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December 20, 2012

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J

Not to harp on about immigration Chris (particularly after your last post), but if Labour were a serious policy-making party with a sensible and coherent long-term view, I doubt they would've spent so much time and money importing hordes of strict Muslims from the developing world, against the direct and frequently-expressed wishes of the public.

John H

The "if" in that final sentence is also a big one... ;-)

John H

Actually, a less facetious answer: I recall after the last election hearing various Labour figures (possibly including EdM?) suggest that New Labour had made a mistake in assuming that ownership didn't matter, and that a combination of economic growth, regulation and modest redistribution could achieve social justice. This is one reason why the Cooperative Party got some additional attention at that time, because it seemed to provide an alternative to straight capitalist ownership.

Since then, though, Labour seems to have gone quiet on ownership again, with most of its efforts focused on moral exhortation: "Pay the Living Wage! Pay your taxes!"

Meanwhile, employee ownership and mutualism have been hijacked by the Tories as a "nice" form of privatisation / removal of employment rights.

Luis Enrique

the question might be worth asking, but if the answer is that private ownership of the means of production is a barrier to left wing policy objectives, then what?

Perlmonger

Never ask a question if you don't want to hear the answer?

There's a more fundamental problem for parliamentary parties whatever their rhetorical position, that they cannot be anything other than marketing operations, even if they had the desire or motivation to not be so.

UnlearningEcon

@luis

Worker ownership of the means of production!

Ralph Musgrave

Slightly off topic… I have doubts about Chris’s fourth question on banks and regulation. He makes the common assumption that more regulation means less lending, ergo such regulation must be limited because lending is by definition “good”.
The truth is that in as far as regulation just removes the need for bank subsidies, such regulation must raise GDP because subsidies almost by definition reduce GDP. (The only exception is where subsidies are warranted by overriding social considerations – as is the case in health or education – or where market failure can be demonstrated.) As to the deflationary effect of less lending, that can be dealt with via stimulus. I.e. the net result would be more non-lending based activity and less lending based activity, and the problem with that is what exactly? None that I can see.

Lending, the basic activity of banks, and banks themselves have been put on a pedestal from which they should be removed forthwith. Banks have expanded relative to GDP by TENFOLD over the last 30 years. They are far too big for their boots.

e

Forgive any ignorance displayed here; unemployment causes a boredom which makes me want to join in conversations I hitherto avoided assiduously.

Given the size of the UK market, is not a vibrant private sector, relatively speaking a likely reality no matter what? And can the left support a backstop to downside consequences of capitalist ownership and control, spiralling welfare and subsidy bill, with employment of last resort at minimum wage? Wouldn’t this also put pressure on an upside, wage led growth? (This doesn’t preclude monetary control i.e. inflation control, does it?) Okay I can see with open boarders it might require a regulation layer of habitual residency status at times perhaps, but other than this?

Philip Walker

UE: in what sense is any genuine worker ownership not also private ownership? The only non-private ownership we have is public ownership: that is, State ownership. And whatever else it is [1], State ownership is not worker ownership.

[1] 'A bad idea' would be top of my list.

Metatone

It's worth noting that Chris steps around the Starbucks question, but it's an important one.

Here's a company that cannot move any more operations overseas and still function. Coffee shops are geographically rooted. So we should ask, what is the result of the transfer pricing and "intellectual property" shenanigans they engage in?

More profit for shareholders, but crucially, more profit for shareholders in the US mother firm. Who we may expect (on average) to largely be US pension funds etc. Who pay tax on the dividend, not here, but in the USA.

So, the system exports money from the UK Treasury to the US Treasury. Perhaps that's something we need to examine?

pjt

"So, the system exports money from the UK Treasury to the US Treasury. Perhaps that's something we need to examine?"

On which examination you will soon find that the process is reciprocal. UK companies bring money to the UK to pay to shareholders there, and foreign companies take it to their home countries. This happens according to laws and treaties, the will of parliament (or whatever the decision maker is) in each country.

Do you think you could make the traffic one way, so that money would flow to UK but not out? No, you couldn't - at least not if you don't have an army that you could use to overthrow any foreign government who makes decisions you don't like, instead of acting based on mutual agreements.

Do you think Britain would be better off if money flow would stop both ways? Think again. London is a well-known financial center and has plenty of headquarters of companies that operate EU-wide or globally. If you stop them, they will have to work from somewhere else, probably somewhere else in the EU Common Market, or the U.S - or, more and more often, in Asia.

Do you think Britain would be better off outside the EU Common Market? That would stop companies headquartered in Ireland or Netherlands from operating in the UK. But I don't think it would make you better off, because of the reciprocity and the power of the larger market area.

If you're losing revenue, it's because your taxman has become too greedy.

Neil

"On which examination you will soon find that the process is reciprocal."

[Citation Needed]

Jim

@Neil: [Citation needed]

Here is a link (http://uk.reuters.com/article/2010/03/05/britain-stocks-earnings-idUKLDE62214F20100305) to an article with a link to a spreadsheet download showing about half the FTSE100 stocks and their global sales (and the geographic breakdown of those sales). How many are UK domiciled I do not know, but a lot are. You will see that companies such as Vodafone, Rolls Royce, Diageo, Rexam, Astrazeneca(all with UK headquarters), to name but a few, have over 80% foreign sales.

The UK is a global trading country and any attempts to increase taxes on foreign companies here would more than backfire on us (if it was even legal under EU law in many cases) with reciprocal action by foreign countries against UK companies who have large sales overseas.

aragon

@Jim

http://www.bloomberg.com/news/2010-12-29/dodging-repatriation-tax-lets-u-s-companies-bring-home-cash.html

"At the White House on Dec. 15, business executives asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens."

[...]

“Sophisticated U.S. companies are routinely repatriating hundreds of billions of dollars in foreign earnings and paying trivially small U.S. taxes on those repatriations,” said Edward D. Kleinbard, a law professor at the University of Southern California in Los Angeles. “They devote enormous resources first to moving income to tax havens, and then to bringing those profits back to the U.S. at the lowest possible tax cost.”

Chris: The current leadership of EdM and EdB; Labour might ask the question, but will never attempt to answer it.

Some of use are willing to test it empirically. Briefly, there is not a shortage of investment opportunities, but a lack of incentives to invest, due to financialisation, also even if initial wage led growth is used to pay down debt (rent to banks) at some point it will become cash positive.

The minimum wage is so low that the low paid are subsidised by the state, this subsidy should be removed. Rasisng the minimum wage would do this. The article at the beginning of my comment shows current corporate taxation just concentrates wealth, (fiancialisation, intellectual property, transfer pricing etc) reducing the incentive for further investment (why invest earn you get extraordinary returns through gaming the governments and systems).

By controlling the money supply and taxation governments should be able to control the economy, but public ownership of utilities etc, in a mixed economy is not excluded. And jobs for all that want them.

Even the IMF is getting in on the act!
https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

http://www.telegraph.co.uk/finance/comment/9623863/IMFs-epic-plan-to-conjure-away-debt-and-dethrone-bankers.html

"The conjuring trick is to replace our system of private bank-created money -- roughly 97pc of the money supply -- with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666."

pjt

Neil: "[Citation Needed]"

One way to look at this is on the EU level. We could start with http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_maastricht_en.htm

Briefly: the very idea of EU is that it is an agreement between countries to create a common market where one can't impose the kind of unilateral taxes you seem to have in mind. It's not a "loophole" or misuse of legislation or anything like that. It's the very purpose and core of EU. You know, this idea that economies of countries are tied together in such a way that they won't go to war against each other, and so on.

We can also look at this on the global level. https://www.google.fi/search?q=hmrc+tax+treaties will show you there are thousands of documents describing tax agreements between UK and other countries. There are similar agreements between all developed nations. The nature of those treaties is that they are mutual. If you throw away your side of the treaty and start taxing foreign companies the way you seem to like, you have also thrown away the other side of the treaty. That's what I mean by saying "reciprocal", though I'm not sure if that's the proper English term.

Anyway, in my country these tax treaties are part of the tax code; they are published as laws and they are applied by courts. I expect it's the same in UK, which is well-known for insisting on rule of law (although the recent developments where bullying of people in demonstrations and more or less violent threats etc are undermining that reputation). And believe me, UK is a country that benefits greatly from international trade. The same is true about most small nations. (This is the other reason why there's this thing called EU: small nations combine their forces to create a bigger common market.)

thomas

"how far can governments influence corporate decisions when they do not have direct ownership or control?"

This is the wrong question.

Governments do not have the solutions, individuals do. Governments can seek to influence corporations and individuals, but they do not have direct control so responses will always be unpredictable.

aragon

pjt: I think you overstate the restrictions on national tax policy. Governments can and should act, individually or collectively.

As the bloomberg article makes clear, no government (not even the US) is making much revenue form international corporations and all therefore have an interest in reducing gaming of the system, by corporations and countries. This also applies to finance.

Within the EU small countries like Ireland and the Netherlands are also taxing the EU wide coporate earnings at low rates, but this is a begger my nieghbor policy. How long should major nations where the activity take place allow the continued gaming of the system (even if it was designed to be gamed).

Laws and even treaties can be changed, governments have scope for action within the existing laws.

If taxation is the price you pay for living in a civilised society (OWH), international coporations are vandals and barbarians (or just crooks). And we are not benefiting from free trade where countries are mechantalist.

Free trade is suposed to be mutually beneficial.

We have the recent examples of banks laundering drug money and the fixing of libor and the derivitive markets. All representing the abuse of the rule of law and doctrine of free trade.

james higham

In this context, the legacy of Keynes is a malign one. Although Keynes spoke of a "comprehensive socialization of investment", he swiftly mitigated this:

As he had no choice but to do.

pjt

Aragon: "Laws and even treaties can be changed"

Sure they can be changed. The point being that if they are changed in the way proposed here, UK (both as a country and an economy, or the UK public sector) could actually lose much more than gain.

BTW, where do you have examples of banks laundering drug money (in Britain)? I'm sure you have read that thing about HSBC in the Guardian or something, but as far as I know, there's no evidence that drug money would have been laundered. There's evidence that there were faults in handling of paperwork whose one stated purpose is prevention of laundering drug money, but that is not quite the same thing.

(A worse crime from US perspective seems to be that the money traffic had some links with Iran.)

aragon

http://www.forbes.com/sites/timworstall/2012/07/17/hsbc-has-not-been-fined-for-money-laundering/

HSBC did not have sufficiently robust internal audit and verification systems to be able to prove that the transactions it was undertaking were not money laundering, terrorist financing or aiding the financing of the drugs trade. This is, and I’m sure you will agree, rather different from actually allowing or doing any of those things.

Those things may even have happened as well: but that isn’t why HSBC has been fined. Their paperwork was inadequate: that is why they were fined."

A fine of $1,900,000,000 USD.

http://www.guardian.co.uk/business/2012/dec/11/hsbc-fine-prosecution-money-laundering

"Had the US authorities decided to press criminal charges, HSBC would almost certainly have lost its banking licence in the US, the future of the institution would have been under threat and the entire banking system would have been destabilised."

Lewis Caroll's Alice would feel at home in this Wonderland.

aragon

pjt: "but as far as I know, there's no evidence that drug money would have been laundered."

http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs

"More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business."

http://www.rollingstone.com/politics/blogs/taibblog/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213

"Breuer admitted that drug dealers would sometimes come to HSBC's Mexican branches and "deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows.""

http://rense.com/general28/money.htm

"There is a consensus among U.S. Congressional Investigators, former bankers and international banking experts that U.S. and European banks launder between $500 billion and $1 trillion of dirty money each year, half of which is laundered by U.S. banks alone."

Just a between half and a trillion per anum.

aragon

pjt: UK (both as a country and an economy, or the UK public sector) could actually lose much more than gain.

As the bloomberg article makes clear transnational coporations are not paying tax anywhere. Within the EU coperate tax system is been gamed by small countries.

UK, as a country, economy and public sector, has little to loose.

Are these companies willing to forgo the UK market to avoid tax ? And if so could the UK subsitute for there withdrawl ?

The money sits ibn offshore bank accounts and is effectively out of circulation, and gives an advantage to international companies over local, as they avoid tax.

If every country collects more tax from activities in thier own national boundaries, rather than trillions accumulating in tax havens that is a net gain, for all countries.

UnlearningEcon

"UE: in what sense is any genuine worker ownership not also private ownership?"

In that it is owned by private individuals, it is private. However, in that it is collective and therefore owned by many, it is not 'private' in that one person cannot exclude everyone else.

Dwayne

My friend I honestly share the same views as you so much questions and no one to answer

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