The ‘brain drain’ scare tactic should be ignored


12:11 pm - April 29th 2009

by Paul Sagar    


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Those who oppose fair taxation have bee quick to deploy a favourite tactic in the wake of the 50p tax on the richest 1% of society: to hold the rest of society hostage by declaring that if we put up taxes, they’ll leave. In fact, they’re at it yesterday on Comment is Free.

That’s right, it’s the dreaded Brain Drain. The bogey-man of the right, which acts as both a threat and a scare tactic. For, firstly, we’re supposed to think that the estimated 25,000 people who will leave if we suffer a brain drain are so valuable that the rest of us will suffer as a result. Secondly, this is used to hold us hostage: “Put up taxes, and we’ll leave…and you need us to stay.”

So it’s worth considering whether a) a Brain Drain will happen, and b) whether it would be an unambiguously bad thing if it does.

For a Brain Drain to happen and be meaningful, two things are required. Firstly, a significant number of people must leave the country, and secondly, that significant number of people must be irreplaceable.

It’s worth questioning whether 25,000 really will leave. After all, leaving friends and relatives behind, abandoning one’s cultural attachments to a place one has lived in for potentially many years, and all in the name of not incurring an extra 10p of tax in every pound over the £150,000 mark – well it’s a little extreme, isn’t it? And remember, it’s a lot easier to tell a journalist or pollster that you will leave the country, and a lot harder to actually do so. Just ask Paul Daniels.

And let’s suppose 25,000 people do leave the country. Out of a population of 60,587,300 that’s not actually very many. Lot’s of people will be left to replace them

Similar thoughts can be brought to bear on Richard Branson’s comments that the 50p tax will be a “block to the next wave of entrepreneurs“. Really? So those people driven to set up business and be successful as their own bosses will now suddenly swallow all their creative talent and not bother to work hard anymore? All because of the prospect that if they become successful they may one day pay an extra 10p of tax in every pound over the massive threshold of £150,000 which would put them in the richest 1% of society? Give me a break.

But let’s suppose lots of rich people really do leave the country – what are we losing? The Brain Drain mongers would have us believe we are losing not just a chunk of the wealthiest 1%, but a chunk of the best, the most essential 1% of individuals driving our economy.

Really?

Won’t a lot of the people who leave be those super-wealthy, globally-mobile people who have made fortunes doing things like managing hedge funds and speculating in The City? You know, those people whose overwhelming contribution to the global economy in the recent past has been to mess it up?

The specter of a Brain Drain is only a worrying one if we maintain the implicit assumption that it’s valuable brains being drained. There are many reasons to doubt that.

But let’s suppose the brains being drained are the “best” – what do we mean by “best”? We mean people who are so unwilling to pay a fairer contribution into the society whose existence has allowed them to become the wealthiest 1% in the first place, that they are prepared to uproot and leave the country to avoid doing so.

What wonderful individuals! Think of how they must run their businesses, treat their neighbours, respect the environment (etc, etc, etc). Are we sure we really even want these people to stay? To allow them to go on captaining our industries and lobbying our politicians?

So it’s not so clear that a Brain Drain will happen, or that if it does it will be unambiguously a bad thing. And given all that, there’s a further matter of principle here. The principle of standing up and saying: We will not be bullied and held to ransom by the bogey-man of the Brain Drain. The wealthiest 1% will not be allowed to tyrannise over the 99%.

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About the author
Paul Sagar is a post-graduate student at the University of London and blogs at Bad Conscience.
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Reader comments


Entrepreneurs get rewarded by capital gains and not salaries anyway, so this is pretty much irrelevant.

In the 1940s-1980s large numbers of top engineers migrated overseas. I am sure the American universities would be happy to employ more of our top professors, especially in the sciences and engineering. Obama is funding stem cell research and I am sure there are plenty of British researchers they would be happy to employ in the USA. British engineers may also find a happey berth in Germany or Switzerland. H MacRae in the “Indy” has pointed out that some are of few assets are our top universities. A chartered engineer/scientist from a top 5 univerity with a M.sc or higher degree and ten years high quality experience is very mobile.

No – far better for the 1% to be tyrannised by the 99% obviously.

Is this the kind of “research” on which LibDem policy is being based?

Oh look – the Treasury themselves estimate that 70% of the potential “take” will be lost through legal avoidance, including the “brain drain”.

“Speaking to the Treasury Select Committee, Mike Williams, the director of personal tax at the Treasury, said that the Government expected to receive only 31 per cent of the possible total income from the tax increase announced in the Budget.”

A pretty thin margin for error remains!

Obviously not including any opportunity cost from foreign entrepreneurs who might have come here in future but have been put off.

Sorry – the link to the Treasury quote is here:

http://business.timesonline.co.uk/tol/business/economics/article6186203.ece

I’ve blogged about particular disablist language used in this post here http://benefitscroungingscum.blogspot.com/2009/04/disablist-language.html

6. Lorna Spenceley

Hurrah! Well said, Paul; about time someone said it.

Bendy Girl, I think you have seriously misread Paul’s piece.

Good grief Lorna – do you object to shops which call themselves Ironmongers?

If the phrase “PC gone mad” was ever justified, it is in your case.
Unless this was a spoof?

Sorry – I meant, good grief Bendy Girl…

Andrew: I’ve not misread Paul’s piece at all, I’m not commenting on the veracity of his arguments but the particular language used. Try changing ‘brain drain mongers’ to ‘brain drain Pakis’ and you should see the point I’m making. I’m sure Paul wouldn’t dream of using racial or sexual language to describe something as stupid, so why would anyone think it’s acceptable to use disablist language to describe something as stupid? People with Down’s Syndrome are NOT stupid and still struggle to avoid the ‘Monger’ label, the use of language like this in this kind of liberal context serves as a valid example of how far there is to go before equality for disabled people is recognised as being as important as equality for any other minority group.

I’m sure that you won’t be surprised if I — as a libertarian — disagree violently with you for painting income tax as “fair taxation”.

However, I do agree totally about the oh so predictable reaction from the right and the corporate media about the announcement of the 50p rate, as I blogged a couple of days ago:

http://towardsmutualbenefit.blogspot.com/2009/04/sod-off-to-galts-gulch.html

Uhh, I am a bit lost with BendyGirl’s post. “Brain drain mongers” refers to people selling the Brain drain idea. I don’t see whats so disabilist about it.

In general, this post is pretty big on opinion and so short on evidence that it verges on an “I see no ships” argument. At least John B or Chris Dillow would track down some supportive statistics or theories before sneering at the prospect of people choosing to work less or work elsewhere on the margins. And it is all too easy to paint the only rich people as the bankers that got us into this mess (although hedge funds aren’t doing too badly, I’m told), but there are others, in manufacturing and elsewhere who are necessary for producing genuine wealth in this country.

Bendy girl, when he uses “mongers”, he means it like “fishmongers” or “ironmongers”. It is a homonym but it has a completely different connotation in this context.

cjcjc: No, of course I don’t object to the word ironmongers, however it’s not the same argument.
Until fairly recently people with Down’s Syndrome were described as Mongols, which is where the playground insult Monger comes from. As I say in the post on my blog I’m very relaxed about the language of disability, whatever people choose to describe themselves as is great.
This is not the same, this is the use of a derogatory term for people with Down’s Syndrome being used to describe something as stupid. The really tragic point is that on a blog mainly read by those with liberal values that isn’t even recognised.

Now that I’ve got my own spot here, the mantra I really want to get across to other writers here at Liberal Conspiracy is bluntly this “evidence, or stfu.”

Most if this article is just a series of sweeping assertions, and this is the problem with so much policy opinion.

I also take issue with the arbitrary definition of fair. I don’t see why it’s automatically fair that high earners should pay a greater proportion of tax, particularly when you look at this in context and realise that the extra raised this year will be only £1.13bn (http://www.telegraph.co.uk/news/newstopics/politics/labour/5238219/Wealthy-people-will-avoid-new-50p-tax-rate-admits-Treasury.html), against costs for things like ID cards that run into tens of billions.

Why is it fair that anyone should pay more tax when the government can’t be trusted to spend the money it already has responsibly?

16. Lorna Spenceley

Bendy Girl, I seriously think you’ve misread Paul’s piece. The word ‘monger’ attached to a noun means ‘seller of’ – eg ironmonger, costermonger, fishmonger – and has done so since before Shakespeare’s day. It’s nothing to do with disability, and if there is a word ‘monger’ that means what you say it does, then it’s a completely different word with a completely different history.

I don’t doubt that there is a proportion of the 1% of affected taxpayers who do, as Charlie says, have particularly valuable skills and who would be a loss to this country if they went abroad. But as Paul points out there may be real practical or personal reasons why they would not do so, even if they felt that their additional tax bill warranted it. Furthermore, if they are that valuable then surely in some cases their employers will increase their salaries to compensate in order to stop them leaving.
So we are really talking about a sub-set of a sub-set of 1% of taxpayers. I hardly think the governmnet should re-write its tax policy to suit such a small number of people.

@Bendy Girl

“Monger” is a word in English meaning:

“1. A dealer in a specific commodity. Often used in combination: an ironmonger. 2. A person promoting something undesirable or discreditable. Often used in combination: a scandalmonger; a warmonger.”

He is using it here as you would use iron-monger, conspiracy-monger, hate-monger, etc.

Bendygirl,

I meant monger in the sense of “fishmonger”, pronounced “munger”.

I did not mean “mong” in the sense of “a derrogatory term used against the mentally disabled”. Not least because I’ve never heard “monger” (pronounced “mong-er”) employed as a term of abuse (or employed at all).

I assure you that in no way shape of form was this piece intended as an attach on the mentally ill.

It has re-written its tax policy to get at a small number of people, whom the Treasury itself admits will act to avoid 70% of it.
That means that there is a serious risk that the 50% rate ends up reducing revenue, leaving aside any impact on future growth.
It’s tokenism, and risky tokenism.
It’s vindictive.
It’s Gordon brown all over.

It really is not. It is being used to describe a group of people as “sellers”. It is not the same word used to refer to sufferers of Down syndrome. There are plenty of examples of this in English: http://www.buzzin.net/english/homonyms.htm

Take “envelope” and “envelope” (not a technical homonym because they are pronounced differently). One can talk about enveloping something without necessarily referring to an item of stationary.

Now that I’ve got my own spot here, the mantra I really want to get across to other writers here at Liberal Conspiracy is bluntly this “evidence, or stfu.”

Martin, there is no evidence to say how many people will move abroad, there are only guesses. What Paul is doing is questioning the logic behind some of those guesses and explaining why people might logically not behave how some people are assuming they will.

A quick note for all those calling for evidence.

Maybe I should have provided more, but there’s quite a few links to follow in the above.

But surely you can see that my main point is driving, albeit in a more restrained way, at the sentiment expressed by Comment is Free contributor Ally Fog, when he wrote yesterday:

“Anyone who is willing to exploit the opportunities this country offers when times are good and then threatens to scarper with their money to a tax haven when asked to help share the burden when times are harsh is a parasite. We’d all be better off if they simply fucked off.

Go on. I mean it.

Fuck right off.

Today.

Go leech off the Swiss or something.

I don’t care if it costs the country billions or trillions, it’s well worth it.

In fact I’ll chuck in another tenner out of my own back pocket to help pay for the Easy Jet. Maybe we could all chip in and charter a jet. FIll it with fuel and let it fly till it crashes.

Am I clear enough? Fuck off.”

(http://www.guardian.co.uk/commentisfree/2009/apr/28/budget-50p-tax-brain-drain)

Yes?

“What wonderful individuals! Think of how they must run their businesses, treat their neighbours, respect the environment (etc, etc, etc). Are we sure we really even want these people to stay? ”

Yes if they increase economic growth and bring more money into the Treasury.

“I’m sure Paul wouldn’t dream of using racial or sexual language to describe something as stupid, so why would anyone think it’s acceptable to use disablist language to describe something as stupid?”

This is a retarded question. Go and do a survey in your local high street and see how many people think using “disablist” language is as bad as words like paki.

Paul: I can’t imagine you writing an attack upon disabled people in any form! As you suggested over at my site it’s the typo which meant I read it as Monger. For those who doubt the use of the word as an insult try http://www.urbandictionary.com/define.php?term=monger (the link includes mentions of fishmonger etc)
I read it as disablist language because it was separated unlike fishmonger or ironmonger, had it been brain drainmonger it wouldn’t have been noticeable.

The point I’m trying to make however is not that this piece was in any way an attack upon those with mental illness, but that the use of this kind of language is an everyday occurrence for disabled people in a way it has largely ceased to be for other minority groups. Most people recognise and understand racial or sexually discriminatory language as offensive whereas words like retard, mong, or window licker are still part of people’s everyday vocabulary.

I don’t care if it costs the country billions or trillions, it’s well worth it.

Is that the LibDem budget in a nutshell?

Go leech off the Swiss or something.

Go give your money to the Swiss governmenr instead?

This Ally Fogg is an economic genius.
Sign him up to Vince’s team instanter!

Richard: Thank you, you’ve just proved the point I was trying to make!

Bendy girl,

except in my haste, I thought it *was* a typo. I’m not sure it was now…though I take your point about leaving a gap between drain and monger, yielding an ambiguity of interpretation.

However, I think this has more to do with your mis-reading of my intention, than the callous use of every day language.

Although Richard isn’t helping things by calling you “retarded”. Richard, did you do that on purpose to get a rise? Not very nice of you if you did…

29. Ken McKenzie

Move over, guys, Bad Science fight about to take place here, nothing to see here.

Martin, don’t accuse people of making sweeping assertions and then finish with this:

“Why is it fair that anyone should pay more tax when the government can’t be trusted to spend the money it already has responsibly?”

A massive assertion.

Anyone so stupid (is that acceptable?) as to read what you wrote in the way Bendy Girl read it deserves it, I’m afraid.

cjcjc,

it’s an expression of popular outrage, held by many in this country.

read the rest of the comments thread to see that Ally F is not alone.

you can make smart-alec comments about my job, or you can recognize that there is genuine public anger on such matters.

Or you could return to your under-bridge lair and wait for the billy goats to pass by.

I think that “mong” is considered pretty unacceptable nowadays. I’ve never heard anyone called a window licker and wouldn’t know what it meant if I did.

33. Shatterface

It’s because of people like Bendy Girl our kids can’t watch Mary, Mungo and Midge let alone Flash Gordon (with Ming the Merciless). As to Dick Spanner, don’t get me started. Gerry Anderson’s most adult show consigned to the scrapheap.

Of course, her own name mocks people with bones which have failed to solidify. My mate Stretch Armstrong can’t walk the street without some disablist pulling his leg. Much like I’m doing here.

As to the rich, don’t let the door hit your arse on the way out.

Cretins (oops!)

I’m sure that in the freakshow that are the CiF comment threads he is not alone.

“Public anger” is generally not a good basis for policymaking, is it?

Especially – to repeat the point you fail to address – as the Treasury has admitted that 70% of the theoretical revenue will not be received. So there is a very obvious risk that it may end up costing money, isn’t there?

35. Shatterface

Danar (33): I think ‘knee-jerk’ is an unfortunate term – someone with Parkinson’s or Tourettes or with involuntary muscle spasms due to anti-depressants might be reading.

Reading in the “mong” meaning in that context wouldn’t even make much sense. They are obviously trying to sell the idea. And can I just say, I am a brain drain monger and proud! Boooooo… they’re going to leave the country and destroy lots of decent jobs. Beware! Beware!

The brain drain is a straw man. It’s easy to debunk because it’s bloody stupid, which is why nobody takes it seriously in the first place. I suppose that it might need pointing out for the especially hard-of-thinking, but nobody else should care.

Tax is complicated. If you want to win an argument about tax, you need to come armed with some facts and figures and not moralistic hand-waving. The reason for this is that the taxation system serves more than one purpose; it may have a moral dimension, but it also has to be efficient. If you address only the moral dimension, your argument will be particularly poor at addressing those other concerns; this might make for good slogans and blog posts, but it doesn’t make for good government.

The ‘brain drain’ is a particularly exaggerated scenario in which, as a result of higher taxes, some people leave the country in order to escape them. Very few people will do that; as Andrew Adams said, there are plenty of other reasons why people might choose to stay even if they’re unhappy about taxes. But it’s equally possible that they will choose not to start a new company, or not to invest in someone else’s innovation, or not to do a whole manner of things because it’s no longer really worth it. Greg Mankiw gave a decent (if US-centric) example of this kind of thing here. If we’re in favour of the 50% rate then it’s those arguments from the likes of Mr. Mankiw (or his British equivalents) that we need to answer, not the extreme notion of people leaving the country.

Where are the brains going to go, and what are they going to do for a living when they get there? Last I heard was that this recession was global.

It’s easy to debunk because it’s bloody stupid, which is why nobody takes it seriously in the first place.

Go ahead and debunk it then!

Trouble is, the Treasury itself thinks 70% of the potential revenue will disappear, including through emigration.

But you second point is absolutely spot on, and one I mentioned earllier.
No-one knows how large the future disincentive effect will be. But there is bound to be *some* effect.

But Ally Fogg and Paul Sagar don’t seem to care about the economics of the thing, just the politics.

“Especially – to repeat the point you fail to address – as the Treasury has admitted that 70% of the theoretical revenue will not be received. So there is a very obvious risk that it may end up costing money, isn’t there?”

This is an argument for closing down loopholes which allow tax avoidance, and getting tough on tax evasion.

It is not an argument for not raising taxes.

@cjcjc – what’s your beef with the libdems? And what on earth has that got to do, in any way, with anything mentioned in this post. You sound demented.

Has anyone noticed the relatively humble and apologetic stance taken by the majority of people who’ve made money out of this financial crisis? I’d love to jump on the ill-feeling bandwagon with you over this supposed risk of 25,000 leaving the country, but i simply don’t think it will happen. It seems as though the tax hasn’t been badly received at all, and that there’s even the possibility that the top-earners would be willing to fight for their national economy whilst taking their fair-share of the blame. Not a popular prediction, but one that i think is highly-likely…

And the comment in the Guardian by Ally F was OTT i’m afraid – i share his standpoint, but that’s just over-sentimental agitprop.

cjcjc: Is this the kind of “research” on which LibDem policy is being based?

Now I know you’re not stupid enough to realise the difference between someone writing in a personal capacity, and someone claiming to speak for all Libdems. I also know that you’ve frequently said ‘play the argument not the man’ – then why do you continue to make such silly points cjcjc? Perhaps you might try the novel idea of judging each policy and article on its own merit than trying to use a comment piece to attack Libdems?

Rob Knight,

“this might make for good slogans and blog posts, but it doesn’t make for good government.”

A fair and good point. But sometimes one needs to fight fire with fire. If the right wants to deploy the brain drain bogey man as a way of opposing tax increases, those on the left must reply…otherwise the bogey man (slogans and blog posts included) will dictate government policy.

My piece was never intended to make policy. It was intended to reply to those who would use a scare tactic-cum-threat to influence government policy in a direction I oppose.

This is a guest post. Paul Sagar is currently press and research assistant to Dr John Pugh, Liberal Democrat MP for Southport.

may answer your polite question.

Paul – one man’s “loophole” is another man’s “allowance” – always brought in for some “good” reason at the time.
Brown was the master of such budget-time gimmicks.
I agree with you at least on that point- as far as possible, simplify, simplify, simplify.

Bendy Girl: You fucked up. How about an apology for your knee-jerk stupidity?

Don’t be stupid. She fucked up in a righteous cause.

It would cripple the monocular and sanctimonious to apologise so don’t dumb down this thread by asking for apologies as your request will fall on deaf ears.

Sunny – I never play only the man.
(I may not be able to win the ball of course, but that’s another thing…)

So those people driven to set up business and be successful as their own bosses will now suddenly swallow all their creative talent and not bother to work hard anymore? All because of the prospect that if they become successful they may one day pay an extra 10p of tax in every pound over the massive threshold of £150,000 which would put them in the richest 1% of society?

This. I mean, exactly how many small business owners are making that sort of money? Everyone I’ve ever known who started their own business did it by putting in ridiculous amounts of hard work for very meagre rewards, at least at first.

One further problem with the ‘;brain drain’ argument is that it exposes such people as mercenaries determined to either sell themselves to the highest bidder (fair enough), or play off one tax regime against another to pay out as little as possible – in which case the country nearest to 0% percent income tax wins.

So how come all these people haven’t swanned off in a huff to somewhere like Dubai and Saudi Arabia yet?

PS: If you want an analogy (with apologies to football-haters), try this: was Beckham ‘irreplaceable’ at Manchester United? Not if your name is Cristiano Ronaldo? And will Fergie think ‘I’m stuffed’ when Ronaldo goes? Not if (a) his youth team produce a replacement (b) he can use the £Xm to buy someone as good/even better (ideally for less than Ronaldo’s wages).

PPS: If you hate football, think of it this way: If Kate Moss went to Milan, don’t you think the fashion industry will find a replacement for the next British Fashion Week?

One more time – the Treasury itself estimates that 70% will be lost through avoidance, including emigration.
I assume they have more experience of this kind of thing than those who are trying to debunk the problem off the tops of their heads on the basis of “everyone they’ve ever known”.

This doesn’t mean the policy is “wrong”, but is does mean it’s quite risky from a revenue gathering perspective.

50. the a&e charge nurse

Whether we like it or not a climate of economic fear and uncertainty create ideal conditions for entrepreneurs – weaker operators can be crushed, while underings can be more easily cowed.

Or are we talking about the professional class (doctors, teachers, lawyers et al) buying a one way ticket to Oz or Canada but not Mexico, obviously).

Either way I find the idea of a drain (rich brains, professional brains or whatever) as largely irrelevant.

After all whatever deficits do arise will rapidly be filled by Russian oligarchs or Polish plumbers.

As I’ve mentioned many times before – I would like the ‘drain’ to amount to an arbitrary 10 million souls, or least enough people so I could get a seat on the tube.

Excellent little piece by Richard Murphy of Tax Research UK:

http://www.taxresearch.org.uk/Blog/2009/04/27/caine-joins-the-vain-drain/

I’m sure there’ll be plenty of volunteers to earn £150,000 for sitting on their arses and telling other people what to do; they’re easily replaced.

& good on Bendy Girl for raising that, even if it did turn out to be a misunderstanding. I really don’t see what’s wrong in general with highlighting use of words with offensive meaning and asking people not to use them. For all you libertarians out there – we’re not talking about the state censoring people but about a request from one individual to another not to use a word that can hurt. And for all you right-wingers out there that get mock-offended whenever the word “toff” is used and start castigating people: you’re hypocrites.

“I don’t care if it costs the country billions or trillions, it’s well worth it.”

How is it worth it if it means less money for the NHS.

“Although Richard isn’t helping things by calling you “retarded”. Richard, did you do that on purpose to get a rise?”

I called the question retarded. It’s a word they use on South Park a lot, I look forward to observing attempts to ban it. Fact is that when people use words like “retard” they’re not thinking of attacking people for being mentally handicapped (that was the acceptable phrase when I was younger). People who use words like faggot and paki usually are actually (usually) targetting homosexuals and pakistanis.

“The brain drain is a straw man. It’s easy to debunk because it’s bloody stupid”

Wasn’t there one in the 1970s?

Yes, I think Rob @37 is right to describe the 50% tax issue as a ‘straw man’ and irrelevant in the wider scheme, though Paul S is also right to say it’s worth exposing as nosnense, since the Right will make great play of it if not challenged.

To be thoroughly useful, in terms of policy, the 50% tax rate-to-flight- debunking thatr Paul S starts here needs to be a bridgehead to a wider debunking of the convenient myth, actually contrary to the evidence that taxation rates in general drive away capital, whether these are individuals or, more importantly, companies.

See http://www.bickerstafferecord.org.uk/?p=582 , if anyone can be arsed, for my summary of the evidence that high tax-capital flight is a conveninet myth

#50 – you keep saying there’s a risk the policy will result in losing revenue, because it’s estimated that only 30% of the potential revenue will

Can you explain how that equates to a risk of losing revenue? It looks to me as if it equates to a rise in revenue of at least 30% of the potential amount, compared with not doing it at all…

56. Lorna Spenceley

Thinking about this some more, doesn’t the apparent willingness of these people to follow the tax regimes around the world turn them into some sort of economic migrants? Perhaps they should have to take some sort of Britishness test to be allowed to stay here? :-)

Because that is an *estimate* leaving only a 1bn margin of error before it starts costing us (and that 1bn is anyway a drop in the ocean of our fiscal problems) – and there is no allowance for any disincentive effect in the future, eg high-earners put off from coming here.

@57 Lorna. LOL, but dead right. On the tax haven that is Jersey, the ‘Jereyness’ test is ‘How much money do you have?’. At least it’s straight up.

#58 – if it’s an estimate, the margin could easily be the other way, too.

60 – because as well as the reduced direct take from the 50% rate, you have to factor in the associated reductions in indirect tax takes. People don’t spend what they don’t have, so by increasing direct taxation you decrease discretionary spending. That’s partly why the IFS reckon that the new top rate will be either revenue neutral or a net loss to the Treasury.

Ultimately, you levy taxes for two reasons: to raise revenue and to alter behaviour. If this tax doesn’t raise significant revenue – and it looks like it won’t – then its principal effect will be symbolic.

The left are usually happy to frame debates in terms of ‘fairness’ and that the rich should pay more. The right have usually tried to frame this debate in terms of revenue efficiency. That’s why Lawson’s budget was so polarising – the left saw the rich paying less, the right saw tax revenues going up.

That still doesn’t convince me – surely those on 50% are not particularly likely to spend the extra money, as it’s a tiny proportion of their income and they spend a smaller proportion of their total income than most people. If you increased taxes on the poorest instead, discretionary spending would decrease further & indirect intake would suffer more.

62. vulpus_rex

The reason the 50% tax rate is riling is not that it is being introduced per se, rather that as usual it will be pissed up the wall.

If Brown is so hard up then why not just cancel the ID cards that no-one wants or alternatively he could just stop the tax credit money laundering scheme.

If he had the will he could take anyone earning less than £12k out of income tax altogether with no tax rises, but no, much better to introduce some spiteful class envy into the mix to feed the dinosaurs.

Bendy Girl – noone who had not had to suffer the ravages of being educated in a new labour sink school could possibly mis-understand the use of the word “monger” in this context, I feel sorry for you.

63. bluepillnation

@61
But the tool the right used to demonstrate “revenue efficiency” in terms of cutting taxes for the rich was the Laffer Curve – a napkin-drawing of doubtful provenance as a financial tool, which has been proven by this recession to be a complete farce of an idea, as we’ve had the lightest regualtion and the lowest taxes on the rich – for generations – for over thirty years now.

Thatcher/Reaganism is the root cause of this recession, nothing more and nothing less.

But Blue – the problems having nothing to do with the Laffer Curve and everything to do with government’s being completely unable to resist bubbles when they are politically useful, whether left or right. That is why we need to take the economy permanently out of government hands.

64: the Laffer Curve is, as has been exhaustively argued on this site, a fundamental truth, but an unhelpful guide to behaviour. Obviously if you have tax rates at 0% you get no revenue. Equally obviously if you levy tax rates at 100% you get next to no revenue. It’s simply that no-one is sure of the shape of the curve between, or where we are on it. The revenue efficiency demonstrated by the Lawson budget was that tax revenues rose after tax rates were cut and simplified.

And for God’s sake, the ‘root cause’ of this recession is not Thatcher, or Reagan. Even taking the Credit Crunch as the proximate cause, the market for complex financial instruments goes back to the 1950s – my old firm wrote the first Eurobond. There are specific points about capital adequacy and accounting standards, as well as issues about the way the rating agencies worked, but to blame this on Thatcher, or on Thatcher’s reforms, or on monetarism is ridiculous. It looks good on the front page of the Socialist Worker, but it barely even makes good JCR political debate.

tim f – HMT originally said that the new rate will raise £2.4bn in total, excluding any effect on discretionary spending, and playing down the possibility of behavioural change. But there would be a real incentive to, for example, transfer income into capital gains, which are taxed at a much lower rate – especially when you consider that at some incomes the marginal rate is over 60%.

Given that revenue expectations are already being downplayed there is a real chance that this will lose money – probably not a lot, but that does mean that there are more efficient taxes around.

bluepillnation,

i admire the sentiment, but I think you’re being just a tad over-simplistic…

nick

“That is why we need to take the economy permanently out of government hands.”

Erm, and whose hands should it go into?

nobody’s? the unregulated free market? No thanks!

an economic dictator, floating free of the government – erm…

other options?

To misquote Churchill, governments are the worst at lookling after economies, except for all those other approaches that have been tried.

“There are specific points about capital adequacy and accounting standards, as well as issues about the way the rating agencies worked, but to blame this on Thatcher, or on Thatcher’s reforms, or on monetarism is ridiculous. It looks good on the front page of the Socialist Worker, but it barely even makes good JCR political debate.”

seconded.

but I repeat: the empirical evidence that suggests tax revenues fall when rates rise is due to a lack of willingness to close the avoidance means for those who are levied with higher rates. Genuine political will – which would involve e.g. shutting down tax havens, getting tough on “tax efficiency” accountancy firms/advisers – could change this.

Paul S – possibly, but it bears repeating that the majority of tax avoidance schemes are deliberately put in place by Governments to encourage behaviour they approve of – ie saving, charity, R&D, capital expenditure etc etc. HMRC is as tough as it can be (given its congenital incompetence) at closing down ‘dodgy’ avoidance schemes, but the problem with calls to clamp down on avoidance is that each avoidance loophole is actually a deliberate policy.

And as for the tax havens the only way to stop them being an avoidance issue is to prevent them levying lower taxes, and that’s a bit of a stretch – what are we going to do? Invade? The real issue with tax havens is that their lack of transparency facilitates tax evasion, and that’s another matter altogether.

And on taking the economy out of the Government’s hands, it always reminds me of the Soviet ambassador who asked ‘who controls the import of bread into London?’ and didn’t believe it when he was told that nobody did and that it happened by itself.

70. bluepillnation

@67
I’m posting during the work day while waiting for a terabyte-sized search to come back, I can’t go into much more depth than that right now! ;)

I do believe that most, if not all, of the rot began with the blanket privatisation, deregulation and dismissal of any human drive other than greed that embodied the Thatcher and Reagan years though. Thanks for appreciating the sentiment!

71. Chris Baldwin

The top rate in 1979 was 83%. Thatcher cut that to 60%. Seeing as I’m a Labour moderniser, I suggest 70% as a reasonable compromise.

72. bluepillnation

@66
The Laffer Curve is bullshit, and you’ll never convince me otherwise, it’s pretty good for conning the uninitiated though, kind of ilke a financial Horation Alger novel.

And while the complex financial instruments may have been around since the ’50s, it was the deregulation of the institutions dealing with them that caused this mess, and that can be derived directly from the repeal of the Glass-Steagall Act, which can be derived frmo the US “Republican Revolution” of 1994, which can be derived from Reagan.

tim f – no offence, but I’ll take the IFS view over your own convictions if that’s OK

Look, if you feel that people shouldn’t keep more than half of what they earn over 150k or whatever for some moral reason, that’s fine. Make that case.

But please don’t pretend that it is a no-brainer from the revenue point of view. It isn’t.
The IFS believes it will be neutral/negative, while even the Treasury thinks it will make only the most marginal of contributions.

“who controls the import of bread into London?”

It’s not ‘nobody’ though. It’s several people, most of whom work for supermarkets. Which is no bad thing, but alas it’s not quite such a neatly clever-clever answer.

75. bluepillnation

@74
But the IFS, like the TPA, is a Tory front group, why should we believe them?

73 – well, if rational argument can’t persuade you, what hope is there?

‘This mess’ was caused by a whole variety of different factors, some of them Government related (some Tory, some Labour), some of them industry-related, some of them human-related. Try reading Galbraith on the Great Crash and see how much echoes down the years – for that matter look at the South Sea Bubble and much of the same applies. Or the Tulip crisis in Holland. Were they the Gipper’s fault too?

Lehman Brothers, Merril Lynch, Bear Sterns – spot a connection? Here’s a clue, they were all investment banks and therefore operated in the same way post the repeal of Glass-Steagal as they did before. The Credit Crisis revealed bad risk management across the board, from complex securities to straightforward commercial lending. The separation of investment from commercial banks (which never applied in the UK anyway) is entirely irrelevant.

75 – In answer to the question ‘who is in charge’, ‘lots of people’ is as close to ‘nobody’ as makes no difference.

“nobody’s? the unregulated free market? No thanks!”

Why not? It worked better than now. The core of our economic problems are the use of government fiat currencies. If we returned to a different method of evaluation, either a commodity backed currency or a system of competitive currencies, we could see a much more stable system developing, as was the case before governments decided they were best placed to manipulate a county’s financial system.

@78 – err, okay [sidles off quietly].

80. bluepillnation

@77
Because “The Gipper” undid all the regulation put in place by FDR to prevent it from happening again. Lo and behold, it happened again.

And the separation of investment from commercial banks is very important to the causes of this recession because regardless of whether a similar law was passed in the UK or not, our banks (and banks in other countries) bought the credit default swaps from the consolidated US banks largely on the basis of AIG’s AAA rating. There’s no such thing as national containment any more – this came from deregulation pure and simple and to deny it is simply conservative/libertarian denial.

Has anybody noticed that the guy who wrote the Comment is Free piece that Paul links to…you know, the one who’s threatening to leave the country because of the tax increase… has also written a book entitled, How I Caused the Credit Crunch.

Here’s the blurb for his book:

“How I Caused the Credit Crunch” traces seven years at the forefront of the credit markets – a tale from the heart of the bewildering banking maelstrom whose catastrophic collapse has plunged the world towards the worst recession since the 1930s. Tetsuya Ishikawa’s story reveals how a young Oxford graduate finds himself in command of vast sums of other people’s money; how a novice to the mysteries of hedge funds, subprime mortgages and CDOs can fix complex deals for billions of dollars in the exclusive bars, brothels and trading floors of London, New York, Frankfurt and Tokyo, and reap the benefits in a colossal annual bonus and an international luxury lifestyle.

And he’s going to leave the country?

Is that a promise? Bye bye, hope your plane crashes in Somalia and you get buttfucked by pirates.

“There’s no such thing as national containment any more – this came from deregulation pure and simple and to deny it is simply conservative/libertarian denial.”

Hate to upset you but there were plenty of libertarians who saw this crisis coming due to the bubble created by low interest rates – interest rates held low by central banks (which are government and government-backed created institutions even if some are privately owned).

81 – Wait, so Reagan’s deregulation (that happened in 1999, and was signed by Clinton, and passed 92-8 by the Senate) was responsible for the South Sea Bubble? Crikey.

And why didn’t Glass-Steagall prevent the Savings & Loan crash of the 1980s?

our banks (and banks in other countries) bought the credit default swaps from the consolidated US banks largely on the basis of AIG’s AAA rating

Eh? Our banks bought (and sold, and issued) packaged instruments from US banks based on the rating of those instruments – that rating provided by, obv, a rating agency, Moodys, Fitch or S&P. AIG had nowt to do with it – it’s an insurance company that’s had its stock downgraded and has therefore had to pay out on its own CDSs.

Look, I sympathise, to an extent, with the idea that a poorly regulated financial sector has brought this mess down on us. But the thing is that it wasn’t an unregulated sector – just try getting through the mess of SEC regs to try and sell a prospectus in the States, for that matter try reading and understanding FSMA here. What it has been is a poorly regulated sector, and that is because the approach taken has been to smother the sector with a rule for every circumstance.

Far more sensible is what used to be known as ‘the Governor’s eyebrows’, where banks’ behaviour that was legit but dodgy would be discouraged after personal intervention by the Bank of England. The sort of compliance culture that has governed the financial sector for the past 15 or so years (greatly exacerbated in the UK by the downgrading of the Bank of England) has greatly contributed to the current financial crisis. If you provide people with an exhaustive list of rules to follow, they will follow them, to the letter, and slip between the gaps to exploit them.

bluepillnation: But the IFS, like the TPA, is a Tory front group, why should we believe them?

Not quite: Everybody likes the independent analysis of the IFS…until it comes up with a response they don’t like.

Oh, and incidentally, I’m not a banker and my experience of most traders has been that they are hyper-agressive, monstrously arrogant and knackered.

Oh, and incidentally, I’m not a banker and my experience of most traders has been that they are hyper-agressive, monstrously arrogant and knackered.

I don’t doubt it (this has indeed been my experience too) but I think it’s a big mistake to think that everyone earning over £150k is an evil banker; for instance, I’ve seen figures (not sure where but I can try to dig them up if anyone likes) saying that 15% of the people earning over £150k are doctors. Now, as far as I can tell, this new budget just made it that more attractive for them to move to somewhere where they don’t spend half of their time working for the government. Am I saying that all, or even many doctors will leave? No, of course not. But decisions like this are made on the margin, and the margin just moved in the direction of encouraging people to leave.

But decisions like this are made on the margin, and the margin just moved in the direction of encouraging people to leave.

A wise observation.

In itself it may not be much…but it may be the last straw.

Anyway, looks as though we will be finding out either way as the boy-king will not be reversing it!

88 – Oh I reckon they will. They aren’t going to comment piecemeal, but I’d have thought that pretty promptly after the election they’ll throw up their hands in horror and call an emergency budget. We’ll probably then see the simplification of tax bands (though possibly an extra penny on current top rate?) among a general scale-back of spending.

Tax rates will be explicitly sold on ‘revenue raising’ rather than ‘fairness.

If I was in charge that is…

timf

good on Bendy Girl for raising that, even if it did turn out to be a misunderstanding. We’re not talking about the state censoring people but about a request from one individual to another not to use a word that can hurt

Sorry to keep coming back to this but, for me, it’s the interesting issue on the thread.

How can someone be so offended by a word, an amalgam of letters, that they want to prohibit others from using it even when, as in this instance, its meaning is entirely unrelated to that which they could construct as being offensive?

To seek to prohibit or control words is always unacceptable and down that road lies a totalitarian society. We all need to grow thicker skins as BG has so eloquently demonstrated.

pagar: it’s like that story where the police kept confusing ‘niggard’ (i.e. mean or stingy) with a familiar term of racial abuse, even though they are likewise not related. I think this is a case of ‘etymology fail’.

91. Shatterface

(91): That was a staffer at the Mayors office in Washington DC.

I also remember a lot of bullshit on the meaning of ‘picnic’ and ‘nitty gritty’.

92. Shatterface

Sorry, badly phrased: the staffer was forced to quit over using the word ‘niggardly’, he wasn’t responsible for the complaint.

93. david brough

Mark Steel addresses the fucking vermin who moan about 50% here:
http://tinyurl.com/c9v6gh

This also highlights the hypocrisy of right-wing filth who use nationalist rhetoric to divide the working class. They never stop on about how the “white working class” are magically different to ethnic minorities and should side with boss-class scum who have the same colour skin, against people with exactly the same interests as us who just happen to be of a different race. This is shite even if you believe it, but they don’t as the evidence shows.

Because how fucking “patriotic” is it to just leave the country? What the fuck are they doing supporting that sort of behaviour and letting an elected government be held to ransom by people who quite plainly do not accept the shite that they talk about national loyality, but on the subject of whom they mysteriously remain silent?

No- I’d be delighted if vermin like Ishikawa fucked off to a libertarian country like Somalia and took all the fucking scum of the blogosphere with them.

david brough,

not that your comment dignifies much of a response, but you do realize that the ‘right wing filth’ who use nationalist rhetoric are an entirely different crowd to the libertarians who don’t really go in for the idea of nationalism much, don’t you? Or do we all look the same to you?

#90 – I think you underestimate the power of words, especially words that trigger memories of abuse.

I just don’t think it’s any trouble to me to find another word. If the word “water” triggered memories of being waterboarded when speaking to victims of torture, I’d find a different one. It’s just courtesy. Of course, that’s slightly different from terms of racial/sexist/disablist abuse as when I was talking to someone else I’d still use the word “water”, whereas I try not to use words I think reinforce race/sex/disability hierarchies.

Frankly I think accusing people of political correctness is the new political correctness. People screech “political correctness gone mad” in order to shut down debate about language and how it’s used. I’m perfectly within my rights to point out why I think use of certain words reinforces particular power structures and challenge people as to their use of them. If people disagree, there’s not much I can do about it. But too often people just react by screaming “OMG POLITICAL CORRECTNESS YOU FASCIST!!!111″ because they don’t want to discuss the question of what the effect of using a particular word is and what the balance is with the utility of that word.

I’ve seen figures (not sure where but I can try to dig them up if anyone likes) saying that 15% of the people earning over £150k are doctors.

But have you considered that the money raised from increasing the income tax on these doctors could be used to train more doctors? These doctor’s training would take a few years to come to fruition but once they do they will be happy to replace the small number of doctors who left. Just like this the money raised taxing these wealthy people can be used to provide services and training to people where it can make a much bigger difference. (Not that this is what Gordo et al will do, they will just give it to RBS again).

ANYWAY – The problem is with redistributive taxation is that the super rich, the ones that really need to pay, can escape it. We do need progressive taxation, but its no panacea, the best way to achieve any Liberal or Socialist’s aims is to get people earning a decent wage in the first place.

84. tim j . Good comment on role of B of England. When people think of those who leave this country are just in finance. How much does a head of R and D for a top company or a professor at MIT who undertakes consultancy earn? Many top researchers at universities set up companies . There is no reason why a whole research team cannot transfer to Stanford, Caltech or Ivy League USA. If a head of a research team transfers to top American university or company those juniors members of the team may be happy to move due to the better quality of life.

If we want to build high speed trains and green technology there will be competition between a few universities and companies for a few good people. A friend told me his head of department moved to the USA and obtained a salary equal to his departmental budget. American universities have been scooping our best brains for decades. Look at the designer of the iPod , a Briton who works for an American company. In the arts, Young, Schama and Ferguson have all oved fom Oxford to Yale or Harvard.
If one looks at the Industrial Revolution in the UK it was probably down to the actions of less than 1000 people over 150 years. If one looks at the computer industry perhaps how few people created it -Turner, Gates , Allen,Jobs, Berner Lee, Dell? How few potential future Nobel Prize winners do we need to lose to dramatically reduce our scientific capability ?

When it comes to major R and D breakthroughs are often down to to relatively few people- look at Dyson, Berners Lee etc.

“Fuck off and “go Galt”, Dan. Suppose a rugged individualist and tough guy like you will have no problems whatsoever supporting yourself without recourse to others.”

Rather than hurling abuse like a 14 year old, why don’t you address his point, namely that libertarians and BNPers despise each other.

It takes bottle for a government to save money – this one hasn’t any.

Rid thyself of all those costly databases, ID alone 35 billion, scrap them. Rid local councils of sponging bastard CEOs, close loop holes in the ‘avoidance’ scam – introduced by many governments and prosecute those who evade taxation. Hold tax havens to account – even the US is really thinking about that one. Troops out of wars they should not be in.

And, going right to the very OP – because someone writes an opinion piece they have to evidence every last bit? What is the point of having an opinion if you cannot voice it? Surely that is a fundamental in debate?

Thirdly – Bendygirl is a bit of a nutter methinks.

100. bluepillnation

@84
I can’t prove it, but I have a strong suspicion that aside from the fact that the Republican Congress could have forced the Glass-Steagall repeal through with or without Clinton’s help, that by not putting up a fight over it Clinton was trying to engineer a quid-pro-quo for his aborted healthcare reform. More fool him, but I can’t see him formulating a deregulation policy that idiotic.

@100
They’re both bullies, believe in a world of winners and losers, and believe strongly in grinding the latter into the dust as “unworthy”. The only difference is that one uses race as a demarcation line, the other money. The ruthlessness and lack of common decency is shared.

“libertarians and BNPers despise each other.”

Not half as much as they both hate ‘lefties’…

But have you considered that the money raised from increasing the income tax on these doctors could be used to train more doctors?

Except that one of the points raised in this thread is that the additional revenue raised will be marginal at best, negative at worst.

103 – You’re right, Glass-Steagall’s repeal was a republican move, albeit one passed by 92-8 in the senate. But… it’s simply not relevant to the current recession for the reasons I set out earlier.

94 – Mark Steel’s a joke. And not a terribly funny one at that.

The argument that raising tax doesn’t bring in any extra money is mad on lots of levels. It’s a good job these people don’t run a shop, as presumably they’d tell their customers “Oh don’t bother giving me any money for those biscuits. The notion that if you give me money, that will raise any more money for me than if you don’t give me any is a myth,” and be bankrupt in a week.,

Fuckwit. It’s a good job he doesn’t run a shop, otherwise he’d presumably tell his customers ‘I’ve just put the price of these biscuits up by ten quid, thereby obviously raising lots more money, as I’ll get ten quid more per packet’. It’s not often that someone so completely disproves their own argument while trying to illustrate it.

The correct first step would be to find out how much the customer is prepared to pay for the biscuits…

You mean there might be a price at which revenue from biscuits is maximised? High enough to raise revenue, but not so high that it causes demand for biscuits to fall? Maybe we could draw this on some sort of curve…

Aye – but bear in mind it varies by customer, and over time.

@Neil [105]
“libertarians and BNPers despise each other.”

Not half as much as they both hate ‘lefties’…

Absolute garbage. Libertarians _are_ lefties, in the _traditional_ sense. We are anti-authoritarian, anti-privilege, and desire a level playing field for all.

With it’s capture by Fabianism over the last century and a bit, it’s the ‘left’ that has completely lost touch with it’s own roots, and morphed into an authoritarian movement that would be anathema to those historic figures that largely brought the movement to life.

Sunny recently asked (“A wake-up call for the left”) how on earth the ‘left’ is going to move forwards, given the obvious drubbing that Labour will reap at the next general election, and the paucity of a coherent left ideological vision. IMHO, that’s a question that the ‘left’ will fail to answer until it starts to look at why a movement against reactionary forces came to arise in the first place.

Right now, we’ve got a ‘right’ that believes in man as fallen, and thus needing of constant parenting by the state. We’ve got a ‘left’ that believes in the perfectibility of man, again under the guidance of the state. Both views presume that someone knows better than you or I how we should live our lives. Both views presume that you and I are somehow ‘less worthy’ than those in power, and consequently ripe for exploitation by the state, and the crooked economic system that both Labour and Tory alike seek to maintain.

Libertarians are not the enemy of the left. We’re about the only bloody group out there that holds to the original values that still infuse your rhetoric, although not your actions.

I had high hopes when this site was launched that it actually meant something when it said that it aimed “to bring together and re-invigorate the liberal-left in Britain”. Although ‘liberal’ and ‘left’ have both been bastardised over the years, it appeared as though somebody here might be serious about reclaiming the heritage of those terms. To see so many floundering around in a sea of reaction and authoritarianism suggests otherwise. It’s a great opportunity going to waste, and ordinary folks, outside of the loops of privilege and power in this country, won’t thank you for it.

Ah, so *that* would be why you never see libertarians using the word ‘lefty’ as a pejorative.

Not half as much as they both hate ‘lefties’…

I just think this shows the pitfalls of having a narrow, one-dimensional view of politics. Personally, as a libertarian, I’m against anyone who is economically or socially authoritarian – and like it or not, these features are exemplified by both the BNP and by the left. If you think that libertarians aren’t opposed to the BNP, you probably haven’t met very many libertarians.

If there are three words which make me switch off it’s: “as a libertarian”.

@david [112]:
“Now for an argument over who’s a tr00 libertarian and who’s a splitter.”

That’s a simple one. To be a libertarian means accepting the non-aggression axiom (http://en.wikipedia.org/wiki/Non-aggression_principle). That’s it. Everything else — all the different flavours of libertarian thought — flow from that principle, and must be consistent with it.

Note that the bare axiom doesn’t even include reference to property — there are a breadth of positions within the anarchist/libertarian tradition on property from private ownership right through to social ownership.

The NAA is all. Stand by it and you are a “tr00″ libertarian, stand against it and you’re not. Other differences simply reflect the diverse nature of humanity, and are _welcomed_ by “tr00″ libertarians as a simple fact of non-authoritarian life.

“I just think this shows the pitfalls of having a narrow, one-dimensional view of politics.” he says, then immediately goes on to berate “the left”…

112. david brough

Right, and who represents libertarians in this country? Because it’s not as if the LURPAK bloggers are great ambassadors, is it?

@david [118]:

“Right, and who represents libertarians in this country?”

Just as the ‘left’ has many different voices, so does the libertarian movement.

However, those on the libertarian right tend to be most vocal, which can give a somewhat skewed idea of what libertarianism _as a whole_ is all about. Imagine what impression folks might get of the ‘left’ if, say, the SWP were it’s loudest voice?

Have a look here for further thoughts:
http://towardsmutualbenefit.blogspot.com/2009/04/right-libertarian-blogging.html

117,

You’re right actually, I should have qualified it with ‘statist’ or ‘traditional.’ There are some people who see themselves as on the left who I have barely any disagreements with whatsoever; if I implied the whole left was statist and authoritarian, I apologize. But I think, suitably qualified, my point still stands.

115. david brough

Can’t think of anything that could possibly stop bloggertarians achieving their aim in this respect:

http://www.cato-unbound.org/2009/04/13/peter-thiel/the-education-of-a-libertarian/

116. bluepillnation

@106
I guess we’ll have to agree to disagree. I say the removal of regulation from banks is the lynchpin of this whole recession, as much as most conservatives and some libertarians would like to blame it on the “stupid poor who tried to buy houses they couldn’t afford” – who was it telling them they could afford it if it wasn’t the banks? The banks didn’t care because they could package that mortgage up into a CDS and be shot of it for good, having made a vast profit on it.

@120
We *need* state intervention in business though, because left to their own devices corporations become inhuman profit-driven monsters with no social conscience whatsoever. State intervention at this point of human evolution is the only thing that can keep business honest.

122

First of all, who said anything about there being corporations? As a matter of fact, the existence of limited liability corporations is entirely a creation of the state, and I think in net, a negative one. I bet you didn’t think you’d hear a libertarian saying that, did you?

@bluepillion [122]:

“State intervention at this point of human evolution is the only thing that can keep business honest.”

Chicken or egg?

Engels wrote: “Bakunin maintains that it is the state which has created capital, that the capitalist has his capital only by the grace of the state. As, therefore, the state is the chief evil, it is above all the state which must be done away with and then capitalism will go to blazes of itself. We, on the contrary, say: Do away with capital, the concentration of the means of production in the hands of the few, and the state will fall of itself.”

The libertarian position is the former, the strict Marxist the latter. You can find arguments to support either pov, but personally (obviously) I find the evidence pretty compelling that it is the state that has created the conditions for ‘state capitalism’ to flourish.

Although this doesn’t look as far back as he has in his printed works, the following by Carson might offer some food for thought: http://www.libertarian.co.uk/lapubs/econn/econn102.htm

122 – it’s certainly a reasonable position that poor regulation of the financial sector was a leading factor in this recesion, but the reality is that it’s a very long way from being a deregulated sector. You simply haven’t looked at the enormous array of SEC provisions that govern the US financial market, nor the combination of FSMA and the Companies Act that govern UK banking if you think it’s deregulated. Someone described it recently as ‘a sledgehammer to miss a nut’ and that’s a reasonably fair description.

And one of the main reasons for the enormous boom in credit derivatives was the mistaken belief that, by spreading risk paper thin, the banks could effectively eliminate it. In other words, they were happy to offer big loans to the poor, because even if they did default, the bank issuing the loan would only get hit with a tiny proportion of the cost. As I say, this was a mistaken belief, but these things are very easy to see in hindsight. The voices calling for the abolition of CDOs were remarkable for their absence two years ago.

“We *need* state intervention in business though, because left to their own devices corporations become inhuman profit-driven monsters with no social conscience whatsoever.”

Strange then that big business has often supported state intervention. The reason? They need it to help them compete on the free market. Take away patents, transport subsidies and other forms of corporate welfare and big business wouldn’t be half as big. Check out http://members.tripod.com/kevin_carson/sitebuildercontent/sitebuilderfiles/Chapter3.pdf

some libertarians would like to blame it on the “stupid poor who tried to buy houses they couldn’t afford” – who was it telling them they could afford it if it wasn’t the banks?

What actually happened was the stupid US Government instructed and encouraged the stupid bankers to loan money to the stupid poor to buy houses they could not afford.

To the bankers it was just junk bonds all over again- Fannie, Freddie and George need to share the blame.


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    […] for top earners. What top earners say is that if their taxes go up, they will leave the country. I’ve disputed that already. But whether or not they do, it has nothing to do with demand for a specific consumer good. […]





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