The Obscurer

The news over the weekend announced that more people than ever are having to pay inheritance tax. It is a subject that invites strong opinions, with, apparently, very little in the way of middle ground.

I think that there may be some good arguments about what the threshold for inheritance tax should be, but other than that I don’t see there being any criticism of inheritance tax that doesn’t equally apply to other taxes. A popular complaint is the fact that with inheritance tax money is being taxed twice; but most peoples’ income is taxed the once only while it stays in the bank; it is taxed a second time the moment you go to the shop and pay VAT on your purchases. I have also read people attack inheritance tax because a bequest in itself is supposed to assist in social mobility, and so taxing it reduces this desirable outcome; but this is a counter intuitive argument if ever I heard one. Many supporters of the tax argue in favour of it for redistributive reasons; and whether or not you feel this is just, inheritance tax surely helps iron out some of the inequalities in wealth that can be passed down through the generations to those lucky (or unlucky) enough to have had rich (or poor) parents.

Personally I’ve never really seen the problem with inheritance tax. The government is going to have to take money off us at some point to pay for services; what better time than when we are dead, when we don’t know anything about it? It seems pretty painless extracting government revenue from me when I am six foot under, and once there are no longer any concerns about marginal rates of tax leading to a disincentive to work.

But I think most complainants about inheritance tax are not the ones paying the tax, but rather the ones planning on receiving the inheritance; or what’s left of it following the state’s “smash and grab”. Normally, if one were to argue against a tax that you don’t personally have to pay it would be a seen as a selfless act; but on this occasion it can seem entirely selfish and self serving, a grievance that the government is interfering with your projected revenue stream of the macabre.

For myself, I remember a few years ago my parents telling my brother and me that we needed to get together sometime with their financial advisor to arrange a trust fund to avoid paying the tax. My brother and I responded in the same way; ignoring the requests, keeping on changing the subject until it was eventually dropped. In short we thought that it was my parents’ money and they should do with it as they wished; if they wanted to set up a trust and needed something signing then we would do so, but that was about it. I don’t especially like thinking about my parents dying, but if I am around when it happens I’m pretty sure I won’t be thinking about the dosh. They can leave me something – or nothing – for all I care; I wouldn’t mind if it all went to the cats’ home.

It all reminds me of a news story a few years back about the tendency for retired people to be Skiers; Spending the Kids Inheritance. There was criticism in some quarters that retirees were having the nerve to spend their pensions on holidays and cars, when they should have been thinking of leaving a nest egg to their offspring. Incredible; surely the only reaction to the news that people in their twilight years are spending their own money on themselves is “good on you, have a great time, you’ve earned it”. All the kids should expect is a post card from St Tropez.

I can understand why some people resent giving money to the government, but not why inheritance tax specifically should be such a bogeyman. The reality about complaining that the government is taxing your inheritance is that you are looking forward to the day when your parents are deceased so you can grab their money; that you are frustrated that you won’t be getting your hands on even more of this unearned windfall from beyond the grave. It is an attitude that I find very, very odd.

PostScript: Two posts in two days! Welcome to the new look, frequently updated Obscurer? Not likely. I’m off to the Lakes for a wee break. No more posts here until Saturday, at the very, very, very earliest.

Kevin Carson’s Mutualist blog included an interesting post a little while ago comparing the innovative Pull Economy with the more traditional Push Economy. In his post he quotes this David Bollier article which explains the difference between the two:

Briefly put, a “push economy” – the familiar industry model of mass production – is based on anticipating consumer demand and then making sure that needed resources are brought together at the right place, at the right time, for the right people. A company in the “push” model forecasts demand, specifies in advance the necessary inputs, regiments production procedures, and then pushes the final product into the marketplace and the culture, using standardized distribution channels and marketing.

By contrast, a “pull economy” – the kind that appears to be materializing in online environments – is based on open, flexible production platforms that use networking technologies to orchestrate a broad range of resources. Instead of producing standardized products for mass markets, companies use pull techniques to assemble products in customized ways to serve local or specialized needs, usually in a rapid or on-the-fly process.

Instead of companies pushing their products at us (in pursuit of their own strategic or competitive advantages), the networked environment radically empowers individuals, and communities of like-minded individuals, to pull the products and services that they want, on their own terms and time requirements. For example, small groups of people with unusual niche interests – say, extreme skateboarders or opera buffs – can now aggregate their consumer demand and successfully induce businesses to serve their specialized interests. In the process, many corporations are having to radically re-organize themselves in order to serve the emerging “pull” market demand.

If I’ve understood the concept correctly – and I’m not wholly convinced that I have – then it certainly seems a far more efficient and effective way of providing goods and services. An apt example of the pull economy could be Lulu, a self-publishing website I have recently “discovered”.

Traditionally, if you wanted to publish your own book you were faced with a dilemma; approach a printers and either organise a short print run which would involve a high unit cost per book, or go for a longer print run which would mean a lower marginal cost but a larger overall bill. As you had to “push” your book out onto an uncertain marketplace it could be difficult to know what to do; far easier, perhaps, to do nothing.

With Lulu, however, you can design the cover and format of your book, upload it to Lulu for free, and then it can sit online indefinitely until someone wants to buy a copy; only then is it printed (or the manuscript itself can just be downloaded). The price is not far off what you would expect to pay for a book in the shops, and the author gets to keep 80% of the profits of each sale, such as they are. As a result many books can now be published that would probably never have seen the light of day before. Some could even become minor hits, although I imagine that this is more likely to happen to niche non-fiction books rather than to “Just Another Novel” by A.N. Other.

This is fine as far as it goes for self-publishing, but it could also show the way forward for more general book publishing in the future. For as long as people like me enjoy browsing in bookshops then I imagine there will always be a need for long print runs in order to fill up all those shelves in the stores; but on the face of it I can see no reason why a company like Amazon will in future need to hold any stock at all if technology is able to allow each book to be printed on demand as and when a customer orders it. In addition, theoretically no book need ever be out of print again, indeed the very term “out of print” could become an anachronism; just so long as they are held on file somewhere ready to be printed then all books, no matter how old or obscure, could be available whenever a potential customer wants to buy a copy.

But for me perhaps the best thing about Lulu is that this may be the best only way that the yellowed manuscript of my novel, currently gathering dust in my loft along with numerous rejection letters from literary agents, will ever get printed and bound and placed on a bookshelf; even if it is just a vanity copy squeezed into my own bookcase between Philip Roth and William Trevor.

In a typically thought-provoking post a few days ago, Chris Dillow at Stumbling And Mumbling discussed why the “left” regards the market as a “right wing” device. His conclusion was that the left falsely equates markets with business, and that the depression in the 1930’s and the Keynesian methods subsequently employed resulted in socialists abandoning market-based theories such as guild socialism in favour of models based upon state intervention.

I am certainly not going to take issue with that analysis, but from a personal point of view I can’t help thinking that this is another issue over which Margaret Thatcher casts her malign shadow. During the ‘Eighties, the phrase “the free-market” in effect became co-opted into – for want of a better term – the Tory brand. Albeit perhaps it was a term that no-one else wanted at the time, but if you opposed Thatcher then it could seem that you had to oppose markets; in becoming synonymous with the free market, I think Thacherism may have given markets a bad name. I certainly suspect that this had a large effect on me personally; although I have never considered myself a socialist, and I have always valued the effectiveness of markets in the economy (well not always, not when I was at nursery), I still used to roll my eyes, either metaphorically or literally, when a Tory, or my Dad, “went off on one” about the unalloyed virtues inherent in the free market.

Antipathy towards Thatherism itself is one reason, but I also think part of the fault lies in the behaviour of certain unthinking Thatcherite drones. Chris says that “much of what (the left) object to about markets shouldn’t be (and isn’t) markets as such but the same things rightists object to – market imperfections”. Fine, but viewing from the sidelines in the ‘Eighties it didn’t look that way to me, and still doesn’t at times. Many “rightists” seem oblivious to and blissfully ignorant of any possible drawback to markets. Particularly when I learned a bit more about economics at school and then at university I found it all to easy to dismiss the pro-market, scratched-record ramblings of some Tory spokesmen; perhaps unfairly. I was and remain far from being an expert in economics, that much should be clear, but many Tories seemed to have gleaned their entire knowledge of the subject from the first page of Lipsey’s “Introduction to Positive Economics” where it discussed the benefits of perfect competition; if only they had turned to page 2 they would have learned that perfect competition is a rare beast indeed, that we are more likely to get imperfect competition, monopolistic competition and oligopolies, and that there are such things as externalities and market failures. Many Tories may indeed be conscious of some market imperfections, but it was hard to tell that under Thatcher when all the simplistic rhetoric was about market forces being able to solve everything.

If, during the ‘Eighties, the Tories had presented me with a realistic view of markets, rather than an idealised one, then perhaps I would have viewed the free market more positively. As it was I think my appreciation of markets was more grudging, like admiring Eric Cantona when he worked wonders in a United shirt. I think it is hard to truly admire something that you see as being a weapon in your opponent’s armoury.

No doubt many people became opposed to the free market because of the Great Depression, but for others I think the matter was up for grabs until Thatcher forced the issue; perhaps in opposing the Tories an appreciation of the free market was thrown out along with the baby and the bathwater, and I may be as culpable as many others in this. As ever, an open mind on matters is to be welcomed.

Chris ends his post by saying it is time for the left to “update their Bayesian priors” and although I am reluctant to claim membership of “the left” I suspect others are less reticent in deciding where I stand. No doubt this is very good advice and I will look into doing some updating right now; just as soon as I find out what “Bayesian priors” actually are.

If I still sound a little hoarse it is because I spent much of Wednesday evening booing Joey; no, not the Ginsters Pasty sponsored Friends spin-off (which I have never seen) but Mr. Barton, footballer, currently of Manchester City.

Actually, I didn’t even do that, but many people did jeer him half-heartedly throughout City’s 3-0 P45-inspiring victory over Newcastle, until he was finally substituted to generous applause because of his pretty good performance that night. I didn’t see the point of booing him during the game; would you boo him if he was clean through on goal, or if he cleared the ball off the line, or was about to take a penalty? Apart from not helping the team, those who booed him through the match really were hostages to fortune.

The reason for City fans’ chagrin is that Barton has asked for a transfer because he wants more money than the club are prepared to pay him, a measly £28,000 per week according to reports. Of course, Joey has claimed he wants to leave for all sorts of other reasons, claiming the club lacks ambition, but in the end it comes down to the fact that he thinks that merely being offered more per week than the average worker earns in a year is “insulting”. This would be less galling if it wasn’t for the fact that were he not a half decent footballer you can imagine Joey would be grateful just to receive a fortnightly giro.

Is Joey pleading poverty? Not quite, but his antics have made me think about the term, or rather about two terms; absolute poverty and relative poverty. The former is a measure that defines those whose level of income has fallen below a definitive poverty line, the latter is usually used to refer to those who earn less than 60% of the median average income. There are arguments over which measure is the best one to use when discussing poverty.

Personally, I favour using absolute poverty; relative poverty seems to be a bit of a statistical conceit. I wince whenever I hear Labour politicians talk about having “taken a million children out of poverty since 1997” when you know they may just be talking about some statistical jiggery-pokery; but then again I wince when I hear Labour politicians talk most of the time anyway. If we are talking about actual poverty then I think we should look at how well off people really are, rather than just how they compare with the average. For example, the number of people in relative poverty will reduce if the poor’s income were to remain static while the median average income falls, which seems nonsensical to me; if this were to happen then you could cheer a cut in levels of poverty, when in fact to me the poor would still be just as poor as before while the average worker would actually be worse off, which seems little cause for celebration.

But there are some misunderstandings about relative poverty; one being that, as those who are poor are defined as earning 60% or less of median income, “there must always be some proportion in poverty”. It is surprising how often I have heard this statement, as if it is proof that relative income is a political tool to ensure there are always some poor to fight for; but even I, as a very poor mathematician, know that if everyone were to earn the same then as a result everyone would earns the median income, therefore everyone must earn more than 60% of the median wage (because everyone would be earning exactly 100% of the median income). If you can accept this as a possible, if unlikely, scenario, then you must accept that there may be numerous other occasions where relative poverty could be zero.

In fact, as my above example shows, relative poverty seems if anything to be more of a guide to inequality; and call me old fashioned but I still think that inequality is something to be concerned about. I may prefer absolute poverty as a definition of poverty, but I do think relative poverty is a useful statistic on its own terms; our relative incomes do affect our access to goods and services and our opportunities in life, we do judge how well off or otherwise we are by comparison with others rather than by an objective assessment of our material wealth. If anything I just think that “relative poverty” is a misleading term, perhaps “inequality index” would be better; either that or people make it crystal clear what they mean and which term they are using when they talk about poverty. The problem with two definitions of poverty, as with two or more definitions of anything, is that people will always choose the one that best supports their case.

But if you think that relative poverty doesn’t matter at all then just have a word with Joey Barton. Actually, if you see him, don’t bother having a word as I wouldn’t expect to get much sense; if you do see him, just give him a slap, and say it’s from me.

There have been some interesting posts over at The Filter^ recently. This one, on the subject of drinking, harks back to an earlier post on the same subject, and follows the author’s usual line that government action will invariably make matters worse, that there are free market solutions to our problems. As usual, Anthony makes some insightful points, most of which I agree with, but I think he seems to just take things a bit too far and reveals what I feel are some of his prejudices.

My attitude to the recent relaxation in the licensing laws is that it is a good thing. Just because some people will overdo it with 24 hour drinking doesn’t mean I should be prevented from having a beer after eleven. The idea that every town centre is a war-zone at the weekend is a myth; I regularly go into Stockport on a Friday (and to a dreaded Wetherspoons to boot) and I cannot think of the last time I saw any trouble there. However, I also work for one of the emergency services, and I know that there is plenty of violence and disorder every night that is entirely drink related. I suppose my attitude is that we should let the free market do what the free market does, but accept that there will likely be externalities as a result, and that we may have to accept an increased role for the public sector, not in opposition to the private sector, but as a consequence of it.

I think that is pretty much my opinion in general; that the free market is the best way of organising things, that is should certainly be given the first go at providing our goods and services, but that we shouldn’t get bogged down in an ideology that the market always knows best. It makes sense to me to accept that the pursuit of profit does not necessarily provide the perfect desired outcome, and that when it fails we shouldn’t begrudge the fact that a public sector solution may be required, and should be valued for what it provides. At the same time, we must be aware that public sector involvement may very well make a situation worse than it was in the first place; we shouldn’t place all of out faith in either sector.

Returning to The Filter^ then; it was this part of Anthony’s original post that got me thinking. Considering an archetypal weekend night he says

The emergency services can complain all they want about how expensive it is to look after us all on a Saturday night, but this merely hints at the underlying problem. If you wish to nanny, expect children. With no financial penalty for drunkenness and irresponsibility – if the public purse picks up the bill, then of course people will make unwise decisions. For those who advocate socialised services that erode personal responsibility, funding A&E is a fair cost.

It is a well written paragraph, and but it seems to start from the point that government and all its agents are to blame and deserve no sympathy for their predicament; but aren’t they really just dealing with the consequences of standard human nature and behaviour? Is there any reason to believe that the welfare state’s nannying has influenced disorder at the weekend? Is it not just down to drunks getting lairy (on drinks bought from private sector providers!)? It sounds as if Anthony believes that the emergency services almost deserve their fate; as if because they are government employees they are complicit in the dependency culture that spawns disorder (when in fact we are far too jaundiced to have a benevolent attitude towards welfarism).

Anthony’s answer is of course that the free market can sort out our problems. It is licensing restrictions and local government red tape that mean only large companies can get planning permission for large bars; cut red tape and a thousand pleasant cafés will bloom (perhaps). But there has been a relaxation of just such regulations in recent years, and with it we have seen an increase in violent disorder and alcohol related crime; I am not suggesting there is a definite cause and effect here, but the facts seem plain. In his response to my comments on his most recent post Anthony suggests that scrapping the NHS and getting people to take out private health insurance will mean people may be hit in the pocket if they kick off and so are more likely to behave; but there already is a financial disincentive in the form of fines and possible imprisonment if you are drunk and disorderly or commit a public order offence, and how many people who get into scrapes will think about the financial implications of responding to a drunken taunt in a pub? How many even bother to go to A&E as it is for their split lip or bust eye? Anthony also suggests the police shouldn’t take drunken brawls between people who like a battle too seriously, and I am sure they would agree; but the police (unlike private sector companies) cannot, and arguably shouldn’t, pick and choose what they deal with. Surely they shouldn’t judge but should just uphold the law and deal with any transgressions they see? I don’t really see how else they should operate.

Anthony is a staunch advocate of the free market, and rightly so; but I think if he has an Achilles heel it is because he doesn’t realise that I am too. He seems to resent almost any action the state may engage in, and to see any argument in favour of public sector action, or any criticism of free market realities, as betraying a statist “government knows best” attitude.

But I have worked in the public sector long enough to know that I don’t fancy any casual extension of the government’s powers, I don’t want the state running more than it has to. The problem is that I have also worked in the private sector long enough to know that they seem little better, and that they share many of the problems and frustrations you find working for the state. To criticise one needn’t mean you have unquestioning faith in the other

Is it impossible to marvel at and embrace the market economy, to be grateful for what it provides us both on its own terms and certainly when compared to the alternatives; and yet to also acknowledge that there is a limit to what it can achieve, that it isn’t perfect, that there are times when the only solution may be government action, and that we can welcome and value that just as highly? It needn’t be a case of either/or, but both, working in partnership to create and protect the wealth and liberties that surely we all value?