The Chicken or the Egg and Who Pays?

Infrastructure spending grows the economy, so they say. Well, maybe not.  I am not convinced. Observationally infrastructure spending occurs when the economy has already grown.   Consider this:-

The Causey Arch was commissioned and financed by the Grand Allies coal cartel to take coal to the growing Tyneside conurbation. That is the demand from Tyneside could not be met by the existing transport of packhorse trains and carts so the plateway was built to increase the supply of coal. Tyneside had already grown and the 'infrastructure' followed that growth.

The town where I gain my living has a traffic problem.  There are two roads one eastbound and one westbound round the dock area that carries all through traffic and acts as a local distributor.  Over the last 20 years or so I have watched as this gyratory system has got more and more clogged as the Town has grown and developed. Economic growth has already happened.  

As you will have realised the traffic has a negative externality. Land prices are probably depressed by this, or more likely removing the traffic would increase the attractiveness of locations in the area. You should note that there are a number of partially- and un-developed sites in the location, a couple of which were bought out of receivership.

There is a plan to solve all this and at the same time provide access to an island site in the Wet Dock to make it suitable for development. From memory the budget is £70m or so.  You will notice that the plan gaily admits that spending this money will make the Island Site valuable. And of course 'drive economic growth'.

Three points.

One clearly Ipswich has already grown. This new infrastructure is being built to relieve the traffic problems created by this growth.

Two. Spending this £70m of other peoples money will hand windfall gains to all the landowners around the gyratory system and a handsome uplift in the value of the Island Site which will accrue to its owners, Associated British Ports.  Why is everyone else paying to finance these windfall gains to a small number of landlords?

Three. Motorists are not paying the costs of their pollution.  Why are they being gifted an improved route? 

The thing is there are only four ways that such infrastructure can be financed, and three of them are flawed.

One,  finance can be raised by taxation. This is taking money out of the economy. It's a zero sum.

Two. The government can borrow money in the market.  This makes less finance available for private investment.

Three.  It can print the money.  Which is a form of taxation.

Or...

Four.  LVT could be applied to the landowners who would therefore pay in proportion to their gains and tolls could be levied on traffic using the crossing. 

I confess that this is a personal niggle that I need to get off my chest. And the fact that Ben Gummer (ex) local MP was in favour of it is enough to condemn it.

Fun Online Polls: The Finsbury Mosque attack; Homophobia

The results to last week's Fun Online Poll were as follows:

Are you surprised that somebody finally snapped and attacked a group of Muslims near a mosque?

No - 94%
Yes - 6%

Not much more to say on that.

Except, it was a good turnout with 128 votes. Unusually, eleven people shared the poll on Facebook and five Tweeted it (besides me), thanks to all those who took the few seconds to do that!
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There have been a lot of headlines decrying our new co-overlords, the DUP as homophobes. Well, quite clearly they are, which is A Bad Thing IMHO. The outrage is mainly from the left. The right wingers who secretly agree with them are remaining tight lipped on the subject.

But why the panic? For sure there are 10 DUP MPs, but only 292,316 people voted for them. It's hardly a mass movement.

If you're worried about homophobia (which I am), what is rather more relevant is that there are about 13 Muslim MPs and just under 3 million Muslims in the UK, half of whom think homosexuality should be illegal and of whom 23,000 are 'potential radicals' and 3,000 are on watch lists.

(Somebody did a great graphic on Twitter suggesting that in many respects, the DUP and Islam have a lot of similarities, I can't find it now. But I can't remember the last time a DUP activist carried out a terrorist attack.)

So that's this week's Fun Online Poll:

"Who is more homophobic: the DUP/their voters or Islam/Muslims?"

Vote here or use the widget in the sidebar.

Socialism / Not Socialism

We (or maybe just me?) got ourselves into a long discussion on an earlier post that rather lost its way.  So I thought I'd try to make a bit clearer the point I was trying to make.  First of all I would expect that all of you know about the Nolan Chart? (I accept that it is a simplification).

 

 

Top = Liberty and Personal Responsibility

 

 

Bottom = Slavery and Personal Irresponsibility 

 

Now, the key point today is that I maintain the left v right is passé.  It's old hat.  What we really need to be talking about is top v bottom.  I do not consider myself either left or right.  All the evidence tells me that the left - aka socialism - does not work.  In fact cannot work.  And similarly the Right 'conservative' does not work. And in fact cannot work.

 

If you look at the history of conservatism in the UK it is exemplified by its ability to gain power by accepting the changes made by the Left.  It has 'conserved' things that were not previously thought of as Right wing or conservative.  And it tends to be authoritarian. Witness the way Osborne handed Draconian and arbitrary power to HMRC or the constant attempts to 'control' the internet. Finally by definition Toryism grew out of land ownership - i.e. rent seeking.

 

On the left the constant failures of economic rationing by bureaucrats, and because of the skewed incentives of those bureaucrats, will tend to lead to more and more regulationism and less and less economic freedom. The left defined itself by mis-defining 'capitalism'. It looked horizontally across the Nolan Chart.  It should have been looking upwards. It decided that on the evidence of that horizontal view markets were not good enough and that central planning by wise bureaucrats was much better. Keynes did not look up either.

 

In short both left and right will tend to trend downwards over time to the bottom. They will both end up as totalitarian regimes. (Witness Corbyn's threat to requisition houses).

 

The chart implies something else.  Without both economic and personal liberty there can be no Liberty.  Property rights (including sound money which is a form of property right) are fundamental to liberty. And this is why the Left can never embrace liberty.

 

But given that the Nation State is a Good Idea what is the least worst way of paying for it that does not erode liberty and economic freedom and uses the least possible coercion?  Enter Georgism.

 

To my mind Georgism achieves two things.  One, It raises tax income in an equitable and efficient way and two, if done properly increases liberty by removing the ability of the few rent seekers to suck the wealth away from the productive in 'economic rent'.  I see no contradiction between Georgism and Liberty. But then I am not an anarcho libertarian.

 

There is a lot more than can be said about this, but I wanted to be as brief as possible and to promote discussion.

 

So what do you think?

Reader's Letter Of The Day

From today's Times:

A NEW PARTY

Sir, We do not want a new centrist party that is a compromise between socialism and neoliberalism (“Now is the moment to launch a new party”, Comment, June 23, and letters, June 24). We want a party that thinks outside the box. It could be Georgist, which has a clear set of principles, or the thoughtful manifesto of the Young People’s Party (UK), as set out on their website.

Richard Ling

Nobody move or the German car makers get it!

Via MBK, from The Times, still working on Project Fear. (Didn't they get the memo? The Referendum was held a year ago and they lost):

A hard Brexit will put up to 18,000 jobs in the German car industry in danger because vehicles will become “significantly more expensive” for British consumers, analysts said yesterday.

The knock-on effects of border duties imposed between Britain and the EU at basic World Trade Organisation levels could mean sales of European-made cars will plummet by one fifth in the UK, Deloitte forecast.

A hard Brexit — defined by the report as leaving the EU single market and falling back on WTO trading rules — would mean a 21 per cent price increase for British consumers, Deloitte said, with the cumulative impact of the drop in the pound and extra trade costs.

The car industry would be one of the sectors that suffers the most because tariffs of 10 per cent for finished vehicles are higher than the WTO average for all goods. It has also come to rely on “just-in-time” supply chains which are highly responsive to demand and would be badly interrupted by the need for customs verification checks at either UK or EU border control posts.

1. WTO rules do not say anywhere that you have to impose a 10% tariff on cars.

2. Where did they get that "10% duty on imported cars" figure from? Funny you should ask, that happens to be the common tariff which EU Member States have to apply to cars imported from e.g. Japan.

3. If the EU want to play silly buggers and apply this 10% tariff to cars made in the UK, there's not much we can do to stop them. It is entirely up to the UK what sort of tariff we impose on imported cars, whereby the ideal tariff is of course precisely zero. On everything. That's good for UK consumers, good for UK producers in the medium and long term and will play well on the world stage.

4. Even if the UK were stupid enough to maintain the standard 10% tariff on cars and 3% - 4% on car parts, it would make naff all difference to most buyers. It would make no difference to people who buy cars made in Japan. Expensive German cars would get a bit more expensive in relative terms, but as we know, showroom prices in £££ are surprisingly stable and largely unaffected by exchange rates or tariffs. And hence the number of cars imported from Germany would fall be nowhere near one-fifth as stated in the article.

5. As per usual, the article fails to distinguish between the impact of tariffs imposed by the UK and those imposed by other countries, both are bad, but to some extent the damage cancels itself out, the effect is not cumulative. (In the same way that taxes and subsidies cancel each other out to some extent).

6. Even if the article is correct and we end up with fewer Audi and BMW drivers behaving like arseholes in the fast lanes of our wonderful motorways, is that really A Bad Thing?

Stupid Criminal Of The Week

Headline from The Daily Mail:

Nanny caught stealing 68 PUNNETS of 'expensive' cherry tomatoes from Coles after her doctor told her to eat more vegetables for health reasons

Tomatoes are of course fruit, not vegetables. Duh.

Sadly, the article does not say how much the house where she works as a nanny is worth, which would have helped to put it all in perspective.

Let's all weep.

The Torygraph has yet another bit of wailing about landlords being unfairly hit by tax changes.

Of course, being the Torygraph, they couldn't resist quoting a few myths:

"This could mean landlords opting to come out of the private rented sector, creating reduced supply or increased costs which could again mean an increase in rents." and

"The more average rents rise, the more ownership figures fall. This is a bad decision which will affect not only landlords but renters, first time buyers and second steppers.”

How does he work that out? Answers on a postcard, please.

YPP (London) brief meet-up tomorrow Friday 23 June

We'll be at The Brewmaster nr Leicester Square from 5.20 or so onwards - if you think you'll turn up later than 6.30, please get in touch gmwadsworth@gmail.com or 07954 59 07 44.

Leicester Square Tube Exit 1, turn left and left again into the alleyway (St Martin's Court). We put a yellow YPP leaflet on the table so that you can find us.

I have to leave 7-ish to cook dinner.

"Psst, we're having trouble shifting these pricey new flats..."

"Not to worry, we can sort you out with taxpayers' money while appearing to help out the little guys..."

Mark Carney says time will never be right for interest rate rise.

From The BBC:

The time will never be right for an interest rate rise, Bank of England governor Mark Carney has confirmed in his Mansion House speech for the fourth year running...

Mr Carney said: "From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment [rate rises].

"You see, there's good inflation - house prices, and bad inflation - wage growth. We'd do what we can to stifle the latter, in the unlikely event it ever happens, but we are relaxed about good inflation.

"In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.

"The Brexit negotiations will drag on for a few years, so that gives me a breathing space for the remaining four years of my tenure at The Bank of England. Waiting to see what the long term impacts of Brexit are should tide over my successor for the next few years after that.

"If the worst comes to the worst, we'll admit that inflation is through the roof and savers are losing money, but at that stage our main concern will be young families who might be pushed into negative equity.

"Come on guys, you know how it works."

Following Mr Carney's comments, the pound fell about 0.4% against the dollar to trade at $0.6682.