We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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“The revived fortunes of fossil fuels, especially coal, may explain some of the weakened resolve for decarbonization. Global bank lending to fossil fuel companies is up 15 per cent, to over $300 billion, in the first nine months of this year, from the same period in 2021, according to data compiled by Bloomberg. This is Wall Street just doing its job: making money. Banks earned more than $1 billion in revenue from fossil lending during the first three quarters, in line with 2021. Why quit business with a booming sector over a distant climate goal?”
– Alistair Marsh, Bloomberg. ($) The US news service has been pushing the whole “Green transition” agenda in recent years in its coverage, at the behest of founder Michael Bloomberg, so there is something darkly amusing watching the organisation concede that decarbonisation has been a big loser for investors in recent months. If you are JP Morgan, BlackRock, Bank of America Merrill Lynch or a small investment house in Massachusetts, you have to explain to clients why you hugely lagged the stock market because of your “Green” decisions.
As the late Richard Feynman once said apropos the Space Shuttle, nature cannot be fooled. That applies to economics as well.
A couple of months ago John McGuirk asked that question:
Landlords have fled the market. They are selling up at an unprecedented rate, or finding other uses for their accommodation. There has been an explosion, meanwhile, in institutional landlords: Big companies and pension funds buying up properties, because unlike the small landlord, they have their own legal offices and in house accountants and the funds to constantly refurbish properties to bring them up to regulatory standard. Ireland’s left wing approach to rental regulation has been – again, predictably – an absolute bonanza for this biggest capitalist institutions.
Government must take the blame for this. It is Government, after all, which passed all these obscene and stupid laws. But the opposition – mainly the noisy left – are the ones who campaigned on it, and for it, and who want to go ever further down the road to disaster. As of today, there are about 700 homes left available for rent in the entire country. About 22 in every single county.
Emphasis added. 700? In a nation of five million people? Could that really be true? It seems so. This video from Sky News says the same.
I hate to say it, but the answer to Mr Guirk’s question is that the misery of would-be renters in Ireland will probably go on for decades, like it has in Stockholm. Rent control is the Japanese knotweed of bad policy: the horrendous difficulty of removing it once it is established becomes an incentive for people to close their eyes to the damage it is doing. The failure of rent controls in Ireland was already several years old when I wrote a post in 2018 called “And why might that be?” It was about how one of the Guardian‘s better journalists could not understand why landlords in Dublin had vacated the long term rental market en masse in favour of Airbnb.
One might think that this clear demonstration of how rent controls work in practice would at least deter us from repeating the folly on the other side of the Irish Sea… I jest, of course. Seen on Guido Fawkes the other day: “New Scottish rent controls crush hopes for 11,000 affordable homes”.
For the past two weeks, a stock narrative has been that UK Chancellor of the Exchequer Kwasi Kwarteng’s “mini-budget” was reckless and rattled the markets, and he should have been more cautious, set out the debt and borrowing side first, not talked about reversing Rishi Sunak’s tax hikes to corporate tax, NICs, etc, and got fully on board with the idea that what the UK needs are the highest taxes since Clement Attlee. This, apparently, is what the clever people in the Square Mile wanted, happily cheered on by much of the media, and the damper ends of the Tory Party.
But given a few days to think about this, what strikes me as what a lot of hysteria there has been, and how heavy taxes remain. This story in the Telegraph today shows how “fiscal drag” caused by static tax thresholds means millions of UK taxpayers will, in real terms, be worse off because their tax bills are going up, not down.
So the idea that we are going to move to some sort of Reaganite low-tax country was always a bit overdone. It suggests that fashionable opinion has so totally imbibed forms of socialism that anything a bit different sends people crazy. (The performance of the International Monetary Fund, an organisation that should be shut down, is a case in point.) It suggest that those Tory MPs threatening to unpick even the smaller tax hikes need to ask themselves why they are Tory MPs at all.
“The point is that Britain was in an economic mess before Ms. Truss took office, and there is no alternative universe in which policies that have failed for 12 years suddenly would start working on the cusp of a global downturn. The choice is the gamble of a major policy overhaul, or the certainty of steeper decline. So yes, U.S. Republicans, do take note of Ms. Truss’s travails in Britain. The Tories squandered their reputation for competent, free-market economic management. They now find that it’s hard to win back at precisely the moment they and the country need it most.”
The Wall Street Journal (I seem to be quoting it a lot these days), giving its transatlantic take on the past 12 years of Conservative fecklessness and some occasional sensible moves. Its verdict on the Bank of England is particularly damning:
The Osborne Treasury and the Bank of England under Governors Mervyn King and Mark Carney set the tone by “looking through” above-target inflation for four years from 2010-13, and again in 2017-19. The central bank ignored its price-stability mandate in order to hold interest rates at historic lows while suppressing government borrowing costs with quantitative easing.
This stoked asset-price inflation, especially in housing, while suppressing productive investment and real wages. Inflation-adjusted pay fell 6.7% from 2009-14.
Mr. Carney’s successor Andrew Bailey poured on generous monetary stimulus during the pandemic, and he has been slow to withdraw it as the inflationary crisis deepens. One day before Mr. Kwarteng’s tax announcement, Mr. Bailey gave markets a bad surprise with a dovish 50-basis-point increase in interest rates rather than a 75-point raise that would follow the Federal Reserve’s lead and match the severity of U.K. inflation.
No wonder markets were primed to question Britain’s policy credibility when Mr. Kwarteng unveiled the new tax plan.
On the bright side, at least we hopefully won’t hear much more about Modern Monetary Theory.
Addendum: I have ordered Edward Chancellor’s book, The Price of Time, and will review it when I get my copy. It is getting good reviews. We shall see!
Sterling is recovering a bit against the dollar. I wonder if some hedge fund types that have shorted the pound have been squeezed out.
Update: In response to bad polls and the fact that many Tory MPs are more or less social democrats with a blue label, the Chancellor has reversed his removal of the 45% top tax rate. So, combined with national insurance and other taxes, top earners face a marginal rate around 60 per cent, which is high even by European standards. Needless to say, this is unlikely to help the party retain power unless there is a dramatic improvement in the economy. And even if there is, the “it’s time for a change” will be hard to resist. Labour can get rid of its nuttier members and get into power.
We have about the highest level of taxation we have had in the UK since the 1970s. In the 2021-2022 tax year tax receipts were 30.3% of GDP. In 2009-2010 they were 25% of GDP which was the lowest level in the last 20 years and occurred under a Labour government.
The recently proposed tax changes are: cancel an increase in corporation tax; reverse a recent (unpopular with the left) 1.25% increase in national insurance contributions; cut basic rate of income tax by 1%; change stamp duty nil band from 125,000 to 250,000 (the average house price is 281,000); remove the 45% additional rate of income tax (paid by 629,000 people earning more than £150,000, to the tune of about £1.5bn (thanks to KJP for the correction)).
Such changes are welcome to me, but do not appear to be particularly radical.
And yet everyone, from the IMF to forex traders to buyers of government bonds to Torygraph columnists, not to mention literally everyone on Twitter, is completely freaking out about it.
Most commentators seem to be aghast at the very concept of tax cuts. Few commentators are talking about spending. Are these tax cuts really so big and costly, or is it that nobody believes that a smaller state can lead to economic growth, instead believing that government tax and spending is a zero sum game, and that anything other than a steady increase in tax and spending is terrifying?
“The unemployment rate was 3.5% in July, the same as in February 2020, but the U.S. has three million fewer workers. Where did everyone go? This in an economy with 11.2 million job openings. It’s mostly men 25 to 54 who haven’t come back to work. Now a McKinsey study suggests that 40% of workers are thinking of quitting their jobs. Does anyone want to work anymore?”
– Andy Kessler, Wall Street Journal ($).
My Grandmother used to have a word. It began with “F” but it’s not that “F” word or even the slightly less bad Irish “F” word as popularised by Father Ted. It’s another “F” word but you will search your dictionary in vain to find it. It’s not in mine. In fact, I am far from sure it has ever been written down. If it were written down it would be something like “footer” with the “foo” pronounced like the “Foo” in Foo Fighters not the “foo” in foot. Well, I say that but that’s only about as close as an Englishmen can get. Monaghan pronunciation is not something that I would advise the typical Englishmen, Scotsman or, indeed, Irishman to attempt. Worse still for any cultural appropriators out there, “footer” almost never came without being preceded with another word. The word means “old” but it is pronounced like “aisle” but we can’t use “aisle” because people in Monaghan take their religion seriously. “Isle” also looks silly so I am going to go for “ail”. Anyway, it turned out that a lot of acquaintances of my grandmother turned out to be “ail footers”. In fact, at times it seemed – if my grandmother was anything to go by – that 90% of the population of Monaghan could be so categorized.
However, it turns out that “footer” is not just a noun but a verb. I say that but I’ve only heard that from the lips of one person – not my grandmother – a resident of Armagh who couldn’t pronounce the word but did at least understand it. So, it’s not in common use. But I can’t think of a better word in light of the mini-Budget announced on Friday. Whatever Liz Truss may be or may do she is not a “footer” and she is not “footering about”.
For Liz Truss to not be a “footer” is an achievement in itself. The last 12 years of Conservative or mainly Conservative rule has been government of Footers, by Footers, for Footers. Liz Truss herself has spent the last ten years as a Cabinet minister. That means 10 years defending policy most of which she must have thought was nonsense. How do you do that without the steady erosion of your sense of right and wrong? How do you do that without losing all sense of urgency? Anyway, she has and the speed at which non-footerish announcements on taxes, regulations, energy and Ukraine are coming out of government is astonishing. I have been burnt so many times by politicians that I have become reluctant to give them my whole-hearted support. I am not yet ready to do that in the case of Liz Truss but this is an extremely promising start.
 There is little about Liz Truss’s appearance or demeanour to suggest (to me at least) a Thatcher-like determination. From Heaver News.
Heaven forbid trying increase gas supplies in a time of gas shortage. Amazing how many greens seem to have a convergence of interests with nice Mr. Putin. Funny that.
– Perry de Havilland on the opposition to fracking in UK from the usual suspects.
From the White House website:
President Biden often summarizes his vision for America in one word: Possibilities. A “digital dollar” may seem far-fetched, but modern technology could make it a real possibility.
A United States central bank digital currency (CBDC) would be a digital form of the U.S. dollar. While the U.S. has not yet decided whether it will pursue a CBDC, the U.S. has been closely examining the implications of, and options for, issuing a CBDC. If the U.S. pursued a CBDC, there could be many possible benefits, such as facilitating efficient and low-cost transactions, fostering greater access to the financial system, boosting economic growth, and supporting the continued centrality of the U.S. within the international financial system. However, a U.S. CBDC could also introduce a variety of risks, as it might affect everything ranging from the stability of the financial system to the protection of sensitive data.
To be fair, these remarks by Dr. Alondra Nelson, head of the White House Office of Science and Technology Policy, Alexander Macgillivray, Principal Deputy United States Chief Technology Officer, and Nik Marda, Policy Advisor do acknowledge the existence of risks:
For example, these objectives state that a U.S. CBDC system should expand equitable access to the financial system, preserve the role of physical cash, and only collect data that is strictly necessary.
Given the record of the FBI, the CIA and the NSA, I would put very little faith in their definition of “strictly necessary” as a shield against the US government spying on its citizens.
“German Galushchenko, the minister of energy, told the YES conference that Ukraine could potentially supply two gigawatts of power to the EU right now, but was being prevented from doing so by bureaucratic obstacles on the European side”
– Niall Ferguson (not that one, the other one).
CEOs at prominent firms such as Apple, Tesla and Goldman Sachs have required employees to return to the office, curbing the working from home trend that got going at the start of the pandemic.
One point that jumps out at me is how this shows that skilled employees have a lot of market muscle today – firms need to persuade them to do certain things and don’t have all the power.
Consider: Labour is not homogenous and takes time to replace. We have seen a dramatic example of this in the airline sector, where thousands of staff, such as those working in security and baggage handling, were let go, creating a bottleneck problem when restrictions ended. Airlines are now scrambling to get people re-hired, but that is not easy as employees and contractors must go through security vetting. Hence the thousands of cancelled and rescheduled flights that have been a feature of the holiday travelling season.
What all this shows is how flawed Karl Marx was in his claim that capitalists have the superior bargaining power over “workers” and that business owners hope to create a “reserve army” of the unemployed who will put downward pressure on wages, hence creating the “surplus” that becomes profit.
Among the many things wrong with Marx’s idea is that claim that the majority of the risks and uncertainties are on the employees’ side. Hiring and retaining labour, including skilled labour, is not straightforward. There are search costs to consider in hiring, and employers know that it is often better to retain a worker, even if they could get someone a bit cheaper, than have the cost and time of hiring another. Also, a worker is paid a wage/salary, at least initially, whether a firm has made a profit or not, and that is a risk the employer has to bear (otherwise why else do firms have revolving credit facilities to manage cashflow?) Further, all workers are to some extent also “capitalists” – they have built skills and character (punctuality, agreeableness, ability to follow rules, get on with others and serve clients, etc) that take time and effort to acquire. A plumber, software programmer or security manager have capital sitting in their heads, and when a firm hires such a person, it is renting that capital.
There are of course of lots of reasons why Marx’s description of labour/capital relations is wrong and simplistic (example: his insertion of the idea of “socially necessary labour” begs the question of how one knows what that is, and it turns out that SNL is revealed by the interplay of prices in a market, rendering his idea circular). But the current working from home/office argument seems to bring home a particular point, which is that those supposedly evil capitalists don’t have all the power, and in many cases, have far less than even they might have hoped for.
Addendum: Thomas Sowell’s critique of Marxism remains one of the most succinct and effective that I have read. Also, there is a segment in Robert Nozick’s Anarchy, State and Utopia where he demolishes the “exploitation” theory very effectively. Another good treatment of the issue is by Kevin McFarlane, an engineer and libertarian.
…a free market in money then we wouldn’t have inflation. (Please note that with zero inflation prices can still move relative to one another.)
…a free market in housing then we wouldn’t have a housing crisis.
…a free market in healthcare then queues for cancer care would be much shorter, perhaps even non-existent.
…a free market in energy then – all things being equal – things would be looking a lot better for this winter. Of course, if we had a genuine free market in energy – all things not being equal – then polluters would be compensating their victims. This could lead to some very odd outcomes and I wouldn’t like to predict what they would be.
…a free market in education there would be a lot less wokeness and a lot less student debt.
…a free market in social media we would have pile-ons, doxing and cancel culture.
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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