Re nationalisation - people aren't as stupid as Legatum make out.

Here's the summary of Legatum's opinion poll:



Commenting on the report, the Legatum Institute’s Matthew Elliott said:

“The findings of our polling are concerning for anyone committed to the principles of free enterprise. Competition entrepreneurship and free trade are all essential to achieving prosperity, not to simply generate profit for businesses, but to extend opportunity to all...

It is clear that those of us who believe passionately in free enterprise need to up our game. We need to redouble our effort in the battle of ideas, because populist thinking has a superficial attraction and we need to better articulate the case for free enterprise, which is the most effective path to prosperity.”

He's missed the point (probably deliberately), as has Jeremy Corbyn (probably supidly) and most other commentators, right or left. The point is that people seem to realise that there is a big difference between monopolies and competitive industries, and are more likely to want to see nationalisation of monopolies. That is not a straight neo-liberal vs socialist thing, it is far more nuanced.

One the second half of the list, there's ship building, food, cars and travel agents, these are competitive industries not monopolies, so only a minority are in favour of nationalisation. I assume 'travel agents' was a trick question to identify the base level of socialist nutters who want to nationalise everything.

Mobile phone companies are very competitive (switching is easy and prices are ever cheaper for ever better services) and they pay for the value of their radio spectrum. We've tried nationalising airlines and it never works, although - unlike mobile phone companies - they do not pay for the value of their landing slot privileges.

Happily, the majority agree with this overall analysis, probably intuitively.

Going down the list of things where a majority is in favour of nationalisation, they are all monopolies in some way...

1. Mains water supply is a natural monopoly, there is simply no point laying parallels set of pipes and drains.

2. Electricity generation can be done perfectly well by private businesses and historically was. It is the national grid which is a natural monopoly, and it only exists because the UK government forced it through in the 1920s and 1930s to hook up all the existing competing electricity generators - thus enabling more competition in the first place.

3. The same sort of logic applies to gas as it does to water or the national grid.

4. People have strong views for or against rail nationalisation, it's not something I'm overly bothered about, suffice to say Transport for London does a great job, it runs the Tube network itself and co-ordinates all the private bus and train companies to provide a pretty seamless service - you can use an Oyster card on just about any mode of transport in Greater London, for example. In most other large towns, public transport is a complete mess.

5. Defence spending is largely a slush fund for a few large manufacturers, it's a heavily subsidised cartel rather than a monopoly.

6. Banking is also a cartel. Banks are brilliant at the day to day stuff, like direct debits, debit cards, online banking and so on, there is no doubt in my mind that if we had only ever had a single, government-run bank it would be really primitive in comparison. So hooray to all that. The problem is that 80% of their lending is mortgages on land so they are behind all the land price/credit bubbles and inevitable land price/credit busts.

'Nationalisation' is only one way of dealing with monopolies and is not always the best. As I said before, there are various ways of dealing with them (items 1 to 6 at the end of that post), you have to decide on a case-by-case basis what to do and try and get the best of both worlds (private provision and public rent collection) in each specific case.

This is not a 'mixed economy' approach, that is far too vague a term, but in an ideal world, the government builds the road network and private businesses make the cars (in a literal sense, but the logic applies to everything else as well). Consider the opposite - driving British Leyland cars on a network of private toll roads...?

President Macron has vaguely good idea - shock

From The Daily Mail:

France needs it's [sic] new lower tax on wealth in order to stem its exodus of millionaires, the country's Prime Minister has warned.

Edouard Philippe defended President Emmanuel Macrons' economic reforms, which have seen thousands take to the street this week, saying they are needed to make France attractive [to] the wealthy again... The annual millionaire's migration report by New World Wealth found that around 10,000 millionaires left France for other countries in 2015...

France's wealth tax currently applies to personal assets of more than 1.3 million euros, but as of Macron's new budget, it will only apply to real estate. Any other forms of wealth, such as shareholdings, will be exempt as of 2018, the government announced this week.

Bravo! An annual recurring 'wealth tax' which only applies to land and buildings is pretty damn' close to Land Value Tax. And a general 'wealth tax' is a stupid idea for various reasons, not least the practicalities of it.

Caveat: it ought to apply to all land and buildings in France, however much or little it is worth, whoever own it and wherever they are tax resident. They can make this look more like a 'wealth tax' by introducing a personal annual exempt allowance for French residents. Admittedly, that is probably against EU law, so residents of other EU member states would also have to get the personal allowance as well. I once did this for real, and the higher charge for a UK resident was waived in the end.

The Disappearing Homes Conundrum

I know that the hard-core Homeys like to play the "disappearing homes" card, but Shelter really ought to know better:

But the evidence, summarised in the table below, suggests that old fashioned controls – setting the rent, not just controlling the increase – would force a significant number of landlords to sell their home, as they could make more money that way.

Now, that might be good for middle earners – a glut of homes suddenly for sale might become available.

But this is where the risk comes in for low earners. They can’t afford to buy and increasingly rely on the private rented sector. As landlords sell up, they would be left with fewer places to live. In the absence of a much larger supply of council and social housing, that risks pushing people into homelessness. This is probably not a gamble worth taking.

FFS.

The number of homes available to rent will fall and the number of potential tenants will fall by a corresponding amount. Those remaining tenants will have lower incomes, so rents would fall naturally anyway. Logic and real life evidence tells us this.

Funny how the UK had rent controls of one form or another for most of the 20th century, and 'homelessness' (however defined) wasn't as acute as it is now. I refer the approach as Georgism Lite.
-----------------
UPDATE JB, in the comments: I'm not claiming this has a significant effect, or is what Shelter has in mind; but could it be that some homes disappear when multiple-occupancy homes revert back to owner-occupier homes?

Fair point, and that did cross my mind - if former tenants, now first time buyers, buy a home which is larger than the one they were renting. I'd guess that this likely to be the case - people tend to rent the smallest/cheapest they can manage in, but when you buy, you tend to plan ahead a bit and get somewhere bigger for if/when they have children etc. In this case, the net supply of homes for rent would decrease by more than the fall in the number of tenants. But I'm sure the effect is marginal.

YPP (London) meet-up, tomorrow Friday 29 September

We'll be at The Brewmaster nr Leicester Square tube station 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.

Killer Arguments Against LVT, Not (423)

Somewhere in this thread (BenJamin' and others on top form!) is the standard fare argument along the following lines:

Under the current system with high taxation of incomes and output and light taxation of land, you at least have the knowledge that once you've paid off the mortgage, then you won't lose your home even if you lose your job.

That's clearly a non-argument in real life:
- it ignores people paying rent or paying off a mortgage, who are expected to pay income tax for the unemployed home-owner;
- it is a dwindingly small number of people;
- it ignore the fact that although that person might be 'safe' in his home, he still has to eat and heat;
- we also have welfare systems that can deal with unemployment (like giving time limited LVT exemptions to people who've lost their job);
- the risk of losing your job is of course much higher under a system that taxes incomes and output;
- and so on.

But let's look at the more fundamental issue.

The point is, when people organise themselves and agree rules of behaviour, there is a Laffer Curve of Liberty, and we ought to organise our rules to maximise liberty (or minimise impositions thereon). With some things, it's a straight line 0% to 100% (like banning drugs or prostitution, that is a straight reduction in some people's liberty without enhancing anybody else's), but usually it is not a straight line from 0% to 100% and there are trade offs.

To give an extreme example, most would agree that banning slavery increases overall liberty; the flip side is that it reduces the liberty of people to own slaves. On a more mundane level, there are speed limits in residential areas, which reduce the liberty of motorists but protect the liberty of pedestrians and residents.

For sure, taxation reduces some people's liberty and increases others' liberty. A net transfer of liberty is a reduction in overall liberty (like transferring liberty from slaves to slave owners). The key is to reduce the net transfer/overall burden as far as possible in total e.g. by spreading it as equitably as possible.

Let's go back to the Faux Libertarians' parable about splitting the restaurant bill. If the total bill is split equally, regardless what anybody ate, that's a Poll Tax* (authoritarian hard right); if we split the bill so that higher earners pay more, regardless of how much they ate, that's income tax (socialist). Both of those encourage over-eating, are objectively unfair and reduce the liberty of those paying for more than the cost of their own meal.

(* Baffles me why so many Homeys think that a Poll Tax is somehow better than LVT. Try substituting Poll Tax for LVT in the original argument: "Under the current system with [a high Poll Tax], you at least have the knowledge that once you've paid off the mortgage, then you won't lose your home even if you lose your job." That's clearly bollocks.)

What's wrong with everybody just paying for their own meal (Georgist)? That's land value tax, and doesn't impose on anybody's liberty. The greedy people will complain that they are worse off than they were under a Poll Tax; the low earners will complain that they are worse off than under income tax. Tough, past wrongs don't justify future wrongs.

It gets worse, of course. With a restaurant, it is the owner and his employees doing the cooking, so they expect to be paid (or else they wouldn't do it), however the bill is split. Land values are created by everybody and nobody, so by default ought to be shared between everybody equally (unlike earned income, which ought be retained by the earners), but under current rules, a minority own most of the land value (Pareto's 80/20 split).

So basically, income tax payers (residents) are paying for the meals to be cooked (obeying common rules and restrictions and thereby creating the land value in the first place) instead of being paid to do so. This does not even entitle them to a meal (land), they have to pay extra (rent or mortgage) if they want some food (somewhere to live).

And land owners (collectively) on the on the other hand are charging people for the cost of the meals, even though they did not provide ingredients or cook them. For sure, most people 'paid for' their land, but that is a transfer between past and present landowners, and is no consolation to the landless (considerably more than half of people alive and most of those not yet born).

This looks like a massive transfer of liberty from the landless to landowners, and as such is a reduction in overall liberty.

Getting back to the topic, that small loss of liberty for a few middle-aged homeowners who've paid off the mortgage and then lose their jobs would be but a drop in the ocean compared to the massive increase in liberty for most other people.

Let's hear it for the donkey!

Says Graeme, who spotted this story:

A peckish donkey caused thousands of euros worth of damage and landed his owner in court after confusing an orange-coloured supercar for a carrot, a German court has heard...

Despite not holding a grudge against the donkey, the businessman is seeking compensation from the donkey owner’s insurer to cover the cost. However, the insurance company have refused to pay out, arguing he should have chosen a better parking spot.

Reminding us that life copies satire. From Newsthump (July 2017):

Local resident Simon Williams told us,”First of all the car is orange. Orange.

“What sort of attention-seeking prick drives around in an orange sports car. I’ll tell you the sort, the sort that is crying out to have the piss taken out of him when he inevitably destroys the thing because he’s a shit driver.

“So we have a prick driving too fast in a bright orange car that costs more than a first home and we’re surprised that public sympathy for his predicament is non-existent. Yeah, I’ve got to be honest, I’m not all that sympathetic.

Fun Online Polls: Central heating; Crash for cash

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

Have you turned on the central heating yet?

Yes - 46%
Not yet - 45%
We don't have central heating - 9%

Thanks to all 87 who took part. Looks like we are exactly on the cusp of than half of us having turned it on (to the extent that we have central heating).

JQ: Can't vote because there is no "no" or "other please specify". I do have central heating but "Not yet" implies that I will turn it on. I probably won't unless the winter is exceptionally cold. I didn't turn it on last year at all.

I'd count that as a "not yet" myself. But well done for making it through last winter unaided!
-------------------------------
Mr Yan: Next poll should be on this - http://www.bbc.co.uk/news/uk-england-41360891

"We don't know the exact reason Birmingham features so heavily in these surveys,"

I think a poll on what factor causes this in Birmingham, Bradford, London and Oldham would be illuminating.

The same question occurred to me when I saw the article. Full list from here.

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

Certain parts of Birmingham, Bradford, Manchester and Oldham topped the league for Crash for Cash. Do these areas have anything else in common?

Vote here or use the widget in the sidebar.

'My little China Girl, she run my assembly plant.... She rule the world'

I found this article linked to Ralph Musgrave's blog. It is certainly a very striking example of capitalism from China.Tim Worstall explains that:
 
One academic survey found more than 80 per cent of Chinese “elites” (those with income at least 12 times higher than the average in their area) are descended from the pre-1949 elite.

I do not dispute the findings and to his credit Worstall does not descend into arguments about a 'capitalist gene' or such silliness. And I am certainly open to the idea of 'family' as the basic unit in capitalism and capitalist reproduction rather than the individual. I think Schumpeter went down this route in arguing about the families that mattered in the USA. But I wonder if the data actually demonstrates what the author concludes in such a clear cut manner?

Anyway, in other news, despite the horrific war, the total destruction of the country and its industry, the Nuremberg trials, occupation of the country by the allied victors, and a new democratic political order, the 1,000 families who ran German industry during the 1930s and 40s, were back running them all again by 1955. I know, not as impressive as the example above, but the Swiss border and Hong Kong (and their banks) have a lot in common perhaps?

Daily Mail on top form

From The Daily Mail:

*Anthea Turner could be raided by bailiffs after failing to settle a debt claim

*She is being sued by company executive Amanda Cavill de Zaveley

*The case revolves around more than £5,000 in missed rent payments

*They were racked up by Miss Turner's sister Wendy Turner Webster when she was living in Mrs Cavill de Zaveley’s £850,000 home in West London

Steve Keen on top form.

Spotted by Lola at Open Democracy:

For a while, this bargain felt win-win for both sides: as the Bank of England recently acknowledged, bank lending creates money at the same time as it creates debt (McLeay, Radia et al. 2014). This money is then spent, either to buy assets, or goods and services. It therefore adds to total demand, and to incomes and capital gains. So, as banks created “money from nothing”, and the UK private sector spent that money that it got for doing nothing, prosperity seemed to abound… [statement 1]

But you can’t have very high levels of credit-based demand without the corollary of an ever-increasing level of debt relative to income. More and more of income is required to service this debt, cutting into spending on goods and services. The turnover of existing money slows down, reducing aggregate demand from actual work [statement 2], while increasing the dependence on credit.

Don't statements 1 and 2 contradict each other? Either credit/debt increases GDP or it reduces it.

As a matter of fact, in the real world it does neither to any great degree.

1. Most of the (increase in) debt is mortgages, which is just an alternative to paying rent. The inevitable transfer of spending power from tenant/borrower to landlord/depositor is pretty much unchanged. This is A Bad Thing either way.

2. A small part of (the increase in) overall household debts (maybe one-eighth?) is credit cards and personal loans used for buying other stuff. This merely brings forward spending a few months or years. Somebody who wants a new car can save up for a few years or he can buy one on HP, take out finance lease, personal contract payment etc (these are all pretty much the same in economic terms). But that person will probably never own more then one car at any one time. Most of that net-extra spending is in the past - the bloke who bought a car on HP two or three years ago is spending less of his current income on other stuff because he is still paying off the HP instalments.

3. It all averages out anyway, yes, increasing levels of debt seem to go hand in hand with extra GDP, until the credit bubble pops, and then we lose GDP. Chances are, the overall long term trend would be much the same if mortgages and house prices were capped somehow (although that would be a good thing in and of itself).

Clearly, Keen's overall point that the whole economy has been hijacked by the banks is correct, he's just very vague on the details.