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Yesterday the BBC’s Andrew Neil interviewed Jeremy Corbyn. A link to the interview is here.
Starting at 21:52 the discussion goes as follows:
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Neil: And as part of the investing in the future you plan to borrow a lot to do that. How much will you borrow?
Corbyn: What we will do, is for the public ownership elements there’ll be an exchange for, erm, bonds for shares in it.
Neil: But what is a bond?
Corbyn: A government – a government bond.
Neil: Yes, it’s a debt instrument. It’s borrowing.
Corbyn: Well, it’s a bond – it’s a government bond which would be serviced by the income from that service, but in addition we would have control of it. Take –
Neil: But you would still have to borrow. Bonds are borrowing. You would borrow.
Corbyn: Take the water industry, for example, which has been a method of siphoning off profits out of this country to offshore companies that made a lot of money at the same time leaving us with expensive water and in some cases very bad levels of pollution.
Neil: You would need to borrow – I understand the case but you would need to borrow to buy the utilities.
Corbyn: No, it’s not a – it’s a swap of the shares for a government bond.
Neil: But if you’re issuing bonds, Mr Corbyn, you’re issuing government debt. You are borrowing.
Corbyn: Issuing bonds that we own which would be paid for by the profits from the industries, so instead of the profits –
Neil: But you’ve said you would cut the water utilities’ profits. That means you wouldn’t have the money to pay for the bonds.
Corbyn: Andrew, instead of the profits being siphoned off they would remain here. That’s an advantage, surely?
Neil: National debt is already an incredible 1.7 trillion. If you borrow to invest on top of the 50 we do, another 25 you say, you need to borrow to nationalise, you may have to borrow – if the IFS is right – for day to day spending.
Corbyn: No, we’re absolutely clear we will not borrow for day to day spending.
Neil: But you might have to, if the IFS is right. Our national debt, which has already soared under the current government would soar even more under Labour, wouldn’t it?
Corbyn: No, because the – we have the rule that we would only borrow to invest for the future. We would not borrow for revenue expenditure. I mean that’s sort of a sensible rule which has not always been followed.
Neil: A technical rise.
Corbyn: And what we’d get in return is investment in better services. That in turn would encourage economic growth. Listen, we have a huge imbalance of investment. Far too much goes to London and the south east in transport infrastructure. Far too little goes to the north east, north west and Yorkshire. Those issues have to be addressed. Hence the National Investment Bank, which will be regionally based all across the UK.
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According to the polls it is looking more likely, though still unlikely, that Mr Corbyn will be our next prime minister. So I would like to know what he means by the above. My base assumption is that he has very little idea what he is talking about. But I must confess that if Andrew Neil were to ask me what a bond is, my answer would be scarcely less waffly than Mr Corbyn’s. Can Samizdata readers explain it all for me and readers like me? What exactly is wrong with his proposals, if anything?
When we hear the phrase “tax the robots,” it doesn’t sound the same as “tax the laundry machines,” or “tax the computers.” It sounds a lot more like the phrase “tax the rich.” This suggests that we tend to think of the robots as an actual class of persons. When we talk about taxing robots, it’s as though we humans can “get back” at the robots for taking our jobs. By taxing robots, we could take back the value they’ve taken from us. But wait a second. If we think of robots this way, it’s probably a sign we’ve been watching too much “Westworld.” Robots as we know them are inanimate objects. They are machines, like cars and computers.
– The Federalist.
This reminds of the broader point, made for example by James Hannam, a tax expert in the UK, that “no matter what name is on the bill, all taxes are ultimately suffered by human beings” (What Everyone Needs To Know About Tax.)
Far too many people seem to be in denial about this basic fact. Tax a robot, and the robot’s owner gets taxed. A robot in that sense is no different from an electric toaster or dishwasher; these are tools made by Man for his use. Until we reach that moment when robots become truly autonomous (and have to pay taxes and perform jury service, etc), this fact is not going to change.
Maybe Bill Gates got swayed by the idea that because robots are displacing human labour in some senses, and this creates a problem, it can be solved by taxing said robots and use the proceeds to give everyone a sort of Universal Basic Income. The idea of a UBI has been embraced even by those who think of themselves as libertarians/classical liberals, on the grounds that in some ways this might weaken resistance to some of the good things that come with disruptive change in commerce and finance. I have a number of problems, however, with UBI, not least its likely devastating impact on any sort of work ethic and a divorce between notions of cultivating a certain character and earning some form of income. At the end of September I am giving a talk on this matter at the end-of-month events that Brian Micklethwait has been putting on. I will update my thoughts on UBI a bit later. For the time being, check this out by Bryan Caplan at Econlog.
The anti-austerity narrative has taken on a life of its own. For large sections of the Left, “anti-austeritarianism” is no longer about a response to a recession. It has become a mindset in its own right. Its central tenet is that there is no such thing as economic constraints – there are only political choices. It is never “necessary” to cut spending on anything. It is always a deliberate choice. In this way, the anti-austerity mindset has really become an anti-economics mindset.
– Kristian Niemietz
This a few months’ old, but I thought of this excellent point on the issue of Single Market access, made by Tim Worstall, when reading some bleatings from Remainers on the subject:
“We could in fact argue that a payment into the EU budget in return for Single Market access is illegal state aid. And thus not allowed under the usual rules of trade with the EU. Because it is state aid. Exporters will face tariffs if the payment is not made. The payment thus benefits exporters. But the payment is made by taxpayers, this is thus aid from taxpayers to exporters. It’s a subsidy for exports – something that isn’t allowed.”
And:
A reasonable guess at the amount the EU would demand for continued Single Market access is £8 billion a year or so. Around and about the current nett contribution and not far off the correct multiple they charge to the far smaller economies of Switzerland and Norway. And recall again, this is what they demand be paid by taxpayers to grant that profitable privilege to exporters.
What we should therefore do is charge that £8 billion to the exporters. This has two useful effects. Firstly, the charge for the privilege now falls precisely and exactly upon those who profit from the privilege. This is where costs are supposed to go, to those who gain the benefits.
And then this:
The crucial point is that the benefits, as far as the UK is concerned, of Single Market access lie with those making the exports. Thus those making the exports should be those paying the cost of Single Market access. If those who benefit think it not worth the cost then no one should be paying such bribesillegal state aid access fees. And simply by applying the costs, correctly, to those who benefit we find out which is the truth.
It’s very difficult indeed, nay impossible, to see the down side of this suggestion. If exporters want Single Market access then exporters can pay for it, not taxpayers. If they won’t pay it then it’s not worth it, is it?
Worstall rightly says that this sort of idea is politically difficult, precisely because it is so logical.
There is another issue. The Single Market, as envisaged by the late Margaret Thatcher, may have been about trade and economics, but as far as much of the EU political class is concerned, it was part of a wider architecture of a European superstate – hence the way debate is linked to its access being tied up with free movement. Even so, as Worstall says, if access to this market really is so important, and denial of entry is going to be “catastrophic” (to quote an excitable Facebook acquaintance of mine), then exporters should not mind paying a fee. It would be no different to, say, paying an annual membership fee, or “tithe” (Worstall’s neat term) to be a member of the London Stock Exchange, or some other market, such as the Tattersalls bloodstock market, etc.
As cannot be said too often, the Single Market is a customs union, surrounded by tariff and non-tariff walls that, for example, have significant costs on consumers. To be a member of such a protected zone ought to be a privilege that those who wish for its membership should pay for, and that payment should not come from the general taxpayer.
Worstall’s logic is impeccable.
I do not know enough to assess the views of Paul Romer, the chief economist for the World Bank, when it comes to his specialism. I need no special knowledge to assess his views as reported in the Times on restoring the standing of his profession. He gets it.
Economists need to stop acting as if they own the moral high ground and start behaving with more humility if they are to win back the public’s trust after Brexit, according to the World Bank’s chief economist.
Paul Romer said that a popular backlash against experts needed to be taken seriously and that Brexit had been partly a reaction to the perceived hypocrisy of economists who claimed to be making unbiased judgments but were actually taking political positions.
Dr Romer, one of the leading economists of his generation, is known for speaking out against his profession. Last September he published a paper, The Trouble with Macroeconomics, in which he accused colleagues of practising a “pseudoscience” underpinned by an “honour code” that prohibits challenge to figures of authority even when their facts are wrong.
Dr Romer said: “To me, Brexit was a vote against the expert advice of economists. We have to earn back our credibility as professionals who will give an unbiased answer. In political discourse, activists often claim that their position is morally superior and no one seems to care, but when economists did so, voters reacted very negatively, perhaps because they are alert to even a whiff of hypocrisy and they sensed that economists were behaving like activists yet invoking the authority of science.
And if any smartarse wants to bring up Michael Gove’s remark about the British people having “had enough of experts”, tell them to listen to his actual words before he was shouted down. He wasn’t talking about any expert on any subject; he was referring specifically to those who said their predictions of Brexit disaster should be believed on grounds of their business and economic expertise, yet who had egregiously got their predictions wrong on the Euro and failed to predict the 2008 crisis at all.
Great is the rejoicing among most of the Guardian commentariat at the news that the Shadow Chancellor, John McDonnell, has said that if it wins the election the Labour party will outlaw all zero-hours contracts.
However there is a steady stream of comments from those not thrilled by their coming liberation from the capitalist exploiter, such as this comment by “fivemack”:
Employing people is not compulsory; if it had to employ people for 40 hours a week at £10 an hour regardless of demand, Deliveroo wouldn’t keep on the same number of employees as it has now, it simply wouldn’t exist. If the Guardian had to publish articles only by people who are full-time Guardian employees, it would miss out on an awful lot of interesting content.
The Guardian‘s own business section ran a story that said in large type that “McDonald’s offers fixed contracts to 115,000 UK zero-hours workers” and in small type that
McDonald’s has been trialling the shift to fixed-hours contracts in 23 sites across the country. The company said that about 80% of workers in the trial chose to remain on flexible contracts
When we were little my siblings and I would accompany my mother as she went from greengrocer to butcher to grocer in those pre-supermarket days. Often the first place she visited in the daily round would be the local bank, National Westminster as I recall, where she would queue to write a cheque “to cash”. (For thus it was, my children, when cash machines and internet payments were as yet unknown.) Boring though it was listening to all those grown-up conversations, at least I was learning about how the world worked.
One day my parents were moaning about lack of money. I was tired of their obtuseness in the face of the obvious. I stamped my little foot and said, “If you haven’t got enough money, go to the bank and get some more.”
What are you laughing at? I’ll have you know that my youthful economic ideas have been taken up by our government in waiting:
Labour will promise to increase spending on infrastructure and public services, the script says. Among the key pledges are a £10-an-hour living wage, a national investment bank to create £500bn to fund capital projects and infrastructure, and a guarantee on the triple lock for pensions.
Tim Newman does a fine job of fisking at length an article by Rachel Nuwer on the BBC (natch!) titled: How western civilisation could collapse.
Spoiler alert:
Tim is not impressed…
Here’s my suggestion: allow British citizens to keep their money in their pockets instead of forcing them to shell out £3bn per year for the BBC to publish garbage like this. A more humane gesture I cannot imagine at this juncture.
Read the whole thing.
I’m not joking. I wrote last year about how many of the international bureaucracies are blindly asserting that higher taxes are pro-growth because government supposedly will productively “invest” any additional revenue. And this reflexive agitation for higher fiscal burdens has been very prevalent this week in New York City. It’s unclear whether participants actually believe their own rhetoric. I’ve shared with some of the folks the empirical data showing the western world became rich in the 1800s when fiscal burdens were very modest. But I’m not expecting any miraculous breakthroughs in economic understanding.
– Daniel Mitchell
…of backwardness, protectionism and cronyism. Sorry, Italy, I love you in so many ways but this is just Third World:
The International Business Times reports, “Italy court bans Uber across the country over unfair competition for traditional taxis”
An Italian court banned the Uber app across the country on Friday ruling that it contributed unfair competition to traditional taxis. In a court ruling, a Rome judge upheld a complaint filed by Italy’s major traditional taxi associations, preventing Uber from using its Black, Lux, Suv, XL, Select and Van services from operating within the country.
I liked this statement by Julian Jessop, chief economist (recently appointed) of the Institute of Economic Affairs, the classical liberal think tank in the UK:
“It’s disappointing that the decision to convert existing EU laws is again being justified in terms of continuity and certainty. Instead, Brexit should provide an opportunity to reduce the burden of regulation on UK households and firms alike.
“It’s also disappointing that the default option in the event of no agreement is being framed in terms of the most pessimistic WTO scenario, ignoring any benefits that might come from unilateral free trade. The UK will have the opportunity to lower barriers that prevent our consumers and businesses from accessing the best and cheapest goods and services, wherever they come from. What’s more, we should consider doing so even if other countries – including the rest of the EU – continue to embrace protectionism.
“However, it’s welcome the commitment to a quick agreement on reciprocal rights for people from the rest of the EU already living and working here and for UK citizens on the continent. Now that Article 50 has been triggered there is no longer any excuse for either side to delay. Indeed, this will be an early test of the willingness of politicians in the rest of the EU to put the interests of ordinary people above their own narrow political projects.”
The facts are unambiguous: despite public perceptions to the contrary, extreme poverty has declined significantly, to the point where its end may actually be in sight. So next time you hear someone bemoaning a supposed rise in world poverty, encourage them to have a look at the evidence for themselves.
– Chelsea Follet
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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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