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The Economist on Piketty May 6, 2014

Posted by Tomboktu in Books, Capitalism, Economics, Inequality, Journalism, Marxism, Taxation Policy, The political discourse, The Right.

I bought the Economist because the cover said it has an article about Piketty. (Reading articles about his book, Capital in the Twenty-first Century, is quicker than reading the book!)

The headline on the actual article is weird: “Bigger than Marx”. That is true neither of the physical heft of the book nor, if everything I have read about it so far is valid, of the contents.

And then the content of the Economist’s review: 13 paragraphs: two are neutral; four approving; seven critical of the book. The Economist cites five critics of his thesis or aspects of it and zero supporters.

Not that I’m terribly surprised at their overall view, but they might have been subtler. Or maybe I should applaud their transparency.

LMD: “Cheap Euroloans at a high cost” April 27, 2014

Posted by Tomboktu in Austerity, Economy, European Politics, European Union, Social Policy, Taxation Policy.
1 comment so far

Seeing as there is a European election under way, from the April issue of Le Monde Diplomatique‘s English language edition:

European leaders considered the introduction of new contractual agreements between the European Commission and member states at a summit in Brussels last December, as demonstrators protested outside about a free trade agreement between the EU and the US (1). If implemented, the new contracts could be the most powerful tool ever granted to the EU’s institutions for dismantling member states’ social welfare provisions.

The contractual arrangements — the Convergence and Competitiveness Instrument (CCI) — are based on a simple principle: in return for financial incentives, European states would be asked to sign up to macroeconomic reforms. These would affect social provisions, the economy and taxation, independently of powers already devolved to EU institutions. Given the Commission’s current priorities, it is easy to imagine that the “financial advantages” might well be conditional on the withdrawal of employment protection and reductions in welfare expenditure or the provision of corporate tax breaks.

The proposal has provoked strong scepticism in some member states, including some of Germany’s traditional allies, and there is strong resistance within the Council too. Even a moderate social mobilisation might find allies within the EU to stop the plan being adopted (or to remove its most problematic aspects). So the EU election campaign offers the European left — who have too often acted too late, and been repeatedly defeated since 2007 — a rare opportunity to act.

“Income Inequality: Evidence and Policy Implications” March 25, 2013

Posted by Tomboktu in Economics, Inequality, Taxation Policy, Uncategorized.

Emmanuel Saez does not propose replacing capitalism, but within its terms, this is a useful lecture that could do with an airing here.

Tax and income — a detail of our political priorities November 11, 2012

Posted by Tomboktu in Ethics, Ireland, Justice, Taxation Policy.

This morning, I saw the breakningnews.ie story on what I assume is a “Sunday press release” from Mattie McGrath. The answer to a parliamentary question he asked established that 1,700 employees in four Irish banks earn receive more than €100,000 each.

In a moment of (poor-taste) whimsy, I wondered if anybody in IBEC is rewriting Martin Niemöller’s famous poem:

First they came for the top civil servants,
and I didn’t speak out because I wasn’t a civil servant.

Then they came for the judges,
and I didn’t speak out because I wasn’t a judge.

Then they came for the balied-out bankers,
and I didn’t speak out because I wasn’t a balied-out banker.

But I don’t think they need worry. I don’t hear the high earnings in the private sector questioned — whether that is the publicly traded companies whose financial results are public records or the legally private firms (like Dunnes Stores), where all is secret.

What I did hear though, was that on Friday, our good deputies put some time into debating Eoghan Murphy’s Tax Transparency Bill 2012. I am not surprised that the deputies understanding of tax transparency is ineffective and that the Bill is pointless. Real tax transparency would follow the Nordic model, where the amount of tax paid by everybody is a public record.

A peculiar tax break May 2, 2012

Posted by Tomboktu in Crazed nonsense..., Inequality, Taxation Policy.

The May issue of Alive! was delivered to my house today. I am not happy to see that it is a registered charity. They advertise the fact because

  • If you pay PAYE and your total donation to Alive! was €250 or more in 2011 we can reclaim your tax.

Please ask us for a for or Tel 01 4048187 for more info.

  • If you are self-assessed or a company and your donation to Aive! was €250 or more in 2011 you can clain tax releief on your donation.

How can an organisation that is so overtly political have been granted charitable status?

Broad approval for economic plan November 20, 2010

Posted by Tomboktu in Capitalism, Taxation Policy.

Mr Cowen said the talks, which resumed this morning, were in the interests of the country and its taxpayers.

Not, I note, in the interests of its citizens (or its residents).

The market and high incomes September 30, 2009

Posted by Tomboktu in Economics, Social Democracy, Taxation Policy, The Left.

I think – but would be happy to be corrected – that one of the weaknesses with the Left is a shortage of ambitious and feasible policy ideas to change a key source of inequality in Western economies: the scale of the inequality in the income that those who are in employment receive for their labour.

Too often it appears that those who of us describe themselves as egalitarians have accepted that the ideal of ‘the redistribution of wealth’ boils down to developing policies to implement a version of that other cliché on what the Left is about: ‘tax and spend’. This does not mean that all tax and spend proposals are unradical. For example, the proposal for a basic income – an income unconditionally granted to all on an individual basis, without means test or work requirement – has been around for some time but is little implemented, and I suspect one of the reasons is that it is seen as a step too far for many. (If my memory is correct, it was a policy backed by Young Fine Gael about 25 years ago when Chris O’Malley was at the helm of the party’s youth wing.) Or another example: The US economist John Roemer has suggested “the creation of two kinds of money: one used for the purchase of goods and the other, referred to as ‘coupons’, for buying shares in companies.” The radical element of his proposal is that all citizens are given coupons through which they derive ownership rights in companies, including dividends and voting for the board, but cannot sell those coupons for ‘ordinary’ money. (This last is one of a number of proposals explored in the Real Utopias Project at the University of Wisconsin. Some of other books from the RU project have other suggestions that I would classify as tax and spend.) And nor does my worry with the extent of the focus on tax and spend policies mean that I think they should be abandoned. You only have to read the article by Brendan Hayes, the ‘refusnik’ on the Commission on Taxation, in the September issue of The Union Post to see why they are sorely needed.

However, the problem that I see with relying only on ‘tax and spend’ policies is that they do not deal with what happens inside the market. Some of them – like investment to combat educational disadvantage or Roemer’s coupons – are designed to give everybody an equal chance as they enter the labour market, but leave the big divergences that occur over the course of different people’s working lives untouched. Other tax and spend policies, like increased social welfare or the basic income, are an attempt to reduce the size of the differences that arise from market processes on an ongoing basis (although no social welfare proposal I have ever heard of would give a sustained income that is anything like that enjoyed by even middle managers, never mind senior executives).

There are two reasons why what happens inside the market should be scrutinised by egalitarians. The first is empirical: the divergence in salaries and other pay for work since the 1970s is the root of the increased inequality in western economies. The second is ideological and, for me, the more important: if we do not examine the inequalities in the market, we give them a credence and contribute to the view that they are somehow ‘normal’, that the natural order of things is for huge inequalities to exist.

Of course, it is not true to say that the only approaches to dealing with economic inequality have been versions of tax and spend. To illustrate: two Irish groupings on the Left have set out policy objectives that go deeper than tax and spend. John Baker and his colleagues at UCD (in Equality: From Theory to Action) have identified the reduction in the inequalities in pay as central to achieving an egalitarian society. And Mary Murphy (a former Labour member of Dublin City Council) and her colleagues in an ad hoc group named Is Feidir Linn (which doesn’t quite have the rhetorical pizzazz of Barak Obama’s original ‘Yes we can’) have gone further and named a specific numerical outcome to be aimed for:

Highest income earners should have no more than ten times the income of the lowest earners.

However, a problem, as I see it, is that all of the discussion is a long way from giving us the content of practical proposals that a policy maker from the Left could table in, say, talks on forming the next government or in negotiations on the programme of the next European Commission.

A comprehensive approach would require looking at the entire range of incomes and how they arise, but my particular interest is the high end of the income scale, and how it has pulled away from the average in the last thirty to forty years. (And for the purposes of this post, I deal only the pay of business executives: it would take too much space to deal with the pay elite of sports-people, rock stars, and ‘celebrity’ broadcasters.).

While I would dearly love to see ideas of the UCD team and Is Feidir Linn further developed, I am glad that they have not rushed ahead with more specific proposals that are poorly grounded, a virtue that cannot be attributed to the British think-tank Compass to justify its campaign for a Commission on High Pay. The Chair of Compass, Neal Lawson, said at the launch of their campaign in August

It’s time the government took action on excessive pay, it’s absolutely right that we now reign in the bonus bandits that created the economic crisis.

The more substantial briefing paper that Compass published expands on this as a key reason for establishing a High Pay Commission:

There is now a clear public interest in exploring the link between high pay, excessive risk taking and the stability of the national economy. That is why Compass is calling for the establishment of a High Pay Commission so that the threat of meltdown and the reality of recession are never repeated because of excessive rewards.

Somebody needs to tell Compass – whose tagline is “Direction for the Democratic Left” – that the logic of this is not particularly of the Left. Applying Compass’s reasoning, if the bandits had not created the crisis, then the level of their pay should not be an issue. Or, could it be that Compass thinks that if those who had created the crisis had not been highly paid, there would be no need to examine their behaviour – that it is OK if medium or low paid workers create global chaos. (For fairness, I should point out that others who provided quotations for Compass’s press statement did offer sounder rationales for examining high pay.)

A second – and potentially much more significant – possible source of change on high executive pay that I have seen discussed recently is an institution I would not have thought of as being notable for its Left stance: the US Supreme Court. Even more surprising is that the intellectual basis is an argument made by Richard Posner, a prominent US scholar and federal judge who would be described as being on the political Right  (albeit he hasn’t become a turncoat:  his rationale is not in the slightest bit egalitarian). In a dissenting opinion in a case called Jones v Harris, he says

executive compensation in large publicly traded firms often is excessive because of the feeble incentives of boards of directors to police compensation.

And after a slew of academic papers to support that point, Posner goes on:

Directors are often CEOs of other companies and naturally think that CEOs should be well paid. And often they are picked by the CEO. Compensation consulting firms, which provide cover for generous compensation packages voted by boards of directors, have a conflict of interest because they are paid not only for their compensation advice but for other services to the firm—services for which they are hired by the officers whose compensation they advised on.

That seems to me to be a pretty good definition of ‘crony capitalism’, a term I associate with Joe Higgins (in the sense, of course, that he uses that term to attack the business elite).

The subsequent appeal in Jones v Harris now means that, as the New York Times put it ‘Supreme Court to Hear Case on Executive Pay’. (Both the jurisprudence and what might be called the judicial politics of Posner’s dissent are also interesting although they are not relevant to my discussion. Links to some of the discussion of those topics can be found here, here and here.) The importance of Posner’s dissent is that it has moved a well-established critique to executive compensation out of the relative backwater of academia into a legal-political sphere, and within that sphere an arena with some bite.

The question is whether egalitarians can provide responses to that critique, or is sophisticated analysis of that section of the labour market the preserve of the Right?

PPPs, they just don’t work June 1, 2007

Posted by franklittle in Economics, Irish Election 2007, Irish Labour Party, Irish Politics, Sinn Féin, Taxation Policy.

A couple of days ago, having wandered into Andersonstown News publisher Mairtín Ó Muilleoir’s blog  following a rightly critical analysis of his review of the election on the inimitable Splintered Sunrise, I left a comment disagreeing with his analysis. His latest post, which I saw when I went back to see if there was a reply, seems to suggest that Sinn Féin in the South should drop it’s objections to PPPs. If that is a misunderstanding, I apologise, but that’s the sense I got. 

A positive reference to PPPs is, for me, like waving red rags at the running of the bulls. 

Public Private Partnerships do not work. Let’s for a moment leave aside the traditional, and by no means invalid, left criticism of them. That they transfer unionised public sector workers into un-unionised and often abused private sector workers. That they transfer control of community facilities to for-profit companies who refuse to allow the community to use them for purposes other than that for which they were built, like schools for example being closed to residents meetings. That construction is often shoddy and getting repairs and cleaning done often extremely difficult leaving children with poor facilities ion a state of disrepair. 

Look at it simply from a value for money point of view. Two examples. The first in education. The Comptroller & Auditor General has exposed the fact that PPPs are more expensive than normal state construction. This is because not only can the state borrow for capital investment at a better rate than business, but the state does not need a profit margin.   

The building of schools under PPP in the South was estimated by the Department to cost 6% less than under normal procurement. The C&AG’s report in 2004, found they will cost between 8% and 15% MORE than under normal procurement.  

So the only argument put in favour of PPPs, that they save the state money and off-load risk to the private sector is a nonsense.  

But wait a minute, maybe it’s an isolated case. Maybe elsewhere PPPs are functioning perfectly. Well, let’s take road-building. Here’s a good example in road-building from the Irish Independent. One section of the Dublin to Galway motorway was built by the state. Another section of it was built under Public Private Partnership. Cost of the state built section worked out at 8.1 million Euros per kilometre. Cost of the PPP built section worked out at 14.1 millioon Euros per kilometre. The PPP section, by the way, will have a toll on it for almost three decades, up to 2035 so the taxpayer gets to pay again, and again, and again.

Bear in mind as well that not taken into account there is the fact that the company with the PPP contract can write off it’s construction costs against it’s Corporation Tax liability, something Labour’s Joan Burton rightly went ballistic over 

Dr Eoin Reeves, senior lecturer in Economics at University of Limerick and director of their PPP and privatisation research group has described the use of PPPs in Ireland as completely unjustified and warned against them as far back as 2001. 

In an 11 page special analysis of the Private Finance Initiative in Britain completed shortly before he died, investigative journalist Paul Foot summed up the system saying:

“In every area where it has been adopted it has cost more, and will go on costing more. The PFI hysteria in the Labour Government led to an enormous transfer of power in Britain: from public, elected authorities to private, unelected corporations.”

Regrettably, it’s not on the internet, but this piece he wrote for the Guardian, although a few years old, gives a taster.  

Ó Mulleoir’s argument seems to be that since McGuinness did it in the North, Shinners in the South should be prepared to do it. To be honest, I have some sympathy with McGuinness’s problem because the Executive has neither borrowing nor tax-raising power, but for a government in the South to even contemplate using PPP is little short of madness. 

It is more expensive than state procurement; it amounts to a subsidy of the private sector by the taxpayer; it undermines public control of our capital infrastructure and it eliminates facilities used by communities. 

PPPs, they just don’t work boys and girls. 

Tax and Education. It’s the fundamentals, stupid? ..er…actually, no, not according to the Irish people it’s not… May 14, 2007

Posted by WorldbyStorm in Education, Irish Election 2007, Irish Politics, Taxation Policy.

Three articles caught my eye over the last day or two.

Firstly the results of the Irish TImes/TNS mrbi poll last week which was reported in a rather thin piece by Stephen Collins on Saturday. It described how the findings demonstrated that the majority of voters were “not prepared to pay more taxes to fund public services, but they believe the Government already has enough money to fund those services, according to the Irish Times /TNS mrbi opinion poll. Stephen Collins , Political Editor, reports.”

72 percent were unwilling to pay more taxes to fund public services with a fairly derisory 23 per cent saying they would. Now, I’m no psephologist, but that 23 per cent looks fairly close to me to the core ‘left vote’ in this state. Not that if we examine self-described voters that we of the left should be too sanguine about just how great solidarity is amongst them either. According to the report: The hostility to paying more taxes was equal among supporters of all political parties, with the exception of Labour, where significantly more people said they would be prepared to pay more.

The response from Labour supporters was quite different to the rest, with 60 per cent opposed to higher taxes but 35 per cent saying they would be willing to pay more to fund public services.

Which leads to perhaps, at best, one cheer for those Labour supporters, which is considerably more than any of the other left parties deserve. Now, all polls are suspect, and perhaps this sort of poll more than most. But…all polls are also straws in the wind.

And as has been noted by others, here and here this is an unsurprising development in a political context where even the Labour Party has decided that it’s a virtuous act to cut taxation even further.

But even more fascinating is the age profile of those who are willing to see higher taxes for services. Unsurprisingly: Across age groups the youngest voters were most hostile to the notion of paying more taxes to fund services, with just 17 per cent in favour, while most support for the prospect was expressed by those in the 50-64 age group.

Seems to me there’s a lot of work to be done out there in our society to point out that there’s no such thing as a free lunch, that if people truly want better services they will cost money and that the current economic situation is unlikely to be a permanent feature of this society. It also appears that this broad opinion on taxation is not the result of any particular consideration of the matter on ideological grounds, but is instead the result of a hegemonic approach by the political establishment to this matter. In that respect neither Labour nor Sinn Féin have done the left many favours over the past couple of months where tax is concerned. But then again, nor have Fine Gael or Fianna Fáil who have pushed the line that management of expenditure is the real issue as if the good times will continue indefinitely.

The second article was perhaps a little bit more comforting. It dealt with Sinn Féin education policy, in particular their opposition to state subvention for fee paying schools. I have always found it odd that the state would allocate resources to that tranche of the private sector. I’m in complete agreement with Sean Crowe who said “parents were entitled to opt for private fee-paying schools if they wished, but the taxpayer should not be asked to provide any subsidy. He said any change in the arrangements for fee-paying schools could include special provision for a small number controlled by religious minorities.”

When one considers that €80 million is distributed to fee-paying schools in what is a fabulous example of government largesse to the middle classes the silence about this aspect of the education from the other left parties is notable. SF is also agin league tables – which again I’d be broadly agree with, and interestingly doesn’t look for the return of fees at third level. I’ve already noted previously that the removal of those fees distorted the education system by freeing up monies for middle class parents to send their children to fee paying second level schools thereby strengthening their effective opportunity. I’ve also noted previously how back in the dim dark 1950s luminaries such as Richard Crossland (hardly a man of the extreme left) recognised that only wholesale change, such as the imposition of allocated places for students from disadvantaged backgrounds would alter the nature of the private (or in the British case public) school system. I find it telling that a half century or so later the left in Ireland seems essentially uninterested in that issue. It’s a debate well worth having, just how we ensure that at the education level we can achieve the best levels of opportunity, access and – as best as is possible – outcome. It’s very possible that the answers to such a debate might not be to my liking, but that’s no reason not to engage on the topic.

Finally, a pointed little comment from John Gormley as reported in the Irish Times. He questioned Fine Gael’s decision to back away from favouring a ban on all corporate donations to political parties.

“They want to continue with the present system that goes to the very heart of planning. This goes to the root of Irish society: the relationship between developers and political parties. We are very uncomfortable with that.”

Good to see someone looking at the big picture.

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