Grecian 2000 (and 12)

Despite his being that peculiar thing, a Scottish Tory, listening to Professor Niall Ferguson’s last Reith lecture, I was taken aback at how gifted and charismatic a communicator he truly is. And he’s got good hair.

The arguments he made about the current situation? Meh. Actually, delete Meh and replace with “pandering to the preservation of elite self-interest despite that being at the destructive expense of society and the economy as a whole”.

Professor Ferguson, of Harvard Business School no less, is of course a very talented Scotsman on the make who has established himself as a (very) well paid ornament of the aforementioned elite. His claim that government borrowing and sovereign debt is a betrayal of future generations is a dangerous one because it provides something that sounds like an intellectual basis that the elite might not otherwise have(or not be able to communicate so articulately) for hacking back government spending. It’s also pants with Greece providing a good starting point as to why.

Greece’s problems stem from two interlinked failures. One, successive governments racked up wodges of sovereign debt to waste on deeply inefficient public sector spending. In this respect Greece seemingly exemplifies the kind of arguments Professor Ferguson made better than any other country. However, there was and is a second Greek failure; successive governments allowed the Greek people and Greek business to dodge taxes on an industrial scale - Greeks love dodging taxes even more than they do sodomy and plate smashing.

The thing is the two failures are deeply, unavoidably and fundamentally entwined, which is why Greece actually lends little support to Professor Ferguson’s argument; a government unwilling to raise revenues i.e. taxes, has to find the money from somewhere to prop up inefficient dreck like Olympic Airlines. Hence, the Greek sovereign debt crisis is as much about tax dodging as it is wasteful government spending because debt financed both.

And as the people with the most benefit the most from tax dodging, Greece’s tragedy is as much about the wealthy camouflaging their swimming pools to avoid flying tax inspectors as it is civil servants receiving bonuses every time they wiped their arses (there is one difference between the two groups of course; Greece’s elite has been busily buying up luxury London property, off-shoring as many Euros as possible in a wonderful statement of national pride and unity. By contrast the civil servants are getting humped).

So even if you accept the notion government debt robs a nation’s children of their future at some point in the, well, future, right now Greece actually exemplifies how debt was and is being used to maximise the incomes and wealth of today’s elite.

But, Professor Ferguson is a historian and historians like facts, so lets have some. In fact lets approach this like say a Sir Lewis Namier, a dead historian who emphasised the importance of self-interest, something Professor Ferguson is profoundly enamoured with; hence, a recent study found doctors and engineers are the worst (or is that most effective?) professions in Greece for tax dodging. Now guess which two professions are heavily represented in the Greek parliament? Yup, failed vets and grease monkeys.

This is interesting. This suggests an alternative model for understanding how shit got to where it is, one where in the West economic and political elites used both public and private debt to mask the incredible growth seen in economic inequality, finance tax dodging (or tax cuts in the US/tax “efficiency” here) and, by seemingly boosting the incomes of us plebs, distract from the profound failure of “wealth” or “job” creators to create wealth for anyone other than themselves.

And sticking with Sir Lewis a mo longer, if I was a rich man, right now (or a rich man’s ornament), in between the yubby dibby dibby and the biddy biddy bum, I’d be going on at great length about how public spending needs to be cut back, how sovereign debt is a terribly bad thing, balanced budgets, couldn’t run a business/ household like that, yadda, yadda, yadda (biddy bum) i.e. doing everything I could to draw attention away from how higher taxes on capital and profits could also sort out sovereign debt (a practical policy suggestion here being howzabout next time there’s an “amnesty” for tax dodgers hiding their money off shore, the threat is pay everything or go to jail).

Budge-this

My favourite budget bit so far is “We are also taking the opportunity to rebuild Britain’s reserves, which had fallen to historically low levels. I can confirm our gold holdings have risen in value to £11 billion. This does not include the 400 or so tonnes of gold sold a decade ago for £2 billion, and which would now be worth six times that at over £13 billion pounds.” i.e. Gordon-the-gold-seller-Brown, you are one seriously useless fucktard.

The 7% new stamp duty rate on £2m plus houses combined with the new 15% rate if you bought them through a company is also awfy cute the way it tells Bob Geldof and co they can try and dodge the stamp duty us plebs pay if they want by buying via a company, but it’ll cost em’more if they do.

In the background to this though and the next few budgets is the supposed reality the Fitch rating agency spelled out when they issued the following chat to explain their decision to move Britain to “negative outlook”: “The triggers that would likely prompt a rating downgrade are … : -- Discretionary fiscal easing that resulted in government debt peaking later and higher than currently forecast;” (then 2 other triggers are mentioned, one is “blah blah blah” and the other “ya de ya de ya”).

Now Fitch is very clearly using jargon to mask an assertion of ignorant and very debateable prejudice. Negative outlook? That’d be them saying we think certain factors means that a downgrading of Britain’s credit rating has become a real possibility, which matters because markets respond to changes in outlook as well as actual ratings. And for both a negative move typically sees governments having to hand over more tax payer fivers to cover its debts. Discretionary fiscal easing? Hmm, that’s quite a cute one really; discretionary? That’d be what a budget is. Fiscal policy? That’d be about taxing and spending.

So essentially, Fitch said in the immediate run up to the budget don’t cut taxes or increase/not reduce spending in ways we don’t like or else i.e. it’s an assessment that can be read as a warning that’s open to interpretation as a threat.

Of course a rating agency would never see things like that, they only ever provide independent opinions based on privileged access to company data after all that others are “free” to choose to act upon or not (similarly, shops only sell guns whereas it’s the psychopathic outsiders who actually use them to shoot their classmates). And yet would a more active, discretionary fiscal policy be a bad thing?

Paul Krugman certainly thinks it wouldn’t, similarly John Kay today talked about how increased public spending on construction in its widest sense would “as the National Audit Office recently observed, be likely to reduce public expenditure over the medium term, not to raise it. The weakness of current – necessary – austerity programmes is that they focus on capital projects and expenditure deferrals because these cuts are easy, even though they are precisely the opposite of what is needed to balance the books in the long term. We need to devote much less attention to headline spending totals and much more to the detailed composition of public expenditure.” Heck, even this joker thought this was a good idea in 2009 cos he’s also mindful of how cos counter-cyclical government spending “leaks” in an open economy such as the UK there’s a need to focus on stuff that doesn’t like building shit. Except, these kind of grounded in facts but still – lets be honest – ideological views are effectively being swept aside by chat like Fitch’s, which is a bad thing.

Fitch’s chat illustrates perfectly the kind of dogma and prejudice that continues to define the terrain on which British fiscal policy is now set and its overall direction. This makes it a clear assault on democracy and, in the view of all sorts of bods, one that is actively shitting on the prospects of both the British economy and the livelihoods of hundreds of thousands of people left unemployed as a result.

Am trying to think how to draw this to a close, howzabout: The budget is shit and all the ConDems should be made to dress up like girly shepherdesses. This is cos government passively accepting the undemocratic constraints on its fiscal freedom private companies i.e. rating agencies, are imposing is a very, very bad thing.

Instead the debateable analytical and moral capabilities of the latter and of the "market" more generaly should be recognised. Thereafter, these external bodies should be held up to more and more aggressive public scrutiny and regulated til they squeal like pigs.

We should also have, because we need it, a huge increase in public sector debt funded public spending on construction. Given the Labour response has been to fixate on the tinkering and ignore the overall thrust of fiscal policy, Milliband and Balls should similarly be ordered to dress up as shepherdesses complete with pink gingham bonnets. There.

Dear Sir

Cool letter to the Telegraph the other day

“SIR – Given the state of the British economy, we urge George Osborne, the Chancellor, to consider scrapping the top rate of tax in his forthcoming Budget. The tax, which is in effect a 58p tax after national insurance is taken into account, puts wealth creators like us in a very awkward position.”

Wealth creators – that’ll be the borrowed American rhetoric in full effect then (or is it job creators or both?), but to be fair “awkward position” is a wonderfully British response; you can imagine a Titanic passenger describing matters as “awkward” unless, of course, they’d already been shepherded onto a life boat due to their first class ticket. I digress …..

“We believe the richest should help the poorest in society” – there’s lovely, so that’ll be charity then i.e. generosity on terms dictated by the provider with an eye to at least a mention in the New Year’s honours list as opposed to the systematic provision of a welfare state. Back to the letter ….

“One per cent of taxpayers are already responsible for 24 per cent of income taxes” – Crikey, is the distribution of incomes in the UK really that skewed, unfair and unjustifiable? I didn’t realise. And this is presumably the same economic inequality that led to the credit crunch in the first place (see later - 1)? The letter then says ….

“But penalising high earners through an unfair, politically motivated tax puts populist politics before sound economics” – alternatively, this rhetorical flourish displays a profound ignorance as to what economics is, sound or otherwise. See later - 2.

“The 50p tax is set to reduce government income, and damages the economy, the public services and charitable giving” – as the Daily Mash pointed out, according to its critics the 50p tax rate manages to cut revenues i.e. have little if any impact, at the same time as having, well a big impact. Logical inconsistencies eh? Dontcha just hate ‘em

“As business people, we want to see our industries, our economy and the Third Sector thrive. Repealing the 50p tax would demonstrate the Chancellor’s wish to celebrate British entrepreneurialism, stimulate industry and contribute to the Government’s growth agenda” – well that or leave him looking like the toffee nosed upper class shit on us plebs with gay abandon cunt that he is. That and someone profoundly ignorant of politics and political and social forces (again, see later - 3). The letter then finishes with

“The sooner the top rate of tax is repealed, the better” - Huzzah!!!!!

The later bits:

1) An idiotic explanation of the credit crunch is to blame government, whereas government’s actual contribution was to be idiotic. Governments were idiotic because, to varying degrees, they believed the rich and powerful (or R’n’P) people who told them (a) trust us, and (b) give us everything we want, which was things like lax principle based as opposed to conservative rules based financial regulation, a shift away rom redistributive taxation, a tax system like a sieve at its top end and so on. The R’n’P then made themselves fortunes as a result, but unfortunately blew the global financial system and various Western economies up in the process.

This fact has profound implications. Like when a Liam Fox tries to get back into cabinet by positioning himself as a standard bearer of the right by saying “To restore competitiveness we must begin by deregulating the labour market …. (i)t is intellectually unsustainable to believe that workplace rights should remain untouchable while output and employment are clearly cyclical” you’re left gawping at the vicious stupidity of it all. Is he actually claiming there’s an “intellectual” link between the ability of say a Patrick Bryceland, director of Commercial and Industrial Cleaning Services Ltd (who signed the letter to the Telegraph), to hire and fire at will and the US sub-prime debt that triggered the credit crunch in the first place?

Or is he both nasty and dumb enough to be suggesting that giving Mr Bryceland even more discretion via even more “flexible” labour laws will help support our current credit rating given Britain is already an outlier in labour market flexibility terms to the extent that bods have talked for years about an Anglo-Saxon economic model as opposed to say a triple A German one? Like, seriously, is he?

2) Ach, where to begin with this one really. “Economics” as used in the letter to the Telegraph, is simply a rhetorical flourish. The word provides no more than an unthinking reference to one academic discipline's twentieth century methodological turn involving an obviously Comte-like notion of social science as science that became a fixation with clever sums impenetrable to outsiders. This change, the adoption of one approach and one set of methodologies by definition could and can only ever provide a distorted and narrow means of understanding what is better understood as a broader political-economy, a point made obvious by the economist's ceteris paribus caveat (and their failure to spot the credit crunch).

Prefacing “economy” with “political” is more realistic (or “sound”) and a reminder of how the political and the social are integral to economic life. The most obvious example of this are the laws governing property rights that make buying and selling possible. These laws vary over time and between nations because they're the kind of outcomes that illustrate how the political is the means by which an economy is achieved and functions.

3) This follows on from recognising the political nature of the economic. You could read this to get a sense of how economic change can have profound social and political consequences. Alternatively you could simply count the number of recent regieme changes that have taken place across Europe. Clearly, the economy is political and the current econopmic situation is already having massive political effects, something the letter’s dismissive reference to “populist”, by which they presumably mean “bad”, politics, misses at a profound level.

Rather, the 50p tax is about perceptions of fairness. Like Mr Goodwin’s knighthood, it’s the token quid government needs right now to legitimise its pro-quo economic policies. Cutting the 50p tax would undermine the legitimacy and therefore the sustainability of these policies. Without it more people would question and perhaps even start to challenge why they are now living in a new age where they are being forced to work harder for longer for less money while paying more taxes in exchange for fewer public services at the same time as the people who caused it all get away seemingly scot-free. I’m sure even Mr Bryceland would agree that from his perspective – is his a minimum wage, no employment benefits, chock full of Eastern European migrants company I wonder? - such a development makes even less “economic” sense than the 50p tax rate.

Actually hang on a mo, mebbe when you take this broader context into account cutting the rate isn’t such a bad idea after all. And as a fabulous person pointed out why exactly are all these company directors i.e. dividend earners as opposed to PAYE income people, complaining anyhow?