fredag 27 april 2007

Vote Blue go Green

The Conservatives have just been handing out a newsheet, mysteriously called "The Moon", to show how they have changed. It urges, "vote Blue go Green". There is some handy advice on energy saving, for example by turning down the heating, though there is nothing about cutting down on travelling by car.

They hit out at stealth taxes and the Council Tax, without saying what they will put in their place. They promise more prisons and police.

The newsheet warns of punishing new taxes which will hit "hard-pressed families and pensioners". It's funny how the copywriters have latched on to this phrase, presumably to differentiate them from lazy feckless single people who deserve our opprobrium. These threatened taxes will also leave tax exiles and non-domiciled residents unaffected, but it would not do to draw attention to the privilege they enjoy, still less to promise to do something about the situation.

It is depressing to think that this is the only realistic alternative to New Labour.

Capitalism



One of my best friends is an unreconstructed Marxist. She is always going on about the evils of “Capitalism”, but what exactly does she, or anyone else for that matter, mean by this term?

“Capital” refers to goods set aside for the production of further goods – the fisherman’s net or the artisan’s tools, for instance are capital. So humans have been employing capital since the Stone Age. And markets have also been around for about the same length of time. Money is merely a medium of exchange, to avoid the need for bartering actual goods. So what is this “Capitalism”?



Clearly, our systems of economic organisation are not good for the environment and often lead to extremes of wealth and poverty, but what precisely is the problem? Is is our tax systems? It is joint-stock companies and the privileged position they enjoy? It is systems of land tenure? Everyone occupies land, but could there be something wrong with the legal and fiscal framework under which land holdings operate? My friend advocates “common ownership”, but how would this work and would it really help the situation? After all, it is a legal fact that the Sovereign owns all the land in England and holds it on behalf of the nation, but in practice, there is no difference between freeholding and absolute ownership of land. Under “common ownership”, how would land be allocated, by whom and on what terms?

It seems that in economics, there is a laxity in the use of terms and definitions that would not be tolerated in the physical sciences, and perhaps that is the problem, as nothing can ever be systematically analysed.

onsdag 25 april 2007

Independent paradox



The Independent holds itself out as Britain's conscience for the intelligent man and woman - otherwise known as the chattering classes. They are always running features on the state of the planet and the plight of the poor. A particular concern recently has been global warming and they have been drawing attention to the "carbon footprint" of air travel.

Today's Independent, however, included a twelve page supplement on investment property - that is, making money on the backs of other people's work. The idea is that you buy property for next to nothing and watch it shoot up in value. But don't ask where this extra value is supposed to come from.

In addition to features on British "investment" opportunities, there are advertisements talking about the mouth-watering opportunities for property investment in far-flung places such as Berlin, Bulgaria, Spain and Dubai, which are a bit out-of-range if you are going to get there by environmentally-friendly local trains.

Nowadays, this is known as "Cognitive Disjunction". The old-fashioned term was hypocrisy.

Don't do as I do, do as I tell you.

Should Scotland go independent?


salty and the scottish parliament
Originally uploaded by Lord Voldemort.

An article in Sunday's Observer discussed the prospect of Scottish indpendence, which the author, Ruaridh Nicoll, was against. Unwittingly, however, he was actually helping to promote
the break-up of the Union through perpetuating the myth of Scotland as a net recipient of revenue. (As a Scot, I hate this idea of a neutered nation – Observer 22 April)

The notion of Scotland as dependent has come about through a
superficial interpretation of revenues and subsidies.

Productivity in Scotland, as in other parts of Britain remote from
centres of population, is inevitably lower than in the more favourably
located regions. This is due to a variety of factors, the most
important of which are transport and energy costs. The difference is
apparent in rents across the country. The high rental values in London and the South East are the market value of the better infrastructure available there. This is a value that is sustained largely by public spending. The real subsidy recipients are landowners in the better-off areas who enjoy steady rental growth on the backs of taxpayers at large.

The problem for Scotland is that it suffers from a national tax policy
that ignores these realities of locational advantage and disadvantage. The tax take, as a proportion of the the wealth produced, is almost the same regardless of whether a business is running in the far north of Scotland or Central London. But in the more distant locations, the burden of tax is critical and can preclude successful production. More tax is demanded from Scotland than it can afford. The same applies also to pockets of geographical disadvantage – East Kent, and even parts of Greater London – within the most prosperous regions.

This explains why some areas suffer from persistently high
unemployment. The problem is tacitly recognised through the programmes of grants and "subsidies" that have been funneled into the regions for many years. But they are not really subsidies, since all they are doing is to feed back, in part and at considerable cost, resources that should not have been taken out in the first place.

If the tax system is not reformed so as to take account of the facts
of geography, the Union indeed cannot endure.

måndag 23 april 2007

UK supermarkets and Third World Wages


tesco
Originally uploaded by hedgeman2006.

An article in today's Independent reports that UK supermarkets are exploiting poor workers in the Third World and driving down wages.

No doubt the big supermarkets are using their muscle to drive a hard bargain, but their intervention on the scene could not possibly do this - on the contrary. And nobody could get away with paying low wages if there was anything better on offer. They are merely exploiting a pre-existing situation - that of large-scale landlessness. If the supermarkets went away, the poorly paid workers would just lose their jobs.

When people have no access to land except on a landlord's terms, then they have no option but to accept, at a penurious wage, whatever work is available. This is just as true in developed countries like Britain as it is in the Third World. Fair Trade schemes can only scratch the surface of the problem.

The solution is the right sort of land reform to ensure that everyone who wants land has free access to it - after all, land costs nothing to produce and is everyone's birthright.

This has nothing to do with the supermarkets but blaming them is a good substitute for thinking about the issue.

söndag 22 april 2007

The saga continues - who needs a replacement for these trains?


HST
Originally uploaded by Mike Knell.

The Department of Transport's consultants continue to develop a specification for a replacement for these trains, which were introduced in the mid-1970s.

The aim is to produce something which is suitable for all sorts of things, capable of being powered by diesel, electricity or some other form of traction as yet undiscovered. The idea is to have generator vehicles providing a power supply, with electric motors distributed along the length of the train beneath the carriages. Siemens has come up with a concept of this kind. The specification also requires much lower weights than has been usual in recent years, at around 36 tons per carriage. A carriage length of 26 metres is proposed.

But when you look at where the trains would run, it comes down to the Great Western main line, London to Aberdeen and a few for the Midland main line. But the GW line is very different to what it was when the HSTs came into service. Then, trains ran non-stop from London to Bath and Cardiff. Now, due to development in the M4 corridor, they have become stopping services, calling at stations every twenty miles or so. There is little high speed running any more on this route. And so London to Bristol and Cardiff should be electrified and a fleet of trains similar to those used on the Waterloo to Bournemouth and Portsmouth services obtained. This leaves the line to Devon and Cornwall to be dealt with, but a short extension of electrification would bring power to Salisbury, which is well laid-out for a change of traction, for example, to diesel. This is more than half-way to Exeter, and the route beyond, to Exeter needs to be upgraded anyway, with restoration of the double track main line.

As for the King's Cross to Aberdeen route - this is already electrified as far as Edinburgh and the smaller numbers travelling beyond do not need a full length train. So here, all that is needed is to split the train and take the Aberdeen section on using, say, diesel traction.

The Midland main line from London to Nottingham, Derby and Sheffield, is also much like the GW route, and ripe for electrification.

Which makes the requirement look a lot simpler. Surely all that is needed is a fleet of carriages made up into, say, 8-car and 5-car sets, which can be run in push-pull mode with any form of locomotive - electric, diesel or whatever?

The requirement for 26 metre long vehicles is worrying. The longer the vehicle, the narrower it has to be due to the overhang on curves. Trains in Britain are already too narrow. The optimum length is about 21.5 metres, allowing a width of 2.80 metres. But possibly a better solution altogether would be to use articulated push-pull units with 16 metre cars, similar to those which make up Eurostar/TGV trains. These can be built to the maximum permitted width in the UK, presently 2.82 metres, owing to the steadier ride which can be achieved through articulation, which also brings other benefits such as greater comfort and safety.

fredag 20 april 2007

"Economics is an art, not a science"


Petticoat Lane, London 1971
Originally uploaded by Floyd Nello.

I was having a discussion this morning with a friend, and he disagreed with my statement that economics is a science - arguing that, on the contrary, it is an art.

I pointed out that economics is subject to laws, such as the "Law of One Price", which sums up the universal experience that, at a particular time and place, the some products sell for much the same price.

You can see this in any street market. This is Petticoat Lane, in Wentworth Street, probably the most famous and oldest of all London's street markets. The market was established over 400 years ago. This is how it looked back in July 1971. Here you can see economics in the raw.

What do we find? The price of fruit, veg, and most other ordinary commodities is much the same, whichever stallholder you go to.

My friend wasn't having this. He suggested that if you looked or sounded foreign, you would be charged more, but that he could often negotiate a bargain as he knew the local stallholders.

All of which is to say that you have to postulate unusual circumstances to show a deviation from the general rule. He thereby proved the point - that on the whole, fruit and veg will change hands for much the same price in a particular market on a particular day.

And so economics is a science.

tisdag 17 april 2007

Land facts



I have just received a flyer offering me the opportunity to "invest" in land, with the chance of winning a plot of land if I complete the form and send it back. It offers an enticing prospect, pointing out that "re-zoned land can achieve tenfold uplifts in value."

I logged onto the website of the company, which is called Commercial Land

There is a nice picture of a green field, and a quote from the Barker Review of Housing, which says that "In 1992 land costs accounted for only 15% of the value of a new home, but by 2003 this proportion had risen to 34%"

The text points out that "Commercial Land and its associates have acquired a wealth of experience in the identification and acquisition of land and property.

"We are committed to making available to individual buyers the opportunity to buy strategic plots of land, all of which are freehold, contain no material covenants and have no demands for overage on them, i.e. no additional payments will be due to a previous owner on granting of planning consent.

"We search throughout England for sites of agricultural, open countryside or forestry land, both inside and outside the Green Belt. Only a small percentage of sites that we inspect will be suitable for acquisition by Commercial Land."

Things may not be quite so rosy. The Government promises something called the Planning Gain Supplement (PGS), which is a tax on the land value uplift realised by planning consents. The main effect of this will be to clog up the market, so Commercial Land's "investors" may have to wait a while for the PGS to fail and be repealed.

But the inability to prevent owners walking off with windfall gains from planning consents has bedevilled the planning system for the past sixty years. It is easy enough to deal with - all that is necessary, as was pointed out in 1947, is to put in place the right system of land value taxation - an annual tax on its rental value.

Sloppy modern banking


Barclays Bank skyscraper at Canary Wharf
Originally uploaded by Richard and Gill.

"Property rights are the basis of any free society...African countries are poor because the people cannot get land ownership and so can't get credit to increase wealth. Because the land is held collectively."

This is why organisations like the World Bank and the International Monetary Fund encourage the privatisation of land in the developing world. The policy will lead to disaster.

The purpose of banks is to create credit - for example, to enable a farmer to keep going between the time the crops are planted, until they have been harvested and sold. The underlying reality behind this is that there is a stock of wealth that has already been created, for example, from the previous year's harvest, which credit gives access to.

Using land as collateral for credit is sloppy banking practice. It gets banks into trouble when land price bubbles develop and then burst. This happened in Japan about 15 years ago. It has taken the Japanese economy years to recover.

The word "credit" comes from "credo", which means "I believe". The relationship between the person giving the credit and the one receiving it is one of trust. The only sound basis for credit is whether the borrower can repay. Bankers need to evaluate the competence and honesty of the borrower and the viability of their business proposal.

Insisting on collateral is the very opposite and has degraded banking into pawnbroking.

If land was no longer available as collateral then bankers would have to offer credit in the real sense of the word in order to stay in business. It would be a very different kind of banking and a very different kind of economy.

lördag 14 april 2007

Quasimodo


The Hunchback of Notre Dame is so named as he was deposited in the cathedral on Quasimodo Sunday, that is the Sunday after Easter Sunday. It comes from the Introit, "Quasi modo geniti infantes, rationabile, sine dolo lac concupiscite, Alleluia, alleluia, alleluia." (1 Peter 2:2,3)

The Gospel text for this day is John 20:19-31. I am always reluctant to quote scripture, but this is an exception.

'When it was evening on that day, the first day of the week, and the doors of the house where the disciples had met were locked for fear of the Jews, Jesus came and stood among them and said, "Peace be with you." After he said this, he showed them his hands and his side. Then the disciples rejoiced when they saw the Lord. Jesus said to them again, "Peace be with you. As the Father has sent me, so I send you." When he had said this, he breathed on them and said to them, "Receive the Holy Spirit. If you forgive the sins of any, they are forgiven them; if you retain the sins of any, they are retained." But Thomas (who was called the Twin), one of the twelve, was not with them when Jesus came. So the other disciples told him, "We have seen the Lord." But he said to them, "Unless I see the mark of the nails in his hands, and put my finger in the mark of the nails and my hand in his side, I will not believe." A week later his disciples were again in the house, and Thomas was with them. Although the doors were shut, Jesus came and stood among them and said, "Peace be with you." Then he said to Thomas, "Put your finger here and see my hands. Reach out your hand and put it in my side. Do not doubt but believe." Thomas answered him, "My Lord and my God!" Jesus said to him, "Have you believed because you have seen me? Blessed are those who have not seen and yet have come to believe." '

This theme is emphasised in the Communion verse "Mitte manum tuam, et cognósce loca clavórum, allelúia: et noli esse incrédulus, sed fidélis, allelúia, allelúia." (Put in thy hand, and know the place of the nails, alleluia: and be not incredulous, but believing, alleluia, alleluia.)

This needs comment. "The Jews" refers to the religious authorities, since all the people inside the room were Jews too. We are told that the doors were locked in order to make it clear that this Risen Jesus can pass through solid objects. But we are also told that he can be touched and felt, and elsewhere in the Post-Resurrection accounts, that he eats real food. So the Risen Christ, though real, is paradoxical.

This raises a second point, concerning the liturgy itself. The scriptures and liturgical texts (Introit, Gradual, Offertory and Communion) have been carefully selected to emphasis the teaching relevant to each day of the year. The Latin texts, in particular, are concise and give focus. So this is a plea to clergy to stick to what is in the books, preferably using Latin. If congregations are unfamiliar with the Latin, this provides an excellent opportunity for study and catechesis.

The Libertarian Fallacy

I have been following and participating in a thread in The Local, discussing the forthcoming abolition of Wealth Tax in Sweden. If you want to discourage something you should tax it. The predictable result of a window tax was bricked-up windows. So if you tax wealth you will end up with poverty. On the other hand, wealth taxes have a good intention - to prevent undue disparities of wealth. The question is how to ensure proper distribution in the first place?

The libertarian position is that free markets will ensure fair distribution. But this is flawed, though not fatally. Fair distribution will come about only if prior equity exists and neither buyers nor sellers of labour are in an advantaged position. But the market is almost always weighted in favour of the purchasers of labour.

The situation is essentially as follows. A ship lands on a fertile and uninhabited island. The passengers disembark and share out all the titles to the land between them. Then another shipload arrives, but these individuals have no option but to accept a labour contract on the terms dictated by the first group to land who now hold all the land titles. This is a situation of wage slavery.

If this isn't clear, consider a game of Monopoly. Four people sit down to play, and after a while, all the properties have been purchased by one player or another. A fifth player then joins. He is forced to play on unfair terms as wherever he lands, he is forced to pay rent.

This is how most economies today operate. They are based on land monopolisation. Capitalism gets blamed but the true problem is monopolisation of land.

onsdag 11 april 2007

"I don't believe in marriage"


Chavs 1
Originally uploaded by hoveringdog.

This morning there was a piece on Radio 4 News about the growing proportion of children born outside marriage and living in single parent households.

This was immediately followed by a feature on the difficulties of preventing bad behaviour in schools. There couldn't possibly be a connection, could there?

"I don't believe in marriage", was a comment made by an amiable but completely irresponsible young man of my aquaintance. It came up in a discussion about adultery, which he thought was perfectly OK. The irony is that he has several times been rescued by his indulgent father when he has needed funds to deal with the effects of his irresponsibility. It is lucky for him that his father actually does believe in marriage or he would have been in big trouble.

söndag 8 april 2007

fredag 6 april 2007

Does Borat get his suits in Teheran?

It is odd how the trivial can grab attention. What struck me about the front page photograph in today's papers, of the released British commandos, was how awkward they looked, all dressed up in badly fitting suits, like the one Borat wears. But the suit worn by the Iranian President didn't look any better. It was not much of an advertisement for Iranian tailoring.

When they arrived back, they were in army fatigues. I wonder if they were allowed to keep the suits as a souvenir?

It would have all looked less contrived if the Iranians had got someone from their British embassy to buy a lot of stuff for them at JJB Sports and send it over in a diplomatic bag. Don't they have any sense of style?

tisdag 3 april 2007

Property tax in Sweden to be abolished in 2008

The Swedish government has announced that (residential) property tax is to be abolished from January 1st 2008. The tax is to be replaced by a council charge of 4,500 kronor (about £350) per home, or a maximum of one percent of the taxable value. The charge for apartment complexes will be a maximum of 900 kronor per apartment. On Tuesday the four governing parties agreed on a framework for the abolition of property tax. A government working group has been charged with analysing the results of the reform. If the proposal has undesired effects, the working group is free to test other alternatives. Any changes must however be financed from within the residential sector.

This looks similar to the Council Tax in Britain, but seemingly, the Swedish government has not looked at its disastrous effects on local government finance. There is no need to wait to see what the undesired effects will be. The public sector will be left short of funds and property prices will rise. This is completely predictable and is observed whenever this policy has been applied.

Sweden is known for the high quality of its public services, but these cost money requires high taxes. There is nothing wrong with that in principle - you can't have what you don't pay for and the poor standard of the public realm in Britain is an important element in the sense of depression that hangs over the country. The governement just has to tax the right things and leave untaxed that which ought not to be taxed - people's earnings.

So the Swedish government's decision will ultimately be to the detriment of the country, and, meanwhile, the reduction in property taxes will drive up property prices, raising the bottom rung of the property ladder. What a pity that these politicians have not looked elsewhere to see what actually happens when property taxes are held down or abolished.

If governments do not tax property then they have to tax earnings. Sweden's high taxes have driven abroad such high earning celebrities as Ingmar Kamprad, founder of IKEA. This shouldn't happen. If you tax land instead, the goverment picks up the money it needs and people are not driven to live in tax havens - people are mobile but land is fixed and cannot be hidden. Can't politicians anywhere learn this lesson?

Property tax in Sweden to be abolished

It is nice to know that for once, the experts concur with my analysis. The Organisation for Economic Co-operation and Development (OECD) has criticized the Swedish government's decision to abolish residential property tax. Sweden needs to reduce tax on labour, not property, according to the OECD. "There are other tax cuts that are much more important. In general, Sweden is a country with higher taxes than other OECD countries, but not when it comes to property tax," Jens Lundsgaard from the OECD's Swedish office told news agency TT. Lundsgaard bases his criticism on a thorough appraisal of the proposal presented by the government on Tuesday. "What the government is doing is favouring housing over work and enterprise, and one has to wonder why that is. "There is a far greater need for tax cuts that address unemployment and tackle exclusion on the labour market than reducing residential taxes," he said.

måndag 2 april 2007

The Great Pension Scam


Pensioners Twenty Percent Off!
Originally uploaded by markltb.

Gordon Brown's great pension scam has finally been rumbled. It took nearly a decade for the public to work out what he had done when he changed the tax arrangements for investment income. It was a subtle wheeze and was hardly noticed at the time, but it has contributed to the disastrous collapse of pension arrangements in Britain.

The brainwave was Gordon Brown's, in conjunction with his young side-kick Ed Balls. About a year before Labour was elected, Brown wrote a piece in the Observer Business section, and it was evident that he was living up to his name, so it was not surprising that he would wreak havoc if he ever came to have power and influence.

As a long-standing campaigner for land value taxation as a substantial replacement for our present harmful taxes, one of the arguments I get thrown at me is that it would be disruptive or too difficult to implement, either politically or in its practical application.

And this is from people who can inflict this sort of thing on the unsuspecting public, leaving millions in old-age poverty.

söndag 1 april 2007

Railways to get 1,000 carriages


Britain's rail passengers have been promised an extra 1,000 train carriages by 2014 in a bid to tackle overcrowding. And soon afterwards we shall see the replacement for the HST taking shape. This ought to be good news but...

The past ten years has seen the replacement of a substantial proportion of Britain's train fleet, with the oldest now dating from the mid-1970s. The trouble is that a lot of it is badly designed. Often the trains have fewer seats, the trains and the seating is cramped and uncomfortable, there is insufficient space for luggage and cycles, the ride quality is poor, there aren't enough toilets, and the ride quality is poor, with severe vibration on some of the diesel-powered trains. The latest generation of British trains are in many ways the worst in the whole of Europe. Will the tradition of bad design continue or will someone get a grip of the problem? Why can't British train passengers enjoy the same standards of amenity as the standard class passengers in the Danish IC3 train above?

A further question is posed. First Great Western is currently refurbishing its fleet of HST trains dating from the late 1970s. This involves completely stripping out the interiors, and it turns out that they are in excellent condition with little corrosion. But most of the similar vehicles surplus from Virgin trains modernisation remain unused and apparently unwanted. The same goes for the 120 electric multiple unit vehicles comprising class 442 constructed for the Bournemouth line in 1988. And a further 70 vehicles of the class 180 Coradia type will also soon be take out of service, with no prospective user. This is a scandalous waste of scarce resources, especially when the Virgin Voyager trains used on the Cross-Country services, and the West Coast Main Line Pendolinos, are chronically overcrowded.

One might ask why the spare vehicles cannot be added to the overcrowded trains, or the spare trains be drafted onto the route? This is not possible as the trains are in fixed formations and incompatible with each other; in the case of the electric trains, they are also tied to particular lines.

All of which ought to have a bearing on the procurement strategy for new rolling stock. Above all, flexibility is needed. All rolling stock should be compatible with all other rolling stock. It should not be tied to a particular form of traction, or a particular route. Which takes us back to the design principle which ruled until the 1950s.

The Journey East #3

The local situation The Catholic church in my part of the world is apparently in quite good shape. However, the liturgy is resolutely Luthe...