23 Things We're Telling You About Capitalism II

In his second chapter Chang tells us that companies really shouldn't be run in the interests of their shareholders. All this guff about shareholder value is just that, guff. Precisely because shareholders can just cut and run by selling their stock they are in fact the most short term thinkers in the entire system.

An argument for which a case can be made and Chang tried to make it. Unfortunately this doesn't really accord with that real world out there: who actually does, no not in theory, but who actually does have a longer term view than the shareholders? Certainly not politicians as they never look beyond the task of winning the next election. And it would be difficult to accuse British unions of thinking much beyond the next pay negotiation. I might even be true that shareholders don't think enough about the longer term: but there ain't nobody else out there with a longer time horizon than the shareholders have. After all, the current value of the shares is the net discounted value of all future income from them. Any company that really isn't thinking about the long term is therefore going to have a low share price.

But there's a much larger underlying confusion in Chang's thinking here. He talks about other ways of organising matters so that extant companies do indeed exist long into the future: deliberately having strategic stockholders for example, the way that the Japanese keiretsu do perhaps. The problem with this is that there's no particular reason why a specific company should exist for the long term. Indeed, it's often entirely desirable that they do not, that they go bust and the assets then distributed in bankruptcy to those who can make better use of them.

Most growth in the economy, and almost all employment growth, comes from new entrants into the market. It is small firms starting and growing, old firms failing and leaving, which changes the marketplace. Yes, of course, we can all think of examples of the opposite: I can never remember whether it is Ericsson or Nokia that started out making gumboots and switched to mobile phones. But this is very much the exception. It is the start ups that revolutionise the economy to all of our great benefit.

Once we accept that then the very idea of trying to insist upon the long term viability of a specific company becomes a nonsense. We want to be able to increase and grow the economy into the future, yes we most certainly do. But there's no particular reason why the corporate entity called Rover, or Rolls Royce, or Glencore, should survive log term. Indeed, there's good reason why we'd be quite happy for firms to die out at some point. That point being when their particular skills and advantages are no long appropriate to the demands of the rest of us in the economy.

Schumpeter made this point, that capitalism is all about creative destruction. Those small companies do provide the creativity and it is the end of large companies, at the end of their business or technological tether, that get destroyed. Stakeholder interests make that destruction a great deal more difficult. Two recent examples:

Uber is a method of hailing a yellow cab over a smartphone rather than waving your arms on a street corner. This isn't rocket science. But it has taken a year so far to fight through the bureaucracy to get this simple system licensed. And once that had been achieved the "stakeholders", the limo drivers of New York City, sued to over turn that. On the grounds, incredibly, that it would be age discrimination as older people were less likely to have a smartphone. Or, as we might put it, the incumbent stakeholders were resisting their creative destruction.

The blast furnaces at Florange in France are another example. The unions, and then the government acting on the behalf of such stakeholders, are insisting that these blast furnaces must remain open. Except no one at all wants the iron made in these furnaces. Technology has moved on, we now recycle a lot of our iron and steel here in Europe. To the point that we just don't need as many blast furnaces as we did: they've been replaced by electric arc furnaces. So who is doing better for the economy as a whole here? The stakeholders fighting to save the past or the shareholders liquidating that past? I would certinaly argue that the shareholders here have the longer term interests right.

And that's what becomes problematic about that stakeholder, as opposed to shareholder, economy. It becomes static. If the stakeholders, as they will, demand that their interests be protected then the interests of stakeholders will indeed be protected. Which means that we cannot have enough of that capitalist destruction to make room for the new capitalist creation. I'd be willing to accept the stakeholder argument if we did in fact desire a stagnant economy. As we don't, I don't.

Another way of putting this is that by running companies for the benefit of the wider community, rather than purely for the profit of the shareholders, we entrench the power over what that company does, whether it survives, whether it gains entry to government subsidy schemes perhaps, in that wider community of stakeholders. Who will, as Adam Smith didn't quite say, then conspire against the wider public to ensure the continuation of their benefits from their stakeholding interest. Which isn't what we want at all. We want companies to continue as long as they continue to make a profit: for profit is that signal that the output is worth more than the inputs, that value is being added. Once that is no longer true we want the companies to fold and make way for new market entrants. Given that profit is the marker of this success or not then we want these decisions made by those who benefit from the profits: the shareholders. Not by those who benefit from the jobs, or patronage, or political power: so not by the workers, not by the unions and not by the politicians.

If stakeholders get to run the system then we'll still have blast furnaces 50 years after they're technologically obsolete and we'll all still have to stand in the rain to get a cab. For stakeholder interests gum up that creative destruction that is the very essence of capitalism.

It turns out money really can buy you happiness

This is from an NBER working paper () by Betsey Stevenson and Justin Wolfers, using data from Gallup's World Poll. From the Economist:

"Gallup asked respondents around the world to imagine a "satisfaction ladder" in which the top step represents a respondent's best possible life. Those being polled are then asked where on the ladder they stand (from zero to a maximum of 10), and how much they earn. Though some countries seem happier than others, people everywhere report more satisfaction as they grow richer. Even more striking, the relationship between income and happiness hardly changes as incomes rise. Moving from rich to richer seems to raise happiness just as much as moving from poor to less poor. One never really grows tired of earning more."

Greed or common sense? I call common sense. There are a lot of things that make people happy, but affluence seems to be the strongest factor. And by far the largest accumulation of wealth in human history was done after the first Industrial Revolution at the onset of capitalism. Affluence made people happier, more innovative and more inclined towards further progress. It's all about incentives people have, and reaching a higher level of income seems to be the best one. This is what drives modern societies; a desire to innovate, to produce, to fight scarcity and to achieve progress. And no one can do this better than the individual entrepreneurs themselves. 

23 things we're telling you about capitalism I

Ha-Joon Chang tells us, in his book "23 Things They Don't Tell You About Capitalism" a number of things: 23 in fact. Over the next few weeks I'll be examining the core of each of these things and showing, where necessary, why the wrong end of the stick is being waved around so excitedly.

Our first shocker is that there is no such thing as a free market. Given that this is so we should therefore succumb to whatever limitations on our actions All Right Thinking People wish to impose upon them. Without complaint at all of course.

No, that's not a satire of Chang's views here, that's the distilled essence of it.

It is of course true that there is no such thing as a truly free market. Even in anarcho-capitalism (in fact especially there, as there would be no other limits) there are restrictions on what happens in a market. At the most simple, there is societal expectation: if we agree to swap apples for pears than I am indeed expecting you to hand over the apples as I deliver the pears. That in this sense no market is ever truly free does not therefore mean that we should accept any and every restriction upon them. One example of how Chang leaps from the first to the second positions is that he tells it is "obvious" that such things as trade in narcotics or transplant organs should be banned: two things that I most certainly, if not the ASI itself, have long argued should have legal trade in them.

A certain nuance in his argument becomes apparent when he claims that what is the proper limit to market activity is inevitably a political question. For what should or should not be traded is an ambiguous thing. Thus there can be no hard and fast rules and it will depend upon opinion at any one time: thus it is politics. Which, if you believe that there are no hard and fast rules would be true. Whether people can choose their own pint or working hours or narcotic of choice does become just an opinion to be settled by political means. If, and only if, you do already believe that politics, not logic, or rights, or civil liberty, should settle such matters.

We free marketeers do though have a set of hard and fast rules. They're at the heart of what classical liberalism is all about. Best summed up in Mill's freedom to swing the fist ending where the nose of another begins. This does give is hard rules. Subject to one exception, markets are the default: except where the exercise of a market right interferes with the rights of another. I cannot claim a free market in someone else's boots but I most certainly can in my own. I cannot insist that someone else work a certain set of hours: but I can indeed insist that he be free to determine his own.

This gives us our framework to decide upon the regulations he sees as just being political. That "obvious" ban on trade in narcotics not only causes deaths through the violence of the illegal trade, deaths through the impurity of the drugs themselves, gross corruption by the illegal money: it's actually a restiction of my own civil rights to do what the hell I want with my own body. Which may or may not include ingesting things Chang assumes should be banned.

The exception of course is externalities but these are a form of indirect harm and so come under our general rubric. Markets in everything except where the civil liberties of another are being harmed.

Chang further makes the mistake that said regulation of markets needs to be done by the authorities. Laws must be passed to govern behaviour: whereas we all see around us, all the time, markets that are governed by convention, accepted behaviour and just general expectations of how people are going to behave. There is no law that says that one should stand their round: yet social pressure is pretty good at ensuring that people who do not know about the displeasure at their actions. To the point of vehement corrections of said behaviour.

So it is with much of the regulation of markets. To show that norms are required, behaviours expected, is insufficient to make the leap to the insistence that the law must define all of these.

And finally, for this chapter, there is the laughable use of working hour and child labour laws to show that markets and thus capitalism, need to be regulated. For of course it is capitalism and markets, that strange duo, that made restrictions on child labour and working hours even possible.

When we all lived in the abject penury of peasant agriculture there were no possible limits on such working hours. All hands on deck all the time was the minimum needed to keep the family fed. This included children of course: indeed, the way in which small children rapidly become earners in peasant agriculture is used as a reason to explain the high fertility of such families. It's only with increasing urbanisation (capitalism there, with the factories) that fertility rates drop as young children are no longer economic assets but costs. It is only after we start to see the first rising in living standards from that combination of markets and capitalism that we can indeed labour only 10 or 12 hours a day, that we can leave children to have a childhood rather than their grubbing for the pennies that aid in keeping their families alive.

You'd think that a Korean would know this. For of course, the time when Britain was rich enough to be able to do this was some century, century and a half, before Korea was. We don't have to be rich as Croesus to be able to limit, say, child labour. But we do have to have at least started the climb out of abject destitution: you know, that climb that only markets and capitalism has ever managed for anyone?

Ten reasons why the Left should like the ASI, 7: Killing nanny

The Left should back the ASI's objection to having the state make decisions for working class people under the claim that it knows best what is good for them.

The ASI opposes the paternalistic notion that working class people in Britain are incapable of making their own choices.  People in authority, including many involved with the medical profession, often take the view that they know better than ordinary people and are therefore entitled to impose their choices.  They seek both laws and punitive taxes to constrain people into living the lives that 'experts' think they should live.  They ban indoor smoking and hide packets from view, and call for plain packaging and ever higher taxes, and justify all of this on health grounds.  The ASI view is that people are entitled to do unhealthy things if they wish, and while it is acceptable to warn them, the choice must be left to individuals to make.

The same applies to high taxes on alcohol and calls for minimum pricing and restriction on its advertising.  Again, health grounds are adduced, even though Britain is among the low consumers among EU members.  If people feel they derive sufficient pleasure from alcohol to justify any adverse consequences, that is a decision they can freely make.  It is no function of the state to treat them as children incapable of making choices for themselves.  Such an attitude is patronizing.

This is also true of foods deemed by experts to be unhealthy, including fats, salt, sugar and fizzy drinks.  There are proposals for fat taxes, for taxes on fizzy drinks and limits on the salt and sugar content of foodstuffs.  Labelling is acceptable so that people know what they are doing, but measures to force them into diets favoured by 'experts' demean and diminish the values of ordinary people.  These 'experts' never seem to consider that ordinary people, especially low-income people, might find that tobacco, alcohol and appetizing foods add interest and satisfaction to their lives.  These might be what some regard as unwise choices, but they are for people to make as adults, not as the protected wards of an over-mighty state.

It's not crazy to think we can eradicate poverty

The New York Times asks us:

Is It Crazy to Think We Can Eradicate Poverty?

The answer is, of course, no. It's not crazy in the slightest. This does assume that we're talking about actual poverty of course, not that inequality which is disguised as relative poverty. So how do we do this?

Fortunately, this deadly and cyclical form of poverty is already on its way toward obsolescence, and much faster than many development economists expected. The first Millennium Development Goal — to halve the proportion of the world population living in dire poverty by 2015 — was met five years early, as the rate fell to an estimated 21 percent in 2010, from 43 percent in 1990. Some economists had feared that the recession would arrest or even reverse the trend, given how interconnected the global economy is, but the improvement continued, unabated. Annual growth dipped for developing economies in 2009 but has since rebounded to about 5.3 percent a year, a figure dragged down by weaker peripheral European economies.

Yes, it's our old friend, economic growth again. If we have more economic growth then there is more value that can be shared among the various people on the planet. Thus more growth will lead to less of this absolute poverty. This really isn't rocket science.

Which brings us to the question of how we should have more of this economic growth? Two pointers come to mind.

The first being that the last 30 years have been a vast explosion of capitalist/free market globalisation. This has halved global poverty. It is again not rocket science to assume that more capitalist/free market globalisation will continue the process.

The second is that we do actually have a report from thousands of chin strokers about the possible paths of the global economy over the next century. I refer of course to the IPCC. Yes, the climate change people. In their economic forecasts, the ones they use to work out what emissions will be, they put forward this possible family of scenarios:

The A1 storyline is a case of rapid and successful economic development, in which regional average income per capita converge - current distinctions between "poor" and "rich" countries eventually dissolve. The primary dynamics are: Strong commitment to market-based solutions. High savings and commitment to education at the household level. High rates of investment and innovation in education, technology, and institutions at the national and international levels. International mobility of people, ideas, and technology.

It's not only possible, we've actually assumed that it is when creating the case about climate change. You know, this is the scientific consensus?

I would also note that this family, the A1 one, also produces an emissions path that means that climate change isn't actually a major problem. The forecasts are basically that the 21 st century will be very like the 20th. Economic growth will be about the same, increases in energy efficiency about the same, solar and other renewables will continue to get cheaper at about the same rate.

And we do end up with, in A1T at least, one scenario in this family, climate change not being a problem and we entirely beat absolute poverty right around the globe. All from a capitalist/freemarket globalisation. The only fly in the ointment is that none of us free market liberals currently advocating this approach are going to around in 2100 to dance on our opponents' graves. Better have the party now, eh?

Apple's taxdodging ways

Apple's played a clever game in getting around some of the US corporate tax rules:

Apple Inc. (AAPL) avoided as much as $9.2 billion in taxes by financing part of a $55 billion stock buyback with debt rather than offshore cash that would have been billed by the U.S. government, Moody’s Investment Services estimates.

That's pretty good really. A $17 billion bond offering has saved them $9 billion in tax.

As background, US companies don't pay US corporate income tax on their foreign profits that they leave in foreign. It's complex but this is the basic outcome. Apple's got some $100 billion in such profits parked offshore and the shareholders, who do after all really own this money, would like some of it. The problem is that the US corporate income tax is 35%, those offshore profits have only paid perhaps 3 or 4% in tax so far, so 30 odd % will be demanded by the taxman if they're taken back into the US to be sent out as a dividend. So, instead, Apple borrows money in the US and pays that out as a dividend.

Hurrah!

Which brings us to the usual complaint but, well, companies should pay tax on their profits. So why am I cheering someone avoiding doing that? The answer there being tax incidence. It never is a company that bears the economic burden of a tax: it's some combination of shareholders, customers and or the workers. In general with corporation tax we say it's split between the workers and the shareholders. The workers get lower wages: because taxing returns to capital means less capital is employed in that economy. It's capital plus labour that raises productivity, raised productivity raises wages. The shareholders because, obviously, the dividends, the profits, are the return to capital and these are being taxed.

So given that we're not actually taxing the companies why is it that we send the tax bill to the company? Simply because it is convenient to do so. There is no economic reason at all to tax company profits. It's just that they're a nice big pile of money that we can tax, without having to go around all of the investors and workers and collect their little bits.

Which is why I applaud Apple's plan. It's becoming increasingly clear (as Google, Facebook, Vodafone, Boots and so on are showing) that companies are no longer a convenient place to go collect the tax money. They're just too good at not being the patsies and coughing up the cash. Given that the only reason we do tax companies is convenience, if it's no longer convenient then perhaps we should stop doing it?

Simply abolish corporation tax altogether. Make income taxes on dividends and other returns from investment the same as they are from any other source of income. There, job done.

And hundreds of thousands of accountants and lawyers will have to go do something productive for a living. Shame, eh?

Why we do rather like tax competition

You'll have noted the current screams from the left side of the aisle about the terrors and inequities of "tax competition". They're squealing as a pig does when it sees the swill bucket being taken away. For the obvious reasons that Dan Mitchell points out here:

But we do know that simple economic theory tells us that monopolists are more likely to raise prices than firms in competitive markets. Likewise, governments are more likely to raise tax rates if they think taxpayers don’t have escape options. And we also know that the proponents of higher tax rates, such as the statist bureaucrats at the Paris-based OECD, are also the biggest opponents of tax competition. The OECD even complained in one of its reports that tax competition “may hamper the application of progressive tax rates.”

Progressive taxes aren't all that much of a bugbear for us here at the ASI. Our income tax proposal has a large personal allowance in it for example, meaning that the average tax rate continues to rise as income does, asymptotically aproaching the flat marginal rate. This is indeed a progressive tax system and as we're recommending one of those we're obviously not against a progressive tax system. There is also Willy Sutton's point, that you tax the rich because that's where the money is.

However, Mitchell's making a slightly different point. Imagine that you don't like the taxes that are being imposed upon you. No, go on, just imagine. You as an individual voter don't actually have much influence over this. Which is why that option of exit is so important. The ability to simply say "The hell with you lot" and leave. We should note that there are very definitely some campaigners who insist that that exit route should be closed off. As, largely, it already is for US citizens. They can leave the US, certainly, but find it very difficult indeed to escape the clutches of the IRS.

Mitchell's also making a very good Smithian point there. It is indeed true that once businessmen have gathered together for that conspiracy against the public then it is indeed competition from alternative suppliers that is said public's only method of beating the conspiracy. And so it is with government: we can only preserve a modicum of freedom (and a modest portion of our wallet) if we are indeed free to choose among competing providers of those governmental services.

Which is what much of the conspiracy among governments is all about: seeking to deny us that exit, that protection from their monopoliy.

An end to zombie politics 4: Land use

Zombie policies on land use are no Aunt Sally: credit conditions come and go, but planning delay (or unavailability) is a project-killer from cycle to cycle. In October 1998, the McInsey report, Driving productivity, identified UK land-use restrictions as one of the critical impediments to productivity growth. This was never contested but neither was it acted upon. In October 2012 Lord Heseltine’s report, No stone unturned, pressed for “…inject[ing] urgency and purpose into the planning system”. On 17 March 2013, the Treasury responded that HMG is committed to “reforming the planning system to reduce costs and bring speed and certainty to business; and to addressing under-investment in the UK’s infrastructure while providing investment opportunities to the private sector.“

All well and good, but this won’t happen unless HMG deals with the underlying reasons for delays choking off the supply of land for growth. The central problem is that the benefits of change in land-use are valued less highly by locals (including local government) than loss in amenity. Another way of looking at this is that benefits are appropriated by developers, users and central government.

It’s beginning to sink in that the goodies need to be spread around if they are to be earned in the first place. In the case of fracking this is straightforward: a fraction of the incremental revenues from drilling or distribution are put the local’s way. HMG is proposing reduced energy costs; other hydrocarbon regimes appropriate revenues for public infrastructure. It’s a matter of mechanics and political judgment and HMG is already going the right way. But more should be done.

Policy for immediate relief

1. On balance I get that the local authorities need to be incentivised to go along with a more liberal planning regime, so as a matter of practical politics I’d go for pushing a bit of the gravy their way.

2. In return, let them accept more permissive guidance to planning authorities; or suspension of the objectionable clauses of the Town and Country Planning Acts.

3. This would be with a view to a holiday on restrictions in the construction of qualifying infrastructure, the definition which to be announced from time to time by the Secretary of State.

4. All this needs to be exempted from judicial review.

Policy for eventual resolution

Sharing out the spoils is more problematic where changes in land-use add value only over time or indirectly. Here let HMG add securitisation to “value capture”, that is sovereign appropriation of increased land-values when road or rail links are built.

5. Let HMG compensate owners of lands blighted by infrastructure at market rates on “most-favoured vendor” terms, with securities representing the value of the overall parcel of land, traded in the secondary market and enjoying time-limited underwriting (eg, negotiability for taxes at par).

6. Let HMG establish Enterprise Zone (EZ) reliefs for the lands concerned, attracting new development and adding to the land value and upside for the bonds.

Please see here for a worked example of such a scheme and here for a draft term-sheet for a land bond.

Devaluing the pound won't do what its advocates want it to do

Civitas this week released a pamphlet, written by import-export businessman John Mills, arguing that the UK government should target an exchange rate a third lower than the current one, in order to boost demand and UK manufacturing by raising net exports. In turn, this would lessen the burden on the welfare state, allow the government to extricate itself from the economy, alleviate long-term unemployment, improve the self-help ethos and traditional work ethic, and even arrest the UK’s international relative decline, Mills argues.

While making this case Mills ties himself up in a few apparent contradictions (e.g. a strong pound is terrible because it is bad for purchasing power) and with no argument dismisses hundreds of years of economic consensus (with a very crude mercantilism) but I will try to distil the most coherent and convincing argument out of the monograph, in order to make the fairest possible critique.

While China has wound its exchange rate policy down, and Japan does not explicitly target the price of the Yen, Civitas founder David Green holds up Switzerland as a good example of how a country can target its exchange rate. Switzerland buys up foreign currency with newly-created money from the central bank in order to keep Swiss Francs at the desired target. While a Civitas blog post from a third author, Daniel Bentley, comes out against a similar money printing means of achieving a lower rate, it’s unclear what else Mills would propose, since he doesn’t suggest any mechanism at all.

In any case, the price of a pound is governed by demand and supply. Economic authorities could either cut demand or boost supply. Since the whole point of the scheme is to raise the demand for British goods by cutting their price a demand-cutting plan would have to be careful. Green thinks that investment into UK housing and gilts is “artificially” propping up sterling, so perhaps he’d like to ban or limit these. Presuming this outrageous interference with trading freedom was legal; it’s unclear if the pound could actually be cheapened by the desired third by cutting these demands.

Still, foreigners hold about 30 per cent of gilts and foreign buyers have recently been responsible for a majority of transactions in prime London property. If previous investments could be hit as well as new activity, sterling would surely come under serious pressure. This would slash home-owning Londoners’ wealth and hike the government’s borrowing costs, but it should also make UK manufactures (and services) cheaper.

However, even with this printing-free mechanism there should be inflation. Any import business will face higher prices on its imports. Presuming margins are already competitive, the entirety of the exchange rate driven cost hike should feed through into prices. Depending on demand elasticities – the responsiveness of consumer choices to price rises in all the different affected markets (the UK currently imports about £570bn of goods, services and oil per year) this might produce some substitution in demand for these goods, along with a secular fall in demand. But it seems highly likely that this demand dip will not be enough to bring prices back to where they were – and bear in mind if it did this would mean a big fall in consumption for the same prices.

The necessity to bluntly interfere in investment and housing decisions make the above method a very unpleasant one, and we have seen how Mills’ promise that there will be no inflation (based on the dip in the pace of price rises seen after the exit from the Exchange Rate Mechanism) appears very unlikely. Of course, as suggested, the above demand-based scheme is highly distortionary aside from its philosophical issues. So the supply-based method of cheapening the pound – money printing, and inflation – starts to look much more attractive.

But – aside from going against Bentley’s blog post, and Mills’ promise not to create inflation – printing has very clear problems as a means of boosting exports. If $1 buys £1 when the money supply is £100, and we print £100, we’d expect – all things being equal, for the dollar to now buy £2. But since all things are equal, UK factories are still only churning out 100 widgets. These originally went for £1 (and hence $1), but now they will go for £2, so despite the fact the pound is cheaper, the widgets still cost $1. We get all the costs (and benefits) of inflation and none of the supposed benefits (and costs) of cheaper sterling.

Here’s where it gets interesting. Printing extra money is futile if your goal is to boost UK net exports past the very shortest of short runs. But it is by no means futile if your goal is to boost UK inflation to overcome the nominal rigidities (cash prices that won’t fall) particularly wages. UK unemployment is still well above the natural rate, even though employment recently hit an all-time record. One of the key reasons it reached the 29.75m peak is that real wages have been falling throughout the crisis.

A further bout of inflation would give the space for relative real prices to adjust to clear markets and bring the UK much closer to full employment of all resources. So while the paper is muddled and wrongheaded, I would actually support an exchange rate target as a misguided way of getting the extra demand we need.

Where is this "austerity" you speak of?

"What austerity?" asks the super-sound UK economic commentator Liam Halligan in the Telegraph.  GDP is down to be sure (6.2% below its pre-crisis peak), and we members of the public are indeed tightening our belts. Not so government. It's belt-tightening amounts to just 2.7% "cuts" over six years. That's after previous Chancellor/PM Gordon Brown expanded government spending by half, from 35% to 50% of GDP. Some "austerity" from our politicians!

The present government aimed to reduce its annual deficit to zero by 2015. In the wake of disappointing growth figures, that has now been expanded to 2018. Will it even be achieved? Most of the "cuts" were end-loaded, so the real complaints haven't even started yet.

Meanwhile, annual borrowing continues to add to the national debt. Even if that 2018 balanced-budget target is achieved, says Halligan, it still means that the national debt in 2017/18, at around £1.7 trillion, will be three times that in 2008. And the interest payments on that expanded debt all have to be met. It is money we could have used on something more useful, had we not been so profligate in the boom years.

Only virtual money-printing on a record scale has saved the government. How nice it is to have the monopoly on money, so you can just mint it to pay off your debts. But then your money loses its value, and lenders stop bailing you out again because they know they will be conned.

Investment, meanwhile, the one thing that might pull the UK out of its doldrums, has dried up. Private sector investment was just 1.2% of GDP in 2012, down from 5.8% in 2007. Businesses are sitting on cash, or paying off their debts, rather than risking money on an uncertain future.

As for the government, its "cuts" have fallen mostly on capital expenditure, nearly halved from £47bn in 2008/09 to just £27bn in 2014/15. That is the easy way to reduce your overspending – you don't have to fire anyone, or raise taxes too much, you just let the potholes get a bit bigger. But it does not tackle government's bloated spending appetite, nor lay down capital for tomorrow.

And now the IMF are joining the pleas to go steady on "austerity". As I said: "What austerity?"