Taxation, growth, and the bishop

4450

taxation-growth-and-the-bishop-

Dr Rowan Williams, Archbishop of Canterbury, has called for higher taxes and limits on economic growth. He says economics should be about good housekeeping, and should be about “creating a habitat that we can actually live in". He wants a Tobin tax on financial transactions, such as Gordon Brown recently floated, and taxes on carbon emissions.

I beg to differ with His Grace on most of his points. I take the view that the Tobin tax is unworkable and unjustified. Currency traders perform a service by generally bringing forward the likely effect of what they see as future trends. And a tax on transactions in one jurisdiction would simply move trade elsewhere.

I disagree with him on growth. I think it is hugely positive, lifting more millions out of poverty and starvation than ever before in human history. The Good Book exhorts us to help the poor, and growth has been the best way ever found of doing this. We should be promoting more of it, trying to spread across Africa the benefits it has been bringing to parts of China and India.

Even on carbon emission taxes, I disagree. If we want to make a difference, it will almost certainly be by using wealth to apply new technologies, rather than by using taxes to limit our lifestyle. The combination of creativity and wealth has a track record of solving problems. It has given rich countries cleaner air and water; it has conquered some diseases and is conquering others; it has fed more people than has ever been managed before.

His Grace talks of us over-using "limited energy and raw materials", but it is technology that enables us to create new sources of energy, and to develop substitutes for scarce resources. And it is the market he criticizes so much which sends the signals that encourage us to do these things.

The good bishop might back Tobin and carbon taxes, and oppose growth and markets, but the lot of humanity is more likely to be enhanced by rejecting the first pair and endorsing the second two instead.

Check out Madsen Pirie's new book, "101 Great Philosophers".

National socialism in action

4448

national-socialism-in-action

The UK government wants internet service providers to keep records of our email and web visits. Really, I am sure that it would love to collect that information on some new custom-designed, multi-billion-pound central database of its own – but it's been getting a lot of flack recently that it is a 'database state'. How very much more convenient to tell private companies they have to keep this information – and hand it over, on a daily basis, as and when the state demands.

In political science terms, this is national socialism: the state doesn't actually run businesses (or in this case, databases), it just forces private companies to behave as it chooses. Private companies become agents of the state. When you hand over personal information to your credit card provider, your phone company, your bank or any number of retailers, you are effectively giving that information to the state.

Given the number of terrorists and paedophiles we are led to believe are out there, perhaps we do want to give our law enforcement agencies the power to see what people are saying and doing on the net. Well, we might, if they used it only for that purpose, and if our state authorities were competent and focused only on public safety. Sadly, they regularly lose our data on the train. The civil service and the police see politicians, not the public, as their bosses. And huge numbers of officials have access to our data. When HMRC lost 2 million child benefit records in the mail, they revealed that it had been copied by a 'junior official'. Junior doctors were caught illicitly sharing juicy patient records of celebrities coming into their hospital. And so it goes on.

How many 'junior' officials are going to be able to demand our email information off my ISP? And if they come across something nicely embarrassing about someone, how many might just be tempted to sell it to the News of the World? Frankly, I would prefer my data to be held nice and secure by the private companies I choose to deal with, against whom I can take action against breach of trust. When governments breach our trust, there is no recourse to any justice.

Dr Butler's book The Rotten State of Britain is now in paperback.

F2T: Petition against green protectionism

4446

f2t-petition-against-green-protectionism

We call upon the World’s leaders to resist calls for green protectionism. Trade enables specialisation, which results in the development of new technologies and leads to the creation of wealth. In the past two decades, trade has enabled over a billion people to escape poverty. Trade is the most powerful weapon in humanity’s armoury to fight poverty and environmental ills, including climate change. Trade restrictions are not desirable, nor are they an effective means of addressing climate change.

Click here to find out more.

Chris Mounsey on Friendly Societies

4449

chris-mounsey-on-friendly-societies

The first thing to be pointed out is that libertarianism is not about leaving people in the street to die. Libertarianism is, first and foremost, a philosophy based on personal liberty—the central crux of which is the non-aggression axiom...

And so begins an expansion of the excellent speech given at the ASI's recent TNG meeting. Click here to read the full text.

East Coast nationalised

4445

east-coast-nationalised

Compared to the banks, it's pretty small beer, but now the government has nationalised the east coast rail franchise, National Express has given up on it, and it has been excitingly re-named East Coast, and the equally excitingly, the transport minister Lord Adonis is now running it. Otherwise, it's the same timetable, prices and routes.

This is, of course, exactly how rail franchising is supposed to work. Services are put out to tender, and are run by private companies, but if one of them comes a cropper, the government steps in until another provider can be found. The only trouble is that the government has been stepping in rather a lot lately. Not because the private sector is inherently flaky, but for a couple of other reasons. First, the government screwed the operators down too hard on price. Many of them already had made considerable investment in the rail industry and were not prepared simply to write it off. So they paid over the odds. Then boom turned to bust (thanks, Gordon) and their figures started to look a bit sick. Second, the government drew up its franchise agreement so ineptly that when the chips are down, it is far cheaper for an operator to fold than continue operating a service. Step forward, the taxpayer. Frankly, it's no way to run a railroad.

Also in this weekend's news, Stephen Byers, the transport minister who bankrupted the private rail infrastructure company Railtrack, saying it was too inefficient and expensive – only to replace it with Network Rail, which is even less efficient, completely unaccountable, and forty times as expensive – is stepping down at the next election. Thank goodness. There are very, very few people I take a dislike to, even if I disagree with them politically. But this over-promoted polytechnic teacher and political careerist is one. Roll on the next election, I say.

Dr Eamonn Butler's book The Rotten State of Britain is now in paperback.

Just what it is that this capitalism thing is good at?

4440

just-what-it-is-that-this-capitalism-thing-is-good-at

Putting aside my usual insistence that capitalism and markets are very different things, a quick question on what is it that the system we commonly call capitalism is so good at? What, really, is the benefit that it brings to us all?

For $70,000 (£42,000), it may not seem like a very good deal: all you get is a polished silver box containing a USB drive on a black velvet tray.

What you get is your personal genome. So, is capitalism simply good to provide exclusive trinkets for billionaires? There are those who say that it is of course, but that would be to grievously misread what is happening here.

The cost of the procedure is dropping fast, and while $70,000 is a significant expense by even a Wall Street banker’s standards, it seems inconsequential when compared with the $3 billion cost of decoding the very first genome — a project that was completed in 2003, after 13 years. Today the same process takes six to eight weeks. By 2015, says Mr Conde, personalised sequencing is likely to cost under $1,000, and take only days.

From $3 billion to $1,000 in only 12 years: yes, the thing which capitalism is so good at is making things cheap.

This is why it works as a socio-economic system. Leave aside all the morality plays of exploitation and the like for a moment and think purely as an entirely hard hearted pragmatist. We've got cheap food now, we can all fill our bellies at the expenditure of trivial, by historical standards, amounts of labour. Cheap clothing: it's within the memory of those alive that Sunday Best really did mean one's second and only other set of clothing. Even housing which seems so expensive has increased in quality so much that it is cheap by any long term comparison. Add medicine, transport, heating, alomst any sector of the eonomy or consumption that you wish to mention. All are incredibly cheap by the only standard that really matters: how long and how hard must we labour to get them.

As that hard headed pragmatist you would note that the capitalism/markets thing is the only system which has managed to achieve this. No other system that we've ever tried has done that truly remarkable thing, offer a sustained, long lasting and general rise in the standard of living: the reason being that no other system comes remotely close to capitalism's ability to make things cheap.

Not bad for a system derided (wrongly) for being based upon nothing but greed, is it?

Taxing out talent

4442

taxing-out-talent

Talent is being forced out of Britain by the twin blows of a levy on non-domiciled individuals and by the impending 50 percent tax rate on incomes above £150,000. The latest to go is reported to be David Landau, a philanthropist who made his fortune selling the advertising paper Loot, and who has given several millions to charitable causes in the arts and education. He has left for Italy. He will not be the last.

George Bull, head of tax at accountants Baker Tilly, warned that half of his US clients were considering leaving Britain because of the "double whammy" of the non-domicile levy and the new 50 per cent tax rate.

The Chancellor, Prime Minister and the Treasury blithely behave as if their new taxes on high achievers will yield the expected revenue without triggering any behavioural changes. They just cannot seem to get their heads around three very simple words: TALENT IS MOBILE.

Governments can tax land which is impossible to move. They can tax factories which are difficult and expensive to move. But when they try to tax talented people they run up against that mobility. The plain fact is that many high-earning individuals are able to move to a friendlier jurisdiction which does not take away most of what they have earned.

Guy Hands, the British head of private equity company Terra Firma, which owns EMI, relocated to Guernsey earlier this year. Many more have threatened to go, including Sir Michael Caine, Tracey Emin, Hugh Osmond – the entrepreneur behind Pizza Express – and Peter Hargreaves, founder of the investment company Hargreaves Lansdowne. Premier League football players including Liverpool's Xabi Alonso and Arsenal's Andrei Arshavin have also identified Britain's tax regime as a problem, raising fears of an exodus of top talent.

High earners do more than create wealth and help generate and sustain jobs; they act as role models to young people, and inspire them, too, to greater ambition and effort. Without these achievers Britain will become a duller, more mediocre place, as those who want to achieve things themselves and to make good in the process will go to do it elsewhere.

The pity of it is that it will all be for nothing. The Treasury will almost certainly raise less revenue, rather than more, as a result of its twin attacks on high earners.

Dr Madsen Pirie has recently authored "101 Great Philosophers".

Immigration policy is a mess

4434

immigration-policy-is-a-mess

Funny how politicians leap on bandwagons before an election - first bank bonuses, now immigration. After a few soothing words about how important migrants were for the UK economy, Gordon Brown went on to outline lots more controls to stop them. Should play well among all those Labour voters who defected to the BNP.

The reality is that immigration has shrunk. All those Poles are going home, now that the streets of Britain are no longer paved with gold. Not that Gordon Brown's new 'tough' policy could prevent EU citizens from working here anyway. Migration has contributed billions to the UK economy. Migrants are 60% less likely to draw state benefits.

Home Secretary Alan Johnson admitted that Labour's immigration policy is a mess, and he's right. It has chased one headline after another, ending up with a dog's breakfast of a 'system' that is neither efficient nor just. Immigrants and their families can be detained indefinitely, are not allowed to work or draw benefits – so they end up being exploited in dangerous and underpaid illicit jobs.

The new points system is supposed to rationalize all this; but it has already proved damaging. We do actually need unskilled migrant workers in our businesses and public services. Overseas students are stymied with all sorts of paperwork and no longer feel welcome, choking Britain's reputation in international education. Companies complain of visa bottlenecks and having to advertise for chief executives in job centres so as to prove that no native person can do the job. The Tories want the same, but with caps on. It will be a relief when the election is over and we can (briefly) discuss this subject rationally again.

Dr Butler's book The Rotten State of Britain is now in paperback.

Can Britain learn from China?

4430

can-britain-learn-from-china

Slowly but surely, economic and demographic pressures, combined with a decline in scientific and educational achievement, will condemn Europe to becoming first a military, then an economic, then an educational backwater, and finally even a cultural backwater. Remember, academic and scientific excellence soon follow economic prowess and China already produces 3 million graduates a year, 250,000 in engineering. In Britain, we can’t even find enough people to teach physics in our schools.

Andrew Neil, 'Britain can learn from China', The Specator (2005).

Cheering news on the gender pay gap front

4439

cheering-news-on-the-gender-pay-gap-front

There are two ways to take this little snippet of news:

The average pay gap between men and women continued to decline last year, falling by 0.4 percentage points, but still leaving a 12.2 per cent difference, according to the Office for National Statistics.

If that gender pay gap is something you worry about then that is good news: it's getting smaller. As it has been for decades. You can also complain about it, as some did:

A spokesman for the Equality and Human Rights Commission said: “The improvement in the gender pay gap is something to be welcomed and we hope this trend will continue.

However, he added: “If this rate of decline continues it will be another 17 years before women and men will be earning equal pay."

But then I would also say that this was good news for those who worry about the gender pay gap. Only 17 years to close something which has been with us for millennia? How wonderful that is in this world that is simply getting better by the day!

But beneath that snark and flippancy there is a much more important point. Solutions and corrections to the perceived problems of said world do not pop up overnight. Even if we hit upon the magic set of actions they still take time to work through society. So the call to action should not be based solely upon the existence of a problem: it should be based on whether that problem is already in the process of being solved or not before we insist on yet more actions to solve it. So it might be with these gender pay gap figures: whatever it is that we needed to do we've already done, the problem will be gone in a couple of decades and Hurrah! let's go and worry about something else.

We might apply the same logic to other problems: recent decades, those recent decades of that hated globalisation and "neo-liberalism", have seen the greatest reduction in human poverty in the history of the globe or our species. Huge great plans to "solve poverty" are thus not needed: we just need to continue doing what we're doing, trading with our fellow humans as we have been and the problem will solve itself. We have, if you wish, already alighted upon the solution and simply need to carry on as we are.

This isn't, of course, a popular thought amongst those who insist that we must do something, now, to solve all the ills of the world but it is a general truism. Many of the perceived problems are already being solved it's just that time as well as solutions are needed.