GFS report: tax losses due to trade fiddles. Sorry, valueless report

Or if you prefer, here\’s today\’s Ritchie!

Developing countries are losing approximately $100 billion dollars every year due to trade mispricing, according to a new report from Global Financial Integrity (GFI).

Ooooh, my! So, what does the report actually say?

Well, they measure the amount of trade they think is mispriced, then look at corporate tax rates, click the calculator and say multiply one by the other and you\’ve got the tax lost.

Now, umm, where have we seen a similar technique then?

Ah, yes, Richard Murphy\’s estimate of the tax gap, wasn\’t it?

And GFS do in fact say that their new report is based upon a Christian Aid one….which was written with the aid of Richard Murphy and John Christansen. And another one from the Tax Justice Network which is essentially the same two people again.

Let us remind ourselves of what the problem with Ritchie\’s calculation was. You cannot take headline tax rates and compare them to tax collected and then claim (or assume, assert) that the gap between the two is because people are being very naughty boys.

For governments deliberately and specifically put into the tax code allowances for certain activities they think desirable which reduce taxes legally owed from those headline rates. In the case of our domestic UK corporate tax system we\’ve got R&D allowances (125% of amount spent on R&D from memory), various odd depreciation thingies, training allowances and for all I know a turkey dinner for Tom Cobbleigh allowance.

This means that the observed gap between headline rate as a percentage of profits and the amount collected cannot be assigned to naughtiness. We have to strip out those entirely legal, legitimate and just as Parliament intended, allowances first.

Which Murphy, you might recall, did not. Indeed, he gets very touchy when you point out this to him.

So, what do GFS do? Yes, they look at headline rate and tax collected and assume the gap is because someone\’s being a naughty little girl.

They entirely ignore that some countries have tax subsidies (even rebates in some places) for exports. Entirely ignore that some (indeed, many) countries have tax free holidays for exporters and new companies.

In short, they make Ritchie\’s mistake. They do not account for the things which governments deliberately put into their tax codes in order to encourage behaviours they deem desirable.

As such their report is as value and content free as Ritchie\’s original was. No surprise that he praises it then and insists that this requires action, eh?

Click here to download a full copy of the report, which adds to the growing literature on this subject and stresses the urgent need for action to tackle this abuse.

Me personally I\’d like to see action against people who lie to us for political and ideological reasons….

On the stranglehold of neoclassical economics on the Nobel

Ritchie says we should look at this.

So we do.

And the example given of how neoclassical economics has a stranglehold on the Nobel is Gunnar Myrdal.

Since our societies claim to be democracies, the exclusion of competing perspectives at university departments of economics means that such departments take a stand for some ideological orientations in society and against others and indeed acquire a role as political propaganda centers.

One of the economists who at an early stage took an interest in value issues in research and education is Gunnar Myrdal. He argued that “values are always with us” in social science research; in the problems we choose to study, in the choice of conceptual and theoretical frame of reference; in the choice of method and in the choice of ways of presenting results.

You cannot choose without referring to some values. It can be added that Myrdal left the neoclassical camp to become an institutional economist.

That\’s the Gunnar Myrdal who won the Nobel in Economics in 1974 along with Hayek.

Genius, eh?

Ritchie Elsewhere!

From his Forbes column:

Secondly, and more importantly, the idea of discounting the future is fundamentally subversive.

Net present value is subversive now, is it?

Then:

Wherever there’s been mark-to-market or fair value accounting, executives in the financial world have used this technique to book profit and pay the bonuses made for themselves.

Sorry, NPV, mark to market and fair value accounting are all synonymous are they? Instead of being rather at odds with each other?

For example, your NPV might tell you that your holdings of option ARM mortgages are just fine and dandy. But the market might tell you that they\’re near worthless.

Which is correct in the long term is moot for this point: to claim that both valuation processes are exactly the same thing is absurd.

I have a feeling that what he\’s done is take the theoretical (and obviously true) point that the value of something today is the value of all future returns to it discounted at the appropriate interest rate and assume that prices in markets are exactly this.

Entirely missing out his hero Keynes\’ points about animal spirits.

How did he get a column there?

Ritchie stops blogging!

He\’s banned comments.*

Thus it ain\’t a blog anymore, it\’s a website.

Ho hum.

This did amuse me though:

It  is increasingly, and unfortunately,  clear that the vast majority of those who do seek to comment come  from way beyond the fringes of political electoral credibility and seek only to harm and undermine society. It is not my duty or desire to assist them.

I am one of those who seek to comment on his pieces, as you know. Indeed, there are constant (well, some) references to myself and my views on his blog.

But this beyond the fringes of electoral credibility bit….hasn\’t anyone told him that I stood as a candidate for UKIP at the last national election we had? You know, UKIP, the party that came second? Beating the Labour Party into third place? Lib Dems to fourth?

That sort of beyond the fringes of electoral credibility?

* His post was brought to my attention in an email headed \”You made Ritchie cry\”. Dib dib dib, I\’ll try and think up another good deed to perform tomorrow.

How civil society works

The modern day civil society that is.

So what will we get? Bankers talking to bankers and saying stakeholders want what bankers want.

I despair.

The EU / EC should:

a) Allocate seats to stakeholder groups

b) Fund them

c) Make clear they can issue minority reports if need be

d) Provide them with technical support.

There was a time when civil society meant what was done outside government. Now it seems to have morphed into what those with bees in their bonnet can get government to pay for. This is how we end up with Friends of the Earth Europe getting 50% of their funds from the European Union for advising the European Union.

And yes, that is our favourite retired accountant making a pitch for a cushy seat on an unaccountable tax funded quango.

You may have noticed that I\’ve got opinions on lots of things. I\’ve never quite had the effrontery though to demand that those who aren\’t interested in them pay for the privilege of being forced to listen to them.

Others seem less reticent.

An exercise for the reader

Here is Ritchie telling us all what is wrong with the current world economic order.

Which is great. But I presume he knows this means abandoning just about everything that is taught in undergraduate economics as a result, which underpins the flawed logic of Anglo-Saxon capitalism as a whole – not just banking?

Let’s start with what goes:

  • Profit maximisation. This is a complete nonsense. Economists think it discounted future cash flow, accountants a measure of the past, and no one can measure either.
  • The idea of markets being efficient. This requires profit maximisation to be true. But we don’t profit maximise and those who seek to do so just abuse others by extracting monopoly rents, which is inefficient. It also requires us all to be clairvoyant, and there is some evidence we are not.
  • Ignoring externalities – the fact the market assumes we can abuse the planet as a ‘free gift of nature’.
  • The idea that wealth is created by markets. Wring, wealth is created by people – the means of ownership of the structure in which they work has little to do with the value of what they do – but efficient management has. there’s no evidence that efficient management is the exclusive preserve of the private sector – although there’s ample evidence of bad management in all sectors.

So Lord Myners, I agree – but let’s sweep away the whole destructive nature of neo-conservative economics and move on. Let’s not tinker at the edges. And let’s be clear about what we’re doing. Nothing else will do.

As an exercise in collaborative crowdsourcing new internetthingummybob can we, in the comments section, see how many fallacies and displays of ignorance we can find in that series of statements?

I\’ll start with the easy one: externalities. These are taught at GCSE level and at every level of economic education above that. So far from ignoring them they\’re central to the entire subject. They first really get examined in Alfred Marshall\’s work of the 1890s (and do please note that Marshall was pretty much the founder of the neo-classical school and also the writer of the basic textbook used for decades). Arthur Pigou (the man who first hired Ritchie\’s beloved Keynes as an economist) developed the idea and what we might do about externalities and had it cracked by the 1920s. There have even been Nobel Prizes awarded for their study (Coase won his in part for this).

Ooooh, yes, another one, wealth not being created by markets. That would be news to Adam Smith now, wouldn\’t it? David Ricardo would also raise an eyebrow. The division of labour and specialisation of it then leads to voluntary exchange of the production stemming from it. Voluntary exchange, by its very definition, creates wealth for both parties involved: no one would make such an exchange if it impoverished them. What is the word we use to describe where voluntary exchange takes place? A market.

And, umm, what in hell has the method of ownership got to do with markets anyway? You can have markets and capitalism, markets and socialism…..

Please do carry on…..

On that corporate income tax incidence thing

One of the things that I\’ve been ragging Ritchie about is his insistence that corporations and companies do so too pay tax. I say they don\’t, that it\’s some combination of workers, customers and shareholders that do.

When I present something that show sthat economists are absolutely certain about this he usually mutters something about it being absurd, blackboard economics, doesn\’t happen in hte real world. His true bile is reserved for a paper by Mike Deveraux who indicated that the workers\’ loss could be more than 100% of the tax rasied from the corporate profits tax.

Deveraux isn\’t to be trusted as he\’s just a shill for the bosses apparently.

So this is interesting:

As a theoretical matter, it has long been understood that it is nonsensical to say that businesses bear tax burdens (see, for example, Seligman 1899). The burdens created by business taxes must be borne by individuals, including shareholders and other owners in the form of reduced after-tax returns, workers in the form of lower wages, and customers in the form of higher prices.

Atkinson and Stiglitz (1980) drew attention to the possibility that using Harberger’s (1962) celebrated tax incidence model, corporate income tax burdens might be borne more than 100% by workers, whose wages could fall so much in response to the reallocation of resources triggered by the corporate tax (reduced corporate output and greater non-corporate output) that owners of corporations actually could come out ahead. So the identities of those who bear the burdens of business taxes depend very much on economic circumstances. These circumstances are potentially discoverable with empirical analysis.

The whole paper is actually as it\’s an empirical study of who really does bear the burden (and very interestingly done as well. Almost Levittian in the way they seek out the data set which allows them to test their hypothesis).

But do note that \”Stiglitz\”. Yup, the same Joe Stiglitz who gained the Nobel. The (lefty) Nobel Laureate who says that it is at least possible that the corporate income tax diminishes the workers\’ wages by more than the revenue raised.

Something which, if true (and the references to that paper allow a lot more investigation), means that the corporate income tax is not progressive. It is actually regressive and thus we\’d do well to abolish it really.

Astonishing finding!

The great unasked question is the incidence of bank and other financial institution profits – who is losing to ensure bankers profit in other words.

Yes, it\’s our favourite retired accountant again.

The economy is zero sum. If one person is to make profits then someone else must be losing that money. Positive sum transactions are therefore impossible.

The only slight problem with this idea is that those societies which operated on this basis were and still are shit poor, while those that recognised the positive sum nature of voluntary transactions are as rich as Croesus.

Odd that really.

Oh dear oh dear Polly

It is to snigger.

Hurrah! says Polly, Obama\’s going to do something about the banks!

And then goes on to list a whole series of things which will change: absolutely not one single one of them has Obama even hinted at changing.

There\’s also a few lovely misunderstandings:

But check their taxes and something else emerges: in 2006 Cadbury paid £205m in tax – though only a token £1m was paid in Britain, while 14% of its turnover is here. Why was that allowed to happen?

Because it\’s the law perhaps? If you pay tax somewhere else (for example, you manufacture somewhere else, make profits somewhere else and thus pay tax somewhere else) then you don\’t pay tax again on the same profits here. This really isn\’t rocket science.

Cadbury won a court ruling saying it could relocate its tax affairs to Dublin provided the transaction was at least \”not wholly artificial\”.Gordon Brown boasted that Britain was open for business, and now most of Britain is sold. As the tax expert Richard Murphy points out, the Anglo-Saxon model has left few Anglo-Saxon businesses: France and Germany do things differently.

And as R. Murphy never quite manages to point out, France and Germany do not do such things differently. For the rules on corporate relocation are not made by nation states. Here, they\’re made by the EU. Tax residency for a company is where the brass plate is. Companies have the same right to move their tax residency as people do or this is one of the fundamental building blocks of the Single Market. Free movement of people, goods and capital and yes, \”legal persons\” such as companies have the same freedom of movement as \”natural persons\” like you and me.

Richard Murphy points out that the London Stock ­Exchange churns vast numbers of shares daily to the dealers\’ short-term benefit, while Warren Buffett makes higher profits sitting on his shares long term.

And Richard Murphy, when he designs his new and wondrous system of using bonds as investment vehicles, finds that he has to design a secondary market in them as well even if he does bury it in one throwaway sentence.

I\’ve actually warned Polly before (directly as it were) that she really shouldn\’t be relying upon Ritchie as a source of analysis of the capital markets. For sadly, he knows very little about them and near nothing about the economics of them.

Extremely worrying

Obama\’s plans for changing the way Wall Street works. I\’m still pondering myself but think that there\’s good value in there. However, here\’s our favourite retired accountant:

Those of us who have been calling for massive reform for a long time are entitled to say better late than never……There’s no doubt Wall Street did not expect this. Nor London either, to where the contagion will rapidly spread, I suspect, to our benefit on this occasion.

Makes me wonder if my initial impression is correct, finding agreement there.

Or here\’s the Wall Street Journal:

Phony populism aside, yesterday Mr. Obama introduced his first serious idea into the debate on reforming the financial system. In calling for an end to proprietary trading at firms with a federal safety net, the President showed that he now understands an important principle: Risk-taking in the capital markets is incompatible with a taxpayer guarantee.

Under the President\’s still-sketchy plan, firms that hold government-insured deposits or are eligible to receive cheap loans in an emergency from the Federal Reserve would not be able to trade for their own accounts. The firms could facilitate customer orders as brokers have always done and continue to underwrite new issues of stocks and bonds, but they could not make bets with their own capital or own or invest in hedge funds.

Yesterday\’s announcement is a critical departure from the reform plan Mr. Obama introduced last year—largely incorporated in the House and Senate bills written by Barney Frank and Chris Dodd. Those plans all sought to expand the universe of too-big-to-fail companies eligible for taxpayer rescue. Mr. Obama has at last joined the most important policy discussion: How to eliminate the moral hazard now embedded in the U.S. financial system.

Now that does make sense. Which leaves me with the problem of finding myself greeting the proposals on the same side as Ritchie. Very confusing.

D\’ye think he actually understands what is being proposed?

Today\’s Ritchie

He doesn\’t fail us yet again.

So, man calls for tax on banks. Or bonuses. Or, well, just make the bastards pay more money, right?

Tax levied.

Man complains that tax is not actually being paid by banks or bankers. Nope, it\’s our pension plans which are paying this tax.

Remember, this is the man who tells us that tax incidence is simply an invention of the right wing neo-liberals who want ensure a good supply of starving babies for our fricasses.

I look forward to Ritchie\’s condemnation of Billy Bragg

Billy Bragg:

I had told her that I am withholding my tax until the chancellor of the exchequer acts to curb the bonus payments to investment bankers at RBS.

Mr. Murphy:

Since property rights are inseparable from the duty to pay tax – both coming from the same source and being indivisible –  the right to hold property is equally and exactly matched by the duty to pay tax. So anyone arguing a tax is not legitimate has at the same time to say property rights do not exist or that government is illegitimate. Those are the options. I think that is what is being said. Those….(…)… who seek to justify tax crime and the avoidance of obligations to government seek to undermine the state and the society we live in. we need to be aware that the choices to be made are ultimately as blunt as that. And it is the very essence of society that we are arguing for when we defend the right to tax.

Billy\’s being anti-democratic you see.

Off with his head, obviously.

Today\’s Ritchie

Sigh. Being anti-tax is anti-democracy now.

Richard Teather:

This is attacking a classic use of a tax haven, as explained in the previous chapter, in which a person resident in (or otherwise subject to the taxation system of) a highly taxed country places his capital in a tax haven where it can earn untaxed income. While there are many cases where the home country does not tax foreign source income (such as the UK’s non-domicile exemption discussed above), most Western countries have a worldwide taxation system that seeks to tax the worldwide income of its residents (or all of its citizens in the case of the USA). This tax haven income therefore does not cease (legally) to become liable to tax merely by being earned offshore: it is still liable to tax and the investor has a duty to report it to his home tax authority. In practice, however, if the investor does not report his income, then the home country can have great difficulties in discovering and taxing it, particularly if the haven country has strong banking secrecy laws.

While I am not seeking to condone dishonesty or criminal activity, from an economic perspective this is merely another example of tax competition: indeed, it is often necessary behaviour in order to take advantage of tax havens. Without the willingness of some to engage in this sort of activity, tax competition would be much less effective and therefore reduce the benefits that flow from it for the rest of us.

OK. So people breaking the law limits the ability to impose restrictive laws upon us.*Shrug*. Semms pretty obvious to me. Put the tax on cigarettes to high and people will smuggle them. Put the tax on booze too high and people will smuggle that. As indeed they do. Put the tax on tea too high and people will smuggle that, as indeed they did to the point that at one time 75% of tea consumption in England was smuggled.

People who evade (ie, break the law to not pay them) taxes place a limit upon how high tax rates can be.

As I say, *shrug*.

People breaking the law by rioting in the street put paid to the poll tax as well.

Ritchie sees this differently.

I added the emphasis: what I think he is doing is condoning criminality.

This is supposedly done, you note, top preserve the right to property. This, however, is an entirely false argument. Since property rights are inseparable from the duty to pay tax – both coming from the same source and being indivisible –  the right to hold property is equally and exactly matched by the duty to pay tax. So anyone arguing a tax is not legitimate has at the same time to say property rights do not exist or that government is illegitimate. Those are the options.

Now note that Teather does not say that people are right to evade tax. Only that by their doing so they they make tax competition more effective. That is, that there are effects from their doing so, effects which are beneficial.

Note also that no one is saying that tax is not legitimate: only that taxes which are too high will be evaded thus there is a limit upon how high taxes can be put.

I think that is what is being said. Those from the right and the financial elite who seek to justify tax crime and the avoidance of obligations to government seek to undermine the state and the society we live in.

No, we\’re just observing that tax rates above a certain level can lead to a fall in revenues collected. You know, observing what happens in the real world? This Laffer Curve thing again?

Do click through to see the comments as well. Most fun.

Today\’s Ritchie!

The man\’s quite wonderful.

Removing the stimulus will involve pain; lower growth, higher unemployment and political unpopularity. But policy-makers don’t like lower growth, higher unemployment and political unpopularity. They enacted the stimulus in the first place to avoid it! At what point will they decide they do want lower growth, higher unemployment and political unpopularity?

Given the choice, they won’t, ever. So it will be imposed on them (and therefore us) by a suddenly less generous bond market via a government funding crisis.

That\’s a comment from Societe Generale. Essentially, politicians would like never to have to make either spending cuts or tax rises because to do so creates political unpopularity. OK, this isn\’t the most refined example of an exegesis of public choice theory but it\’s fair enough for all that.

And what will force choices upon the politicians? The running out of money to borrow in a less generous bond market. Note that all this takes is people being unwilling to purchase bonds at the prices that the government would like to sell them (ie, they\’d like a higher interest coupon attached than the govt would like to attach). If the government can\’t roll over old debt nor issue new debt to cover new deficits then interest to be paid on the debt rises and eventually (at some point, maybe close in time and maybe far away) all the govt income is being spent on interest on the bonds and the whole structure collapses. Of course, before that actually happens (although there are governments which have gone down that way) there\’s a change of behaviour forced upon the govt by the realisation that they cannot keep borrowing at anything like sensible prices. Retrench or trigger either a complete collapse of their borrowing capability or trigger a massive hyperinflation by attempting to finance the deficits by printing money.

Note that this doesn\’t require any power grab by bankers, doesn\’t require even collusion. All it requires is that, \”umm, you know, UK PLC isn\’t offering me enough money to take the risk of future inflation. Naah. I\’ll stick it in France PLC instead.\”

Now Ritchie\’s reaction:

So there we have it: banker’s attitude to democracy is stuff electorates, we’ll get what we want by imposition.

Have no doubt about it – the fight with bankers is about who rules. And the antidemocratic elites of finance (for that is what they are – in banking, accountancy and the legal profession) want to rule. Democracy is not for them. And they’ll precipitate a crisis in it to get what they want.

Aren\’t you happy that someone with such a clear eyed and rational view of The City and government debt is advising the TUC on their suggestions for both tax policy and City regulation?

This is also good:

The Masters of the Universe are clueless. All they know they want is the power to continue to purloin assets for their own benefit at cost to the rest of it. So long as they can do that, by capturing our savings, our pension funds, our bank accounts and our tax revenues for their own benefit, then they’re happy. If they can’t, they’ll impose their demands on us.

But the politicians still listen to them – so granting them power. And the time has come for bankers to lose that power. They have to loose the power to create money, the power to dictate markets, the power to impose policy, the power to ravish economies.

Connect that with the above and the most important phrase is \”the power to dictate markets\” when in fact what is meant is the power of markets to dictate to politicians. Markets of course simply being us voting with our cash: that is, Ritchie\’s not in favour of us, by the simple act of deciding what we do with our own property, being able to tell politicians that their latest bright idea is in fact a pile of shite.

Which of course is why he advocates capital controls: none of us should be allowed to take our money out of the ambit of British politicians. For it\’s not really ours at all: no, no, how simplistic, it\’s society\’s, to be used as society, distilled through the wisdom of those like Ritchie, determines.

He\’s also praised Anne Pettifor\’s idea that the government should just pass a law saying that banks have to lend to the government at very low interest rates. Yup, that\’s another one. We should get less for our savings because Gordon Brown is fiscally incontinent.

There\’s a phrase to describe this sort of policy: \”financial repression\”. And it\’s just as bad as any other form of government repression.

Now, aren\’t you really glad he\’s advising the TUC?

Today\’s Ritchie!

Marvels:

This, I stress is not a minor difference. This is the two bodies being fundamentally at odds with each other and with the IASB being absolutely in the wrong.

The IASB promotes the mark to market model. This is the absolute reverse of what accounting used to be when it came to bad debts. Accountants always used to anticipate losses on debts and make provision for them. This was prudent.

But come mark to market and securitised loans so long as there was a market for the security no provision for loss was allowed EVEN IF the underlying assets were obviously not performing: the market ruled value and prudence could not overtake. So there was no provisioning. Imprudence ruled. Losses could only be recognised when they had occurred with regard to the vast majority of bank debt.

So, of course, IFRS accounts allowed bank profit to sky rocket as loss provisions fell.

And then the world fell apart because bankers believed they could lend and never make a loss.

That is completely and utterly the fault of the International Accounting Standards Board.

No wonder Basel disagrees with them.

And Basel has to win this one. And all accountants should support Basel because prudent may be boring but it’s what good accountancy is about.

Rightie ho. IASB are evil bastards bringing the world closer to the precipice because they\’re in the pay of the Grey Aliens running the accounting firms. Or something. But definitely the baddies and we should all be siding with the Basel Boys.

So, what do the Basel Boys say about this idea of provisioning through the lifetime of the loan rather than only at the moment it all goes sour?

Here.

The Committee is promoting stronger provisioning practices through three related
initiatives. First, it is advocating a change in the accounting standards towards an expected
loss (EL) approach. The Committee strongly supports the initiative of the IASB to move to an
EL approach.

Oh. It\’s the Grey Aliens who actually suggested the expected loss approach, the IASB who brought the whole thing up and the Basel Boys fully support them in having done so.

Methinks Ritchie might have allowed his enthusiasm too long a leash there.

Independent evaluations of books in blurbs

Ritchie\’s got a book out.

Impeccably researched and packed with new insights, this groundbreaking book exposes financial capitalism\’s best kept secret.\”

John Christiansen, Director, Tax Justice Netork International Secretariat, London.

Nice to see someone entirely unconnected with Ritchie, someone with no political, economic or even working link, providing such a glowing review.

Tempus Mutandis

What a difference a few days makes for our Ritchie.

Jan 4th.

businesses don’t pay taxes. People do.

Rather curiously on NI I agree with Worstall.

Come on guys. You need to agree a line. You can’t both be right.

Employment taxes are bourne by employees.

Jan 6th.

First it gives lie to the argument that taxes on employment are paid by employees

Employment taxes are not bourne by employees.

Ho hum….

Fourth Ritchie of the day!

This is really just to remind us all of it.

I say: businesses don’t pay taxes. People do.

Ritchie says:

Rather curiously on NI I agree with Worstall.

Excellent!

So, R. Murphy says that it is individuals, not companies, that pay national insurance.

So, marginal tax rates are not in fact 40% at the top end. They\’re 40% plus what is it, 12% employees\’ NI and 13% employers\’ NI?

Ah, no, the NI cap on employees\’ NI is about or below the top end tax bracket, isn\’t it?

Right, so top end marginal tax rates are thus 53% or so.

But wait! we\’ve also got the upcoming rise in the top tax rate to 50%.

And guess what else? Ritchie thinks that we ought to lift that employees\’ NI cap. Everyone should pay it on all their income above the minimal threshold.

So the tax system he\’d like to see is one of 50% plus 13% plus 12%. A top marginal tax rate of 75%?

Don\’t forget, Ritchie says that individuals pay NI.

Umm, anyone think we might be going over the Laffer Curve inflection point here?

Third Ritchie of the day!

You lucky, lucky people you.

Stock market returns have been (by the S&P) negative over the past decade. This is true but miselading. We were having rather a boom in Dec 1999 for example.

But:

This is not chance: this is reality. Markets have run out of steam. They have no more value to add unless and until more people have access to more wealth in the world – something markets themselves cannot deliver and which those who run them resist. Put simply – those with wealth have found out there is a limit to how many new white goods, cars, music, and IT you need. And most of the rest are poor and can’t now afford houses, let alone anything else. In that case markets can’t expand.

A tad Marxian (no, not Marxist, just influenced by) don\’t you think? Capitalism will collapse of its own inherent contradictions stuff: what will the market do when there are no more markets to exploit?

But let\’s just concentrate on this part:

They have no more value to add unless and until more people have access to more wealth in the world – something markets themselves cannot deliver and which those who run them resist.

We seem to have got the horse and cart arse about tip here. Markets, that voluntary exchange thing, are the mechanism by which value is added so that there is more wealth in the world so that there is more for people to have access to.

And what have we seen in recent decades? Why, we\’ve seen the expansion of markets around the globe. What else have we seen? The largest creation of wealth that can be shared in the history of our species. And what has the result of that been? Ever more people able to share in this newly created wealth: which in turn has led to the largest fall in human poverty since Eve voluntarily exchanged an apple with Adam in return for the knowledge of rumpy pumpy.

Anyone like to post Ritchie a copy of the GCSE economics syllabus?