22 Jun 2016

Referendum Economics

From the Financial Times [not paywalled], via Twitter.

18 May 2016

New Zealand history relevant to Brexit Debate.

The following observations from the Encyclopedia of New Zealand are relevant to the debate over whether the UK should leave or remain in the UK.
"In 1961 Britain announced that it was seeking to join the European Economic Community (EEC)... If Britain joined the EEC it would have to sign up to the [common agricultural policy], and that would mean an end to New Zealand being able to export agricultural products to Britain."
With UKs help and based on NZ support for Allies during WWII, NZ managed to negotiate access to the British markets with quotas that reduced over time. But...
"In the late 1930s Britain took more than 80% of New Zealand exports. By 1960 it took 53%, which reduced to 36% in 1970, and 5% in 2007."
Britain is not even a major trading partner of NZ any more. What the British don't seem to realise is how protectionist the EU is. It routinely erects trade barriers for those outside the EU to protect the industries within. Farming, for example, is heavily subsidised throughout the EU, while tariffs and quotas prevent other countries from outselling heavily subsidised produce. Something that cost New Zealand most of it's existing export market in the 1960s and 1970s.

The idea that if Britain leaves the EU it will automatically retain the right to free trade with Europe is idiotic. At the very least there will be protracted negotiations during which Britain will not have access to the EU markets. Of course UK is a major trading partner of the EU so trade agreements will definitely be put in place. But the EU is in a position to demand major concessions of the smaller entity.

For this we can use the model of Norway, which remains outside the EU mainly because of the issue of fishing quotas, but has to pass all the laws made by the EU and pay into the various funds. It is in almost every respect a fully paid-up member of the EU, except that it has no voice in policy making. This would not be a favourable situation for Britain.

Leaving the EU at this point would be disastrous for Britain. There is no doubt the need to reform the EU and in particular the Euro, but being outside will leave us powerless to demand or effect change.

26 Apr 2016

New Article on German Cities That Began to Provide Public Goods in 1500s.

This is very interesting:

Origins of growth: How state institutions forged during the Protestant Reformation drove development.

Jeremiah Dittmar, Ralf R Meisenzahl. Vox 26 April 2016.
Throughout history, most states have functioned as kleptocracies and not as providers of public goods. This column analyses the diffusion of legal institutions that established Europe’s first large-scale experiments in mass public education. These institutions originated in Germany during the Protestant Reformation due to popular political mobilisation, but only in around half of Protestant cities. Cities that formalised these institutions grew faster over the next 200 years, both by attracting and by producing more highly skilled residents.

21 Apr 2016

House Prices vs Average Earnings

"The relationship between earnings and house prices began to break down in the 1980s, after sweeping financial deregulation began in the 1970s." 

15 Apr 2016

Fuck Neoliberalism

The academic world experienced a minor stir last week with the publication of the text of a paper given at an AAG meeting in San Francisco, by Dr Simon Springer of the University of Victoria, Canada. Published on the academic website academia.edu, the paper entitled, Fuck Neoliberalism, has been viewed more than 14,000 times which has put Dr Springer in the top 0.1% of scholars using the website.

The author is a serious academic with a long history of publishing on the subject of Neoliberalism, viewing it as an inherently violent ideology. The paper is unrepentantly vernacular in tone while still being rooted in the discipline. This quote gives a flavour of the former:
"Fuck the hold that it has on our political imaginations. Fuck the violence it engenders. Fuck the inequality it extols as a virtue. Fuck the way it has ravaged the environment. Fuck the endless cycle of accumulation and the cult of growth. Fuck the Mont Pelerin society and all the think tanks that continue to prop it up and promote it. Fuck Friedrich Hayek and Milton Friedman for saddling us with their ideas. Fuck the Thatchers, the Reagans, and all the cowardly, self-interested politicians who seek only to scratch the back of avarice. Fuck the fear-mongering exclusion that sees "others" as worthy of cleaning our toilets and mopping our floors, but not as members of our communities. Fuck the ever-intensifying move towards metrics and the failure to appreciate that not everything that counts can be counted. Fuck the desire for profit over the needs of community. Fuck absolutely everything neoliberalism stands for, and fuck the Trojan horse that it rode in on!"

Dr Springer sums up, in both his words and his attitude, so much of what I think and feel about the current situation in the world. I'm grateful for his articulation of the problem in this manner. It is calculated to offend a system which routinely offends those it feeds off. Neoliberalism itself is offensive, it is violent, and ultimately Dr Springer believes that it necessary to act against it, to resist Neoliberalism:
We must start to become enactive in our politics and begin embracing a more relational sense of solidarity that recognizes that the subjugation and suffering of one is in fact indicative of the oppression of all (Shannon and Rouge 2009; Springer 2014). 

He also suggested using the hashtag #fuckneoliberalism though this has not really taken off. I'm using it however.

There is a video of the talk on YouTube. The sound quality is not very good, but it is interesting to hear the author of the paper speaking the words in this context.

14 Apr 2016

How Broken is the World's Tax System?

A recent Oxfam report, Broken at the Top: How America’s dysfunctional tax system costs billions in
corporate tax dodginguses the top 50 US companies to expose just how broken the tax systems of the world are.
"US corporate giants such as Apple, Walmart, and General Electric have stashed $1.4 trillion in tax havens... The sum, larger than the economic output of Russia, South Korea and Spain, is held in an “opaque and secretive network” of 1,608 subsidiaries based offshore." - Guardian
The $1.4 trillion held offshore contrasts with the $1 trillion paid in tax by the top 50 US firms between 2008 and 2014. However, the same companies had also enjoyed a combined $11.2 trillion in federal loans, bailouts, and loan guarantees during the same period. This meant the firms had reduced their effective tax rate from the US headline rate of 35% to an average of 26.5%.

And some of the saving was spent on lobbying the US government for great tax-payer funded handouts. The top 50 US firms spent $2.6 billion between 2008 and 2014 on lobbying the US government, and they get massive bang for their buck!
“For every $1 spent on lobbying, these 50 companies collectively received $130 in tax breaks and more than $4,000 in federal loans, loan guarantees and bailouts.”
So not only do they not pay tax on their profits, and keep vast reserves in tax havens, they get enormous handouts from the government, and have massive influence over govt policy in their own favour. A company with vast reserves of cash should not get government subsidies.

You think America is a democracy? It clearly is not a democracy, it's an oligarchy with an entertainment wing. While everyone is distracted by Trump & Co. the corporations are stealing all the money.


2 Apr 2016

Cameron Defends

David Cameron defended Britain’s decision to reject higher EU tariffs on Chinese steel on Friday as the business secretary faced the anger of Port Talbot workers whose livelihoods have been undermined by cut-price imports. - Guardian
So Cameron thinks that destroying the UK steel industry was the right thing to do. And nationalisation is the wrong thing to do.

And so we're looking at 40,000 people on the dole?

Meanwhile China slaps a 46% tariff on  ‘grain-oriented electrical steel’ produced in UK. They claim we are dumping it, while they are selling their steel in Europe at well below the cost of making it.

I think we have to say that Sajid Javid wins the prize for the best April Fools prank of the century.

1 Apr 2016

British Steal

So it turns out that the UK business secretary, Sajid Javid, knew all along about the impact of China dumping steel in Europe at below cost. Chinese steel production is heavily state subsidised. But given an opportunity to provide some relief to the UK steel industry he declined saying:
“The responsibility of government is to look at the overall impact on British industry and jobs,” the Business Secretary said. 
“If duties get disproportionate it would have an impact in Britain and elsewhere on consumers of steel. Those businesses tell us it will cost jobs and exports if duties got out of control. 
“It’s important to be led by evidence and get the right balance of duty required to correct the harm being done to the domestic market. 
“To go further might in the short term look the right way to go to protect industry but you have to remember in Britain there are also companies that consume steel as part of the production process.” - Telegraph 10 Feb 2016

Blogger Craig Murray says
On Javid’s instruction, last year the British diplomatic mission to the EU (UKREP Brussels) was lobbying the EU commission against higher punitive tariffs on Chinese steel than the 13% the UK supported – even though the Commission found that dumped Chinese steel had an effective state subsidy of up to 72%. I have this from a British diplomatic source.

And adds:

There are no steel mills in Tory constituencies.
So this collapse of the British steel industry is part of a plan by Javid and the other Tories it seems. No one is quite sure how the plan will work. We want to export more to China, hence we keep them sweet by allowing them to torpedo our steel industry and put 40,000 people out of work and then we send them all the stuff we manufacture from Chinese steel? Only the Chinese seem to benefit from this. So is Javid in the pay of the Chinese government? Or is he a moron? Or a socio-path? Or what?

31 Mar 2016

British Steel

This morning I am puzzling over the UK steel industry. Our Indian overlords, Tata, are selling up British Steel (making plans for Nigel!) because it is losing £1 million per day. That's not a viable business.

But there are many calls from the left to "save our steel industry". Petitions and so forth. How does one save an industry that is losing £1 million per day? At the very least this means spending £1 million per day.

The alternative is that about 40,000 jobs will be lost and a massive blow to manufacturing in the UK at a time when we're teetering on the verge of recession again. When the Tories came into power they were promising to rebalance the economy and create a "northern powerhouse" that would produce "export-led growth" (merchantilism 101). Now it looks like the North is going to be gutted, again. And Wales too.

The global economic slow down is not going to go away. Steel consumption will continue to be at much lower levels than the peaks of the last few years. China is not going to boom again any time soon. China subsidise steel production and sell it on the world market at below cost. It keeps Chinese steel workers in jobs.

So is this what we need to do? Basically this would be a different kind of welfare payment. Instead of paying the dole to unemployed steep workers, we subsidise a failing, unprofitable business to keep them employed. Keeping the steel industy costs about £350 million per year. Average welfare payments would be about £20,000 per year, times 40,000 = £800 million. So it would be much cheaper to keep the steel industry going - though I've plucked that figure out of the air.

And of course 40,000 people in work is probably better than 40,000 people on the dole. The spinoffs are hard to calculate. In some places whole towns would more or less cease to be economically viable if we lost these jobs.

But will EU laws allow govt to act to prevent the closure? Are we allowed to subsidise steel production? I'm not sure. Will government ideology allow them to even consider it? Loads of unknowns.

18 Jan 2016

Economics humour

Mainstream economists predicted none of the last five recessions.

Heterodox economists predicted all ten of the last five recessions.