Ragging on Ritchie

According to figures from the finance ministry this week, the so-called differential contribution, a special rate of income tax for the highest earners, generated an additional €400m last year. That compares to a forecast of €1.9bn.
It is not exactly a minor shortfall. The tax only raised a quarter of what was expected. This year is not likely to prove much better. Revenue is forecast at €650m, €1bn less than was planned. It has proved a spectacular flop.
Of course, it is not hard to work out what went wrong. The better-off simply adjusted their income to bring themselves under the threshold, or else they moved elsewhere.

True, the French extra tax hasn’t worked out. But it’s not, as far as I know, actually a Laffer response. It’s more fun than that:

That is, the initial numbers used to show how much the tax would raise were wrong. Wrong simply because the Treasury didn’t know how many people there were with how much of which type of income would be affected by the new tax. That is, this is failure by Hayek, not failure by Laffer.

Recall the Nobel lecture, The Pretence of Knowledge. The core lesson of which is that the centre, government, never does know enough about something as complex as the economy to be able to plan in detail. It’s not just wishes and all get to be an autocrat for a day, it’s not intentions, it’s simply the lack of that detailed knowledge that makes it all so difficult. There is also no cure for this – the Hayekian contention is that the centre will never, cannot, have the knowledge in the necessary detail.

Failure by Hayek is indeed different from failure by Laffer. Even if the end result is much the same, the plans of ants and autocrats gang aft agley….

Failure, yes, but failure for a slightly different reason.

Spud wants the Bank of England to lose its independence so that government can determine monetary policy. More democratic that way. The Observer on why this isn’t a good idea:

That The Don is in favour of it should give Spud thought, obvs.

Inflation – thus interest rates – would be higher over time without CB independence. Further, for any given monetary stance interest rates would be higher. Because everyone and their Granny will assume that the politicians will run interest rates too low, inflation too high. Just because that’s what everyone will, logically, think the politicians will do.

As ever, it’s not that Spud is wrong, the task is only ever to work out why.

Defence isn’t fundamentally about armaments. It’s about legitimacy.

If people do not believe a society is worth defending, then no quantity of weapons will save it. And neoliberalism, which is designed to reward the few, cannot now demand sacrifice from the many.

That is why I think the only credible defence policy now is a politics of care: a society that values everyone, delivers for everyone, and earns loyalty by legitimacy.

Spending more on the NHS will show PutHitler what’s what, what?

I was persuaded then, and remain persuaded now, that the costs of economic growth are seen in the climate breakdown that challenges our very existence, not just our economy.

They gave that laddie the Nobel for exploring the externalities of the economy, right?

In my opinion, this is entirely unacceptable, and not just because it will have been agreed under coercion. I have always found it repugnant that US bases in the UK are considered, for all practical purposes, to be US sovereign territory.

In this context, I entirely agree with Zach Polanski that the time has arrived for us to reconsider the hosting of US bases in the UK, and, through base sharing, in places like Cyprus, from which support has been provided for the Israeli genocide in Gaza.

NATO should, at this moment, be reconsidering the whole reason why it permits forces from a hostile country like the USA to be located in its territory, with a necessary transition for their removal now being a requirement for peace in Europe.

He really does need to grasp that the Greens choose those who gain vermine by a vote of party members, not decisions of party leaders sucked up to.

I also very much love that reference to Cyprus. The US bases in the UK are not sovereign US territory in any manner. The UK bases in Cyprus are, in every manner, sovereign UK territory.

Don’t ignore UK unemployment: it’s the breeding ground for domestic fascism

Well, OK then. Therefore raising the minimum wage is a precursor to fascism then. Good to have that sorted.

The number of employed people in the UK has fallen again, particularly in shops, restaurants and hotels, reflecting weak hiring,

OK, so that’s what we would expect if it were the min wage causing unemployment. Low end jobs turn out to be no jobs at the higher pay rate.

Third, no wonder Labout has the poll ratings it has. This unemployment is the deliberate consequence of a combination of both fiscal and monetary policy that is intended to keep unemployment high so that inflation can, supposedly, be kept low, as if there is an obvious relationship between the two when, as a matter of fact, there is not.

Spudnomics manages to analyse low end unemployment – that precursor to fascism – without even mentioning the cause, the min wage.

But still, we have that news just in from Ely. A higher minimum wage causes fascism.

If Trump chooses to threaten Denmark militarily over Greenland, Denmark cannot respond militarily. It does not have the scale. But it does have the sort of leverage that matters in the modern global economy because Denmark is not just a small NATO state of about the size of Scotland; it is also a critical supplier of medicines to the United States, and the US healthcare system is built in a way that makes rapid substitution for the drugs it supplies nigh on impossible.

The most significant of its pharmaceutical exports is insulin. Reported trade figures suggest that around 74% of US insulin imports (by value) come from Denmark. That is not a marginal share. It effectively means that the USA is dependent on Denmark for the insulin it needs, with no alternatives being available, and millions of Americans require that insulin continuously. A disruption in supply would not, then, just be an inconvenience. It would not even create rationing. It could create clinical harm and a domestic political crisis.

And from this we will get to a critique of neoliberalism!

This is globalisation backfiring on the USA. The usual claim is that markets optimise supply chains and diversify risk. That story is false. The reality has always been that, at a global level, markets concentrate profits and, in doing so, often concentrate production. Denmark is where that concentration of insulin production has ended up.

Abject fucking tossery, of course.

It’s 74% “of imports”. The vast majority of insulin used in the US is produced in the US. True, true, Novo Nordisk – a Danish company – is one of the three major producers. But they produce inside the US as well as in Denmark.

But Spudnomics, see?

I have argued that AI can, and probably will, cause inflation, and it can, and probably will, cause unemployment,

It’s difficult to understand how AI can create inflation and it’s really, near impossible to grasp how it will create both inflation and unemployment. But, you know, Spudnomics, a rare and different beast.

That combination of high inflation and increasing unemployment is, however, something that is said to be impossible in orthodox economic models.

Quite. But apparently….

That threat from AI has to be dealt with by regulation. It can’t   be dealt with by the standard techniques of inflation management that we’ve got now, because they won’t work because there are no relationships left which they are meant to manage

Oh, right, now that will make the economy more efficient then, right? A speshul price for electricity for what btw? Running a data centre? But cat pictures are not AI. But AI is done in the same data centres, no?

Instead, we have to challenge AI directly by charging it for the whole cost of its electricity.

Sigh.

That’s the key point now.  AI cannot run the economy into the ground; it should instead be managed. The government needs to stay in charge.

That typical Spudcraftian Horror that something might happen without a tick on a clipboard.

The rest of it’s just a rehash – AI is the new excuse that is.

Someone we all know has decided to analyse a post about liberalism. In doing so they’ve moved the meaning of “liberal” from the use in the original post being analysed – the American meaning of liberal – to the British one – classical liberalism.

Hilarity ensues.

There is no coincidence here, at all, of course. When draconian politics wants to suppress debate, it has a new weapon to do so, and one that is immediately effective. It just turns off the internet, and the whole population affected is discombobulated as a result.

Let’s be candid: that would be the consequence here, and let’s not pretend it could not happen, because it very obviously could.

Do we need to worry about a world in which that might happen, and how we could communicate in that case, not least when traditional telecommunication networks have, very conveniently, disappeared? I am not listing it as a high priority right now. I am noting it as an issue. How could we communicate in that case?

This following his clipping of this:

We’d all use Starlink, from Elon Musk. As my mate from Iran is trying to do in his reporting on events there.

Sigh.

He was interested in the traffic data for my YouTube channel. I suggested that so far this year, we are averaging 95,000 views a day.

Hmmm. YouTube runs on 45% to Google, 55% to creator. Ad rates are $3 to $5/mille.

£60k a year? -ish? Worth doing, obviously. But once the laddie is paid – gotta be min wage at least, right? – that’s £40k, spread around the household and…..we can see why he was mentioning that he’d like a grant or three that paid him to just think, right?

Also, my base prejudice about the internet. If you can gain a big US following then you can do fine. Other markets not so much. Not that I’m going to but if I were then anything I did would be aimed at the US market for this and this reason alone. That same level of “mid-level success” is 10x what anything UK is.

But it does not follow that pensions are the problem. On the contrary, state pensions are one of the defining achievements of the modern welfare state. Invented by Bismarck, of all people, they are a promise that old age will not mean destitution, dependency, or fear. And they were never meant to function only when the demography is convenient. They were meant to exist precisely because human lives do not run to the demands of Treasury spreadsheets.

The more important point to note is this. When the Financial Times implies that if we want to keep pension spending high then we have to raise taxes, it slips in an assumption that is almost never made explicit. It implies that the only way to manage pension spending is either to cut it or to increase the tax burden on those who work. It also implies, by omission, that wealth, and the huge unearned incomes it generates, are largely untouchable in this and any other debate on the contributions to be made by way of taxation to managing the finances of the state.

That is the real issue here. Pension reform has become code for telling ordinary people to work longer, accept less security, and shoulder more risk, while the owners of property and financial assets continue to accumulate returns with remarkably little obligation to the societies from which those returns are extracted, and yet it is not pensions that have undermined Europe’s capacity to cope with ageing. What has undermined it is chronic underinvestment, weak wage growth, and a housing system that facilitates rent extraction while the state refuses to act as a builder of productive and social capacity. If the economy cannot support its pensioners, it is not because pensioners exist. It is because too much of the economy has been structured to serve wealth rather than wellbeing.

If European states want pension systems that endure, the answer is not austerity by demography. It is to rebuild real economic capacity, and to tax income and gains from wealth, and even wealth itself, properly. That is not an extreme position. It is what a serious society would do.

So, taxes have to rise if we’re to continue with decent pensions then. OK. He’s spent a lot of effort there proving what he desires to deny really…..

Universal basic income (UBI) is often dismissed as unaffordable, unrealistic, or politically impossible. But the conversation I had recently with Howard Reed and Elliott Johnson of the Common Sense Policy Group at Northumbria University left me less sure of that.

The Group’s research challenges the Treasury orthodoxy in two important ways:

Public investment multipliers are far bigger than assumed, and

Even current spending has a strong multiplier effect, meaning it can pay for itself

And if the economic case for investment is stronger than we’ve been told, then the political question changes too: why aren’t we investing in that case?

Even I can’t be bothered to wade through the bullshit to check but an assumption.

They’ve looked at the gross effect. Which isn’t correct. What we require is the net effect.

So, as we all know all, taxation has a deadweight effect. Economic activity that does not happen as a result of taxing. Sure, sure, we can use the money raised – and MMT doesn’t change this as we must still tax to curb the resultant inflation – to do such wonders. But we lose what would have happened without the tax.

Thus any multipliers must be nett – outcome minus what would have happened without the action.

At current levels of taxation deadweights are estimated – very rule of thumb – at 30 to 50% of the sum raised. Therefore multipliers must be greater than 1.6 to 2x in order for the outcome to be greater than what is lost.

Are they?

The comments on this blog are a perfect example of that free thinking, enabled by the work we do.

Artificial intelligence is often presented as a growth driver. I argue the opposite risk is emerging.

AI-driven cost-cutting threatens jobs and demand, with the risk of a GDP decline,

He’s arguing that increased labour productivity is a bad idea.

Sigh.

The US attorney’s office inquiry, which includes an analysis of Powell’s public statements and an examination of spending records, was approved in November by attorney Jeanine Pirro, the NYT reported, citing officials briefed on the situation.

In a statement on Sunday evening, Powell insisted the legal threat was “not about” his testimony last summer, or congressional oversight of the Fed. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions – or whether instead monetary policy will be directed by political pressure or intimidation,” he said.

“I have served at the Federal Reserve under four administrations, Republicans and Democrats alike,” Powell added. “In every case, I have carried out my duties without political fear or favor, focused solely on our mandate of price stability and maximum employment.

1) Despicable, Trump, fascism, democracy at threat.

2) Just what I’ve always said, interest rates should be politically set, centreal bank independence is a nonsense.

Presumably, being Spud, he’ll say both.

All this requires that I take time to think about what to do next, taking into account the risks that exist. That is what I propose to do today.

It will, quite soon, look like I am bird watching, and I will undoubtedly be out in the open, with a pair of binoculars around my neck, except when I might be having a coffee, but will I necessarily be able to avoid thoughts of a world that is very, very mad as a consequence of the actions of Donald Trump, which are now getting worse than anything I anticipated, this quickly, even though I entirely accurately described him as a fascist seeking to destroy democracy from time long before it became popular to do so?

I am not sure I will be able to avoid those thoughts, because we now have the reality of that prediction coming true to face.

How, then, do we live with a nagging fear of fascism, and the fact that our government, and so many other governments, and so few commentators, appear willing to call this fascism when its very obvious impact already exists all around us? That is the question I need to consider.

All eyes turn Elyward as we await the solution for our times.

If defence spending requires austerity elsewhere, the first and most fundamental question is not financial but moral and political and is instead what exactly are we trying to defend in that case? It should be obvious that a country in which public services are degraded, poverty is allowed to rise, and insecurity becomes a normal condition of life is not a society organised around shared purpose or mutual care. If, at the same time, as would appear to be the assumption, the interests of the wealthy are protected from sacrifice, the message is unmistakable: defence is not about collective security but about preserving an unequal status quo.

We must allow Vova to invade in order to save the NHS.

Artificial intelligence is not virtual, clean, or weightless. It has a rapidly escalating physical cost in electricity, water, and emissions—and ordinary people will pay the price.

Research shows that AI data centres could soon consume electricity on the scale of entire nations. At the same time, AI cooling systems are diverting vast quantities of water in a world already facing severe shortages.

This video asks the questions politicians are refusing to confront: who pays for AI’s energy and water use, who profits, and whether unlimited AI growth is compatible with planetary limits, democratic accountability, and basic human needs.

AI may promise growth—but at what cost, and to whom?

Richard J Murphy gains the benefit: he uses AI to produce his slop after all. At what cost? The diminution of the collective IQ of the species, obviously.

He was, of course, referring to the tanker that had been renamed and reregistered this week when sailing, without a cargo, from the Caribbean to Russia, and which was boarded by US troops, apparently airlifted from UK bases yesterday, with the active support of UK naval forces.

I question the validity of that action: it looks very like piracy to me.

By definition piracy cannot be committed by a State.

Sigh.

On the other hand this is amusing:

The ship was sailing in international waters when seized. The intention of the seizure appears to be to bring the crew to trial in the USA for sanctions breaking. If that was happening, I would condemn the crime, but the arrests and seizure of the vessel still appear to lack conformity with international law. The US attitude now appears to be that anyone can be arrested anywhere by them, and the UK appears to be endorsing that view by supporting that operation. I wonder what will happen when others apply that logic? The obvious question to ask is whether the right the US claims is peculiar to them, in which case it is not international law but organised thuggery and law breaking that is in operation, or whether it is universal, in which case, is anyone now safe?

Britain once went to war against the US over this very issue. The Americans saying you cannot board and inspect and the UK insisting the Royal Navy could do anything it liked, anywhere, anywhen. The RN was right, of course. Well, for about a further century they were.

Let me, however, return to the subject of my tweet. It has been well known for decades, and was documented by me in my 2010 book on tax havens, that essentially disposable tax haven companies, enjoying significant levels of opacity as to their operations, ownership and control, are widely used in shipping to limt the information available on the identity of those managing more marginal shipping fleets of vesels used for santion busting and other illict trades. The call for accountability on this issue has been going on for a long time, requiring proper corporate identities with open registers of beneficial ownerships and officers, as well as proper accounts on public record, but although the UK has the power to enforce this requirement in its Overseas Territories and the Crown Dependencies, in none of which are such things properly available, nothing is really happening to effect the required levels of openness.

If anyone wants to know why “shadowy maritime activity” is happening, it is because successive UK governments have facilitated it. We are to blame.

And that’s even more amusing. Thje seized tanker had just been reflagged as Russian. Ever so subject to British law that is, right?