Vir Cantium

I'm right, you know …

When Luvvies Try To Do Economics

I like Bill Nighy … as an actor. He’s good. But he should stick to acting.

The same goes for Richard Curtis: a fine writer there is little doubt, but he should stick to writing. Nevertheless, they and their chums have embarked on a crusade. A campaign to introduce a Tobin Tax.

The Robin Hood Tax is a tiny tax on bankers that would raise billions to tackle poverty and climate change, at home and abroad.
By taking an average of 0.05% from speculative banking transactions, hundreds of billions of pounds would be raised every year.

Gosh, it really is the silver bullet! The panacea!

Yesterday, the Robin Hood Tax had plenty of favourable airtime, particularly on the BBC. It’s difficult to reconcile, I know: a campaign driven by leading members of the world of entertainment, supporting an idea that involves increasing taxation and the tentacles of the state, getting a warm welcome from the major (and state-supported) player in UK media.

But wait, it’s not just luvvies involved here:

Who’s in?

Gordon Brown, Angela Merkel (the German Chancellor) and Nicolas Sarkozy (the French President) have all spoken out in support of a tax on financial transactions.

No mention of support from the great President Obama. Funny that.

Anyway, Gordon Brown supports it. So it’s dead in the water then.

Speaking on the PM programme last night, dear old Bill’s support seemed to hang on the “fact” that Richard Curtis is a very intelligent man, so he must be right. But isn’t a Tobin Tax unworkable without every country signing up? Oh no, even if the UK alone were to do it, it would raise x billion which could then be used to fight child poverty.

Now I’ve left out the amount because (a) the thing would still be unworkable, so it hardly matters, and (b) the loss to the Exchequer would be “x” times a significant multiple as the institutions leave London and take their corporation tax, PAYE, employers and employee’s National insurance and stamp duties with them. Then there’s the cost to ordinary pension funds from this “tiny tax on bankers” (and yes, the equivalent effects on Frankfurt or Tokyo should the grand global plan come together). Oh, wait …

Will the tax be passed on to consumers?
The Robin Hood Tax will not impact on personal banking or on retail banking. That’s because it targets a distinct area of bank operations – high-frequency large-volume trading, undertaken by financial institutions in the ‘casino economy’. 

If you change money to go on holiday, send remittances abroad, invest in a pension fund or take out a mortgage, you will not be affected by this tiny tax.

Really? Well, I guess this would explain why Curtis, Nighy et al weren’t complaining too loudly when so many were enjoying low interest rates and free banking, partly made possible by the “socially useless” but profitable activities of the banks – they’re using fantasy economics. Next year they’ll be campaigning to have more money trees planted.

Underpinning the plan is the touchingly quaint and naïve assumption that throwing billions of public money at a problem will solve it … like child poverty. Note to Bill: this isn’t 1997 any more. Billions have been thrown at child poverty, and things haven’t got any better. Sometimes, you know, it’s not just about money. And even when it is, it’s not always about governments spending it.

One last point for now: if the Sally Army, Oxfam, ‘, Christian Aid, RSPB, Save the Children, Comic Relief and many others were hoping to get any money / unwanted clothing / bric-a-brac off me in future, then they will have to become proper charities again … not campaign fronts for statist left-wing causes.


9 responses to “When Luvvies Try To Do Economics

  1. Sarah Jago February 12, 2010 at 8:13 pm

    Deary me. Picked up your ill-informed views when I went to read about the Robin Hood tax. Are you one of the wunch of bankers who tried to trip up this campaign?

    Free trade is NOT fair trade – ask the Caribbean banana farmers. Libertarianism is a poisonous ideology that feeds off the worst aspects of human nature, encouraging greed and selfishness. The rest of it… well, not worth the typing.

    You seem to be intelligent, so I don’t know how you reconcile your statements with the fact that we are a deeply unequal society, with all the problems that generates. I would have thought that conservatives would want to save on the long term costs of poor education, worklessness and anti-social behaviour that we are bearing at the moment – the legacy of 18 glorious years of conservative government.

    Just from an economic point of view, it is much better to encourage social mobility and an educated population because we become economically productive citizens who do not resort to crime, lawlessness and anti-social behaviour, which is much more costly to deal with. From 1979 to 1997, conservative governments trashed an entire generation through unemployment, destroyed our manufacturing industries and embedded deprivation in many of our communities. Conservatives then ruined a new generation with ‘there is no such thing as society’, ‘greed is good’and allowing your rich friends in the city to get richer with little regulation, propagating a view that trampling over others for your own good was acceptable and even admirable. As can be seen from your views – you must have been young in 1979.

    And in case you think I am a labour person – I’m not. My grandfather was chair of his local conservative association, and my dad voted conservative until Mrs Thatcher started pulling apart the NHS. Party politics is redundant, not relevant to the complexities of modern life and we should put our political parties out of their misery. Frankly, we need to find a different way of sorting out how our society should be, we should not be at the whim of people who put their ideologies before real people’s lives. It’s very arrogant and self-aggrandising, really, telling everyone else that you know best. Still, your blog is great: next time someone says conservatives wouldn’t be so bad, I can send them the link to your blog. And it reminds me (again) why I simply could not bear to have to spend time with people like you – the reason I usually give to people who ask why I don’t stand for my local council.

    • Vir Cantium February 15, 2010 at 11:36 am

      Thank you for your generic left-wing rant. You seem to have ticked quite a few boxes there: the misquoted “no such thing as society”, the Gordon Gecko reference, talking about the dark ages of 79-97, and so on. You did forget to mention, though, the one about how Mrs Thatcher liked to drown puppies in her spare time. I liked the spoonerism, though. Did you think that one up yourself?

      I was young in 1979, but I do remember that crime and social inequality existed before then. I also know that manufacturing industries were being destroyed by trade union intransigence, that nationalised industries ended up serving ministers and civil servants rather than actually investing, competing and so surviving to preserve and create employment. I feel it is clear that many years of state-funded social engineering have often served to exacerbate inequalities rather than cure them, so to propose more of the same on such a scale as proposed by the Robin Hood Taxers just isn’t credible.

      With your views of Conservatives being based on 30-year old stereotypes, it perhaps understandable that you feel such disdain for us. While you have written an eloquent essay on why you hate Tories, you have not offered any solutions of your own. You have certainly not offered any rebuttal to the points in my post. Indeed, I suspect from reading your final paragraph that you don’t vote – as shame, as it rather invalidates your moral right to complain about how things are.

      Oh, and to answer one specific point of yours: free trade is about removing barriers. That means, for example, not locking out developing world farmers from the EU protectionist bloc. It means a greater exchange of culture and understanding between countries. Crucially, it means that nations who are interdependent economically on each other are far less likely to go to war against each other. An insignificant objective?

  2. Daniel King February 15, 2010 at 3:45 pm

    My goodness your arguments are rubbish. If you are going to write a blog like this that you expect others to read then have the decency to articulate a thought through viewpoint. a) is this tax presented as a panacea – no, but as part of a wider solution b) just because the US does not back it yet does not mean that it is “dead” or that others should not back it. Equally just because “Luvvies” as you disparagingly put do back it then it does not mean it is wrong – as you imply. c) yes spending money does not solve all the problems, but it can begin to tackle issues caused by wider social inequalities.

    • Vir Cantium February 17, 2010 at 12:15 am

      Actually, unless most – if not all economies implement the tax then it is dead – without the US it doesn’t even make the drawing board. It has to be a global tax otherwise it simply won’t work because the affected institutions will just move – a process made all the easier these days becasue of the less geographically-dependent nature of modern banking. Therefore what is done with money that is unlikley to materialise becomes largely academic. Hence my suggestion that those in the entertainment industry (and yes I employed the widely-used light-hearted term “luvvies”) who are supporting it are not demonstrating that economic theory is their strong point – call that disparaging or rubbish if you like.

  3. Rhys Beavan February 16, 2010 at 2:29 pm

    Well done. Your argument is beautifully wafer-thin!

    I have two suggestions for you:

    1) look in to the way that charities (particularly development charities) operate and try to get your head round the fact that they rely on more than bring and buy sales to raise funds. They also have to lobby like hell to get their agenda heard.
    2) Stop writing this dreadful blog.

    • Vir Cantium February 17, 2010 at 12:24 am

      1) Gosh, those charities that have to undergo tho irksome task of justifying their cause and proving the worth of their work in order to get funds. Democracy is a pain isn’t it? While your “bring and buy sale” remark is deliberately flippant, it does highlight the difference between persuading people to donate by choice and forcing them by taxation, no matter how convinced you may be of the rightness and invincibility of your case.
      2) Stop reading this dreadful blog if it’s upsetting you that much.

  4. Jon February 16, 2010 at 8:05 pm

    Nothing wrong with playing ‘devil’s advocate’, but offer a solution at least. You’re showing a very negative attitude in criticising others, but what do you have to offer?

    The ‘Robin Hood Tax’ is positive move on a sector which has undermined the global economy and now carries on with it’s collective head in the sand.

    This is the best solution I’ve heard yet – almost the perfect tax. There are many negative externalities from investment banking and such a tax could go some way to reducing speculation (which frequently destabilises markets) and also act as a redistribution of income – possibly reducing the burden on regular tax payers… in time.

    As things stand we’re heading for another major financial crisis unless something innovative is done to address this. It’s time to be strong and ambitious, not cowed and weak.

    • Vir Cantium February 17, 2010 at 12:39 am

      I could make some suggestions of my own – that would make up a good few blog posts. It could include not having governments holding back the developing world through trade barriers, it could involve working to remove corrupt governments and encouraging more investment in the developing world by western industries (if that weren’t to be condemned by the Left as exploitation), to name a few possibilities, but the situation is certainly more complicated than implied by the simplistic tone of the Robin Hood Tax campaign’s solution.

      All that doesn’t invailidate my pointing out the fundamental flaws in what is proposed. I cannot see how a tax that will confiscate over half of global banking profits (and banking underpins the global economy) will have no effect on ordinary people, and thus be described as “almost perfect” – even if it had any chance of being effective.

      Speculation serves an important function in any market as it adds liquidity and makes it less vulnerable to distortions – we naturally only notice the occasions when it amplifies external effects.

      However, you are right I think that we are heading for another major financial crisis. At the heart of the last one was a credit bubble inflated by irresponsible lending … for which, by definition, there must also have been irresponsible borrowing. Not only should the bank bailouts have included the condition of heads on platters, but measures need to be taken to ensure that excessive borrowing is not encouraged in the future (as it was, for example, by artificially low interest rates in the UK, and government pressure in the US).

  5. Tim Sennett March 27, 2010 at 1:54 am

    You present simplistic arguments but valid ones. You’d do well to remember that if you’re trying to score points off a die-hard leftie then political arguments will not cut the mustard. You must present practical affronts to their dogma – cold hard figures.

    The Robin Hood Taxers have a poisonous presence in the media and I’ve been trying to do my bit and point out some flaws. I work in the City and this tax would not really affect my area of business. It would simply cost my clients money. What the Taxers don’t realise or understand is that my clients, far from being big-time risk takers, speculators et al., are just people like them: pension fund holders, small-time investors and people who want a better return on their money. They seem unable to grasp this.

    The core problem with the idea is the simple fact that trading one asset for another does not represent taxable economic activity. Rather, it is only a favourable movement in price that can be taxed. Take US derivatives, for example. Over $800 TRILLION worth traded last year yet this yielded less than $25bn in GROSS revenue. Trading size and volume does not equal turnover, and the RHTers don’t seem to be able to grasp this.

    Excuse the nonsensical rant. This Robin Hood Tax just annoys me with its short-sightedness. The simple facts are this:

    1) This tax will not raise anything like the amount of money the campaign claims;

    2) it will damage the banks if they cooperate and force them to trade different products [don’t forget: CFDs and Spreadbetting were invented to avoid another transaction tax – stamp duty];

    3) costs will be passed on to the consumer, simply because these costs are not represented by direct charges but by what’s called the bid-offer spread [the price at which traders (market makers) buy and sell assets – if the spread ‘widens’, your pension fund will face greater costs as they will not get as good a price when selling or buying investments];

    4) markets will lose liquidity, as happened with the bond trading levy in the 70s and Sweden’s proposed duty [forget when].

    I could go on. So many holes, such little time. Excellent article, but keep it practical and knowledgeable, rather than idealogical!

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