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October 13, 2017

Comments

Chris Williams

Hmm... here you're conflating a lot of tendencies and calling them all 'lefty', whereas there are very few people who embody them all. My comrades in the Greens, for example, are _very_ good at tutting and opposing growth, but not completely down on markets. But it's in this that we differentiate ourselves from Labour lefties, who love growth and despite (correctly) tutting. Some Greens are fans of unions, some of minimum wage, some both. Trade union fans in Labour, on the other hand, are totally up for economic growth along with union power. The 'we secretly hate the working class' thing is largely a hostile construct, rather than something many actually existing lefties do. I think you've engaged in an inapproprite vector addition here.

Chris Williams

Sorry, for 'despite' above, read 'despise'.

Matthew Moore

Well said

Maybe you should give up on trying to rehabilitate 'Marxism' as a word (regardless of how you feel the name has been used or misused). It's too tainted at this point to aid communication.

How would you describe your philosophy otherwise?

ConfusedNeoLiberal

Honestly I think your main disagreements with the Left come from mostly two sources: that you're willing to recognize the power of markets and you're humble to recognize that even if "the right people with the right ethics" were in power, that wouldn't solve all problems.

e

Well I think you're the thinking persons centrist. Of the type common-or-garden fanatical lefties, such as myself, like to hear more from. You rightly challenge policy ideas, but with a clarity/purpose that positions support for the correct direction of travel. You don't, as a rule, butter up class antagonists – so more power to your elbow mate. If only the likes of Chris Leslie could learn from you...

Phil

I dispute your premise. If 'lefties' are moralistic puritans alienated from the working class, they don't include Marxists.

Mind you, the hairshirt tendency has deep roots in and around the Left. Here's Enrico Berlinguer from January 1977:

"we are deeply convinced that to replace certain habits of life with others that are more exacting and not extravagant, can lead not to a worsening in the quality of life, but to substantial improvement, to growth in the ‘humanity’ of life. A more austere society can be – indeed ought to be – a society that is more just, better ordered, with less inequality, in reality more free and democratic, certainly more humane."

And here's his sidekick, union leader Luciano Lama, speaking the previous day:

"Austerity ... is a word that smarts. But we need to say it without fear: it doesn’t mean giving up and putting ourselves in the hands of Fate, but making a choice for change. ... Therefore we have the fixed intention of avoiding ... actions which would not be consistent with this choice, such as industrial platforms centred on salary"

Inflation in Italy was running at 14% at the time.

TickyW

"Also, I’m more sceptical than many lefties of higher corporation tax."

Chris, it's not so much about raising corporation tax - it's more about defeating the absurd proposition that the correct rate of corporation tax is zero.

Those who propose this do not seem to understand company law - a company is a separate legal entity which exists, and consumes public services, in its own right. If corporation tax is abolished who will bear the cost of diminshed public services? Why workers of course, who will either have to suffer high rates of income tax and/or VAT or suffer lost public services.

Kent

You want us to take you seriously while you write for the iea? Either you think we readers are stupid or you are too naive.
http://www.bbc.co.uk/blogs/adamcurtis/entries/fdb484c8-99a1-32a3-83be-20108374b985

Jim

"If corporation tax is abolished who will bear the cost of diminished public services? "

How about the actual people who own the company? Who are the people being taxed by proxy by corporation tax anyway? Everything within a company is owned by the shareholders, including the profits, if the State takes some of the profit before it reaches the shareholders, it can't tax the profit as income the shareholders don't get.

I mean there are reasons to tax corporations rather than leave all the taxation to fall on the shareholder owners, mainly that if a lot of the owners are overseas you get little tax from that company's profits. But don't imagine that if corporation tax was zero no-one else would end up paying more tax, they undoubtedly would.

chris

@ Kent - I don't write for the IEA.

Blissex

«markets function – when they do so well – as selection devices, selecting for more efficient strategies and against less efficient ones. [ ... ] entry and exit rather than from incumbent firms upping their game.»

My usual claim is that what selects for efficiency is not "markets" or "capitalism", but a good bankruptcy system, in which businesses that fail can get closed by creditors. The fatal flaw of the USSR was that failed businesses were practically never bankrupted, not that it was "communist" or even "centrally planned". The outcomes of low efficiency happen in "capitalist" and "market driven" societies where bankruptcy is difficult and complicated and rarely happens (e.g. most crony-capitalist regimes like in the middle east or latin america, but not only).

My usual (but not so common) claim is that the 3 main direct factors of economic progress have been the bankruptcy, the industrial mode of production, and the diffusion of coal and oil as fuels.

Blissex

«"If corporation tax is abolished who will bear the cost of diminished public services?"»

That is a ridiculous question: corporation tax is not literally a tax on corporations, but in practice they are a witholding tax targeted at their owners.

«How about the actual people who own the company? Who are the people being taxed by proxy by corporation tax anyway?»

That is often very difficult to determine. There are taxes that are optimally economically, like the land tax, or take all income above a threshold, but tax systems in the real world also have to be designed taking into account administrative issues like evasion and avoidance.
These usually mean that a lot of small taxes are better than a single big tax, and that taxing income at every point in its generation is better than just at its final destination; to make sure that various evasion/avoidance devices are less convenient to use.

Then in most tax system the receivers of final income can always deduct from their taxes those already paid by the corporations of which they own a share, proportionally to the share of dividends received for that share. That's why corporate tax rates should always be higher than the highest personal tax rate, otherwise the obvious game is to pay the tax on dividends at the lower corporation rate and not cumulate it with personal income.

Luis Enrique

Bloody centrist Marxist

Jim

"My usual claim is that what selects for efficiency is not "markets" or "capitalism", but a good bankruptcy system, in which businesses that fail can get closed by creditors. The fatal flaw of the USSR was that failed businesses were practically never bankrupted, not that it was "communist" or even "centrally planned"."

Well thats a bit like saying what makes an efficient hospital is the mortuary service. Yes every hospital needs one, without it the place is going to be stacked high with corpses eventually, but there's slightly more going on than just that.

Yes of course you're right, the possibility of a producer failing and being removed from the marketplace is partly what keeps the rest on their toes, but that is a fundamental part of a market economy, and not a part of a planned economy. A planned economy with multiple suppliers any of whom can go bust if they don't do a good job isn't a planned economy any more is it?

There are two other factors that form the free market triumvirate with bankruptcy, and they are the search for profit and the ability of new entrants to enter the market. Without those, a market that consisted of State owned entities that could theoretically go bust would soon stultify into an effective conspiracy against the consumer - every player would have one goal only, to avoid bankruptcy, which would mean avoiding all risks, never innovating to try and gain market share, and never facing competition from below when they get complacent.

Kent

@chris - I misread. My sincere apologies.

Alan Paxton

Neither Christopher Snowdon's article nor your post really engages with the Green critique of growth, which is that the planet we live on has finite resources and a finite ability to bear our assaults and that these are not compatible with limitless economic growth. There are hard limits to growth and a lot of evidence - on global climate change for example - that we are running headlong into them. This is not really a lefty argument. Leftists are votaries of Progress on the whole and are just as uncomfortable with limits to growth as are the free marketeers.

TickyW

@Jim and @Blissex

Shareholders are not the owners of companies in English law.

Blissex

«Ending economic growth does not move people up a higher spiritual plane. Quite the opposite. It makes them mean and nasty.»
«the Green critique of growth, which is that the planet we live on has finite resources and a finite ability to bear our assaults and that these are not compatible with limitless economic growth.»

Both of you are sort of right: there is a current of "green" thought that thinks that "growth" is bad in its own right, even if it is sustainable, because it is corrupting of character or displaces nature, or both.

The other current of "green" thought claims instead that "growth" is unsustainable, as in "planet ... not compatible with limitless economic growth".

The latter current usually is too pessimistic in some ways and too optimistic in others, but its fundamental insight is that*much* of current *GDP* growth is based on asset stripping, that is on running down the fertility of "land". After all "GDP" is gross of depreciation by definition, and JB Clark "disappeared" the concepts of "land" and "fertility" from maistream Economics.

The pessimism of the "sustainable growth" current is that some growth is possible thanks to improvements in "technology" as distinct from asset stripping, and that the "fertility of land" eventually in part gets restored (crop rotation for example).

The optimism of the "sustainable growth" current is that in several areas of the planet we have probably already way overshot carrying capacity, getting into the "poisoning" part of the growth cycle, and that may restore itself in some cases but very very slowly.

«Leftists are votaries of Progress»

There are "Leftists" of all sort of shades and shapes, which is also a problem with our blogger's generalizations...

Blissex

«Yes of course you're right, the possibility of a producer failing and being removed from the marketplace is partly what keeps the rest on their toes,»

Our blogger advisedly talked about "exit", not "keeps the rest on their toes". The essence of bankruptcy is that failed business stop consuming net resources, and their assets are recycled, unlike most part of dead bodies. What disappears in a bankruptcy is mostly the failed management team.

«but that is a fundamental part of a market economy, and not a part of a planned economy. A planned economy with multiple suppliers any of whom can go bust if they don't do a good job isn't a planned economy any more is it?»

That is a fully ridiculous assumption, based on confusing market/planned and state owned/privately owned entities.
It is entirely possible for example to have a state owned economy where the state owns several different entities producing the same stuff, and for all of them to be centrally planned; and when some of entities fail to make plan they are bankrupted.
Indeed this is *the rule* for large companies: a big car company may have a dozen car plants producing the same models even, and they would be all centrally planned, and those that don't make the plan would get shutdown and their assets redistributed among the better ones.

«There are two other factors that form the free market triumvirate with bankruptcy, and they are the search for profit»

But "search for profit" is obviously the same as "avoiding bankruptcy": eventually an entity that does not make a profit, intended as positive value added including labour and capital costs, goes bankrupt.
Perhaps your argument parrots, but not literally, the neoclassical claim about "profit maximization", not mere "search for profit"; but there is no evidence that most entities do that, they tend to be run to satisfice profits, that is to try and stay non-bankrupt and keep their management teams well supplied with cash.

«and the ability of new entrants to enter the market»

Well, that is a given, not something special: bankruptcy includes the ability to redeploy the assets in new entities. Bankruptcy does not mean that all plants and stocks get torched, the employee massacred, and the managers slaughtered. They usually get recycled.

A fluid, flexible bankruptcy systems includes the ability to create new businesses easily from parts of failed one, and indeed it is one of the best aspects of it.

And the ability to have new entities does not depend on markets either: large entities create, close, move, subsidiaries all the time, according to a central plan usually.

«a market that consisted of State owned entities that could theoretically go bust would soon stultify into an effective conspiracy against the consumer - every player would have one goal only, to avoid bankruptcy, which would mean avoiding all risks,»

That pretty much describes all large capitalist enterprises, few of which are adventurous, and all of which have "poison pills" against takeovers, and highly collusive behaviours against customers. Even A Smith in the 18th century wrote that as one of the top aims of private enterprise.
Extreme risk aversion comes from being established, not whether ownership is from the state or resource allocation is market-driven.

«never innovating to try and gain market share»

Conversely a centrally-planned state-owned company could be more adventurous knowing that beating the plan could generate rewards, and risks would be minimized by having a benevolent owner.
This again happens all the time within large centrally planned capitalist enterprises, that often put subsidiaries in internal competition against the plan. Incentives don't necessarily depend on markets or private ownership.

Bankruptcy is the "first do no harm" principle of business economics, and it is very powerful indeed. It enables efficiency with industrial modes of production fueled (literally) by very cheap mineral coal and oil.

cjcjc

Doesn't GDP measure value added?
It was the soviets who confused GDP/growth with resource consumption.
We may live on a "finite" planet, but that is such a banal observation as to be meaningless.

Blissex

«Doesn't GDP measure value added?»

No, strictly speaking it is only meant to be equivalent to it; as the name says it is meant to measure gross (of depreciation) domestic production, and it is a vector of physical quantities (number of cars, hours of doctors work, ...), not pounds or dollars. What is usually called GDP is not GDP but the GDP *index*, that is GDP multiplied by prices.

Its counterpart is *GDI*, that is supposed to be "value added" divided among various income sources, and that is measured in pounds/dollars/...


There are two big related problems: much of GDP cannot be measured *directly*, so GDP is *assumed* to be equal to GDI in those cases, and GDI includes income streams that are not "value added" but "redistribution".

The most obvious example is most of the finance sector: defining its contribution to GDP is difficult, so its contribution to GDI is taken as a measure of its GDP contribution, but a lot of the GDI of finance is purely redistributive.

«It was the soviets who confused GDP/growth with resource consumption.»

As I remember it that description is vastly incorrect: their claim, which was based on an incorrect understanding, was that only GMP (Gross *Material* Product) was a meaningful concept, because services were metaphysical production. That claim was partially incorrect because a lot of service result in physical output, for example if 50 people sit in a cinema to watch a 2 hour movie, 100 hours of entertainment have been produced, and that's a physical quantity, not a metaphysical one. The claim was partially correct because in many cases services result in to production, they are purely redistributive.

It is GDP itself that contains by definition resource consumption, because it is as the name says Gross of depreciation.

For example consider oil extraction: 1 million barrels of oil extraction add 1 million barrels of oil to GDP, but also should add 1 million barrels of oil to depreciation, because once extracted that oil is gone.
So the extraction of 1 million barrels of oil adds to Gross Domestic Product (and to Gross Material Product), but adds nothing to *Net* Domestic Product. Actually things are more complicated because in theory only *final* production should be added to GDP, and lots of oil is used as input in the production of other stuff.

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