Wednesday, 21 May 2014

UKIP or the Greens: Who are really saying the unsayable?

Amidst their recent popularity, the United Kingdom Independence Party has tried to encourage the perception that they stand outside the established political consensus, offering arguments and perspectives neglected by mainstream political debate. This of course, is at odds with the fact that support for most UKIP policies can be found in the mainstream rightwing press every week. There is nothing daring about talking about exiting the EU, or transgressive about plotting to reduce immigration.  UKIP might have other radical concerns or proposals, but they certainly haven’t told anybody yet: Nigel Farage disowned his 2010 General Election manifesto, and has failed to disclose any updated domestic policies. It’s only with his recent comments on Romanians that Farage has said anything genuinely controversial, and he has expressed ambivalence since.

By contrast to UKIP’s flimsy policy platform, it is the Green Party, the other lot outside the mainstream party system, who have genuinely consensus shaking ideas. To take a few examples:
  • On Migration (note that it is ‘migration’, rather than immigration; not just an issue of coming, but leaving), the Greens turn the standard debate on its head, challenging the assumption that rich countries have a right to exclude foreigners, and framing the debate around global inequality, rather than the economic self-interest of the UK
  • On Economic Inequality, the Greens argue for a Citizens’ Income, an unconditional sum of money for all citizens to prevent destitution and allow them a degree of freedom from the pressing imperative for a job and income, allowing them to develop their education, family life etc. This is a radical policy with prominent historic advocates on the left and the right, yet one which is unknown to most Britons today
  • On International Trade, the Greens express a degree of scepticism about free trade uncommon among major parties or the mainstream media. There is a general acceptance in the UK that the free movement of goods and services (though not labour) is an unmitigated boon. Even UKIP, for all their mistrust of the European common market, want to set up a Commonwealth Free Trade Area. By contrast, the Greens oppose the Transatlantic Trade and Investment Partnership, seeing it as undemocratic, and emphasise ‘fair trade’ over ‘free trade’
  • On Public Services, the Greens are committed to nationalising railways, water and energy, policies that are highly popular, but rejected by the other big parties.
The position of the Greens highlights the benefits and dangers of genuinely defying consensus. On some issues, like nationalisation, you are likely to hit a position that has widespread appeal, and find yourself speaking for the ordinary man against an out of tough elite. On other issues, like, immigration, you’ll be voicing a fringe viewpoint that will likely get you written off as lunatic. And in some cases, as with the basic income, the idea will be so untested that you just won’t know how people will respond until you test it.

However they are received, greater acknowledgement of Green positions would stimulate and enhance what are often stale political debate.

Monday, 28 April 2014

A tax on conspicuous consumption?

In a recent Vox article, Matthew Yglesias argues for punitive income and inheritance taxes. His logic is that these taxes can have benefits beyond just raising government revenue – by deterring the high pay and large bequests that encourage socially harmful inequality, they can be beneficial even if nobody pays them.

Yglesisas repurposes the reasoning that underpins excise taxes, such as those on tobacco or gambling, and applies it to income and inheritance:

Tax T discourages behaviour B, which contributes to social problem P

Where T can be tax on cigarettes, behaviour B smoking and P the public health cost of smoking-related disease. Or in Yglesias’ argument, T is income tax, B is high corporate pay and P is income inequality.

An interesting question is whether this line of thinking can be used to justify rises in other existing taxes. I have previously discussed the possibility that income tax could be used as a means to reduce working hours – Rupert Read claims that “high tax rates are a good thing inasmuch as they discourage the culture of overwork which grips societies like ours”.

Another interesting application would be to increase sales tax (eg VAT) on ‘positional goods’, such as luxury fashion items and jewellery, which are bought primarily to increase the owners’ social status. Besides the direct negative effects for those who have to endure the other people’s wealth being shoved in their faces, the purchase of these goods also leads to an ‘arms race’, where households spend more and more in an effort to best each other, with more of their money diverted from things that they will genuinely enjoy. Higher sales tax on luxury items would mean fewer purchases of positional goods, lower status anxiety and help defuse the consumption arms race.

Robert Frank has gone further and advocated scrapping income tax and replacing it with a progressive consumption tax for these very reasons. Under Frank’s scheme, households would have to disclose their incomes and savings to the tax authorities, and would be taxed on the remainder. This is an interesting idea, but I have a couple of reservations. First, this seems an unnecessarily bureaucratic system involving a lot of paperwork and scope for errors. Secondly, it is clearly the case that not all consumption is on positional goods. Frank would tax spending on food and rent, money spent on meeting basic needs. By contrast, a positional goods tax can be targeted at more expensive goods that are more likely to be for display, rather than being intrinsically valuable.

However reformed, income tax and sales might just be the tip of the iceberg in terms of Yglesias’ argument – what other existing taxes can be reconsidered as excise duties?

Sunday, 30 March 2014

The Misleading Rhetoric of the ‘Global Race’

The idea that Britain is involved in a ‘global race’ which it will ‘lose’ to other countries unless the necessary reforms are undertaken has been a staple of Conservative party rhetoric for the past 18 months. Numerous commentators have reviewed and ridiculed the phenomenon, with critics typically returning to two objections. Firstly, there is the lack of precision around what exactly the race is for:

This race, we are told, is economic. Our opponents are usually specified: the rising countries of Asia and South America such as China, India and Brazil. Yet the prize is vaguely and promiscuously defined: ‘jobs’, ‘wealth’, ‘growth’, ‘trade’, ‘talent’, ‘technology’, ‘skills’, ‘capital’,  ‘competitiveness’, ‘big ideas’,‘influence’, innovation’, ‘investment’, ‘investment opportunities’, ‘recovery’

This lack of clarity leads to the suspicion that the argument is not the result of any analysis of global economic and social trends, but is rather an exercise in creating a foreign bogeyman to threaten those who object to Tory policies.

The second common objection to the metaphor of the global race is its implication that economic trends are zero-sum, that for every winner there must be a loser
Countries get richer together. If China carries on reforming and growing, there will be more opportunities there for Britain
Yet Chancellor George Osborne’s article with his German counterpart Wolfgang Schauble in Thursday’s Financial Times continued to display these confusions and worse. In a single paragraph, they list four domains in which they believe European countries are at risk of losing the global race – economic growth, patent applications (presumably as a proxy for innovation or technological development), youth unemployment and social welfare spending:
Recovery in Europe is vital. But our continent is falling behind. Over the past six years the European economy has stalled. In the same period the Indian economy has grown by more than a third, and the Chinese economy by almost 70 per cent. Europe’s share of world patent applications almost halved in the past decade. A quarter of young people looking for work cannot find any. Europe accounts for just over 7 per cent of the world’s population but 50 per cent of global social welfare spending. Reform is the key.
But in each of these domains the metaphor of a race is misleading – either because they are focusing on the wrong metric or because a competitive approach is inappropriate

Though Osborne and Schauble do not explicitly refer to the idea of a global race, this is clearly the image they are trying to invoke when they worry that “our continent is falling behind”. But who is Europe falling behind, and in which race?

The first race, it becomes clear, is the race for higher economic output. In this race, Europe is falling behind China and India, as they have seen higher growth in the past six years. Stated so clearly, the absurdity of the claim should be apparent – rich Europe cannot be falling behind much poorer countries like China and India – it is clearly ahead of them.* Rather, what is happening is that China and India are catching up to the EU.

Being caught up might not be as bad as falling behind, but it’s still almost always a bad thing. Yet there are a couple of salient facts required to put that in context. The first is that this is a race where it is harder to lead than to chase. The economic principle of convergence means that poorer countries will tend to grow faster than rich ones, essentially because they can trade with and copy technologies from them. The GDP race is one that it is hard to lead – the EU is like a cyclist which must accept that other riders will benefit from their slipstream. Thus lower growth than India or China is not a tragedy to be bemoaned, but the almost inevitable consequence of having a bigger economy. The real problem for Europe is its lack of growth in absolute terms.

The second critical fact is that this is not a case of Europe needing to fend off immediate rivals in a close race Rather, Europe, in seeking to extend its lead over India and China, is like a runner sprinting to lap straggling laggards in the race. Depending on the source, average EU income is 20th-30th in the world. By contrast, China is placed in the 90s and India in the 130s. Stepping out of the metaphor, there is something deeply unpleasant about Europe seeking to out-grow poor countries like India and China. If Osborne and Schauble want faster growth than India and China, then by implication what they want is a more grossly unequal world where the rich are even more distant from the global poor than before.

The second race that Osborne and Schauble want to win is the competition for most patent applications. They are correct that Europe’s share of global patents has declined, but again, they fail to provide the relevant context. First, in absolute terms, patent applications are around 50% higher than a decade ago, according to World Bank data. Second, this seems like another area where convergence has occurred – the EU still has more patents per capita than average, with 10% of global applications, despite (as Osborne and Schauble later observe) having only 7% of the global population.

The third point made is around youth unemployment. However, there is no comparative metric used to illustrate this, so it’s not clear who Europe is supposed to be ‘falling behind’.

Osborne and Schauble’s fourth indicator is the most pernicious – social welfare spending. This is one race where it is particularly unclear what constitutes ‘winning’. I personally would have thought that out-spending other countries would be beating them, but it is clear that the finance ministers see Europe’s high spending as a failure. But I can only presume that they do not see having the lowest social welfare spending in the world as a desirable goal, either.

The fact that Osborne and Schauble offer the context of Europe’s population suggests they see this as some sort of odd ‘race to the middle’ – in their view Europe should be closer to average global social spending. The implication is that social spending is a ‘goldilocks good’ – some is desirable, but too much is a bad thing. But if this is the case, why should we take the global average to be the best indicator of the ideal level? Being above the global average for social spending could just mean that other countries spend too little on social welfare. And in this case that is almost certainly what it means. Why should we care about an average that is clearly pulled down by developing countries lacking the finances to develop welfare states of their own?

There are almost certainly some domains where competitive global comparison is the appropriate way to think about them. But Osborne and Schauble’s letter suggests the Conservatives still haven’t found them

* Even is the race is in terms of absolute GDP (ie not adjusted for China and India’s larger populations), the EU remains clearly ahead of India and just ahead of China

Sunday, 12 January 2014

Can cosmopolitans vote for Scottish independence?

A cosmopolitan nationalist is a contradiction in terms. Yet I want to suggest that in some cases consistent cosmopolitans may be justified in supporting nationalist causes – in particular, voting ‘yes’ in independence referenda like the ones anticipated in Scotland and Catalonia in 2014.

Cosmopolitanism is the moral or political theory that insists that nationality is morally arbitrary – that we have no greater reason to promote or care about the welfare of our compatriots than people of any other country. This is, almost by definition, antagonistic to nationalism, which insists that we woe at least some loyalty to our nation and its inhabitants. Cosmopolitanism means, literally, citizenship of the world. Nationalism seeks to carve out a slice of the world, and put it above others.

So cosmopolitans and nationalists are certainly unlikely comrades, but if circumstances conspire in the right way, I think they can end up on the same side.

The first point to make is that while cosmopolitans embrace global citizenship in a moral sense, few major cosmopolitans have called for its institutional corollary – a world state. Thomas Pogge offers perhaps the most prominent discussion of an ideal cosmopolitan global order, and maintains an important role for nation-states, as part of a ‘multi-layered’ order, with power diffused down to regional institutions and up to global organisations. Moreover, Pogge sees secessionist referenda, as in Scotland or Catalonia, as part of the “cosmopolitan ideal of democracy”:
“The inhabitants of any contiguous territory of reasonable shape, if sufficiently numerous, may decide-through some majoritarian or supermajoritarian procedure-to form themselves into a political unit of a level commensurate with their number”
Even commitment to a world state does not necessarily entail opposition to secession. After all, voters are being asked to choose between Scotland and the UK, or Catalonia and Spain – ‘World State’ is unlikely to appear on any ballots. On the face of it, World Staters are likely to oppose secession as it represents a move further away from a World State – greater fragmentation, rather than unity. But it could be that a more indirect route to global unification seems more likely – for example, if one of the new states is more open to multi-national institutions (as Scotland appears to be more supportive of the EU than the rest of the UK). More likely, neither option will make a World State substantially more likely, in which case the World Stater is in the same position as other cosmopolitans, forced to fall back on other considerations.

So what considerations should guide a cosmopolitan voter? While Pogge suggests that cosmopolitans should accept the decisions of referenda, he does not offer any guidance on how to decide which side to support once a referendum is called. One possibility is that this falls within the legitimate sphere of compatriot preference that some cosmopolitans accept – that this is one area where it is OK to give voice to nationalist sympathies. If this is the case, then the decision is simple - the cosmopolitan is free to vote for whichever country they feel most emotional attachment to.

But suppose we want to deny it is ever legitimate to show compatriot preference, or perhaps that we genuinely have no emotional preference? In that case, there are three relevant considerations that a cosmopolitan needs to account for:

1. Will secession leave the new country (ie Scotland/Catalonia) better off?

2. Will secession leave the rump/original country (ie ‘rUK’/Spain) better off?

3. Will secession be better for those from other countries (eg Spain, Romania, Somalia, Niger)?

This might seem trivial, but it is important to bear all three considerations in mind when reviewing the arguments for independence. For starters, notice that the vast majority of the debate addresses only consideration 1.

The cosmopolitan must therefore be indifferent to any zero-sum nationalist claims. If Catalonia claims it will be richer with independence because it will have to share less of its wealth with Spain, then the cosmopolitan will not see this as positive, since it will make Spain worse off. Moreover, they must be alert to knock-on effects. If an independent Scotland would be a fairer, more equal place than rUK, this good must be balanced against the harm to the rest of Britain of losing Scotland’s moderating influence (and, for example, embracing neo-liberalism more fully). Cosmopolitans are also likely to pay particular attention to domains like foreign and immigration policy which impact people of other nationalities. Thus an independent Scotland’s more pacific stance in international relations and greater openness to immigration is likely to strengthen the cosmopolitan’s appetite for independence (assuming, of course, that this does not significantly affect rUK’s policy).

Thus a cosmopolitan’s reasoning on the independence question is likely to be more complex and more pragmatic than most. other voters. There are more interests to be considered, certain arguments that must be thrown out, other arguments that must be given greater emphasis. But it is entirely possible that independence may be the course that best promotes cosmopolitan values.