Sunday, 25 September 2016

Stakeholder Rights

Stakeholder Rights

Professor Atkinson has made 15 proposals for reducing inequality; and for good measure added 5 further ideas that could be worked up to become proposals. His thoroughness is impressive, but is he perhaps carrying things too far. He seems to have made it his objective that everyone in the country has the same spending power. I see in Britain a great variety of abilities and tastes, and conclude that this is natural; something to work with, rather than against. To level out the wealth of citizens completely would be highly artificial and constitute a massive interference. 

I believe our first objective should be to halt the slide towards inequality. There are too many ways (**) in which the rich (or smart) can take from the poor (or simple). I feel impelled to intervene, as when watching a big bully pounding a weakling. We clearly cannot rely on the ‘bullies’ having a sense of generosity or fairness. Though, in Britain, it is still regarded as unacceptably bad form to kill a person and take his goods, even that sense of justice may soon be challenged; we already tax alcohol, promote gambling, tolerate lethal drugs, allow extortionate interest rates, and overlook or condone the ‘collateral’ bombing of citizens.  

So, leaving aside for the present the reasons why we must combat inequality, and passing on to consider the means, I would like to comment on only one of Professor Atkinson’s proposals. 

Proposal 2: Public policy should aim at a proper balance of power among stakeholders, and to this end should:
(a) introduce an explicitly distributional dimension into competition policy;
(b) ensure a legal framework that allows trade unions to represent workers on level terms; and
(c) establish, where it does not already exist, a Social and Economic Council involving the social partners and other nongovernmental bodies.”

Stakeholders presumably include Labour and Capital as major players, with perhaps customers and government as minor players. For two centuries we have witnessed the tug of war between Capital and Labour. The public can see both sides of the argument, though dimly, and in tiny glimpses; and has made some attempt to maintain a balance  by siding at times with Labour and at times with Capital. This is a most unsatisfactory arrangement. The fair (or “proper”) balance is too ill-defined, too subjective, the mechanism too unwieldy and slow-responding. Professor Atkinson may have cracked it with his “distributional dimension”, “level terms” and his “Social and Economic Council”, but I see these as little more than making official and ponderous the agonising conflicts we all feel during a prolonged strike. What is the proper balance?

In order to “aim at a proper balance of power”, we must first define it.  Of course the market can decide the proper balance, when some businesses fail and others succeed. But that is destructive and painful to watch. Some years ago I suggested looking, for each business in turn, at the ‘annual cost’ of Labour and the ‘annual cost’ of Capital. In many employments these are approximately in the ratio 1:2. It would be just to have worker participation on management boards in a similar ratio. At the very least this would lead to workers understanding better the economics of the business, and would foster a spirit of common purpose.  

** The rich can buy up the competition, or the food supply, or with deep pockets they can simply wait. They can sometimes even subvert justice.

Monday, 19 September 2016

Estate Tax and Limits to Wealth

Estate Tax and Limits to Wealth

Francis Coppola discusses  the “fairness” or otherwise of the tax paid by an estate when a person dies (previously call Death Duty, currently called  Inheritance Tax). It seems a rather easy ‘Aunt Sally’.  I think 'Estate tax' about the most essential, and least harmful, tax in existence. Great accumulations of wealth are bad for nearly everyone in society. But by ’great accumulations' I mean something like the top 1%. Gordon Brown was being snidely clever but at the same time very foolish in leaving unchanged the threshold for Estate tax, for with inflating house prices he got increased revenue, but seriously distorted the effect and purpose of the tax. Within months the Tories had realised that a great segment of the electorate would turn their way if they declared abolition of Estate Tax a manifesto issue. 

I had a letter in the Times back in 2007 on Tory plans to abolish 'Inheritance tax', which I think still relevant today. 
Date: Fri, 17 Aug 2007 

Dear Sir,

We are told that John Redwood has proposed abolishing inheritance tax. I have not heard anything so daft in a long time.

For one thing, Britain does not have inheritance tax; it has 'death duties' or 'estate tax' paid on the estate of someone who dies, though this has mistakenly been called inheritance tax since 1986. In many countries in Europe there is a true inheritance tax, paid by beneficiaries of an inheritance.

For another thing, death duties are among the most clearly beneficial of taxes. Death duties are not new. They were levied in Roman times and in Medieval England, and have been continuously applied in Britain since 1894. It has been argued that death duties are superior both to taxing income and taxing spending, for both those depress trade and productivity.

But the most significant benefit of death duties, which I hope everyone will bear in mind, is in combating the agglomeration of wealth into the hands of the few. This is of vital importance for there are so many ways in which the few powerful interests can exploit the many weak ones. Far from abolishing the tax on estates, it is crucially important for the maintenance of a wide distribution of wealth and stakeholder interest in this country that we improve the tax; target it better and collect it more fairly.  Yours sincerely,

I strongly recommend all political parties, and anyone interested in taxation, to read the “Mirrlees Review: Reforming the Tax System for the 21st Century”, which is magisterial in its scope, thoroughness, and disinterested high-mindedness. Besides, it is available online. Though published  in 2011, it is still relevant, because no attention has yet been paid to its recommendations.

Sunday, 11 September 2016

Runciman, have you any Suggestions?

Open Letter to a professor of Politics

Dear D. R.,
    In your recent article in the London Review of Books, you raise some interesting topics but, to my mind, do not carry them far enough; do not resolve anything. 
    I rather like it that you are coyly frank about your own position as a critic of the conservative establishment. I hesitate to call you a ‘leftie’ as I would probably reject that label for myself, preferring to call myself a liberal-democratic-socialist (seeing the Liberal element as referring to a Lloyd George/Beveridge type of intelligent interference with the brutalities of the free market; the democratic element as an acknowledgement that on questions of morals everyman has an equal say; the socialist element as acknowledging my preference for society as ‘one big happy family'.)
    You say that Constitutional Reform really matters, but I cannot see what reforms you are thinking of (apart from an elected upper house either to oppose or to rubber-stamp the lower house).
    You rhetorically ask “who can put together a coalition of the disaffected capable of defeating [the present Tory government]?”   Accepting your analysis, I would go further, and ask “Why does the ‘left’ appear fragmented, and unable to oppose the right?”  Is it simply that the right is motivated by a single common interest — that of ‘Self’; while motivation on the left is more diverse; the intellectual Fabian element being altruistic, the Labour Left being rooted in the sectional interests of labour, while regional parties are preoccupied with their regional interests.
    You mention a number of divides: metropolitan/rural, north/south, Scotland/England, old/young, Brexit/Bremain. Then go on to opine that the ‘First-Past-The-Post’ voting system will split any anti-Tory coalition long before it will split the Tory party. It seems empirically true, but again provokes the question ‘why’. Why was the Tory party not split on the question of Europe? It was split in the nineties, but this time round seems to be rallying to the flag.)
    Then you come to an interestingly novel, if dispiriting, idea. Social Democracy, you suggest, is failing at the national level, right across Europe; but may survive at a subordinate level in city governments (London, Manchester, and possible abroad also; at the ‘metropolitan’ level as you call it.) Dispiriting, indeed. 
    Is it that the British people recognise, perhaps subconsciously, that there is more ‘ability for government’ in the Tory party than in the non-Tory opposition; more first-class degrees, six-figure salaries, barristers, stock-brokers and bankers? If this is a valid conclusion, two questions: why and what do we do?  Was Labour’s Economic Advisory Committee pointing the way we should go?
    Regarding Constitutional Reform, what can we suggest? Would proportional representation help? I have believed so for 60 years, but [a] it is clearly not coming soon, and [b] I am no longer convinced. It will not come until the non-Tories coalesce, it won’t help unless they coalesce, and it would be unnecessary if they did coalesce. I am currently more optimistic about what I call ‘weighted voting in the Commons’, where the mathematical strengths of the parties in the country are used to balance up the voting strengths of the MPs that accept party whips. Thus one Green MP might be worth 20 Tory MPs, etc. This scheme has several obvious merits (and doubtless some flaws).
    The other ‘hope’ for the non-Tory voters would be a motivating idea so general (and motivating) as to match that giving coherence to the Tory party. Any candidate ideas? Perhaps grabbing the moral high-ground; doing the "Right Thing"; Justice, Equality, Honesty, etc.

Yours sincerely, Cawstein
Middleton Cheney,
BANBURY, Northamptonshire