Well, everyone wonders about MPs at times. Where do they find them? How on earth does anyone end up voting for them? You know, the basic questions that anyone would ask when actually confronted with a few specimens of the beast. And then there are those specific specimens that really puzzle us. To take this from Siobhan McDonagh MP. She tweeted out the letter she had sent to Azzurri, the owners of the Zizzi chain of restaurants.
Today, the Scottish thinker Adam Smith (1723-1790) is best known for his pioneering work of economics, The Wealth of Nations (1776). But the book that actually propelled him to fame was The Theory of Moral Sentiments, published on this day in 1759.
Moralists had been struggling to work out the principles that made some actions morally good and others morally bad. To churchmen, the answer was obvious: it was the word of God. Skeptics speculated about whether we had a sixth sense, a ‘moral sense’ that would guide us towards good.
Smith’s breakthrough was to identify our moral judgements as a matter of human beings’ deep psychology as social creatures. Human beings, he argued, have a natural ‘sympathy’ (today we would say ‘empathy’) for others. That enables them to understand how to moderate their behaviour and preserve harmony. It is the basis of moral judgements about behaviour, and the source of human virtue.
Writing exactly a century before Charles Darwin’s The Origin of Species (1859), Smith was not sure why such social behaviour should prevail. He put it down to providence: today we would put it down to evolution.
The book was an intellectual sensation. Churchmen, of course, did not like it very much, but it caught the eye of Charles Townsend, an intellectual and senior member of the British government, who was highly impressed and sought an introduction to Smith through their mutual friend, the philosopher David Hume (1711-1776). Townsend immediately hired Smith, on a salary of £300 a year for life, to be tutor to his stepson, the young Duke of Buccleuch. It was a fortune – and it gave Smith the independence and experience to start writing the work for which he is remembered today, The Wealth of Nations.
That the population in general is getting fatter is true. The western world is rapidly becoming one of fatty lardbuckets as far as the eye can see with distressing aesthetic results. However, it's very important indeed to understand that this is not because we are all eating more:
Former UK cabinet minister Owen Paterson has just delivered the most intelligent case for the UK leaving the European Union that I have ever heard. His basic point is that the EU is not the ‘status quo’ but something that is rapidly moving to destinations that are uncertain and dangerous, particularly for the UK; and that being outside is the safer, more stable option.
Take the eurozone. It is rapidly becoming one country, says Paterson. In order to deal with the imbalances that the fixed currency has only exacerbated, it needs to centralise decision making on budgets and bailouts. Plans for this are well advanced, eurozone sovereignty is being pooled, members’ discretion over their own budgets is being curbed and the eurozone will in effect be its own political union by 2025 – just nine years away. That is a very different kind of EU that is being envisaged, and not one that strikes a chord in the UK.
The UK government says that the UK will have ‘special status’ outside this and the other centralising tendencies. But how? There is no binding agreement that grants the UK any special status: the only sort of special status around seems to be a Norway-style outer circle. Not in the euro, not at the core, out on the fringes – it is clear that the UK’s influence could only diminish. The UK would still be outvoted, still overruled by the ECJ, still expected to chip in to eurozone bail-outs (as it was with Greece), but even less able to do anything about it.
Then there are security issues, with five new countries, 87m new potential EU citizens, waiting to join. Such as Turkey, with its leaky 700-mile border abutting a war zone. Once migrants make it to Germany or the other countries that are supposed to share them out, before long they become EU citizens and able to travel and work in their destination of choice – the UK. And we have no say in it. Migration, as ASI has shown, is generally beneficial: but far more so if it happens at a manageable rate.
Paterson’s vision for a UK outside these uncertainties is one of a self-governing, free-trading nation, a true part of the global family, its international trade and participation no longer absorbed into the EU. And as for trade deals, the EU is far weaker than the UK would be alone, each member having its own interests to throw into the horse-dealing, and proceeding only as fast as the slowest and most intransigent. The UK could do deals with China, India – and indeed the US, far quicker. It would also have greater representation on trade and other international bodies such as the WTO, where currently it is represented by the EU.
Leaving the EU is not an instant commitment, but a process. There would – and certainly should – be a long process of discussion before the formal commitment to withdraw (and the two-year i-dotting period that follows it) is given. In the meantime, the UK would continue to trade with the EU – something that 5m EU jobs, and EU supply chains, depend on. But meanwhile, we could be opening up better relations with the rest of the world.
There is no status quo. If the UK remains in the EU, it will be a second-class citizen, and the EU’s political centralization will continue, dragging the UK along with it. The eurozone, politically integrated by 2025, will dominate the rest. Outside, the UK could at least control its borders, its budget, its national debt, its public services, its international trade. What’s not to like?
A rather interesting little finding from over The Pond concerning the connection between inequality and the health of the population. Over here we've had Michael Marmot insisting for decades that health inequality is to be explained by economic inequality. And Wilkinson and Pickett have been shouting that they are not just connected by economic inequality is the direct cause of ill health for all. At which point we get the American study into health and inequality and we find something a little different:
The current complaint from these politicians seems to be that they don't like the way politics works:
That's our first reaction, at least, to this story that a Welsh billionaire is willing to invest some of his own money in a rescue of the Port Talbot steel assets. The giggle coming from, no, not the idea that there is a Welsh billionaire, the thought that, well, yes, that's what we rather expect from people when they buy something. They use their money to buy the thing that they're buying. Seems a reasonable and logical idea to us but it's obviously caught The Guardian by surprise:
St Joseph's Hospice is in Liverpool, where it cares for the terminally ill in a manner that the National Health Service simply never can manage. They have sent the following around to their supporters:
Charity shop staff who work for Jospice face the prospect of losing their job due to rises in the minimum wage…
There are currently eight retail managers working across these shops but it is proposed that this number be reduced to five.
The decision has been blamed on the government’s new National Living Wage, which rose to £7.50 an hour for over 25s as at the start of April and is expected to rise to £9 by 2020.
A spokesperson for Jospicesaid: ‘We have informed our eight retail managers that we propose to implement a new retail team structure. Due to ever rising costs and the introduction of the National Living Wage we are unable to continue with the existing staff structure within our retail team….
As a charity we have to raise half our income through fundraising in our local communities and so we have to be as efficient as possible.
We'd just like to say well done Chancellor, well done.
President Obama says the UK needs to stay in the EU to promote ‘peace, prosperity and democracy’. Sadly, the EU does not promote any of these.
Peace in Europe is promoted by NATO. Look at the Balkans war. Though appalling genocide was going on under the noses of EU ‘peacekeepers’, the EU was unable to bring the conflict to an end. It was only when NATO – led in large part by the UK – stepped in that the carnage was stopped.
And take Ukraine. It wanted closer links with the EU, but the EU’s ‘all or nothing’ policy made Putin fearful that this buffer state would turn into a Western enemy. The EU could do nothing to resist the occupation that followed.
Prosperity? The EU is the slowest-growing trading bloc in the world. Partly that is because of its sclerotic common currency, the euro – a political project that was pursued in the face of economic commonsense.
Democracy? Power in the EU centres on the Commission, a group of appointed, not elected, politicians and officials. The public do not directly elect the national politicians who sit on the Council of Ministers – nor, for that matter, the panels of finance and foreign-policy ministers. And the vast majority of people in the UK have no idea at all who their Member of the European Parliament is. Not that the Parliament has any power to initiate legislation anyway. Our own legislation, and our Supreme Court, are overridden by EU institutions.
For such a powerful nation, America is remarkably naive about foreign policy. The Administration seems to think that the EU is a kind of NAFTA, a loose free-trade agreement. In fact it is a political union – and one that no American would, on closer inspection, ever wish on itself or its friends.
The more research that gets done into the details of Thomas Piketty's thesis (essentially, wealth concentration will leave us all as serfs again) the more there seem to be great gaping holes in it. For example, a central piece of the logic is that wealth will pile up, this will be inherited, and that wealth inequality will thus get worse over the generations. We're not convinced that such a bourgeois world would be a bad one but that thesis does depend upon the idea that inheritance concentrates wealth.
Which, apparently, it doesn't:
Studies analysing the link between inheritance and wealth inequality have used different methods and data sources, ranging from simulated distributions to individual observations in surveys or data on wealth from tax records (e.g. Davies 1982, Wolff 2002, 2015, Boserup et al. 2016). Consensus has not yet been reached over the exact relationship. However, a recurrent result, which Wolff (2002) was the first to find, is that, perhaps surprisingly, inheritances tend to decrease wealth inequality.
Note that this isn't a new finding: it's just that Piketty assumed the opposite.
In a recent study (Elinder et al. 2016) we examine how inheritances affect wealth inequality using a new population-wide register database. The database contains detailed accounts on wealth and inheritances (including zeros) for all family and non-family heirs of every deceased person in Sweden during several years in the early 2000s. These rich data enable us to estimate the causal effect of inheritances on the distribution of wealth and, importantly, to also uncover the mechanisms underlying this effect. We are also able to study the distributional consequences of inheritance taxation and the effect of inheritances on wealth mobility.
Our main results establish what previous studies have pointed to, namely that inheritances decrease the inequality of wealth.
The Gini coefficient decreases by 6%, a relatively large effect which is roughly in line with the wealth compression following the burst of the dotcom bubble in 2000 when stocks in internet companies, held mostly by the wealthy, lost their value.1
We also find that inheritances increase the absolute dispersion of wealth among heirs, measured as the difference in wealth between the heirs in the 25th and 75th percentiles of the distribution.
Isn't that fascinating? And more, the taxation of inheritances itself increases wealth inequality.
We observe the exact amount of inheritance taxes paid by each heir (some pay nothing), and when we examine how the tax payments affect the wealth distribution we find that the tax has a dis-equalising effect. That is, all else equal, the tax by itself tends to increase wealth inequality.
Of course, dependent upon what the money raised is spent upon the act of spending can reduce inequality again. But if inequality is the point and purpose of inheritance tax, which for many it is, there seems little point in increasing inequality by said taxing only to use the revenues to undo the effects just caused.
Our own longer term view has been that inheritance tax hasn't worked. The truly rich don't pay it, using trusts and lifetime gifts and so on. It's the less than plutocratic but still successful that do pay it. We've noted that old folk wisdom, clogs to clogs in three generations, and think that it has good predictive power. Even the inheritance of the grandest fortune cannot survive an inheritor truly determined to waste it and eventually, given the way genetics seems to work, one does always turn up to do such.
This might not draw nods of approval from those who would plan society but we've at least an urge to let people inherit as they may and leave the occasional existence of spendthrifts to deal with wealth concentration. There's very, very, few (in fact, other than those very few aristocratic families who held substantial urban land and kept it, we're not sure there are any) fortunes that have survived more than three generations.
The sands of time seem to deal well enough with this problem, why plan for it?
