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From Arse To Elbow
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As Matt notes, the Laffer curve is a simple political misdirection that causes us to obsess about a top tax rate that is marginal to revenue (though emblematically important to morale). But rather than putting up taxes on the immobile poor, why not increase taxes on land? Not only does it have the virtue of immobility, but a land value tax is an incentive to productive use and carries no deadweight loss.
Toggle Commented 2 days ago on Note on Laffer curves at Stumbling and Mumbling
@Steven Clarke, Government debt can be financed indefinitely so long as we can service the interest. In contrast, a trade deficit is an IOU. Over the short term, you expect deficits to be balanced out by surpluses, as trade ebbs and flows. If the imbalance looks semi-permanent, you need to settle up. The major factor in the worsening balance of payments since 2011 has been the fall in income earned by UK companies on foreign assets relative to income earned by foreigners on UK assets (i.e. more cash is going out than coming in). Chris's chart suggests that UK companies have maintained earnings by drawing down their cash surpluses. A large government debt plus high interest rates has (depending on fiscal policy) the effect of crowding out public expenditure or prompting compensatory tax rises, both of which depress aggregate demand. A large balance of payments deficit has the effect of draining income out of the country and thus lowering total investment (even if some is recycled as foreign direct investment). If the interest rate on government debt is low, a government deficit is preferable to a balance of payments deficit.
Toggle Commented Apr 1, 2015 on The other deficit at Stumbling and Mumbling
I think its commonly recognised that deficit fetishism has caused the UK media to lose its collective marbles, but I was still surprised by the acceptance of George Osborne's recent claim that "paying your way in the world" means cutting the government deficit rather than balancing the current account. It says something about the degradation of politics that you have to rely on a hereditary peer (Viscount Hanworth) to point this out. I don't see the quality of debate improving much over the next 5 weeks.
Toggle Commented Mar 31, 2015 on The other deficit at Stumbling and Mumbling
Will Davies has an interesting post at Potlatch that intersects with this topic.
Toggle Commented Mar 26, 2015 on The Clarkson problem at Stumbling and Mumbling
I think you're mixing two different things here: the satisfaction that comes from completing a task well (running a marathon); and the degree of control wrested from your work situation. Bureaucrats (and that includes all species of management) are happy in their work not because they are getting things done, but because they can exercise control. Of course, they may be deluding themselves about the extent and permanence of it (think of the Tom Wilkinson character in The Full Monty). The politically important bloc in the workforce is no longer made up of alienated production line drones, or even of call-centre operatives or warehouse fulfillers, but of "facilitators" and "analysts" and "team leaders", all busy filling their hours with email. Their limited autonomy keeps alienation at bay, but it also undermines productivity. Neoliberalism, with its focus on continuous performance management (close inspection, targets, data analysis etc), and its valorisation of human capital (HR, attitudinal training etc), breeds corporate bureaucracy. This is an acceptable cost for business (i.e. big capital) as it creates a common culture with the state, but it's also exploited as a "counter-movement" (a la Polanyi) by the middle-classes. The modern industrial issue is not alienation but parasitism (rent-seeking, if you will). As job polarisation advances, this will only get worse.
Toggle Commented Mar 25, 2015 on Alienation: the non-issue at Stumbling and Mumbling
Rogerh says "our consulting firms are in international demand". Maybe, but most UK-based business consultancies focus on tax, audit and financial services - they're not actually in the business of improving productivity. Consultancies that focus on actual productivity improvement (as opposed to cost-cutting through outsourcing), such as process engineering and lean manufacturing, tend to be American subsidiaries or their offshoots. Over the long run, productivity growth tends to differ across sectors due to capital composition. Manufacturing has high rates (lots of capital), business services has so-so rates, and consumer services have low rates (lots of labour). As we shifted from manufacturing to services, our productivity growth was flattered by a) the shakeout of under-capitalised manufacturing in the 80s, and b) the amplification of business services growth in the 90s by price inflation. Manufacturing is now too small to drive aggregate productivity growth up much, while the business services gravy-train appears to have temporarily halted, initially because of the 2008 crisis and subsequently due to weak global demand (reflected in our worsening balance of payments). A lot of recent growth in the economy has been down to consumer services, which acts as a drag on productivity growth because of its high-labour/low-wage composition. Our fundamental problem (reflected in low levels of capital investment, stagnant productivity growth, and a worsening balance of payments) is the imbalance in the economy. There was a lot of talk about this in 2009, but there has been no material attempts to address it since.
The South Yorks police focus on car crime was not just the result of political priorities, it also reflected the ease by which it could be measured (due to auto insurance) and an ideology that valued property more than people. We measure what we value, so all measurement is ideological, but we also measure things that are convenient to measure, and our assumptions about convenience are also ideological. As Luke notes, David Boyle's criticism of "gaming" only makes sense if you believe that there is a greater social benefit in raising an A student to A* than in raising a D to a C. This is ideological both in what it values ("bright kids poorly-served by the state sector") and in its assumption that the metric is insufficiently discriminatory ("grade inflation"). Another example: "happiness economics" is clearly a case of changing the subject at a time when developed nations are facing stagnation (GDP growth is passé), but it also reflects an expectation, driven by preference marketing and big data (i.e. surveillance), that we can truly assess people's state of mind, rather than having to rely on a vox-pop. On Ozil: passing up a shooting chance when clean through is not a stat that Opta or anyone else seem to measure, but it's something that the Arsenal crowd are acutely sensitive to (and not just in the German's case).
Wouldn't it be safer if he just twatted himself?
It's not entirely accurate to say that such markets don't exist. In a limited way, both PPI and IPI provide cover for future employment uncertainty. The reason why a more extensive, career-oriented market doesn't exist is because there is no willing market maker. The private insurance industry has no interest in pursuing this. A society-wide system would require a mandate, which would necessitate low premiums and invite state regulation to prevent excess profits or bilking. As we've seen with Obamacare, this sort of intervention will only be supported by the insurance industry if they fear greater losses due to rent-extraction by other sectors (i.e. the medical industry). The problem then is not merely an ideological failure to envisage a pro-social market, but the refusal of government to be a market-maker other than in the context of privatisation.
Miliband has actually been quite deft in translating an issue of lobbying (i.e. influence bought on a time & materials basis) into one of paid directorships and therefore corporate governance. The root of the problem goes back to the Cadbury Report of 1992 (following Polly Peck, BCCI and Robert Maxwell), which sought to improve governance standards without statute, preferring "comply or explain", aka brazen it out. This recommended increasing the number of non-executive directors, which created a gravy-train for the usual City suspects. Many companies split their management between an executive board, that handled all operational decisions, and a main board (with majority NEDs) that handled public and investor relations. The result has been the "not me, guv" excuses of the directors when malfeasance comes to light (HSBC are just the latest of many). Over time, MPs started to be attracted to NED roles, largely because having one on board was regarded in the Russian idiom as "krysha", i.e protection. The rationale was that an MP would want to avoid reputational damage, so s/he would keep the business on the straight and narrow, governance-wise. Because the market recognised this, an MP as a NED boosted "soundness". Their technical input was irrelevant and their usefulness for lobbying was merely a bonus. The ethical issue isn't MPs having paid directorships in small family firms, or even NED roles where they can genuinely bring industry expertise to bear, but the venality of those who tart themselves out to FTSE-listed firms as a form of PR. This encourages the mindset of "what's good for business is good for UK Plc".
Toggle Commented Feb 26, 2015 on Why Miliband is right at Stumbling and Mumbling
The suggestion (made by Luis) that secular stagnation means that the "rate of technical progress has shifted down" is debateable. An alternative view is that technical progress is just as rapid (or even accelerating) but that the unit cost is deflating due to a compositional change in technology, specifically the impact of software. This is leading to surplus capital (because innovation is insufficiently "wasteful" and network effects lower the cost of expansion), low interest rates (the capital surplus amplified by increased savings due to demography and developing nation growth), and the diversion of savings into property (the search for a safe store as much as for yield). In this light, London planning regs and the investment in transport are designed to maintain values, not to undermine them. For example, as a high-speed railway, HS2 will (unlike the Metropolitan line) benefit a relatively few, wealthy commuters. Some bankers will relocate from Amersham to the Forest of Arden. They will be back-filled by wealthy bods in Central London moving out to start a family in Bucks. They will in turn be back-filled by wealthy foreign investors seeking a London safe-deposit box. As an aside, the point to remember about teleworking is that if it were going to radically change economic geography it would have done so by now. The bulk of teleworking is not cottage-based laptop-users, but office-based workers on the move with a smartphone. Technology is losing the race with diminishing returns at the moment because the rate at which it recyles capital to labour has fallen. We tend to think of this in terms of a lack of demand for labour (e.g. job polarisation and growing inequality), but it is equally a lack of demand for capital by new technology.
Definitely the new Peter Crouch.
Forgive me for sounding cynical, but New Labour never went away. It obviously suits some to associate it with Blair & co, but Brown, Balls and Miliband are as much in thrall to neoliberalism (and the US Democrats) as Mandelson and Milburn ever were. Consider yesterday's announcement of apprenticeships for every school-leaver who "gets the grades". This is part of a "middle-out" economic plan, inspired by Obama and lauded by Mandelson, which will shovel more government money towards big capital. New Labour is far from defunct.
@DFTM, a fallacy *is* a logical assumption, but one that is incomplete or based on a false premise. For example, the lump of labour theory is internally logical, but it also happens to be wrong. Similarly, the belief that innovations can be categorised as "easy" or "hard", giving rise to the notion that we have worked our way through the former and are now struggling with the latter, is based on the fales premise that innovations have a fixed value on an eternal scale of difficulty. The terms are wholly subjective - it's a matter of perspective. I'm not clear what point you're making with the programming language example, as you (rightly) note that an innovation can be "easier" if it builds on what has gone before. Are you agreeing with me or just questioning the use of the word "fallacy"? I'm also lost by your cunning plan to skip a primary innovation and focus on the secondary. You can't have one without the other - these are relative terms. I agree that not every new product is truly innovative, and may be nothing more than repackaging, but this is actually a feature of capitalism, not a bug. It's about thorough exploitation (or recycling, if you prefer). Yes, this produces a surfeit of bullshit, but bullshit is an integral part of market discovery (i.e. figuring out what sort of price consumers will tolerate for all-new snakeoil). Over time, bullshit will grow both absolutely and proportionately, but that reflects a growth in aggregate global wealth and disposable incomes, not diminishing returns. There is a structural reason why Martin Sorrell always looks so smug.
It's important to remember that the Austrian school developed in an era of widespread political and cultural pessimism, between the defeat by Prussia in 1866 and the calamity of World War One. In other words, the intellectual roots of modern free market jihad lie in social pessimism. The sort of Burkean or Oakeshottean pessimism you are looking for springs from a belief that the "natural order" is worth preserving. The Austrian school lost this belief, lapsing into cynicism (self-interest as the motor of economic life, democracy inevitably looting the public treasury etc). It's just a different type opf pessimism. Re "it's quite possible that it is now harder to make innovations than it was before, simply because we've already discovered the easy ideas". This is a fallacy. Innovation is cumulative - if I want to invent a new software program, I don't first have to invent electric power and computers. Innovation also tends to branch - i.e. a primary invention gives rise to multiple secondary inventions, producing geometric growth. It is also amplified by population, education and communication. In other words, we are still growing the number of inventors, maximising their exploitation and making collaboration easier. We're not short of new ideas, rather we're facing a surfeit of them, which is leading to commodity deflation and reducing the returns to capital.
The idea that certain policy areas should be beyond democracy is pernicious. I understand why SWL feels this, but he undermines his case by holding up central banks as non-political, as if they were not subject to ideology and regulatory capture. I wonder how he'd feel if the security services suggested they too should be exempt from democratic accountability, for "technical" reasons. More practically, we over-estimate capitalist wiles. Your average voter has never heard of Stefano Pessina and will not assume that being the CEO of Boots gives him any particular insight into the world beyond the cosmetics counter. Though the Tories persist with this "captains of industry" tripe every election, there is no evidence it actually works. As with most propaganda, its purpose is not to change minds but to reinforce existing prejudices. As Syriza has shown, electorates are not averse to stimulus programmes instead of austerity. The problem is not democracy, or even the power that capitalists have to influence the media, but the absence of choice. Kalecki's point was that capitalists don't have to intimidate the electorate; they just need to intimidate the main political parties.
A jobs guarantee wouldn't be paid at the national minimum wage, but slightly below it. This is to encourage labour to move from the public sector to the private sector once the economy picks up and (low-paying) vacancies are created in the latter. The job guarantee is meant to be a self-regulating mechanism to deal with temporary unemployment. If paid at the NMW (let alone the living wage), this would encourage some workers to prefer the security of a public sector role. For the same reason, the jobs are likely to be unattractive, to avoid workers discounting their wage expectations for pro-social roles. In practice, job guarantee schemes either tend towards the antiquated model of the 20th century (a labour battalion with the prospect of parole), or they are pro-capital schemes that provide subsidies to business for certain types of worker (e.g. the young or long-term unemployed) for fixed periods. The use of the term "job guarantee" for the latter is questionable - "subsidy guarantee" would be more accurate.
Toggle Commented Jan 30, 2015 on The left's ideas at Stumbling and Mumbling
Aaronovitch's article contructs a strawman: "Socialists [who] like to think Syriza’s victory will usher in a new economic order". Dave Spart gets a mention (apparently he's relocated from Neasden to Lewisham). As evidence for the existence of this beastie, Aaronovitch cites the posturing drivel of Giles Fraser and Natalie Bennett, before going on to contrast this with "the achievements of the centre-left government of the hated Tony Blair". Given Aaronovitch's fondness for an old tune, his lament for the lack of ideas seems somewhat forced. But perhaps we are being naive in thinking that newspaper columnists actually deal in ideas. From the weeping Tories of the Guardian to the true believers of the Telegraph, ideas (rather than ideology) are noticeable by their absence. PS: I managed to bypass the paywall using the Google cache, which might work for others (yeah, stick it to the man):
Toggle Commented Jan 29, 2015 on The left's ideas at Stumbling and Mumbling
@Neil Wilson, re "there is always something that needs doing that others see as needing doing". Yeah, like building pyramids. "BI fails because those doing the necessary work ... resent those that don't do anything". Au contraire. In a society where labour is increasingly superfluous, "work" becomes a positional good rather than an economic imperative. You can see the early stages of this in the shift to unpaid internships and the increasing cost of tertiary education. The consequence is that the "haves" are increasingly attracted to the idea of a dole for the "have nots", which is one reason why the CBI is in vogue on the right as much as the left. Always remember that a CBI is just a mechanism, that can be introduced in either an egalitarian or an inegalitarian fashion. @SpinningHugo, the free movement of labour in the EU does not entitle non-citizens to claim benefits. This point was coinfirmed by the ECJ in November. The benefits granted are a matter of domestic policy, hence why the Tories and Labour are competing to ratchet them down. @Neil21, good question. I imagine he'll be along shortly with his "cunning plan" for slavery 2.0.
Toggle Commented Jan 27, 2015 on Basic income: some issues at Stumbling and Mumbling
Natalie Bennett's fumble points to a philosophical problem at the heart of the Green Party's support for a CBI (which is also indicated by their manifesto's silence on uprating). Short of a post-scarcity society, the argument for shifting from a predominantly contributory system of welfare insurance to one of basic entitlement is structural unemployment combined with commodity deflation - i.e. we can produce more than enough goods and services short of full employment. A Green argument for CBI would be that it doesn't make sense to incentivise marginal work that produces a large externality in environmental degradation. Better to pay people to cultivate their garden's than compete with drones as delivery van drivers etc. But if we assume continued productivity growth due to technology (which could well be faster with a CBI), then the number of jobs will continue to shrink, which means a growing cost for welfare as a proportion of GDP. Whether the CBI becomes more parsimonious or more generous (and thus redistributive) over time depends on how we divvy-up the fruits of growth. This is a political choice that the Greens struggle with because of their commitment to zero growth. In a low growth economy, where capital-labour substitution continues apace, you can only prevent the CBI from becoming a mechanism for immiseration through significant wealth redistribution via the state, which means the expropriation of capital. This conflicts with the Greens support for private property.
Toggle Commented Jan 27, 2015 on Basic income: some issues at Stumbling and Mumbling
As he proved in today's commentary on the Brighton-Arsenal game, Savage is perfectly capable of considering mutiple and even contradictory points of view, just not at the same time. All he is actually doing is fulfilling his contractual obligations to act as a sounding brass and thus windup viewers: "X is very poor; Y is brilliant; X is brilliant; Y is very poor" ad infinitum. You could easily build a Robbie Savage random commentary generator. Just vary the above pattern with a few shouts of "magic", "you just can't do that", and "that was a good foul".
Luis, No need to apologise. My second comment in this thread was perhaps a little opaque. It was late, and I'd just polished off a lovely little Malbec that I'd picked up in Borough Market that morning. Anyway, my point is not that choice isn't important or desirable (we can all think of myriad occasions when it is) but that it becomes a fetish and thus intrudes on situations where it is trivial or irrelevant. This elevation of choice is characteristic both of choice-fundamentalists and critics of "rampant consumerism". Bourne and Sentamu need to get out more; or perhaps read The Dice Man.
Toggle Commented Jan 22, 2015 on The oblique path to growth at Stumbling and Mumbling
Luis, I was actually agreeing with the thrust of your original comment - that consumerism is a "phantasm" - but suggesting that both the critics and defenders of consumerism share an ideological purpose in treating every mundane transaction as a moment of significant choice. I wasn't lining up with the Jeremiahs, but reinforcing my earlier point that Bourne/Sentamu is a false dichotomy. For example, issues ostensibly about "community", such as fair-trade and ethical sourcing, are used to reinforce the idea of consumer choice as something powerful and serious (the rights + responsibilities trope). I'm just trying to buy a banana. As you note, the Guardianista critique of consumerism is class-biased: you are dulled by advertising into buying crap at Iceland; I exercise my good taste by buying cheese at a farmers' market. The "rampant consumerism" critique does not seek an end to consumerism, but a better quality consumerism. My point about media coverage is twofold. First, we are inundated with stories that imply we should care about retailers and the extent of market choice (the daily updates from the supermarket front, the perennial M&S "crisis" etc); that we should feel guilty about not being active choosers (e.g. switching utilities); and that we should be frustrated by a lack of choice (rail fares). Second, this selectivity narrows the agenda. For example, renationalising the railways (which would disproportionately benefit the South East middle class) gets an airing, but renationalising the utilities (which would benefit most people) doesn't. The media also bias the domain of choice to our role as consumers, ignoring our role as producers (as AAV notes). For example, we could more quickly switch our energy sources from conventional to renewable via nationalisation than consumer pressure (even with subsidies).
Toggle Commented Jan 22, 2015 on The oblique path to growth at Stumbling and Mumbling
@Luis, rampant consumerism is less about us spending every minute of our waking lives buying unnecessary crap and more about extending the mode of consumerism to necessities. In other words, framing inescapable consumption as choice. This is why Panorama devotes programmes to the doings of Tesco, why increases or cuts in gas bills and rail fares are always headline news, and why "rent" is still a poor relation to "mortgages" and "property investment" in media discourse. The effect of this is not only to frame any argument against the priority of commodities over community as a restraint on choice, but to drown out consideration of what we might actually like within the domain of true choice.
Toggle Commented Jan 21, 2015 on The oblique path to growth at Stumbling and Mumbling
As has been mentioned a few times on this blog, a citizens' basic income would be one way of simultaneously increasing growth and community. What's not to like? The reason why this, and other egalitarian measures, is outside the Overton Window is precisely because of the false dichotomy that Bourne presents. Whereas once the church acted as an ideological arm of the state ("work hard, your reward lies in Heaven"), now it acts as an outsourced conscience, providing a low-cost "indulgence" for the rich and making pro-social policy look unworldy (funny how Justin Welby, after years in business, proved utterly naive in respect of payday lenders). If John Sentamu didn't exist, Ryan Bourne would have to invent him.
Toggle Commented Jan 21, 2015 on The oblique path to growth at Stumbling and Mumbling