Thursday, 2 February 2017

Outbreaks of common sense in right leaning think tanks!

Exhibit One: Philip Booth (of the Institute for Economic Affairs) in today's City AM:

Cafod argues that we should remove our trade barriers without expecting anything in return from other countries. There is much to be said for this. Our trade barriers hurt British consumers and poor-country exporters and, ultimately, harm UK industries with an export focus. For example, we still have very high tariff barriers of up to 30 per cent on processed foods such as coffee and chocolate. We should just remove them...

Trade deals have become extraordinarily complex because most trade barriers relate to regulation. When it comes to agriculture, for example, regulation of GM foods is used to keep imports out. In financial services, we make enormous efforts to make already complex national regulatory systems internationally compatible. This all requires a great deal of commercial expertise. The result can be a marathon process and trade deals that create regulatory regimes that benefit incumbents and large firms.

Outside the EU, the UK government can be more relaxed about not using trade deals to harmonise regulation except, perhaps, in extreme cases of health and safety. Products and services that abide by UK regulations can be clearly labelled as such and consumers can then make their own choices.

We cannot go on negotiating trade deals that resemble the Encyclopaedia Britannica. Such deals should go the same way as the hard copy of that great set of books. We should give an intellectual and political lead so that countries such as India and most African nations might follow. Such a policy would enrich consumers and disempower elites.

He doesn't specifically say "Sod this, let's have unilateral free trade" but I think we can assume that's what he meant.

Which is what I and others have been saying here, free trade agreements (which sometimes take ages to sort out) are themselves a hindrance to free trade, not least because a free trade agreement with any one particular country automatically means less favourable terms for other countries. Far better to start with unilateral free trade as a general assumption and - if needs be - impose embargoes now and then.
Exhibit Two: David Bentley (of Civitas) in The Times (via MBK):

[The government's] goal is to increase the amount of land brought forward for development and the speed at which it is built on. There are various proposals for achieving these objectives and one fundamental obstacle to both: the right of landowners to hold back potential sites and squeeze as much profit from them as they can.

Securing planning permission for homes on greenfield sites usually results in an enormous windfall for the landowner. These are often life-changing sums for a farmer, say, who happens to occupy the land that is needed for new homes due to the expansion of the local town or city.

The average hectare of agricultural land in England is worth about £21,000; with permission to build homes on it that rises to about £2 million (excluding London, where values are very much higher still). If the owner does not think they are getting a good enough price, they can sit tight and wait while the market rises, as it usually does, or someone comes along with a better offer.

But the right to extract every last penny from sites like this — enshrined in the 1961 Land Compensation Act — is to the cost of the rest of the community. The more the developer pays for the site, the less money there will be for infrastructure or social housing, and the more the new homes will have to fetch to turn a profit...

Underlying the housing crisis is the issue Mark Twain was addressing: that land is inherently scarce and inflates in value as the population grows and more people come to draw on it. The question is, who should benefit from this progress?

He's falling for the "increasing supply will push down prices" myth but at least he's grasped some of the basics. I don't like his suggested solution to this either, as Richie in the commenters says: "Three words, 'land value tax'.", but hey, it's a start.


Lola said...

Straws in the wind Mr W. Straws in the wind. And there are more and more of them. take heart.

Derek said...

Unilateral Free Trade can work or it can be trouble. The thing is that Free Trade increases the return to rents. So if nothing else is done, rentiers will profit from it much more than entrepreneurs and wage earners who may possibly end up worse off.

So the trick, which should come as no surprise to regular readers of this blog, is to capture the rents to replace VAT and income taxes so that everybody benefits. In other words if we implement Land Value Tax plus a Citizen's Dividend together with Unilateral Free Trade, Britain can do pretty well. If we don't, the future looks grim for all but the Chosen Few.

Lola said...

Derek. 10/10. Top of the class. Kiss the teacher. Where do we sign?

DBC Reed said...

Please explain how free trade copes with the Trump problem i.e. as soon as Poland was liberated from the red terror, British Timken and Avon Cosmetics fled Northampton (Eng) where they'd be based for years as fast as their coarse misshapen legs would carry them for attractions of cheaper wages, leaving Northampton without industrial employment.(The Town is notorious for fradulent business practice i.e. the Tory council entered into a deal with the usual suspects to redevelop the football ground in a big showboating project ; Labour had built it previously. The businessmen have run off with circa £10 million as the Fraud Squad flap about))
That's the problem with Lola's version of the private sector: no reference to fraud which I have encountered at every turn in my disastrous business experience which includes HBOS style bank fraud.

Mark Wadsworth said...

L, let's hope so.

D, yes, landowners will get some of the benefit but not all. Half of adults are also owner-occupiers, so whether they gain with their "worker/consumer" hat on or their "landowner" hat doesn't matter. It is working tenants who will only benefit "a bit", but at least they will benefit a bit, better than nothing. Plus, other countries, especially poor ones will benefit, it will be good for foreign relations and this is all good stuff.

DBC, can you please drop the personal insults?

As it happens, to get Big Corruption you need Big Government and Big Business, or Big Business and Big Landowner. A small government is inherently less corrupt because it has smaller budgets for crap and waste.

DBC Reed said...

Whom am I insulting? I rather admire Lola's David Cameron world view where all is amenable to a bit of give and take.(Better than what we've got now from May:she seems unaware that at the last General election her party and she were steadfast remainers.)
In my opinion the whole privatisation project is fraudulent: things like railways and council run leisure centres are taken over (free of charge) by all-purpose private sector bureaucrats who run them into the ground and decrease aggregate demand for real producers by cutting wages.In these cases less government means more corruption as the private-sector bureaucrats steadily increase their wages.

Shiney said...

@DBC Please remember your basic economics... imports make us richer. Mercantilism is bad. Specialisation and all that. And why are 'industrial jobs' somehow better than 'jobs'.... and I ask this as an owner/manager of a manufacturing business.

It seems to me to be a fetish among you lefties that one's output is more 'worthy' if it can be dropped on your foot. I don't get it.... I wish you could explain.

Dinero said...

Its worth noting that the partner that is running a deficit in bilateral duoploist trade partnership is the one that is running an advantage as they are receiving goods in return for IOUs.

Derek said...

DBCR asks; "Please explain how free trade copes with the Trump problem i.e. as soon as Poland was liberated from the red terror, British Timken and Avon Cosmetics fled Northampton (Eng) where they'd be based for years as fast as their coarse misshapen legs would carry them for attractions of cheaper wages, leaving Northampton without industrial employment."

It's a fair question. My answer would be that free trade doesn't cope with that. The cause is to do with the high rent and the bad tax structure in the UK compared to that in Poland. So to stop that sort of flight, we need to restructure the local UK tax system so that UK rentiers are bearing a much bigger share of the tax burden and UK workers and UK enterprises like Timken and Avon are bearing a much smaller one.

If UK workers didn't have to pay such a large part of the tax burden, they could be far more competitive with Poland, etc. without having to accept lower net wages. Likewise if UK enterprises had lower tax bills and lower gross wages to pay, other countries would become a lot less attractive.

On the privatisation debacles, I am in complete agreement with you. Firstly I see no advantage in replacing public monopolies with private ones. And secondly I well believe that fraud is a serious problem with a lot of these deals.

DBC Reed said...

Shiney: You remember your basic economics!Reliance on imports doesn't circulate the wages/ demand to pay for them.Remember the Corn Laws abolition fandango: reducing the duty on corn imports would reduce the price of bread such that the industrial workers of GB (living in slums and competing with child labour)would henceforth be transported to lives of unparalleled ease and munificence.Karl Marx ,living here at the time,predicted that post abolition the manufacturers would cut wages, which they did.So cheap imports lowered demand.
CF robotisation : goods cheap/ no wage element , so no demand = stagnation.Answer: Basic Income computed on value of national production (Major Douglas 1920)
@ Derek we are largely in agreement especially on the privatisation fraud.You appear to be suggesting that if British labour was not loaded with punitive land and accommodation charges it could compete with cheap foreign labour.But as Trump says once the jobs go there is no way to get them back.

Shiney said...


You are cross posting/off topic again. I didn't say that Basic Income or LVT was not the answer... or that wages would not be reduced that is not the 1st part point of Mark's post re trade agreements. I was just pointing out that, in general, trade makes us ALL (i.e. humanity in general) richer and mercantilism is bad.

Unless you are a petty nationalist of course.....

Bayard said...

DBCR, just because something is done badly doesn't mean it shouldn't be done at all. Should nobody repair houses simply because there are cowboys areound who will bodge the work? The fact that the government, whether Tory or Tory-lite has arranged privatisation to benefit their cronies, doesn't mean to say that things should not be privatised, nor does the failure of the fraud squad to properly police local and central government and their friends mean that local and central government should have no dealings with the private sector. The problem is not privatisation, it is a much broader one, which is the lack of accountability of central and local government.

Lola said...

Derek at 01.57. Second paragraph. yep

Roughly the average UK 'worker' pays 50% of his wages in rent and 50% of the remaining 50% in tax, (or the reverse - it doesn't matter). He lives on 25% of what he earns.

And that is THE problem. That is why the British worker in uncompetitive. He's no more expensive than any other worker, he's just regulated, taxed and rented to buggery.

DBC Reed said...

Excuse me : you did tell me to remember my basic economics and that "imports make us richer" a point Dinero made also in considerable complexity of language.In answering that point I am sticking to the subject.
@B You seem to be saying that privatisation should be attempted for its own sake never mind any economic efficiency.I seem to remember various Conservative deadbeats arguing at the time for the privatisation of railways on the grounds that it was super dooper efficient and would also do away with the public subsidies that indicate Satanic inroads into public affairs. In the event full privatisation soon came to an end when the trains kept crashing and rolling down the bank (in so-called "deregulation" accidents).The subsidies continued to be paid to private sector rent seekers like Richard Branson (and nationalised train operators from abroad).What is the point of getting operators to try and take over lines where expenses have been cut to the bone ..and then to try to extract a profit from them?
I suppose the reasoning is apparent to those who have a religious aversion to public financing .

Lola said...

DBCR re railway de-nationalisation Excepting MW's valid points about land since de-nationalisation the railways have become more efficient, carried more passengers, become more punctual and safer. I accept that the latter point is a bit moot and it might be that technology trends make every mode of transport safer over time. ( ) In re that link if it was down to de-nationalisation it could also be said that if de-nationalisation had been more thorough it would also have been easier to prevent circumstances like Hatfield.

And the network was established by private capital - again making the nod to MW's valid points about land privilege.

Lola said...

From Wiki:-

No comment really. Just another vignette in the long road (rail?) to or from LVT..

Shiney said...


But that IS basic economics - imports DO make the importing country richer. Tariffs to protect certain favoured industries do not.

And.... Oh I give up! I've got work to do creating value.

Bayard said...

"@B You seem to be saying that privatisation should be attempted for its own sake never mind any economic efficiency."

Possibly to you, not to anyone else. Saying that privatisation should not be vetoed simply because sucessive governments have made a botch of it to benefit their friends in the private sector is not saying it should be attempted for its own sake. My argument in no way rules out any other separate argument why privatisation is inherently evil, it just rules out the argument that it shouldn't be attempted because past attempts have been deliberately botched.

And yes, I agree with you that the privatisation of the railways was botched in exactly that way, but that doesn't mean that the railways couldn't have been privatised in a way that didn't lead to the downsides of the present system, nor that the railways aren't now better than they were before, nor yet that the railways were any good when nationalised.

AFAIAC, the railways should never have been nationalised in the first place. All that that did was take failing private sector companies and remove the profit motive from the equation. Joint stock companies don't work very well under private ownership. They work a damn sight worse under public ownership. The railways should have become an arm of the state, like SNCF, or left in the private sector. What we got was the worst of both worlds. How typically British.