Well, yes Mr. Sparrow, and?
Jeff Sparrow treats us to an extended whine about wealth and inequality.
The grotesque inequality embodied by Musk, Bezos and Zuckerberg is a threat to democracy
Gosh.
Oxfam tells us that a mere 10 people now possess more wealth than the bottom 40% of humanity – and that the richest 20 tycoons collectively own more than the entire GDP of sub-Saharan Africa.
This is normal. For it is possible to have negative wealth - in a way that we do not record negative incomes in the associated figures - where debts are higher than assets holdings. The obvious example is the student fresh out of college who has student loan debt, a high lifetime income to look forward to but as the sheepskin is not counted as a financial asset but the debt is, well, a debt, then they have negative wealth. In fact, some of the poorest people in the world by this wealth measure are the top graduates from the top American universities and training programmes about to embark on globally top earning careers.
It is - roughly and about - true that if you’re a £10 note and no debts then you’re richer than 30% of fellow Britons. Wealthier that is. The same is true of $10 and fellow Americans.
Oh, also, comparing wealth, a stock, to GDP, a flow, is very bad number crunching.
But, you know:
Between April 2020 and April 2021, Musk reportedly made nearly US$140bn……Not so long ago, the Zuck earned an eye-watering $28,538 a minute……..A few years back, the Guardian’s Arwa Mahdawi noted that, if you had earned $5,000 each and every day from 1493 onwards, you’d still have less money than Jeff Bezos – even after his divorce. The monstrous scale of global inequality renders genuine democracy a farce.
Mark Zuckerberg has shed $90 billion in 2022 while Jeff Bezos and Elon Musk have both lost $58 billion as gloomy earnings reports leave tech stocks reeling
So, what happened last year has all gone into reverse this. Global wealth inequality - by this specific measure being used about the tech bro’s - is markely lower than it was last. Perhaps those 20 tycoons now own less than the GDP of sub-Saharan Africa.
OK, is democracy now better? Has that position of sub-Saharan Africa been improved as a result of this change? Are we, in fact, better off as a result of this reversal of the thing being complained about?
Not obviously, no. We’d be fascinated to find anyone at all who would be able to - heck, try to - point to anything that has got better as a result of this reversal.
So, the original complaint is not a real one, is it. It’s nobbut a whine and a mither. But then this is The Guardian on economics so how surprised should we be?
Larry Elliott gets suckered by the wrong kind of environmentalists
Larry Elliott tells us that there’s something to this degrowth idea as a method of dealing with climate change. That’s because he’s been suckered by the wrong kind of environmentalist - those who know nothing of the economics of climate change:
Given the existential threat posed by global heating, the concept that growth is good is being seriously challenged by those who say policymakers should be aiming for zero growth or even degrowth economies, ones that are shrinking. Make no mistake, it is a good thing that the accepted wisdom is being questioned. The idea that faster growth is the solution to every problem is no longer tenable.
It’s possible to be very basic indeed here. The solution to the problem - as described - is a change in the technologies used. Moving to higher value add technologies is - by definition - economic growth. Therefore growth is the solution, as both are that change in technologies used to those which add more value.
There is nothing new about the current debate. Thomas Malthus predicted eventual famine once population growth exceeded food supplies. John Stuart Mill’s comment, that the “increase in wealth is not boundless”, paved the way for what became known as steady-state economics. Herman Daly, who died last month, long championed the idea that the constraints of the natural world imposed limits to growth.
Well, in one sense of course there’s nothing new about this. Economics is the study of the allocation of scarce resources. So, we’re all agreeing that scarcity is a limit to, a brake upon, growth. Where Daly, specifically, went wrong - and we had this out with him directly - is in his insistence that we can only have qualitative growth, rather than quantitative. Sure, he might even be right about that - but he adamantly refused to accept that GDP is both of those. It’s value added and if we add more value by qualitative growth then that’s still GDP growth.
Being more specific about climate change this has been looked at. Back when, before the patina of repeated layers of economic misunderstanding were spread over the subject. The Special Report on Emissions Scenarios. The economy has growth, does not have growth, the population rises, comes to a peak then falls, what energy producing technologies are used and so on?
The results were that the growth limiting models produced a worse climate outcome. Or, more accurately, the highest growth model plus increased coal use (A1FI) produced the worst, the highest growth model with technological advance (A1T) produced the second best climate outcome plus a vastly better human outcome in terms of the richness with which folk could live their lives. The lowest growth model (B2) produced the second worst climate outcome and by far the worst human outcome.
It really is all there, in those original models that the entire construct of climate change is built upon. The Stern Review - as one example - uses these models, as does Nordhaus’ Nobel winning work. RCP 8.5 in today’s set of models is really just A1FI gussied up a tad.
We started the whole climate change game with the setting of some rules. Which is that our models even showing that it could happen were based upon the idea that economic growth - without coal - is the solution. Given those rules of the game we cannot then turn around and say that growth is not the solution to climate change.
Well, of course, we can, for many are saying so. But they are wrong.
It's not Elon Musk with the misunderstanding here
Nor Jeff Bezos. In fact, both seem very much more rooted and based than the critic here:
Elon Musk is inspired by Iain Banks’s utopian sci-fi novels – but he doesn’t understand them
The billionaire says he’s ‘a utopian anarchist of the kind described by Iain M Banks’ – but what of Banks’s socialist and anti-wealth views?
Ah, yes:
As with Consider Phlebas and the eight Culture books to follow – the final published a year before Banks’s death – the story revolves around a “post-scarcity” human society in the far future. The Culture is a civilisation without want or need
Quite so, very Marxist, very communist:
“Let’s be clear: unless I have profoundly misunderstood its position, I pretty much despise American libertarianism,” he told PhD researcher Jude Roberts, in a series of interviews published by Strange Horizons magazine. “Have these people seriously looked at the problems of the world and thought, ‘Hmm, what we need here is a bit more selfishness?’…Which bit of not having private property, and the absence of money in the Culture novels, have these people missed?”
Indeed.
But the Big Q is how do we get from here to there? One answer would be that we change humans. We wait for New Soviet Man to arrive and all will be well. Or, we can do what Marx predicted would happen. Capitalism continues to become ever more productive until we arrive in that post-scarcity society and all will indeed be well. Which is where Banks picks up the point to weave into his tales.
Now, it’s possible to wonder whether Marx was actually right - the very idea of a post-scarcity society doesn’t fit well with the existence of positional goods for example. But why not as the McGuffin for a series of novels? Why not even as a dream about the possible future society?
But as Marx pointed out it is a thought about the future and there is that little step of getting from here to there. And also as Marx pointed out it’s the onward march of capitalist efficiency - driven, obviously, by the entrepreneurs - which will, if it can indeed happen at all, lead us into those sunlit uplands.
To borrow some of the phraseology from those who think too little about this, the objective reality is that Musk and Bezos, along with their class, are the very handmaids of that world to come. If, of course, it does come. For as - to berate the point - Marx himself pointed out, that true communism, that Culture, will only arrive in a post-scarcity society. So, we’ve got to keep making capitalism that ever more efficient until we get there, don’t we?
As Musk, Bezos and their class do.
It’s not Musk and Bezos with the misunderstanding about their place in the onward march of history and the inevitable arrival of the glorious future now, is it?
Is it Conservative?
When the word conservative is spelled with a small ‘c’ it refers to a psychological trait, one that seeks to keep things as they are, and that resists change. Change, for many people, leaves them uncomfortable and less able to predict and to cope with unfamiliar circumstances.
When Conservative is spelled with a capital ‘C’ it refers to a political tradition that wants such changes as take place to be organic and spontaneous, resulting from the accumulated decisions people make about their lives. It opposes attempts to force society to conform to preconceived plans. Conservatism wants change to be evolutionary, not revolutionary. It seeks not to preserve any particular status quo at any time, but the process by which it changes. It conserves a process rather than an outcome.
Some of the stances taken by Conservatives are the product of that desire for change to be spontaneous. If the future shape of society is to be determined by the decisions people make, it follows that people should be free to take them. It thus involves a significant degree of personal freedom, and an opposition to rules that force people to conform to someone else’s decisions.
It also explains why Conservatives favour low taxes. They want people to be able to allocate their resources according to their own priorities, rather than to have their resources taken to be spent on someone else’s priorities.
It explains, too, why Conservatives have traditionally favoured strong armed forces. If people are to make most of their own decisions, they must be protected from having this freedom usurped by foreign aggression and bullying.
The Conservative Party in Parliament has sometimes been Conservative, sometimes not. There was nothing remotely Conservative about Edward Heath’s wage and price controls, for example. As with all political parties, it attracts those who seek power and position and are indifferent to or even hostile to its underlying philosophy.
Some commentators point out that if the Conservative Party in Parliament favours high taxation and high spending, and seeks to micro-manage people’s lives, nominally in the interests of their future health and welfare, it is by no means following in the Conservative political tradition. They are correct; it is not.
But, but, *why* do we want to reduce taxes on landlords?
It is a standard economic insistence that business rates are actually paid by landlords. It is a standard political insistence that business rates are paid by retailers. The economists are right here.
This should - but does not - feed through into politics.
Business rates are pushing squeezed companies over the edge
Commercial property owners who were over-geared for current market conditions, perhaps so, yes. But that’s their lookout, no one else’s.
Machin calculates that retailers pay “25pc of all business rates despite being 5pc of the economy”.
Retailers don’t pay rates, landlords do. There are some retailers who are their own landlords, true, but it’s as landlords that they pay rates, not retailers.
If Hunt can only cut one tax, it should be this one. Business rates are crippling the real economy and the scars could be long-lasting.
Which brings us to that headline question. Why do we want to cut taxes on landlords? Until that’s answered there is no argument in favour of cutting business rates, is there?
Do note that there isn’t any argument within economics about this. Sure, there are quibbles and mitherings about how long the adjustments take and all that, the interaction of the base facts with upwards only rent reviews ‘n’ all. But those base facts aren’t at issue. Business rates are, like other repeated taxations of real property, paid by landlords. We’ve an entire school of economics built upon this insight and while the Georgists can become somewhat over-enthusiastic about the issue they are right on the basics of land value taxation.
So, to repeat: But, but, *why* do we want to reduce taxes on landlords?
A welcome to the 8 billionth
This week we bid a warm welcome to the 8 billionth human being. We look forward eagerly to their intellectual and artistic contributions and to their role in enhancing the common lot of humankind.
Some people regard humans as a kind of pollution to the planet. Indeed, some treat humanity as the greatest threat posed to the Earth. We do not. We share the view of the late Julian Simon that human beings constitute “The Ultimate Resource.”
Although some have suggested that the world’s population will rise to 50 billion or more, the rate of increase is slowing, and projections suggest that it might reach 10 billion, and then start to decline. A major reason is that as nations become richer, their birthrate declines, and the world as a whole has been growing richer. Coupled with this is the fact that as education, particularly that of women, is extended, birthrate goes down. The world is not going to drown in people.
Others have claimed that Earth’s resources are being used up, and there will be precious little left for future generations. This is incorrect. Human ingenuity has developed ways of satisfying our needs with fewer resources than it previously took, and has also enabled us to tap new sources of them. “Water wars” will be no more likely than “peak oil” was. We are clever enough to find new ways of doing things.
We are also clever enough to mitigate the effects our presence has on the environment by inventing technological means of diminishing it. It will be human creativity, the infinite resource, that will enable us to live, not more simply, but more cleverly and more cleanly.
This week saw us lay another place at life’s table, and we look forward to the contribution the 8 billionth person will make to humanity’s achievements, inventions and adventures.
If only John Harris would pay attention
The British right’s hostility to climate action is deeply entrenched – and extremely dangerous
D’ye know, we’re really not sure about that. We, of course, think of ourselves as being on the left, as all liberals - even the classical kind - are. The aim is to make life better for all, including and especially the poor. So, we advocate that peace, easy taxes and the tolerable administration of justice which achieves that task. We get labelled as being of the right because we insist that markets are the way to get that job done. Given that we’re right - as in correct - on this we must be labelled as we are, far-right, in order that the easily swayed do not begin to understand the point.
For we’ve not been hostile to climate action in the slightest. We’ve spent the past 15 years at least advocating the correct plan to deal with the problem. As they gave Nordhaus the Nobel for, Stern a peerage, assuming that the IPCC is correct about the existence and problems of climate change then the solution is a carbon tax at the social cost of emissions. Job done.
For that is what the actual science says. Do, please, note that “assuming” in there.
Harris contrasts our modest, moderate and correct analysis with this:
There is a very good book that explores all of this, published last summer: White Skin, Black Fuel, authored by the Swedish academic and activist Andreas Malm, and a group of “scholars, activist and students” called the Zetkin Collective. It roots the right’s climate politics in things that are as much psychological as political: nostalgia for an age of empire founded on coal and oil, a yearning for the machismo of heavy industry, and a view of the global south as a deep threat. The latter’s climate-based suffering must be othered and ignored, and its people have to be shut out, even as climate breakdown makes large-scale human movement more inevitable than ever.
One of Malm’s recent books - his publisher sent it to us surely by mistake - advocates the use of Leninist war communism as the correct reaction to climate change. That war communism that emptied the cities, dropped industrial output by 80%, caused a famine that killed perhaps up to 10 million and had to be abandoned after 3 years to return to the more market based system of the New Economic Policy.
It’s us that are to be regarded as dangerous, while Malm is “very good”?
Perhaps we could make just that tiniest, littlest, suggestion to John Harris? Could you start paying attention?
One Penny on the Income Tax
From time to time, a strange proposal raises its head in the UK. This is the suggestion to raise taxes to finance some suitable and of course very worthy causes, e.g., the National Health Service or education. This financing is to be done by raising income tax by “one penny”. And why not? The cause is eminently worthy. And one penny doesn’t sound like very much. Except of course, this is another example of politicians using words that don’t quite mean what they sound like, in order to make us part with more of our money.
In fact, “one penny on the income tax” is an almost perfect example of what should be called a stealth tax.
This is for two reasons. First, the strange use of “one penny”. Presumably, this goes back to the days when there were 240 pennies in the pound. Since there is no unit describing 1/240th, it is easier and natural to refer to talk in absolute number of pence. But that was 50 years ago. Since there are now 100 pennies in the pound, why not talk about percentage points? True, some of this may simply be inertia. But it is difficult to abandon the suspicion that it is because one penny somehow sounds very much less than one percent.
The second reason why referring to “one penny on the income tax” is invidious, is because it actually disguises the relative size of the tax increase involved. If you only pay the basic rate of income tax, the tax amount of your taxable income taken from you is 20% (that is to say, one-fifth). If you add “one penny” to the basic rate of tax, this means actually increasing your tax payments by 5% or one-twentieth, since your tax rate is now 21%.
If you are a higher rate payer per year (40 or 45%), the increase is proportionately less, although of course, in absolute terms, your tax rises by more. However, your tax burden will rise by between 2.2% and 2.5%. It could, of course be argued that a 2.2% or even a 5% rise in any person’s tax burden is not particularly onerous. But that is beside the point. Whatever tax burden is, actual and/all proposed, taxpayers should be aware of it. They should not be tricked or cajoled into paying higher taxes by stealth or obfuscation.
So how much is actually “one penny on the income tax”? In 2019, when the Liberal Democrats launched one of the regular proposals along these lines, The Telegraph calculated that the cost for an average taxpayer would amount to £170 per annum. But going out and telling voters, “we intend to take another £170 off you” presumably doesn’t sound very innocuous, or attractive.
But as voters and taxpayers, should we not insist on honesty from our elected representatives?
Seldom meet together....but the conversation ends in a conspiracy......
As we’ve noted before one useful manner of reading Wealth of Nations is as a prolonged scream against the restrictions of the medieval guild economy. Against the idea that only this elite caste may be allowed to perform this function, only that other over there that other. For by restricting the numbers in the elite the conspiracy raises the income of those in it as against those of everyone else.
‘Unqualified experts’ should not have role in child welfare cases, court told
Gosh.
The family court should not ordinarily permit the instruction of “experts who purport to be ‘experts in alienation’,” in cases involving decisions around child welfare, the Association of Clinical Psychologists (ACP-UK) has advised a senior judge.
Well, that makes sense, if people aren’t experts then don’t allow them to be used as experts.
In a court document seen by the Observer, lawyers for the ACP-UK claim those who profess to be “experts in alienation” display a “confirmatory bias and an unhelpfully narrow lens, which is likely to render them unsuitable for conducting, in an open-minded way, a psychological assessment of the family”.
That looks suspiciously like an insistence that only those who think the right way should be allowed to do the work. But perhaps that’s us just being cynics.
At a hearing before Sir Andrew McFarlane, Mills also warned against using psychologists who are neither practitioners regulated by the Health and Care Professions Council nor academics who are chartered members of the British Psychological Society.
And now we’re not being cynics. The actual claim is that only those who are members of the correct guild (s) may be so used. To the benefit of the incomes of all those in the guild (s) and the disbenefit of everyone else.
One of the reasons that Wealth of Nations is still such a good guide to the modern world, that some two and a half centuries after publication, is that human scheming and guild manipulations haven’t changed all that much over the 246 years. It’s only necessary to read the daily newspapers to spot the machinations.
Misunderstanding Keynes really isn't a good idea
We often enough disagree with Keynes the economist. Often because we both understand him and also understand what he didn’t. Things like political incentives for example.
It’s fair enough to say that in recession government should expand demand and then repair that roof when the Sun shines. Except political incentives don’t work that way - that spending never does get cut. We particularly recall Polly Toynbee’s insistences over the decades - quite, she’s not an economist and this is rather the point we’re making - that when Brown was running surpluses she insisted that there was money there to spend so spend, gloriously, when deficits have appeared she’s argued for spending, gloriously, upon the need revealed by the deficits. Add to that the desire for politicians to spend and not to cut nor tax and we gain a ratchet effect.
Or, more simply, we never do get to that Sun nor the roof repair.
This is different though from the mistake of minsunderstanding Keynes when he was in fact right. As here:
People have predicted that robots will destroy the labour market for decades. As far back as 1933 the economist John Maynard Keynes prophesied widespread technological unemployment was coming “due to our discovery of means of economizing the use of labour outrunning the pace at which we can find new uses for labour”.
No. Keynes did not say that there was going to be some outbreak of that technological unemployment, not as a general feature of the economy. He said that it would be some transient condition. From that same essay, Economic Possibilities for our Grandchildren:
But this is only a temporary phase of maladjustment.
That’s actually the next - and unquoted above - sentence. In the introduction there’s a further discussion:
We are suffering, not from the rheumatics of old age, but from the growing-pains of over-rapid changes, from the painfulness of readjustment between one economic period and another. The increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption;
Technological unemployment, as a thing, does not exist. Technological unemployment as a stage, a transience, does.
Getting this right of course tells us what to do about it. The planned and managed economy is slower to adapt than the free market one. Thus the route through the stage is to be more free market and less planned. We do not face an end stage problem about which something must be done, we have an ephemeral issue which is best solved by getting out of the way.
Interesting what you can show if you actually understand Keynes, isn’t it.