Unrestrained majoritarianism allows exploitation of minorities
A few weeks ago, the Institute for Fiscal Studies pointed out that just 1% of Britain's taxpayers contributed 30% of income tax receipts. A decade ago the top 1% paid 20% of the total – indicating how much of the government's tax burden has been shifted onto higher earners.
But that is just income tax. What about the general burden of taxation, and who it goes to support? You might think that maybe four-fifths of us pay tax in order to support the other, low-earning one-fifth. Not a bit of it. In fact the majority of households in Britain are supported by the minority. Three-fifths of households get more from the state than they contribute. Only two-fifths contribute more than they receive, according to figures from the accountancy group Smith & Williamson.
The group who do best in terms of the difference between what they pay in and what they get out is in fact not the poorest at all. It is remarkable that the lowest-income decile, the tenth of households on lowest earnings (averaging £10,300 before tax) should pay tax at all, but they do – and national insurance, VAT and many other taxes to boot. Add it all up and take it away from the value of the benefits they get from the state, and the net support they get is worth £9,540. But the next decile up, households with an average gross income of £15,500, pocket a net balance of £11,240 in benefits over what they pay in taxes. The decile after that, earning £18,800, also get a better deal than the poorest, with a net balance of £10,240.
You may think it equally remarkable that higher earners should get any benefits from the state at all, but of course they do – think of all that free healthcare and education, child benefits and various subsidies to farms and businesses. In fact, a household in the seventh-highest earning decile, earning an average £38,800, receives benefits from the state of not quite £12,000 while paying taxes of not quite £11,000, making them net contributors of just £1,820. A household in the top earnings decile, on £101,300, would contribute a net £28,410.
So there you have it. Only a minority of the public, the top four deciles, meaning the highest-earning two-fifths of the population, pay more into the state than they get out. The majority, three-fifths, are living at their expense.
This in itself cannot be a healthy situation. Democracy is wonderful, but unrestrained majoritarian politics allows the majority to exploit minorities – and in the field of taxation, that exploitation is easy-peasy and the depth of it can be enormous. As we see today.
An ageing libertarian on drugs
Over at ConservativeHome I've written a response to Kathy Gyngell's piece that claimed that "ageing libertarians" (!) are pushing drug legalization on unsuspecting youths:
No, “ageing libertarians” are not pushing legalization on abstemious youngsters – in the US, at least, a recent poll found that 67 per cent of under-30s supported legalisation, compared to 58 per cent of the population in general.
No, it is not legitimate to dismiss inconvenient research because it comes from “pro-drugs lobby groups”. Nobody should dismiss Kathy’s arguments simply because she is anti-drugs either. We should all play the ball, not the man.
And no, it’s not good enough to say that drug laws don’t matter because drug use is ‘marginal’ compared to alcohol and tobacco use. In the 12 months ending March 2013, there were around 87,000 convictions for drug offences. If our laws are unjust, then roughly 87,000 people are being wrongly convicted every year. Around 70 per cent of drug offenses relate to cannabis possession.
The Lego movie is the most libertarian film of the year
There's one important category missing from all the film awards ceremonies this month: The Most Libertarian Film of the Year. And the winner this year is without a shadow of a doubt The Lego Movie. Setting hilarity and great animation aside (and it has boxes of those), The Lego Movie shows us a compelling dystopian world of conformity, regulation and authority where everyone "must follow the instructions" or be "put to sleep". It is a tale of the battle between the chaotic, creative destruction of freedom, and the rigid, forceful regulation of bureaucracy.
The run-of-the-mill protagonist Emmet is blatantly shown to be brainwashed by repetitive and generic tv shows, corporatist celebration days like Taco Tuesdays, and a perpetually playing propaganda anthem called "Everything is Awesome" with clearly collectivist undertones: "everything is cool when you're part of a team". He works with other construction workers to tear down the "weird" and diverse buildings and replace them with generic ones.
But it gets so much better. The dystopian dictator's position as both the CEO of the Octan Corporation and President of the World perfectly encapsulates the problems with corporatism and monopolies on force. Indeed, his evil plan is stultifying regulation taken to the extreme: he wants to use superglue to literally stick everything permanently into the "perfect" position, relying on a robotic army of "micro-managers" to make sure that everything is exactly how he wants it to be before being stuck into place. There could be no clearer metaphor for the perils of intruding technocrats.
The evil Lord President Business wishes to destroy the chaos of innovation, hunting down and killing or imprisoning all the talented and resourceful master builders, and even erecting closely guarded borders between the different worlds in order to prevent the free movement of minifigures and their mixing of cultures into more interesting and diverse configurations.
At the same time, the resistance's enclave, Cloud Cuckoo Land is an anarchist utopia. As the UniKitty tells the heroes, "There is no government, no bedtime, no baby-sitters", though others have suggested this is also a subtle critique of the slightly creepy anti-freedom parts of modern tolerance culture: "Any idea is a good idea ...Except the not-happy ones." The dichotomy is later qualified when it turns out that creativity can work better when constrained within some rules that don't try to curtail it completely. You'd be challenged to find a simpler, more personal and appealing defence of the rule of law as conducive to freedom and human flourishing.
Above all, however, The Lego Movie is a story about the beauty of creative destruction, and how the battle between our fearful controlling impulses and our acceptance of the uncertainty of freedom is a profoundly personal one. It is an enjoyable must-watch for fans of free markets.
Quote of the week
"The miracles of the past three and a half centuries – the unprecedented improvements in democracy, in longevity, in freedom, in literacy, in calorie intake, in infant survival rates, in height, in equality of opportunity – came about largely because of the individualist market system developed in the Anglosphere. All these miracles followed from the recognition of people as free individuals, equal before the law, and able to make agreements one with another for mutual benefit."
– Daniel Hannan
How We Invented Freedom & Why It Matters
Equality: as cheap as 50p?
Peter Oborne argues that Ed Balls' pledge to raise the 45p top tax rate back up to 50p is a good idea. While the extremely high marginal rates (top main rate 83%, plus a 15% surcharge for "unearned income") of the 1960s and '70s might have been driven by "socialist envy", George Osborne's dropping the rate from 50p to 45p in was "profoundly shaming and offensive", Oborne contends. This is because, echoing Stanley Baldwin and his brand of Toryism, the conservatives should represent the whole country, not the rich or any other factional interest.
Apparently the Coalition has "devoted a great deal of effort to lowering the living standards of the poor", and this move to "make the rich richer" is inappropriate when the poor are getting poorer. I contend this by arguing that inequality is down to 90s levels under chancellor Osborne, while the worst-off in society are the only group to actually see their living standards improve the since the recession hit. And the (ugly, unpleasant, and regrettable) attitudes that have emerged towards benefits claimants are probably driving government rhetoric in that area, rather than vice versa.
In general, it annoys me when a columnist writes something apparently trading on what everyone just knows. Sometimes the common view is incorrect. Funnily enough, politics is the area where people err most profoundly and with the most regularity. And I would argue that Oborne is trading on falsehoods in his piece; would it still be a coherent argument if it started with the factual premise that inequality in the UK fell back below its 1997-8 low in 2011-12, 0.34 measured by the GINI coefficient? That the top 10% of earners endured the biggest blow to their incomes since the onset of the recession? And that the bottom 10% by income were the only one to see a rise in living standards taking inflation into account? I don't think so.
The IFS reports I link above predict that by 2015-16 inequality will rise back to roughly its pre-recession level, so perhaps Oborne could refocus his attack on the future inequality Osborne possibly has a hand in. But in all likelihood there is probably little the government can do about inequality over the long-term, caused as it is by very fundamental trends and robust as it is to institutions even such as the USSR's. Most of the extra inequality since the 60s and 70s has come from couples engaging in much more assortative mating. And very long-term trends are mainly dominated by heritability of social class—those with Norman surnames are 28% more likely than a random sample of similar others to get an Oxford place.
An Indonesian answer to George Monbiot's question
George Monbiot got very hot under the collar recently about a provision in hte various trade treaties that are under negotiation at present. Arguing that the ability of an investor to take a matter to arbitration was a vile undermining of democracy:
They have good reason to ask. The commission insists that its Transatlantic Trade and Investment Partnership should include a toxic mechanism called investor-state dispute settlement. Where this has been forced into other trade agreements, it has allowed big corporations to sue governments before secretive arbitration panels composed of corporate lawyers, which bypass domestic courts and override the will of parliaments. This mechanism could threaten almost any means by which governments might seek to defend their citizens or protect the natural world. Already it is being used by mining companies to sue governments trying to keep them out of protected areas; by banks fighting financial regulation; by a nuclear company contesting Germany's decision to switch off atomic power.
And here's an example of what it is actually all about:
Freeport-McMoRan Copper & Gold Inc. (FCX) and Newmont Mining Corp. (NEM), the largest U.S. miners, said new Indonesian rules on metal export duties infringe on contracts they have with the government. Indonesia issued regulations on metal exports this month that curbed the shipping of unprocessed ore and placed duties on exports of copper concentrate, a semi-processed ore that’s shipped from mines to smelters. The rules have resulted in delays to obtain export permits, and Freeport plans to defer some production, according to the Phoenix-based company, the world’s biggest publicly traded copper producer. The duties on copper, which begin at 25 percent and will rise to 60 percent by mid-2016, took Freeport by surprise, Chief Executive Officer Richard Adkerson said yesterday on a conference call with analysts. Indonesia, where the company operates its biggest mine, the Grasberg copper and gold operation, accounted for 19 percent of its third-quarter revenue, according to data compiled by Bloomberg. Newmont’s Batu Hijau mine in the country contributed 6.8 percent of the miner’s total sales, the data show.
Indonesia has banned, in hte case of nickel, and heavily taxed, in the case of copper, the export of ores and or concentrates. They want the minerals to be processed within the country. Well, OK, I don't think that's sensible, you may or may not, but what is obvious is that this seriously changes the positions of those companies who have already invested billions into mines in the country. And that's what the right to go to arbitration is about.
If a government says, right, here's the terms upon which you can invest in our country then that's just fine. And it's also just fine if the government decides that it wants to change the law. However, if it does change the law it also has to compensate those who the law change affects. For example, Indonesia is entirely at liberty to nationalise those mines if it should wish to. But it does also have to pay market value when doing so. Similarly, the country is entirely within its rights to ban the export of concentrates. But it must compensate those who have invested on the understanding that concentrate exports would be allowed.
And the only purpose of arbitration is to make sure that the people deciding upon what the compensation should be are not controlled by the government that will have to be doing the compensating.
That's why these clauses exist in these treaties. Essentially, to make sure that governments keep their word.
Motorways, pubs and nannies
A new pub has opened in Beaconsfield, Buckinghamshire. That's news in itself, given that around 1200 pubs closed down last year, thanks (or no thanks) to the weight of retail and employment regulation that makes pubs so darn expensive to run.
But the Hope & Champion is of doubt interest, because it is in the Extra Motorway Service Area at Junction 2 of the M40. So the people who go there are almost certain to get there by car. So naturally there have been plenty of critics complaining that this initiative sends out all the wrong signals about drinking and driving.
Well, pubs in the UK are licensed, precisely because we know the potential problems that can go with alcohol consumption. But the fact is that the local police did not object to the licence, nor did the local authority. And the local paper is giving the new pub splash coverage. So local people don't think there's a problem here.
The real problem is the message that the critics send out, yet again – that the political class in Britain thinks the adult population of their country are completely incapable of making their own choices, and that their lives have to be micro-managed for them. This pub, like most others these days, is basically a restaurant that also serves alcohol. It opens at four in the morning and starts selling alcohol at nine - though apart from one stalwart getting stuck into a pint for the cameras, most people there this morning were getting stuck into nothing more life-threatening than a Full English Breakfast. And if a group of people want to stop off the M40 for lunch or dinner, why should the passengers be denied the pleasure of a small sherry just so that drivers are 'kept away from temptation'?
Weatherspoons, the pub owners, are a responsible chain. Their menus carry Drink Aware slogans and information. Their staff do not serve people who have already had enough. People know that there are legal limits on drinking and driving - and they know that even drinking below the legal limit can slow down your reactions. So most drivers who visit the pub, alone or with a group, would probably not have alcohol anyway, and their passengers would probably not want them to.
So as the police and local authority figure, there's no problem. The only problem is all those people who deem it their business to treat us like children.
Young Writer on Liberty Competition 2014
The Adam Smith Institute invites you to enter our annual student competition, Young Writer on Liberty. This year's theme is:
Three policy choices to make the UK a freer country
Each entrant must write three essays in the style of the ASI blog, each no longer than 400 words, and each explaining a different policy choice that could make the UK freer, richer and happier. No policy choice is out of the question—indeed counterintuitive policy choices may be particularly interesting if backed up by strong arguments.
The winner will receive £250 and have their three posts published on our blog. They will also get a box of liberty-themed books and the opportunity to do two weeks of work experience here at the ASI.
Twos runner-up will also have their posts published on the blog, as well as receiving a package full of interesting books.
Last year's winner was George Kirby, who argued that we should legalise markets in organs, that there should be greater roaming rights in the UK, like those enjoyed in some Nordic countries, and that the UK would benefit from US-style federalism.
Entrants must be 20 or under on the closing date, 21st March 2014. Please submit all entries to schools@old.adamsmith.org. Good luck, and I look forward to reading all of your pieces!
From the annals of standard bureaucratic behaviour we bring you the RSPCA
It is most politically incorrect to attack the RSPCA: after all, they're the guardians of those animals that we English treat so much better than our own children. But I'm afraid that it does have to be done. For we're now seeing standard bureaucratic behaviour from said RSPCA, something straight out of C. Northcote Parkinson:
Pet owners should be forced to join a register, buy a licence and pass a competence test to help tackle the abuse of animals, the RSPCA’s chief vet has suggested. James Yeates said the introduction of such measures would “make it clear” that owning a pet was a “privilege and a responsibility”.
A privilege that you'll only be abe to enjoy if the RSPCA approves of both you and your pet no doubt.
And yes, I know, the organisation is claiming that this isn't quite what anyone means but then we've all seen kite flying of this type before. Further, we know absolutely that any such licence scheme would be a costly monstrosity. We used to have dog licences and the system cost far more to administer than any revenue that came from it.
But the real point comes from what this suggestion tells us about those inside the RSPCA. They're a bureaucracy just doing what bureaucracies do. Which is, as Parkinson pointed out to us, simply exist for the sake of existing. Once established, once past that first flush of success in addressing whatever it is, the point and purpose of a bureaucracy is simply to maintain its own existence and, if possible, expand the budget and size of it. And that's it.
Which is precisely what the RSPCA is doing here. There is no point or purpose to licencing all of the nations pets other than to give the RSPCA something to do. Which is why they have suggested it.
And, of course, why we should tell them where they can get off and the horse they rode in on.
Canada puts human rights before puritan prodnosery
Time was when human rights were rather a province of the left: you know, the liberals. As it is today they're still the province of those of us who are still liberals, those called the classical liberals, but the rest of the left seems to have moved on to other things. As in with the current attempts to restrict prostitution, even to criminalise either the buying or selling of sex between consenting adults. Canada has looked at this matter and has declared that actually, it's all a matter of those human rights, not the imposition of the usual puritan prodnosery:
Canada has removed all anti-prostitution laws after sex workers fought for safer working conditions following the serial killings of prostitutes by a pig farmer in British Columbia. The 9-0 Supreme Court ruling found that the laws violated the guarantee to life, liberty and security of the person but it will not take effect immediately because Parliament has a one-year reprieve to respond with new legislation. Prostitution isn't illegal in Canada, but many of the activities associated with prostitution are classified as criminal offenses.
That is indeed exactly how it should be of course. The acts themselves should be legal simply because they are indeed between consenting adults and they're not violating Mill's point about the swung fist and someone else's nose.
If the act itself is legal then so too should all ancillary activities, subject only to the laws that apply to all activities. We might well demand that streetwalking cease, on the same grounds that we might demand that any other public nuisance ceases. But only on exactly those same grounds. We might demand that those earning money pay their income taxes but again, only on the same grounds that anyone else earning does (and I know that HMRC has teams that do exactly that).
It is a human rights issue: we cannot allow people to limit the way in which others decide to live their lives just because the first group do not like that way of other people living their lives.