Dear God Above, this man’s job title includes both of the words “professor” and “economy” does it?

This blog is about why Brexit is bound to harm ordinary people. The list is long.

First, there’s the cost of tariffs. Put simply, we import more than we export and there is little sign of that changing. The result is we are bound to pay more in tariffs than we raise, and tariffs, like VAT, are regressive. That means more is paid as a proportion by lower income households than higher income ones. The result is a double whammy: we will all be worse off but lower income households will be worse off by more.

We pay more in tariffs than we raise, because we import more than we export?

Whut? Who pays tariffs? Consumers in the country the imports are headed to. Who collects the tariffs? The government of the country the imports are headed to.

So, the French government collects the tariffs on British exports going to France, the people who pay them are French consumers. And the British government collects the tariffs on French exports to Britain, the British consumers being the people who pay them.

That is, the mount of tariffs we pay is equal to the amount of tariffs we raise. Must be, can’t be any other way. A tariff is upon us, not them.

And yet there’a a university in the British Isles which employs this man as a professor of a subject that includes economy in the title?

Tempus fugit eh, Eheu fugaces.

37 thoughts on “Dear God Above, this man’s job title includes both of the words “professor” and “economy” does it?”

  1. To be fair there was the moron who wrote the report on corporate subsidies who included depreciation as a subsidy. Employed as a proper academic in a red brick up north somewhere. Seen in that light, Murphy’s inability to understand tariffs seems about par for the course for the shallow end of the academic pool. Somewhat disturbing to think he’s teaching people, but such is life.

  2. “and tariffs, like VAT, are regressive.”

    Leave the EU and VAT is no longer a legal requirement, so even if you were to accept the substance of his argument, you could resolve it by balancing out tariffs with reduced VAT.

  3. So – its *your own government* which *chooses* to impose tariffs. So if tariffs are regressive and ‘bad’ then he can lobby that government to NOT DO IT and so avoid this negative consequence of Brexit.

    He’s basically saying that he thinks one of the Brexit consequences is that you all will start punching yourselves in the face.

    Also – aren’t the taxes paid by the lower income then turned around and re-claimed as state-aid? Not as good as not taking the money in the first place (again, which the government has the choice of not doing) but they’re getting at least some of it back (and probably more) in aid. Which has the benefit of keeping the poors in line and voting for the party that promises more goodies.

  4. I am surprised that nobody has picked up on overseas students being defined as “export earnings”? Given the amount of state aid to this sector in many ways they represent a liability. Also, doubtless given the amount of urban housing now for students they are a factor in the “housing crisis”. For those that go home trained etc. they might well work for rather lower wages than in the UK adding to the price differences that contribute to the decline of our real exports. Also, we are told there is the problem of the low numbers of working class UK students being able to access higher education.

  5. Are tariffs on imports always paid by the consumers in the country imposing the tariff? Doesn’t it depend on how competitive the market for the item in question is?

    Lets say one imposes a 10% tariff on imported cars from Germany, but none from Japan. Mr BMW importer faces having to put his prices up by 10%, thus making his product uncompetitive vs (say) a Lexus or Jaguar. He and the manufacturer in Germany decide instead to pay the tariff between them, and thus keep the price of their cars the same in the UK. Tariff thus not paid by consumers but shareholders in BMW and the UK importer.

    Whereas if you’re importing something that cannot be got anywhere else tariff free, or substituted with home products, then the 10% goes straight on the price and the consumer does indeed pay the tariff.

    Thus the amount paid by the consumer would vary from 0% to 10% depending on the type and nature of the product.

  6. @Rob,

    Porches aren’t particularly easy to import though are they. Since they all have to be bespoke made to fit on the front of your house rather than being made by the thousand in a factory in Germany.

  7. “we are told there is the problem of the low numbers of working class UK students being able to access higher education”: that’s because the feeble buggers won’t get off their knees and bloody apply.

  8. Ten points and almost all of them are bollocks – I did find this one interesting

    ”Fifth, UK productivity, and so income, will crash as a great many highly trained people leave the country. It does not matter whether there are quotas or anything else: life for many is being made very uncomfortable in post-Brexit Britain and skilled people will go elsewhere. That will reduce our national income at cost to us all.’

    Perhaps one of the upsides of Brexit amidst the devastation is that he might sod off to Ireland….

  9. Let’s not be mistaken here, by “we” he means the Courageous State; he isn’t in the fucking consumer is he!

    So he thinks be g a net importer means “we” will pay more in tariffs than we will receive. So he’s got it the wrong way round. Cos he’s a fucking cretin.

  10. Bloke in North Dorset

    Ref V_P’s quote…

    The only time we’ve had a serious brain drain was in the ’60s an ’70s when the Courageous State was taxing the richest at marginal rates > 90%.

  11. @BiCR: does what ever happen? Importers swallowing tariffs because they are in a competitive market and will sell zero if they hike prices by x%? I don’t know in practice, i’m just hypothesising as to what could happen.

    If one takes a very competitive market, with plenty of home country production capacity, and imports available from non-tariff countries, then yes I could see it happening.

    For example, take agricultural commodities – they are 100% fungible (a tonne of wheat is a tonne of wheat, a side of beef is a side of beef) and there is plenty of UK supply capacity. Thus if EU food imports into the UK had a tariff slapped on it, but produce from outside the EU had none, they would either have to face selling nothing, or keeping their price equal to the market price and swallow the tariff themselves (if they could).

  12. BIND

    Absolutely correct but lest we forget th Curajus State exists in the real world. Murphy advocates significant and wide- ranging capital controls. The logical corollary beyond that is of course people controls, and in the real- world Curajus state people firstly need permits to move between settlements and are forbidden to leave the country. In the extremely unlikely event that Murphy’s ideas were implemented, within the changeover period I would think 15 million would be gone. Certainly I have informed my wife that with or without her, my two children will be on the first Luxembourg bound flight the following day after a Corbyn victory…..

  13. V_P: my primary impetus for emigrating was Labour’s win in 1997 but it was 1999 before I had the opportunity to make a go of it. Anything akin to a Corbyn victory would have had me off like a flash, safe harbour at the other end or no. Thankfully it remains the longest of long shots, so you can probably avoid being an asylum seeker in Luxembourg for the foreseeable future.

  14. BiND
    The only time we’ve had a serious brain drain was in the ’60s an ’70s when the Courageous State was taxing the richest at marginal rates > 90%.

    Two unrelated phenomena. Entertainers left because of punitive tax rates, brains left because salaries in the US were very much higher.

    I asked an engineer friend who had been there how much higher, and he told me he bought a good second hand car with his first pay check and had enough left over to pay the rent and feed his family.

    Luckily, things are so much better in the UK now, comrade.

  15. Bloke in North Dorset

    RlJ,

    Not only did we have marginal rates > 90% we also had an incomes and prices policy so companies couldn’t raise wages even if they wanted to. As V_P says, there was also capital controls so even if you wanted to leave it was very hard.

    Its a shame we couldn’t make some people go back and live through those times, they might have different ideas about the competency and reach of the State.

  16. “Van_Patten

    Ten points and almost all of them are bollocks – I did find this one interesting

    ”Fifth, UK productivity, and so income, will crash as a great many highly trained people leave the country…”

    Indeed. Amazing that the Murphaloon will deny that high taxes would make people leave the country because of some ill-defined inertia but apparently, feeling ‘uncomfortable’ for completely undefined reasons will make people flee in droves.

    Someone should “cut-out and keep” his ten reasons and we can re-visit them in a year or so…

  17. ” my primary impetus for emigrating was Labour’s win in 1997 but it was 1999 before I had the opportunity to make a go of it. ”

    Mine too. Took me till 2003 though (had to finish university first)

  18. Thanks for the excellent responses, especially from the superb BiCR – I do think it’s a remote possibility but both Brexit and Trump were being considered as ‘Black Swan’ events so contingency planning is essential.

    BiND – I am in favour of assisted emigration for the likes of Murphy to North Korea. I would make government expenditure on such an endeavour ‘ring fenced’. I’d even fund the classes in Korean for them, just so they can see what his ideas look like in the real world, implemented by people with considerably more intelligence than much of the UK electorate and public sector.

    Andrew C – that is one of the best points I have seen – reminds me of the only occasion prior to my ban that I was able to reduce him to silence. He implied that poor people also suffered from disincentives (probably not realising any second order consequences to that admission) and I heartily agreed with him on that – the obviously corollary is that they therefore should pay less tax, which he remained silent on…..

  19. We must hope that his students from overseas go back home to spread their enlightenment, increasing stupidity amongst our competitors.

  20. BTW – Any news from Tim so far today? Let’s hope the forces of Murphyism haven’t finally got to him? Presume he is travelling but anyone any the wiser?

  21. The halfwit seems to fail to appreciate that we are currently paying EUR 25 billion a year to avoid EUR 6 billion in EU tariffs on our exports. It takes a lot of downsides to wipe out that saving.

  22. @Alex

    Gross contribution pre-rebate might be 25 bn, but the net contribution is closer to E10 billion

    https://fullfact.org/europe/our-eu-membership-fee-55-million/

    tariffs may be 6 billion, but there will be other costs of compliance (then again there are the costs of compliance already to be in line with SEM).

    The tariffs are not the real issue (only the Murphy would believe this) it is the lost value added that might come about because of the lack of single market access – reduced FDI, reduced domestic investment. Assuming that new trade opportunities were less – which given search costs, will be true at least in the short run.

  23. Jim,

    No, that doesn’t happen — or, rather, the net effect isn’t what you’re claiming. Either the firm’s profit margins are big enough that they can afford to knock the tariff-caused price increase off the price and still make a profit — in which case it’s still actually the consumer paying the tariff, just as it’s the consumer paying the manufacturing costs and marketing and so on — or they’re not, in which case the firm won’t do it.

  24. @Ken

    “Gross contribution pre-rebate might be 25 bn, but the net contribution is closer to E10 billion.”

    The rebate is 33% of the net contribution before rebate. The rebate is about EUR 7 billion, hence the net contribution is EUR 14 billion. However if you are going to include the money we get back from the EU (including the rebate), then it is only fair to make an allowance for the cost of being tied into EU prices by the customs union, That is a hard number to fix, but the notional duty that would be imposed on imports from the EU at current WTO rates is around £13 billion a year, so the actual opportunity cost is a lower figure that roughly offsets the EUR 11 billion in cash payments we get back from the EU.

    This leaves a contribution of EUR 25 billion to avoid duties of EUR 6 billion.

  25. @Ken
    “reduced FDI” – This is a Remainer myth. Brexit will scarcely affect FDI because the UK only barely exports any goods to Europe with substantial tariffs – cars being the notable exception.

    Nobody builds a factory in the UK to fill the supermarket shelves of Europe. Anything made here for export to the EU is either high tech, pharma or aerospace related (all very low or nil-tariff), or s3ervices based (no tariff).

  26. @Alex

    The duty imposed on UK imports from the EU would fall upon UK consumers – Timmy’s point. Alternatively, I suppose you could argue that the UK has to impose duties on goods that we import from elsewhere, but this would still run into the problem that in WTO we would have some duties. So your argument is rejected.

    I’m happier with the net UK contribution as the cost of access.

    With regard to FDI you assume that the only costs are tariffs, but this is incorrect. Services suffer from trade barriers, which the SEM has begun to lower – the prime contention in the City at the moment. In addition, even goods can suffer from non-tariff barriers, which are the target of SEM. I’m not convinced that the effect will be as large as the Remainers moan, but neither will the effect be totally negligible.

  27. @Ken. The SEM has hardly changed non-tariff barriers for services. True enough passporting means that wholesale financial service providers can sell to retail customers throughout the SEM, but in reality financial companies already did that by setting up appropriate subsidiaries and having them regulated before passporting. The lack of a passporting regime won’t make any difference to wholesale markets (any more than EU companies are prevented from accessing wholesale markets in HK or NY). Most international financial companies present in London aren’t there for the retail opportunities.

  28. Totally off topic but followers of TRUK will be well aware of our Prof’s love of CBC reporting (and the fact he is undisputed creator of CBCR). Well, the French Constitutional Court (Conseil constitutionnel) has rules on 8 December 2016 that CBCR is incompatibility with the French constitution. Per IBFD “The Court ruled that such public CbC reporting disregards the business freedom (liberté d’entreprendre) in so far as it compels companies to disclose their business strategy. Although the fight against tax evasion and tax fraud is a constitutional value, the obligation to make public economic and fiscal data on a country-by-country basis will enable competitors operating in the same market to identify key elements of their industrial and commercial strategy, which disproportionally affects the freedom of a company as compared to the objective of the public CbC reporting. Therefore, the Constitutional Court declared that article 137 of the Law was unconstitutional and repealed this article from the Law (published in the Official Journal on 10 December 2016).”

  29. @ken – “Alternatively, I suppose you could argue that the UK has to impose duties on goods that we import from elsewhere, but this would still run into the problem that in WTO we would have some duties. ”

    But in many cases despite whatever tariff we put on some goods the world price + UK de minimis tariff is still less than the EU duty free price (e.g. Chinese solar panels without the 111% EU duty look pretty competitive alongside the German equivalent). The potential saving is somewhere between 0 and £12.9 billion.but nobody seems to have done a proper analysis.

  30. Off topic, or maybe on original topic – here’s a tweet from a professor of economics:

    Richard Murphy ‏@RichardJMurphy 18m18 minutes ago

    Expensive areas have few care homes because they can’t be staffed. So they won’t be paying for them either though increased council tax

    What?

  31. @ Max
    That implies that those with sufficiently high incomes that they can afford to live in expensive areas cannot afford to pay the higher fees needed. ER?

    Self-funding care home patients are subsidising local-authority-funded care home patients to the extent of 20-30%. The rich can better afford to pay the extra so expensive areas can afford to have care homes staffed by people commuting from cheaper areas – and in the expensive areas there are more self-funding patients so the care home is less likely to go bust because the local authority fee rates are less than their costs..

  32. Alex

    Passporting is hardly the massive thing that the City pretends (I smell special pleading and positioning before exit), but there are quite a few jobs tied up with EU/SEM. Post Brexit Euro clearing will go to Frankfurt and so will allied jobs – the ECJ blocked attempts to bring Euro clearing back inside the Eurozone, but post exit, this will no longer be true. We know that a lot of credit card business is dependent on SEM, yes the banks did set up subsidiaries and branches to deal with this, but the SEM – in the form of things like MIFID I and II are removing non-tariff barriers. To claim otherwise is just wrong. Will the UK remain Europe’s primary financial centre after Brexit? Most probably (99.999%). Will it lose some business. Yes. In the medium term might it grow faster, yes – EU regulation is incompetent and stupid. Doesnt mean that there will not be short run effects and impacts on FDI.

    You 0-12.9 billion is apples with oranges. It is a potential gain but not guaranteed. In addition, the EU as a trading bloc has gained some preferential access for UK exports.

    The UK pays a net E10 billion to avoid E6 billion in tariffs (your number), plus sundry non tariff barriers. There is a net effect of EU tariff barriers on foreign imports + positive/negative effects on UK exports to the RoW.

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