old pumping stations to get rid of them. If people are the problem, you wonder why the EA employs more than 11,000 of them. Without human intervention, the Somerset Levels would become an inland sea. Perhaps that is what the EA wants.
I think maybe that it is what the EA wants, not that such an organisation could perhaps say so bluntly lest it provoke so much public anger that its staff would be sacked and leadership replaced. But even if you don’t go in for conspiracy theories (and I don’t) you might wonder whether the ideological tilt of the EA fits with those who actually want such disasters not to be averted because it will be used as handy evidence of Man-made climate change. Pictures of vast floods across parts of the UK will, I can bet, be used by the alarmists to justify their arguments that Man is wrecking the climate and so we need yet more windmills and all the rest of it. Much easier to do that rather than go to the boring effort of dredging rivers and undertaking civil engineering projects to reduce the flooding risks in the first place.
Another thought that strikes me as if the EA really has taken some sort of policy switch and decided that old pumping stations should be destroyed or left idle, who exactly approved of this policy? Was there any public discussion of this? Who is, or should be, held accountable for it?
Meanwhile, here is an article by the founder of the Glastonbury Festival, who, I suspect, can see the commercially devastating impact of the EA’s position. And a similar call for change in the local media.
As Moore says, the EA has over 11,000 staff. It is about time that organisation began to become part of the solution of flooding risk, not an active and foolish contributor towards it.
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.
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.
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.
“But please, let’s not now pile hypocrisy on top of our grotesque abdication of responsibility. No more hand-wringing. No further calls for “something to be done”. Nothing is going to be done. Because we don’t actually want it to be done. Yes, we want the horrors of Syria to disappear. We want Assad to disappear. But we want someone else to make them disappear for us, so we can go back to congratulating ourselves about how we stood tall for peace.”
- Dan Hodges
He raises the uncomfortable fact that, while non-interventionists can clearly state, with a lot of hard evidence to back them up, that intervening by military means can just make things worse, lead to a quagmire, etc, doing nothing also can have its costs. And he’s right to say that anyone who complains about Assad, and the other side, has no real credibility without at least stating what could or should have been done about it instead. Of course, if Western politicians say, “The situation is terrible, both if we get involved and if we don’t. Life is a bitch sometimes but there it is,” they are not going to be very popular.