By definition, Net Zero in steel means closing blast furnaces
Something that the system in general seems to not know:
A British Steel spokesman said: “Jingye has invested hundreds of millions of pounds to support the ongoing transformation of the business and is committed to investing in the long-term future of British Steel as we transition to net zero. The steel we make can play a central role in transitioning to a low-carbon, circular economy and we’ve ambitious plans to invest in a range of technologies to reduce the carbon intensity of our operations, with solutions that are globally recognised and accepted.”
OK, super. Net Zero means one of two things about steel. If the solution is to go circular then that means recycling scrap steel. That can be done, it means using electric arc furnaces and it’s a just fine way to make steel. Britain exports scrap steel so there’s a domestic supply of the raw material. There is a problem in that it’s still not possible to make certain steels via this technological route - anything for the nuclear industry for example. That’s just an industry where we must always create from virgin, not recycled, material.
If we’re not to go circular, but still Net Zero, then we have to change the technology used to make that virgin steel (“virgin” here means from iron ore) to some form of direct reduction, or DRI. That’s OK, that can be done. This allows the production of all kinds of steel (in those words from the movie, “both country and western”) but at greater capital and possibly operating costs.
The problem with these simple facts is that it’s not obvious that the system - politics, government, the bureaucracy and so on - quite grasps the next part of this:
The Chinese owners of British Steel have injected only a fraction of the £1.2bn they promised to invest despite begging British taxpayers for a bailout worth hundreds of millions of pounds.
Jingye, the largely unknown Chinese company that acquired British Steel almost three years ago, has pumped in just £156m since acquiring the business in a Government-supported takeover in March 2020, the Telegraph can disclose.
Jingye is threatening to close one of the plant’s two blast furnaces and make 2,000 people at the British Steel works redundant unless Grant Shapps, the Business Secretary, agrees to provide state aid totalling hundreds of millions of pounds.
Either of those potential solutions means closing those blast furnaces. It is not possible to go either Net Zero or circular while retaining those blast furnaces. By definition, the stated ambitions for the industry include closing those blast furnaces.
This is true whether it’s done by the Chinese, the government, with or without subsidy, today or in two decades’ time. Net Zero means closing blast furnaces.
It’s actually necessary to make a decision here, it’s not possible to fudge this matter. Blast furnaces and no Net Zero or Net Zero and no blast furnaces? Yes, we know, politics never does like having to make an actual choice but here’s one that cannot be mithered. So, and?
Against the subsidy of nightclubs
Just as we start here, yes children, your current elders did used to do all this sort of stuff. Where do you think you, you next generations, come from? Having pointed that out:
As a DJ, I know the government must intervene to save the night time industry
Dave Haslam
The increasing closure of nightclubs threatens jobs, as well as the future of music and the souls of towns and cities
No.
At least, not yet, not without further examination.
It is, of course, possible that government action is destroying a previously viable business sector. Given our views here that wouldn’t surprise in the slightest. But it’s also necessary to grasp the point we like to make so often - there are structural declines in business sectors as well, simply things that have passed their time.
So, we need to work out whether nightclubs are failing because of enemy action or because they’re going the way of buggy whip makers and coal mines - things we either don’t need, or don’t want, or at least need fewer of. If it’s enemy action then stop said enemy doing that. If it’s structural then the correct response is a shrug and an “Ah, well”. The general point is true whichever of these it is that is affecting nightclubs.
Yes, we know, dance is the oldest of the human arts, that the young gather to do so is hardly a surprise. And yet there is - clearly and obviously - a certain amount of sexual display and even sexual commingling that accompanies the practice. Such sexual display and commingling now has other outlets - Grindr, Tinder, Bumble are the ones we oldies have heard of as they appear in the newspapers often enough - so is the decline in the nightclub sector because of actions to force it to decline or the disappearance of one of the uses to which nightclubs used to be put?
Before whatever might be done is even planned, let alone done, we need the answer to that question. If the - to adapt the old vernacular - meet market function is now online, not in physical space, then this is a secular, systemic, change and not one that requires action to reverse. If it’s the other, if it is supply being suppressed even while demand remains strong then we should stop doing whatever it is that is doing the suppression. No, not subsidise, not grant special conditions, but stop doing that suppression - for if the one sector is suffering from such conditions then so will others. We should lift the same such weights upon all sectors, not just the one.
So, yes, we’re against the subsidy of nightclubs, either way. Even as what should be done differs dependent upon the answer to the important question. Why are nightclubs having these problems? Is it government or folk now have another method of finding sex?
Just to note, an observation that the young no longer do use nightclubs to meet others rather proves the point.
The tax sums of Associate Professor Advani
In this analysis of the recent tax changes we find something we agree with:
Most of the “stealth tax” comes from freezing the threshold at which employer’s national insurance kicks in. This freeze means employers will have to pay more for each employee. Proportionally it affects the lowest paid the most, ultimately feeding through to lower wages and employment for that group. This alone raises £5.5bn.
Quite so, employers’ national insurance is incident upon the workers’ wages. This means that the combination of income tax, employees’ and employers’ NI leads to a marginal tax rate of over 40%. An over 40% marginal tax rate which applies to those still working part time on the minimum wage. This is not just bad tax policy it’s an outrage and a vileness. Which is why, of course, the personal allowance for all three taxes should be, at minimum, the level of the full year, full time, minimum wage.
If you want the poor to have more money then stop taxing them so damn much.
Not that Advani - necessarily - agrees with our solution but we do agree with his analysis of the incidence and thus the problem.
We have much more difficulty with this idea:
Despite repeated mentions of the former chancellor Nigel Lawson during his budget speech, Hunt did not follow his example and equalise the tax rates on income and on capital gains. Currently, someone earning an income of £1m as an employee will pay 47% tax on every additional pound they earn, and their employer has to put in another 13.8% on top. If they can instead take their pay through a company they own and manage, they can take the money out as a capital gain. This allows the first £1m to be taxed at a rate of only 10%, after which the rate is still only 20%.
No, that’s not quite how it does work. You do not “take out” money from a company as a capital gain. You have to sell in order to make the capital gain. This is conceptually different.
The chancellor could have paired an increase rates with a reintroduction of the inflation allowance for capital gains, reverting to the system we had before 1998, benefiting many people who receive income in this way.
One of the reasons Gordon Brown changed the system was that he thought - rightly or wrongly - that a lower rate without the inflation allowance increased the tax take. To reverse the decision we’d all need to see the actual sums that back up the insistence that he was wrong. Given that CPI is 9,6% presently we think it unlikely to be honest.
Perhaps Associate Professor Advani would like to do those sums for the rest of us?
Well, yes Mr. Sparrow, and?
Jeff Sparrow treats us to an extended whine about wealth and inequality.
The grotesque inequality embodied by Musk, Bezos and Zuckerberg is a threat to democracy
Gosh.
Oxfam tells us that a mere 10 people now possess more wealth than the bottom 40% of humanity – and that the richest 20 tycoons collectively own more than the entire GDP of sub-Saharan Africa.
This is normal. For it is possible to have negative wealth - in a way that we do not record negative incomes in the associated figures - where debts are higher than assets holdings. The obvious example is the student fresh out of college who has student loan debt, a high lifetime income to look forward to but as the sheepskin is not counted as a financial asset but the debt is, well, a debt, then they have negative wealth. In fact, some of the poorest people in the world by this wealth measure are the top graduates from the top American universities and training programmes about to embark on globally top earning careers.
It is - roughly and about - true that if you’re a £10 note and no debts then you’re richer than 30% of fellow Britons. Wealthier that is. The same is true of $10 and fellow Americans.
Oh, also, comparing wealth, a stock, to GDP, a flow, is very bad number crunching.
But, you know:
Between April 2020 and April 2021, Musk reportedly made nearly US$140bn……Not so long ago, the Zuck earned an eye-watering $28,538 a minute……..A few years back, the Guardian’s Arwa Mahdawi noted that, if you had earned $5,000 each and every day from 1493 onwards, you’d still have less money than Jeff Bezos – even after his divorce. The monstrous scale of global inequality renders genuine democracy a farce.
Mark Zuckerberg has shed $90 billion in 2022 while Jeff Bezos and Elon Musk have both lost $58 billion as gloomy earnings reports leave tech stocks reeling
So, what happened last year has all gone into reverse this. Global wealth inequality - by this specific measure being used about the tech bro’s - is markely lower than it was last. Perhaps those 20 tycoons now own less than the GDP of sub-Saharan Africa.
OK, is democracy now better? Has that position of sub-Saharan Africa been improved as a result of this change? Are we, in fact, better off as a result of this reversal of the thing being complained about?
Not obviously, no. We’d be fascinated to find anyone at all who would be able to - heck, try to - point to anything that has got better as a result of this reversal.
So, the original complaint is not a real one, is it. It’s nobbut a whine and a mither. But then this is The Guardian on economics so how surprised should we be?
Larry Elliott gets suckered by the wrong kind of environmentalists
Larry Elliott tells us that there’s something to this degrowth idea as a method of dealing with climate change. That’s because he’s been suckered by the wrong kind of environmentalist - those who know nothing of the economics of climate change:
Given the existential threat posed by global heating, the concept that growth is good is being seriously challenged by those who say policymakers should be aiming for zero growth or even degrowth economies, ones that are shrinking. Make no mistake, it is a good thing that the accepted wisdom is being questioned. The idea that faster growth is the solution to every problem is no longer tenable.
It’s possible to be very basic indeed here. The solution to the problem - as described - is a change in the technologies used. Moving to higher value add technologies is - by definition - economic growth. Therefore growth is the solution, as both are that change in technologies used to those which add more value.
There is nothing new about the current debate. Thomas Malthus predicted eventual famine once population growth exceeded food supplies. John Stuart Mill’s comment, that the “increase in wealth is not boundless”, paved the way for what became known as steady-state economics. Herman Daly, who died last month, long championed the idea that the constraints of the natural world imposed limits to growth.
Well, in one sense of course there’s nothing new about this. Economics is the study of the allocation of scarce resources. So, we’re all agreeing that scarcity is a limit to, a brake upon, growth. Where Daly, specifically, went wrong - and we had this out with him directly - is in his insistence that we can only have qualitative growth, rather than quantitative. Sure, he might even be right about that - but he adamantly refused to accept that GDP is both of those. It’s value added and if we add more value by qualitative growth then that’s still GDP growth.
Being more specific about climate change this has been looked at. Back when, before the patina of repeated layers of economic misunderstanding were spread over the subject. The Special Report on Emissions Scenarios. The economy has growth, does not have growth, the population rises, comes to a peak then falls, what energy producing technologies are used and so on?
The results were that the growth limiting models produced a worse climate outcome. Or, more accurately, the highest growth model plus increased coal use (A1FI) produced the worst, the highest growth model with technological advance (A1T) produced the second best climate outcome plus a vastly better human outcome in terms of the richness with which folk could live their lives. The lowest growth model (B2) produced the second worst climate outcome and by far the worst human outcome.
It really is all there, in those original models that the entire construct of climate change is built upon. The Stern Review - as one example - uses these models, as does Nordhaus’ Nobel winning work. RCP 8.5 in today’s set of models is really just A1FI gussied up a tad.
We started the whole climate change game with the setting of some rules. Which is that our models even showing that it could happen were based upon the idea that economic growth - without coal - is the solution. Given those rules of the game we cannot then turn around and say that growth is not the solution to climate change.
Well, of course, we can, for many are saying so. But they are wrong.
It's not Elon Musk with the misunderstanding here
Nor Jeff Bezos. In fact, both seem very much more rooted and based than the critic here:
Elon Musk is inspired by Iain Banks’s utopian sci-fi novels – but he doesn’t understand them
The billionaire says he’s ‘a utopian anarchist of the kind described by Iain M Banks’ – but what of Banks’s socialist and anti-wealth views?
Ah, yes:
As with Consider Phlebas and the eight Culture books to follow – the final published a year before Banks’s death – the story revolves around a “post-scarcity” human society in the far future. The Culture is a civilisation without want or need
Quite so, very Marxist, very communist:
“Let’s be clear: unless I have profoundly misunderstood its position, I pretty much despise American libertarianism,” he told PhD researcher Jude Roberts, in a series of interviews published by Strange Horizons magazine. “Have these people seriously looked at the problems of the world and thought, ‘Hmm, what we need here is a bit more selfishness?’…Which bit of not having private property, and the absence of money in the Culture novels, have these people missed?”
Indeed.
But the Big Q is how do we get from here to there? One answer would be that we change humans. We wait for New Soviet Man to arrive and all will be well. Or, we can do what Marx predicted would happen. Capitalism continues to become ever more productive until we arrive in that post-scarcity society and all will indeed be well. Which is where Banks picks up the point to weave into his tales.
Now, it’s possible to wonder whether Marx was actually right - the very idea of a post-scarcity society doesn’t fit well with the existence of positional goods for example. But why not as the McGuffin for a series of novels? Why not even as a dream about the possible future society?
But as Marx pointed out it is a thought about the future and there is that little step of getting from here to there. And also as Marx pointed out it’s the onward march of capitalist efficiency - driven, obviously, by the entrepreneurs - which will, if it can indeed happen at all, lead us into those sunlit uplands.
To borrow some of the phraseology from those who think too little about this, the objective reality is that Musk and Bezos, along with their class, are the very handmaids of that world to come. If, of course, it does come. For as - to berate the point - Marx himself pointed out, that true communism, that Culture, will only arrive in a post-scarcity society. So, we’ve got to keep making capitalism that ever more efficient until we get there, don’t we?
As Musk, Bezos and their class do.
It’s not Musk and Bezos with the misunderstanding about their place in the onward march of history and the inevitable arrival of the glorious future now, is it?
Is it Conservative?
When the word conservative is spelled with a small ‘c’ it refers to a psychological trait, one that seeks to keep things as they are, and that resists change. Change, for many people, leaves them uncomfortable and less able to predict and to cope with unfamiliar circumstances.
When Conservative is spelled with a capital ‘C’ it refers to a political tradition that wants such changes as take place to be organic and spontaneous, resulting from the accumulated decisions people make about their lives. It opposes attempts to force society to conform to preconceived plans. Conservatism wants change to be evolutionary, not revolutionary. It seeks not to preserve any particular status quo at any time, but the process by which it changes. It conserves a process rather than an outcome.
Some of the stances taken by Conservatives are the product of that desire for change to be spontaneous. If the future shape of society is to be determined by the decisions people make, it follows that people should be free to take them. It thus involves a significant degree of personal freedom, and an opposition to rules that force people to conform to someone else’s decisions.
It also explains why Conservatives favour low taxes. They want people to be able to allocate their resources according to their own priorities, rather than to have their resources taken to be spent on someone else’s priorities.
It explains, too, why Conservatives have traditionally favoured strong armed forces. If people are to make most of their own decisions, they must be protected from having this freedom usurped by foreign aggression and bullying.
The Conservative Party in Parliament has sometimes been Conservative, sometimes not. There was nothing remotely Conservative about Edward Heath’s wage and price controls, for example. As with all political parties, it attracts those who seek power and position and are indifferent to or even hostile to its underlying philosophy.
Some commentators point out that if the Conservative Party in Parliament favours high taxation and high spending, and seeks to micro-manage people’s lives, nominally in the interests of their future health and welfare, it is by no means following in the Conservative political tradition. They are correct; it is not.
But, but, *why* do we want to reduce taxes on landlords?
It is a standard economic insistence that business rates are actually paid by landlords. It is a standard political insistence that business rates are paid by retailers. The economists are right here.
This should - but does not - feed through into politics.
Business rates are pushing squeezed companies over the edge
Commercial property owners who were over-geared for current market conditions, perhaps so, yes. But that’s their lookout, no one else’s.
Machin calculates that retailers pay “25pc of all business rates despite being 5pc of the economy”.
Retailers don’t pay rates, landlords do. There are some retailers who are their own landlords, true, but it’s as landlords that they pay rates, not retailers.
If Hunt can only cut one tax, it should be this one. Business rates are crippling the real economy and the scars could be long-lasting.
Which brings us to that headline question. Why do we want to cut taxes on landlords? Until that’s answered there is no argument in favour of cutting business rates, is there?
Do note that there isn’t any argument within economics about this. Sure, there are quibbles and mitherings about how long the adjustments take and all that, the interaction of the base facts with upwards only rent reviews ‘n’ all. But those base facts aren’t at issue. Business rates are, like other repeated taxations of real property, paid by landlords. We’ve an entire school of economics built upon this insight and while the Georgists can become somewhat over-enthusiastic about the issue they are right on the basics of land value taxation.
So, to repeat: But, but, *why* do we want to reduce taxes on landlords?
A welcome to the 8 billionth
This week we bid a warm welcome to the 8 billionth human being. We look forward eagerly to their intellectual and artistic contributions and to their role in enhancing the common lot of humankind.
Some people regard humans as a kind of pollution to the planet. Indeed, some treat humanity as the greatest threat posed to the Earth. We do not. We share the view of the late Julian Simon that human beings constitute “The Ultimate Resource.”
Although some have suggested that the world’s population will rise to 50 billion or more, the rate of increase is slowing, and projections suggest that it might reach 10 billion, and then start to decline. A major reason is that as nations become richer, their birthrate declines, and the world as a whole has been growing richer. Coupled with this is the fact that as education, particularly that of women, is extended, birthrate goes down. The world is not going to drown in people.
Others have claimed that Earth’s resources are being used up, and there will be precious little left for future generations. This is incorrect. Human ingenuity has developed ways of satisfying our needs with fewer resources than it previously took, and has also enabled us to tap new sources of them. “Water wars” will be no more likely than “peak oil” was. We are clever enough to find new ways of doing things.
We are also clever enough to mitigate the effects our presence has on the environment by inventing technological means of diminishing it. It will be human creativity, the infinite resource, that will enable us to live, not more simply, but more cleverly and more cleanly.
This week saw us lay another place at life’s table, and we look forward to the contribution the 8 billionth person will make to humanity’s achievements, inventions and adventures.
If only John Harris would pay attention
The British right’s hostility to climate action is deeply entrenched – and extremely dangerous
D’ye know, we’re really not sure about that. We, of course, think of ourselves as being on the left, as all liberals - even the classical kind - are. The aim is to make life better for all, including and especially the poor. So, we advocate that peace, easy taxes and the tolerable administration of justice which achieves that task. We get labelled as being of the right because we insist that markets are the way to get that job done. Given that we’re right - as in correct - on this we must be labelled as we are, far-right, in order that the easily swayed do not begin to understand the point.
For we’ve not been hostile to climate action in the slightest. We’ve spent the past 15 years at least advocating the correct plan to deal with the problem. As they gave Nordhaus the Nobel for, Stern a peerage, assuming that the IPCC is correct about the existence and problems of climate change then the solution is a carbon tax at the social cost of emissions. Job done.
For that is what the actual science says. Do, please, note that “assuming” in there.
Harris contrasts our modest, moderate and correct analysis with this:
There is a very good book that explores all of this, published last summer: White Skin, Black Fuel, authored by the Swedish academic and activist Andreas Malm, and a group of “scholars, activist and students” called the Zetkin Collective. It roots the right’s climate politics in things that are as much psychological as political: nostalgia for an age of empire founded on coal and oil, a yearning for the machismo of heavy industry, and a view of the global south as a deep threat. The latter’s climate-based suffering must be othered and ignored, and its people have to be shut out, even as climate breakdown makes large-scale human movement more inevitable than ever.
One of Malm’s recent books - his publisher sent it to us surely by mistake - advocates the use of Leninist war communism as the correct reaction to climate change. That war communism that emptied the cities, dropped industrial output by 80%, caused a famine that killed perhaps up to 10 million and had to be abandoned after 3 years to return to the more market based system of the New Economic Policy.
It’s us that are to be regarded as dangerous, while Malm is “very good”?
Perhaps we could make just that tiniest, littlest, suggestion to John Harris? Could you start paying attention?