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Amid the recent revival of the spectre of large tax increases, a simply splendid post by David Farrer pointing out exactly why the political classes need them:
The truth is that the welfare state is bankrupt and almost no one, not the Scotsman editorial writer and certainly not the Tories, is willing to say that the Emperor has no clothes.
And not just the British welfare state either. For all the robust free market rhetoric that frightens the piss out of European lefties, the American welfare state is in just as parlous a condition:
Are we really broke? The answer is clearly, YES, but living on borrowed time and money. A recent study was done by Jagadeesh Gokhale and Kent Smetters which measures our government’s current debts and projected debts based on the proposed federal budget and revenues for 2004. By extending the numbers in constant 2003 dollars, they have come to the conclusion that the Federal government is officially insolvent to the tune of $44 trillion.
According to Financial Sense Online (from whence the above quote is lifted) both Medicare and Social Security will be bankrupt by 2010 or 2011.
This is really the big, global, dirty, open secret: the 20th century welfare state constructs are lurching, creaking and on the verge of collapse. Yet, in polite circles, this looming disaster cannot even be discussed, let alone addressed. Such is the taboo status of the welfare state that most Western politicians would rather be seen to publicly champion child molestation than any serious reform agenda.
It is for this reason that the reactionaries are trying to float various methods for the state to plunder everything and anything they can in the desperate, febrile, frantic hope that they can put off the Day of Reckoning for just a few more precious years.
Andy Duncan has heard the voice of Metatron Peter Hain and he is pretty sure it may have been Hain’s lips that were moving but it was Tony Blair’s voice we were hearing
On the BBC Today program this morning, Labour Party Leader of the House of Commons, and Secretary of State for Wales, Peter Hain floated the idea of increased income taxes. As he’s the semi-official Voice on Earth, for the internal workings of Prime Minister Tony Blair’s mind, his attempt to start this ‘debate’ can be assumed to have been cleared by Downing Street.
Is this the last desperate throw, by an increasingly desperate Prime Minister?
In the interview, the BBC Radio 4 Presenter, John Humphrys, tried to press Mr Hain on this ‘debate’, but didn’t get the minister further than saying the rich would be ‘asked’ to contribute more, for the common good of the public services.
Mr Hain refused to define what is ‘rich’, and refused to define how much income tax would be going up by, except to say it wouldn’t be “punitive”.
Mr Humphrys put forward the figures of £50,000 pounds a year as being the Labour Party’s definition of rich, and 60% per cent income tax, as being a ‘fair’ contribution. Mr Hain did not refute these figures, merely avoided answering the questions in his self-styled ‘debate’.
Given that Tony Blair hinted at more tax increases, earlier in the week in his Fabian Society speech, it seems he is ready to formally break his 1997 ‘pledge’ to not increase income tax.
But does this really signal it’s time up for Tony Blair?
Andy Duncan
The sharp eyed and attentive amongst you may have spotted the funky monkey that has appeared in the ‘free market’ section of our sidebar… we have acquired a sponsor!
But not just any sponsor.
The Gold Casino is an off-shore internet casino (obviously) in the most literal sense of the term. It is located on a server in the Principality of Sealand, a fully independent micro-state off the shore of Great Britain. Don’t like the state? Go set up your own.
No I am not joking!
Well I did say micro-state, didn’t I?
So take a peak at what our sponsor is offering by poking the funky monkey and check out their message via the link underneath the sidebar graphic. I assure you it is far more interesting that the usual marketing blather one is usually confronted with… you will see why we find them so ideologically agreeable!
It adds a whole new nuance to the term ‘off-shore business’
I did a posting here a few days ago about how political debates are, at any rate in Europe, and most especially here in Britain and in England, becoming more about who we are, and not just about who is right. It was the one about the Renault TV car advert.
There were many commenters, one of whom said that in the USA, things were different. Who we are, he said, is not an issue in the USA, because we know who we are. And in the sense that in the USA, unlike here, or for that matter here, there is no debate about what country they should be, what continent they should be a part of, and so on, that’s true.
But now take a read of this bit, from a Sunday Times article by Andrew Sullivan, on the subject of Hillary Clinton. Hillary C, says Sullivan, is the most divisive US politician since Nixon, and she doesn’t just divide at the level of opinion, she divides at the level of “identity”. (Equals: who we are.) → Continue reading: Andrew Sullivan on Hillary Clinton – and me on the globalisation of the “who we are” question
A new EU directive, that goes into effect on July 1, will require all Internet firms to account for value added tax, or VAT, on “digital sales.” Computerworld reports how overseas Internet retailers may see their European profit push derailed by one of the oldest drags on business: tax.
The effect of the law will be an additional 15 to 25 percent levy on Internet transactions such as software and music downloads, monthly subscriptions to an Internet service provider and on any product purchased through an online auction anywhere in the EU.
The VAT tax is not new burden for European dot-coms that have been charging customers VAT since their inception. Their overseas rivals though have been exempt, making foreign firms an obvious choice for the bargain-hunting consumer. David Melville, general counsel of UK ISP Freeserve, a division of French ISP Wanadoo, rejoices:
It’s a massive competitive disadvantage. It’s good to see at last it being eroded.
Freeserve has lobbied furiously for the past two years to get the loophole closed, saying its chief rival AOL UK, the Internet unit of AOL Time Warner, saved 150 million pounds ($249.7 million) in tax payments over the years.
Shock, horror! How about lobbying the EU comissariat to abolish the internet sales VAT in the EU instead?! I thought not.
For example, on eBay, a UK seller will pay six pounds to list an automobile and 35 pounds for real estate, both 20 percent increases that include the UK’s 17.5 percent VAT charge. Some analysts predict that the new tax will decreases sales in the short term, which will hurt American dot-coms such as eBay and Amazon, given their expectations of higher growth in their overseas business.
But European firms feel justice have been done.:
The old way certainly gave non-EU companies a leg up during a very crucial stage in the development of the market.
Please note the assumption that it is acceptable for governments to meddle with competitive markets and ‘equalise the race’. The EU businesses behave in a way that is not surprising, they are happy to see their overseas competitors weakened, however, I fear their victory is rather Pyrrhic.
Last year I was annoyed when the government of Switzerland broke the last link between the Swiss Franc and gold.
I was annoyed as it was yet another defeat for tradition and decency in the world. Decay and collapse may be a process we have to go through to get to a position where people can rebuild – but that does not mean I have to like the process. But I thought the broken link would have little practical importance – as the Swiss Franc was (like all other currencies) basically a fiat (government command – token money) currency already.
It seems that I was quite wrong. The Swiss money supply (whether one measures narrow money or broad money) has been expanding like mad.
Not only are the Swiss powers-that-be expanding the money supply faster than the American powers are, but they are doing so faster than the British or even the European Union authorities. I have been watching the progress of the various money supply expansions via the back pages of The Economist for quite some time.
I wonder if the Swiss authorities are trying to get some temporary economic growth (via the standard credit bubble) in order to influence the elections in October?
Looking at reality (even the imperfectly measured expansion of money supplies) does make watching political debate quite a strange experience. For example, in Britain, virtually everyone talks of how the European Union Central Bank is following too ‘tight’ a policy – whereas in reality it is inflating the money supply more than the Americans or even the British are doing.
Both pro and anti Euro forces in this country are deeply ignorant of even the most basic facts.
I was just watching a report on early morning TV which was in itself a rather mundane piece about how the authorities in Britain are clamping (immobilising) cars which are stopped on the road and found to have unpaid vehicle tax. Yeah yeah, whatever.
But then came a remark which astonished me…
“Unpaid annual Vehicle Excise Duty costs the British economy millions of pounds per year”
Now without getting into the rights and wrongs of vehicle ownership taxes (as opposed to road use taxes), the implication is clear: money not paid to the state for the privilege of owning your own several property does not create wealth… only when that money is safely in the hands of the state does the British economy benefit. Note, the words use are not “costs the British state millions…” but rather “costs the British economy millions…”
And with that tax money taken out of private hands, the state creates a net gain in wealth how exactly? Hiring more wealth destroying bureaucrats? And of course that money you selfish tax dodgers have not paid to the state is going to be flushed down the toilet rather than being used for some alternative economic activity, right? Likewise immobilising people’s transport because they have not paid an annual ownership tax, and thereby preventing those people making deliveries or getting to work, that does not British economy a penny, right?
Arrogance and ignorance in equal measure. The state is not your friend.
Although I am unlikely to be in a rush to join either of these organisations, today is a day a day I can say I am for once in agreement with their current campaigns.
Amnesty is campaigning against Castro’s crackdown on dissidents. OK he might not change his ways just because you send a letter of complaint, but Amnesty also, rightly, reckons the US government embargo needs to go. More contact will weaken, not strengthen Castro. And anyway, if I want to go to Cuba, what business is it of the US government?
Oxfam has also been making some helpful noises on Trade for Africa, on CNBC in Evian one of their spokespeople rightly said aid did not matter any where as near as much as trade. The best thing for Africa would be an end to subsidies for American and European farmers. Their latest paper on the G8 summit has the usual nonsense about how poor taxpayers in the West should subsidise rich kleptocratic dictators in Africa through government-to-government aid, but also calls on G8 governments to…
Address the enourmous harm being done by the subsidies rich Western Countries pay their farm sectors to produce a glut of cheap food which is dumped on world markets, undercutting African farmers and robbing their livelihoods. To fight a war on unfair trade rules, the G8 countries should: Immediately stop using subsidies and export credits that cause over-production and dumping of surpluses in developing countries. Open their own markets to all products from Africa and other low-income countries.
Looks like the message is semi-seeping through to NGOs.
As for Bono and Oxfam’s “Drop the debt” campaign, even a greedy capitalist like myself recognises that debts derived from old Cold War era geo-political bribes should not burden Africa’s children. Time for a market-solution to the debt. Let the failed-states go bankrupt. Alternative, better, delivery mechanisms for education and healthcare can be created. Africa doesn’t need corrupt governments and armies, it needs teachers and nurses.
Paul Staines
Those who look for symbolism as a guide to events might like to note that ‘Evian’ spelled backwards is ‘Naive’. Whilst I would never suggest that that is anything except concidental I do reckon that even a casual observer of the latest G8 conference in that Southern French town would have noticed that idealism (to the extent that it ever existed at all) has given way to thorny realpolitik.
No amount of mutual backslapping and bonhomie can disguise the fact that this latest conference was little more than a cosmetic exercise in alleged unity of purpose where none, in fact, exists. Quite aside from the fact that US-EU tensions are hardly going to be settled by a couple of days of diplomatic chinwagging in the Alps, the early exit of George Bush illustrates pretty effectively where he feels his priorities lie:
President George W Bush was not present for the summit’s final session on Tuesday, having left the previous day on the Middle Eastern leg of his foreign tour.
Nothing could illustrate more clearly that the Americans regard the Middle-East as a more pressing concern than the latest round of plaintiff appeals for ‘international somethingorother’ from the likes of Chirac and Shroeder. The former demands attention, the latter can be safely stacked in the pending tray.
But even aside from that, there are cracks which just cannot be papered over with reams of polite communiques. Even a left-of-centre and devoutly internationalist British PM is pressing for a different worldview than the one assiduously promoted from Paris. The result will be no single worldview at all.
I suspect that this G8 malarkey has had its day and not because of the travelling circus of the ‘Great Unwashed’ wreaking havoc and gutting town-centres in its wake, but rather because the reasons for its inception just no longer hold true. This annual round of global group-hugging was only important when it was felt (perhaps not unreasonably) that the interests of the world’s great industrial powers were converging. They are not converging any longer and, if anything, they are diverging. This is not so much globalisation as polarisation.
This will likely not be the last G8 summit. There will probably be more in the future. But I suspect we have seen the last meaningful one and that the summits of tomorrow will be prove to be nothing more than an exercise in formality and politeness where the delegates exchange chit-chat whilst waiting for something bigger and more exciting to come along.
I am all in favour of the recent decision by shareholders of European drugs giant GlaxoSmithKline to vote down a proposed ‘golden parachute’ payout to its chief executive in the event that he ever got the boot.
The payment would have been $36 million, and while I yield to no-body in my admiration for the capitalist system, it seems perfectly fair if the owners of the firm – the shareholders – felt such a proposal was going too far. A case of property owners using their property as they say fit. Of course, by ‘too far’ we are entering the field of subjective judgement. It seems a bit odd that in an age where few bat an eyelid at the sums earned by Formula One racing drivers or footballers, so many get riled at such payouts to company bosses.
In any event, we are going to see more examples of big groups of shareholders like pension funds getting upset about this sort of pay regime. One thing slightly bugs me in that some of these pension funds are increasingly being seen by anti-globalistas and similar-minded folk as ways of inflicting their views on the world. The buzzword out there is ‘shareholder activism’. Let’s be clear here. It is our retirement money at stake. By all means let’s not vote in big pay rises for hopeless bosses, but tomorrow’s pensioners need the wealth generated by good firms of today – and often that means hiring the best people.
And that sort of thing comes at a price.
It is becoming increasingly clear that Europe’s economic problems are a year or so away from becoming nightmarish. The international economic establishment is getting worried, G7 finance ministers, the OECD and the IMF are making increasingly gloomy noises. Deflation approaches like a glacier, slowly but almost impossible to stop without radical measures. The ECB’s constitution is inadequate to deal with the problem. It is charged with holding down inflation and maintaining price stability, not with encouraging economic growth.
Inflation is not a threat, deflation is a real threat. Japan has had 41 consecutive months with no inflation, Germany is going the same way pulling Europe with it. The US has abandoned the strong dollar policy in order to reflate, devalue its debt and cheapen exports. Consequently the Euro has now strengthed over 40% from its lows, adding to the woes of exporters. Germany is mired in high taxes, social costs and rigid structural problems – Eurozone unemployment rates are nearly double that of the Anglosphere countries. Real interest rates (base rate – inflation) in the Eurozone are punishing compared to the US. Don’t even think about the unfunded pension problems.
So what does the ECB do? Nothing. Last year many people laughed when 90 year-old Milton Friedman joked that he would outlive the Euro. If the ECB does not re-invent itself as a growth orientated central bank, Milton may yet have the last laugh.
Paul Staines
Yesterday’s post about the mean and stupid RIAA has created some debate in the comments section. And in the meantime, the RIAA has a few more nasty tricks up its sleeve. ZDNet reports:
Some of the world’s largest record labels are quietly financing the creation of programs by small software firms that, if implemented, would sabotage the computers and Internet connections of people who download pirated music, according to a published report.
To those who argue that laws should be obeyed ‘coz that’s what they are there for:
Citing industry executives, The New York Times reported in an article that appeared on its Web site on Saturday, that the efforts bear varying degrees of legality including attacking a computer’s Internet connection to slow or halt downloads and overwhelming distribution networks with programs that masquerade as music files. [Trojan horses and viruses]
To those who venerate the Constitution and let it inspire their opinions about the changing reality of copyright enforcement:
Last month a federal judge in Los Angeles ruled that file-sharing services Grokster and Morpheus were not guilty of copyright infringement.
If upheld, the ruling on Grokster and Morpheus could make it harder for the record industry to go after technology that allows people to trade files, provided the companies that offer such tools have no control over how their technology is used. As a result, record companies are going to have to find other targets for their legal wrath.
Perhaps legal intimidation, coupled with ‘aggressive’ technology may be effective for a while, but the ‘problem’ with technology is that somewhere, quite soon, one or more clever little buggers will find a way around it. Turning nasty to those who want to listen to music, i.e. record companies’ actual markets, does not strike me as the best business strategy. Free markets mean that the players are able to freely satisfy the demand they identify. It does not mean violation of property rights and free-for-all but I cannot accept that is what the RIAA is fighting against. Their desperate efforts to recoup losses has far more to do with overpriced contracts with top chart artists, bloated marketing budgets and costly advertising wars about places in the very top charts that make the artists so expensive, than with any copyright infringements.
If you are a business in free markets and a new phenomenon emerges that may just jeopardise your distribution system (in this case, internet and P2P replacing CDs and other off-line media), you do not go around intimidating your current, former and potential customers. You find a way of accommodating that demand, adjusting your business model or finding an alternative way to satisfy it. That’s free market to me!
As Michael Page, an attorney who represented the defendants in the Grokster and Morpheus case predicts:
It puts pressure on the labels to take seriously that the public wants electronic distribution. They’re going to have to stop trying to figure out a way to make the Internet go away and figure out a way to use it.
Perhaps, unless you think you have enough muscle to try to curb the markets and customer behaviour and make sure that your oligopoly prevents any new entrants from making impact on the balance of power in the industry. Oh wait, that sounds just like the RIAA…
This debate is not exactly about copyright and intellectual property. The reason we are having it is that it is easier for the RIAA to go the route of legal intimidation and obstreperousness (the US is, after all, the land of lawyers) than giving in to more uncertain and painful pressures of market forces and customer demand. Oh, and of progress and technological development…
Note to our ‘in-house’ entertainment industry expert: Is this what you had in mind, Simon? Surely not.
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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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