Update – Cameron’s Patriotism 140


UPDATE

Exactly as predicted, the broadcast media this morning are hailing Cameron’s patriotism in opposing a financial transaction tax and “Protecting the City of London”, as though this were the Blitz.

Both the BBC and Sky News have featured economists “explaining” what a bad thing a financial transaction tax would be for the City of London. Both were employed by institutions which would have to pay the tax – a fact which was not pointed out.

Despite the fact that a large majority of academic economists, the European Commission, 23 European governmnets, the Obama administration, and Vince Cable before he got his ministerial chauffeur, all believe that a transaction tax is an essential step towards preventing the banking speculation that caused this whole mess, the media are not presenting anyone who believes in the transaction tax.

No, the media narrative is simple. It’s fighting off the Johnny foreigner, Batting for Britain.

What a load of crap.

End of update: here is yesterday’s piece:

The xenophobic yaah-booing of the Tories over the demand for Cameron to show the “Bulldog spirit” is Europe is quite sickening. It is astonishing that the broadcast media have universally bought in to the spin that Cameron is “Defending Britain” by opposing the banking transaction tax, that all other major European powers want.

Cameron is not defending Britain. He is defending his banking paymasters. A transaction tax is essential to discourage multiple speculative transactions and other banking practices which have shown they can wreck entire national economies. Cameron’s opposition to the transaction tax should be vilified as reckless and a blatant pursuit of class interest, not universally lauded as “patriotic”.

Our schadenfreude at Germany’s difficulties is misplaced. Germany remains a much better economy than the UK. They manufacture a great deal more and thus have a much better balanced economy. Despite having swallowed East Germany, German GDP per capita is once again higher than that of the UK, by about 3%.

Crucially, as shown in the recent OECD report, income in Germany is much more fairly distributed than in the UK. The UK in fact is twice as unequal. In the UK the top ten per cent of the population have an average income that is twelve times that of the bottom ten per cent. The same figure for Germany is six times. What is more, inequality in Germany has been falling for the last six years, whereas in the UK it is accelerating.

Yet the German economy has outgrown the UK economy in the same period. That is impossible, according to every TV pundit I have seen in the last month. “It is massive reward for thrusting executives that encourages them to put the dynamic effort in, that leads to economic growth and drags the low paid mere mortals along behind them. If the gap between rich and poor is not colossal and widening, the economy cannot perform as well. Otherwise these vital high earners will desert us and move to Singapore.”

The mantra that economic growth must entail a widening wealth gap is scarcely challenged in the mainstream media narrative. But it is plainly untrue. In Germany in 1990 the top 1% of income “earners” received a staggering 11.1% of total national incomes. By 2007 that figure was – still 11.1%. By contrast in the UK in 1990 the top 1% took 9.9% of national income. By 2007 that figure had shot up to 14.2%. And all the indications are that in the last four years it has accelerated still faster, almost certainly now over 16%.

So if those braying conservatives are right about what makes economies grow, our economy should be streaking ahead of Germany. But it isn’t, quite the opposite. Meanwhile the “right wing” Merkel has overseen a greater drop in inequality than Britain has seen in two generations.

A period of humility from Britain is called for. Those braying Tory MPs are fools.


140 thoughts on “Update – Cameron’s Patriotism

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  • Iain Orr

    Canspeccy

    For Adam Smith the free market is an analytical concept; seldom are buyers in a position to have full knowledge about alternative products and equal access to them ( eg the tarifs that protect EU agricultural products against competition from developing countries). Hee observed that those with the power to do so will scheme to replace free markets in gooods and services with monopolies or cartels.

    .
    He has an interesting passage in the Wealth of Nations contrasting the roles of wages and profits:

    “In reality high profits tend much more to raise the price of work than high wages. Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”

  • Jon

    > Free market capitalism is the most effective machine for raising the
    > standard of living of ordinary people
    .
    Depends what you mean by ‘free market’. What has raised the standards of living conditions in the past two hundred years in capitalist economies is a mix of regulated competition and the welfare state. I sense a huge paradox in your belief system, since you are critical of bankers but cite Friedman as a competent economist. The bankers – indeed any corporatists, together with their political bag-men – are the essence of Friedmanite economics. Essentially, greed is good – and look where that has got us!
    .
    I don’t think it is a coincidence that the rise of neoconservative economics over the last thirty years have massively attacked the living conditions of the working classes and created a massive new disparity between the rich and the poor. This has reversed the New Deal in the US and the post-war welfare consensus in Europe, which gave Britain a universal health-care system it should be proud of.
    .
    Capitalism is essentially eating itself, which is the natural order of such a barely-regulated system. In fact, it’s the only reason why I am an anti-capitalist, and a reluctant one at that – if the system did not promote sociopaths to the top, in politics and in business, and if things other than profit could be factored into the bottom line, I think I’d lobby for greater fairness within the current system. But as it is, it is run by the greedy and the dishonest, who care only for their class, and genuinely believe that some people are destined to be poor.
    .
    I am afraid I don’t know a lot about Adam Smith. But I did read that he isn’t the free-marketeer that you and others suppose he was, and I think that would be an interesting research topic for both of us. There is an Adam Smith institute somewhere in the US, which acts as a think-tank for hard-right economic policy ideas, and yet Smith was an advocate of a much more mixed economy that acted as a governor against corporate greed. Smith’s name is taken in vain so much, he must be spinning in his grave.

  • Jives

    @ Jon,
    .
    “Capitalism is essentially eating itself, which is the natural order of such a barely-regulated system. In fact, it’s the only reason why I am an anti-capitalist, and a reluctant one at that – if the system did not promote sociopaths to the top, in politics and in business, and if things other than profit could be factored into the bottom line, I think I’d lobby for greater fairness within the current system. But as it is, it is run by the greedy and the dishonest, who care only for their class, and genuinely believe that some people are destined to be poor.”
    .
    Spot on.

  • Joe

    [Free market capitalism is the most effective machine for raising the standard of living of ordinary people]



    Tell it to the Amazonian Indians who are having their homeland raped by free market capitalism or the many tens of thousands of poor Indians who are having their land stolen by free market capitalists. All the people of who died in the coup in Chile would not agree with you either,they voted for a socialist. The many thousands of Indonesians who have lost their land to free market capitalism would also not agree with you. The Bolivians who kicked out a free market capitalist water company that was screwing them big time would also disagree with you. Unfettered free market capitalism does not work, that is why we are in a crap hole economy now. As for your claim about the Chinese,I think that working 100 hours per week for little money and even being fined for going to the toilet and not being allowed to talk to any other workers says it all about free market capitalism there. Living in a dorm with a few thousand others were you are at the beck and call of your bosses is a joke frankly and akin to Britain in the 18th century. The fact is that free market capitalism is making very few people more wealthy. In the UK and America wages have not moved in real terms since the 1970’s,we have what we have today because we use virtual slave labour in many 2nd/3rd world states. So stick your free market capitalist BS where the sun don’t shine.

  • Joe

    Trying to ban people from posting on your site because a group of long term racists and fools does not like them does you no favours at all,just goes to show that you support them and the endless name calling. Love Ken

  • Rose

    Jon – congrats for keeping it all civilised here; I value your measured and thoughtful responses to others’ passionately expressed views, as well as the contributions of Komodo, Mary, Jives and other diggers. Thanks all of you.

  • CanSpeccy

    Hello Iain,
    .
    Yes, like you, I’ve have actually read Adam Smith. That is why I spoke earlier of competitive free markets.
    .
    I’ve also read Milton Friedman, unlike Jon, who appears to know nothing of Friedman except what socialist detractors such as Naomi Klein may have to say about him.
    .
    In any case, whether Friedman was in cahoots with corrupt capitalists or not, it has no logical bearing on the validity of his writings.
    .
    Both Smith and Friedman’s ideas imply the need for a framework of laws to prevent monopolism and cartelization of the economy, so trying to associate those great writers with the evils of monopoly capitalism is a disreputable tactic.
    .
    Equally, blaming Adam Smith for the rape of the Amazon is moronic. Whether it is right to clear the population of Amazon forests for agricultural development with machine guns is a moral question that only a moral imbecile would answer incorrectly. It has nothing to do with economics.

  • CanSpeccy

    Why is it my last post did not appear?
    .
    Re: Jives comment that “Capitalism is essentially eating itself”
    .
    Would that that were true, at least true of the form of capitalism we have now that seems rarely subject to law and in fact often appears to dictate the law.
    .
    But throwing out free market capitalism because you have a corrupt political establishment — in order to create what? a socialist system run by a corrupt political establishment? — is simply nuts. Read the history of the Soviet Union and see what socialism is really all about. There’s an excellent account of the Soviet Union, incidentally, by Geoffrey Hosking “Russia and the Russians.”
    .
    Or just read the history of Britain’s nationalized industries, which were totally bloody useless. They simply consumed wealth.

  • CanSpeccy

    There seem to be some delays and echos in the system.
    .
    Thanks, mod, for fixing my code. If you would also delete the duplicate post before the corrected one, that would be appreciated.

  • Jives

    Canspecccy,
    .
    There are the occassional gremlins in the comments section.Apparently it’s the spam filter that has a tendency to do strange things.

  • Jon

    @Rose – thanks.
    .
    @canspeccy – there is nothing “disreputable” about linking Friedman with the mess we’re in now. Partly because it is an honestly held opinion, and so is hardly disingenuous, but also because Friedman became an icon for the hard-right, and as far as I am aware believes in no government intervention in the markets at all. Says Paul Krugman, “It’s extremely hard to find cases in which Friedman acknowledged the possibility that markets could go wrong, or that government intervention could serve a useful purpose”.
    .
    That said, you are right to imply that the socialism for corporations, which is what we have now, Friedman would have opposed. That in itself is a good thing.
    .
    Please steer clear of calling your opponents “moronic” – let’s all keep it civil!
    .
    Anyway… I would post more, but I’ve got a cuppa tea to make, and the dinner to put on.

  • CanSpeccy

    Jon,
    .
    You are muddled or dishonest. I called no one here moronic.

    What I said was with intended reference to the London riots: “You tell people they are exploited and robbed by the toffs, then you have a moronic mass indignant at the idea of working for a piddling minimum wage when the toffs are pulling down millions.”
    .
    Perhaps you think the rioters justified in rioting by sound logical reasons. I disagree.
    .
    And since we’re dishing out nannyish advice, may I suggest that if you are acting as a moderator you should moderate, and if you are a participant in the conversation you participate in the conversation, but on no occasion is it appropriate for you combine both roles in a single comment.
    .
    You quote from Krugman, perfectly illustrates the weakness, not to say silliness or dishonesty of Friedman’s critics. to say “It’s extremely hard to find cases in which Friedman acknowledged the possibility that markets could go wrong, or that government intervention could serve a useful purpose” is rather like saying “”It’s extremely hard to find cases in which Newton acknowledged the possibility that gravity could go wrong, or that government intervention could serve a useful purpose.”
    .
    A market is a process of exchange that can only occur without external control. Wherever a government intervenes you have something that is not a free market. But at all times that Adam Smith or Friedman are speaking of a market the are speaking of a free market. That is to say free both of government intervention and monopolistic control.

  • Jon

    Hmm, what you said was:
    .
    > Equally, blaming Adam Smith for the rape of the Amazon is moronic.
    .
    And also:
    .
    > Whether it is right to clear the population of Amazon forests for agricultural
    > development with machine guns is a moral question that only a moral imbecile would
    > answer incorrectly.
    .
    There you go, your own words. Your opponents are “moronic” and “moral imbeciles”. And I am “nannyish” plus either “muddled or dishonest”. Can you see why it isn’t much fun having a discussion with you?
    .
    You’re right about the mix of moderator and participant though – I will try to take that on board, whilst still participating to some degree. And on that note I will drop out of this conversation – perhaps Jives et al may wish to carry it on instead.

  • Canspeccy

    So, Jon,
    .
    You disagree that on the question of “Whether it is right to clear the population of Amazon forests for agricultural development with machine guns … only a moral imbecile would answer incorrectly.”
    .
    Well it takes all sorts, I suppose.

  • CanSpeccy

    You objected to my mode of expression.
    .
    But how can you object to my mode of expression if you do not disagree with the sentiment: namely, that clearing land of people with machine guns is moral imbecility. And if you do not disagree, how can you object to the mode of expression?

  • CanSpeccy

    Oops! Hit the send button prematurely. The last sentence of my last post is redundant.
    .
    Reverting to you comment:
    .
    “I am afraid I don’t know a lot about Adam Smith. But I did read that he isn’t the free-marketeer that you and others suppose he was, and I think that would be an interesting research topic for both of us.”
    .
    Reading Adam Smith would certainly be a good research topic for you. And no doubt I could learn more about Smith too. However, having read his complete works, I don’t feel the need to be as modest about my knowledge on this subject as you presume to be on my behalf.
    .
    On the question of free markets, there is no question that Smith believed that the public interest was best served by competitive free markets. However, he was at pains to point out the danger of monopolism and price fixing, even though at the time he wrote, the scope for cartels and price fixing was negligible in comparison with the possibilities that exist today in a globalized economy in which a handful of entities control most multinational corporations.
    .
    When you say, “There is an Adam Smith institute somewhere in the US, which acts as a think-tank for hard-right economic policy ideas,” you are probably referring to the Adam Smith institute in Edinburgh, Scotland. They publish boring monographs by some of the lesser economic lights including various economics Nobelists. However, it is absurd to confuse whatever axe they have to grind with the views of Adam Smith.
    .
    You say, “Smith was an advocate of a much more mixed economy”, a claim that would surely have startled Smith. The term “mixed economy” had yet to be invented in 1776, when the W of N was first published, and any notion of government management of the economy would under the circumstances that existed then have seemed totally bizarre.
    .
    But as you say, “Smith’s name is taken in vain so much”!

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