Tuesday, 21 February 2012

For the Lack of a True Statesman

Well, that's pretty much it for Greece. It seems to me that if ever an incoming government wouldn't want its hands tied by the last one, the Greek general election in April will prove it. The wretched Greeks may be workshy, taxdodging and feckless and have suffered thoroughly dishonest government since the Euro was conceived, but they get nothing out of this deal. Revolution can only be averted by a change of government to one which is not prepared to be Frankfurt's bitch, forcing a generation of Greeks to emigrate.

But golly there are still plenty of Euro supporters in Britain. It has to do with aversion to change, I think. If Greece goes, so Europe goes, they argue. If Europe goes, so Britain goes. Well, that’s when one has to pin the Europhile to the wall with the simplicity of the argument.

And it’s pretty easy, frankly. Put simply, the Euro was created out of the barely-smouldering embers of the last war, insofar as the Germans and the French felt in the 80s and 90s there was still another step they could take towards ensuring that IT could never happen again, which was to tie themselves together and create the world’s first instance of economically independent countries believing that they could run faster as a three-legged team, rather than - as nature intended - as co-ordinated individuals. Worse, this became, with the full 17 members, akin to the pyramid of riders in a motorcycle display team reckoning that they could negotiate the bends and bumps in the road just as easily as an individual rider.

The Germans, being good mechanics, realised this wasn’t an ideal plan, but so keen were they to prove their Europäischer credentials, they were prepared to risk the hardest-of-won of reputations - that of sound money. They created a treaty (Maastricht) which decided upon the hurdles to be jumped and the hoops to be gone through in order to prove that this widely differing group of economies had ‘converged’. Quite right, you might say. But there was one problem – the hurdles were never erected, nor the hoops produced. It was deemed sufficient that ‘prospective’ convergence would do. So, hurry along, no time to be lost, you’ve all passed, let’s get the prize giving ceremony started. The treaty, in short, was a fudge.

This proves a point which cannot be stressed enough – international treaties, particularly those involving the pooling or the relinquishing of sovereignty, MUST be created by truly gifted statesmen and draughtsmen, or not at all. We are talking Rolls Royce engineering here, the absolute and very best. And if no such statesmen or draughtsmen exist, call the whole thing off. Pity was, there WERE no Jeffersons in Europe. Delors and Mitterands and Kohls, but no Jeffersons. Margaret Thatcher knew this, and told us so.

Thomas Jefferson, who was at one time Secretary of State, Vice President and then President of the world’s greatest free republic, chose not to say so on his headstone. Instead, he wrote: "Here was buried Thomas Jefferson, author of the Declaration of American Independence, of the Statute of Virginia for Religious Freedom, and father of the University of Virginia."

Tuesday, 14 February 2012

The Art of the Laffer Curve

It can never be repeated enough - high levels of taxation are self-defeating. We have the third highest marginal rate of income tax in the world. This is bonkers economics. The man who wrote the book on this and has had his theory proved time and again is one of a panel that the Speccie asked to address our no-growth problem (a problem that is NOT being addressed in No. 11 Downing Street). Here is his cut-out-and-keep easy aide memoire to articulate the argument:

Cut the 50p tax Arthur Laffer, Chairman, Laffer Associates
Reducing the burden which government places on the economy, through tax cuts, is the surest way to promote growth. I have never heard of a country that taxed itself into prosperity. Yet Britain last year raised the top rate of income tax from 40 per cent to 50 per cent. For more economic growth, and more tax revenue, this rate should be lowered immediately.

This paradox — lower rates, but higher yield — has been demonstrated time and time again, the world over. Between 1980 and 2007, the US cut tax rates on every form of income, the highest, the lowest and all those in the middle. The result was that the rich paid more, even if their tax levels were reduced. Let’s take the top 1 per cent of earners. Over this 27-year period, their contribution to the income tax collected in America doubled from 19.5 per cent to 40 per cent. The same dynamics applied in Britain: when the top rate of income tax was lowered to 40 per cent in 1988, the share of income tax collected from the richest 1 per cent rose from 14 per cent then to 27 per cent last year. Raising tax rates on the rich is about as bad an idea for the UK as I could imagine.

The government doesn’t need to do something. It needs to undo much of what it already has done. If you want poor people to do better, create jobs, not welfare — and to do this make taxes lower, not higher. ‘The best form of welfare,’ in the words of John F. Kennedy, ‘is still a good high-paying job.’

Not nearly enough people articulate this basic argument. If you test the alternative socialist argument to destruction - tax the rich more and more and they will pay more and more - you will find that the 'rich' (and the wealth creators, and the job creators) have moved abroad, and not just to Switzerland, because ANY other jurisdiction will be an improvement. Remember the old maxim:

Socialism is the equal distribution of misery.

Saturday, 11 February 2012

Another Villain or Three

The interesting thing about the Nat Rothschild verdict and the media reporting of it is how teflon-coated Mandelson has proved to be this time.

Rothschild is obviously a disgusting individual, deeply unattractive in almost every way. Born into plutocracy, and obviously with a sharp brain, he appears to be interested in money and power and nothing else. He might have done any amount of good in this world, given his wealth, brains and opportunities. Instead he surrounds himself with the skidmarks of the financial/political/celeb society in which his type move.

Mandy is attracted by his money, doubtless, and the doors that he can open to other billionaire sleazebags. But Mandy is politically savvy, if accident-prone. The two sackings from Cabinet were entirely justified, even if the Hinduja brothers did lead him astray. He should have known that jumping, spontaneously, on board a billionaire's lear jet and heading off for a bit of homo-eroticism in the Siberian tundra would go down poorly, even if he wasn't actively taking bribes or promising to use his influence in corrupt fashion. (He wouldn't, would he?)

So I find it interesting that the court seems to have gone out of its way to exonerate Mandy of any wrongdoing and to have heaped all its scorn upon ugly Nat. God knows Mandy is a moth to a flame when unworthy billionaires are there to be befriended, and his appetite for being thrashed on his noble but naked buttocks with birch twigs whilst rolling in the snow is almost certainly enormous. But he knew why he was there, who he would meet, and what might become of it all. It surprises me that none of the press felt like pointing this out.

Friday, 10 February 2012

A Villainous Woman

Yes, she may look like a harmless little red squirrel or chipmunk, with her wide, innocent Bambi eyes, fragrant teeth and glossed lips. But take it from me, she's a wrong'un; an ocean-going, copper-bottomed, weapons-grade villain.

Her company, A4e -"a social purpose company with the sole aim to improve people's lives around the world" - (pass the sick-bag, please), turns over the thick end of £200m, ALL OF IT government contracts. That's you and me, idle blog readers.

We are mugs. Mugs! Because guess what the sweet-looking Emma Harrison is doing with the wonga? I'll tell you what: she's producing a dividend of £11m for her board, of which doe-eyed Emmykins takes £9.5m.

The cross-party group of MPs (yes, I know, hardly beacons of competence and integrity themselves) have described the performance of her company on these contracts as 'abysmal'. Will the contracts be withdrawn? I think we know the answer. There will be hand-wringing and obfuscation, lies and excuses. And the same contracts will be awarded again, with assurances that A4e's performance will be scrutinised more closely, yadda yadda.

Meanwhile, that poor blameless bastard Stephen Hester has not been allowed to take his bonus in shares, tied up for years and directly dependent upon his company's shareprice, because those slimeball politicians have given in to ignorant populism and ganged up on him because he's a banker. He is deemed to be doing a pretty good job, by the way. He was asked to go in and sort out Mr Fred Goodwin's mess. He didn't cause it. He wasn't even in the banking industry in the last few years before the bubble burst.

Hester can't get his highly conditional £1m bonus, with all its strings attached, despite his good hard work. This ginger witch, however, has just pocketed ten times that amount, ALL OF IT TAXPAYERS MONEY, despite being incompetent.

What does the coalition DO all day? The low-hanging fruit of usless spending that they could eradicate without a squeak of justifiable protest is there for all of us to see. Have they got rid of any of those gissajob Quangos? Have they hell.

This government may be slightly better than the Brown Terror that preceded it. But it is the most disappointing government of my lifetime. Given a golden ticket by the electorate to get a grip on things, with the polls still in their favour (astonishing, but that's the Ed Miliband effect for you), they arse about like the PG Tips chimps trying to move that upright piano and make a predictable bloody mess of it. With the exception of Gove and Duncan Smith, they deserve our contempt.