Just why are the left so angry these days?

It’s said that academic feuds are so bitter simply because there’s no actual there to the feud. Whatever stakes are entirely trivial if they even exist at all therefore everyone can be as bitter and angry as they like. Which leads us to this interesting question, why is the modern left so angry all the time?

It’s the defining characteristic of today’s progressive left: Anger. And it’s not just the rioters like Antifa, or the unspeakably rude people who confront administration figures in restaurants and gratuitously yell at them. Take a look at any of the new icons of the Democratic Party when they are speaking — for example Alexandria Ocasio-Cortez, or Ilhan Omar — and you see them seething with barely controllable anger, if not outright fury. Same with essentially every left-wing commenter on CNN or MSNBC.

That is, of course, about the Americans but there’s nothing Owen Jones does that makes him any different, is there? At which point we’ll try and essay an answer.

They’re finding out how wrong and irrelevant they and their beliefs are. No, obviously not that desire, say, for greater equality, or a better education system or whatever. Rather, their proposed solutions, even methods of getting to one, have been shown to be entirely and wholly wrong.

Us free market and capitalist types used to be the left. And the policies we recommended, that free market capitalism, free trade and so on, made all richer and also, handily, collapsed inequality at the same time. Life got better for all. Further, we got poverty pretty much entirely licked. There is no one at all in any of the rich countries living in that $1.90 a day absolute poverty that was the modal experience of mankind. We were left and we were right.

Today’s left doesn’t like either those markets nor that capitalism. And yet these things still work to solve today’s problems:

I also should not have to teach these sorts of factoids to college-level students, but given the priorities of others I have to:

All humans used to be desperately poor.

The only sustained period of improvement in that condition is the current one (ongoing for about 350 years, or 7% of human history).

This enrichment is associated with regions that practice market tested betterment.

The improvement in China and India over the last 40 years are unprecedented improvements in the condition of humanity

Those changes are associated with a shift in political, social, and legal culture away from other systems and towards one market tested betterment.

Imagine that you’re absolutely certain that the presiding system is wrong. That we must overturn that entire system in order to kill poverty and make the world a better place. Then reality decides to disagree with you. In fact, those policies you recommend, when tried out in places like Zimbabwe, Venezuela, merely impoverish. And the people doing that free market capitalism stuff raise billions - no, really, billions - up out of that historic destitution.

Well, wouldn’t you be angry if it was proven to you, again and again, that absolutely everything you agree was true was, in fact, wrong? Of course, when facts change it’s always possible to change your mind but anger is so much more comforting, isn’t it?

The Royal Society's charter

Leading British scientists met at an "invisible college" in the 1660s to promote and explore scientific ideas. King Charles II approved of the venture, and on July 15th, 1662, he signed a royal charter that brought the Royal Society of London in existence. It still exists, and has enjoyed the support of every subsequent monarch. Charles II used to attend and enjoy its meetings, making intelligent contributions to the papers and experiments presented there.

It is the world's oldest scientific institution, and exists to promote science, to support it, to recognize excellence in the field, and to offer scientific advice bearing on policy matters. It still does all of these things. Historically the Society has been associated with great scientific achievements. It published Newton's "Principia Mathematica," Benjamin Franklin's experiments with electricity and lightning, published the first report in English on inoculation, backed Charles Babbage's differential engine, and published Chadwick's detection of the neutron.

The Society's motto, Nullius in verba, means "Take nobody's word for it." It expresses a determination to establish facts via observation and experiment rather than by taking them on authority.

The Royal Society provides a good example of how important patronage and status can spur scientists on to discovery and success, and the same principle works in other fields. It does not always take floods of public money, disbursed through grant-giving committees, to oil the wheels of scientific advance. Academic scientists like to receive grants, and many spend a great deal of time bidding for them. But some critics have pointed out that grants tend to go to proposals within the mainstream of current received opinion, rather than to the off-the-wall initiatives that might upset settled thinking. Private money from businesses and philanthropists tends to be more adventurous.

Today's science might well translate into tomorrow's business, so in 2008, the Society opened the Royal Society Enterprise Fund, with which to back new scientific companies, and to fund itself in future from the returns on its early investments. The Society's awards, prize lectures and medals all come with cash to finance future research.

There is a charming story told to illustrate the Society's emphasis on hard science as opposed to popular myth and superstition. It is reported that King Charles II once asked the members why it was that if he had two identical pails of water and placed a four-pound fish into one of them, it would not weigh more than the other. The scientists cane up with a variety of convoluted explanations until one finally said, "My Lord, I deny the fact." The King laughed and admitted it was a joke, but its lesson was to base theories on established facts.

It's an effective antidote today to conspiracy theories, in that the 'facts' behind them are usually false. Very often we are presented with alleged facts, whether about Bermuda triangles, moon landings, UFOs or bending spoons, that appear to leave no explanations other than supernatural or conspiratorial ones. The best response is to echo the scientist who stood up King Charles II, and to deny the 'facts' that are presented as real.

Facebook's $5 billion fine shows us that the Efficient Markets Hypothesis is right

It must be difficult trying to struggle through a discussion of a story without having the basic intellectual tools to understand how the story works. Which is the pickle that John Naughton finds himself in here in The Observer. Facebook gets fined $5 billion over data breaches and the share price goes up? Clearly, something is wrong with something, somewhere!

If you want a measure of the problem society will have in controlling the tech giants, then ponder this: as it has become clear that the US Federal Trade Commission is about to impose a fine of $5bn (£4bn) on Facebook for violating a decree governing privacy breaches, the company’s share price went up!

This is a landmark moment. It’s the biggest ever fine imposed by the FTC, the body set up to police American capitalism. And $5bn is a lot of money in anybody’s language. Anybody’s but Facebook’s. It represents just a month of revenues and the stock market knew it. Facebook’s capitalisation went up $6bn with the news. This was a fine that actually increased Mark Zuckerberg’s personal wealth.

The bit that’s gone wrong is Naughton - and to be fair, many others - not grasping that the Efficient Markets Hypothesis is actually correct. At least that semi-strong version, which says that all publicly available information will already be in market prices.

So, what has happened here? We’ve long known that Facebook is going to get fined over the Cambridge Analytica stuff. Facebook even told us that it had $3 billion stashed away in its accounts to pay such a fine. Market participants knew all of this. It was all already in the share price.

So, what happens when the fine is actually announced? That there’s going to be a fine of billions is something already in the price. That the fine isn’t the maximum that it could be removes some uncertainty. Thus the price moves up.

For, recall what the basic message of that EMH is. Only new information moves markets. Old information is already included in those prices. We think it’s fairly important that if you want to write about how markets work then you have a grasp of how markets work. Sadly, not all agree with what we regard as an entirely uncontentious insistence.

Storming the Bastille

It was on the famous quatorze juillet in 1789, 230 years ago today, that the mob stormed the Bastille fortress prison in Paris, an event taken to mark the beginning of the French Revolution, and celebrated every subsequent July 14th. It was more symbolic than real, although there was some purpose to it. France's Third Estate (the people) first stormed the Hôtel des Invalides seeking the 30,000 muskets held there. Unfortunately for the mob, the Hôtel's commandant had moved their 250 barrels of gunpowder to the Bastille a few days earlier.

The mob turned its attention to the Bastille, with nearly a thousand of them gathering outside to demand its surrender and the release of its gunpowder. The Bastille had a few defending troops of its own, plus 32 Swiss regular guards of the Salis-Samade Regiment as reinforcements. It also had 18 eight-pound guns and 12 smaller pieces mounted on its walls. Its governor, Bernard-René de Launay, refused to surrender.

After a lengthy fight during which 98 attackers and one defender were killed, the mob seized control. The governor was dragged to the Hôtel de Ville, and after much abuse, was stabbed many times to his death, and his head paraded on a spike. The three officers of the permanent Bastille garrison were also killed by the crowd, and two of the invalides of the garrison were lynched, plus two of the Swiss regulars. The mob then went and killed the prévôt dès marchands (mayor).

The Bastille's prisoners were released – all seven of them. They were four forgers, a madman imprisoned at his family's request, someone who'd tried to kill Louis XV thirty years previously, and a Count imprisoned by his father. The mob missed a much bigger catch, the Marquis de Sade, who'd left 10 days earlier. It was not a great haul, but the act was symbolic and fuelled the Revolution.

The sad record of that Revolution is written in blood and terror, as ever more extremist and radical groups practised ever more atrocities. It devoured its own, as revolutions do, with the majority of those guillotined being ordinary French men and women rather than aristocrats. The Reign of Terror came and went, as Robespierre and Saint Just were swept away in its carnage. The mob regularly rampaged the streets, getting its own way until one day a young army officer called Napoleon gave them "a whiff of grapeshot" at point blank range. Then they stopped.

The French Revolution ended in a dictatorship and a career of European conquest that only ended at Waterloo. It contrasted starkly with the English "Glorious Revolution" that made constitutional government the norm, and the American War of Independence that secured the rights of Englishmen for the American colonists, and embedded them in a constitution.

The Bolshevik Revolution in Russia followed more the French style than the English or American ones. It outdid the French one in blood, terror and oppression, and was no more successful at attaining a decent life for its citizenry afterwards. One lesson is that revolutions which sweep away society to put in its place one derived from abstract principles, are less successful than ones which build up and improve what the past has done, and try to erase such of its failings as they can.

An invalid argument - people won't therefore they must

Everything has its costs, everything has its benefits. The mark of a liberal society being that we get to decide the correct balance for ourselves, of an illiberal that we’re told what to do by someone else’s estimations of that balance.

A corollary of this is that if the people who have to bear those costs, and also to enjoy those benefits, don’t think it’s worth it then we shouldn’t impose them upon them. So it is with emissions in cities. It is urban dwellers who gain the transport from cars, it is urban dwellers who suffer the resultant pollution. Which is what invalidates this insistence here:

Among other weaknesses, the measures cities must employ when left to tackle dirty air on their own are politically contentious, and therefore vulnerable. That’s because they inevitably put the costs of cleaning the air on to individual drivers – who must pay fees or buy better vehicles – rather than on to the car manufacturers whose cheating is the real cause of our toxic pollution.

It’s not hard to imagine a similar reversal happening in London. The new ultra-low emission zone (Ulez) is likely to be a big issue in next year’s mayoral election. And if Sadiq Khan wins and extends it to the North and South Circular roads in 2021 as he intends, it is sure to spark intense opposition from the far larger number of motorists who will then be affected.

It’s those in that area who enjoy those benefits and suffer those costs. If they think that a ban, or limit, isn’t worth it, who are we who are subject to neither cost nor benefit, to force upon them the very policy they are rejecting?

Not what we’re not suggesting, that pollution’s just fine, that nothing should be done etc. Rather, we’re jabbing at the hole in the logic of this particular argument being used. The people who will suffer the policy might not vote for it therefore it must be forced upon them. Our point being that if they don’t want it then that’s the reason it shouldn’t be forced, isn’t it?

Caesar, Kaiser, Tsar, Shah

July 13th, 100BC, saw the birth of Gaius Julius Caesar, a man who would change the world. One of his lasting changes was the introduction of the modern calendar. He replaced the Roman moon-related calendar by one based on the sun, and gave us our year of 365.25 days with an extra day every fourth year. He added three extra months and has July named after him.

It was, of course, his military conquests and political changes that earned him fame. He was at the watershed as the Roman Republic broke down and was transformed into the Roman Empire. Although its apologists spoke grandly of ‘Republican virtues,’ the fact was that the old system that worked for a city could not cope adequately with the vast territory Rome now controlled. In practice, well-born senators appointed each other to the governorships of provinces that they then looted.

The territory under Rome was hugely enlarged by Caesar’s conquests in Gaul and Germany, and he needed land for his veterans. Although well born himself, Caesar backed the popular cause against most of the aristocracy. He was, perhaps, an early populist. Had he left his army at Italy’s frontier, as the rules required, he would have been defenceless against trial and probable execution in Rome. In crossing the Rubicon with his army, he set in motion the events that changed Rome into an empire governed by all-powerful rulers.

When he took control, Caesar set about implementing reforms that would transform Rome. He extended Roman citizenship far beyond Italy’s borders, creating a unified state of its disparate provinces. He centralized its bureaucracy into a single government, and put into effect the land reforms that supported his veterans. He was proclaimed ‘dictator’ for life, and carried out populist reforms that made the common people regard him as their champion. He undermined the wealth and power of Rome’s élite senators, which is why they killed him.

The model of a strong leader with authoritarian powers, backed by a loyal army, is one that has been followed many times since in many places. Napoleon Bonaparte is probably the most famous example. Populists in modern times have to pay lip service, at least, to democratic mandates, although in Venezuela Chavez and Maduro have shown how readily the democratic process can be subverted.

T H White, who authored many of “The Making of a President” books in the 1960s and early 1970s, also wrote a play called, "Caesar at the Rubicon" (1968). At its end, Caesar finally crosses the river to head for Rome with his army. His closing line as he does so is, "If men cannot agree on how to rule themselves, someone else must rule them." When societies descend into conflict and chaos, they should know that the eternal Caesar waits at the eternal Rubicon, sitting astride his white horse with his army behind him, and with that old, old sword at his side…

The real Nordic model: higher taxes on low-income workers

Britons have a thing for the Nordic countries – especially so if you’re on the left. In their quest for well-functioning and more socially equitable societies, the Nordics have long played a utopian role for Britain’s left-leaning forces.

This ranges from envy of Sweden’s work-life balance and child care system, to reflections on Norwegian experiences, and grand plans by think-tanks to “win the Nordic model for the UK”, to discussion of Finland’s egalitarian and successful schooling and Denmark’s futurism.

British people often only look at what Nordic governments do on the spending side: expansive social welfare spending, generous benefits and impressive social equity. They hardly ever take a look at the accompanying revenue side.

Comparing Swedish and British governments unveils some interesting differences.

Yes, measures of country-wide income inequality put Sweden among the middle or lower end of its peers, with UK standing out; the Gini-coefficient after taxes and transfers has Sweden at 0.28 while the UK almost tops the EU-chart at 0.35. Similarly, incomes of the highest-paid 10% of British earners clock some 34% of all pre-tax income (progressive taxes put the post-tax figure at 28%), whereas their Swedish equivalents earn only 28% of pre-tax (24% post-tax) income. The much-despised top-1% of British earners receive around 12% of pre-tax income, whereas Sweden’s top-1% earners only get 8%.

Britain also taxes its population less than does Sweden (35% of GDP as opposed to 44%), but comparing the reliance of various kinds of taxes as government revenues makes this even more clear. In the figure below I have mapped out tax revenues as share of GDP in four categories of income; the first two bars from the left are taxes on labour (direct income taxes as well as indirect ones like payroll/national contribution levies) the third taxes on capital and the fourth various consumption taxes.

This shows the taxation differences between Sweden and UK. As we would expect from income tax rates, labour incomes are much more heavily taxed in Sweden than in Britain. They don’t, however, exclusively or even predominantly apply to high-income earners. Sweden holds the European record for the lowest level where incomes are subject to direct taxation, at one-seventh of Britain’s remarkably high Personal Allowance (£12,500). Moreover, the elevated indirect taxes (payroll taxes) apply on even the lowest incomes, greatly contributing to why Sweden has among Europe’s highest cost of labour, while UK is below average on this – something that may explain the 2.5 percentage point lower unemployment rate in Britain.

The UK relies more on capital taxation than Sweden – and this difference is not driven by corporation tax, which in both countries generate revenues of 3% of GDP. Rather, the big difference is that the UK taxes property a lot heavier than does Sweden, whereas Sweden relies on taxes on investment and savings more than does the UK.

Admittedly, comparing tax systems is tricky and relying on revenues as I have here does not show the full picture. For instance, a small open economy like Sweden may not have the ability to heavily taxing certain tax bases since the burden for relocating elsewhere might be small and corporations or individuals would simply up and leave if they deemed taxes to be too extractive; similarly, British tax authorities may have larger leeway in taxing high-value properties in London with no or little behaviour response, and thereby rely more heavily on properties for tax revenue.

Bursting the Nordic utopian bubble, Kristian Niemietz at IEA describes the Nordic economies as

relatively liberal, relatively lightly-regulated market economies, with relatively low levels of state intervention – but they are also, at the same time, economies characterised by high taxes, generous welfare states, and generously funded public services.

A few decades before writing The Wealth of Nations, Adam Smith concluded that all that was necessary for a successful country were “peace, easy taxes, and a tolerable administration of justice”. Whatever he thought of as ‘easy’ probably differs from what we would think of today. Nevertheless, a quick look into the tax revenues of Sweden and the UK should awaken the dreaming leftie. Spending like Sweden means taxing like Sweden – reduced property taxes, abolish wealth and inheritance taxes, hike taxes on productive investments and, most importantly: almost double tax revenue on even low-income labourers. Much less tempting, I imagine.

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British tax data is taken from Office for Budget Responsibility’s databank; Swedish tax data comes from ESV, The Swedish National Financial Management Authority, and can be easily accessible here.

Josiah Wedgwood, an Industrial Revolution pioneer

One of the most remarkable and successful pioneers of the Industrial Revolution was born on July 12th, 1730. Josiah Wedgwood was born into a family of non-conformist potters, and showed early talent at 9 years old. He survived a bout of smallpox, but it left his leg too weak to work a potter’s wheel, so he turned to design rather than production.

Wedgwood took the trouble to learn chemistry, so that he could understand and refine the techniques of firing and glazing and the properties of clay. He was a friend of Joseph Priestly, a fellow member of the Lunar Society. He developed several unique glazes and new types of pottery, and found popularity for his products with the top nobility, including Queen Charlotte, whose patronage he traded on.

He virtually invented modern mass-produced pottery by industrializing the industry. He used specialized division of labour to produce high quality at low cost, and sold his wares in every European city as well as to the wider world. He produced less costly versions of his top ranges, to supply the growing middle classes of England. He satisfied the new interest in the classical world by producing works based on ancient designs of vases and plates.

Wedgwood is credited with inventing modern marketing, using mail order, a money back guarantee, and travelling salesmen. He even pioneered “buy one, get one free” and free delivery. Like many of his fellows leading the Industrial Revolution, he keenly promoted the idea of improvement, and of a commitment to making the world a better place. He was an avid campaigner for the abolition of slavery.

It was this notion that humanity could improve itself and that the world could become a better place that was a spur driving the Industrial Revolution. Instead of being content to live fulfilled lives, as their grandfathers and great-grandfathers had sought to do, humanity embarked upon that upward curve that we have never left. The Industrial Revolution applied creative technology to doing things better and making things affordable to the masses that had previously been the prerogative of the well-to-do.

We are still living in that world, with creative intellects seeking every day to make it better. Steve Jobs and Elon Musk are the spiritual heirs of Josiah Wedgwood, developing and promoting the new products and processes that will enrich our world with new opportunities. Instead of seeking to obstruct such people, we should be encouraging them to flourish. Instead of obsessing with how to make people more equal, we should be making it easier for them to expand the choices and the chances that they make available to others. Instead of trying to cut down the tall flowers, we should be seeking to have as many flowers grow as tall as they can. Josiah Wedgwood, whom we honour on his birthday, was one of the very tall ones.

We don't agree that government is a luxury good - at this level of income

Paul Johnson, of the IFS, is here saying that government is a luxury, or superior, good:

Even so, with political will we could, if we wanted, raise the level of tax closer to the European average. We can afford to. One approach would be to raise taxes gradually as incomes rise — slowly enough that people are left with more money in their pockets than before, and quickly enough that the state’s budget rises as a fraction of national income. As we get richer not only can we spend more on public services, we can spend more as a fraction of our income on them.

Note what luxury, or superior, means here. It’s a technical term meaning “We spend more of our incomes on this as our incomes rise”. A normal good is something we spend the same portion on, an inferior less. Johnson is indicating that government is that superior good, something we can - and thus he implies should - spend more of our income on as incomes rise.

We disagree.

A further technical point being that pretty much everything is an inferior, normal or superior good at some level of income. It’s all Maslow’s Hierarchy all over again, what we desire changes as we sate one such and then move on to being able to deal with the next want.

We agree entirely that at a certain level of income then government is indeed that luxury good. We don’t need to get far above mere and simple subsistence to want to pay people to keep the levels of Thugs and general dacoity down. We might well be willing to pass more of yet higher incomes through government to create that system of social insurance. But, as with everything in Maslow’s Pyramid such tastes do get sated at some point. And something will gradually switch from being a superior good to a normal and then invert to an inferior. Where, as we get yet richer again, we spend ever less of our continually rising income on it.

We would, in fact do, argue that this happened some time ago with government. We’ve already more than enough of it. And as incomes rise off into the future - technology does march on - then government should righteously shrink as a portion of GDP. We’ve got enough, we have a social safety net, we’ve got people regulating the things that need to be regulated. Thus we should be spending ever more of our growing incomes on those things which are, at this level of income, luxury or superior goods, reducing our expenditure on those inferiors.

A bit more of that freedom and liberty sounds good to us.

Another way to put this being that we’ve created that rootstock necessary for human flourishing already. Time now for a bit more of that fructifying created by more choice and less government.

Isn't this the truth

Extensive allegations about corruption in South Africa. About which one says:

Several of the Watsons’ other BEE partners became part of the country’s new political elite; there was a revolving door, in these first years of the new government, between political appointments and BEE entrepreneurs. “The minute you have a system where people make money just by the connections they have, rather than the work that they do, the system is ripe for abuse,” says the political economist Moeletsi Mbeki, long a staunch critic of BEE. “It’s a recipe for corruption.”

Quite so, this is true of systems that allocate economic activity, ownership, legal privilege, on the accidents of social position, the school tie network, race, political party membership and so on. All systems have been used at times and all do spiral into that network of corruption. Some worse than others of course but the direction of travel is always the same.

This being a great merit of markets and simple, pure, cash. If people are able to do whatever it is better than the competition - competition which is free of legal constraint from actually competing - then they should be the people doing that thing. Getting the best results does indeed mean that the economy is going as well as it can given technological constraints.

Further, a market economy has its own feedback mechanism. Those who aren’t the best succumb to that competition and are removed from the economic fray.

Another way to put this being that if politicians don’t have the power to choose favourites then we consumers aren’t subject to the inefficiencies and inadequacies of political favourites. Whether that’s a Duke with a Royal Monopoly or the man the President shared a trench with gaining some favour.

If economic privilege is allocated on anything other than efficiency then the inefficient will gain such privilege to the impoverishment of everyone else. This isn’t a good way to run a society.