Various topics

Here are the bits and pieces I didn't get round to doing a full post on last week:

1. Dave has now taken UK government policies to their obvious conclusion: They don't own land, don't give them money.

2. Nick is indeed an idiot:

The comments were made just hours after it emerged that Michael Gove, the Education Secretary, is secretly planning to axe GCSEs by 2016 in favour of a new generation of rigorous qualifications.

In the most radical shake-up of the exams system in 25 years, it was revealed that around three-quarters of pupils could sit tough tests modelled on the old O-level. Remaining pupils may take more straightforward qualifications styled on traditional CSEs in subjects such as maths, English and science.

Seems fair enough, you might think. Quite which exams any child takes is up to the individual children, their teachers and parents, and not really anybody else's business.

Speaking at the Rio+20 Earth summit, Mr Clegg said it was “not Government policy”.

“An exam system needs to be rigorous and stretching of course but any review of the exam system – and we have already done a number of changes – should always be built for the future not turning the clock back to the past as has to reward hard work and aspiration by all children not just cater for a few at the top. Any exam system and any school system should be for the many not for the few."

The top three-quarters is hardly "the few", is it? Turning the clock back half a century is not necessarily A Bad Thing: for example, if we could turn back the UK housing policy clock half a century that would be A Very Good Thing Indeed. Ditto UK policy towards the Common Market. And exams are not there to "reward hard work", they are merely an official recognition of how good anybody is at passing exams and bear little or no relation to the amount of "hard work and aspiration" involved. It's up to the people who set the syllabus and mark the exams to make sure that as much useful knowledge as possible is picked up in the process.

3. The Daily Mail wonders why Dave didn't criticise Gary Barlow's tax arrangements. And I wonder whether Gary would support a move from taxing earned income to taxing the rental value of land.

4. City AM's editor claims that simplifying the income tax system and reducing the headline rate would discourage tax evasion.

Well yes, that would be a good thing in and of itself, but the incentive to shift earned income offshore and repackage it as e.g. loans (or to ship CDs and DVDs from the Channel Islands rather than from elsewhere in the UK) will always be there as long as we have taxes on incomes and output. And Home-Owner-Ist to the last, he claims that:

We need a flat tax with a wide base, where all income – from labour or capital – is taxed at the same, low rate, with no loopholes. Until we adopt such a system – of the sort outlined by the 2020 Tax Commission, which I chaired – injustices and inequities will remain rife.

As long as we have taxes on income and capital - and little or none on land values - injustices and inequities will remain rife, full stop.

5. I wonder why the UK government is going through the rigmarole of trying to extradite Julian Assange to Sweden, knowing full well he'll probably end up being sent to the USA. The UK government usually sends people to the USA at the drop of a hat, even if they have not broken any UK law or committed a crime on US soil.

6. The local council (or quite whoever was in charge) has spent half a million quid smartening up the facades on Leyton High Road. It does indeed look a lot nicer now, and local traders seem to be very happy.

That's probably money well spent, if the rental value of each of dozens of shops goes up by a few thousand quid a year and Business Rates go up accordingly, then the taxpayer gets his money back fairly quickly. This is the sort of thing which would just never happen if you waited for dozens of landlords, owners and occupiers to unanimously agree to do it.

7. Niall Ferguson reckons that young people should welcome "austerity" because they are the ones who'll be paying off the deficit in future.

He's only half right because he's only looking at half the picture.

Sure, since the "financial crisis" deficit spending has morphed into straight forward kleptocracy and ought to be reduced or eliminated. But the debts have been racked up, and it only seems fair to repay them, as the people lending the government money were not the same people as benefitted from it.

Niall Ferguson's big mistake is to assume that existing debts will be repaid out of taxes on future incomes; i.e. those that pay them off are a different generation to the one which took the money or had the money spent on it. It would make far more sense to repay those debts out of money collected from those who benefitted most, i.e. the large landowners, bankers and Baby Boomers generally, which could be achieved quite simply by taxing the rental value of land.

In extremis, a one-off windfall tax on the capital value of land and buildings of about twenty per cent would be sufficient to pay off the UK's accumulated government debt, and pay for a sizeable fund out of which to pay future public sector pensions.

8. Kate Middleton probably genuinely thought that those children she visited on a camping trip were disadvantaged. Turns out, they weren't.

Niall Ferguson: Why the West is history

I thoroughly enjoyed Niall Ferguson's gleeful baiting in Episodes 1 and 2, but he went off the rails a bit in Episode 3 of his series Civilisation: Is the West History, incorrectly titled "Property". His explanation of why the North American economies had been so much more successful that the South American ones, boils down to this:

A. In South America, the leaders of the original conquering armies allotted all the land to themselves in huge great estates. If you owned the land, then you also owned all the native tribes which lived on that land, so you had ready made slaves.

An autocratic, self-interested government which can direct the people to do what it wants is not going to be very successful economically (for the same reasons as the Soviet Bloc was not very successful) and even worse, after Bolivar et al fought for the independence of these countries from Spain and Portugal, nothing much really changed, it was just a new boss replacing an old boss.

Democracy never really took hold in these countries, they alternate between communist and populist presidents, interrupted by military coups. He reckoned that all these problems went back to the fact that most of the land is owned by such a small percentage of the population.

B. In the USA, he looked at the example of South Carolina (he makes us assume that something similar went on in most British colonies) and explained that whoever got their first didn't just declare that all the land belonged to themselves, they were a bit more subtle about it.

The system was that anybody (i.e. English peasants) could turn up in SC, work as an 'indentured servant' for an existing landowner for a certain length of time (wasn't quite clear how long, but must have been at least ten years) and after that, the government would allocate him some land (between 50 and 200 acres, from memory, depending on other factors, women got less than men) and the right to vote (all males who owned more than 50 acres had the right to vote).

This, he said, led to a 'property owning democracy' (more correctly, a 'land owning democracy') and as history has showed us, this worked much better than the South American non-land owning democracy. He hinted right at the end of the programme that the USA had a 'dark secret' namely that they had their own underclass, African slaves, who were in exactly the same position as the native South Americans.

So far so good, that all seems perfectly plausible - it has always puzzled me why there should be such a disparity between e.g. the USA and Mexico (Mexico counts as South America for these purposes, being a former Spanish colony).

C. So which vast chunks of the story did he deliberately omit or overlook?

1. Was the SC system not a pyramid scheme? It only works as long as there is new land for "them" (whoever "they" may be) to parcel out.

2. Was each generation of new arrivals in SC not in a subtle way a slave? Being forced to be an 'indentured servant' for an incumbent for ten or more years sounds like slavery to me, albeit time-limited.

3. He contrasts USA with South America and correctly concludes that a land-owning democracy is better than a non-land owning democracy; and a democracy is better than an autocracy or dictatorship (glossing over the other possibility - a land-owning non-democracy). Wouldn't it have been better to give new arrivals to SC the vote from Day One?

4. He did not dwell on Tom Paine's alternative vision for parcelling out land, which was instead of the incumbents using this free source of wealth to buy new arrivals into time-limited slavery, new arrivals would merely pay market rent for the amount of land they could put to good use themselves. To the extent that this market rent was more than enough to pay for the core functions of the state (which were minimal in those days), the rest would have been dished out again as a Citizen's Dividend - so even if a new arrival owned no land in the literal sense, he would have had an economic interest in it (everybody would get a pro rata share of the total rental income).

5. Niall F explained what the starting position was in North and South America a couple of hundred of years ago, and then fast-forwarded to the contrast between the gleaming sky scrapers of New York and the slums of South America. There are of course slums in the USA and gleaming new sky scrapers in South America as well of course, but this is a million miles (and several hundred of years) away from the original model of self-sufficient farmers in the British colonies.

6. The 50-acre cut off for the right to vote may have made sense (in their terms) three centuries ago, but nowadays it would be a nonsense. A single acre of Manhattan would be worth as much as a ten thousand acre farm out in Wyoming (or whatever the relationship is). And he glossed over the fact that as long as governments protect and guarantee land ownership without taxing it (and especially if they tax incomes, even of the landless, to pay for things which benefit land owners) there is a natural tendency for land ownership to become more and more concentrated (with the banks doing their best to make sure this happens).

7. So although the starting points in North and South America may have been very different, the end result is that North America is becoming more and more like South America; and if democracy never really worked in South America because a vote isn't worth much to a landless peasant, doesn't the value of the right to vote in the USA become worth less and less over time as land ownership becomes ever more concentrated in ever fewer hands (the banks are indirectly the biggest landowners of all, because they collect the rental value in the form of mortgage interest and repayments)?

8. Isn't the original SC model much the same Home-Owner-Ist pyramid scheme as governments in the UK (and elsewhere) still run today - you start your adult life as a landless peasant, and for the rest of your working life you have to hand over half of what you earn to the government in taxes, who spend a third of it on themselves; a third on things which benefit land owners and the remainder on welfare (to compensate those whom the system leaves by the wayside and to pay old age pensions to people who have been through the mill).

And of the remaining half of your income, you have to spend half of that on paying for the right to 'own' a tiny patch of land. At least in SC they were honest about it - work as a slave for ten years and then you can become a slave-owner yourself.

Just askin', is all.

We'll see whether Niall F redeems himself in the next episode about slavery. The fact that the Union states 'freed' slaves first; became an industrial power and hence defeated the Confederate states illustrates, yet again, that slavery is economically very inefficient (see also contrast between North America and South America as summarised above).