Treth Twristiaeth? Dim diolch!

There has a been a lot of news recently so it might have passed you by but something genuinely staggering happened in this country last week. It wasn’t the Prime Minister bungling the most important speech of her life. Nor was it Theresa May getting confused between support for the free market and intervening in it. No, it was the Welsh Government’s budget – with the first taxes to be levied and collected by a separate authority in Wales in nearly 800 years.

Nationalists in Wales will be glad of this fact in and of itself. But should we be? Well powers for their own sake aren’t that interesting, it’s more about what’s done with them.

One of the things that came out of the budget wasn’t actually a plan to use them to create a power but a shortlist of potential new taxes. Mark Drayford, the economy minister of the Welsh Labour government in Wales, set out some possibilities. Among these were a new tourism tax and a new disposable plastics tax.

There is good reason to support disposable plastics taxes and Wales has a good track record on them. Wales was the first place in the UK to introduce a tax on carrier bags and the subsequent drop in use was a cornerstone of the argument in getting it adopted by other parts of the UK. Devolution as it should be – experimenting with good governance, working out what we want less of and using price incentives to change a negative outcome (after all there are some pretty nasty externalities that come out of plastic bags).

The problem is, that makes the second one on the list quite bizarre. Presumably the Welsh government thinks that tourists are a good thing for Wales, it certainly likes to appeal to them to come (and spend their money in local communities). But as we alluded to above we mostly use taxes, like plastic bag taxes, to get less of something.

Tourist taxes make sense where demand is inelastic – there’s only one Sagrada Familia and one Parthenon for tourists to visit after all. And taxing people that free-ride on public costs of keeping places like Venice afloat (literally), makes sense. But where demand is elastic, where it is responsive to price changes, then taxing tourists just makes the numbers coming fall and it reduces the economic benefits of tourism.

While the Tourism Alliance measures elasticity of the UK as a whole, it doesn’t give exact numbers for Wales. Yet there are some proxies that we can use that suggest the Welsh tourism sector is elastic and that this tourism tax would be a pretty poor idea.

The first is simply that the Welsh government advertises heavily both internally and externally - if you get high numbers of visitors turning up regardless of the money you spend telling people to then you wouldn’t bother (you’d hope).

The second is that the Welsh government themselves collect figures of visitors and their and Visit Britain’s own analysis shows swings with big increases in tourist numbers during the recession and dropping after as well as when the weather in the UK is poor (2012 was a particularly rainy summer in Wales and was just as the UK was recovering from the financial crisis).

Thirdly the falling value of the pound has had an enormous impact on numbers coming to Wales. In the past year tourism numbers are up 11%, following a drop in the pound after the Brexit vote.

The tourism sector supports 40,000 jobs in Wales, boosts GDP by £4.8bn per annum and the evidence suggests this (and the numbers of tourists coming in the first place) is price sensitive. If the Welsh Government wants to use a sector as a cash cow then tourism really isn’t the one to go for. Maybe it would be good for Wales to wait another 800 years before adding any additional taxes?

Strengthen neoliberalism & change the world

What sort of traits make someone amenable to neoliberalism? An inherent scepticism about the role of authority? A general optimism with a strong belief in one’s own self-worth?

It feels obvious that such traits are held by just a minority of people in society. Yet, one only needs to look at the scale of government reform that occurred across the developed world during the 1980s and ’90s to see something big was going on. Surely, the extent of policy changes far exceeded what was due to the minority amenable to neoliberalism. What caused this out-sized influence? And what does it suggest about how we can better spread neoliberal ideas?

A brief discussion of banking deregulation in the developed world suggests the sharing of credible policy experiences spreads neoliberal ideas. I support this by describing why I believe having societies share policy experiences acts like a filter, making neoliberal policies the ones more likely to be adopted. Organisations like the Adam Smith Institute devoted to spreading neoliberal ideas should encourage societies to share their experiences of different policies.

By the 1970s, the economic controls of banking put in place during and following the Great Depression were creating a raft of problems across the developed world. As a credible acknowledgement of these problems, some governments started instituting policy changes – it became more pressing for other governments to follow suit. For a 2011 MA thesis, I completed research studying banking regulation in seven developed countries: Australia, Canada, Germany, Norway, New Zealand, the UK and the US. Of these, all 7 significantly deregulated their banking industries between the mid-1970s and the 1990s.

It seems likely that the sharing of policy experiences, made more credible by accompanying policy changes, played a big part in why all 7 of my countries deregulated banking at roughly the same time. What’s to say though, that neoclassical policies will always be an outcome from such sharing? For example, the OECD Secretariat shares policy experiences between governments; neoliberal is not often used to describe the policies it recommends. 

To be effective at promoting neoliberal policies, sharing needs to focus on the people in societies, and not on their governments. Defined broadly, it is societies that experience the full costs and benefits of different policies. Putting societies first acts like a filter generally removing more statist policies. Since intrusive government actions often have unintended consequences, it follows that reductions in the intrusiveness of actions will have fewer unintended consequences. This implies that societies will generally be more positive about and better at sharing policy changes that result in less intrusive government actions.

At the beginning of this post, I asked what factors might strengthen neoliberalism. A description of banking deregulation across the developed world suggests the sharing of credible policy experiences may achieve this. Having societies share policy experiences will act like a filter to ensure it is generally neoliberal policies that are spread. To strengthen neoliberalism, its proponents should encourage societies to share their credible experiences of different policies.

A bizarre argument about womens' empowerment

An interesting claim here, that we should indeed be concerned about womens' empowerment - something we agree upon at least - but that we must concentrate on their political empowerment, not the economic:

The assumption behind all of these donations is the same: Women’s empowerment is an economic issue, one that can be separated from politics. It follows, then, that it can be resolved by a benevolent Western donor who provides sewing machines or chickens, and thus delivers the women of India (or Kenya or Mozambique or wherever in what’s known as the “global south”) from their lives of disempowered want.

Well, yes, we tend to think that those who are dirt poor are not empowered in any meaningful manner. Further, that the very fact that one starts to create economic value empowers. Either through being able to command that economic value itself - we do all tend to agree that richer people have more life freedom - and also by being able to trade it. Other people would like to share in that value created, this gives you power over them.

In fact, a useful definition of either wealth or empowerment is the ability to command the labour and resources of others. Richer people, even if it's only be a couple of laying hens, have more of this. 

But apparently we're wrong:

It’s time for a change to the “empowerment” conversation. Development organizations’ programs must be evaluated on the basis of whether they enable women to increase their potential for political mobilization, such that they can create sustainable gender equality.

Somehow we just can't agree with the idea that another march on the district office in favour of gender parity is going to be as successful as women owning economic assets, such in itself being most empowering. One of the joys of our argument is that Karl and Friedrich would agree with us. The relations of production really do mean that a change in the economic structure leads to a change in who has the power. That is, if, as they do now in the rich world, women have more economic power then they will also have both greater political power and greater gender parity.

Economic development thus bringing about the desired goal rather than being an alternative to it.

Force against Catalonia risks a high cost for Spain

It pays to stay ahead of the game. If you don’t plan or innovate as a business you find a competitor will appear in front of you. If you’re a political party that doesn’t catch voters' imagination you’ll find a rival beating you to office – the Tories might like to take note of this after a disastrous end to their party conference in Manchester this week. But what happens if you’re a country and you don’t move with the times to ensure you retain the support of your citizens?

In Spain this fortnight they’re finding out. It turns out that the cost of a rigid and unchanging constitution, that was designed to do one thing (namely, end a dictatorship and help the country transition to a modern democracy), is pretty high as it risks losing the respect of the citizens it supposedly serves. 

Mariano Rajoy, the Spanish Prime Minister, has spent the past half-decade hiding behind the words of the constitution that demand the Kingdom be ‘indissoluble’. Yesterday the Spanish King himself appealed to these words to undermine the organisers of the democratic vote made on Sunday. 

Catalonia’s independence referendum was a symptom of a system which doesn’t keep up with shifting priorities of its people. Catalans have, more and more, been drawn to a rival project that says it reflects better the aims, identity and aspirations of the people of Catalonia better than a government based in Madrid. These shifting priorities have come up against the hard fact of a constitution that Spanish authorities will not let bend. 

Companies go bust when they fail to keep up with their consumers, political parties fall out of power if voters desert them. Countries are no different, if their institutions and structures don’t match their citizens’ preferences they find their authority dissipates totally and they unravel without extreme coercion. Beating old women, using military police to injure nearly a thousand of their own people, troops on the streets, and now suspending parliamentary operations makes it pretty clear that Spain is choosing the option of force. Spain should be more careful, its constitution and modern authority is derived from its commitment to democracy. 

Flexibility, conciliation and a proposal to run a second and fully respected referendum could yet save Spain. It’s still an option for Rajoy and the Spanish establishment. It could win a vote if it gave its Catalan citizens the choice. It’s a risk that Spain should take. And, after a decade of intransigence and a weekend of violence it’s a right Catalonia has won. If Spain doesn’t take the risk, just like a business running out cash, the state will find (very quickly indeed) it doesn’t have enough Catalan supporters to justify its continued control of the region. 

But what happens if Rajoy chooses to inflict pain on Catalonia? Frankly, Spain risks undermining not just its own authority but the legitimacy of the European continent to speak out on the issues of democracy and violence against citizens across the world – that’s one hell of a cost for the EU to bear in order to maintain the territorial integrity of a member state.

I have a small bet in the office. I am betting that the European Commission, its Parliament and its member states abandon Catalonia when it declares independence (which the Spanish court’s planned suspension of the Catalan parliament for next Monday has almost certainly made even more inevitable).

If I’m right, if Europe turns the other way and Spain is free to crack down on its own people without any international repercussions, it will show up the lie that the EU is a project that works for its citizens and not just its bureaucracies and elites. The European Union might just find its own authority goes as well and it risks a crisis of its own legitimacy – of those that were drawn to its nature as crossing boundaries and transcending national identities – the Catalan crisis is a European crisis too. Will the EU step ahead of the game?

If artificial meat does take over then climate change just isn't much of a problem

George Monbiot tells us all that artificial meat is soon going to be a real product rather than a lab curiosity and he could be right about that. However, it's what happens after that which interests here. George goes on to tell us that this will, quite obviously, curb all those emissions that raising livestock currently causes. And the subsequent rewilding of pasture will reduce emissions once again.

As the final argument crumbles, we are left facing an uncomfortable fact: animal farming looks as incompatible with a sustained future for humans and other species as mining coal.

That vast expanse of pastureland, from which we obtain so little at such great environmental cost, would be better used for rewilding: the mass restoration of nature. Not only would this help to reverse the catastrophic decline in habitats and the diversity and abundance of wildlife, but the returning forests, wetlands and savannahs are likely to absorb far more carbon than even the most sophisticated forms of grazing.

OK - don't think about whether this will happen but think about what if? The answer being that climate change stops being a problem. 

If we take seriously the IPCC and the like reports then there are various scenarios for how emissions will turn out in the future. The whole problem being a serious one if we're on A1FI or RCP 8.5 (dependent upon which set of scenarios we want to use). It not being a serious one if we're on A1T or RCP 2.6. And the truth is that neither A1FI or RCP 8.5 are really even possible, let alone likely for we've already done more than enough to head them off. They both insist, for example,  that the world will be using more coal in 2070 than it does now. Not just more but more as a portion of total energy provision. Given what has already been done with solar and wind power that's just not going to happen at all. And certainly not when we consider what is likely to happen to solar over the coming decades.

One of the sadnesses of the climate change "debate" is that whenever we see a new report stating that if we don't do something about climate change then - the results are always based upon the assumption that A1FI or RCP 8.5 are what is going to happen - entirely ignoring that we have already done something.

And this thought about artificial meat just adds to this. If it is true, that the technology becomes mainstream, then we are again moving further away from the predicted danger and much closer to the don't worry about it scenario.

At which point, of course, then we've got to struggle mightily a great deal less, don't we? That is, all these predictions of how things are changing just keep telling us how much less change needs to be done.

Oddly, very few people indeed tell us this. 

This argument about Catalonia is true but incomplete

Catalonia, as we've seen, has a number of people in it who would like to be independent of Spain. Whether this is a good idea or not is not for us to decide. But, as this Spanish writer puts it, it is possible to construct an argument about it:

I live in Pozuelo, a municipality in the outskirts of Madrid, where I commute daily. Pozuelo is the richest city in Spain, with an average household income of €73,000. Pozuelo is full of good private schools. Many of my neighbors use neither the public school system nor the public health system.

Let’s imagine one of my neighbors starts a movement for Pozuelo’s “right to decide”. His proposal to the neighbors is simple: we will remain in the EU, but we will be independent from Spain.

He would explain that the over €35,000 in taxes that each of our households currently pay (including over €20,000 in income taxes) finance services that we don’t consume. He would tell them that Carabanchel is stealing from us, just like the Andalusians and the people from Extremadura steal from us. He will promise a fiscal dividend of €20,000 per family.

OK, yes, that could be true. Further:

I hope, dear reader, that the argument is clear. The right to self-determination is not compatible with a welfare state and high-quality public services, especially in a single and integrated market. The rich will always have an incentive to benefit (single market, freedom of movement) without paying for redistribution to the poor.

That’s why Europe cannot, must not, allow these self-interested demands to succeed. Tuscany or Bavaria would reap great benefits if they could split, without cost, from their states to the detriment of their fellow citizens in Southern Italy or East Germany.

That would also be true. As the arguments about Scottish economic independence show us, there are indeed cross subsidies within the nation states. 

But that's not the end of the chain of logic at all. We all do agree that we've different redistributional responsibilities to different groups. No one at all thinks it odd that we redistribute more to the children in our households, less to those in other households in our same nation and very much less to those in other nations. If this were not so then there wouldn't be all that fuss about whether Germany should be paying Greek government expenses or not. Or within nation redistribution would be that 0.7% of GDP that we distribute as overseas aid.

We all do indeed agree, the occasional moral philosopher aside, that the volume of that cash flow is going to be different according to whether the recipient is perceived as in-group or ex-. Yes, we do still argue about how large the flow is but the basic idea of it being different is well founded. 

The argument about secession and redistribution then becomes, well, who is in-group and who is ex-? It is entirely true that if one of the richer parts of Spain leaves Spain then poorer parts will get less redistribution. But we cannot just say that it must not happen therefore - we've got to have a justification ofwhy the different parts are all to be considered in-group.

And if we're honest about it it's really not clear at all that current national borders do indeed usefully define who is in- and ex-. As Ireland leaving in 1921, Scotland arguing about it now, Yugoslavia breaking up, the implosion of the Soviet Union and all the rest show. 

Just because the lines on the map are as they are isn't a sufficient justification for the insistence upon redistribution across that total grouping. For that's just not how people work, is it?  

A little lesson for those who would nationalise everything

As we're being told many people - more so the young and inexperienced of course - are in favour of nationalising near everything. We've even seen one claim that the banking system is a natural monopoly and therefore should be nationalised.

We who are rich in maturity could, as we all are of course, carry on reminding people of how bad things were when nationalisation was rife. Sadly, none of those Marinas and Allegros have survived long enough to be usable as present day examples of the horrors that were.

So, instead, how things work out elsewhere:

Also, there are widespread objections among consumers against LPG cylinder price.

They said they have to pay different prices for a same product of a company in different areas.

A 12.5kg cylinder sells at Tk950 in Dhaka, while it is priced between Tk1,100 and Tk1,200 in Rajshahi, Khulna and Barisal.

On the other hand, a cylinder of state-run LP Gas Ltd sells at Tk800, though it is priced at Tk700. This type of cylinders, however, is not available in markets due to a supply shortage.

This is not an aberration. In Venezuela they insist that the government make food nice and cheap. There is no food in Venezuela. Housing was nice and cheap in the Soviet bloc - there was a serious shortage of housing for the 70 years of the Union's existence. Bangladesh has both government and privately supplied LPG. The government stuff isn't available.

Nationalisation and the political control of prices - along with that absence of the profit motive - will mean that everything is nice and cheap and you can't have any because of a supply shortage. As it did, so it will.


People aren't quite grasping how markets work

That Jezza and Labour are now promising everything to all - rent control being the latest nonsense - isn't all that much of a surprise. That's politics after all. But it is worrying that people just aren't grasping why so much of what is being promised is nonsense:

He did it because villainous letting agents encourage owners to do so, insisting on “market rents”, which they alone seem to set, and which are often much higher than levels of frozen local housing allowance, and devised without inspecting the property (my own rentier has never seen the flat and lives in another city, so it’s no surprise he relied on the agent’s viewpoint).

Market rents, like any other market price, are simply the balance of supply and demand. And something that most seem not to be aware of:

Main points

Private rental prices paid by tenants in Great Britain rose by 1.6% in the 12 months to August 2017; this is down from 1.8% in July 2017.

In England, private rental prices grew by 1.7%, Wales saw growth of 1.3% while Scotland saw rental prices increase by 0.3% in the 12 months to August 2017.

London private rental prices grew by 1.2% in the 12 months to August 2017, that is, 0.4 percentage points below the Great Britain 12-month growth rate.

Rents are rising by less than the general inflation rate, by less than wage growth. That balance of supply and demand seems to be working in favour of tenants then.

Further, it most certainly is not true that "market rents" are simply numbers being made up, not by anyone. It would, of course, be rent controls which are simply made up numbers.

Prices simply are not random numbers allocated as we wish. They're the vital information about who wants what so much, who is willing to supply what is wanted. As such we mess with them at our peril.

They say this about Ryanair as if it's a bad thing

Apparently selling people something they want at a price they wish to pay is a bad idea now:

But that show of transparency shouldn’t persuade anyone that this is an aberration rather than a symptom, a visible culmination of the logic of low-cost economics. Ryanair is a highly efficient business in an industry whose dominant vision is – in a phrase coined by the government’s airline commission – that “low-cost is king”. 

Unbundling has become part of our world, and not just when we fly. It shows up in a host of what are billed as consumer choices, and increasingly in what were once public services.

Effects like this aren’t unique to airlines. As consumers, we have been hooked by bargains that come at a cost.

Ryanair has nurtured the dream of flying to obscure cities for a tenner, because we can.

And Uber has encouraged a swath of city dwellers to take taxis when before they might have used public transport,

 Complaints are shrugged off by BA bosses: customers want low fares.

All of this is being said in those shocked tones of disapproval. As if it's just clear and obvious that supplying what people want is a bad idea. When, of course, nothing could be further from the truth. This is the entire point and aim of our having an economy in the first place, that people gain what they desire, that consumers get as much of what they want as can possibly be supplied to them. 

There is only one valid point in the diatribe:

Ultimately, the cheaper deal is making us all pay. Unbundling doesn’t eliminate costs, it just makes them external. And they still have to be met by someone, somewhere.

Absolutely, and bundling doesn't eliminate costs either, it just internalises them and thus forces everyone, whether they wish the extras or not, to pay for them. Which is why we like the unbundling of course - so that consumers may indeed select from that menu of options.

The very thing being complained about is the very thing which we actually desire.