Tuesday, 16 May 2017

If only Corbyn talked about RENTS instead of waffling on about PROFITS

Corbyn was on the telly just now, muttering about the "obscene profits" made by privatised utilities. By doing so he misses the point and lays himself open to the knee-jerk Tory response, for example from The Telegraph:

Jeremy Corbyn will take Britain back to the 1970s by nationalising industries, forcing wage caps on businesses and giving huge power to the unions if he gets into power, a leaked copy of Labour's draft manifesto reveals.

The 43-page document, obtained by the Daily Telegraph, shows that Mr Corbyn plans to nationalise energy, rail and mail and will introduce a 20:1 pay cap for businesses...

Nationalising "industries" generally and the government running them is always a disaster, of course, we know that.

There's nothing wrong with a genuine business making large profits. If VW make a million good quality, affordable family cars and make a thousand pounds profit from each one, good luck to them. Nobody's forced to buy a new VW, you can buy a second hand one, buy from another manufacturer, or arrange your life so you don't need (another) car etc. If VW fuck up with the 'emissions scandal' (a storm in a teacup if you ask me), they make a loss. Tough.

Punishing successful businesses regardless of how they earn their money is a stupid idea anyway, or else we'd punish VW (or their British equivalent) for making good cars and reward them for the 'emissions scandal'.

But if you think about the list of things he'd like to (re)nationalise*, you'll realise that the bulk of their so-called profits are not profits in the economic sense or the cost-accounting sense. They are "rents".

Rents are notoriously difficult to define, but you know 'em when you see 'em.

1. You are stuck with one water supplier, you have to use their services (although this is sensibly alleviated with price caps). In the absence of these, they could double or treble water and sewage charges and 99% of people would just pay up.

2. You can choose from a small number of gas and electricity suppliers, they themselves don't make super-profits and shouldn't be the target here but the people selling oil, coal and gas to the power stations are very much collecting rent (natural resources). The National Grid on the other hand really does have a monopoly as between power stations and end users, it only exists because the UK government set it up back in the 1920s and 1930s, no private enterprise could ever have achieved that (the biggest problem is getting rights of way over land, not the technical stuff).

3. If you work in any larger town, you have to get in by public transport, they can set their season ticket prices at a large chunk of the extra salary you can earn by working in town and not stacking shelves in the village shop.

4. The Royal Mail (used to) have a monopoly on posting letters and unless you are couriering urgent stuff a short distance, they still do in practical terms. I'm all in favour of bottom-up privatisation i.e. allowing private businesses to deliver letters, but a top-down privatisation i.e. sell off of The Royal Mail with all its criminally undervalued land and buildings merely to generate fees for merchant bankers was a straightforward scam.

5. Urban land is the largest chunk of rent in any modern economy, Corbyn gave that less importance**, but we know that banks get most of their income by acting as debt collectors for land sellers, so they are just collecting rent. This is why the largest salaries and largest salary discrepancies are in businesses that primarily collect rent (banks, insurance and privatised utilities etc). If VW are happy to pay their chairman ten million quid a year, good luck to them, that's a spat between bosses and shareholders and doesn't affect the price of VW cars or even the wages of VW workers.

* Of course, most of our so-called privatised utilities are still state-owned. The German national railway owns our railways, the Spanish government owns our airports, the French national electricity company owns our water companies etc, heck knows what the Norwegian Sovereign Wealth Fund and the Arabs own.

** The "rents" which Corbyn would never mention are the obscene salaries which a few public sector fat cats pay themselves, as well as everybody working for a government department that has no reason to exist in the first place, but that's Socialists for you.

There are endless examples of rents and rent-seeking, they add up to about 50% of the whole economy, so he could double most people's disposable income if he either eliminated them or taxed and redistributed them (preferably by reducing or eliminating taxes on earnings and output).

Here endeth today's rant.


Lola said...

A buffoon blinded by his own bigotry.

FWIW I think it is tragic that the Labour Party has sunk to this. And the 'Progressive Alliance' is no better.

Where is the lefty 'Party of Liberty' to challenge what looks like being the rent seeking nannying interventionist tax mad authoritarianism of Mayism?

If only he knew it he has an open goal to hold her feet to the fire - and that is not, repeat not, by using deceitful Blairism.

Mark Wadsworth said...

L, where is the party of liberty? You are part of it.

Lola said...

Yes yes. I know I know.

But You Know What I Mean.

Bayard said...

"The National Grid on the other hand really does have a monopoly as between power stations and end users, it only exists because the UK government set it up back in the 1920s and 1930s,"

Not just the National Grid, but all the pipes, wires and aerials that make up the telephone system, the mobile phone networks and the local electricity, gas and water distribution systems. They are all much more monopolies than public transport. With public transport at least there is private transport as an option. If you want to be connected to the telephone network it's BT Openreach or nothing.

Lola, it's better than NuLab, anyway.

DBC Reed said...

Oh dear oh dear. The Labour Manifesto says "We will initiate a review into reforming council tax and business rates and consider new options such as a land value tax to ensure local government funding for the long term". This is a bit of a breakthrough and not to be sniffed at: the Labour Party can hardly stick LVT straight in to the manifesto when there is such little knowledge of it generally. A review is the opportunity for the likes of MW to use his close contacts with the Labour Land Campaign of which he and John McDonnell are members to come up with a non-partisan version of LVT that will a) work b)keep the Homey voters quiet.
Instead we get a lot of amateurish, sub UKIP ranting , sans full-stops ,that will keep him off the invite list.
(You might care to consider that renationalisation of the railways is popular with commuters. Many people remember, with something like affection, the old pre-Thatcher days, when Conservative governments could successfully run mixed economies with unions, collective bargaining and nationalisation of the natural monopolies and could maintain full employment and build a motorway network and new towns.But the new right aims much lower- and still fails).

Mike W said...

DBC Reed,

I agree with you on this. More. It is an amazing moment in my opinion. I suspect Mark had already written the above before the 'news'. We have to make LVT stick with Labour now and in the future. Is it nearing the 1910 moment? Never thought we would get that far. As you know, I had given up hope that Labour would even go down fighting. Now we have LVT lite, Tobin tax and LVT. My wife came to meet me at the station as I got back from work tonight, which was a little odd. She simply said 'its happened'!

DBS Reed above. I assume the 'MW' is Mark above. Just in case. I am getting a new MP this time, no matter what; who will not be so close to the leadership. I knew my old MP would get me my three minutes with Corbyn when he came to our city. As you know, I asked, when my chance came, would he consider a LVT in a Labour Manifesto? It turns out Corbyn told me the plain and simple truth:'Yes, we are considering the submissions on it'. God bless him. As I assumed he was bullshitting me. Shame on me.

I do not know who did the work, and handed in those LVT submisssions to Corbyn's team. But I would say we all owe him/her a huge debt of gratitude. And look forward to reading about it in the future. Heartfelt, thanks, whoever you are.

DBC Reed, final thought, I notice some folks, (BJ?) here are already fighting the antis in the comments section of the Indie. We are not all kippers here :)

Striebs said...


I commuted to work for many years under British Rail and following than many more under South West Trains .

The service is far better under South West Trains . The station staff are helpful which was hardly ever the case under B.R. which I suppose as a nationalised industry was compelled by HMGovt to employ the unemployable .

There wouldn't be many SWT commuters who would swap the current situation for nationalisation but long suffering Virgin Trains commuters might .

I agree with Mark Wadsworth that it was a pity Mr Corbyn couldn't have taken to opportunity to advance the debate .

Don't think I can vote for any of the major parties or UKIP this time . Will look for an independent or YPP standing in Wokingham .

Bayard said...

"You might care to consider that renationalisation of the railways is popular with commuters."

That's probably because they think they will get the current or better service at a lower cost. However, you and I both know that any savings in commuter fares will flow straight into increased housing costs. Also, people who don't remember BR are looking at railways on the continent and thinking our railways could be like that, whereas they are much more likely to be like BR of old. As Streibs points out, it is a matter of attitude as much as funding. I well remember from my railway enthusiast days that such enthusiasm was strictly frowned upon in BR management, being something that only the workers were allowed to indulge in. For the bosses, it had to be simply another boring job.

Mark Wadsworth said...

Striebs, only 3 people are standing for YPP and none of them is in Wokingham.

As to railways, some are fine* (south west, the ones to the east of London), some are OK (Virgin) and some are bastards (north east and clearly southern).

* i.e. the cost of taking the train is roughly the same as the cost of petrol for taking the car.

DBC Reed said...

Dave Wetzel of Labour land Campaign, who was all over the Independent website yesterday explaining LVT, (instead of MW who once was a go-to expert on the subject) was Vice chairman of TfL until chucked out for partisan political reasons by Boris Johnson, the national embarrassment. Dave's vision of LVT was that all public transport should be run on the proceeds of LVT, since without the Tube etc, London house prices and land value would slump: public transport(sans LVT) was causing house price inflation which could be tapped for good purposes.
I would have thought it is entirely reasonable and non-partisan to tax inflated land values and use the proceeds to finance the local railways instead of housowners keeping the proceeds as untaxed, unearned capital gains: a massive subsidy for doing fuck-all ie a bribe.
In the ideal situation,the train etc running companies, would be publicly owned as subsidising private companies just leads to favours, back handers and yet more corruption,