Tuesday, April 17, 2012

Debate: Green vs Free Market Ideology

I have been having a very long and enjoyable debate with @MarkJLittlewood, CEO of the Institute for Economic Affairs, which aims to disseminate of free-market thinking. He was up against @RichardJMurphy, the excellent tax analyst, on Newsnight. They had a brief interchange on Twitter, and I poked my stick in.

The debate began back on 11th April, and has continued since. I am reviewing it here, on the grounds that the 21st century will be a battleground between two ideologies - that of the Greens (political ecologists), and that of the Free Market Fundamentalists. I am doing a certain amount of paraphrasing, to smooth out the note-form of Twitter, and naturally I will be able to expand my own point of view better than I can expand MJL, but I will do my best to be fair.  Unusual for a free market fundamentalist, Mark (MJL) was polite and reasonable. I am happy to edit the text here if I have misrepresented.

This section is on taxation.

It began when MJL said that the top 1% earn 13% of national income and pay 28% of the total income tax take - implying (I suppose) that they are overtaxed.

I countered that the Institute for Fiscal Studies says that the top 1% pay 12.8% of income tax. The top 10% (less the top 1%, confusingly) pay 27.6% of the total income tax take. But they have 31% of total income. So they're not over-taxed.  

MJL came back with Office for National Statistics figures, which have the top 10% paying half of the IT take. The top 1% earn about 13% of income and pay  about 28% of the tax (the latter % has been going up for 10+ years).

To which we could add these data from the nef site:
Net property wealth: the 1% own more in property than the 99% put together.
Total aggregate wealth (housing + financial + physical + pensions)
Top 1% of households: £1.3 trillion
Bottom half of households: £1.0 trillion
MJL was dealing in incomes, but absolute wealth puts things into better perspective.
[update ends]
That's accountancy for you. Confusion. Even so, when you are bringing in telephone number amounts of money, you can afford to pay more. It's just numbers, compared to people who are struggling to make ends meet. The rich benefit from being taxed, if the money is spent wisely.  They get less crime, less risk of rebellion, arson, mayhem &c in a more equal society.

MJL: The issue is whether we really want the state to spend about 50% of national income. That's way too high. (He later sets the aim of the state having 29% of the national income - which is a massive 40% drop in the state's income). He is open minded about the rate at which the state's funding is cut - which is good, because one of the factors in Greece's collapse is the high flow of loan money which followed Greece's accession to the Euro, followed by the sudden cessation of the same flow after the 2009 crash.

Now this is the rub. The Small State Ideal. This is what George Osborne is all about - cutting down the State.  The hullabaloo about the deficit is a smokescreen for his crazed chainsaw maniac attack on the British economy.

I countered: It's not so much the amount the state spends as the efficiency of its spending. We could cut down Trident &c, and go for real investment. I could have added the Green Wage Subsidy, which is a far more efficient way of managing welfare benefits - while getting people out of unemployment and greening the economy at the same time.

I advance 's proposals (Anti-avoidance rule, Transparency, Increase HMRC staff, Reform small business tax, Close Tax Havens) which claim to be able to bring in an extra £25bn/yr to the UK economy

MJL doubts they would produce that much.

I say Osborne himself says tax avoidance costs UK £5bn p.a. He is bound to underestimate, because Osborne is a tax avoider himself, to the tune of £1.6 million.

MJL says a lot of tax avoidance is positively encouraged. For example you can pay £11K into an ISA every year.

I say this is weak. ISAs, charity giving and other breaks does not mean that super-rich should use havens and  accountants to avoid tax. ISAs are aimed to encourage saving, charity breaks to encourage charitable giving. Tax avoidance for the mega-rich is just tax avoidance for the mega-rich, a haemorrhage of money away from the public purse. MJL says it is private money. I say It is clearly not reasonable that Warren Buffet pays less % of his income than his cleaner.

MJL: We need to stop believing the problem is too little tax - it's too much spending.

RL: Osborne keeps on about how awful the deficit is. That cannot be addressed by cutting spending alone. We must also staunch the haemorrhage represented by mega tax avoidance. And we need better, more wisely directed investment - primarily into energy conservation.

This opens up a whole new area of discussion, which I will review later. I hope this gives a flavour of the debate between a Green and Free Marketeer, which as I say, is the major debate of our age. 


Joe E said...

I'm not convinced that Green politics is the opposite of Free Market politics. I believe in the usefulness of free markets as as well as fairly deep green environmentalism. I think we've forgotten that the broader democratic society can set the terms by which free markets exist. So we can decide which areas of life are open to free market activity; which should be managed by government; and which should be banned altogether. And the free market elements can be controlled by our rules, set up so as to achieve the outcomes that we want.
Free markets are not the opposite of government, either - they need government services to survive. You can't have a free market without property law, transport infrastructure, educated, healthy workers and so on. So free markets and democratic government go together; the alternative is feudalism of one flavour or another.

DocRichard said...

Hi Joe, thanks for commenting.
I think we may be confused about the term "free market". We greens should have no problem with a market. It is a natural and enjoyable human experience. It is the idea of the FREE market - or more accurately, Free Market Fundamentalism as George Soros puts it, which is the problem. It idealises and absolutises the freedom of the Market as a quasi-mystical Invisible Hand. All that is wrong in any economy stems from inhibition of the freedom of the market.

As you will see in the next review of the debate, FMF leads necessarily to AGW denial.

The Greens' position should neither a Marxist Command Economy, nor FMF, but a Guided Market - guided to better serve the needs of society and environment.

I hope this clarifies the position.