We've studied poverty, now let's study wealth

Numerous studies have examined poverty and the lot of poor people. Now Rainer Zitelman has studied the psychology of the super rich. His study, based on in depth interviews and questionnaires, looks at wealthy Germans who gained their wealth, not as employees of large corporations, but as entrepreneurs and investors.

It reveals significant factors. For example, the parents of 60 percent of them were self-employed, which is ten times the average for Germany. They were not necessarily rich, but they worked for themselves.

School or education did not play a key role in determining their future status as super rich, but extra-curricular activities did, notably competitive sports or entrepreneurial activity. As youngsters, they tended to be difficult, even rebellious, unwilling to subordinate themselves to authority or established organizations.

They all had sales skills in the broad sense: selling ideas, or selling themselves. They exhibited the ability to explain things clearly. They showed a pronounced optimism, and had early acceptance of high levels of risk. They were reliant on intuitive as well as analytical knowledge, and they showed a readiness to learn from experience and “turn the page” on negative experiences.

Zitelman’s research reveals that they had personality traits that went with success. They scored high in self-discipline and deliberation (advance planning). They tended to be conscientious (thorough, meticulous), as opposed to negligent or careless. They were hardworking as opposed to lazy. They tended to be well-organized, punctual, ambitious and persevering.

The upshot is that although luck, of course, plays some role in determining who will succeed, it mostly comes down to personality traits. They have drive and determination. They succeed because they have the qualities that often lead to success, and in doing so they create the wealth that enriches society as well as themselves.

There is no new economics, just more examples of the old

We are told, endlessly, that we’re in a new economics here. Growth only goes to the rich, the entire structure of what we thought we knew is wrong and thus, well, thus we’ve got to do all the things we previously knew were wrong.

This is, umm, wrong. We do not have a new economics these days, we just have ever more examples of the old:

The jobs market has defied Brexit worries and fears of an economic slowdown to add another 79,000 posts in the three months to October.

A record 32.5m people are now in work, a rise of 396,000 on the year.

Pay growth also accelerated to a new 10-year high, with regular pay up 3.3pc, its strongest rate since the end of 2008.

Bonuses, which are volatile, rose by 4.2pc year-on-year. Once those are included, the average worker’s earnings came in at £528 per week.

This means wages are outstripping inflation, as prices increased by 2.4pc over the same period.

Wages rise when unemployment is low, wages don’t rise when unemployment is high. This is such old economics that even Karl Marx managed to get it right with his comments about the reserve army of the unemployed.

It’s entirely true that we don’t know economics well enough to know everything but we do indeed know some things. The old verities apply simply because they are verities.

A backdoor to the backstop?

If the EU will not modify the proposed Brexit agreement to allow the UK to end a backstop when it chooses to do so, it seems unlikely that it could command a Parliamentary majority to implement it. In which case the UK would leave on March 29th under WTO rules.

David Singh Grewal, a professor of law at Yale University, and Richard Tuck a professor of government at Harvard University, have written an intriguing piece in the Irish Times suggesting a possible course of action the UK might then undertake, much to its advantage, and providing a solution to the apparent impasse.

They point out that WTO rules allow for a “national security exception.” It is in article 21 of the general agreement on tariffs and trade (Gatt). “Nothing in this agreement shall be construed . . . to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests . . . taken in time of war or other emergency in international relations.”

These are somewhat uncharted waters, and it isn’t as clear as one might like what would constitute an “essential security interest” or an “emergency in international relations,” but the UK could argue that free access of goods across the Irish border was indeed vital for our security interest, which is true, or would prevent an emergency in international relations, which is also true.

It would not be completely unprecedented, however, because President Trump has claimed that the preferential tariffs imposed on some foreign goods are need to protect the security interest of the US.

If this reasoning were sustained it means that the UK could, under WTO rules, allow goods from the Irish Republic free access across the border into Northern Ireland, without allowing goods from the rest of the EU similar free access until a free trade deal had been completed. There would thus be an open border that honoured the Good Friday Agreement.

How the Republic of Ireland and the EU chose to respond to such a unilateral initiative remains to be seen, but it would be to the advantage of both to accept it. They would not be able to prevent the UK from doing this, even should they perversely wish to do so. The UK could use this approach to prevent a backstop from inhibiting its future freedom, or from requiring the consent of the EU to end it.

This would seem to be a valid and attractive alternative if no deal can be agreed that can pass through Parliament.

We can't afford social care already so let's promise ourselves more

From The Guardian, an example of quite gloriously missing the point:

As the characters and plot of Care show, quality care and support costs huge sums, and local authorities have never been under such a relentless onslaught, with budgets ravaged and social care suffering horrifically. As a result family members are forced to care for older relatives full time, putting on hold their own children, jobs and lives.

More and more people are forced to remortgage or sell their homes to fund care, at a time when parental homes are expected to provide both a pension for the home owners and a foot on the housing ladder for their children: eventually, the money runs out.

That people pay for their own lives out of their own resources doesn’t sound all that objectionable to us. Nor does the idea that families care for families - we always though that was rather the point of that most basic of human institutions.

But then this:

Here, we have a jobs crisis and a care crisis: why not push for a Grey New Deal? It could be a charter of rights each citizen should expect, a formalisation of respect across institutions and socially, and a long-term budgeted cash injection to create the skilled jobs and develop the technology needed to make sure we can care properly for older people. The people delivering that care should receive a decent wage for decent work, and expect job security and job satisfaction.

We’ve already agreed that we cannot afford what we’ve already promised ourselves - that embracing welfare state - within what we’re all prepared to cough up to pay for it. Thus promising ourselves more isn’t one of those things that’s going to work, is it?

The logic being presented to us is that of the restaurant diner who agrees that they can’t afford the mackerel, or the sardines, so why not order the lobster? An entirely wondrous starting point for a phantastical short story perhaps but not quite the way to interact with reality.

Fuel poverty, proof of how much richer we are

The dreadful incidence of fuel poverty in Britain is taken as evidence of how uncaring, unequal, generally undesirable, we are. The truth is the opposite, it’s proof of how much richer we are these days:

Can we please have a focus on the dire state of our housing stock? This will mean investment by the government in energy efficiency, with money from the Treasury. There are millions of fuel-poor homes – each requiring tens of thousands of pounds spent on them if the occupants are to be warm despite their low incomes. We should be spending billions of pounds to reduce fuel poverty.

There’s a certain bitter sweetness to the idea that standard policy is to drive up the cost of energy to beat climate change while also insisting that everyone be able to have cheap energy to heat their housing.

However, fuel poverty is defined as being able to heat a certain amount of the dwelling, to a certain level, on less than 10% of income. The areas to be heated, the temperature they’re to be heated to, being far above those normal in a middle class household of only one generation back.

Actually, very much higher than was normal anywhere before the widespread adoption of central heating in the 1970s and 80s. Which is indeed proof of how much richer we are, isn’t it?

Adam Smith and the linen shirt. A society which goes from yhe lack of one not marking you as poor to doing so has become richer by those very proliferating linen shirts. A society that used to live in cold houses and now regards doing so as poverty is a richer one.

The standards by which we measure fuel poverty are proof that we’ve become richer this past generation.

Testing recreational drugs for purity saves lives so let's legalise them

We have been pointing this out for some time now, that proper and rigorous testing of illegal drugs saves lives. For the basic cause of most overdoses is that people don’t know what they’re taking, at what purity level. If those little packets of fun - and yes, they are fun, why the heck do you think people take them - are tested to see what’s in them then here will be fewer such mistakes over dosage and fewer deaths.

Thus the answer is to make drugs legal:

An alarming rise in drug-related deaths at music festivals can be countered by testing illicit substances onsite, according to the first academic study of its kind, which has triggered calls for similar services to be rolled out at all major events.

Testers found that one in five substances sold at the Secret Garden Party, a four-day festival in Cambridgeshire in July 2016, were not as described by dealers.

Samples contained ketamine instead of cocaine, while a drug sold as MDMA turned out to be n-ethylpentylone, a long-lasting cathinone that can cause anxiety, paranoia, insomnia and psychosis.

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Others contained pharmaceuticals and cutting agents such as anti-malaria medication, as well as less harmful ingredients such as brown sugar and plaster of paris.

Chemists from the non-profit social enterprise The Loop analysed 247 drug samples brought in anonymously by festivalgoers. Two-thirds of people who discovered they had had substances missold to them subsequently handed over further substances to the police, according to the study.

Knowledge saves lives so let’s have more knowledge.

About as far as most liberal opinion is prepared to go is that such street pharmaceuticals should be decriminalised. We, being proper liberals, insist that proper legalisation is the route. For only when producers can in fact advertise - yes, advertise - their brand will they have that skin in the game. They’ll have something valuable which they don’t wish to destroy, a reputation for not killing their customers. Thus they won’t, we’ll get drugs which actually are what they say on the packet.

The analogy here is to the early days of food brands. 1830, 1840, saw that England had been rapidly urbanised and the old methods of food provision didn’t really work. No one did buy repeatedly from the bloke next door in the village any more. Adulteration was rife. Brands arose competing upon the quality and purity of their ingredients and proliferated in the 1850s. The first serious laws about food adulteration came in the 1870s, by which time the problem was largely over.

The same, but in inverse, came with the slightly later technology of canning. A hit and miss affair to start with, those brands that are still with us and still valuable - as examples, Heinz and Campbell’s - distinguished themselves by getting canning right and killing fewer to no consumers. They became valuable as a result, a value the owners have preserved.

Once there’s a value to having a drug brand then people will produce clean and dose controlled highs. They can and only will gain such value when it’s legal to have a drug brand.

Thus we wish to have legal drugs. Assuming, that is, that we wish to reduce the danger of drugs rather than just insist that other people shouldn’t be doing what we think they shouldn’t.

Lights out for Chavismo

In Chavista Venezuela it is not just running water that is no longer available, but electricity too.  Inadequate investment and a lack of maintenance has collapsed the electricity grid, plunging much of the country into darkness for prolonged periods of time.

Electricity used to be partially privately-owned, part state-owned, but in 2007 former President Hugo Chavez expropriated the assets of the largest private power producer, Electricidad de Caracas. Chavez merged all electric companies into one big state monopoly, the Corporación Eléctrica Nacional (CORPOELEC).

Power cuts due to underinvestment and poor management began in 2009 and have increased in both frequency and severity over time. In 2016 public sector employees were put on a three day week in order to preserve power.

While $50 billion was supposedly invested in the sector in recent years, there is little to show for it aside from 130 houses worth €72 million in Spain recently confiscated by Spanish police from Venezuela’s Deputy Minister of Energy and Mines. Such corruption, also in the form of power stations paid for but never built, clearly contributed to the failure of the system. Of Venezuela’s installed electricity capacity, 50% of the system does not work and 75% of the infrastructure is obsolete. The electricity grid is hopelessly inadequate and completely unable to meet demand.

Key turbines have been allowed to deteriorate and some power installations have actually exploded due to lack of maintenance. The maintenance crisis is exacerbated by the resignation of many qualified engineers and technicians who have fled the country. The Chavista regime’s decision to keep electricity prices substantially below cost has prevented CORPOELEC from earning enough money to maintain its systems. Instead of benefiting regular citizens, the absurdly low electricity prices have spurred a wave of Bitcoin mining.

Electricity shortages have had a dire effect on the Venezuelan economy. During power cuts the Caracas metro no longer operates, and people must walk to work. In Maracaibo, Venezuela’s second largest city, and the surrounding state of Zulia power cuts last days at a time. In Zulia a lack of maintenance means that the power plants are running at 20 percent of capacity, according to Angel Navas, the President of the National Federation of Electrical Workers.

Zulia used to produce 70% of Venezuela’s milk and meat but in the absence of electricity to milk cows and keep meat from spoiling, the state’s production has fallen almost by half, according to Venezuela’s National Federation of Ranchers. Businesses cannot sell their goods, especially because they require electric card readers to process payments now that hyperinflation has made cash too bulky to be practical.

However, the situation is much worse in hospitals, where lives depend on a stable electricity supply. Hania Salazar, the president of the Zulia state nursing association, said that hospitals in Venezuela are becoming large-scale morgues. He questioned "how, as a human, as a health professional, can you treat a patient when you don’t have anything to offer them when you don’t know when the electricity will cut off".

The regime’s failure to provide its citizens with basic utilities is a damning indictment of its ability to provide stable governance. Having assumed the burden of caring for its citizens through expropriations, it has comprehensively failed them on all fronts. Venezuelans deserve a government that can provide them with the basic human necessities.

More information on the Venezuela Campaign can be found on their website. 

The Generation Game of tax thee but not tax me

An example of one of the great truths of taxation. Many to most are in favour of other people being taxed in order to pay or me, rather fewer go for taxing me to pay for thee. Nice to see you again old truth.

The young aren’t so interested in being dinged to pay for the social care of the old, the old are intensely interested in someone, anyone other than them, being taxed to pay for said care:

Younger adults are far less keen than older people on raising taxes to fund public services and want volunteers to help ease the growing crisis in social care, a survey shows.

It reveals a stark generational divide over whether to increase taxation, with under-45s much less supportive than those aged over 45.

The results suggest that public support for tax rises to fund the NHS, and the health service receiving a growing share of public spending, may be eroded in the coming years.

While overall 41% of the public believe taxes should go up to fund public services such as the NHS, just 33% of 18 to 24-year-olds and even fewer – 30% – of those aged between 25 and 44 agreed.

In contrast, backing is strongest among those aged 45-54 (42%), 55-64 (46%) and over 65 (54%).

It’s all rather Who, Whom? isn’t it? Who gets taxed for the benefit of whom?

Our own insistence is that getting someone else to pay for you through the political process is rather cheap. Cheap morally but also cheap in the sense that you’re not having to pay the cost of what you’re getting. This doesn’t accord with any true measure of value, which is that you really do think the thing is worth what you’ve got to give up to get it. On the obvious grounds that you’re insisting that someone else give up so you get. That’s why it’s only market systems which do deliver what’s worthwhile - precisely because people will only pay from their own resources for those things that they themselves think it worthwhile to get.

Without double standards they'd not have any

With respect to the French protests we have this from one of the country’s more vocal tax campaigners.

The Guardian discusses protests in France this morning, 8nckuding this comment and quote:

Isabelle, 41, a single mother, had never taken part in a protest movement before. She works at a sandwich stand at Toulouse airport for the minimum wage – less than €1,200 a month – and her daily shifts begin at 3am. She was among many who had deliberately spoiled her ballot paper in last year’s presidential election final round, unwilling to choose between Macron or the far-right Marine Le Pen.

“This is now about so much more than fuel tax,” she said. “We seem to live in a world gone mad where the rich pay next to nothing and the poor are constantly taxed. We’ve had enough of the elite.”

It is fifteen years since tax justice campaigning began. But the attitude of the wealthiest has not changed. They still think tax ‘is for little people’. They are wrong. We said so. Now very large numbers of people are agreeing.

We have for a decade or so been suggesting a solution to this. Raise the personal allowance so that those on low incomes - oooh, say, those earning around the full year, full time minimum wage - are not in the income tax system at all. We’ve even been successful in that the personal allowance is rising to £12,500 a year.

We’d also like to see national insurance payments only start at that level but then no campaign achieves all its objectives immediately.

The most vociferous shouting against this idea has been coming from these very same tax justice campaigners. Making sure that taxation doesn’t fall on the little people opposed by those who will, when it’s foreigners, change their rhetoric.

There’s a line somewhere about how without double standards certain people would have no standards at all. That might be a little harsh but logical consistency certainly isn’t a strong suit now, is it?

Or as we should put it, it’s us classical liberals proposing and carrying to fruition the policies that benefit the poor, the progressive liberals doing something quite different.

Not replacing Politics by Economics, but inserting the real world into it

Paul Mason has written a challenging piece in ExecReview. He does so from a Left-wing activist background as a Corbyn supporter who says that Labour “should welcome Momentum,” and as a one-time Channel 4 News Economics Editor. He quotes Goldsmiths University academic, Will Davies, who describes “the disenchantment of politics by economics”. Mason writes that:

“Another way of phrasing Davies’s definition, then, could be the evisceration of politics by economics, or more simply the surgical removal of emotional reasoning from political decision-making.”

It was neoliberalism that did this, of course. He is right in the sense that neoliberalism did change politics, but wrong in supposing that it used economics to remove emotional reasoning from it. Inspired by David Hume, neoliberals know that while reason can direct people how to act, it is emotion that makes them want to act in the first place. People might want to give as much of humanity as possible the extra wealth that bring additional opportunities and choices in its wake, and they might want to lift the poor of this world into a decent standard of living, but these wishes do not tell them how to do it.

What neoliberals did was to require that political decisions should take account of the real world, the practical world of experience. It is not enough to approach them with emotions, praiseworthy though many of them might be. Neoliberals brought the empiricism of practical observation to bear on policy proposals. The question was not, “does this express people’s emotions about identity and class?” but “does this achieve the sought-for results in practice?” Neoliberals looked at what had worked in the past and sought to build on it. They looked at what had worked in other countries, and sought to adapt and apply its lessons elsewhere.

No less importantly, they looked at what had not worked in the past, and not worked elsewhere, and rejected it. It was discarded on practical grounds, incorporating the lessons of experience. The aim is to change and improve the real world, not to feel good by having worthwhile emotions about what it might be in some imagined future. We might even paraphrase Marx. “Some thinkers have interpreted the world through an emotional lens. The point is to change it.”