The trickle-down con job

The recent huge corporate tax cut was supposed to encourage companies to invest and to hire more workers. Investments made by Standard & Poor’s 500 largest companies has been $475 billion in the first three quarters of the year,19% up. R & D has risen by 34% during the same period.

But the above figures disguise a more objectionable trend: stock buybacks, which increase the value of the shares for the benefit of company executives. Buybacks have totaled $579 billion in the first three quarters of 2018. Instead of raising wages or avoiding layoffs. At the same time dividend payments are running at record levels. Meanwhile capital expenditure by companies remains largely on a trend similar to that before the tax cuts.

Meanwhile, average earnings of private sector workers are up 2.8% in 2018.

In other words, trickle-down, as usual, isn’t trickling down. It never did, but it has been used for decades as a means of making the rich (donors) richer and conning the public, some of whom, in Democrat-leaning areas, are ending up paying more, not less tax. On the other hand one has to acknowledge that the money that returns to investors is usually re-invested in companies that need the investment, and this is a plus for the economy. Overall, however, the majority of buybacks add little to national wealth.

Why Britain voted Leave: Brexit explained to non-Brits

My non-British friends often ask me why Britain voted to leave the European Union. Some are Europeans themselves, the vast majority of whom feel sad and bewildered by Britain’s departure. Others are American or Asian, who don’t know much about the EU beyond its primary function as a facilitator of trade, and so would like a proper explanation of Brexit. So here are what I believe to be the most significant causes of the vote to leave. I make no secret of my views- my friends know I’m a passionate pro-European- but I’ll try to be impartial for the purposes of this article:

  1. Britain’s long-term Euroscepticism. Britain wasn’t one of the founding members of the European Coal and Steel Community, as the organisation was then known. The country later joined the European Economic Community, but only after what appeared to be a severe economic malaise. The UK’s relationship with Europe has always been transactional; its benefits outweigh the costs.  Most of the Continent has a historical emotional attachment to European integration as the answer to the extreme nationalism that caused both world wars, imperialism and Depression-era protectionism. Britain had the benefit of the English Channel, protected by the world’s best navy. The lesson it learnt from WW2 was one of British superiority and fighting spirit, not the benefits of international co-operation. The lack of ideological zeal for the EU in Britain, even during the Blair years, cannot be understated.
  2. The effectiveness of the Leave campaign. When the referendum campaign was first announced, most people believed Remain would win by a comfortable margin. It had the support of most of the established political parties, businesses, academics, economists and the trade unions. It also had the lion’s share of celebrity endorsements, particularly those from the creative arts. Leave had the support of a minority of Conservative MPs, a minor party called the UK Independence Party, a few right-wing think tanks and some newspapers. But Leave had some key advantages. It ran a media-savvy campaign, with eye-catching slogans, targeted social media adverts and slick marketing. It had some eloquent and charismatic figures, most notably Boris Johnson and Nigel Farage. More importantly, the Leave campaign used the discontent felt by many Britons to its advantage. It promised change, and characterised Remain as a tired establishment uninterested in the lives of ordinary people. This populist narrative turned Remain’s endorsement-heavy campaign from being an asset to a liability.
  3. The nature of Britain’s economic recovery. Pre-Brexit Britain was often trumpeted as an economic success story. Unlike much of Europe, the country had got its deficit under control. Unemployment was comparatively low, and inflation well below the developed world average. The post-2010 austerity measures and reduction of the public sector workforce didn’t cause a recession or increase unemployment, as the private sector grew to compensate. However, beneath the headline figures was an economy severely underperforming. Wage stagnation was the worst in the developed world except for Greece. Austerity had starved public services of funds, particularly in local government, the legal system and welfare. The country was also experiencing increasing spatial inequality, as London and the university towns boomed while post-industrial towns and coastal communities suffered. Economic discontent wasn’t the most important cause of the vote to Leave. But given the narrowness of the result, it could’ve made the difference between staying in and leaving.
  4. The failures of the EU. One of the most potent arguments in favour of Leave was that the EU had failed to provide the kind of political stability and economic prosperity it promised. The EU seemed paralysed when faced with the migration crisis, the Eurozone sovereign debt crisis or the crisis in Ukraine. To many, the EU was both too powerful and not powerful enough: sufficiently consequential to be a supranational imposition on nation-state sovereignty, while too weak to respond to challenges decisively and sufficiently. Eurosceptics successfully argued that freed from the EU’s lethargic and irresponsive structure, the UK could make a success of going alone.
  5. An excessively negative Remain campaign. To the unending frustration of Remain campaigners, Vote Leave labelled any warnings against leaving the EU as ‘Project Fear.’ This obviously isn’t a proper argument. But it contains an element of truth- the Remain campaign was too negative. It focused too much on the drawbacks of Brexit, when the precise consequences of leaving were impossible to quantify. Rather Remain should’ve emphasised the achievements of the EU: why it was founded in the first place and how Britain should use its place in the EU to build a better future. The most obvious example of this was Remain’s failure to defend Freedom of Movement. In an age of disillusionment, negative campaigning doesn’t work when people feel they have nothing to lose.
  6. A broader dissatisfaction with globalisation. Brexit didn’t happen in isolation- it has to be seen as part of a trend sweeping the rest of the world. Globalisation is increasingly divisive. For its proponents, it has increased prosperity, facilitated democracy and enhanced human freedom. But its critics cite the increasing income inequality between the global elites and the rest of the world. They regard the supranational institutions that oversee globalisation, including the EU, as out of touch, undemocratic and uncaring. Authoritarian opponents of globalisation resent the socially liberal culture and increasing migration that seems to accompany it. Free trade, the cornerstone of globalisation, has displaced jobs and caused whole industries to go into terminal decline. Britain, like most countries, has managed globalisation poorly. The consequence here was leaving the EU.
  7. Divisions within the Conservative Party. Ever since the Thatcher years, the European question has proved to be the Conservative Party’s Achilles’ Heel. Conservative Eurosceptics were first empowered by Thatcher’s Bruges speech, which generally supported the EU but explicitly opposed what she saw as the group’s socialist and federalist tendencies. A small number of Conservative MPs then rebelled against Prime Minister Major and voted against the Maastricht Treaty. Ongoing Conservative infighting over Europe was one of the reasons why David Cameron called the referendum. The Conservative Party then declared itself neutral during the campaign, so as not to upset its Eurosceptic faction. The party’s base is now overwhelmingly anti-EU. Any aspiring future Conservative leader will have to be Eurosceptic, something which makes rejoining the EU quite unlikely.

Marriage, ancient and modern

Care of the Husband’s Person

On 8 April 2010 the London Review of Books reviewed a 14th Century Parisian book of household management called The Good Wife’s Guide: A Medieval Household Book. This is a compendium of medieval lore which aimed to instruct young wives how to be good, efficient, and obedient. The following is an excerpt from a section entitled Care of the Husband’s Person:

Therefore love your husband’s person carefully. I entreat you to see that he has clean linen, for that is your domain, while the concerns and troubles of men are those outside affairs that they must handle, amidst coming and going, running here and there, in rain, wind, snow and hail, sometimes drenched, sometimes dry, now sweating, now shivering, ill-fed, ill-lodged, ill-shod and poorly rested. Yet nothing represents a hardship for him, because the thought of his wife’s good care for him on his return comforts him immensely. The ease, joys and pleasures he knows she will provide for him herself, or have done for him in his presence, cheer him: removing his shoes in front of a good fire, washing his feet, offering clean shoes, and socks, serving plenteous food and drink …. she puts him to sleep in white sheets and his nightcap, covered with good furs, and satisfies him with other joys and amusements, intimacies, loves and secrets about which I remain silent.

With the above in mind let us now fast forward seven hundred years to my updated version, noting the changed roles of husband and wife. This is how the above might be written in 2019:

Care of the Wife’s Person

Therefore love your wife’s person carefully. I entreat you, before you sit down to watch sport on television all day with a can of beer in hand, to see that she has clean underclothes, for the washing machine is your domain, as is the washing up and the making of the bed in the morning. The concerns and troubles of women are those outside affairs that they must handle, amidst taking the children to school, getting the car serviced, running here and there in rain, wind, snow and hail, sometimes drenched, sometimes dry, now sweating, now shivering, dealing with the bank, the mortgage and an unsympathetic boss, buying new shoes for the children and taking them to football practice, violin lessons and ballet; getting her facial, haircut and manicure and answering all the emails during her half hour lunch break. Despite eating on the run, arranging all the social commitments and the visits of plumbers and electricians, nothing represents a hardship for her, because the thought of her husband’s good care for her on her return home comforts her immensely. The ease, joys and pleasures she knows he will provide for her cheer her: removing her shoes in front of a good fire, washing her feet, offering clean shoes, and socks, cooking plenteous food and pouring copious drink …. he puts her to sleep in white sheets, and, after he brings her a nice hot drink of cocoa and she has taken her anti-depressants, he tries to satisfies her with other joys and amusements, intimacies, loves and secrets, before she falls asleep exhausted. As to his feelings about this I remain silent.

——————————————-

The Good Wife’s Guide: A Medieval Household Book is translated by Gina Greco and Christine Rose and published by Cornell, £16.95, March 2009, ISBN 978-0-8014-7474-3.

Big retail. No.2

The other day I commented on scanners in shops, the fact that they almost encourage shop-lifting, and the cavalier attitude of companies to “wastage” (or non-payment for goods by customers). Why do retailers shrug their shoulders?

1.  The purchase of scanners shows up on the balance sheet as depreciation, and the government has decreed that it can be written off against tax under the heading “Accelerated Depreciation”. Thus, a hunk of tax can be saved almost immediately.  

2.  Stores can reduce their overhead by eliminating counter staff, keeping just one person to supervise, say, six scanning machines.

3.  Since many American companies are now virtual monopolies (thank you, Congress!) there is no problem – if deemed necessary just raise prices to make up for “waste of inventory.”

The scam that has re-written the rules on depreciation is a subsidy to capital investment, encouraging firms to substitute capital for labour. It helps large companies pay no U.S tax at all, thus worsening the fiscal situation. Verizon (telephone and internet) has benefitting from millions of dollars of subsidies (why, please?) and is reported to have had a negative 3% tax liability for the last three years. Almost free of tax, why bother about customers walking out without paying for their soda pop?

Epicurus would have commented that corporations and super-rich individuals should not benefit from discriminatory tax benefits, set up by politicians to encourage “political support”. If an individual or a corporation is not paying at least a net 10%(?) of all profits and income in tax, they should be audited by the IRS. We the taxpayers put up with far too much pampering of big business and big earners.

Big retail

I am in the local CVS, one of the many near-monopolies, retailing everything from pharmaceuticals to fizzy drink. I have bought some milk, and scan the carton, cost $2.67. A total of $38.97 shows up on the screen. While accustomed to price gouging this is, nevertheless, mildly surprising. I find one of the few, increasingly elusive, staff.  

“Look what your machine is trying to charge me for a pitiful little carton of milk!”

Says she, looking not in the least surprised, “This is happening all the time.”

“It looks as if somebody scanned their items, didn’t like the look of the price, and walked out with the items without paying.”

“You’re right, Sir. As I say it’s happening all the time.”

“You mean several times a day?”

“Oh, yes, We can’t keep an eye on everyone.”

Should we be dismayed by the unethical and dishonest people who walk out without paying?  Yes. Should we sympathize with the company? No! They account for theft in their pricing. To put it another way, the honest guys are subsidising the dishonest ones. Big companies are not particularly bothered by theft, or “wastage” as it is called. Epicurus would advocate for more humans behind check-out counters, and retirement for price scanners. It wouldn’t stop mistakes and inaccurate payments, but it would provide more employment at least.