Basic income: good in Namibia, bad in Libertopia


11:00 am - December 28th 2008

by Don Paskini    


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Namibia is piloting a Basic Income Grant, in which every Namibian citizen gets N$100 per month until they are eligible for the state pension, with no conditions and no strings attached, paid for through higher taxes on those in need or not in poverty. It seems to have been very successful, helping progress towards all eight of the Millennium Development Goals. It helps people pay their school fees and healthcare fees, and contrary to what critics suggested, hasn’t led to people sitting around doing nothing.

So why not, as many people on here and elsewhere, from both the right and the left have suggested, introduce a Citizens’ Basic Income in the UK? After all, no one believes that the current welfare system and society, with its bureaucracy, means testing, high levels of poverty and great cost, is perfect.

There are many different kinds of basic income scheme (if you’re interested, here is a good place to start), but let’s take Chris Dillow’s proposal first:

“By abolishing VAT exemptions and zero-ratings and income and inheritance tax reliefs, we could save over £90bn. And this doesn’t touch tax reliefs in savings or capital gains.
Table C11 shows that we’d save another £121.4bn by abolishing social security benefits, £15.2bn by scrapping tax credits, and £3.2bn from the Common Agricultural Policy; all these handouts would of course be replaced by the CBI. And table C13 shows that we’d save another £6.8bn from scrapping the DTI and Department for Culture, Media and Sport.
This gives us almost £240 billion. With an adult population of 45.5 million, this would give a CBI of just over £5200. That’s £100 a week, which is £18 a week more than the basic state pension.”

There are good, and detailed, discussions of this proposal in the comments here and here. The basic objection is that there are some people who get absolutely hammered under these proposals – disabled people, poor families and people in private rented housing who are claiming housing benefit. It’s worth noting the terrible mess that the supporter of the proposals gets into on the last point in particular, ending up calling for private tenants who can’t find a job being required to do ‘workfare’ or lose their homes.

Now some of the supporters of Citizens Basic Income are quite relaxed about this – sure, some people will lose out, but reducing marginal tax rates is worth cutting the amount of money that poor families (who need to take responsibility for their decision to have kids) get, and, hey, if you can’t afford to live in London then you should move somewhere else. But leftie supporters of the basic income would quite rightly be feeling a bit nervous about this – spending £240 billion in order to make millions of poor people worse off and set up a new, coercive bureaucracy to force people to do menial and pointless jobs (called “soft workfare” by the Citizens Income Trust) or lose their home doesn’t sound much like social justice to me.

But happily there are ways around this problem. The problem of housing costs are significantly reduced if it is combined with a massive council house building programme, to be able to guarantee social housing at a ‘social rent’ for anyone who needs it.

And there’s no reason why a basic income has to replace child benefit or disability-related benefits, it could be a new addition to the welfare state to go alongside child benefit, disability benefits and the old age pension (raised to the same level as Pension Credit). That way, no one living in poverty loses out, the benefits system is much simpler, and millions are better off. This is roughly what anti-poverty experts like Ruth Lister support, and why they are often listed as supporters of the Citizens Income.

The only problem (apart from the very significant political challenges) is that if you work out the cost of this, those on higher incomes are going to have a very large tax bill coming their way. And I think that’s the point at which Tim Worstall, Devil’s Kitchen and the Libertarian Party decide that maybe this isn’t such a good idea after all.

Paying all citizens a basic income either involves slashing the money which lots of poor people get, or large tax rises and significant levels of redistribution.

These are two very different proposals which often get lumped together in an attempt to claim widespread support for the principle of a basic income. Personally, given the choice, I prefer the way that the Namibians have done it to the way that the Libertarians want to do it.

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About the author
Don Paskini is deputy-editor of LC. He also blogs at donpaskini. He is on twitter as @donpaskini
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Reader comments


It’s worth noting the terrible mess that the supporter of the proposals gets into on the last point in particular, ending up calling for private tenants who can’t find a job being required to do ‘workfare’ or lose their homes.

Re-introduction of the workhouse, much?

I think this is a good article. I am a ‘leftie’ supporter of the CBI which I think would if it was run along the lines you suggest be a significant improvement on our current benefits system. Of course, the other significant argument for it is that it would drive up wages and make paying poverty pay virtually impossible if companies wanted to be competitive in the labour market…

“And I think that’s the point at which Tim Worstall, Devil’s Kitchen and the Libertarian Party decide that maybe this isn’t such a good idea after all.”

Hmm. First comment on Chris Dillow’s first post that you link.

“Again, fully agreed. Difficult to think of a better way to reform the welfare state.”

By, erm, Tim Worstall.

Us bastard neo-liberals eh, supporting such awful things like a CBI, a higher personal allowance to take the poor out of the tax net (not necessarily at the same time as a CBI, of course) and so on.

Hi Tim,

I read your comment to mean that you agree with Chris’ idea of CBI being paid for by scrapping housing benefit, child benefit, disability benefits etc., i.e. if it cost essentially the same as the current welfare state (+ scrapping a few quangos). As per the article, I think this is would absolutely hammer lots of poor people.

Would you still support it if it involved retaining housing, child and disability benefits, mass council house building, and being paid for via c. £100 billion extra taxes on higher earners? Because those are the only grounds on which I think it would make sense for lefties to support it.

5. Mike Killingworth

£5k pa will just cover the rent of a Council flat in London leaving people with no work with no money for food or clothes, let alone the fares to go to job interviews or anything else.

CBI is a tax cut for the rich in fancy dress.

“mass council house building”

Absolutely not. I see no evidence whatsoever that the State is a better provider of housing than the market. Quite the opposite.

“disability benefits”

Yes.

“child”

No.

“housing”

No.

I am willing to see taxation rise on the better off to correct what I see as the biggest problem with the current structure of the welfare state, yes. That biggest problem being the incredible marginal tax rates faced by many of the working poor. 70% is almost usual, 90% common and there are those who face over 100% marginal tax and benefit withdrawal rates. This is simply insane.

But then I don’t think that such higher rates would actually be necessary. Chris has provided a static analysis (for simplification reasons) while a better analysis would come from a dynamic one. Remove those incredibly high marginal tax rates and we’ll see people willing to work more and earn more. This isn’t, btw, “The Laffer Curve”, it’s “Laffer Curve Effects” and yes, we really do expect to see them if marginal tax rates fall from 90% and more to 20%.

Absolutely not. I see no evidence whatsoever that the State is a better provider of housing than the market. Quite the opposite.

Read the papers. Jeezus.

‘there’s no reason why a basic income has to replace child benefit or disability-related benefits’

I thought this scheme was being funded, in part, ‘by abolishing social security benefits’?

(btw, I’m not Tim Worstall)

6 – Tim W [1] – the basic income proposals that you support would have the practical effect of forcing people out of London and the South East if they can’t find a job and cutting the incomes of poor families by half or more.

8 – Tim W [2] – the idea of basic income being paid for by abolishing most or all social security benefits is the Libertopian one. But as in Namibia, it could instead be financed by higher taxes on middle and upper income earners, while keeping or expanding the current welfare state.

To be honest, you have to ask yourself whether ramping up child benefit is a good thing. I disagree & think a CBI should replace it. With a CBI, or with my alternative idea of child benefit being capped at #3 if a CBI does not exist, you might just get people like Karen Matthews, Alison Goulding & their fellows thinking twice before reproducing willy-nilly & expecting the welfare state to provide for them.

You may well say that children will suffer, but children are suffering now thanks to the present system, & would things be any worse? If it were made easier to adopt, they might have a brighter future than their “mother” can give them. It seems to me that discouraging huge families is good rather than bad & a great deal of harm is currently caused to the children of the underclass, those who live alongside them, & society in general.

As for the disabled, I support some form of disability benefit very much like DLA as it currently exists. There could also be council-provided services if need be, such as already exists now. I do not see how this is an argument against the CBI.

Social housing is necessary, as not everyone can be a homeowner, & we’ve seen the folly of pursuing middle-class “aspirations” regardless of whether the money is there through the encouragement of irresponsible borrowing. Whether it be council or housing association would depend. I have no objection to council houses being built if it can be proven that they work (which I am quite sceptical about), so long as they are not concentrated on mass sink estates as before. You could decide on a local basis whether social housing was in the public or the third sector.

So long as the arrogance of the 50s/60s estate builders is banished, social housing of either kind is probably preferable than privately rented property, especially given the relative expense of the latter. We would be better off if more organisations like housing associations & cooperatives existed. You could even call them a “third way” between capitalism & statism, if that phrase weren’t put permanently out of respectable discourse by that dildo Giddens & his mates.

“You may well say that children will suffer, but children are suffering now thanks to the present system, & would things be any worse?”

Yes, I think that if you reduced the amount that a lone parent with two kids received from a bit over £200/week to £100/week, and also removed all housing and council tax benefit, then the children would suffer, and that would be clearly and obviously worse than the current situation.

There are a small number of people who will have kids in order to get extra cash, and these people get an enormous amount of media attention. There are millions of people who are doing a frankly heroic job bringing up children on very little money, and they get very little media attention.

I think it is better, more efficient and effective and more humane to design a welfare system around the needs of the majority, rather than punishing them as part of a moral panic about the “underclass”.

“So long as the arrogance of the 50s/60s estate builders is banished, social housing of either kind is probably preferable than privately rented property, especially given the relative expense of the latter.”

Eh? The costs are going to be the same, the difference is in how they’re paid. If we subsidise private rentals for the poor (which is getting rather off the subject of a CBI) then at least we can see, explicitly, what we’re spending. If we have “social” housing built by the State then a lot of the costs are hidden. But they don’t go away just because they are hidden.

There will be a marginal difference perhaps given that the private sector’s cost of capital is higher than that of the public sector but that’s pretty much it.

donpaskini,

the basic income proposals that you support would have the practical effect of forcing people out of London and the South East

What is inherently wrong with this?

Tim Worstall, what about registered social landlords? They are not run for profit & rents are lower, but they don’t necessarily have to do with the state.

You have also to consider that, under the present system, many are in receipt of housing benefit, so it costs the taxpayer, who effectively pays landlords’ salaries.

“Tim Worstall, what about registered social landlords? They are not run for profit & rents are lower, but they don’t necessarily have to do with the state.”

I’ve no objection to anyone doing as they wish with their money. If that means paying up to build housing to be let at below market rents, carry on. It’s the tax subsidy of such that I argue about. Truly free standing social landlords? Good luck to ’em.

“You have also to consider that, under the present system, many are in receipt of housing benefit, so it costs the taxpayer, who effectively pays landlords’ salaries.”

Sure, that’s what I mean by the subsidy being explicit. If we have social landlords who are not truly freestanding (say, they get government guarantees on their debt, or more direct grants etc) then that cost is hidden.

The way out of so many of these issues is to fund CBI from LVT. In which case it has tended to be called “rent-sharing” in recent years – it is “pre-distribution” not “re-distribution”. I have a spreadsheet showing how at the peak of the market admittedly, there would have been sufficient in land values to finance £100 per week for adults and a declining proportion for children according to age roughly in line with the McClements’ scale of household composition and costs.

If you don’t capture the economic rent in land then yes, you are always going to be faced with creating more subsidy to landowners for doing precisely nada and you are going to have to find more money from somewhere to do that.

It need not even be done by some politically motivated state apparatus but through community land banks/communty land trusts.

Many of the libertarians I know support CBI, though feweer support LVT or its variants. Tim Worstall is one. Milton Friedman arguably another (he certainly favoured a Negative Income Tax though to me that implies we would still have an income tax which I personally wouldn’t!).

It is actually many on the other side of the spectrum, who seem to object to CBI on the basis that it will make people lazy and not address real needs. But the point is that even the paltry sums paid by, say, Restore, to their workers would give them some added pocket money that would not be taken off them in tax and even for the least able, the disincentive to do something to earn a little more would be removed, whilst for the better off the CBI would eventually be insignificant in all their other costs and incomes.

“CBI is a tax cut for the rich in fancy dress”

“But as in Namibia, it could instead be financed by higher taxes on middle and upper income earners, while keeping or expanding [ie or abolishing] the [current] welfare state.”

This doesn’t add up.

There are so many different, inconsistent and mutually contradictory themes in the idea of CBI that sensible discussion of it almost impossible – assuming CBI conforms to one model is disingenuous intellectual capitulation.

So before we jump to any conclusions, could we have a bit more detailed exposition of the Namibian model and place this within the various different theoretical frameworks to enable sufficiently rigorous analysis.

Until that time the cases both for and against CBI will remain unproven.

Mike@5, the reasonable expectation is that most people will, if possible, want to earn money to supplement their CBI. It’s meant to guarantee a basic standard of survival.

And I find it very odd that you seem to think your comment is a point against CBI, rather than a point against London’s disproportionate economic sway and its over-inflated property market. Both of which are problems which could be solved by either (a) LVT or (b) as per ukliberty at 14, a lot of people moving to somewhere cheaper. London weightings, in all their forms, actually subsidise the City and the multi-millionaire buy-to-let landlords.

20. Mike Killingworth

[19] Alix, why on earth should people have to move away from where all their social networks (including family) and support systems are just so that others who can afford to do so may pay a little less tax? This is a classic example of “transactional” thinking – the value of relationships doesn’t show up in economic analysis so therefore it must be nil.

Mike,
one of the reasons why London is so successful is that people are prepared to move away from their social networks to go there. I can only assume the advantages and opportunities outweigh the losses.

Alix,
I’m a bit picky about describing London weightings as ‘subsidies’ per se. Surely they support essential services without which the community would collapse – y’know, like coffee bars and sewagery. Not even multi-millionaires can live without one or other at some point during the day…

Mike: They shouldn’t. If the CBI on its own is just enough to pay the rent on a council flat, then a couple can afford to live in one in London on just the CBI, and still have £50 p/w each to live on, assuming neither does any part time work whatsoever.

If you’re single living in London, then do as I did when I moved there, and live in a shared house—if you’re from there, stay with family until you’ve got a secure income of your own to supplement the CBI.

Quite frankly, one of the reasons housing in London is so expensive is because many people want a ‘place of their own’, when they’d be better off financially and socially with housemates or a partner.

This would not force people out of the SE, in fact given that it would have to come with a removal of penalties for getting work above the benefits level, it would encourage those currently out of work completely to take part time work—last I looked, there were many part time vacancies all over London, mostly not viable for those trapped in the current system as the marginal withdrawal rate is far too high.

@Don, thank you for a nice overview article—I am, in principle, in favour of a CBI and an LVT, but the details are something that would need a lot of hammering out—raising the futilities of some of the schemes proposed is essential.

One way to prevent current children living in poverty if you remove child benefit completely (something I’m not sold on either way) could be a phased withdrawal of it? It continues to be paid for existing children but not new ones?

You could instead have a basic rate allowance on the tax threshold for children, meaning people with kids can earn more before paying tax, thus again encouraging parents to work part time, etc?

18 – thomas, this was an introductory article – there’s a lot more info in the links, particularly bignam.org about what they are doing in Namibia and citizensincome.org for basic income related research.

Thanks Don, yes, and I’m appreciative, but an introduction shouldn’t prejudice itself against the outcome if it believes in doing itself justice (otherwise it is just polemical).

I look forward to the follow-ups.

22 – good points, like you I’m sympathetic to the idea of basic income, and indeed Land Value Tax, but want to hear a lot more detail about how it might actually be feasible.

One thing I don’t understand is why there is even a debate about scrapping child benefit – it is simple, easy to administer and popular, and it is not like somehow magically children will suddenly require no money to look after or something. £25/week for children, £100/week for working age adults, £125/week for pensioners would seem like a reasonable place to start. One challenge which the Green Party (which supports a basic income) has noted is that it is quite difficult to compensate families for the loss of child tax credit – the government has redistributed a lot of money to poor families. I think it would be an absolute deal breaker for any basic income scheme if it left significant numbers of people worse off than the current system, so that is another difficult, if not insoluble, challenge.

One thing I didn’t mention is that I do think that basic income calculations should make use of the very useful research by Joseph Rowntree Foundation about what the adequate income for a dignified life in the UK is and that, e.g. basic income + full time work should guarantee someone enough money to live with dignity.

Why does it mitigate against a fairer system that a significant proportion of people may be worse off as a result?

Because they wouldn’t vote for it?

They wouldn’t necessarily be worse off anyway, if you factor in all the additional liberated employment options they would then have. And the fact that you wouldn’t have the state spying on them anymore (a good which cannot easily be valued but is still very valuable).

@donpaskini: “One thing I don’t understand is why there is even a debate about scrapping child benefit…”

As @asquith (comment 11) explained, there is an argument that child benefit creates a perverse incentive. I’m a bit sceptical myself but a lot of commentators particularly on the right make this argument.

“basic income calculations should make use of the very useful research by Joseph Rowntree Foundation about what the adequate income for a dignified life in the UK is and that, e.g. basic income + full time work”

I’m not sure if the Rowntree number to “live in dignity” is the same as the Rowntree number “to not live in poverty” of £13,400 but I’ll assume that it is.

Having made that assumption we already are at that point. Please note, the Rowntree number is a pre-tax number. Take off the tax and NI to be paid on that sum and we get just north of £11k. If you work full time on the NMW (37 hours a week say) then you earn, pre-tax, just north of £11k. So, if it weren’t for our quite disgusting tax system which charges the poor such an amount on their meagre earnings (as I have been known to put it, taxing the dustman to provide opera for the Duke) then someone working full time would, without the benefit system at all, have enough to live in dignity (or at least, not poverty).

Again, this is well off the CBI subject, but it backs up the arguments of people like the Adam Smith Institute (which, yes, I am connected with) and UKIP (ditto) that we should, as a simple matter of economic justice (plus efficiency and all that) substantially raise the personal allowance. I personally regard it as simply absurd that we tax the incomes of and hand back subsidies through tax credits to exactly the same people.

The cost of a £ 1,000 rise in the allowance is some £6 billion. Putting the allowance at £11k therefore would cost some £30 billion. We take the working poor (ie, those below the Rowntree number) entirely out of the tax net. Someone on NMW lives not the life of Riley, but at least that Rowntree number.

(Worth noting that it wouldn’t in fact cost £30 billion for we wouldn’t be doing that dance of taking and giving money to the same people any more. Plus some dynamic effects no doubt. But even if it did cost that much, anyone seriously want to argue that this isn’t a better cause than where 5% of the budget currently goes?)

“I’m a bit picky about describing London weightings as ’subsidies’ per se.”

London weightings only exist because we have national pay deals. And that we have London weightings also shows that we should not have national pay deals, for the weightings are an admission that costs vary around the country and therefore so should wages. And if wages should vary around the country therefore we shouldn’t have national pay deals. Abolish he national pay deals and have purely local bargaining for wages. The net effect would be that wages for “essential workers” would rise substantially in London and the SE….and that would of course help in filling the gaps of such workers in those areas.

Not sure how the current financial woes and housing “crash”, prove that market housing doesn’t work.

I’d like to see the government give more tax incentives for builders to concentrate on low-income housing. Regulation would need to be sensible and robust.

31. Mike Killingworth

Oh dear, oh dear.

At least Tim Worstall has exploded himself – can a man who opposes national pay bargaining but supports nationally-set tax threshholds be taken seriously?

Mat [22] – you seem to forget that London is full of “studios” and one-bedroom flats to which your “housemate” solution can’t be applied. Quite why you want a taxation system which sets out to penalise people who, for example because of emotional/mental health issues (to say nothing of widows and widowers), simply can’t live in a relationship I’ve no idea.

Aaron – do you not think that rocketing housing lists, growing numbers of reposessions, mortgage lending collapsing and rising negative equity rather point to flaws in a system which relies on eternally rising house prices and statospheric mortgages that people would never be able to fully repay if they lived longer than Methuselah and had pockets to match Donald Trump?

If I’m quite honest I find the housing situation in the UK utterly sickening. The large and growing murky world of private landlords charging massive amounts to cash-strapped local authorities for renting back properties that were originally sold under so-called “right” to buy legislation, is symptomatic of a deep malaise in our social policy. The fact is that the swathes of hidden homeless that we have right now are in part the direct consequence of a national obsession with “owning” (ie banks owning and people buying in 30 odd years of installments) homes, coupled with housing policies deliberately geared towards destroying public housing and replacing it with debts for those who can least afford them.

Mike

At least Tim Worstall has exploded himself – can a man who opposes national pay bargaining but supports nationally-set tax threshholds be taken seriously?

Who should I take more seriously–the person who shows his working and sets out with rigorous explanation why his proposals benefit the worst off, or the person who simply gripes about a suggestion?

National pay deals make little to no sense whatsoever in most sectors. It is a lot cheaper to live in Yorkshire than it is in London or even Devon (where I’m from). Due to national deals, every teaching job in Devon is over subscribed–before I met Jennie I planned to complete my training as a teacher, but there was pretty much zero chance of me getting a job there as one.

Whereas in London and other difficult areas, the opposite is true. If Schools could set their own pay rates according to local circumstance, some could save money to use on other things, others could pay more to attract better staff.

National tax thresholds would (ad could) eventually be replaced with much more localised thresholds–as a lot of spending is local, ideally most of that should be raised locally, we are one of the most centralised democracies, especially for a population of our size.

Mat [22] – you seem to forget that London is full of “studios” and one-bedroom flats to which your “housemate” solution can’t be applied.

Yes, because the current setup encourages people to live alone, thus the market is distorted. Many of them could be taken by couples, not individuals, and regardless if the system changed demand for them sould significantly lessen thus their rental value would decrease.

Nice supply/demand effect, right?

Quite why you want a taxation system which sets out to penalise people who, for example because of emotional/mental health issues (to say nothing of widows and widowers), simply can’t live in a relationship I’ve no idea.

I don’t. I want a taxation system that benefits them, by allowing them to work as many hours a week as they feel capable of without losing out on the benefits they’re currently reliant on.

/i understand the point you’re trying to make, but desriously, try to at least understand the points we’re trying to make in response rahter than attack straw men?

but desriously,

Seriously. Seriously. Gah! Damn tiny laptop keyboards.

35. Mike Killingworth

MatGB, I have two difficulties. First is that I don’t know how you’d get there from here – changing the dwelling mix is a 30-year job minimum and your proposals would create a shedload of hardship and misery in the meantime. That is not to say that nothing should be done – I would support a Council tax supplement to be applied to under-occupiers, probably on a time-related basis (e.g. 1% per year for every spare room after the first one). That would be doable. Councils could also be a lot more proactive than they are in tackling under-occupation in social housing – at the moment they don’t bother because the courts rightly interpret “suitable alternative accommodation” very strictly. But there is clear scope for more incentives (a comprehensive relocation/removals service, rent-free periods/cash etc).

I don’t really think that the problem of recruitment in the teaching sector is wholly down to pay. It’s very easy to suppose that we are the homo economicus beloved of theory, but people working in the field of behavioural economics know darn well that we’re not like that at all. Indeed, if we were like that, advertising and PR wouldn’t exist, other than to provide purely factual information.

If you are saying that governments should monitor the quality of life in different parts of the country and seek to equalise it, there is a case for that: it will however always be in flux and it is far from immediately obvious how far it is due to market failure and in any case raises deeper questions such as how urbanised/suburbanised we think society should be.

And even if I accepted the ethical case for workfare – which I don’t – the time to introduce it is during a period of labour shortage, not at the start of the deepest and longest recession since the 1930s.

But AT – at the bottom of all our housing woes, private and public, are the controls on planning that meant that the supply of housing will always be outstripped by demand.

Mike @20

Why not? I’m about to. I can’t afford to live anywhere near where I was born (London), so I’m moving 300 miles away. What is so disastrous about that? As Thomas says, plenty of of people make the move the other way (poor sods).

38. Mike Killingworth

Alix, it’s one thing to do it in your 20s, quite another in the second half of life…

I guess any system is going to seem unfair to someone. But overall is a given system more fair to more people than another system, without penalising a minority too harshly?

It is all very well talking about people with emotional/mental health problems, people who don’t want to move away and have to make new friends, particularly if they are older (perhaps worth pointing out that many pensioners have moved overseas), but I think Tim Worstall, Chris Dillow, and Mark Wadsworth’s ideas (I only mention them because these are the people I hear about CBI and raising the personal allowance from etc) should be explored further than that.

As for the properties London is “full of”… I don’t understand that point. London has many thousands of studios, one, two, three bedroom flats, two, three, four, N bedroom houses, advertised by private landlords at the moment, and I am told (although I don’t know if it’s true) that it is a renter’s market at the moment.

Mike, I came from part of the country that a large number of people retire to. Moving in retirement to somewhere nicer that better suits you is fairly normal.

Given that this would affect a statistically small number of people who only have the state basic pension and are single and who live in London and who don’t want to share accommodation with others (I’ve previously cited my old landlady who let her spare rooms out in previous threads), can you change the record or come up witha serious analysis?

I can’t see your objection covering a statistically relevant proportion of people, but I’m a liberal by inclination—show me some facts and I’ll rethink my opinion.

The biggest problem of housing costs within London is the Greenbelt and usage/zoning restrictions on property. Free up more brownfield land for property development instead of light industrial and you can get a lot more accommodation, thus reducing prices.

There’s plenty of light industrial units going empty in the rest of the country to take up the slack of businesses relocating.

41. Mike Killingworth

[39][40] I don’t think that either I or anyone else in this discussion has been providing much more than anecdote. FWIW here’s another one – long long ago the London County Council built seaside bungalows for pensioners and very popular they were indeed.

I don’t expect to convince people who think that the operation of the market is basically benign. A truly free market as found in economics textbooks may well be so, but one of the preconditions for that is perfect information, which in itself disqualifies it from any real-world relevance. A second problem is that it assumes that market prices reflect individuals’ utility (the original “mark to market” scam) and even if they do so in the aggregate the theory itself actually tells us that there will be losers as well as winners. And don’t get me started on economiic liberals’ unlimited capacity to wish away transitional costs…

I would say that a left-winger would be someone who is both socially liberal (i.e. relates welfare to individuals rather than to groups) and critiques markets as they actually are, rather than as theory pretends them to be. It seems to me to be odd that now of all times people wish to take a rosy view of market operations: like fire, they are a good servant and a bad master.

And this still leaves us with the difficulty I discussed in my Xmas Eve piece: even at its best, politics can only deliver justice, whereas for the good society we also want compassion, whose precondition is intimacy – each of us can only project it onto one person at any given moment. That is why the anarcho-syndicalist vision, otherwise so seductive, has always failed. Power, of its nature, is projected by the few onto the many – it can never be compassionate.

“the theory itself actually tells us that there will be losers as well as winners.”

It does? You might want to write that up you know. A certain Nobel in it…..if you can prove it of course.

Think about what a market actually is. It’s where people undertake voluntary exchange. That’s it, that’s all it is. Voluntary exchanges simply do not take place unless both participants in one think that they benefit from that exchange. There are, thus, no losers in a voluntary exchange, there are only winners.

It is true that some will end up with more than others but that does not mean that those with less are losers. They are still better off than if the voluntary exchanges had not taken place. Markets are win/win I’m afraid, not win/lose.

On the London point, I do have to ask why it is necessary for the entire country’s policy to be dictated by the needs of the minority in this way. The fact that you can’t get a broom cupboard in London for the same amount that you could get a three-bed terraced house in Liverpool is a problem, without doubt. But wasn’t the whole purpose of giving London its own devolved assembly so that it can come up with London-centric solutions to these problems without having to hold the rest of us back?

CBI would work just fine outside of London. To go back to my Liverpool example, about a year ago I was renting a 3-bed terrace there for £425 per month (to the shock and amazement of anyone from London who I told about this). So, three people sharing that house on a CBI of £5k each, would be paying almost exactly 1/3 of their income on housing costs, leaving each with around £330 per month left over, or around £80 per week. Assuming that each person then starts work at, say, 15 hours per week at £6 per hour, they double their income and no benefits are withdrawn. Even better, there’s no forms to fill in, no letters from the council, no need to inform anyone ‘when your circumstances change’. This situation is so much better than the situation which is presently the case. I’m not a heartless bastard, so I can see that it wouldn’t work quite so well for people in London. But isn’t that a problem for the London assembly/mayor to solve, given that it’s not a problem for the rest of us? Nobody wants to force innocent long-term London residents out of their homes, which is why I’d expect them to vote for a local solution that would make that unnecessary.

On the wider point, I think Tim Worstall is being pretty reasonable here (you know, for a rabid libertarian and all that…) and the only difference I have with him is that I probably would be happy to see a state-funded house-building program, but hopefully as a one-off in recognition of the fact that housing in this country is a bit, well, screwed at the moment. In the long-term, I think local associations – preferably run as going concerns and not tax-raising arms of government – should be able to fund the creation of socially-affordable housing. Also, the Land Value Tax mentioned earlier by Jock might well help in alleviating the problems of land (mis-)use which restrict the supply of housing at present.

44. Mike Killingworth

[42] Oh FFS. Did you read my earlier post?

Let’s try a concrete example and see how we get on. While sorting out granny’s estate I find a painting in the attic which I sell for £500. It turns out to be worth ten times as much, because I was slipshod in establishing its value. I fail to see in what ordinary language sense such a transaction is “win-win”. “Win-win” presupposes perfect information on the part of both the buyer and seller.

You may say that all I have done is given an example of market failure. That’s my point exactly: in the real world most transactions contain an element of “failure” in this sense.

In the real world, sellers try to reduce the amount of information available to buyers – the other day I saw an ad by a high street chain in which they said that they recommended Windows for their computers. I am not aware of any computer that won’t work under one of Windows’ superior rivals, so why do they do this? Because they have a deal with Microsoft which works for both of them, but most certainly doesn’t work for the consumer.

Do you seriously think that the people who bought derivatives knew what they were buying? In fact, if the real world corresponded to theory, that whole market couldn’t have developed. More generally, if market transactions are “win-win” by definition, why do we have laws against fraud and such bodies as trading standards offices?

“While sorting out granny’s estate I find a painting in the attic which I sell for £500. It turns out to be worth ten times as much, because I was slipshod in establishing its value.”

The £500 you received is more than the value to you of Granny’s painting. You have won. Otherwise, you wouldn’t have sold the painting for £500.

QED.

46. Mike Killingworth

[45] I knew you’d say that. You continue to assume what you wish to prove. Still, it’s nice to know that you’ve never been cheated whenever you’ve bought or sold something.

Just for the record, which economist claims that every single transaction in every single market is a “win-win” for the participants? I don’t know of one. The ones I know of claim that prices clear markets, which is a horse of a different colour.

“I knew you’d say that.”

I tend to believe people who predict things before, not after. 🙂

“which economist claims that every single transaction in every single market is a “win-win” for the participants?”

Those who point out that voluntary exchange only happens if the participants believe they will benefit from the transaction.

Mike, the very heart of economics, every basic text I’ve picked up and read through, says that one of the main points of economics is to identify, explain and attempt to avoid areas of market failure.

You are right to say there’s no such thing as a perfect market. You are wrong to assume that decent liberal economists say that there is. Anyone who thinks there is a fully functioning perfect market is delusional, and thus not a decent liberal economist.

Beyond that, both Rob and Tim are answering you well. The value of a product is determined, wholly, by the price the purchaser is prepared to pay. Someone with better information can, you are correct, negotiate a better price. But the seller can choose to accept or not. Or chose to do some more research.

By accepting the lower price, you are saying that the time and expertise needed to find out more isn’t something you think is worth the time. That’s your choice.

But a single sale of a single painting is a bad example across the board, thus it’s remarkably easy for anyone who’s actually read up on this sort of thing to knock holes through your argument.

If you want to critique something, first understand it. That’s why I’m reading as much about economics as I can. That’s why I read Chris Dillow, Tim Harford, Paul Krugman and, well, Tim Worstall as often as I can find the time for.

Seriously, your knowledge of economics and the study thereof is showing it’s lack in this discussion. Knowing I lack such knowledge, I’ve gone out to try and find out as much as I can because I think it matters. It either matters to you, in which case find out more, or it doesn’t, in which case get off the soap box.

(and Tim Harford’s Undercover Economist is an excellent primer for the basics of economics, and quite a short read as well. Doesn’t do the maths or the theory, but does explain what it’s actually all about)

By your definition, every decent economist I know, including Tim Worstall, is left wing. But don’t let that stop you.

Markets aren’t perfect, but they’re better than anything else thus found out. Thus understanding them and recognising hteir points of failure (and dealing with them through such things as Pigouvian taxation to deal with externalities) is pretty much essential.

The current tax/benefit/welfare system is a horrible distortion that incentivises those at the bottom to stay there, as breaking out is very difficult financially. I want to change that.

CBI witha high threshold looks to me like the best way. What’s your solution?

Mike @38

And yet many people do it, and not just in their 20s. People relocate all the time for their jobs, occasionally for their children’s schooling, and they also relocate because they have children at all (all Londoners except the filthy, filthy rich and the council tenants have to leave when they have kids.)

I can’t really believe that you’re arguing a situation like the London status quo, which screws so many people on low earnings over so royally, should prevail. And I can’t really believe you’d support a hypothetical subsidy of a higher CBI for London which would have to be paid for by everybody else. I think to some extent you’ve been backed into arguing it. So how about looking at it this way:

Currently, the SE property market is horrendously unequal. It’s sustainable only because more and more people keep coming to London and the SE and maintaining the awful price levels. You talk about people being forced to leave their support networks – well, thousands of younger people leave their support networks every year to come to London. And thousands of older people leave London (and their support networks) to have kids or to retire. My parents are doing it too. They can’t afford to stay in the place they’ve lived for the last thirty years because it’s too close to London. Where they’re from.

It’s happening right now. Just not in the direction that seems to bother you. They do it, of course, because the bargain works out well for them (or so they think). Gain = more money (if you’re young, because it means a better job, and if you’re older, because it means more house for your money), cost = cut off from original support network.

All this means three things. (a) a lot of non-Londoners cutting themselves off from their support networks by moving to London, (b) Londoners can’t afford to live where they were born because the competition for a breathing space is so insane and (c) cities like Manchester and Liverpool lose most of their top-flight student output the minute they graduate. They hurl gobs of money at regeneration projects in an effort to get people to stay, but it’s a losing battle. The population of Liverpool has dropped 5% in the last decade, did you know that?

London isn’t unsustainable. Otherwise it wouldn’t be sustaining itself. Somehow – god knows how – the people that clean the offices in Canary Wharf manage to afford to live close enough to the centre to get to work for 5.30am. The day they stop being able to afford to do that is the day London will collapse like a deck of cards, but it hasn’t happened yet. I’m not one for intervention – one day, it will happen, and until then I’m off.

But IF something like the CBI were to be introduced, and IF your point about the relative worth of the CBI level in terms of London rents as opposed to Liverpool’s rents was discussed, do you seriously mean to tell me that you’d support a higher level of CBI for London so that (a) people could continue to move there and cut themselves off from their support networks, thus driving up rents so that (b) people who were born there would continue to be unable to afford to stay and (c) Liverpool’s population continues to decline?

As I say, I’m sure you didn’t originally start this conversation meaning to support this viewpoint. But it scares me that people can totally unselfconsciously adopt this caring “you-heartless-bastards-what-about-the-poor” persona while defending a totally indefensible status quo that screws the poor over a barrel.

“, every decent economist I know, including Tim Worstall,”

One miserably tiny thing. I’m not an economist and don’t claim to be. I’m an interested (perhaps too interested but that’s another matter) amateur.

As to the left wing bit though, I agree. I regard myself as being upon the left. I want the poor of the world to be richer than they are and I rail against the current power structure which prevents them from being so. That’s pretty lefty, isn’t it?

51. Mike Killingworth

[48] Mat, I’ve actually got a copy of Harford. It’s so full of errors that I would need to set up a blog of my own to go through them all. Suffice it to say for now that the idea that all market failures could somehow be gotten rid of is just la-la land. Clue: politics is determinant in the last instance.

[49] London has always been overcrowded, that’s the nature of capital cities. As to your hypothetical, since I don’t support CBI it doesn’t enter the question. Basically CBI offers simplicity of administration (although in practice I doubt that, you’d probably need ID cards to determine who was and was not a citizen) as against the present system which attempts, however poorly, to actually funnel funds where they’re needed. Defenders of CBI have to admit that there will be exceptions – such as the very severely disabled in long-stay hospitals and some form of child support, so even the promised simplicity is chimerical.

Relative poverty is ineradicable. And we have the example of the former Soviet blocs to remind us that minimising it carries costs which are generally thought to be way too high.

Why is CBI a particularly dangerous proposal at this particular time? Because the economists you’re all so fond of by and large think that government spending needs to be cut by nearly a third to bring it in line with the tax base. The political reality is that the burden of those cuts will fall on the poorest, because they no longer have a political voice. The rest of the country is more than happy to reduce them to the level of squalor which they endured a century ago. In effect, they are no longer part of civil society – if they ever were (the Labour Party, when it was a Labour Party, was the political wing of the skilled working class). CBI simply presents a mechanism for effecting this dystopia.

No Nick, the “market” is rigged in favour of mortgaged housing, backed up by 25 years of government policy geared towards making people believe that having a giant bank loan (sorry I mean “owning a house” ;-)) is their route to self-worth.

“the “market” is rigged in favour of mortgaged housing, backed up by 25 years of government policy”

Erm, a little economic history please. The past 25 years have seen the *removal* of many of the ways that the market was skewed in favour of owner occupied (which is what I assume you mean by “mortgaged” housing) housing.

First the limitation of MIRAS, then the abolition. The introduction of Assured Short Term Tenancies (think I’ve got that phrase right, but the lifting of the rules whereby a simple private rental agreement could create a life time tenancy), the ridding of the “Fair Rent” rules. That first removed the tax bias in favour of owner occupied. The two latter encouraged the creation again of a private rental sector (the abolition of which had pretty much been post-war policy).

It might be that you would prefer social, or State, or council, rather than private sector rentals but the actual policy mix since the early 80s has been to remove private ownership privileges and to encourage private sector rentals. Plus sell of the council housing as well.

Mike @ 51 wrote:

Relative poverty is ineradicable. And we have the example of the former Soviet blocs to remind us that minimising it carries costs which are generally thought to be way too high.

Eradicating relative poverty is very difficult and would require a much more redistributive tax arrangement than we presently have, that’s for sure. And I don’t think that ‘relative poverty’ does much good as a measurement of social justice – I think we’d be better off focussing on achieving universal minimums for everyone, and there are many other measurements of social status that a mere income measurement cannot capture (e.g. risk of poverty might be present for lots of people who are not, necessarily, in poverty themselves and this might be a sign of market failure in insurance). Of course, another reason why relative poverty won’t be eradicated is that the continued existence of relative poverty provides most of the justification for government action, much of which – these days – is directed at harassing the poor.

Why is CBI a particularly dangerous proposal at this particular time? Because the economists you’re all so fond of by and large think that government spending needs to be cut by nearly a third to bring it in line with the tax base. The political reality is that the burden of those cuts will fall on the poorest, because they no longer have a political voice. The rest of the country is more than happy to reduce them to the level of squalor which they endured a century ago. In effect, they are no longer part of civil society – if they ever were (the Labour Party, when it was a Labour Party, was the political wing of the skilled working class). CBI simply presents a mechanism for effecting this dystopia.

What I really want to do is excerpt every single sentence here and respond with ‘why?’ to each one. You really do need to provide some explanation or cite some sources for these kinds of beliefs. Which economists want to cut taxes by a third? It’s hardly likely to be the same people proposing a CBI which would require a fairly hefty tax bill to pay for it.

The poor no longer have a political voice? Well, what are you doing about it? Some of us are arguing that the best way of helping the poor might be a non-means-tested annual grant of equal or greater value than the JSA and, in many parts of the country outside London, also higher than their housing benefit. What’s your proposal? I’d like to add a few other points, such as being in favour of devolution as a means of making politics more responsive to the concerns of citizens and less easily captured by expensive lobbying as another proposal worth consideration here, if we are concerned with boosting the political voice of the poor.

To say that most of the country is happy to reduce the poor to the squalor of the 19th (or early 20th) century is a frankly bizarre statement. What basis do you have for it? If Thatcher argued that there’s no such thing as society, you’re arguing that there is such a thing and it’s full of sociopaths. And even if you’re right, I can’t help but think that a non-withdrawable, no-strings-attached grant each year, to rise in proportion to GDP, is a pretty good way of guaranteeing that nobody ends up in the squalor of the 19th century and I’d be more than happy to debate your reasons for thinking otherwise if you’d be happy to tell me what they are.

Right, I throw myself back into the fray.

Supporters of CBI, what do you make of immigration in general & how it would impact on this? Presumably, you can’t just have any old twat walking in & claiming on day 1. So what should be done?

Do you support a scheme whereby people have to work & pay taxes for a certain length of time (ie. become “citizens”) before they can receive a CBI? If they get into trouble before such a time, should there be any recourse to public funds? Do you, for example, support the current arrangements for supporting asylum seekers on NASS?

I can honestly say it only occured to me a few days ago that this would be a problem. I would like to hear what people make of the situation (genuine question).

The whole issue of immigration is one on which I’ve struggled to make up my mind, as I can see that the numbers coming in should be restricted because the country & it’s natural environment (like the world as a whole) cannot sustain an ever-rising population. I support reducing the causes of immigration by well-aimed aid targeted towards education, infrastructure & contraception but there also need to be restrictions, imho. On the other hand, I personally like most of the immigrants (economic migrants & asylum seekers alike) that I’ve met. I would like some input as to how it is meant to work in the context of a CBI.

“Do you support a scheme whereby people have to work & pay taxes for a certain length of time (ie. become “citizens”) before they can receive a CBI?”

“Citizens” receive it as of right. So there are no work or tax requirements, no. But there is that pesky citizenship requirement, yes. I.e., eligible for a UK passport, collect your money. Not? No.

Asylum seekers would need a different system. Other immigrants, legal or illegal, wouldnot be eligible until they had passed whatever tests it is that we insist upon for gaining citizenship.

It was Milton Friedman who pointed out that you can’t really have open immigration and a welfare state. The latter would be overwhelmed by the former.

The biggest problem in our current set up is that it is illegal to distinguish between UK and EU citizens in such matters. So in order to make sure that we can indeed make such distinctions a CBI would mean that we need to leave the EU. But then I consider that a benefit of such a scheme.

Yes, but should asylum seekers be permitted to work (I would think they should) whilst waiting for their claims to be dealt with? Do you support the present immigration arrangements, & would they work in the context of a CBI or would they have to be altered?

I wouldn’t mourn over leaving the EU either. I suspect that most European immigrants, even if they weren’t eligible to a CBI, would continue working & paying taxes, so they wouldn’t require benefits. Poles, for example, have much lower unemployment rates than many Britons, white or otherwise.

All genuine questions which you can ignore if you like. But I am finding immigration the hardest thing to deal with whilst forming my world view, so a little help would be appreciated 🙂

Obviously I’d like to hear from everyone else too 😉

Mike @ 51
you are hinting at the answers to the problems you identify, but don’t take the extra step to provide those answers.

-Market imperfection is a consequence of information breakdown among market participants. Some players view their interest in manipulating information about the market in order to gain additional advantage, however this vested interest has a tendency to work against them in the long run so there is a requirement to educate about the consequences of restricting the free flow of information.

To take your example of the granny and her painting. If one valuable painting is found there is a reasonable chance that another will also.

With the insight gained about your buyers behaviour from the previous transaction, are you likely to favour a sale to the same person a second time round? Obviously not, since their reputation as an honest broker has been damaged among their potential customer base. If they undertook the unfair transaction for pure profit motives they run the risk that their business will suffer, but if they bought the painting to build a collection then neither are they likely to be able to fulfill this ambition.

-The nature of capital cities is not towards overcrowding – this depends on the wider planning policy for the country. Britain has long suffered from unbalanced ad hoc planning arrangements and London is the ultimate magnification of this.

Equally, but on the other side of the argument, overly centralised planning for urban areas has its own set of problems. Take Brasilia, for example: a model core surrounded by densely populated shantytowns where crime and disease fester beyond any control. In many cases sanitation, education and most basic private or state services are missing.

-Relative poverty is not ineradicable, that is unless you mean relative lack of wealth.

Wealth inequalities are not necessarily accompanied by illiteracy, post-industrial health problems (like addiction, obesity or mental health disorders), social exclusion and the rest of it. Such problems have more to do with a lack of social mobility inherent in a closed class-based social system (which the soviet bloc did as much to reestablish as overturn, replacing a land-owning aristocracy with an ideological aristocracy in the process of militarising several generations through constant warfare).

-The political reality of introducing CBI is that the costs will fall on those less well able to afford them ONLY if it is introduced by an illiberal or not-wholly-liberal party (which is why I have some doubts about what it would be like if any of the current parties brought it in).

On the basis that CBI would be easier and cheaper to administrate, it would be fairer and more equal to the citizenry than the system of the welfare/workfare state we have at present and would liberate the population from the stranglehold of state bureaucracy I find it hard to raise objections to CBI in principle. On the other hand until economic and social mechanisms are better understood I see no way that a satisfactory formula can be calculated in practice any time in the forseeable near future and CBI will remain a truly liberal political aspiration.

CBI can be the basis of a lasting social and economic equality, but the monetized amounts must represent essentially equal human values for it to function effectively.

When investigating the idea my interest was taken by the idea of extending baby bonds, though even then it would take a literal lifetime to transition from the welfare state to a citizens state where all individuals were to be endowed with minimal financial means to subsist on.

So I sympathise with your problem of managing any transition, but because of the level of resolution required to maintain the political will for a sufficient period rather that the costs of introducing it might be prohibitive.

CBI would also require a complete reevaluation of the division of labour and the conception of employment relations, so I can understand any hesitation when trying to grasp the scope of its implications.

Asquith,
global migration is an interesting side debate on the subject of CBI, but again I return to the problem of choosing universal human values common to every individual. Answer this and the problems associated with migration (not just immigration, as the point about London/Liverpool demonstrates) are almost immediately resolved.

“Presumably, you can’t just have any old twat walking in & claiming on day 1.”

Why the fuck not?

62. Mike Killingworth

[54] Rob, you make some good points on the issue of relative poverty. It isn’t amenable to purely fiscal proposals (such as CBI) and life would be simpler, really, if no one was bothered about it. But that isn’t going to happen. It might shed some light on the matter to reframe the issue as “relative wealth” instead – I suspect that most people are much more comfortable with honestly self-made riches (Branson, Roddick, Rowling etc) than they are with other forms of wealth ( foreign kleptocrats, heirs) – but dealing with the latter runs up against the problems that some kleptocrats are as powerful as the State itself, and to tackle inherited wealth would mean getting rid of royalty, for a start. (Not that the latter would probably fuss many folk here.)

I admit to over-egging the pudding in claiming that a number of economists want the public sector cut by a third. I only know of one, who posts on Smithson’s site as “Ken” – he says our debt is £680bn and the tax base can only sustain £500bn (presumably he gets the latter figure from a historical trend line). I’d certainly welcome Chris Dillow’s thoughts on this – I do actually have a lot of time for him!

The issue of whether the poor have a political voice or not probably deserves a thread to itself. The view that the Labour movement – when it was an effective part of political society, say from 1910 to 1980 or thereabouts – represented the interests of the skilled, rather than the unskilled working class (i.e. the C2s, not the DEs) is a fairly mainstream one. I don’t think anyone would argue that the latter group has increased its political clout since the démise of “old Labour”, would they? At the very least, they are more fractured by race than ever they were in the past.

A “society full of sociopaths” isn’t exactly how I’d put it – I would however argue that we went through an unusually solidaristic – politically expressed as social-democratic – period in the thirty years after World War II: the havoc that wrought, together with the memory of Lloyd George’s broken promises a generation before, created a polity that was further to the left than at any time before or since. The NHS is all that remains of that world.

63. Mike Killingworth

[59] Thomas, I agree wholly with the second half of your post – shall we both quit while we’re ahead?

Mike,
err… please don’t cite Branson as an example of an honest man. He started off by scamming import duties on Tubular Bells and has gone on from there to being one of the most tax averse people who are still eligible to donate to political parties.

Don’t you recall the reasons he was objected to as a potential buyer for the financial institution that was NR?

Blimey, thanks Mike. I’m not used to people agreeing with me!

I’m not sure about stopping here though, when this is a good opportunity to try and draw on the imagination of everyone else for some ideas on the financial mechanisms which would support CBI. Taxation wouldn’t do it and I’d be suspicious of political interference if the civil service administered it, so how would it work? Are we talking closer to a national dividend than a CBI?

66. Mike Killingworth

[64, 65] I stand corrected on Branson. It does however point up the difficulty of identifying people who have made serious money in a squeaky-clean way!

As to CBI, I have always tried to look at it from a “real world” perspective – it looks great on paper, but so did the Titanic!

So you are happy with the half-way measures we’ve got at the moment which do half what they’re promised to and do it only half as well?

I’m assuming you’re not a cynical pessimist who thinks all political action is futile and that you’re opposed to a fully nationalised economy and the prospect of a state fully-dependent on charity, so the question remains how can it be rejigged to function better?

68. Mike Killingworth

[67] Well I suppose I would say I have a robust view on the limits of political action when it comes down to producing the good life!

I certainly think that the time to introduce radical fiscal change of this type is when there is at least a prospect of full employment – we are looking at 2-3 million unemployed and I cannot for the life of me see which sectors the new jobs are supposed to come from*. In part, this is due to our unwillingness to invest in the education sector (until recently) and the “capture” of such investment by the producer interest, within which I would include government ministers… but there remains the issue which you rightly flagged of being able to trust the motivation of whichever bunch of politicians actually introduce these changes, given that the most vulnerable people in our society are also the most disconnected from the political process.

*It would be interesting to know how many of our existing jobs couldn’t be performed by immigrants or else outsourced to Asia, etc. Precious few, I expect – and remember that employers will always prefer to hire immigrants rather than citizens, as they feel fewer qualms about treating them badly. We are all living in denial about what globalisation means for our lifestyles.

“we are looking at 2-3 million unemployed and I cannot for the life of me see which sectors the new jobs are supposed to come from*”

Nor can anyone else. That’s why planning an economy doesn’t work.

Well now that you’ve raised the spectre of unemployment, let me address this.

With CBI why would there be any need for unemployment benefit or a Jobseeker’s allowance? There would be no such thing as unemployment, only inactivity. So I take the reverse view that a period of higher unemployment is actually the easiest time to introduce it.

At the same time we should consider the other mainstays of the welfare state.

The state pension and housing benefit could be abolished in a similar way, while child benefit would essentially be reallocated if it was into a scheme based on national endowment. All this massively helps solve the funding gap at the same time as reducing PSBR interest repayments.

And why stop there? Personal allowances in the tax system could be removed altogether, which raises a big chunk of cash, while national minimum wage legislation would be repealed at the same time thus liberating less profitable businesses and enabling the economy to grow into more marginal territory – that’s where you’ll find your millions of jobs, for example in exploiting less income-reliable (ie less profitable) but cleaner (ie more efficient) renewable energy sources.

Furthermore I’ve seen suggestions that CBI would have a positive impact on reducing a variety of crimes motivated by social deprivation, thereby not only reducing the damage to social capital and property involved but also the clear-up costs. Again if it was based on an endowment scheme criminals would have the means to pay compensation or for the costs of bringing about their justice (ie in legal aid, court fees and in paying for their board and lodging when in prison).

On a side note by tying investment levels during childhood to school attendance/performance a natural incentive against truancy and towards excellence could be created.

On the point of immigration – because the problems immigration and asylum stem from basic inequalities between individuals resultant from unequal states and unjust governments such a system which successfully levelled the playing field would reduce ‘negative migration’ due to illiberalism and circulate the flows of ‘economic migration’ by spreading economic development.

Finally the accumulated security all this brings would have a huge impact on reducing the risk and costs involved in insurance and would shrink premiums accordingly.

Even going beyond that you could start hypothecating parts of CBI for use on other necessary services such as some universal private healthcare, basic utilities, further education course/tuition fees, sports clubs subscriptions or even membership to political parties.

None of this would be uncontroversial, but it should prove hugely appealing to a brad enough mix of individuals, business and state alike.

For the individual most of the bureaucratic complexity would magically evaporate because the state would stop creating it for us to deal with. From the opposite point of view the state then has fewer problems to deal with and efforts can be focused on those that persist.

Of course it would be paradoxical for partisan politicians to propose any of this because they’d be doing themselves out of their jobs and could no longer manipulate the legislative programme to create the discontent from which they build their supporter base (it’s the old case of chicken and egg, just like the war on terror and ID cards/42 days etc).

To me at least CBI or a national dividend is a potentially wonderful all-encompassing idea because it levels the playing field out for the starting whistle rather than digging up the pitch and getting stuck in the holes of our own making while the game goes on around you.

Though I admit some demotivating factors may arise without sufficient inspiration – which can only be created in the education system – many perverse incentives would simply cease to exist.

71. Mike Killingworth

[69]

“we are looking at 2-3 million unemployed and I cannot for the life of me see which sectors the new jobs are supposed to come from*”

Nor can anyone else. That’s why planning an economy doesn’t work.

So you mean that governments should just say “we can’t do anything about unemployment, it’s all in the lap of the gods” – that’s what the US Republicans said in the 1920s, and much good it did them. But you no doubt think that the New Deal was an unmitigated disaster…

[70] Are you quite sure that CBI doesn’t also cure warts and ensure that England regain the Ashes next year? Do try harder, or alternatively re-arrange the following words to make a well-known phrase “oil salesman snake”.

I absolutely disbelieve that either of you give a flying f*rt about poverty.

Actually I think it will be Land Value Tax that would enable England to regain the Ashes next year!

🙂

“So you mean that governments should just say “we can’t do anything about unemployment, it’s all in the lap of the gods” – that’s what the US Republicans said in the 1920s,”

Erm, no. Saying that “planning the economy doesn’t work” and saying ” we can’t do anything about unemployment” are not the same thing. We might indeed lower interest rates. Or increase (or decrease) unemployment benefits. Or create make work schemes, or have a fiscal boost, or provide training schemes, or reduce taxation on entrepreneurs, or reduce the paperwork that reduces the number of entrepreneurs…..all of these would be doing somehting about unemployment but they wouldn’t be “planning the economy” in the sense that I meant.

BTW, it was the 30s, not the 20s, the Republicans (or at least Hoover, who was the Republican President) didn’t do nothing, they did a number of stupidly counter-productive things, like the Smoot Hawley tariffs etc. Roosevelt did some even more nakedly and embarassingly stupid things, like try to raise real wages in the middle of the Depression. As opposed to those, yes, doingnothing would be better. But there are things also which are better than doing nothing.

Like I said above which you agreed with, Mike, the scope of CBI is potentially revolutionary and massive. I’d appreciate it if you could answer the specific claims rather than dismiss them childishly out of hand.

And yes Jock, if LVT enables economic development of the domestic professional cricket circuit so that more talent is fostered to a higher extent it could. But it wouldn’t happen until 2013 at least 😀


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