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Tim Worstall

Argle gargle!

In the United States, Republican voters shown how wealth is spread in the
US and in Sweden, but not told which set of figures described which country,
thought the Swedish distribution better. US voters overall chose as ideal
a wealth distribution that was more equal than Sweden’s. (In Sweden, the
top 20% of earners get four times the lowest earning 20%; in the US the
difference is eight times.)

Don\’t you think that people attempting to entirely reorganise the economy should know the difference between wealth and income?

Will these scumbag cunts please stop lying to us?

Now it\’s the ignorants over at Class who are peddling the same old fucking nonsense.

This is all part of a long term trend. In the last thirty years the share of the national
income going to wages and salaries fell, while the proportion going to profits
rose2.

This is not true. You are lying.

The reference is to this earlier TUC paper.

In the last three decades, the proportion of national income going to wage-earners has fallen, while the proportion going to profits has risen.

This is not true. This is lying.

There are four parts to national income. The labour share, profits share, taxes minus subsidies and mixed income.

Within the labour share there are two things: wages and employer paid taxes on employment.

The wages share has been falling as a percentage of the labour share. Because employers\’ national insurance has risen substantially over the decades.

The labour share has been falling as a percentage of GDP, yes. But the profit share has not been rising. It\’s actually smack bang where it was in 1980. The \”mixed income\” share has risen. But this is pretty much irrelevant for the point people are trying to make here. And taxes minus subsidies has risen. This is largely driven by the increase in VAT rates over the decades.

So, wages have fallen as a percentage, the labour share has fallen as a percentage. Is this because the profits share has risen? Given that the profits share hasn\’t risen, no , it\’s not. It\’s because taxes have risen.

So, please, could all you scumbag little cunts please stop lying to the Great British Public?

Thank you, we\’d all be most grateful.

Quote of the day

The lesson of Hillsborough is that even after being clubbed in the face with clear proof that the state is not to be trusted, people will still defer to the state and tell me that I\’m the crazy one for wanting to do things differently.

Ignorant tosspot bastards at The Guardian

US census figures show more than one in five children are living in poverty

No, the US census figures do not show that.

The figures released by the census also show that little dent has been made on America\’s high levels of poverty, with some 15% of the nation – representing around 46.2 million people – living in poverty in 2011.

No, they really do not show that.

Here, in the Census report, is why they do not say that:

The poverty estimates released today compare the official poverty thresholds to money income before taxes, not including the value of noncash benefits.

What the Census figures actually report is the number of people who would be living in poverty if it were not for most of the things that the American Government does to alleviate poverty.

This is an important difference.

This chart uses a very different measure of poverty* but does allow us to compare across countries.

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You will note that the level of poverty by market incomes alone is exactly the same in the UK and US and actually lower than it is in Sweden.

The second measure is after taxes and benefits. Yes, isn\’t it amazing: if you give money to poor people then they will be less poor. And there will be fewer poor people once you measure the help given to the poor.

Except, except, we come up against something of a problem. Much of what the US does to alleviate poverty comes through either the tax system or is benefits in kind. As we can see from what Census says, they are not including this in their calculations of poverty. In that second measure of poverty they are also not considering benefits in kind. I am not sure whether they are including the effects of the tax system (more specifically, I know they are including income taxes paid but not sure if they are including tax credits offered).

In more detail: the US poverty figures include market income plus direct money transfers. Essentially, the traditional welfare, or TANF (or whatever they\’ve renamed it). They do not include the EITC (equivalent to our working tax credits), Section 8 housing vouchers (housing benefit) nor Food Stamps (we have no equivalent).

And the EITC, Section 8 and food stamps are the three major poverty alleviation programs (actually, Medicaid is much larger but that\’s a difficult one to estimate the importance of in these figures) in the US.

Therefore, essentially, the US poverty numbers detail poverty in the US before poverty alleviation attempts. The numbers for all other countries show them after poverty alleviation attempts.

Anyone care to calculate the UK poverty figures before housing benefit, tax credits and income support? For that\’s pretty much what that US number is.

Which brings us to what The Guardian (and every other fucker out there to be honest) gets so wrong. The US poverty numbers do not count the number of people living in poverty. Not by the standards we apply to every other country.

They count the number of people who would be living in poverty if the government were not attempting to alleviate poverty. They are, not quite but much more closely, akin to the market incomes measures of poverty, not the post tax and benefit ones.

 

 

*The standard US definition of poverty is an absolute standard. This chart shows relative poverty. But the same point about poverty alleviation still stands.

An oddity at CiF

I find that I can no longer leave a comment at Comment is Free.

Anyone else having the same problem? Been going for a couple of days now.

I assume it\’s a software glitch somewhere but if I have been banned I\’d love to know.

That European Union explained in two sentences

Regarding the economy of Portugal:

The program remains broadly on track. In 2012, despite headwinds from abroad, real GDP growth remains in line with projections, exports are performing better than expected, and the fast reduction in the external deficit is contributing to alleviating the external financing constraint.

In 2012, economic activity is projected to decline by 3 percent.

Shrinking GDP is now regarded as real GDP growth.

Can we leave yet?

More @RichardJMurphy argle bargle

I just knew that this number was going to get bandied about. All the usual suspects will lie about it all. And here\’s one more of them, the retired accountant from Wandsworth known as Ritchie:

In the 60s and 70s wages took around 60% of GDP.

Now it’s about 53%.

That’s a massive shift away from the reward to work in the economy.

That means people are paid less for the value they create.

But it also means that value is taxed less as profit is now (unlike the 60s and 70s) much less taxed than labour.

And this is despite a real rise in the population.

The result is there is more demand for public services and less to pay for it. So we have a government funding crisis.

Sigh.

This is, quite simply, bollocks. Complete, total and utter bollocks.

As I explain in exhaustive detail here.

He\’s making the idiot mistake of thinking that the labour share of income and the profit share of income constitute unity.

Which they do not.

Has the labour share of income fallen? Why, yes, it has. Has the profit share of income risen? Not from the 60s it hasn\’t, no. And even Brendan Barber says that the 70s numbers were unsustainable.

What has risen since then? Why, that would be self employed income, a little bit. And taxes minus subsidies. The largest part of which is the rise in VAT over the decades.

So, far from the fall in the labour share of income being responsible for a fall in tax revenues to pay for public services the fall in the labour share of income is a result of a rise in tax revenues to pay for government services.

Normally with Ritchie I\’m willing to assume that his mistakes are due to his ignorance. This one though, this one I think rises to the level of an outright lie. A deliberate one.

Does Ms. Mazzucato know absolutely fucking nothing about finance?

It\’s the usual Guardianista rant.

Banks don\’t lend to innovative companies therefore we don\’t get enough innovation. Thus government must step up and fund innovative companies doing innovation.

What\’s so cretinous about this logical chain is that it entirely ignores the environment which is being described. You know, that strange system of \”Anglo Saxon\” capitalism. As opposed to Continental, Rhineland, whatever you want to call it.

It\’s exactly the same mistake that Willy Hutton has been making for the last couple of decades.

In this Anglo Saxon system, whether it\’s a good one or a bad one, we don\’t look to commercial banks to fund innovation. We don\’t look to them to provide equity finance, nor anything like equity finance. We look to them to provide debt finance.

Sure, you can argue that they\’re not providing enough of that at present: but let\’s not forget the difference between cyclical swings and the structural shape of the financial economy.

In this Anglo Saxon system we look to markets to provide equity. Not banks. Anything and everything from a few friends chipping in on their credit cards through Crowdcube to AIM. This is where the equity portion of business investment comes from in this, our system.

Maybe it\’s a good system, maybe it\’s worse than that Rhineland system. But if you\’re going to talk about it the least you can do is point out that this is the system, not just complain that banks don\’t provide equity therefore the state must.

Just as an example, I raised equity at the beginning of this year. First round was quite simply to fund me wandering around the Erzgebirge while shouting \”Wo ist der scandium?\” to all and sundry. And to have someone check out a hillside in Madagascar, peer into an Austrian mountain of processing waste, mutter \”Gdiya scandie?\” to Czech geologists (err, that\’s Russian, I think, but a Slavic language at least) in the Krusny Hory.

We\’re currently prepping the spreadsheets for the second round of financing as we found some, know how we\’re going to get it out, where, with whom and who we\’re going to sell it to.

Now, that\’s a fairly risky adventure there. Something that really does require equity financing, not debt. But we found this money. In The City of course.

Raising funds for innovation is indeed possible in this Anglo Saxon* system it\’s just that we don\’t do it through banks.

* See, that\’s a funny. Because the Erzgebirge is in Saxony…umm, OK, it\’s not a funny.

That Olympics legacy

This planned legacy would see some of the 80-passenger boats converted into self-hire vessels based at Limehouse, with others still used for general transport. The hope was this would help promote further investment in an area which faces serious economic deprivation.

Invigorate the lesser regions of the East End, oh my yes. That\’s what the £20 billion was really all about d\’ye see?

It was supposed to be one of the smaller but more immediate legacies of London 2012: an Olympic and Paralympic passenger boat service along east London\’s river Lea which, once the Games were over, would evolve into a popular leisure business over the course of its 15-year contract.

Instead, the company which was awarded the exclusive deal – and then attracted savage criticism for charging up to £95 for a ticket – has seemingly gone bust before London 2012 even finished.

Expect more of these sorts of stories. Myself, I\’d estimate that 150% of these \”legacies\” will turn out to not actually exist in any meaningful sense.

The extra 50% being what would have been done if the money had remained fructifying in the pockets of the populace of course.

Seumas is shameless

Between 1975 and 2007, the share of wages in national income fell from 65% to 54%, while escalating inequality within that smaller share has meant stagnating real wages for low and average earners.

A central factor in the shrinking slice of the economic cake going to workers – which helped lay the ground for the crisis of 2007-8 by fuelling personal debt – has been the weakening of trade unions,

No, actually, it wasn\’t.

Details here.

As even Brendan Barber agrees, the mid-70s position was not sustainable. So we should start at 1980.

And the fall in the labour share of income has not been explained by weak unions nor increasing profits. Rather, by the rise in VAT and a rise in self-employment.

I\’m afraid that this is another one of those fake statistics that will be bandied around the political arena for years to come. And it\’s one that needs to be killed: not because it is politically opportune for idiots like Milne, not because it reflects badly on the sort of policies I like either. But simply because it is wrong.

The important question to ask about an industrial policy

But the result has been to leave Britain as the only major economy without an industrial strategy, the only G8 country without a national investment strategy, and pretty much the only advanced country without a serious regional development policy. Britain is virtually the only big country in the world that thinks it can grow industry without having an actual strategy to do it.

So we stand alone, again, do we?

Good. Now, please check our economic performance against those of other countries. Are we growing more slowly over time? No, the last three years is not an adequate timescale: try a couple of decades at least. Has our manufacturing sector shrunk more or less than that of other countries?

Given that it hasn\’t shrunk that is.

This is the important question. Not whether everyone else has a strategy but does having a strategy make any difference?

To provide good new jobs? His speech did not so much as mention the words, yet jobs should surely be front and centre in any such plan.

Jobs are a cost, not a benefit, you ignorant tosspots (actually, tosspot, as it is Aditya Chakrabortty who writes The Guardian\’s economic editorials).

Plod can be stupid

Penalties for growing and selling cannabis must be toughened because a surge in the trade is driving up shootings and gang-related violence, a senior police officer has warned.

Sigh.

Violence and gang w3arfare are driven by the illegality of the product. In the absence of a possible appeal to the law of the land then might makes right.

Plod therefore says that in order to reduce the violence caused by illegality we must increase the illegality. For that is what increasing penalties means, an increase in how illegal the stuff is along that spectrum from a parking ticket to crucifixion for recommending the wrong flavour of God.

Doesn\’t sound all that sensible, does it?

This state owned business bank thing

More pertinently, a full-blown state lending bank – which the Business Secretary seems to be edging towards – would be illegal under EU law.

That is a point I hadn\’t considered.

You can have a state owned bank, that\’s obvious. But in order not to be providing illegal state aid lending decisions must be made on a fully commercial basis.

The definition of fully commercial basis pretty much being \”would the loan be made by a non-state bank?\”

At which point there\’s not all that much point in having a state owned bank, is there?

It ain\’t what you spend it\’s how you spend it

Pupil performance has remained “flat” since the mid-90s despite a sharp increase in investment in the education system, it was revealed.

The respected Organisation for Economic Co-operation and Development (OECD) told how the proportion of national wealth spent on schools and colleges soared from 3.6 per cent to 4.5 per cent in 2009 – the sixth highest total in the developed world.

By the time the last Government left office, around £64 billion was being spent on education.

But today’s study revealed that the hike led to “no improvement in student learning outcomes”, with Britain slipping behind many other countries in reading, mathematics and science.

Turning on the tax fire hose doesn\’t actually solve problems. It\’s how you spend money that matters, not how much.

Or, to put it into the English political words, it\’s not resources it\’s the structure.

Another way of putting it is that we should always be interested in the outputs, not the volume of inputs. And a system that can swallow an extra 0.9% of GDP with no change in outputs at all obviously needs a severe restructuring.

And Ritchie on the TUC report

What it shows is how much the average worker has lost because wages have not kept up with growth over the last thirty years.

The “missing income” went to profits and investment returns, of course.

The trouble was with profits concentrated in very few hands and wages widely spread people couldn’t afford to buy the products that were being made without borrowing back the wages they’d lost from the people who’s taken them from them with the result that debt skyrocketed and recession followed.

And the tax take fell too as profits are taxed less than wages.

The result, austerity?

Oh dear Lord.

As the wage share of income fell because taxation rose (that VAT thing) then it\’s very difficult indeed to say that the tax take fell as a result of the wage share of income falling.