Ragging on Ritchie

Labour is treated as a burden in accounting, by choice.

For a corporation, business, what else is labour but a burden? Money has to be paid out for it – a useful definition of what is a cost, a burden, or not, no?

Is there room for more corporation tax when wages comprise a bit over 60% of GDP and profits a smaller part at around 8% in the USA, but disproportionately the rates of tax on them is widely different, with labour bearing a far larger part, as is apparent.

The reasonable question to ask is why is that? And is that fair?

It would seem that the race to the bottom in corporation tax has resulted in a fundamental shift in tax burdens from companies onto individuals. Tax After Coronavirus (TACs) has to tackle this issue.

Companies don;t pay tax. As the Mirrlees Review points out:

Corporations provide a convenient contractual arrangement that allows
groups of individuals to own assets through a separate legal entity offering
the benefit of limited liability. However, neither separate legal identity nor
limited liability provides a rationale for a tax on company profits, since the
terms and conditions under which creditors are willing to lend to companies
will adjust to reflect this legal protection.
Perhaps the most important point to keep in mind when considering
company taxation is that it is not meaningful to think about the effects of
taxes on companies separately from the effects of those taxes on the
individuals associated with companies.

Even Snippa’s question, let alone his answer, isn’t meaningful.

And nor was there a clue that there was any real commitment to an industrial policy

Governments shouldn’t have an industrial policy. They always end up with crowing about tractor production statistics……

Snippa is, of course, unpaid by Fair Tax Mark.

I was asked by the Fair Tax Mark to look at this issue and draft a response for then, which has now gone in.

Hmmm…..

It’s remarkable how incredibly badly he understands things:

Currently economics and accounting agree that the future does not matter – they literally discount it, and pretend all that matters is here and now. But that conflicts with our human priorities. Accounting and economics are in real need of reform

— Richard Murphy (@RichardJMurphy) July 6, 2020

Discounting the future.

He should try reading the Stern Review, long discussion of it in there. Of course we discount the future. Because human beings do, righteously. A pound today is worth more than one tomorrow. Partly the time issue – interest – and partly uncertainty – the risk premium.

These things just do exist. Discounting the future – no, this does not mean the future is assigned no value, only that it is assigned a lower one than today – is thus just a part and parcel of being a being with a limited lifespan facing uncertainty.

As the Stern Review describes at length.

Now, it’s possible to have interesting conversations about the rate at which we should discount. But the base idea that we should is so obvious that it’s entirely remarkable to even think of opposing it.

We’re back in that world where Snippa just never does consider that other people have thought through the same problem occasionally.

So, the new video explaining economics.

If economics is about the allocation of scarce resources then we have t know what is scarce. And my point is a simple one. Economics has treated money and financial capital as scarce. But it isn’t the real constraint in the economy. The planet is the real scarce resource – and so are we.

Economics has asked the wrong questions I hope to ask better ones.

Economics does not assume that money is scarce. It assumes that the things that can be deployed by the use of money are scarce. Therefore money is not the real constraint, real resources are.

Among which we include the planet. At least, those parts of it which are scarce – say, refined metals, or even economic ore bodies. Which is why they have a price.

So his explanations of economics are starting off with a straw man. Which doesn’t bode well for the future of the series.

UK manufacturers are to export surplus medical ventilators after they produced 14,000 to treat coronavirus patients only to find that most were not needed.

Boris Johnson hailed the success of the “ventilator challenge”, which began in mid-March when he urged British industry to help produce up to 30,000 of the devices amid fears that NHS supplies could be overwhelmed.

Snippa telling us how lovely his Green Plan will be:

A huge number and range of jobs will required to install, service and update this
massive retrofitting programme. They will include general builders, roofers and
labourers, plumbers, heating and air conditioning engineers, joiners, window fitters,
insulation specialists, plasterers and renderers, electricians, carpenters, painters and
decorators, solar PV roof fitters, engineers, building scientists and researchers.

Jobs are a cost, not a benefit. This is detailing how expensive the programme will be.

And guess what he and Hines don’t do? That’s right, consider how much of this insulating of houses has already been done…..

But what landlords will soon learn us that when there are no tenants their priorities have remarkably little value. Evictions work when there are new tenants who can pay who are queueing for property. But such tenants will be few and far between soon. Then the financial crisis really begins.

At which point rents fall given the lack of willing tenants at current prices.

The government could solve this, of course. It could provide statutory deferral periods. And mandatory rent cuts.

Why should the government involve itself in something that is already solved?

But the point is that those models are all political. There is literally nothing in the economy that does not have a power relationship built into it – the tax system being a perfect example of that. It is power alone that results in income from wealth being taxed less than income from work; nothing else can explain that.

From the opening of a Piketty and Saez paperpaper:

According to the profession’s most popular theoretical models, optimal tax rates on capital
should be equal to zero in the long run–including from the viewpoint of those individuals or
dynasties who own no capital at all. Taken literally, the policy implication of those theoretical
results would be to eliminate all inheritance taxes, property taxes, corporate profits taxes,
and individual taxes on capital income and recoup the resulting tax revenue loss with higher
labor income or consumption or lump-sum taxes. Strikingly, even individuals with no capital
or inheritance would benefit from such a change.

Sure, you can disagree, as Piketty and Saez do. They buttressing their disagreement by changing the social weighting given to such things as inequality.

But do note what it’s not about – power. The standard economic models are about economic efficiency. You can indeed start to claim that efficiency ain’t all and as a bald statement it’s true. The question actually becomes when should we prioritise efficiency and when some other thing we’re interested in?

To claim that the non-equality of capital and labour income taxation is because of power is to be ignorant of the basics of the subject under discussion.

But then, you know, Snippa and economics.

Worse, if capital can move freely and labour can’t then wages will be suppressed.

The UK imports capital – must do, we run a trade deficit. So, we gain more capital to add to the labour we’ve got. Labour doesn’t get to move – sure, he’s over egging that it cannot rather than just less – therefore there is less labour here.

So, the UK ends up with less labour and more capital. How does this suppress wages?

Note to Boris Johnson: the opposite of free markets is not communism, it is regulated capitalism where everyone gets a fair chance to compete on a level playing field because a wise government ensures that is the case.

— Richard Murphy (@RichardJMurphy) June 30, 2020

Markets and capitalism are entirely orthogonal to each other. We can have free market not-capitalism as John Lewis proves. The opposite of free markets is unfree markets, something that historically hasn’t worked out well. The basic problem being quis custodiet etc.

Unless, of course, breaking us for the next stage – the end of democracy stage – requires that reduction to our knees stage first of all, that is.

I can’t rule that out. But maybe, just maybe, that is the plan, after all and it’s me that’s being conned into thinking something else. In which case I’ll put on record my awareness of this now just in case it’s true, which is at least plausible.

After all, the only possible reason the elected government doesn’t implement the plans of the unelected Sage of Ely must be because those elected intend to destroy democracy.

Obviously.

And, third, why the presumption that QE will end? Why is that being assumed?

At some point it will, as even MMT says. We cannot forever monetise fiscal policy, not without doing a Weimar we can’t.

That stranded assets problem:

Fund managers have known about stranded assets for more than a decade, and still they left pensioners exposed to them. Now those assets, and the pensions, are going up in financial smoke https://t.co/34AFTddKBJ via @financialtimes

— Richard Murphy (@RichardJMurphy) June 30, 2020

Well, yes, can’t we just see the effect on pensioners of that asset write down?

Fool.

Three things. First, £9 billion is not huge: it is just a blip in the £100 billion that is required to be spent each year to deliver the Green New Deal, and leaves the vast majority of houses thermally inefficient still.

Citation needed.

And when we do go look it up don;t we find that most of the housing stock is already insulated?

So, about Wirecard Snippa tells us that:

They will not pass company law that requires that accounting is responsible to all stakeholders, and not just shareholders.

They have not been willing to address the failure of the IFRS to address tax abuse via country-by-country reporting – which they have refused to consider.

They have accepted that the IFRS will not go near climate change because they say they are not competent to do so.

As a result, governments tolerate the accounting standard setter refusing to address the two biggest issues in accounting today because the profession does not wish these matters to be addressed.

And across the whole neoliberal world this is considered acceptable by governments.

Well, OK, that’s the Spud Blog Generator Mark I revving up. But the fun part is this:

But don’t get excited. The FREP apparently had just 15 employees and a budget of €6m. BaFin may be little better.

BaFin, which is a state body, was hugely, horribly, worse. Actually trying to jail the FT reporters working on the story.

Spud still can’t grasp that the state can be worse.

John Turning says:
June 27 2020 at 11:14 am
It seems that you took more interest in the troubles in Northern Ireland because you have a part Irish ancestry.
That pretty well is racism. It’s unavoidable. You take more interest in subjects that connect to your identity which includes your racial background.
Taking the same amount of interest in civil strife in countries with lots of brown people would be indicative of not-racism – but only a Martian could be so impartial.
Adam Smith has written well on this.

Reply
Richard Murphy says:
June 27 2020 at 12:27 pm
Welcome to the banned list

For of course Adam Smith was wrong about everything, having been before Spud invented proper economics. How could someone not be banned for that?

I hate racism. I always have. I have reason to. As someone who appears to have all the characteristics that have offered undue advantage (white, male, etc.,) I have most definitely experienced racism.

Maybe people don’t recall now how the Irish were once treated in this country. I lived that experience when growing up. If anything identities you as Irish when you don’t otherwise sound it the name Murphy does.

The casual name calling was normal, whether it be Paddy, Spud or whatever.

The way he describes his background he’s about as Irish as I am. That is, not, but close enough to be eligible for the passport.

As we know, Ritchie tells us that the solution to the current woes is that rents be cut. For landlords have the resources to weather the problems.

Shopping centre giant Intu enters administration

Hmm.