The Last Ditch

The Bolshevik Broadcasting Corporation profiles the Taxpayers' Alliance

Link: BBC NEWS | Politics | The campaign group: Taxpayers' Alliance.

The Taxpayers' Alliance, like the UK Libertarian Party, is an institution that should have existed for centuries. It is unbelievable that British taxpayers are so passive, so docile that, until recently, they never established a group to represent their interests. As the linked article notes, such groups exist in other major democracies.

This shows just how successful Britain's Leftist mainstream has been in establishing the idea that taxes are good per se and that public spending is somehow more moral than private spending. In truth, of course, taxes are good to the precise extent that they are accurately directed to beneficial purposes. Taxes which are wasted, lost in fiscal churn or otherwise misdirected are not good at all. Unless, that is, you are the holder of a sinecure public sector "non-job" or a businessman ripping off what Wat Tyler over at Burning our Money (the blog I would read if I were restricted to just one ) calls "the Simple Shopper."

On trips to the United States I have always been impressed by the way their press holds government to account for its spending. People there are relatively well-informed (and suitably sceptical) about "pork barrel" politics and public sector waste. The fact that they must fill out their own tax returns and write cheques for their tax bills focuses their minds on how much of their labour is taken by force to be consumed by others.

Perhaps the worst innovation ever in Britain was "PAYE" (Pay As You Earn). Employers deduct tax "at source" and give it directly to the government, paying their employees only the net amount. Most employees only look at the bottom line on their pay slip. They never see their tax money and think of their net income as their earnings. Yet they are working until June each year as effective serfs of those who derive their living from the state.

Whatever the cause, in Britain, the press has failed dismally to hold government to account over expenditure. The formation of the Taxpayers Alliance has finally ensured that the point of view of the productive part of the population is heard, if not yet nearly as loudly as that of those demanding an every-increasing share of others' earnings.

It's saddening that the Taxpayer's Alliance regards the BBC's subtle hatchet job as a good write up. In an email bulletin to us members of the Low Tax Coalition, Matthew Elliott (the TPA's Chief Executive) writes of Brian Wheeler, the author of the BBC piece;

He's very complimentary about our work and the way we campaign for lower taxes and better government - and he seems to have got a real handle on what we're about.

This, despite the fact that Wheeler manages, by focusing on Matthew's denials, to give prominence to the idea that the TPA is "a Tory front." Indeed he begins by saying it was;

...founded in 2004 by a group of "libertarian" Conservatives, frustrated by what they saw as the party's decision to ditch its traditional tax cutting message

Don't you just love the way he holds the concept of "libertarian" at arm's length with the linguistic tweezers of quotation marks, as if it were something very smelly indeed? He goes on to say (bearing in mind that one "admits" only something bad);

Mr Elliott freely admits that the Taxpayers' Alliance message - that the state has become bloated and wasteful and that Britons are paying too much tax - is essentially the same as any number of other right wing think tanks and pressure groups.

So an organisation which questions the use of public money is automatically "right-wing", a "Tory front" and (horror of horrors) "libertarian?" I hardly think any members of the Labour Party (who ought to be just as concerned to see their tax pounds wisely spent) are going to sign up on the basis of that account!

We have a long way to go in building public awareness. Election-swinging millions now live off the British taxpayer without the slightest compunction. First amongst them are the politicians who (during intervals from gorging in the public trough themselves) buy votes with the product of other peoples' work. 

The TPA is doing a great job and I urge you to support it.

Top US accountability officer quits over job constraints

Link: Top US accountability officer quits over job constraints - Yahoo! News.

Perhaps I spoke too soon in lauding the US system of government for allowing its Comptroller General to inform the voting public of the true, dire, state of the nation's finances. The gentleman in question, David Walker, is making an early departure from the US Government Accountability Office (GAO) to head a new public interest foundation.

In a press statement, he said;

As Comptroller General of the United States and head of the GAO, there are real limitations on what I can do and say in connection with key public policy issues, especially issues that directly relate to GAO's client -- the Congress

I wonder what those "real limitations" are.

It's amazing how often politicians attempt to hide the facts, rather than face them. It seems to be a defect in democracy itself that, since so few voters are paying any real attention, spin, lies and suppression of data work better, politically, than good performance. The more "professional" politics becomes, the more dishonest it seems to be.

Perhaps it's time to brush the dust off my plan (patent pending) to appoint legislators by lottery so that they are truly representative of society (and unable to form such lasting conspiracies against the public interest as the Labour, Conservative and Liberal Democrat Parties). Or perhaps we need term limits on legislators so that no-one can become a career politician.

Of course, it would be far simpler to shrink the state to such an extent that being a legislator could - as it once was - be part-time voluntary work.

YouTube - GAO: "USA is living beyond its means"

Link: YouTube - GAO: "USA is living beyond its means".

I don't feature this video to gloat at the financial mess the USA is in. After "the Greatest Generation" came "the Greedy Generation" which lavished unfunded benefits on itself. It happened in Britain even more than in America. My generation has paid, and my children's generation (if they are foolish enough to stay in Britain) will pay the debts which were run up by our fathers and grandfathers with their unfunded health care, state education and pensions schemes. All were described as "free", but they have cost dearly. The only plan of the people who conceived them was that we subsequent generations would pick up the bill. It was a demographic pyramid scheme, which went hopelessly wrong when the baby boom turned out to be a one off. The frantic attempts to pack our small island with immigrants is a direct consequence of that, as the baby boomers try to create the demographics they imagined when they laid their greedy plans.

I post the video rather to demonstrate - and to honour - how public accountability functions in a real democracy. Anyone who imagines the British Government would allow a public official to give such an honest public account of our national finances is deluding himself. Yes, the candidates in the current Presidential elections are promising to increase public expenditure further, even though present commitments are unfunded to an awesome extent. But the information is there for any citizen - or for any journalist - to call them out on their imprudence. The US press regularly does. In Britain, alas, we have only our dear and worthy friend Wat Tyler.

Our position is every bit as bad as, if not worse than, America's. Yet our press has utterly failed to hold the government to account. Our journalists have lazily swallowed the myth of Gordon Brown's "prudence." As for Britain's equivalent to America's Comptroller General, what can one say?  He isn't fit to hold a candle to Dave Walker.

h/t Devil's Kitchen

Shall the twain ever meet?

Today I attended a debate between businessmen and academics advocating investment in China vs India. The audience was told to imagine it had $500 million to invest and must choose between the two countries. I thought the result was a clear win for China, though the chairman diplomatically declared it a draw.

I have a personal interest in this. After Moscow, it is likely that I will move to set up a new practice in another large emerging market, which could easily be China or India (or Vietnam or Turkey or Brazil). From a personal point of view, there is much to be said for all these options. I would be proud to assist the development of the world’s greatest democracy. It would be great -after all my years in Eastern Europe - to work in English in a Common Law environment. India’s legal institutions look like home right now and I share most Englishmen’s warmth towards the country.

On the other hand, what a privilege it would be to play even a minor role in the full return to the world of its oldest continuous civilisation. For most of human history, the Chinese were the leaders in business, technology and the arts. Some ideological wrong turns have put it behind “the West,” at least in business, but it is far from clear to me that China belongs there. Its performance in the past years suggests the contrary.

Turkey would allow me to “complete the set” by working in the third of the world’s families of legal system. Brazil has a more appealing lifestyle than any country I have ever worked in (not excluding dreary, puritanical England). My friends who work there speak highly of life in Vietnam too.

The debate was at a higher level than that. The markets are (as we are being forcibly reminded right now by the cleansing fire on the horizon) far from perfect. But billions, nay trillions, do not flow on entirely irrational grounds. My personal career choices will be constrained by the markets’ view of my next destination.

As always, it is quite a shock to hear China and India compared. Business favours China as the next big thing, despite the fact that - as one speaker put it - “the success of your investment will depend on the leadership skills of the 73 million members of the Chinese Communist Party.” The same speaker (a Cambridge professor) went on to praise those skills and the “remarkable leadership achievement” involved in getting China to her present position on the world economic stage. Her “superb infrastructure” was praised time and again although this is a country with piped water to less than 10% of its population and zero political freedom.

India is seen by business as big, messy and anarchic. Her very democracy is presented as a disadvantage, as engaging with the electorate it makes it hard to deliver the roads, utilities and other infrastructure necessary to support development. It is firmly on the “too difficult” pile for many potential investors. Sometimes the hypocrisy of the West can shock even me.

As the crisis in capital markets leads to what one speaker today called “a flight to prime”, it is not as if the world's capitalists will have the resources to hedge their bets on China by investing in India too. Choices will have to be made and, from what I heard today, they will be driven by ease of access and general investor-friendliness as much as by anything else. At the moment, those criteria favour China.

A country, like India, that requires a potential visitor from Russia to give up his passport for as long as 28 days to get a visa, should frankly grow up. International capital flows depend on international capitalists travelling. If an humble lawyer such as I could not contemplate staying in one country for so long, no fund manager with global investments can possibly do so. I have had to cancel my attendance at a conference in Mumbai for just this reason. My choice was to give up my passport for a month in Moscow, or sit in London for a working week to get a visa faster. I couldn’t afford to do either. That's plain stupid.

So is the behaviour of India's legal profession, which will not allow its lawyers to be employed by - or be in partnership with - foreign lawyers. The international law firms are key to foreign direct investment. It's nothing to do with their nationality of origin and everything to do with their presence in the world's key financial markets. The London law firms are not great because they are English; they are great because they support the biggest international financial market. The New York firms are not great because they are American. They are great because they support the activities on the biggest financial market. Deny them access and you tell their clients to "be afraid. "

Funds investing “other people’s money” (quite probably your pension fund, dear reader) must do all necessary “due diligence” (including obtaining legal opinions from serious firms) before committing. The idea that Indian firms, organised as they are along the lines of English dental practices, are going to do that is simply ridiculous. If China and Russia can tolerate the running dogs of foreign capitalism, so can India.

These issues aside, isn’t it sad that capital should favour a communist-led country because of its ability to facilitate the infrastructure required to make investment easy? I have a soft spot for India. I would love to see the world’s largest democracy prosper. Nothing would make me prouder than to be part of that. I hope the competitive pressure from China will force her to get her act together and - in particular - to build infrastructure and speed up decision making.

Her advocates in the debate forlornly tried to make virtues out of India’s failings. For the sake of India’s people, I hope the country can do better than that. For the time being, however, my next posting is far more likely to be Shanghai than Mumbai. I hope this blog can be published from behind the Great Firewall of China.

Liveblogging economics in Paris

Evan Davis, the BBC Economics Editor is addressing the conference I am attending in Paris. My God, but he’s condescending. He is so used to addressing the peasantry on IngSoc TV that he seemingly cannot adjust to an intelligent audience. The moderator praised him for "making complicated things seem simple," but his style of presentation annoyed the hell out of me. Ignoring the "Play School" tone of voice and listening to what he's saying, however, it's quite interesting.

He is positing three scenarios (and putting a 33% probability on each of them);

1. Rebalancing: Americans, Brits et al  have been spending too much and saving too little. The Germans, Chinese et al have been doing the opposite. This will now reverse and after a pause all will be well.
2. Inflation: If you have overgrown the economy "beyond its true capacity" by 2-3% a year for a few years, you get inflation. You need a slowdown for a corresponding period to squeeze inflation out of the system. It limits the ability of the central banks to reduce interest rates. This is a slowdown as medicine and it has to hurt to work. If this scenario is correct, then the mistake we made was to assume that the China effect was permanent not temporary. In other words, we took the price reductions on cheap goods from China as being permanent and adjusted our lives accordingly, forgetting that China's increased output would lead to increases in raw materials prices and other costs.
3. Recession: Clasically, this is defined as two consecutive quarters of negative growth, but is better thought of as a vicious circle. A feedback loop of slowdown causes more slowdown and so on. Individuals are afraid of the slowdown they see around them, rein in their spending and save for what seems an increasingly likely rainy day. It’s a matter of “behavioural economics,” where people cease to be rational actors. The confidence factor is crucial and a collapse of confidence can be disastrous. That’s what happened to Japan in the 1990’s and it could be as bad as that for us in the West this time as it was for them, if the irrationality of the downside mirrors the irrationality of the recent upside. The parallels with Japan continue as their slump was associated with the sort of banking crisis we are having now. On the positive side, our banks are acknowledging their losses more quickly and (apparently) more honestly than the Japanese banks which went into denial and consequently leaked bad news over a long time, undermining confidence in the process.

He concluded by blaming the central banks of the world (especially the most aggressive ones, such as the Fed) which have encouraged us to spend to the detriment of our personal balance sheets. First we fooled ourselves with the dot com bubble and then we fooled ourselves with a property prices bubble. We are unlikely to find another bubble with which to make us comfortable with spending money on Chinese goods, however aggressive the central banks try to be.

He took a straw poll of the people in the audience which showed us as divided 50:50 between his scenarios 1 (optimism) and scenarios 2 or 3 (pessimism). He commented that the proportions were very similar when he did the same thing at Davos recently. I fell into the pessimistic camp, but only because he asked it about the Western economies specifically. I am quite bullish about the emerging markets of the world in general, and in Russia/China/India in particular. Davis was inclined to agree, commenting that the "catch up element" in their growth will allow them to do better, although their growth will be slowed by the global slowdown. However while he acknowledged there is a view that  emerging Europe and China have "decoupled" from the United States economy, he remains skeptical, commenting that it's what people want to believe.

Given that he had no view as to which scenario was most likely, it's hard to know how anyone in his audience should adjust their business plans. However, since he gives equal probability to his two pessimistic scenarios, he seems to share my view that the question is (for the USA, Britain and Western Europe, at least) not "will it be bad?" but "how bad is it going to be?"

Nearly two million 'wrongly' get benefit

Link: Nearly two million 'wrongly' get benefit - Times Online.

1. The coffers are empty.
2. Unemployment benefit is cheaper than disability benefit.
3. Higher unemployment is to be expected anyway as the economy goes into recession.
4. A new "government advisor" finds that the "right-wing tabloids" were right after all.

Case study: The £120,000 couple

Link: Case study: The £120,000 couple - Telegraph.

The Telegraph is supposed to be a Conservative paper, but this feature today reveals how socialist thinking has penetrated British souls. Wealth is not a high wage, but enough capital to produce an above average income. "Shopping at Waitrose" does not equal wealth and "driving an Audi" (a rather boring German car, beloved of the poor in spirit) certainly does not.

My secretary in Russia employs a nanny and aspires to a second home in the country. She will certainly achieve it. The poverty of Britain's aspirations after 60 years of state socialism makes me weep.

National Debt

  Link: The Devil's Kitchen: National Debt.

Don't click through to the linked post if you are offended by bad language or economic mismanagement. Frankly, the details of the latter are so shocking, that you will be a sensitive soul indeed if you even notice The Devil's Kitchen's foul language. Such is the scale of New Labour's prudence economic ****wittery.

The Office for National Statistics (click graph to the left to enlarge) shows the National Debt as a percentage of GDP. In a sustained period of GDP growth, one might have hoped for a prudent government to reduce that proportion. Indeed, while honouring its first term pledge to keep to Conservative spending plans, Labour did so. The story has been rather different in the second and third terms; Labour's "Post prudence years."

After some googling, I was able to find figures for UK GDP since 1997 and make the graph below (click to enlarge). This shows GDP from 1997 to 2005 (no figures are yet available for 2006 and 2007).

If the government is spending £60 billion more than it takes in tax at the end of such a good economic run, imagine the carnage when GDP growth turns down. It is hard not to share DK's view that;

They are spending money like they are just trying to empty the piggy-bank as swiftly as possible so that whoever takes over from them is utterly ****ed.

By the way, you may be amused by a screen shot (below, click to enlarge) of what happens if you try to find the above basic data on the Office for National Statistics site.

To add to all this, our darling Chancellor has further increased the National Debt by underwriting the obligations of a failing bank. It is difficult to discern what relationship this bears to his puppet-master's famed "prudence."  The consequences of Northern Rock being allowed to fail (with the established depositor protection for the small savers) would have been as nothing, compared to the mess we are wading into now.

When the government removes the lampposts in London on "global warming" grounds and makes private ownership of ropes illegal for "health and safety" reasons, we will know that they know they have been rumbled.

Blame faulty tax credits for bad behaviour

Link: Blame faulty tax credits for bad behaviour - Telegraph.

Apart from the ritual denunciation of Thatcher (there wasn't enough money in the world, Mr Field, to subsidise the blighted British industry of my youth) this article makes so much more sense than anything coming from the Tories. People living close to the working-classes know the dispiriting effect on couples striving for an honest life of the millions of "unwaged" (formerly known, pre-spin, as "the unemployed') living better on benefits. A young woman working all hours to supplement her unskilled husbands meagre wages told Mrs Paine how she struggled to talk him out of giving up. Their "disabled" neighbour had just taken delivery of  a new car provided by the State. "She's more agile than me but has never worked. Everything that needs doing at her house is paid for by the Government. We never stop working, but will never own a new car in our lives"

I am heartily sick of the sons of Fettes, Eton and the Scottish manse wrecking the lives of decent men and women, while importing third world peasants to keep the economy ticking over. How can they live with their consciences?

Study shows 250,000 problem gamblers in UK | Special reports | Guardian Unlimited

Link: Study shows 250,000 problem gamblers in UK | Special reports | Guardian Unlimited.

Perhaps so, but these are the two worst. At least the other 249,998 do it with their own money.