The Pin Factory Blog

There's an interesting piece over at Bloomberg talking about those longer working hours that turned up with the Industrial Revolution. You know, the ones where the peasantry had to be whipped off the fields and into the factories so that the filthy capitalists could exploit them:

First, working-class writers put a very different spin on the increase in working hours that accompanied industrialization. The autobiographies make clear that in pre- industrial Britain, there simply wasn’t enough work to go around. As a result, few people were fully employed throughout the year. This gave them leisure time, but it also left most families eking out an uncomfortable living on the margins. The lack of consistent employment also forced workers to stay in positions that were unsuitable or grossly exploitative.

That the people suffering under such exploitation thought it was a good thing does rather change what should be our view of said exploitation. And it's also not clear precisely who had the power here:

Higher levels of employment also helped change the balance of power between master and laborer. So long as jobs remained scarce, workers, by necessity, obeyed their employers. The price of dissent or disobedience was unemployment. With more jobs, such subservience became less and less necessary. In the booming new industrial towns, workers could, and did, walk out on employers over relatively minor matters, confident that finding more work wouldn’t be difficult.

Or, as I might put it, the only thing worse than being exploited by a capitalist factory owner is not being exploited by a capitalist factory owner.

I will admit thought that I'm always very wary of people giving us pre-industrial working hours. There's a terrible tendency to only include paid working hours as working hours. And of course in a rural, largely subsistence, economy paid working hours are indeed few and far between. But that doesn't mean that each day isn't full of unrelenting labour: there's still the potato patch to dig, the firewood to be collected, the pigs to run for acorns, the cow to milk and muck out and so on. Indeed, when we get back to feudal times working hours seem to be measured as only the work that was done for the feudal lord. Which is obviously nonsense: that's the work that was done to pay the rent and pay the rent only. Think it through: one source tells us that villeins had 70 days a year holiday. Seriously? An animal keeping peasant has 70 days off a year? What the heck happens to all the animals?

But back to the effect of the industrial revolution: did it actually improve the lives of those sucked into the factories or not? Was Marx correct on the immiseration or not?

One very useful number that I've seen recently (offline, so no link) is the difference between farmhand wages in the North and the South. In the 1830s, 1840s, Somerset and Dorset were almost untouched by the new industries: farmhand wages were of the order of 8 shillings a week. Up north the entire countryside was littered with cotton mills and whippet flange factories. Farmhand wages were 16 to 18 shillings a week. The farmers had to pay double the wages to stop their labour going off to exploit the capitalists in the factories.

I'm still not entirely sure that the industrial revolution did lead to longer working hours. Longer paid working hours, most certainly yes, but really not sure about the combination of paid and subsistence hours. On the other hand I am absolutely certain that the factories improved the living conditions of those who worked in them. And I don't think us moderns quite understand the misery of a subsistence peasant lifestyle: if we did we'd understand a great deal better why people flocked to those factories and mines as they did.

Of course, if any of our Marxist inclined confreres were minded to actually find out about why people did so all they've got to do is buy a ticket to China and go ask the people in the factories there. "So, why did you live a life of rural idiocy and destitution to earn five times the wages making iPads?" would seem to be a useful start to such an interrogation.

Madsen tells us why we should be supporting raising the personal allowance. Essentially, it's obvious, moral and fair: not something you can say about most issues related to taxation. But there's another reason that we should do this: one that should make the left love us even more for pointing out. It's all contained here in this little chart:

Agreed, that doesn't tell anyone very much as it's not labelled. But what it is is the personal allowance for income tax expressed as a percentage of average wages. Sadly, we had to rely upon government figures to create this so it's obviously not quite right. Pre-1966 it's mean wages, after median and 1967 doesn't appear to exist anywhere in the records. We didn't run it all the way back to the beginning of income tax either. The £60 a year tax free limit in 1799 would be around £68,000 or so now meaning that only the top 1% would have to pay income tax. Even I think that government can beneficially spend slightly more money than that would raise.

The point of this exercise though is to show that the ASI's insistence that the personal allowance should rise strongly is not some modern abberation. We are in fact, possibly for the only time ever, being profoundly conservative. What has happened since WWII is that successive Chancellors (of both parties please note) have used fiscal drag to pull ever more people into the income tax net. Wages tend to, over time even if not each year, rise faster than inflation. So, if you only raise allowances in line with general inflation not nominal wage rises more people will end up paying income tax. Of course, you can increase this effect by not raising the personal allowance at all as G. Brown did at least once.

The current work of the Coalition (as Madsen points out, prompted by the Lib Dems) to significantly raise the personal allowance is a good start. But a good start is not enough: what we really want to get back to is those halcyon days celebrated by Ken Loach's "The Spirit of 45". You know, that time so praised by Polly when we all came together to create the New Jeruslalem. That time when you only entered the income tax system when you were earning more than 50% of average wages.

Given that average wages are currently in the mid £20 thousands per year this would mean that the personal allowance should be some £12,500 a year or so. Which is, amazingly, the number that we already shout that it should be.

The point of this little piece being that this is not a radical departure from prevailing norms at all. It's actually a return to the socialist taxation policies of Major Attlee: and obviously there's not a leftist in the country who would think returning to the policies of those days would be a bad idea.

Yes, I know, there will be a certain cognitive dissonance at the idea that the ASI (and possibly even worse, one T. Worstall) is recommending the post-war policies of the Labour Party. But yes, let us be properly socialist about taxation in one respect: let's stop taxing the poor so damn much.

My thanks to the commenter who calls himself Surreptitious Evil as it was he that did all the hard work of digging out the figures and setting up Excel.

Every child learns at some stage that a good way to divert blame is to point the finger at someone else.  Now the politicians on the Parliamentary Commission on Banking Standards have discovered the trick.  They hope that as the lynch mob pursues the HBOS trio of Sir James Crosby, Lord Stevenson and Andy Hornby, the role played by politicians in the financial crisis will be quietly overlooked. 

If so, they reckoned without Fraser Nelson.  The Spectator Editor, writing in today's Telegraph, exposes the accomplices who should share their guilt.  Politicians were "infatuated with bankers," he writes, largely because financial services provided two-fifths of all corporation tax collected for a government that over-dosed on spending. 

"Financial greed is always dangerous, but when paired with political vanity it becomes lethal. By working hand-in-glove with the financial sector, Labour ran a form of crony capitalism – and allowed the banks to have loans of up to 35 times their assets. Brown’s government was so dazzled by the tax haul, so swept up in the party spirit, that it left the teenagers with the car keys and a case of tequila. The crash was inevitable."

Correct, as we have said before on this site.  By all means point to the greedy bankers taking reckless risks, but don't overlook the people behind them, the politicians and central bankers who facilitated this and egged them on for political gain.  Fraser's piece should be required reading for those involved in public finance, not least because the lessons have not been learned.

"Government still thinks it can rig the banking system. It still places its faith in dangerously underpriced debt. It still thinks that the remedy for our hangover is some salt, some lemon and another round of tequila. Even bankers are looking on aghast. The financiers, after all, did not cause this downturn. They added to the drama, but the basic problem was (and remains) one of overspending."

Before people can work on a remedy, they should first work on their understanding of the wrong.

3. The ASI enthusiastically supports giving goods from developing countries unrestricted access to developed world markets.  The Left should appreciate our stance in firmly and publicly supporting the one thing that can make people in poorer countries wealthier.

Some campaign for more aid, but the ASI's line is that trade is more important.  Humanitarian aid is fine, and we should give generously to support victims of natural disasters, to help provide clean water, and to fund health programmes.  We do not, however, support development aid that is designed to boost state investment in industry or state direction of emerging economies.  Every country that has gone from poor to rich has done it through trade, and none has done it without trade.

Some of those who piously call for more development aid also support the tariffs and subsidies by which some developed countries prevent poorer countries from selling their goods in rich world markets.  We express our support for nations struggling to become wealthier with a three-word mantra: "Buy their stuff."  When others were wearing wristbands that said "Make Poverty History," we produced and distributed thousands that proclaimed "I buy goods from poorer countries."  The former expressed a hope that other people would do something, but ours declared something the wearer was actually doing to bring about change.

When we buy goods from developing countries, we become wealthier by having cash left over after buying their lower-priced produce.  They become richer from the money we pay for their goods.  It is a win-win process that is rapidly lifting most parts of the world above subsistence poverty.

2. The ASI supported debt relief for third world countries.  The Left should appreciate the removal of the debt-servicing burden from the citizens of poorer countries that this would bring.

Many of the churches joined a 'Jubilee' campaign at the turn of the Millennium, calling for much of the debt owed by poorer countries to rich ones to be cancelled.  Even before then the ASI had called for the same, pointing out that in many cases the loans had been ill-advised, given to dictators for dubious projects, and that much of the money had been spent by them on arms and self-aggrandizement.  Now sometimes long after many of those dictators had gone, the burden of servicing those debts fell upon people struggling at subsistence level.  The ASI even featured on Bono's website for its stance on this issue.

The ASI took the position that this was a one-off, a move to right previous errors, and certainly not a co-ordinated policy to cover future loans.  It urged tighter controls and conditions over the issue of subsequent loans to make sure that these errors were not repeated.  To the charge that a Jubilee debt amnesty would encourage reckless borrowing in future, the ASI replied that poor countries must not assume that they could count on this happening at the turn of every future millennium.

The UK should become a federation of states, hugely increasing the power of local compared to central government, thus allowing the individual more control over his life. Also, it would allow more differentiation across the country, meaning a variety of policies could be tested in all areas of the public sector. The most successful could then be imitated, meaning progress for the nation as a whole.

I envisage a division of the country by region, such as the South-West, the East Midlands, and so on. Wales, Northern Ireland and Scotland would each be a state, as could the Channel Islands and the Isle of Man. Territories further overseas might also become states, or they could retain their current status. States should have independence similar to Swiss cantons, with their own government and parliament.

Such a rearrangement of the country would, of course, be a huge change. But that is not an argument against it. Indeed, we could use the opportunity to at least debate some fundamental questions concerning the structure of the state: for example, the power of the monarchy, and the lack of a codified constitution. A more plausible objection is that local governments already have sufficient powers. But they have limited power over taxes - “England’s local government finance system is one of the most centralised in the world” – and laws.

Most of local governments' funding comes from central government grants, This means that councils have less incentive to spend responsibly, as they don't have to answer to the people they get most of their funding from – the nation's taxpayers. Thus, councils often spend money unnecessarily as the tax year nears its end, to ensure they don't have their budget cut for the next year. If local councillors had to face, on a daily basis, the source of most of their income, they would be more inclined to spend it wisely.

Local control over laws would be another important aspect of such a change. If the population of one region wants to legalise drugs, why should it be held back by the rest of the country? As a state, London, say, could go ahead with some drug legalisation. Then, if and when its policies proved successful, other states which had doubted drug legalisation's benefits could follow.

There are many reasons why most Adam Smith Institute initiatives do not find favour with the Left.  We favour a spontaneous society rather than one planned centrally according to a preconceived idea of what it should be like.  They favour equality where we seek opportunities for everyone.  Many on the Left think in terms of class struggle, where the advancement of one class can only take place at the expense of another.  We do not think in class terms, but treat people as individuals, seeking opportunities for advancement for everyone.  Despite these major differences in outlook, there are some reasons why the Left should approve of some of the positions and policies of the ASI.  Here is the first of ten of them.

1.  The ASI has long advocated raising the minimum threshold for income tax to the level of the minimum wage.  The Left should approve of the way this would raise the take-home pay of low earners.

For over a decade the ASI has urged that the income tax threshold should be raised.  The ASI advocated a threshold of £12,500 when the actual threshold was less than half that figure.  Its case was partly a moral one, in that low paid people find it hard enough as it is to get by, without having the taxman take some of their meagre cash.  The ASI points out that someone on the minimum wage for a normal working week will earn about that figure, which also happens to be roughly half the average wage.

The ASI's case is logical, too, in that it seems absurd to set a minimum wage and then take money from those who earn it.  In some cases this leaves people with too little to manage so they become eligible for benefits.  Much simpler not to take it in the first place.  The coalition agreement contained a pledge to raise the threshold to £10,000 over this parliament, a clause that came from the Liberal-Democrats, not from the Conservatives.  All credit to George Osborne, therefore, for bringing that target forward a year.

Those who campaign for a "living wage" should note that the Minimum Wage minus tax is almost spot on the 'living wage,' with one big difference.  Instead of requiring firms to pay staff at above market levels, cutting the number of jobs, the ASI policy of linking the threshold to minimum wage has the Treasury footing the difference, without the job losses a 'living wage' would entail.

Recently, Kier Martland produced an article in The Libertarian attacking Sam Bowman's take on immigration, suggesting an alternative libertarian view on the issue – using Hoppe to back up the position. I think this view is entirely mistaken. Indeed, Anthony Gregory and Walter Block take apart Hoppe's position here and Block again here.

The position taken by Hoppe is that nobody should be able to make a claim on the state without 100% consent from those paying for it, including for goods such as roads. The issue is that the state does exist, so long as there is government we should seek to ensure a policy of least damage done. By having high costs or even bans to hire migrants, the state would be taking away people's right to freely associate and make contracts. Further, by increasing the cost of labour, and doing other such damage to the economy as described in Bowman's article, restrictions on immigration do damage to the taxpayer. Hoppe's “second best” position simply doesn't hold true.

If one group in society objects to immigration, that does not mean migration is wrong because they pay a small percentage of the cost (even though, again, immigrants are a net positive for the tax collector). Indeed, the same argument would hold true for economic nationalists or greens who wished for only local goods to be sold in the economy. By importing foreign products, one would be initiating trespass on the roads by transporting goods unwanted by third parties. The same could be said of any good transported that an individual disapproved of, whether alcohol, meat products or any other “vice”. Similarly, Christian Scientists or others who disapprove of modern medicine might insist that taxpayer roads not be used for transporting any related materials. The position is ridiculous, you cannot support absolute rights to reject immigration whilst not supporting the same absolute right to reject other goods and services people might disapprove of.

By suggesting an increase in government control of migration, both Martland and Hoppe are going the wrong way on this issue – it is not about defending the taxpayer. Increasing the scope of the state, and the cost to taxation in policing it, as the Hoppeans propose, is damaging. What about those who pay taxes that DO want immigrants to use government services such as roads? Are their rights lesser than those who are for government restriction? Even if the costs and size of government are larger to be more restrictive? Should they be forced to fund border forces in this way? The Hoppean position on immigration is illogical; you do not reduce the scope of the state by increasing it and the number of tasks it undertakes. We should be looking at ways to limit the damage and cost of government now, and not sit in ivory towers trying to fudge a philosophical position that takes away the right of free association.

The Guardian has published many silly pieces in its time, as have other papers, but today it published a piece by Lynsey Hanley that must rank as one of the most breathtakingly silly of all time. The article claims that raising the income tax threshold to £10,000 patronizes the low-paid. Moreover it "disenfranchises 3 million people":

More fundamentally, it suggests that people on low wages are effectively earning pin money, not "proper" money that requires being taxed, and therefore that the low-waged aren't full citizens. The article goes on to say that if people don't pay towards public resources, they lose their perceived entitlement to them.

Where to start? First of all, low-paid people pay a great deal in taxation, especially in VAT, and many of them pay taxes on alcohol, tobacco and petrol, plus dozens of other unseen taxes. The £10,000 threshold only exempts them from income tax, which is quite reasonable when you realize it is below the minimum wage. If people are not earning the minimum, it makes no sense to take some of their money away from them. They still pay the other taxes. Secondly, if paying no income tax makes you lose your "perceived entitlement" to public resources, doesn't paying less tax than someone else give you less entitlement to them?

Lynsey Hanley claims that "a fundamental component of citizenship, however, is paying towards the ongoing work of building and maintaining resources for everyone to use." In her disoriented world people on pensions, or disabled people supported by the state would not appear to be full citizens. I disagree.

In her world "Tax cuts are always a sop, no matter who you're giving them to." Again, I beg to differ. When the state takes less of our money it isn't "giving" us anything, certainly not a sop, because the money does not belong to the state. She wants the poor to pay taxes to make them full citizens. "To tax only the rich, or the better off, is madness. It's disenfranchisement by any other name," she says. No it isn't. It is taking money to support public resources from those who can afford it rather than from those who cannot. The rich should pay the taxes for the same reason that gangster Willie Sutton robbed banks, "because that's where the money is." I like it when we succeed, by lowering top tax rates, in having the rich contribute a greater share of total taxation. That's what should happen.

I wonder how many of the low-paid would agree with her that they should be paying more income tax? I suspect you could count them all on the one finger they would use to indicate their opinion.

Sir Andrew Motion, head of the Campaign to Protect Rural England, has called for taxes that will put countryside second homes beyond the reach of all except the very rich.  His motivation is very clearly expressed.  These second homes are:

"… very often lived in by people who scoot down in their cars, see their smart friends, don't join in the life of the community and don't feed into it.  They're townies in the countryside, they make sure they're back in London in time to catch the 10 o'clock news on Sunday night."

Clearly Sir Andrew does not like these people or their lifestyle choices, and does not want them in the countryside of rural England.  The total number of people with 'weekend second homes' is put at over 165,000.  Of the 25 million homes in Britain this represents less than 1 percent of the total.  A somewhat larger number own a second home, but let it out for income instead of using it themselves.

Small though the number is, it clearly represents a problem for Sir Andrew, who does not like what these townies are doing.  For the townies themselves this is not a problem, since they are making the choice to live in this way, and enjoying that choice.  Sir Andrew and his CPRE think it quite legitimate to use the power of the law to prevent others making choices that they themselves disapprove of. 

As times change, so do lifestyles.  Affluence and mobility have given some people the option to enjoy the countryside at weekends or during holidays, and Sir Andrew and his friends want this stopped.  They think it reasonable to use the law to make the world the way they would prefer it to be, rather than the way others prefer it to be.  He doesn't want second homes to be illegal, just "very expensive."  

This calls to mind the CPRE's ongoing campaign to prevent more housing in the countryside, keeping its pleasures confined to those who already enjoy living there.  Sir Andrew and the CPRE should investigate whether it might be a lot cheaper simply to use barbed wire to keep townies out of the countryside.  After all, similar measures have been used before in other countries.