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.
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Well, continuing in my theme of talking about folk heading off to mountainous nations with more sensible tax laws than in the UK, I see that Sir Simon Jenkins thinks that Britain would be well rid of the thousands of financiers and other folk who are threatening to leave the UK because of high taxes. Jenkins is a rum fish: he is often quite astute in pointing out, for example, the damaging impact of regulations on certain industries and in some ways his instincts are quite liberal in the old, proper use of that word. But he also thinks that tax rates don’t really matter. To hell with ’em, he says: these bankers are just bluffing:
“There may be someone out there outraged at paying 10 per cent more in tax from an enormous income, and equally outraged at his firm being taxed on his enormous bonus. Of these a few may be so outraged as to uproot their families, desert their friends and go into exile — before they find that a £2 million London house costs £9 million in Geneva. If they can do their business entirely online, why be in London at all? But I doubt if there really are 9,000 such sad, migratory souls.”
Jenkins needs to get out more. There are indeed thousands of people who are not amused at the prospect of having their wallets so comprehensively lifted. In my travels and through work in the media and wealth management sector, I can tell Sir Simon that the exodus of folk is not a mirage. It is happening. Note the lazy assumption that because these evil bankers are paid so much, it will not make any difference if the state seizes another 10 per cent of their annual income. In fact, once changes to pension allowances, thresholds and National Insurance are taken into account, the top rate of income tax in the UK will be more than 60 per cent in marginal terms for anyone earning more than £150,000 a year. That tax bite is higher than will be the case on top earners in France, if my memory serves. Way to go, Mr Brown! But what is objectionable about Jenkins’ reasoning – if we can dignify his comment by such a word – is the idea that such folk have no right to be outraged at having almost two-thirds of their income above a certain level seized, at source. The assumption is that no-one really “needs” all that filthy lucre and should be jolly grateful that they do not have to surrender even more. The unconscious collectivism is all too evident.
The consider this classic:
“We used to get the same tax-dread from the British film industry, howling at being taxed like ordinary mortals. Yet the last time Britain made really good films, in the Sixties and Seventies, marginal income tax was 80 per cent. In 1986 the Big Bang transformed the City of London, leading to German, Swiss and American banks pouring into London. It ensured that the City, then languishing under competition from abroad, would flourish. At the time, marginal income tax was not 40 per cent or 50 per cent but 60 per cent.”
That is a silly argument. No-one is claiming that if taxes rise, that the economy collapses overnight – the damaging effect can take quite a while to have its effect. But have its effect it did. Many of the stars of 1970s films, such as Michael Caine, Peter Sellers, Sean Connery, Richard Burton, Roger Moore, did not live in the UK for part of the period that coincided with confiscatory tax rates. Sellers, for example, ended his days in Switzerland.
“It was not until two years later, in 1988, that the chancellor, Nigel Lawson, cut the tax to 40 per cent. By then Margaret Thatcher was so fearful of over-heating the economy that she pleaded with him that 50 per cent was enough. It was not Thatcher who cut the tax, as Johnson keeps saying, but Lawson. It led to inflation, boom and bust.”
Well, if Mrs Thatcher really did think that 50 per cent was “enough”, then all I can say is that I am glad Mr, now Lord, Lawson, prevailed. If the state takes a smaller chunk of a person’s income at source, that does not necessarily fuel inflation – since before the tax was cut, presumably the money being seized from such taxpayers was being spent on something else. In fact, I would add that one of Mrs Thatcher’s faults was her support for mortgage interest tax relief, which encouraged people to over-extend their borrowing on property and helped fuel the housing boom of the late 1980s (UK regulations restricting house building did not help either, but that is another story).
Finally, there is this:
Bankers can drift around the tax havens of the world while we are stuck in London but I don’t see why I should pay off their gambling debts with my taxes when they will not pay them too. If they storm off in a huff, good riddance. I don’t want such people investing my money.
Here he is confusing good arguments – no bailouts for failed bankers – with a sort of vengeful “fuck-you!” spite against bankers in general. If Sir Simon wants to make the case against “too big to fail” bailouts of bankers, argue for a genuine free market in banking rather than the statist, moral-hazard disaster we have now, and insist that the Keynesian madness now in vogue be challenged, I will be cheering him on. I suspect I might have to wait a while.
I would like my first post on Samizdata to be something of lasting utility, and a link to a fact-packed post on a new blog might be just the thing. Super-Economy (wonderfully subtitled ‘Kurdish-Swedish perspectives on the American Economy’) kicked off with a broadside against the egregious Paul Krugman. Krugman had said in his New York Times column that the US has lessons to learn from the EU because the latter’s growth has been as good – well, almost – as that of the US recently.
He demonstrated this by comparing US GDP levels with – incredible but true – three European cities: London, Paris and Frankfurt. Tino, the blogger, comes back not just with the obvious rebuttal of a comparison between a country and three of the world’s wealthiest cities but with tables comparing the US, its individual states and the countries of the EU. You can find, for example, that the UK ranks below Missouri in terms of GDP per head – but at least we are above Alabama, which beats France. In fact the UK has a GDP per head of $35,669 as compared with $45,489 for the US. The average for the EU15 is $33,452.
Tino also tabulates GDP per head of various ethnic groups in Europe and their transplanted kin in the US. The average Brit is two-thirds as productive as the average ‘British-American’. The ethnic angle is what would have interested Steve Sailer, where I saw Tino’s blog linked (Sailer is indispensable – one of the few bloggers whom I read every day).
The differences Tino lists are huge enough to overwhelm any cavilling about definitions or methods. File the tables and use them as intellectual ammunition against anyone who argues that left-leaning Europe is better at capitalism than the US is.
I was reading the Telegraph and came across this gem…
HMRC inspectors have started the crackdown in a bid to tackle tax evasion, which loses the economy around £3billion a year.
Huh? So that £3 billion that does not get paid to the state is a “loss to the economy”? How does that work exactly? Do the tax evaders burn that alleged 3 billion quid in their backyards to make sure that if they can not keep control of the money they earned, no one else will? Is that what Christopher Hope is claiming?
In what way is money not paid to the state, but instead allocated to some other economic activity chosen by the person whose money it is, a “loss to the economy”? Does Mr. Hope think taxing people’s money creates more net wealth (or indeed any net wealth) compared to money left untaxed for private wealth creation? Really?
On the front cover of the current edition of the Economist people are given a “Bubble Warning“. If one reads the article to which the front cover refers, one is informed that the massive monetary expansion (i.e. creating money from nothing) and fiscal deficits of various governments, but particularly the United States and the United Kingdom, have artificially maintained false values in assets – in everything from shares to housing and commercial property. A vast bubble economy – an unsustainable mess that these governments have no real plan to deal with.
I admit that I read Economist articles (when I read them at all) through a deep red haze of rage – but I think I would have spotted the words “we are very sorry we gave governments such bad advice all through the current crises” and I do not remember them being there. For, of course, it was the Economist itself (along with the rest of the establishment) that pushed the policies of bailout (TARP and so on) and “stimulus” that have meant that markets have not cleared, mal-investments have not really been liquidated and the bubble economy now stares us in the face.
The economic crises of 2008 was caused by the general increase in the money supply pushed (each time they “saved the world” i.e. prevented a clear out of mal-investments, year after year) by Central Banks – particularly (but certainly not exclusively) by Alan Greenspan of the Federal Reserve. The role of the Fed in general is explained in Thomas Woods’ work “Meltdown”, and the political reasons why the increase in the money supply flowed especially into the housing market are explained in Thomas Sowell’s work “Housing: Boom and Bust”.
In 2008 is was no longer possible to avoid a terrible economic slump. That chance was lost when Greenspan (and his fellow government Central Bankers) had “saved the world” by avoiding (by increasing the money supply) the painful but needed clearing of the market and liquidation of mal-investments – which they did again and again over the years, with each time they did leaving the bubble economy worse than it was before – putting off the problem (and making it worse) not solving it. → Continue reading: The hypocrisy of the ‘Bubble Warning’ in the Economist magazine
People (like Anatole Kaletsky) who have the view that large quantities of government debt somehow don’t matter and are are not potentially damaging would do well to listen to this talk given by Professor Kevin Dowd, that I was fortunate enough to attend at the Libertarian International conference in Paris last September.
An audio only version is here.
The whole talk is good, but the first half (mainly about sound ways of recapitalising banks) is drier than the second. The really good stuff gets going at about the 20 minute mark.
Update: For the first few minutes of this lecture, it seems that Professor Dowd is giving the same talk he gave at the Chris Tame lecture earlier in the year. However, this is not the case. He gets through that in the first half of the talk. It is in the second half of this that he really says exactly what he thinks, and it is refreshing to hear someone just come out and say these things. If you heard the earlier lecture, it is still worth listening to at least the second half of this one.
This headline and lead paragraph in the Times (of London) deserves a sort of award:
Thrifty families accused of prolonging the recession –
Anxious families are repaying debts instead of spending in the shops, amid concern over the uncertain economic outlook. The share of income saved in banks and building societies has risen to its highest level in more than a decade, heightening fears that faltering consumer demand could prolong the recession.
This is a sort of reflexive crude Keynesian message at work; the laziness of the assumption that recessions are ended by people spending more – never mind where the money comes from – continues to hold a grip on the MSM. In fairness, maybe what the writer is trying to say is that saving is a good thing but if everyone saves “too much” (however one can define that), then in the aggregate, it drags everything down. But that does rather ignore the situation that has built up over the years, and the disruption to the economic system caused by excessively cheap credit. People who try to reduce their debt, save more and decide to forgo spending money they haven’t got are not “prolonging the recession” beyond some point that can be marked down on a graph. The current economic Snafu was caused – as the author of this newspaper item must be dimly aware – by a country hooked on the drug of cheap credit, beguiled by the idiotic notion that whenever the drug wore off and the hangover kicked in, that that nice Dr Greenspan and friends would administer yet more of the drug, to get yet another high. That way lies the equivalent of liver poisoning.
It may seem a Scrooge-like message for this time of year to point out that you cannot spend money that you don’t have; businesses cannot invest money that has not been already saved, and that interest rates must reflect the balance of supply and demand for savings. The “Austrian” economic insight that money is a claim on resources, and that two people cannot hold the same claim on a resource at the same time, needs to be relentlessly rammed home.
The best way to end a recession is to unravel the massive misallocation of resources caused by printing money as soon as possible, to let labour markets clear, to cut public spending and cut taxes, and where necessary, recapitalise banks speedily. (Check out this paper for a good course to steer). Such a process is inevitably painful. In the short run, the pain is worse than the sort of dragged out situation we have now. But ask yourself this question, dear reader: what is the more compassionate policy – a short, sharp recession and closure of failed banks, followed by a rapid 1921-like recovery, or a Japanese-style multi-decade of stagnation?
On that note, this makes a good Christmas present for those interested in economic affairs, if you still have the time to get it shipped.
When you read this passionate denunciation of the sheer intellectual cowardice of the Conservative Party over the issues of tax, public spending and the banking sector, ask yourself again: who gives a brass farthing as to whether David Cameron and friends win power next year? Who?
I’ve just been watching this video, of Lord Monkton laying into the Climategate gang. What makes it so potent is that he is quite bluntly calling them crooks, and calling anyone who still follows their fraudulent prophecies dupes and fools. He names names, and crimes. Yes, crimes. And yes, criminals. Criminals with names. Monkton does all this in his posh British public school voice. Nevertheless, you can almost see him doing that thing that fist fighters do, but with their beckoning hands rather than with their mouths, and pointing at their own chins. Come and get me! Give me your best shot! I say you are a pack of scoundrels. Prove me wrong! I say that the logical thing to do about “climate change” is: nothing. Nothing. Why on earth do you still have the damned nerve to think anything else? Such pugilistic vulgarities are not to be found in the text of the talk. Monkton is too canny, too cool, to get that excited. But that is the subtext.
Here is some other evidence that those with the job of chasing crooks are now getting interested in this.
I agree with Johnathan Pearce in the previous posting that the old-school media are definitely, albeit belatedly and with much embarrassment and confusion, starting to notice all this. You can feel that most crucial of propaganda processes happening with Climategate: the reversing of the burden of proof. Unfair to all the fraud detectives (Watts, McIntyre, and the rest of them, including Monkton himself) though it undoubtedly was, those noble toilers, until the Climategate revelations erupted, had to prove everything, in defiance of the default position. Their every tiny blemish was jumped upon. Their major claims were ignored. Now the default position is slowly mutating into: It’s all made-up nonsense. And the burden of proof is shifting onto the shoulders of all those who want to go on believing in such ever more discredited alarmism. In short, our side is winning this argument, big time.
And it turns out that the rich countries do indeed wish to remain rich, as I merely hoped was the case a week ago. The underlying point being: nobody is actually as scared about climate change as they were a few months back. Doubters who feared that there might have been “something in it”, “no smoke without fire”, etc., now doubt far more completely. All but the craziest warmists are now going rather quieter. The people who matter no longer feel deep in their guts, those of them who ever did, that there has to be a deal, or the earth will fry. All potential parties to it are now more willing than they were to walk away from Copenhagen with no deal, because the fear of being blamed for not reaching a deal is now (in the nick of time) being replaced by the fear of being accused of having reached a bad deal.
In other good news: Gordon Brown is backing the Copenhagen Conference to be a success.
And yes, I know, a huge amount of institutional infrastructure remains in place, created partly by means of these climatic lies, before people had to justify believing in them and when critics of that apparent scientific consensus (Monkton has interesting things to say about that) had to justify believing in anything else. The Copenhagen Conference, for all that it now looks like being a huge disappointment to the more incurable of the AGW alarmists, will still do quite a lot of harm. The war isn’t over, to put it mildly.
But winning arguments is no small thing. During the 1980s I vividly recall being told, by people whose pessimism about the Cold War was so profound that they might as well have been Soviet agents of influence for all the use they were to the side they claimed to be on, that merely proving that despotic state centralism was an economic disaster would make no difference. Those wicked Soviet Communists – who were, they claimed, so very much cleverer than any of us – would still eat us all alive, and all the more horribly on account of having run out of stuff to eat in Russia and surrounding parts. Well, it turned out that winning that argument counted for quite a lot. And winning this one will count for a lot too.
My good friend Rob Fisher recently wrote the following on his own blog.
I listen to Radio One in the morning. Chris Moyles and a bunch of other celebrities walked up Kilamanjaro to raise money for charity. Now Moyles has just got back from a trip to Uganda to give out malaria nets with the money raised.
He said that two things surprised him about Uganda. It’s very green and lush; and everyone has mobile phones.
I think part of the reason everyone thinks Africa is brown and dry is Live Aid. “Where nothing ever grows; no rain or rivers flow.” Never mind forced relocation. Looking around on loc.alize.us, Uganda is a bit greener than Ethiopia.
Yes, but Bob Geldof and Midge Ure wrote those lyrics, and they had this British preconception already. Another factor might be that the places in Africa that British people are most likely to visit are Egypt, Tunisia, Morocco and South Africa: the Sahara, and the arid south. There is plenty of fertile land in the middle. A tragedy is that some of the most fertile parts of Africa tend to be some of the most troubled: the vast Congo basin is prime land, essentially, and yet its history has been unspeakable, at least since the arrival of King Leopold’s privateers in 1877. As Chris Moyles discovered, Uganda is green and fertile, but its history is not the happiest either.
People who attempt to raise awareness of malaria in Africa and elsewhere, and to raise money for its prevention deserve praise, of course, but what I am struck by is that the story about mobile phones becoming ubiquitous in poor countries has only just reached these people. This story is at least five years old now in the sense that most people have access to one and probably closer to ten in the sense that mobile phones existed in these countries and networks have been quite comprehensive, in many cases as comprehensive or more so than in rich countries.
A related story: about three years ago I was walking along the Thames path on a Sunday afternoon. and I passed City Hall. Outside the building was some kind of “Here is how bad things are in the third world and why we should fell guilty” kind of exhibition provided for us by Ken Livingstone’s lackeys using our money. Amongst the factoids of information in this display was the statement that “90% of the world’s population have never made a phone call”.
The “x% of the world’s population have never made a phone call” meme has been around for a while. 90% is obviously ridiculous and shows intense innumeracy from whoever made it up. (About 15% of the world’s population lives in rich countries, and if you add “rich parts of middle income countries, you can increase this number to 20 or 25%). The meme seems to usually be stated as “50% of the world’s population have never made a phone call”. Clay Shirky attempted to investigate where the meme came from, and the first recorded statement of it appears to be from engineer Greg LeVert of telephone company MCI in 1994. However, he said it in the context of “.. but oh boy is this going to change with all the great new technology that’s in the pipeline”. Nobody knows where he got the factoid from though: he may have just made it up. However, the Al Gores and Michael Moores and Kofi Annans and the like (and even people like Melinda Gates and Carly Fiorina who should know better) have repeated it endlessly since – or at least were doing so until only a few years ago.
It is, of course, just not true. It is extraordinary that people should repeat out of context a ten year old view of what the poor world is like, as if the ten years between 1995 and 2005 were static in the development of telecommunications.
At the time I encountered that exhibition outside City Hall, there were around 3 billion active mobile phones in the world: so therefore, although 90% of the world’s population had never made a phone call, about 50% of the world’s population owned a mobile phone. (They were all big texters, apparently). Since then, the number of mobiles in the world has increased by a further 50% to around 4.5 billion. The number of people with multiple phones per person or separate voice and data accounts and such has now reached the point where you cannot go directly from this to “4.5 billion people have mobile phones”, but the number of people who do is clearly greater than 50% of the world’s population. Given phones shared between families and friends, and the interesting third world concept of the cellular payphone, the percentage of the world’s population that is old enough to have made a phone call and has never done so must be in the low single figures.
The use of this meme by the internationally prominent seems to have finally died over the last couple of years: even someone as dim as Al Gore can figure out from his occasional views out of windows of five star hotels or between the gaps between members of his entourage on his occasional trips to the third world that something has changed, I suspect. Finance and business folk get this completely and got it long ago: fortunes have already been made selling mobile phones to people in poor countries.
But the well intentioned who seldom leave rich cities other than to visit Mediterranean beaches still don’t generally get it. At best, people who see Africa as a problem to be addressed through benevolence, charity and aid have made small differences in a few places. The capitalists who have built mobile phone networks have transformed the continent utterly. The logistical networks that go with them have facilitated all kinds of other changes, too, in terms of logistics and markets. All kinds of consumer goods are available that were not before. (Many people cannot afford them on an everyday basis, but they are there, and this matters). Just as in the west, food is better, and there is more variety. There are lots of under the radar small businesses that were not there before either. Access to information and to the outside world is much greater.
As it happens, my first trip to Africa was to Kenya and Tanzania, and a main aim of that trip was to climb Kilimanjaro, too. → Continue reading: Mobile phones are only part of the story in Africa
In an earlier posting today, I expressed the fear that this Copenhagen nonsense would lead to quite a few more stupid laws. But the news right now seems to be rather better than that:
The UN Copenhagen climate talks are in disarray today after developing countries reacted furiously to leaked documents that show world leaders will next week be asked to sign an agreement that hands more power to rich countries and sidelines the UN’s role in all future climate change negotiations.
If this shindig can be a total fiasco I really do not care why (for his own idiot reasons this guy agrees). Sadly, I fear that this leak may just be negotiation as usual. The bodge that results will still probably be pretty terrible.
On the other hand, maybe the rich countries do not actually want a deal. Reading that Guardian report, you can almost hear the rich country negotiators muttering amongst themselves that they would prefer to stay rich. But maybe that is a step too far towards being sensible, and too much to hope for.
Fingers crossed.
Here is an interesting discussion – of the sort likely to send parts of the redistributionist left over the edge – pointing out that in certain respects, the poorest in the US have become better off and that by some yardsticks, inequality has also shrunk. For what it is worth, inequality per se is not an issue that I regard as one raising any injustice whatsoever so long as the economic pie expands. If the economy was a fixed pie, then there might be some presumption that a large slice for Mr X came at the expense, possibly, of Mr Y. It is, however, worth noting, I think, that support for the free market order tends to be more robust when there is a large, entrepreneurial middle class into which anyone, given sufficient hard work and a pinch of luck, can enter and where the chance to escape poverty is high.
All in all, the stats I refer to in the link are encouraging news, and worth spreading around.
Peter Schiff, as ever, has a nice take on an argument that I have heard expressed from various commentators in recent years and months: China saves “too much” and its “excessive” savings are the source for all this Western borrowing – and now the financial SNAFU – so Chinese folk need to get their wallets out, spend more, be less frugal, so that this “imbalance” in the world economy can be corrected.
Schiff gives this line of thinking fairly brutal treatment, but as he says, there is also some truth in it. Because China’s exchange rate is kept artificially low against the dollar and other currencies, Chinese exports are cheaper in Western markets than they would otherwise be; this means that in turn, China earns large amounts of foreign exchange, which in turn get invested in things like Western government debt securities, such as US Treasuries. This buying of Western debt like Treasuries has enabled Western consumers to enjoy credit for cheaper than otherwise would have been the case, fuelling the credit boom, etc. Of course, what this line of thinking tends to overlook is that if Chinese savings are based on real earnings, and those earnings are being invested in Western productive assets, then how is this a problem? Consider: part of the 19th Century, the UK invested enormous sums of its capital in places such as Argentina, the US, Canada, Australia, India, and so on. This export of capital was entirely benign as it generated long term returns based on real investments. Would it have been better had this process not happened?
I agree with Mr Schiff that the Chinese yuan will float freely eventually; when it does so, Chinese exports will be more expensive in Western markets, while Chinese consumers will be able to buy more Western goods, and so the “problem” of all this surplus capital will disappear or be less pronounced. The “imbalance” will begin to rectify itself, given the chance. And that means the West will have to rely more on its own savings to generate investment in the future. The question, of course, is whether the tax and regulatory climate makes that process happen smoothly or not.
There have been many different explanations of what has gone awry in the world economy in recent years, and of course any search for an explanation cannot ignore China and the impact of its own policies. But it strikes me as unjust to put China in the dock. The prime driver of the crisis has been Western monetary incontinence, a largely home-grown force.
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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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