Questions & Protestations Answered
12:36 PM - 14 Jun 2013
12:39 PM - 14 Jun 2013
There are a number of questions people ask me about the idea of linking
banker and bank taxes to unemployment, and many of them are in the form of
protests that "this [bad-thing] will happen" …
I've answered every one I've encountered, many of which were thrown up by the economist Professor Danny Blanchflower. A flavour of our twitter interaction is illustrated in the box.
If you can think of one I haven't answered email me and I'll reply and add it to this.
But first… Idiots who mean well
The problem with other proposals to either "encourage" the financial sector to lend to SMEs, or to fund and create a state owned and directed "bank for businesses", or even that we nationalise all the banks, is that they all require the constant input and control of those who propose them.
Targets set by Government for lending by banks are subject to corruption; either by having the targets subverted or the lending figures distorted; both happened with Project Merlin.
The Robin Hood Tax and a "bank for businesses" would
mean either "idiots who mean well" are put in charge,
or giving control of huge capital to the same crooked bankers who operate
already vast frauds.
It would simply become a "business cost"of doing business as usual. Over time any good done with the funds clawed back by this will be eroded to ineffectualness by the banks continuing with exactly the same behviour.
Worse than that, they will try even harder to rip wealth from the real economy!
Direct greed to the good
The feedback mechanism I propose means experts are in charge but it doesn't
matter if they mean well, all that matters is that they want to reduce their
tax bill. The simplest way of doing that is by investing in the real economy.
There are other, higher risk and more complex methods of course.
This doesn't become a simple cost of doing business as usual, it becomes good business to look after the real economy.
So why not just repeat Darling's tax — how is your idea better?
OK Danny, you did ask.
Repeating Darling's tax wouldn't achieve these objectives, a bonus tax doesn't even have objectives
Darling's tax was a one off, and was framed only as a means of raising money,
with a strong hint of booting the bankers arses for what they had done. So
any link to behaviour was to behaviour in the past. No one, certainly not
bankers, believed the wishy-washy warnings that 'tougher action' would be
taken in the future if they didn't change their behaviour.
Time has proven that this was empty rhetoric at best, and more likely propaganda to shield the banks from more consequential reform; if it wasn't, it had that effect.
The general problem with politicians policies are that they all require
the constant supervision and decision making of the policy maker, who will
be subjected to lobbying (bribery) and paid smear jobs from journalists in
what we, even in the UK, must now call Main-stream Media — meaning
completely corrupt and corporate controlled media.
Darling's tax would have been one of these policies if it was repeated every year. We saw with Project Merlin that the banks will posture, protest and flat out lie about what they have actually done.
Reducing income inequality would boost economic growth, according to new OECD analysis. This work finds that countries where income inequality is decreasing grow faster than those with rising inequality.
July 3, 2014
Think a higher minimum wage is a job killer? Think again: The states that raised their minimum wages on January 1 have seen higher employment growth since then than the states that kept theirs at the same rate.
30 June 2014
The experience of the 13 states that increased their minimum wage on January 1st of this year might provide some guidance for what to expect
My idea, Danny, is better because you set it and tell the banks to bugger
off and get on with it. It is therefore completely immune from lobbying.
If they want to reduce their income tax to 'normal' levels they must invest
in SMEs to grow the economy. This marries the banks to the real economy.
There is no denying this, care to try Danny? Ever heard the complaint, 'the banks are divorced from the real economy'?
Darling's was a hard-wired, arbitrary figure which would have been the same
even if two minutes after it was implemented all bankers had become saints
and decided to work for the good of mankind instead of themselves.
My idea is better Danny because it rewards good behaviour by the banks month on month with ONS released figures, but also punishes bad behaviour month on month; so it encourages all bankers to become saints; investment would have soared, unemployment would have plummeted, and "we'd all be rich".
My idea makes the most valuable people in the banks those who are most successful
at growing local businesses. This is completely at odds with the practice
just now of the most valuable people being those who can extract the most
fees from the high street, or those in the "investment" side who destroy those high street businesses to make even small
Repeating Darling's tax wouldn't achieve these objectives, a bonus tax doesn't even have objectives.
Repeating the bankers' bonus tax would just mean they'd try even harder to screw over everyone in pursuit of avarice.
The financial system will become more stable over time rather than less
because the sector is now married to the real economy, and everyone's interests
are in having prosperity for the whole population, rather than the sole target
being personal gain without regard for the rest of the economy, and even
with known, devastating consequences for whole countries.
No longer will it be in the interests of the likes of RBS to bankrupt businesses to seize assets.
There is an implicit regulatory effect via peer to peer supervision between
both individuals and between competing institutions — and no need for
costly Vicker's reforms; a cost to be born be the consumer-tax-payer.
This is cost free reform.
Repeating the bankers' bonus tax would just mean they'd try even harder to screw over everyone in pursuit of avarice.
Tell me Danny, how many ways must I list of how my idea is better than Darling's, and how much better the World would be, before you accept it?
The cases against linking banker & bank taxes to unemployment:
Let's examine the detail.
Bankers will just avoid it
This shows you have been so completely subverted by the mythology of bankers that you think they have magical powers to avoid tax — they don't.
Empirically they didn't avoid Alistair Darling's 'Banker Bonus Tax', but from first principles it is obvious that such a declaration implies that they must be avoiding all tax and therefore must be paying zero percent tax just now. But we know they don't … so that's that dealt with.
It's been suggested that a banker forming his own company, which the banks
then pay to provide a service, is a way to avoid income-tax. Again, even
if this were a viable option for traders and the like to do en mass without
prompting regulatory intervention or even primary legislation, it doesn't
For all sorts of reasons the CEOs of banks can't pull that trick.
Let's imagine that its only the senior members of banks who pay an income tax rate tied to the real economy, do you really think they'll be happy to take any sort of financial hit while their underlings get away with murder? No, they'll direct the banks resources to the real economy.
Bankers will leave the UK
Even if this BBA propaganda was true, let them leave — the banks will still be full of our money.
Shot to the head or emigration, they can't take it with them.
Let the gamblers leave, the banks will still be forced to invest our money from "their" banks in our economy, not to gamble it in casinos. We want rid of the gamblers anyway.
Can't be done unilaterally
Again I say the banks are full of our money skimmed from our economy.
One country linking macro-economic performance to banker & bank taxes forces all banks in that country to invest in that country's economy, no matter the global reach of those banks.
To paraphrase the utterly criminal HSBC - All the World's banks become local.
Look at Germany and their economic success with banks investing locally. Imagine if this was repeated on a Global scale.
The courts would rule against it
Alistair Darling's 'Banker Bonus Tax' was legal, the precedent has been set. That was proposed and implemented in a matter of a week or so, or even a few days. This sort of objection is a projection of Fear, Uncertainty & Doubt by those who are working for the interests of the banks.
It'll just be lots of minimum wage jobs
Minimum Wage Jobs
Let's accept for the sake of argument that it is a danger that "It'll just be lots of minimum wage jobs". So, how do we increase the minimum level?
The Low Pay Commission decides on the level of the minimum wage, which is the "constant input and control of those who propose them" problem again.
Change this to a mechanistic feedback system by setting the minimum
to a "substantial percentage of the average wage".
This would provide forward guidance to business; as the natural increase in average wage naturally increases the minimum wage. This would give us Vacuum Down; where money from the top in companies is transferred to the lower paid — where else is the money going to come from? It's the same money that was supposed to reach the exploited via Trickle Down.
We would therefore as a society ensure that inequality has some kind of lower bound, and again the only place the money can come from is the very top.
Perhaps getting to the "substantial percentage" in one leap would be inadvisable, a simple Minimum Wage Escalator is the answer here; again it provides forward guidance that in three steps, say every 6 months, it will be increased incrementally, then the forward guidance is the natural increase in average wage.
I'll leave it to others to set a figure to "substantial".
Top-rate of income tax: feedback from average wage
Its easy for me to see that calculating the general top-rate income
tax by a multiple of average wage would be a simple way to pressure minimum
We'd get all high-salaried individuals looking to reduce their income tax by bringing up the average wage; should see greater calls for legal Minimum Wage to be increased or reinforce support for it.
I'd suggest that this would reduce inequality and according to the OECD would therefore boost economic growth, which in itself would have an upward pressure on low wages.
All taxes should be expressed as a feedback mechanism.
I have occasionally said that a hypothesis worth examining is that: "All taxes should be expressed as a feedback mechanism". This would force us to ask the question; what is the purpose of this tax?
I've suggested elsewhere that the link with banker's income tax should be to a "basket of economic indicators"; I imagined a simple rule which said that if one of the indicators became dominant (like unemployment) this became the sole determinant
This was from someone even more cynical than me, and pessimistic as well.
This implies "the banks" will actively monitor things to suppress wages, but the cynicism implicit in the protest says banks won't actually care what the wage level is, low or high, as long as it counts as "not unemployed".
High-paid workers must ipso facto produce higher value for the economy, and investors.
Raising top-rate income tax won't increase amount of money raised
Even if this were true it doesn't matter.
The fundamental point isn't to raise money for the exchequer, otherwise I'd be satisfied with just having a Robin Hood Tax, the point is to direct the behaviour of banks toward investing in the real economy.
How do you police it?
You don't police it, you set it.
This is a really dumb question.
It is directly analogous to, "How does a driver 'police' the cruise control in his car?".
The only question then is what do you set it at, and the answer to that is, whatever gets a desirable economic outcome for the whole population.
Obviously you don't police feedback mechanisms, that's the beauty of them, that's why they are used, that's why the term 'automatic' is often used to describe them.
Either you didn't understand the proposal or you have an agenda which means you are determined to attack the idea in any way possible; the simplest explanation being you think it might harm your own interests in some way.
I mean really? It just isn't.
Its a feedback mechanism I'm proposing not an absolute limit! Its the difference
between cruise control in your car and a speed limit on the road.
How dumb do you have to be to not understand that difference?
There's no evidence for this
This is a deeply dishonest or cretinous protest.
Its a brand new, novel idea, of course there isn't evidence for it. There wasn't evidence that the World Wide Web would go beyond CERN, but Tim Berners Lee still named it that, maybe he should have listened to the pricks in the English tabloid press who ridiculed him for saying that it would change the World?
Fear, uncertainty & doubt
"Oh! There could be unknown consequences which could be damaging".
This and other vague invocations of lurking dangers is just a complete nonsense.
Thankfully I've thrown away the memory of the dipshit on Twitter who kept
banging on about this in various wording, although an unfortunate consequence
of that is I can't remember the good stuff I threw back in his face!
Basically, to listen to that is to never make any change of anything at all for the rest of time.
Bank share price
No one has mentioned this, but as it's the only reason I can think of for someone who agrees the idea will work but refuses to publicise it. But don't worry, this not only ensures that banks will be safer than houses, it also means that over the long term share prices will keep pace with any growth in the economy. The danger of no change in bank behaviour is there will be another crash which is not recoverable at all.