Monday, 22 January 2018

When Oxfam talk more sense than the ASI and the IEA..

From Oxfam's actual report (page 10-11 of summary):

The mainstream economic justification of inequality is that it provides incentives for innovation and investment. We are told that billionaires are the ultimate demonstration of the benefits of talent, hard work and innovation, and that this benefits us all.

Yet there is growing evidence that the current levels of extreme inequality far exceed what can be justified by talent, effort and risk-taking. Instead they are more often the product of inheritance, monopoly or crony connections to government.

Approximately a third of billionaire wealth is derived from inheritance. Over the next 20 years, 500 of the world’s richest people will hand over $2.4 trillion to their heirs – a sum larger than the GDP of India, a country of 1.3 billion people. Monopolies fuel excessive returns to owners and shareholders at the expense of the rest of the economy.

The power of monopoly to generate extreme wealth is demonstrated by the fortune of Carlos Slim, the sixth richest man in the world. His fortune derives from an almost complete monopoly he was able to establish over fixed line, mobile and broadband communications services in Mexico. The OECD found that this monopoly has had significant negative effects for consumers and the economy.

Monopoly power is compounded by cronyism, the ability of powerful private interests to manipulate public policy to entrench existing monopolies and create new ones. Privatization deals, natural resources given away below fair value, corrupt public procurement, or tax exemptions and loopholes are all ways in which well-connected private interests can enrich themselves at the expense of the public.

And so on and so forth. That seems like a fair summary to me. Their actual recommendations are a bit wishy-washy and vague, but at least they are on the right lines in identifying the causes of massive concentration of wealth - monopolists who add nothing to the economy and are only rich because other people are poorer. In no way can you construe the report as anti-capitalist or anti-free trade.

I'll mark Oxfam down for confusing "wealth" with "income" though. If interest rates fall and share prices go up, then that doesn't really change anybody's net income. You can't live off share prices, you can only live off the dividends. Similarly, it is the ongoing payments of rent which make tenants poorer and the landlord richer, not how much the house changes in value. Who cares what Carlos Slim's business is worth - what matters is that every Mexican is overcharged by a few $ a month, which all goes into Mr Slim's pockets.

Enter stage right, the Neo-Libs, who clearly couldn't be arsed to even read the summary document and just trot out the usual irrelevant story about capitalism and free trade being A Good Thing. Well of course they bloody well are, and the Oxfam report doesn't say that they aren't.

Mark Littlewood in City AM:

More needs to be done to break down trade barriers and to encourage more countries to replicate the radical free market policies that led countries like South Korea, Japan, and more recently China from grinding poverty to great wealth in a single generation.

This means advancing property rights and ending corruption in countries like Zimbabwe, privatising state monopolies in Venezuela, and working to abolish trade barriers such as the EU’s Common Agricultural Policy.

Charities like Oxfam should be out leading the charge on these issues. But instead of focusing on those who have too little, this report again relentlessly targets those the charity believes have too much.

From The Daily Mail:

Sam Dumitriu of the free market Adam Smith Institute said that every day for the past 25 years, capitalism has lifted 138,000 people have been lifted out of extreme poverty.

He said: 'The report is, as ever, exceptionally misleading and misses the point - we should care about the welfare of the poor, not the wealth of the rich. As China, India and Vietnam embraced neoliberal reforms that enforce property rights, reduce regulations and increase competition, the world's poorest have received a massive pay rise leading to a more equal global income distribution.'

'It's the countries that rejected free markets that have bucked the trend. In Venezuela, the move to socialism under Chavez and Maduro has meant that more than 75 per cent of the population now live in poverty with many unable to afford basic necessities like food and medicine, despite having the world's largest proven oil reserves.'

All of which highlights that these Neo-Libs are being paid to dress up privilege, corruption and monopoly power as free enterprise.


Ben Jamin' said...

Shame Oxfam can't be arsed to get people like you to help write their reports, as people like Littlewood and Dumitriu would be forced to confront the very things they are paid to avoid.

As it is, Oxfam make it too easy.

Lola said...

BJ. The daft thing is that Adam Smith was fro taxes on rents.
I think that this more likely to have been utter laziness by Dumitriu than downright stupidity.

DBC Reed said...

There is a "summary" of Wealth of Nations on the Adam Smith Institute website and nowhere in it does it mention that good government increases land values and so the state has a legitimate right to tax land because it raised its value- which is what Smith actually says in the original.The ASI appears to be engaged in a deliberate policy of representing Smith's laissez faire as completely anti-tax, when the tax yield of LVT would be enormous- even by Socialist standards!The ASI's policy should therefore be called Smith Minus (the land tax [understood])or lazyfaire.

Lola said...


I have had no time to read the Oxfam report today, but if Guido is right then Oxfam are talking out of their arses. It is precisely failed (failing) government that has got us into this mess.

Lola said...

DBCR. I do not agree. I have had some lively debate with the ASI. They generally support land taxes. Eventually Ben Southwood was getting message before he left for pastures new and Tim Worstall is definitely a supporter. They are fully aware that 'good' government is necessary for economic success. It's just that they (and I) know that 'good' government is not 'big' government. In fact just the opposite, BIG government being Very Bad indeed.

Ben Jamin' said...


For understandable reasons, Smith/classical economists and Georgists apply Socialist theory to land, but leave labour and capital out of it.

Inconsistent and wrong.

"good government increases land values and so the state has a legitimate right to tax land because it raised its value"

This is wrong. The state, landowners or landusers may well do things that causes demand to be shifted for land (or some other good/service) but that doesn't confer a property right, thus the right to tax or pocket a rental income from it.

If LVT were not considered as a "tax" owed to the state to pay for public services, this issue may have made better progress. IMHO.

Mark Wadsworth said...

BJ, Oxfam wouldn't ask me, and the Neo Libs would trash it anyway without having read it.

L, nope, it's co-ordinated and deliberate.

DBC, agreed.

L, Guido can piss off, he's just another one that justifies cronyism by pretending it's proper capitalism, without realising that the report is not anti-capitalist in the slightest. There is plenty of irrelevant stuff in the report which we could tear apart, I just liked that introduction/explanation that I quoted.

BJ, we explain the same thing in different ways, you can justify LVT on many different levels. Land rents belong to everybody and nobody IMHO.

Lola said...

MW. The tweet quoted on Guido is not helpful then.

The Stigler said...

The only concern (based on a tweet by Oxfam about wanting more state control) is that they're cherry picking Carlos Slim and ignoring some billionaires who really did make it on a combination of skill, hard work, innovation and luck.

We really have to drive a wedge between these two ways of getting rich and almost no-one works at that. I doubt Oxfam also call for anyone to be allowed to do conveyancing or represent someone in court, or teach a child in a school or the removal of a dozen other forms of cronyism that also raise costs or lower quality for consumers.

And as I said: there aren't many real businessmen in the Conservative Party. You don't get mechanics or software developers or wine merchants. It's stuffed full of people supplying to the state (jumping through pointless hoops) and people in fields like financial services.

When a Conservative MP has outside interests working for a management consultancy, they aren't really doing any work. They're just getting paid to further that organisation's agenda. Same as banking. You think anyone would hire a twat like George Osborne to actually run anything?

L fairfax said...

Are you sure that the ASI is in favour of status quo in Mexico?
Are they really in favour of monopolies?
(BTW Carlos Slim is covered in the fascinating book the failure of Nations).

Lola said...

TS. "You think anyone would hire a twat like George Osborne to actually run anything? Apart from that self-serving oligarch (sic) that owns the Evening Standard you mean?

Mike W said...

'We really have to drive a wedge between these two ways of getting rich and almost no-one works at that.'

TS agree with your whole post. Quote above, that's the tricky political bit. But we are all tilting at it here.

DBCR I think your original, 'The Real Adam Smith Institute' idea was a neat one.I guess you could call them at the moment, ASI Lite?

But, as Lola says, was reading an article from ASI myself, supporting the Basic Citizens Income idea, in complete contrast to the Boles Tory bloke, we looked at the other week. ASI and the Tories have to at least debate these basic liberal ideas, and evidently do not read from the same page all the time. Of course, come an election, all disagreement is no doubt put on the back burner. Fair enough.

DBC Reed said...

In the course of checking out how energetically the ASI had been promoting LVT I Googled Adam Smith Institute Land Value Tax and second up was a storming article from 2009 by someone called Mark Wadsworth. This contained the absolutely critical Wealth of Nations quote from Smith about how good governance puts up land values so a tax on land is the only legitimate impost. This quote has been copied into my notes word for word and I suspect that I copied it from MW's article because I had no idea about Smith in my early days (decades) of supporting LVT , thinking he was anti all tax as the ASI is careful to suggest in its sustained policy of "chasing with the fox and hunting with the hounds" ( an old expression which is defined as to "Try to remain on good terms with both sides in a conflict or dispute".)