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Labour will pave the streets of Birmingham with gold

Today the Shadow Chancellor John McDonnell launched a report commissioned by the Labour Party from GFC Economics & Clearpoint Corporation Management Ltd. I have had a quick read of it, not in any detail but enough to think that you might be interested in reading it too. Here it is:

Financing Investment: Interim Report

It is called Financing Investment but it does not say much about financing investment. I suppose a report called Let’s Put The National Investment Bank And The Strategic Investment Board And A Bit Of the Bank Of England All Next Door To Each Other In Birmingham And Mention It Twenty Times is better for votes in Birmingham. They’ll be able to put out a special Birmingham edition of Monopoly with that street collecting a massive rent.

However there is more to this report than just more swanky government buildings in Birmingham. Branch offices in Glasgow and Cardiff are also promised. And this caught my eye:

There is a risk that the disproportionate number of technology companies in London and the South East will increase, exacerbating regional inequality.

You hear that, South East? Only in Labourland is an increase in the number of technology companies in one area seen as a “risk” in itself.

But that is a mere taster. On page 47 we begin to reach the meat of the proposal. Rejoice! There is to be something called a Strategic Investment Board.

The Strategic Investment Board will sit at the heart of the economy, coordinating R&D, commercialisation and information flows

We learn that

3. The Strategic Investment Board will draw on science and technology to devise comprehensive policy proposals for investment. There will be an emphasis on R&D investment. Private sector R&D will not be crowded out. It will be encouraged.

It is nice to be reassured that private sector R&D will not be crowded out, but the very fact that the possibility is mentioned does rather imply that public sector R&D will be crowded in. Who will be deciding who gets this “investment”, and what reason have we to suppose they would be good at it? The answer is not reassuring:

5. Scientists and researchers at the cutting edge of their fields will be appointed to senior advisory positions. The Strategic Investment Board will also seek the advice of trade unionists, businesses and leading industrialists.

Ah, “getting round the table”, I remember that. I was too young to understand all the hoo-hah about Barbara Castle’s In Place of Strife in 1969, but I can just about remember the series of increasingly ineffectual “Solemn and Binding agreements” and “Concordats” agreed between Labour governments and the unions over beer and sandwiches at No.10 as the 1970s wore on. None of them stuck.

(Edit: in the comments Sam Duncan says, “So they’re basically digging Neddie and the NEB out of the dustbin and bunging them in the microwave for a couple of minutes, then? That’s the Great Corbyn Plan?”)

On page 48 it says,

The Strategic Investment Board will scrutinise and advise the monetary and financial policy authorities as banks shift from unproductive lending to innovative companies.

That all sounds very nice, but why is a bunch of scientists, businessmen and trade unionists moonlighting from their proper jobs expected to be able to tell what lending is unproductive? While lending to “innovative companies” can turn out well, it is not a game for amateurs. God only knows that the banks have not always done a good job, but at least it was their job. And it is strange to see the socialists display such faith that the capitalist exploiter will act for the common good and not, for instance, draw an enormous salary augmented by backhanders to ensure that companies in which he has a well-disguised interest get all this luverly investment.

On page 49:

We suggest that the Strategic Investment Board has six permanent committee members plus two
representatives, one each from the National Investment Bank and the publicly-controlled RBS. This
will ensure a consistency between the polices of the National Investment Bank/RBS and the Bank of
England.

Wha-wha-what is the Royal Bank of Scotland doing there? They’re not thinking of using money deposited by the public with RBS for this “investment”, are they? Investment specifically directed at innovative companies? That might, er, cause queues to form outside RBS branches on the morning of a Labour election victory.

I have left the biggest question, where the money is to come from – because I really don’t think RBS can cover it all – as an exercise for the reader. The Labour party answer is “From the National Investment Bank, stupid.”

Samizdata quote of the day

People talk and think about jobs like they are things. Like you can possess one, lose one, or like you need to go get one from someone. So they go to job boards looking for the people who are giving away jobs. They go through the societal rituals that are expected of job seekers. But they are making a fundamental mistake–because jobs are not things, they are abstractions.

Getting lost in this abstraction causes a lot of pain and confusion. Seeing past the abstraction lets you see the countless opportunities you have available to you.

A job is an abstraction to describe a relationship between one person and another individual or group of people that agree to a certain type of ongoing trade. To get a job, you don’t need someone to create it and give it to you; you simply need to convince someone that you can make them more money than you cost.

Ryan Ferguson

Mongolia, the EU’s blacklisted tax haven

It has been quite a grim century for Mongolia, many decades under the Soviet yoke after the ‘Mad Baron’ von Ungern-Sternberg managed to take over in the chaos after WW1, and write his own grim chapter, and still its capital is called ‘Red Hero’, but despite that name, Mongolia has got itself into the EU’s bad books, not by human rights abuses, but by a lack of them as a tax haven.

To determine whether a country is a “non-cooperative jurisdiction” the EU index measures the transparency of its tax regime, tax rates and whether the tax system encourages multinationals to unfairly shift profits to low tax regimes to avoid higher duties in other states. In particular these include tax systems that offer incentives such as 0% corporate tax to foreign companies.

The scoundrels, the shame of it, not taxing someone!

EU members have been left to decide what action to take against the offenders. Ministers ruled out imposing a withholding tax on transactions to tax havens as well as other financial sanctions.

OK, how about undercutting or matching them for starters? That would, actually, hurt them.

For some reason, the ‘charity’ Oxfam thinks it is entitled to chip in.

The UK-based charity Oxfam last week published its own list of 35 countries that it said should be blacklisted.

Are Oxfam’s shops taxed (or business-rated) in the same way as their commercial neighbours? Can they explain how sanctions (so useful against South Africa under Apartheid) improve the lot of the poor? Since sanctions harm, the corollary is that free trade doesn’t, and yet… But I digress.

Let’s hope that Mongolia shows the same defiance before its accusers as the Baron von Ungern-Sternberg did when facing a People’s Court, from ‘Setting the East Ablaze’ by Peter Hopkirk.

‘Showing no signs of fear at the fate awaiting him, the baron challenged the right of a ‘people’s court’ to try him. He told his Bolshevik accusers: ‘For a thousand years Ungerns have given other people orders. We have never taken orders from anyone. I refuse to accept the authority of the working class’.

Then they shot him.

The full blacklist is:

The 17 blacklisted territories are:
American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, The Marshall Islands,Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia, United Arab Emirates.

and conceding the point that taxes create poverty:

The EU made exceptions for countries faced with natural disasters such as hurricanes, and put the process temporarily on hold.

Terror at living outside the EU, ctd

Recent UK gross domestic forecast predictions, issued this week via the glum figure of UK finance minister Philip Hammond, have encouraged some of my friends who are EU Remainers to shout about how Brexit is damaging Britain, we are going to lose tens of thousands of jobs to the continent, or wherever, etc, etc. The rage is not dying, in fact. Some of the language (Brexit supporters are “retarded” being a recent one) is not becoming milder. We haven’t yet reached the acceptance phase after the initial shock and anger.

Apart from the devaluation of sterling after June last year, there hasn’t been all that much of a shift on the economics front. The underlying performance of the UK economy does not appear to have altered that much. Some American banks such as Goldman Sachs and JP Morgan talk of shifting some business to the continent to create subsidiaries in anticipation of any EU access shenanigans, as I would expect, but it hardly fits with a Biblical level of terror to justify some of the vehement language I see on forums such as Facebook.

Assume we must take seriously the risk of life outside the joyous embrace of the EU Single Market, this is worth considering, from Tory MP and former minister, Peter Lilley:

The Single Market is talked about as if it were some inner sanctum accessible to a privileged few. In fact, every country has access to the Single Market – with or without tariffs. The Single Market programme, which I implemented, involved harmonising product rules – sensible, since businesses can now make one product range for the European market, not 28. But that benefits American and Japanese exporters as much as German or British firms. Although often invoked as particularly benefiting UK service companies, in fact UK service exports to the EU have grown less rapidly since the Single Market reforms than any member state except Greece and Italy

He also responds to the point that apparently, by being outside the EU, the UK will now submit to EU rules without being able to influence them:

People assume Britain benefits from participating in setting these rules. But rules provide a framework within which all companies operate – not an advantage to any individual country. Britain set the rules of tennis but rarely wins Wimbledon! British exports to the EU have grown less rapidly since the Single Market than they did before 1993, less than our partners’ and much less than non-EU countries’ exports! Maybe that is partly because we suffer EU regulations on 100% of our companies (costing our economy billions of £s) whereas non-EU firms need only comply with EU regulations on activities carried out within the EU.

And on the “passporting” issue that comes up:

How important is the right to passport services to the EU? Passporting lets financial institutions operate throughout the EU via branches supervised by their home country regulator without seeking authorisation from local regulators. Having introduced the Single Market measures, I decided to make a speech extolling how they had removed barriers to trade, not least through passporting. Unfortunately, my officials could not find a single company doing business it previously could not do! Banks were almost invariably operating, not through branches, but via subsidiaries which still needed local authorisation and regulation. (Emphasis mine.)

And on the terror that outside the EU, the UK will be hurt, Mr Lilley looks at EU-regulated mutual funds and alternative investment funds regulation (private equity, real estate, private equity, etc):

Since then the UCITS, MiFID and AIFM directives have extended passporting rights to other financial service providers who do take advantage of it. However, most UCITS funds choose to operate via subsidiaries in Luxembourg and Dublin without causing an exodus of jobs from London. Also the AIFM directive provides for recognition of equivalent standards of regulation by non-EU providers which is intended to be granted to Hong Kong and Singapore, so could scarcely be refused to the UK post Brexit.

In other words, you don’t have to be in the EU to manage investments sold within its borders. And yet if you take some of the Remainer arguments at face value, you would think that the UK is to be cast into a dark, lonely place.

A final thought. One of my Remainer co-jousters talks of the folly of the UK “going it alone”, as he claimed we had done after 1945. That, however, not only ignores our membership of NATO but also the UK’s web of trade with not just the continent of Europe, but also the old Commonwealth nations and places such as Argentina, and of course the US. The UK was hardly living under a rock during the period before EEC membership began in 1973, and further, that membership involved slapping tariffs on many of those countries. As Mr Lilley says, it has taken ages for the EU to hammer out free trade deals with nations such as India, China, etc, and to improve on what we have with the US. (I have even seen some of my Remainer friends dismiss this range of countries as “minor”, or “colonial outposts”). So let me get this straight: the US, Canada, Australia, New Zealand, India, South Africa, parts of Latin America, the Pacific-Rim, etc, are “minor”, but the European Union is a powerhouse. Great, got it.

Have a good weekend everyone.

 

Under socialism, the crows will not fly away

In the comments to my earlier post about the West Indies Federation, Bruce relayed something his schoolteacher once told him:

Question to the class:

There are ten crows sitting on a wire.

You shoot one. (This was back when guns, shooters and shooting had not been totally criminalized by the ruling-class sociopaths).

How many are left?

Nine?

That would be the answer expected from most kids.

Correct answer?

NONE!

Crows, unlike most of the lamestream media, academics and politicians, are NOT STUPID.

To which Niall Kilmartin replied:

Bruce (November 23, 2017 at 8:11 am), there is a socialist version of your ‘crows’ story.

At one of the glumly festive parties Stalin used to inflict on his politburo cronies, he told the story of how, while he was in exile in Siberia under Tsarism, he was out skiing and saw several crows perched on a branch. He shot a couple then skied back for more ammunition, returned and shot the rest. After he left the room, Beria said, “He’s lying” (understandably the others were cautious in responding, fearing a provocation). Conquest, in his biography of Stalin, charitably suggests the story may have been just a Siberian version of the old US Western “tall tale’, told for entertainment as a whopper not intended to be believed. It has also been suggested that the crows’ feet were frozen to the branch and Stalin for once in his life was telling the truth.

Whatever the truth of it, the moral is clear: under socialism, the crows will not fly away.

Far be it for me to say that our Shadow Chancellor is taking tips from Stalin, but that line did remind me of what I heard him saying on an audio clip posted last week by Guido Fawkes:

McDonnell now sure there won’t be a run on the pound.

John McDonnell has changed his tune from Labour conference […] Now he insists “there’s never going to be a run on the pound” and “of course” he isn’t planning capital controls if it happens. Only a few years ago McDonnell used to openly threaten the City with capital controls if they opposed his policies.

You say that like it’s a bad thing, Mr Barnier

The Times tells us that a moment of decision approaches. “EU nations will block Brexit deal if Britain ditches Brussels regulations, warns Michel Barnier”:

National parliaments or regional assemblies across the European Union will block a future trade deal if Britain tears up Brussels regulations on competition, food safety, social standards or environmental protection, Michel Barnier warned today.

The EU was alarmed a fortnight ago when Liam Fox, the secretary of state for trade, hinted that after Brexit Britain would ditch regulations on health and the environment to secure new trading deals with countries such as the United States.

In a stark warning to Conservatives and Brexit supporters, Mr Barnier, the European chief negotiator on Brexit, warned that Britain’s choice between Donald Trump’s vision of a deregulated laissez-faire economy

Are we talking about the same Donald Trump here? Swanky hotels, reality TV, funny hair, President of the United States of America? ‘Cos that guy’s a protectionist. Like you.

or the “European model” of social and environmental protection will determine the shape of a final Brexit deal.

“The UK has chosen to leave the EU. Does it want to stay close to the European model or does it want to gradually move away from it?” he said at the Centre for European Reform in Brussels.

Any preference?

Berwick and Carlisle off-licences, just rejoice at that news!

Scotland has become the land of the minimum alcohol price. Gushingly the BBC says that Scotland will become the first country in the World to have a minimum alcohol price (if you don’t count prohibition as an ‘infinite’ price). The UK’s Supreme Court has ruled that the proposal does not violate EU law (when pretty much anything else might).

And of course, it is for the good health of the wretched, like Gorbachev’s war on vodka.

When he took over the Soviet government in 1985, Gorbachev unleashed a massive campaign to promote soft drinks and fruit juices — instead of vodka.

His government also hiked the price of vodka and severely limited its sale. In typical Soviet style, he also proposed truly heavy-handed, excessive regulations to combat the shift from vodka to other forms of alcohol.

For instance, in the south of Russia, 100-year-old vineyards were systematically eradicated. The result was predictable enough. There were huge lines in vodka stores, of course. And in those lines, arguments and fights broke out incessantly.

Prior to Gorbachev’s anti-vodka campaign, the drink was often consumed by a “troika.” Consuming vodka in groups of three made sense because a bottle cost three rubles. In this way, each person contributed one ruble — and in turn, each had one glass.

But now, instead of just boozing up with each other, people actually shared their misery about life in larger groups. These people realized that in their miserable, detoxed circumstances, waiting in line had never been harder. And it had never been more politically explosive.

However, this measure is backed by remarkably precise science:

27. The University of Sheffield study went on to model the effect of a 50 pence per unit of alcohol minimum price on drinkers in poverty and not in poverty. It concluded that annual consumption by harmful drinkers in poverty would experience a fall of 681 units (as compared with nearly 181 units for such drinkers not in poverty), while consumption by hazardous drinkers in poverty would experience a fall of just under 88 units (as compared with a fall of only 30 units for such drinkers not in poverty). There would be 2,036 fewer deaths and 38,859 fewer hospitalisations during the first 20 years of the policy, after which when the policy had achieved its full impact, there would be an estimated 121 fewer deaths and 2,042 fewer hospital admissions each year.

The good news is that this is not a tax, the extra cost goes to the retailer, not the government (or, worse still, the UK government) although presumably they will get a cut from the VAT imposed on the ‘value-added’ of the extra paid, but don’t get me started on that.

The ultimate justification, and the reason why it was all being litigated, was that the minimum pricing was one way to skin the cat without having a general tax increase, whilst balancing the government’s health policy against the right to trade freely.

As to the general advantages and values of minimum pricing for health in relation to the benefits of free EU trade and competition, the Scottish Parliament and Government have as a matter of general policy decided to put very great weight on combatting alcohol-related mortality and hospitalisation and other forms of alcohol-related harm. That was a judgment which it was for them to make, and their right to make it militates strongly against intrusive review by a domestic court. That minimum pricing will involve a market distortion, including of EU trade and competition, is accepted. However, I find it impossible, even if it is appropriate to undertake the exercise at all in this context, to conclude that this can or should be regarded as outweighing the health benefits which are intended by minimum pricing.

More good news is that the laws are ‘experimental’ (Where have we heard that before?), so will expire after 6 years… Don’t hold your breath waiting for non-renewal.

So are good times ahead for alcohol retailers in the English Border towns, as the poor, harried Scots seek to trade with free England?

On the plus side, it is at least not a tax. But what unintended consequences might flow?

Edits: My thanks to Longrider for reminding us of the (late, unlamented) Danish fat tax, butter late than never.

I note that Part VI of the Act of Union with England 1707 states:

That all parts of the United Kingdom for ever from and after the Union shall have the same Allowances Encouragements and Drawbacks and be under the same Prohibitions Restrictions and Regulations of Trade and lyable to the same Customs and Duties on Import and Export And that the Allowances Encouragements and Drawbacks Prohibitions Restrictions and Regulations of Trade and the Customs and Duties on Import and Export settled in England when the Union commences shall from and after the Union take place throughout the whole United Kingdom . . .

And the English Act of Union 1706 has the same wording.

Samizdata quote of the day

Imposition of tariffs hurts the poorest in society, who spend a larger proportion of their income on food. To quote Daniel Hannan’s new Institute For Free Trade, in regards to industries that have been artificially propped up by government, “we must not shy away from the fact that some people lose out from free trade. But it is vitally important to clarify the scale on which this occurs. Many more people lose out from protectionist policies. The overall effect of an open trading environment on the economy is undoubtedly positive.”

In sharp contrast, Jones laid out his vision of post-Brexit Britain as follows: “What we can’t do is have free-trade deals that deliver cheaper goods in Britain but end up with us exporting jobs to somewhere else.” Like many protectionists who have come before him, Jones ignores both jobs lost to protectionism (more expensive inputs lead to more expensive outputs) and the very concept that for the last two hundred years has made his own nation prosper: comparative advantage.

Alexander Hammond

Samizdata quote of the day

Washington is a parasite that sucks the rest of the country dry. The counties surrounding Washington, D.C., have the highest per capita income of any metropolitan area in the country including New York, Hollywood and Silicon Valley. The unemployment rate is also the lowest of any large region in the country.

At least New York, Silicon Valley and Hollywood all produce something we need or enjoy. Washington produces red tape, taxes and new ways to handicap innovation on a daily basis.

While America staggers after its first lost decade (2007–17) and with a new lost decade set to begin (Japan, anyone?), Washington grows fat and rich. Trust me, the hotels and restaurants in town are jammed. No depression here.

Jim Rickards.

Not sure I’d agree with him on Hollywood but he is one of an apparently growing number of commentators who have noticed the parallels between the West’s current predicament and the Fall of the Western Roman Empire.

Samizdata quote of the day

The United States wants Canada to end supply management, which impedes agricultural imports – dairy, eggs, and poultry. Canada’s trade negotiators and politicians steadfastly refuse, and in their defense of the policy call up an astounding piece of logic: that the less Canadians have, the richer we are.

Canada’s Agriculture Minister insists that supply management is an “excellent system” and that “to deal with anything else is simply a non-starter.” Supporters on the left argue that the policy is necessary to protect domestic farmers from unfair competition from American farmers who receive government subsidies.

Conservatives have argued the same. Current Parliament Member and former International Trade Minister, Ed Fast argued in a recent essay that America simply wants access to the Canadian market “to deal with its own problem of overproduction, to the detriment of Canadian farmers.”

Here is what all proponents of supply management are arguing: If we allow the Americans to send us milk, then their problem of overproduction becomes our problem. Don’t you see how problematic it is, how much poorer we will become if we allow them to send to us the fruits of their overproduction, and at a low price to boot? Don’t you see how much richer we would be if we had less milk?

Matthew Lau

Samizdata quote of the day

Unilateral free trade benefits us all and even benefits the poor more than other groups in society. Just what we learned 169 years ago with the repeal of the Corn Laws. Further, as they say, tariff protection makes all poorer while also weighing more heavily upon the poor. This is not an argument in favour of trade protection.

Unilateral free trade it is then, eh?

Tim Worstall

But nationalisation is about control, not making things ‘better’

Complaints about the water industry, meanwhile, are at an all-time low and, according to the independent water consumer watchdog, satisfaction with the industry is at record levels.

If there ever was a time when water customers were ripped-off it was when water was state-owned and millions of households were sometimes paying for a service that had been cut off.

Ian King

But I do think King is making a fundamental error by assuming the motives for nationalising has anything whatsoever to do with about producing better value, or improved management 😆, or in any way yielding more of the thing an industry does. Yes, I know what they say, and I can say I am a hippopotamus with opposable thumbs (I am, of course). Nationalisation is about a total world view, in which the state is all, and nothing must be beyond the reach of its unfettered power: the state is an end in and of itself. Quoting facts about the water industry at Corbyn supporters is not just an exercise in futility, it indicates a complete failure to understand the enemy. Indeed, the only reason to talk to them at all is for the benefit of third parties who may be listening.