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Tuesday, 30 August 2011

More Thoughts on Government Debt: towards Zero Government Debt

Over the course of a lifetime, I have often borrowed money. Usually, I have had to explain to someone what I want it for - buying a house, a car, or whatever. Once, I even asked for £1000 to launch a business - and here I am nearly twenty years later still running it, debt free.

At the same time, I had to show some evidence which would give my Bank confidence that I could and would pay back the money I was borrowing.

I may be completely wrong, but when Governments issue Bonds (ie, invitations to lend them money)no one seems to ask them what they want the money for. In the past, it was often enough blindingly obvious - most obviously, when they were fighting a war. Everyone knows that wars are very expensive.

But now it seems everyone takes it for granted that governments borrow money for unspecified purposes which do, however, include such well-known components as paying back the last lot of (maturing) debt and covering the (current) budget deficit.

This all seems to me a bit slapdash and to result in very large banks (BNP Paribas, for example) lending large sums of money to governments (that of Greece, for example) who are very unlikely to pay it back. No one really asked what the money was going to be used for and whether there was any reason to suppose it could be paid back. The system was called, Having an AAA rating and sovereign governments held AAA ratings as a sort of courtesy title.

My suggestion is that banks (and other investors) should start asking governments seeking funds what the money is going to be used for.

Governments could help by issuing bonds for specific purposes - for example, extending the London Underground. Here, lenders can see that the money is going into a long-term investment which, with any luck,will result in profits which will comfortably pay the interest during the life of the bond and the capital sum when it matures.

If governments then continue to issue Bonds for unspecified purposes but, basically, to cover their incompetence, investors might become more wary and demand higher rates of interest on such Fecklessness Bonds. Eventually, governments might give up and realise that there is no longer a market for fecklessness.

There is really no reason why governments should not run balanced budgets, or at any rate, budgets balanced to a small margin of error. Nor is there any reason why they should borrow for anything other than purposes which will, in not too long a term, strengthen their tax base - in other words, productive investments in infrastructure.

As for wars, By Jingo! Let those who want to fight wars pay for them.

Review: Liaquat Ahamed, Lords of Finance

In the UK, the department of Business, Innovation and Skills (Proprietor: Vince Cable) issues a list of dates on which it advises employers to lock out their workers. These are what are commonly known as Bank Holidays and are designed nowadays to boost imports (people go abroad) and kill off any "green shoots" of growth in GDP.

It felt appropriate to read Liaquat Ahamed's splendid book over the long August Bank Holiday weekend. It's another of those books by someone who isn't an academic which makes one wonder why we bother with academics. It's true that he has degrees from Harvard and Cambridge; but he has written this beautifully crafted and researched 500 page book in his spare time away from being a "professional investment manager".

Though the cover blurb makes you think it is going to be about the Great Crash and the Great Depression, it is actually a much bigger study of central banking between 1914 and the mid-1930s focussing on the relations between four key players - Benjmain Strong at the New York Fed, Montagu Norman at the Bank of England, Hjalmar Scacht at the Reichsbank and Emile Moreau at La Banque de France. These institutions were still, for all or much of this period, privately owned and foolishly organised but responsibility devolved upon them to maintain financial stability at both domestic and international levels - the four main characters spend much of their time travelling, by train and boat, to meet each other.

They deal with bank reserves, international loans, interest rate setting, money supply, price inflation (or deflation), employment levels, war debts, war reparations and exchange rates. For much of the time, they are committed to mantaining the Gold Standard. Some of them do and some of them don't know what they are doing and the same is true of the politicians with whom they are uneasily involved. Britain's Labour Party comes out of the story as clueless and deferential to every orthodoxy around.

Some of the most interesting cameos in the book concern the moments when the politicians and the bankers collide: for example, Winston Churchill fatefully returning the UK to the Gold Standard in 1925 - a decision he later acknowledged as the worst in his life. Or, more importantly, Franklin Roosevelt tearing up the rule book, taking America off gold, encouraging price inflation, and thus in a very short period, turning around the US economy. This narative comes at the tail end of Ahamed's book and feels less than generous towards Roosevelt's huge achievement. In contrast, Keynes gets full credit for the perspicacity of the running critique he offers for the entire period and mostly from the sidelines.

Many other episodes have - and are designed to have - a contemporary resonance, right down to the rogue trader who busts an investment bank. And when in 1928 a British treasury official snootily remarks that "The French have always had a sure instinct for investing in bankrupt countries" it is impossible not to think of BNP Paribas' current exposure to Greek debt.

The really sobering thing about this very readable book is that though it gestures to the post-war achievements of the IMF, the World Bank and Keynesian economics in avoiding anything like the turmoils of the 1920s and 1930s it still leaves me with the thought that plus ca change, plus c'est la meme chose. It also leaves a clear message that big players never pay their debts.

Friday, 26 August 2011

Review: Abdul Salaam Zaeff, My Life with The Taliban

Recently I reviewed here the Memoirs of the UKs former Ambassador in Kabul, Sherard Cowper-Coles (Cables from Kabul) who came to the conclusion that the only way forward (read: out of the mess)in Afghanistan would involve engaging in a political dialogue with the Taliban, whose Islamic Emirate government the Americans overthrew in the aftermath of 9 / 11.

This position is based on Cowper-Coles' "close to conclusive" belief that the Taliban and Al Qaeda were and are quite different orgnisations, with different aspirations and goals. The Taliban want Afghanistan for the (Islamic) Afghans. Al Qaeda wanted global jihad and simply used Afghanistan as a base for its global adventures.

Abdul Salam Zaeff was a senior member of the 'old' Taliban who was the Islamic Emirate's Ambasador to Pakistan at 9 / 11. He became the international face of the Taliban as it resisted demands to hand over Osama bin Laden to the USA.

Now he is living back in Kabul after several years as a prisoner of the Americans in Bagram, Kandahar and Guantanamo - a protracted experience which he recounts in harrowing detail. The detail suggests to me that he is telling the truth and more than fully explains his current desire to be left alone in Kabul and not drawn into the "dialogue" now being proposed. The US would like to see him as "Moderate Taliban", a label he resists strenuously: "The thought of dividing them into moderates and hardliners is a useless and reckless aim" (p 153)

He comes across as a man who has experienced too much: born in 1968, orphaned as a young boy, exiled in Pakistani refugee camps, a fifteen-year old jihadi against the Russian Occupation, a founder member of the Taliban opposition to the war lords and mobsters who moved into the vacuum left by the retreating Russians, a minister in the Taliban government, a much-abused prisoner of the Americans.

I have a sense of someone brave and defiant but also as someone struggling with depression, seeking support in religion and wanting nothing more than to pursue his Islamic studies. He comes across as both humane and flawed. He gives very little ground.

For example, on the destruction of the Buddhist statues at Bamyan, he observes "While I agreed that the destruction was within the boundaries of shari'a law, I considered the issue of the statues to be more than just a religious matter, and that the destruction was unnecessary and a case of bad timing" (p. 128). That is the sum total effect on him of entreaties [he was Ambassador in Pakistan at the time]from China, Iran and Japan.

Again, when he has to deal with US demands for the extradition of Osama bin Laden, he takes the diplomatic high-ground - we don't have an extradition treaty with you, if he is guilty of any offence then we will try him if you give us the evidence or even allow an Islamic tribunal in another country to do so, and so on - when probably he could have said, we don't know where he is and we cannot control him.

At the same time, Zaeff cries when he is summoned by a neighbour to watch on TV the destruction of the Twin Towers since he immediately realises that it is a disaster for Afghanistan (pp 141 - 143). That did not lead him to conclude that maybe Afghan hospitality extended to bin Laden was at an end.

There are surprising themes in this book, notably his hatred of the Pakistani authorities who he sees as tools of the Americans, and nasty ones at that. He also sees the British presence as motivated by a desire to revenge ninety year old defeats - not so laughable when you realise that we back it up by seeing Afghanistan as a suitable theatre of war for our spare princes.

There are also big ommisions - next to nothing about drugs, no attempt to defend the Taliban's exclusion of women from education and public life, or its taste for public executions (though the USA has never made Saudi Arabia justify those). Nor does he confront the fact that some Afghans may want a different future to the one he imagines for them, though it is true the Taliban did try to come to some agreement with the Northern Alliance before assasinating its leader (Massoud).

Zaeff often comes across as a likeable man, but at other moments I am not sure if I am dealing with religous conviction or just with priggishness and narrow-mindedness - the same kind of feeling I might well have reading Catholic theologians. There is a general problem with those who come at the world from a theologically-schooled world-view, that they cannot always see the wood for the trees. They don't prioritise. Zaeff's remarks on the Bamyan statues is as close as he gets to doing so.

This is a very readable book, once you realise that you do not have to remember the names of the Tolstoyanly long list of characters. A great deal of credit is undoubtedly due to Zaeff's editors, Alix Strick van Linschoten and Felix Kuehn.

Thursday, 25 August 2011

When the Majority is Right: Condorcet Meets Who Wants to be a Millionaire

This is academic autobiography

A couple of times recently, I have been taken back to work I did in the 1970s on the justification for majority voting, both in government and the legal system (jury trials)

The first writers to treat the matter seriously were Rousseau and Condorcet, the latter - among other talents - a mathematician specialising in the theory of probabilities.

Condorcet showed that majority voting is a good guide to truth:

(1) the more enlightened (knowledgeable) is each individual voter, with a minimum requirement that they be more likely to be right than wrong on any one occasion (p = greater than 0.5)

(2) provided that when voting, voters are trying to give the right answer

(3) and provided that they vote independently of each other - if one voter follows the lead of another, that simply reduces the effective number of voters

If these conditions are met, then in a majority vote the probability of the majority being right increases (and quite dramatically, heading towards p = 1 [certainty])the larger the vote gap between majority and minority.

Since I did the work in the 1970s, the TV quiz show Who Wants to be a Millionaire? has come along and it demonstrates Condorcet's theorem perfectly. When a contestant Asks The Audience to select the right answer from four possible answers, he or she can safely assume:

(1) that the Audience is quite knowledgeable- Quiz show live audiences are likely to contain a high proportion of people good at quizzes
(2) members of the audience have no motive to give answers they believe to be untrue (they enjoy giving right answers!)
(3) they vote independently of each other using push-button consoles with little or no time to consult the person sitting next to them

Hey Presto, the audience's choice of right answer will, almost certainly, BE the right answer. If some researcher checked back over Ask the Audience choices, I think they would rarely find that the Audience got it wrong. Ask the Audience is a No Brainer if you don't know the answer yourself.

There is more serious stuff in my essay "Majoritarianism" on my website

Monday, 22 August 2011

Big State? Small State? It's not a Theological Question

The Tea Party gives the case for small government a bad name. They treat it as a theological issue. (In contrast, they treat religion as a public relations issue: the important thing is to show very publicly that you do God. I doubt that God is impressed.)

There are times when government should expand its sphere of activity and times when it should contract. It's not a theological issue.

In World War Two, state activity expanded enormously in the UK and USA to meet the challenge of a determined and very powerful enemy. Some of that expansion was quite quickly reversed after the end of hostilities: rationing, for example.

If the economy goes into downturn, we know that it makes economic sense for the government to expand to pick up the slack. That is what the New Deal was about, though unlike later versions of it, the original New Deal actually got roads and hydroelectric power dams built. Modern governments find that too much of a challenge and prefer simply to hand out benefits to booost consumer spending. That's a pity.

That's also part of the incompetence of modern governments. If there is a case for smaller government in the UK - and there is - it's primarily because our unreformed and unreformable institutions cannot organise a piss up in a brewery. Give them money and they waste it. Better not give it them, then. You have to work with what you've got and we have got Whitehall and Town Halls.

I'd like to see taxes going down to around twenty percent of GDP. I'd abolish VAT, raise the income tax threshold dramatically but increase inheritance tax and introduce property taxes ("Mansion taxes"). It would be seriously illegal to ship your money to the Channel Islands. In other words, I'd introduce a progressive tax regime.

At the same time, I'd link benefits - unemployment benefit, access to health care, old age pensions - much more closely to contributory insurance schemes. Everyone should get their National Insurance number at birth and with it the assumption that they will contribute. I would reverse child benefits: parents should pay into the insurance schemes for their children from birth. In this way, we could encourage a more responsible approach to having children.

Many things would have to go. The Arts Council. The House of Lords. Most of the Armed Forces, since we would be a small state not a big state intent on invading other countries. Free Bus Passes. Private Finance Initiatives. Hiring private sector consultants to advise government - there, I am sure, is something we can agree upon.
And I'd move Whitehall to an office block in Croydon and release all that real estate for sale.

Sunday, 21 August 2011

Does Italy Need an Ataturk?

I have just read M. Sukru Hanioglu's Ataturk (Princeton UP 2011) - sorry I can't get Blogger to do the umlauts etc - an academic study, dripping footnotes, of Ataturk's world view. For fifteen years, until his death in 1938, Kemal Ataturk drove the creation of modern Turkey as a successor state of the Ottoman Empire, a task he equated with promoting scientific materialism, secularism and Westernisation. To this day, Kemalism provides the main alternative to Turkish Islam - but even Turkish Islam is quite unlike the unreformed Islams of the Arab lands.

Thanks to Ataturk, modern Turkey uses the Roman alphabet and the Christian calendar, is largely unveiled and sends dreadful performers to the Eurovision song contest. Ataturk introduced the Swiss Civil Code, which created equal rights for women, and modelled the Turkish Republic on Europe's republics.

In the Ottoman Empire, enthroned in Constantinople, the Sultan as secular ruler was also the Caliph as religious ruler. In the 1920s, Ataturk first of all abolished the Sultanate and then, a much more sensitive task, abolished the Caliphate. This he saw as essential to the task of modernisation and westernisation.

In this period, Italy was moving in the opposite direction. The Papacy had been defeated in the 19th century and after 1870 the religious ruler no longer controlled a territory (the Papal States). Thus, the inhabitants of the Vatican became, in principle, answerable to Italian law - a situation they found intolerable. Mussolini came to the rescue in the Lateran Treaty of 1929 which gave the Catholic Church a territory - today's Vatican City State - and thus removed Church officials from accountability to anyone else's laws.

The territory is actually a bit bigger than we usually think, since it includes Castel Gandolfo and church Basilicas. Either way, big enough to operate a criminal organisation (including an unsavoury bank) and big enough to give refuge to fugitives from justice. The Vatican's internal organisation remains today opaque and unaccountable.

The absolute monarchy of the Vatican is careful not to offend Italy's government, however corrupt, provided it toes the Vatican line. So it does, since the Church's endorsement is still worth having in a conservative society.

Italy needs an Ataturk who will repudiate the Lateran Treaty and insist that no one who lives in Italy is outside Italian jurisdiction. No more Vatican hiding places, no more Holy See passports.

Its called Modernity, something the Vatican has held at bay since 1929. Time to call time.

Wednesday, 17 August 2011

A Tit for Two Tats: A More Rational Approach to Riot Offenders

In the back of my mind, I have this idea from the theory of games. In general, there are benefits from co-operation which exceed the benefits from conflict. Most games are not zero-sum games in which my gain is your loss and vice versa.

So when someone who you relied on to co-operate, in a potentially positive sum game, fails to do so, the rational response is to give them another chance - and, if possible, to signal that this is what you are doing. But if they fail to co-operate a second time, then you go into conflict mode and strike back hard. In other words, A Tit for Two Tats.

This "second chance" strategy was the one David Cameron adopted when he appointed Andy Coulson - the known-to-have-been-dodgy News of the World editor - as his head of communications.

Many of the crimes committed during England's recent riots were opportunistic. Many of those who have been caught are the most naive - the people who did not cover their faces or who did not know how to run fast when confronted. Many of them have no previous criminal record. They are the wrong people on which to exercise Tit for Tat. The heavy sentences should be imposed on those who have done it - or something similar - before.

It is foolish to criminalise large numbers of people who you actually need not to be criminals, but to become hard-working and law-abiding citizens. The only rational policy is to give them a second chance. To do otherwise is simply to begin the process by which an offender becomes a repeat offender. And society becomes a zero-sum game.


Added 24 July 2018: These ideas are incorporated into the chapter "Crimes and Punishments" in my book The Best I Can Do (degree zero 2016), freely available from Amazon, Waterstones and other booksellers.

Tuesday, 16 August 2011

The New Statesman on The Coming Anarchy

I thought I'd buy one of the mags put out by London's chattering classes and picked The New Statesman since it had the most lurid cover: The Coming Anarchy. Streets on Fire. Markets in Free Fall. Eurozone in Crisis. Can it be stopped? in bold black print on a background of swirling smoke.

Inside, it's all pretty polite:

The Leader, " If the Prime Minister still believes in tackling the causes of youth disorder ... he must now lead the thoughtful debate that the recent disturbances demand". Sounds like The Times to me. It's meant to produce a "Hear, Hear" reaction.

Peter Wilby, retired New Statesman editor opines, "I see no ethical distinction between how the financial services industry loots its customers and how youths looted London shops", which is what Peter Oborne said in The Daily Telegraph a few days previously. So on this the chattering classes are agreed. Whether it means that they think bankers should be locked up or, rather, that youths should not be locked up, I don't know.

Nana Yaa Mensch, chief sub-editor is more interesting because she was there on the streets of Brixton unlike the police who weren't: "Is this the face of policing in the age of cutbacks...?" That's arguable: for many years Private Eye's police logs from Neasden have presented idleness as the face of London policing, cutbacks or no cutbacks. Cutbacks never cut back on schmoozing time with News International.

Laurie Penny concludes that " Civil unrest is a frightening thing, but more racism, more violence and more young people being demonised will not heal our cities" which David Cameron could agree with. He just thinks that first you punish the offenders hard enough for them never want to offend again. True, all the evidence is that only the death penalty can achieve that. Send them to prison for six months and your yoof offenders turn into yoof re-offenders.

And last but not least, Ken Livingstone, Mayor of London 2000 to 2008, "We need one clear answer, from the Tories in Whitehall and City Hall, to when they will call off and reverse their police cuts" Well, nice to see Ken and Boris in agreement.

So, on balance, the chattering classes of the Left are in agreement with the chattering classes of the Right.

Here's what will actually happen:

Since we happen to have a Tory-led administration, there will be some repression. David Cameron will front the campaign. He's not the sharpest tool in the box but he knows that this is what the tabloids expect of him. He is not going to play to Daily Telegraph readers and imprison the bankers and the general enthusiasm for imprisoning young people who weren't so street-wise as to hide their faces will soon wear off. (And already, some of those accused of the more serious offences appear not to be yoof at all: for example, the person accused of setting fire to the Reeves furniture store in Croydon is 33 years old)

Since there's not much money about, not much else will happen. The future will be pretty much like the past. But cheer up, that only means riots once in a decade or so.

Monday, 15 August 2011

Tragedy and Carelessness, Part Two

In a previous Post (5 June 2011) I wrote out from memory my family tree on my mother's side (and including her siblings) back to the mid-nineteenth century. It's quite detailed. In contrast, from memory I would have been able to tell you very little about my father's side. My father's parents called each other "Mum" and "Dad" so I never knew their first names. Of course, I knew that Grandad's surname was Pateman and, fifty years ago or more, my mother told me that Grandma's maiden name was "Veryard" and I remembered it.

Only by going onto a genealogical site yesterday do I now know that my grandfather was Albert William Pateman, born 1885 West Ham, died 1962 Woolwich, and that my grandmother was Eliza Kate Veryard, born 1886 Edmonton, died 1979 Bexley. Here they are photographed in the 1950s:

They married 1910 (in Edmonton) and my father (Albert George Pateman) was born there in 1912. His elder brother, William Arthur F (Uncle Willie) was born in 1910, his elder sister (Auntie Kit) in 1914, his younger brother Arthur 1915 - but he died as a young man in a motorbike crash so he was never an Uncle - and Auntie Edna in 1918. Edna's birth is registered in Dartford, indicating that by this time the family had left Edmonton, and it is around Dartford in North West Kent that my father grew up and remained for much of his life. I was born in West Hill Hospital Dartford.

I knew my grandparents as what I would now call an eccentric pensioner couple who lived at 41 Churchfield Road Welling, which I guess was a rented house. It was notable for an outside toilet, a single damson tree in the wilderness of the garden, a single cold tap in the kitchen and an upstairs which was out of bounds. The front room was full of bric a brac, my grandmother being an enthusiast for jumble sales. All living took place in the living room where my grandfather sat beside the fire pushing logs into the flames. He did not chop wood and my grandmother appeared not to cook: I firmly believe that they lived on a diet of tea, biscuits and sardines on toast, except when they came to have Christmas Dinner with my parents.

My grandfather, a short man who held himself erect with his shoulders pulled back, had a story about riding to private school on the south coast in a carriage, a box of chocolates in his hand. I think this was fantasy.

My mother is the only source of informaton about his employment, my father never mentioning it. She told me Grandad had been a school caretaker and a bookie's runner. On her own 1938 marriage certificate, he is indeed described as a school caretaker.

Grandma's appearance was exotic, with large fleshy features suitable for caricature; my Mother inferred from her very large nose that she was Jewish. But she was born in Edmonton, home to a large number of Veryards, some also called Eliza. Though her Birth in Edmonton is registered, she doesn't show up in the Middlesex or London Censuses of 1891 and 1901 [WRONG: see footnote which corroborates the original paragraphs which follow now].

Memory tells me that she spoke of a childhood which included a printer's shop, and this may link her to the Thomas Veryard who was born in 1854 at Castle Cary but moved to North London (an area which is sometimes London and sometimes Middlesex, just as Tottenham is sometimes Edmonton).

I think Grandma may have had Somerset links which may explain why my parents honeymooned in Castle Cary in the 1930s. There was also some connection to Dymchurch in Kent where my grandparents had a caravan in the 1950s and where photographs prove that I stayed.

FOOTNOTE Though I cannot find anything in the 1891 Census, in the 1901 Census Eliza K Veryard turns up living at 69 The Crescent,Tottenham. She is listed as the daughter of Thomas J Veryard, aged 47, a "Letter Press Printer, worker on own account at home", who was born in Castle Cary, Somerset. He is living with his wife Ellen, aged 47, born at Alford in Somerset. The other members of this household are daughter Julia (18), my grandmother Eliza K (14 - one would expect 15 or 16 but I don't think that is a problem), Tom (12), Arthur L (9), Frederick (7),Gertrude (4), Maud (3) - Maud rings a bell with me - Joseph (1), and Thomas Veryard's mother Eliza (75: born 1825, died 1907 Edmonton - from the Internet, it seems she did not marry but that the father of Thomas was called Paul Done).

In the 1881 Census the family is at 13 Aske Street, Shoreditch, aged 26, with his wife Ellen,a son Robert (7) born at Castle Cary, a daughter Ellen (4) and a lodger, Emma Veryard, a paper bag maker.

I count 10 children and thus assume that there are many other descendants of Thomas J Veryard and Ellen Veryard. But if the Internet search is correct, Thomas Veryard owes his surname to the fact that his mother did not marry.

Added 24 July 2018: I have now published a memoir of my childhood, I Have Done This In Secret (degree zero 2018), freely available from Amazon, Waterstones and other booksellers.

Genteel Poverty and Hidden Affluence: probing beneath the surface

Thinking some more about Danny Dorling's book, discussed in my previous Post, I remembered a concern I have about polite social science and government surveys.

It is too readily assumed that people tell the truth. Often, they don't but you have to be intrusive to find that out. Social scientists are supposed to seek the truth not prove that they are polite or well-meaning.

There was once a stock literary character, the elderly spinster or widow living in "genteel poverty". The money had run out but she tried to keep up appearances, deceiving the world into thinking that there was more in her purse than there really was. Had a social scientist passed through and asked her how she was doing, "Very Well, Thank You" she would have replied.

The opposites of the genteel spinster are all those people who plead poverty when they aren't poor. Often, they have a plausible case because their "official" incomes are poverty incomes. But sometimes those incomes have hidden supplements.

The same is true for those who are willing to admit to affluence but are in reality quite wealthy.

Crime, work in the black economy, windfalls, extended family support and inheritances all boost people's standards of living. They may provide unreliable and intermittent boosts to income, but that is not a reason to ignore them. Some people get through their whole life on a series of windfalls.

If you are going to make a serious study of inner city deprivation or rural poverty, you need to factor in things like the proceeds of crime and how they get distributed. You need to probe the black economy and add in its effect on income levels.

You also need to look at family networks of support and not just at individual income profiles. When my mother left my father, our new stock of furniture comprised cast-offs from my mother's brothers and sisters. London's recent looters did not just loot for themselves; some of those plasma TVs were for the family.

Then there are windfalls from Premium Bonds and the Lottery. When Premium Bonds were introduced in 1956, my paternal grandmother presented me with one. Just one. I still have it somewhere. But if you manage to buy a few thousand Premium Bonds, then you will have tax-free windfalls from time to time which don't show up as "Interest on Savings". It's what my father relied on. He also had a very good act to demonstrate poverty. He lived in a caravan. Many were fooled.

Lottery wins are also tax free. I realise that the Lottery is basically a tax on the poor, but even a modest lottery win can temporarily boost the income of an extended family. Most inheritances are also tax free and even poor people get them sometimes. They can provide an enormous boost to a family's fortunes.

Only if you probe behind the front most of us present to the world can you explain things like the strange ability of so many families to come up with staggering sums of money for weddings. Now there's a topic for Danny Dorling. I bet there's a North - South and rural - urban divide on wedding costs!


Added 24 July 2018: This Blog post provides material for the chapter "Judging by Appearances" in my book, The Best I Can Do (degree zero 2016), freely available from Amazon, Waterstones and other booksellers.

Saturday, 13 August 2011

Review: Danny Dorling, So You Think You Know About Britain?

Danny Dorling is a Professor of Human Geography and a whizz with statistics. He has all sorts of Gold Medals to his credit. In spirit, his book could be twinned with Richard Wilkinson and Kate Pickett's The Spirit Level: Why Equality is Better for Everyone (2009).

But the letter of that latter book comprises tightly-focussed use of statistics, remorsely marshalled in support of the single conclusion they draw.In contrast, Dorling's book is an unfocussed scatter of statistics (some interesting), unintegrated mildly left-wing recipes for a better future, occasional hobby horses, and bits of chumminess. You can imagine it having been stitched together from academic articles, seminar papers, newspaper comment, invited talks,and so on. I ended up feeling disappointed and frustrated.

His copy editors weren't up to much either: who would have thought a publishing house would miss the confusion of Principals and Principles? (page 136, twice)

It remains true that the UK is one of the world's most unequal (advanced) societies which in recent years (and like its big brother, the USA) has become more unequal. Every measure of equality and inequality tells the same story: social mobility, educational experience and outcomes, health and health care, housing, income and wealth, North and South, town and country, mortality.

One of the things that I liked about The Spirit Level was the attention it paid to Japan as both a more equal society and a low tax one. I find that appealing, simply because there is just so much evidence (and not just from the Taxpayers' Alliance) that UK governments are unable to use tax revenues effectively to achieve their goals, whatever those goals are. So I am interested in alternatives.

For example, if you twinned minimum wage legislation with maximum wage legislation you could cut out some of the disastrous middle-man activity of redistributive taxation. And the more you lift tax thresholds at the bottom, the less you have to supplement people's incomes with hand-outs.

But one of my fears is that there is no one who will see Equality and Low Taxes as a policy agenda worth developing, just because those who develop agendas are almost entirely those (like the UK Professoriate) who are sustained by state funding and who automatically see More State as preferable to Less State.

Whether UK political parties could even begin to grasp the magnitude of the task they would face if they sought to reverse the relentless growth of inequality is another question. Over the past decade, they have found it more convenient to throw the people the circuses of War and Royal Weddings in the belief that these are bigger vote winners than justice or fairness. And they may well be right.

Wednesday, 10 August 2011

Today's Rioters - Tomorrow's Politicians?

Both David Cameron and Boris Johnson once belonged to a Club devoted to trashing other's people's property. The Bullingdon Boys may have done it only when roaring drunk, but they still did it.

Likewise, some of today's rioters will turn up in ten years time as tomorrow's politicians (probably Tory) and community leaders.

There are really only two ways of responding to urban disorder on the scale we have seen in the past week:

You can take the view that shit happens: all big cities contain a large disaffected underclass of young people and all big cities enjoy reluctant and sometimes corrupt policing. From time to time, often in school holidays when the young people are on the streets and the police are on the beaches, something will happen which creates turmoil. You just have to live with it. There is no quick fix or even any tolerable slow fix.

Or you can take the view that something is fundamentally wrong with your society or at least your big cities. You can wring your hands, read lots of sociological and criminological studies, find a way forward and - what? Vote Labour? Vote BNP?

No winning political party is going to step forward with an agenda, left or right, which would even begin to drain the volatility out of inner city life. That's in part because it is the job of inner cities to contain all the people that leafy suburbs cannot contain. For the rest, to abolish an inner city underclass implies social change (left or right) on a scale no one is willing to contemplate.

So there's not much choice: Get over it!

Tuesday, 9 August 2011

Review: Frank Furedi, On Tolerance

Frank Furedi is a Professor of Sociology but this is a work of social criticsm rather than sociological analysis.

Furedi thinks that "tolerance" has been redefined in (fairly recent)social practice to mean uncritical acceptance of diversity rather than recognition of the right to speak freely about things that matter (and even things that don't).

The intolerant person is now the person who does not accept (let alone welcome) diversity, who criticises other people's beliefs and lifestyles. Such people must, at the very least, be stigmatised and ostracised; in some cases, they should be prosecuted and silenced. Tolerance of diversity should be upheld by means of intolerance towards critics.

As part of the shift, the old John Stuart Mill-inspired notions - that the state should only act to prevent physical or material harms to others and that the (psychological) harm of being offended does not count - have been reworked so that the harm of offence is elevated to the same rank as other harms.

Furedi regards this shift and reworking as inherently paternalistic: individuals and groups are seen as psychologically vulnerable and in need of protection from both the careless and the careful words of others. They are not thought to be strong enough to have the thought that sticks and stones may break my bones but words will never hurt me.

"Free Speech" once meant that you could not only criticise but do it with gusto: Marx once wrote that you treat the ridiculous seriously when you treat it as ridiculous - and proceeded to do so. Woe betide anyone nowadays who thinks that such freedom remains.

Furedi does not work up his examples very satisfactorily and this may be because he too is inhibited by his academic milieu from saying what he thinks. Universities are now places where the route to success is the path defined by whatever currently counts as inclusive, responsible and politically correct. No one is interested in unpleasant truths, especially if they are truths.

Furedi misses a major element of classical liberalism, that its theory of liberty was the twin of a theory of authority. John Stuart Mill probably wrote more about authority and spent more time thinking about it than he did about liberty. His theory of liberty emerges in the context of developing an account of the kinds of authority (centrally, political authority) to which we should freely and rationally consent. The starting point for this account is an understanding of how authority in science is established. (See my essay, "Liberty, Authority and the Negative Dialectics of J.S.Mill" on my website).

Taking a look at this 19th century preoccupation with scientific authority would allow Furedi to improve on his briefly-expressed scepticism about peer review (pp.188-90).

This is a readable polemic which will be disliked by the Sunday School tendency among ecologists, feminists, postmodernists and those ridiculous people who call themselves relativists but become very agitated if anyone disagrees.

We can provide Security for Your Business, Sir, even if the Met. can't

Coming next in London: vigilantes. If the Metropolitan Police is perceived to be unable or unwilling to help (and it is so perceived), then small businesses on a single street and small residential areas will arrange their own self-defence - or pay freelance vigilantes to protect them.

This thought may be over-influenced by my previous Post, but there is already evidence for it in one or two areas of London - a street of Turkish shops protected by Turkish guys with baseball bats, for example.

The youths who have created mayhem in London for the past few days may be street wise, but they are not that street-wise. There are many uncovered faces on video and CCTV showing just who attacked the shop window or carried the TV away. Even if the Met never catches up with them, older (but not necessarily wiser) members of their own community will. There will be some beatings meted out and maybe worse.

All big cites have a potentially volatile underclass of young men (and sometimes young women), concentrated in poor districts, and all big cities have police forces which are selective in the services they provide.

At the Met, they are well set-up to protect Fortnum and Mason from peaceful protesters; less well set-up to protect small shopkeepers in Tottenham or Brixton from arson. And there are so many lunches and parties to attend.

So my guess is that fit young men, a few years older than the looters and just a little bit wiser, will see in the current mayhem some money-making opportunities. They will be making local businesses offers they cannot refuse - and probably will not want to refuse.

Sunday, 7 August 2011

Review: Federico Varese, Mafias on the Move

This is a very academic study (Princeton University Press 2011) of a very non-academic subject and the overall effect is a bit like Brechtian estrangement (Verfremdung): instead of portraits of godfathers who are, at the same time, chilling and charismatic, Varese offers correlations and statistical significance.

He works with a narrow definition of mafias as criminal organisations which offer protection (often willingly sought) backed up with the threat of violence. This makes mafias alternatives to the state - the organisation which in a given territory is able to claim a legitimate monopoly over the use of force to secure, when needed, life and property.

This contrast between private and public enforcement makes less surprising Varese's conclusion that mafias emerge and achieve success where there is a deficit of state power - where state organs are unable to protect markets and enforce debts and private groups step in to do so.

State organs may themselves operate like mafias providing "protection umbrellas" in return for bribes and retainers. This is what happens in contemporary China and once happened in "Tammany Hall" New York, making it hard for private mafias to break into the market.

On Varese's definition, the involvement of mafias in illegal rackets - alcohol, drugs, gambling, prostitution - is secondary to their main activity.

All mafia activities, if even half-way successful, generate large amounts of money and the most serious internal mafia disputes, often fatal for participants, seem to arise from free-lancing with community funds or even outright embezzlement. Varese documents this in his studies of Russian mafias.

As the title of his book indicates, his specific focus is on mafia mobility. He concludes that mafias are very much linked to a territory (just like ordinary state authorities) where they know everyone who matters, who can be trusted and who can't. They do not migrate voluntarily, only to escape state authorities or rival mobs. And when they do migrate, they are not always successful in establishing themselves in a new territory. The sub-title of the book is a bit misleading: "How Organised Crime Conquers New Territories". Varese's conclusion is that quite often, they don't - which is less sensational than the sub-title implies.

If you can bear the prose, Varese's book is interesting and his field research demonstrates personal courage.

But Varese does rather confirm a feeling I have that, nowadays, much of the best research we have is done not by academics but by serious investigative journalists. In my own recent reading, I would single out Barbara Demick's, Nothing to Envy: Real Lives in North Korea (Granta 2010) as a book which provides a mass of data in the context of a narrative at once sophisticated and compelling. It ought to be possible to write many books about the world's many mafias which achive that combination.

Friday, 5 August 2011

Do Criminals Pay Their Taxes, Unlike Vodafone?

Government agencies often remind us that serious criminals do not pay their taxes - so often that serious criminals probably also think that they do not pay their taxes. They can pride themselves on being up there with Vodafone. But are they sometimes mistaken?

Suppose you (no offence meant) are a moderately successful drug dealer. You have lots of cash. In fact, that's all you have (apart from drugs, of course). Some of it you spend in the designer boutiques, so-called because they are designed for people like you. Here you pay VAT, like everyone else, so the government gets to take a first slice from your income.

But when it comes to your car or your house, there's a problem. It's hard to find a car dealer who will take £30k from you in cash for a new Merc without recording the fact that you paid cash, thereby (I assume - I haven't done the experiment; mine's a Skoda) alerting the rozzers. And even if you can get round this problem, you are still vulnerable to being stopped and asked, How did you fund your purchase of this car, Sir? We understand you are employed as a night club bouncer. Does it pay that well?

This is why criminals have to roll up their sleeves and do Money Laundering. How do you do it? (I should charge for the next bit).

Well, you go to your bank, show them your meagre savings and ask them for a loan so you can buy the lease on a fish and chip shop. Thanks to Project Merlin, they are very obliging and you duly open your shop, with a manager and staff. It's all above board - you serve nice fish and chips, take HelfnSafety seriously and clean the toilets. The staff pay tax and National Insurance on their wages. What's the catch?

Every week, when you visit, you sample what's on offer and pay for it. Maybe £500. Maybe £1000. Yes, you put your hard earned cash in the till to boost the takings. After all, who can tell how many portions of chips can be made from a sack of potatoes?

When it comes to self-assessment time, your accountant records a healthy profit. The staff get a bonus. And you pay the tax bill.

Now, at last, all that black money has been laundered into white money. You can go out and write a cheque for your new Merc. Because like everyone else, you have paid your income taxes. And, now, once again on your new Merc you are paying VAT.

It's a strange way to run a fish and chip shop, but I guess it happens.

Monday, 1 August 2011

Review: Terry Eagleton, Why Marx Was Right

If my Blog was called "Why Marx was Right" it would have many more visitors. And many more comments, since there is a large world-wide community of postgraduates who want to engage in exegetical dispute. As People of the Book, we could fight like fraternal ferrets in a sack. It could be great fun, if you are into that sort of fun.

How much fun was indicated by my previous post: Google returns over a million results for the phrase "Why Marx Was Right" and only a measly sixteen thousand for "Why Jesus Was Right".

Terry Eagleton is onto a winner.

The book itself is all right and good in parts, especially once you get past the first three chapters and into the philosophical anthropology which takes its inspiration from Marx's 1844 Manuscripts. It is the work of someone who has been a stout trouper for a humanist and fairly ecumenical Marxism over fifty years.

This fact does make the opening sentence look like rhetorical false naivety:

"This book had its origin in a single striking thought: What if all the most familiar objections to Marx's work are mistaken? Or at least, if not totally wrongheaded, mostly so?" (p. ix)

That made me imagine the Pope starting a sermon, "I woke up this morning with a single striking thought: What if all the most familiar objections to Roman Catholicism are mistaken? Or at least ..."

I find it difficult to engage with People of the Book. It's an odd kind of intellectual life to poke around in the textual remains of a dead man, pulling out bits which you can flourish with a "See, he was right!"

In the case of Marx, there is an awful lot of text and it would be remarkable if you could find nothing to flourish. As a literary theorist, Eagleton knows that, just as he knows that the secret of a good interpretation is to keep it pretty general: "The End of the World is Nigh" not "The World will end on 20 January 2012".

I can understand the attraction of a Book which has an Answer to all Questions, especially when it allows you to skip class. That attracted me when I was eighteen. Then I realised that if you want to know anything you just have to study history, economics and all the rest and that it's never-ending. Of course, it's not theory-free but the object of science is not to preserve the theory ( to "save the appearances") but to advance understanding.

Terry Eagleton is a very, very well-read man but there are occasionally points where it's clear he has skipped a class - thus at page 180: "Surprisingly little blood was spilt in the Bolshevik revolution of 1917. In fact, the actual takeover of key points in Moscow was accomplished without a shot being fired".

Er, Petrograd?*


* The Bolsheviks seized power in the capital, Petrograd, on the night of 24 - 25 October (Old Style) 1917. This was bloodless. The subsequent seizure of power in Moscow was not bloodless. Moscow became the capital of Russia in 1918

Added 24 July 2018. For more on this theme, see the chapter "Karl Marx" in my book Silence Is So Accurate (degree zero 2017), freely available from Amazon, Waterstones and other booksellers.

Google meets Terry Eagleton, Why Marx was Right

Yesterday, I bought Terry Eagleton's Why Marx Was Right, overcoming my distaste for the title. My review of the book can be found as the next Post after this one. But the title gave me an idea:

I typed it into Google, using scare quotes.

"Why Marx was right" generates 1,170,000 results

Then I typed in some variations on the the original search string, always with scare quotes:

"Why Hitler was right" generates 17,100 results
"Why Jesus was right" 16,300
"Why Darwin was right" 11,600
"Why Freud was right" 881
"Why Galileo was right" 693
"Why Adam Smith was right" 445
"Why Copernicus was right" 251
"Why Engels was right" 191
"Why Malthus was right" 109
"Why Ayn Rand was right" 9
"Why Hegel was right" 5
"Why Stalin was right" 4
"Why Schopenhauer was right" 3
"Why John Stuart Mill was right" 3
"Why Nostradamus was right" 3
"Why Popper was right" 2
"Why Fichte was right" 0*
"Why Schelling was right" 0*
"Why Bentham was right" 0*

* By the time you read this, Google will, of course, deliver 1 :)

The challenge, it seems to me, is to find a substitute for "X" (where X is a dead person) in "Why X was right" which returns a Google number larger than does Marx. Please Comment below if you succeed. At the moment, it does rather look as if Marx is the only dead person about whom people are still passionate to show that he was right. "Why Marx was wrong" generates a mere 6,370 results, which means that the opposition is overwhelmingly outnumbered.

A Baby Boomer's Guide to House Price Valuation

This guide is for couples born between 1945 and 1950, who bought a house for thirty thousand or so in the 1970s or 1980s, and who still live in it having escaped divorce and successfully paid off the mortgage.

In some parts of the country, they live in a very nice house worth £300 000 or so; in other parts, in some jerry-built disaster zone worth £300 000 or so.

It feels good, sipping your glass of Waitrose wine, to be sitting on £300k in equity. And life expectancy figures tell you (and your children) that you can still be sitting there in twenty years time.

But house prices go down as well as up. That is the worry The Daily Mail nags you with.

It's not really relevant. Here's the test you should perform.

Imagine that you sell your house and invest the equity into something as safe as houses. Maybe you can earn £15k annually in interest. But you have to pay tax on at least some of this (it won't all squeeze into ISAs) and you have to allow the capital sum to grow a bit (not take out all the interest) if you want to maintain the real value of your income in the face of some inflation. The combined effect is that you can only net around £10k a year.

Now imagine that you rent your house back to yourself. If it would cost you more than £10k to rent, then there's your gain from owning your own house outright. If it would cost you less, there's your loss. In most parts of the country, you will be making a gain of a few thousand.

Forget about the equity, forget about what you paid out in mortgage interest (that's the past), the difference between potential interest income and imputed rent is the current Benefit (or Disaster) of Home Ownership - and probably for the next twenty years.

As for the Equity, that's the Benefit to your children. If you died today, it would be a big benefit to them because chances are they are struggling in the housing market. If you live a normal life span, the inheritance will come too late - best leave it to your grandchildren in that case.

Want to help now? Remortgage at low interest rates up to the point where your imputed rental gain from ownership drops to zero. Hand the money to your children, as a gift if you can afford it or as a low-interest loan if you can't. Some mortgage companies (Alliance Leicester) will lend until you are 75 at normal rates of interest.

Have another glass of wine and think about it.