More Macro

More Macro

In this article, “Britain’s tax delusion”, the ‘Statesman identifies that the UK is not overtaxed, that taxing non-doms and imposing VAT on school fees will raise trivial amounts of money and that the clawback of child benefit has a disincentive on the supply of effort. It is silent on the clawback of the personal allowance which does the same, and fails to substantiate its arguments on income and wealth equality by not quoting the gini coefficient or any altenrative statistics, or facts as I like to call them.

… creates a system that is not just dysfunctional but profoundly inequitable, in which the average effective tax rate paid by those earning more than £10m a year is lower than that of most nurses. In 1845, Benjamin Disraeli wrote of England’s division into “two nations”: the rich and the poor. Today, the gulf between Asset Britain and Austerity Britain is as wide.

Since both major parties identify growth as the answer, we need to ask how they think it’ll happen, the three sources of growth are investment (private or public), government expenditures (i.e. the deficit), or exports (and we know why they’re fucked).

The challenge for Western democracies is to provide for that spending while encouraging investment and job creation. It is a challenge that Britain is failing. Instead, the UK’s tax system is quietly managing our ­economy towards disaster.

Business taxation does not encourage investment; the UK’s investment rate is low by international comparison.

Growth strategies must only be pursued in the context of combatting climate change. So a new coal mine is not a good idea.

Modern economists argue that investment in human capital is a priority as an incubator of growth. Even those politicians who agree are silent in the face of monetarist orthodoxy which requires continued austerity. After 13 years you’d think they’d have learnt, but it seems not.

Image Credit: from , cropped. Fair use as it has no economic impact on the original publisher. …

Brexit & modern supply side economics

Brexit & modern supply side economics

I have just read Jonathn Portes’ review of Peter Foster’s book “What Went Wrong With Brexit?”. Foster was a remainer, despite following in the footsteps of Boris Johnson as the Telegraph’s Brussels correspondent. Portes looks at the economic damage, the under investment in human capital and the continued timidity of our politicians. In this review, I [hope I] add to the debate by looking at long term goals and short term modern supply side programmes, most importantly in my mind, rejoining Horizon Europe.

There’s a couple of things in the article which interest me. Portes in the subtitle ensures that we understand the damage that Cameron and Osborne ‘s austerity has done to the UK economy. A critical conclusion from this article is that the problems in the British economy are endemic, predate the Brexit vote but are made worse by the increased bureaucracy in conducting foreign trade, and the miserly modern supply side policies of this Tory government. The Portes’ review concludes with a look at Foster’s proposals on making things better. Portes suggests that the realistic choice, because of our political leader’s timidity is between minimal change to the future trade and cooperation agreement or rejoining the single market. Portes suggests that the minimal change suggestions i.e. fixing Brexit will not be as easy to achieve as its proponents hope.

Portes and Foster shred the argument that leaving the single market will reduce bureaucracy and red tape. We can see by the 5th delay to introduce full customs checks on the UK/EU sea border that  these checks are hard and expensive to implement and that the EU’s imposition of the checks and paper work inhibits EU companies exporting to the UK.  

The review, segues to macro-; a critical passage in the review states,

… this perhaps reflects a wider failing. While there are occasional references to the political and economic backdrop against which the referendum took place, it’s hard not to come away with the impression that Foster, like many broadly centrist remainers, thinks that the UK was on the right track until Brexit came along to upend both our politics and our economy. But the UK’s productivity slowdown began around the time of the global financial crisis, while other longstanding and interrelated structural issues – inequality, housing and skills – long predate this.

Portes also argues that the Cameron/Osborne initiated austerity economics has made the UK’s structural problems worse. With the exception of the Truss administration, the austerity ideology has driven the Tory government’s macroeconomics since 2010. But now, due to Brexit, we are now in a position where the balance of trade and foreign exchange rates are worsening, foreign investment is declining, there are labour shortages, and we remain the only major economy to have a GDP lower than its pre-pandemic peak.

The Government looks to compound this by reducing the number of university places, by restricting immigration, and by continuing to exclude the UK from Horizon Europe. This last aspect of government policy, I find both bizarre and another aspect of the self-harm that austerity and Brexit have caused. It is curious that Sunak permits this policy to stand, given that he is a fan of Paul Romer’s work on investment & innovation. Romer argues that growth is driven by investment in Human Capital. Re-joining Horizon Europe, the EU’s R&D funding programme, is on the table, since much of our problems are because of low skills and low investment, we should grab this opportunity with both hands. Each year we are excluded exacerbates the damage to our research, innovation, and productivity.

Portes looks at Foster’s proposals for change. He suggests that centralist remainers/rejoiners ambition is limited to either fixing Brexit or rejoining the single market. Most seem to compromise around Starmer’s Labour’s proposal to fix Brexit. Portes suggests this will not be as easy as its proponents hope.

As I have said, as have others, why would the EU amend the Future Trade & Cooperation agreement exclusively to the advantage of the United Kingdom, specifically the proposals to ease immigration controls within the European Union to allow musicians and other creative artists to tour the European Union and to allow professional services consultants to work in the EU seems highly ambitious without some form of sectoral reciprocation and the EU’s start position will be freedom of movement for all labour. As Portes puts it,

He [Foster] outlines a long list of technical changes where, with both determination and goodwill, the UK could make modest but meaningful improvements to the current Trade and Cooperation Agreement, although he perhaps underplays how hard it will be to persuade our European counterparts to engage seriously with this agenda.

It maybe the only way to fix Brexit, is to take the terms we are offered by the EU, and an indivisible single market is part of that. If that’s on offer, we should take it. …

Whose jobs are AI coming for?

Whose jobs are AI coming for?

McKinsey have produced a report on the role of generative AI on productivity and the future economy. The white paper can be found on their website. They launched the paper with a series of webinars, one of which I attended. Here are my notes and thoughts …

Data, Information, Knowledge, & Wisdom

The first point they wanted to make was that they don’t believe it will make programmers redundant. This is not the view of Forbes, who argue that these new machines will reduce the need for human programmers. My limited experience with ChatGPT suggests that its quite good at writing code, although it needed customising before use, but it was not so good at drafting laws, which is curious because as Lessig argues, “Code is Law”.  

Historically IT has automated low wage information processing jobs. While information processing is considerably broader than paper pushing, the new generation of AI tools are capable of adding significant value to people working higher up the data, information, knowledge, wisdom pyramid. , such as teachers, lawyers and doctors.

The speakers at my webinar said that life’s getting better, a proposition I question. I add, economic activity still fundamentally requires inputs of labour and capital. It is my contention that software and information systems are difficult to categorise as uniquely belonging to one of these classes of resource. However, to reduce the workforce headcount, it is necessary to increase productivity. Under capitalism, we need to recognise not the benefits of increased productivity are unlikely to go to the workers.

In the light of these macro-economic trends, we also need to consider both those jobs but cannot yet be automated, the manipulation of the real world, and those for whom there is no work, the latter implying that we need to consider our Social Security systems and training/retraining opportunities.

Some creative workers have already raised issues about the use of their copyrighted work to train these AI systems. This is not the last time that our industrial age intellectual property laws come into conflict with the needs of 21st century IT systems. We have seen constant and persistent battles between the DatenKraken and industrial age music monopolies; a political fight that has generally been won by the content owners, claiming a moral case on behalf of the creators. It should be noted that even exceptionally creative programming staff are not paid by royalty and neither are firefighters. Admittedly this is a decision taken by the creators themselves, although the creative industry monopolies have an immense amount of say in the payment models used.

Forbes suggests that, financial services, media & marketing and legal services jobs are particularly vulnerable andn threse industries will be able to take advantage of these new technologies. What they say about legal services shows that the opportunity to use the productivity increases to enable more customers to obtain legal advice may well occur.  I’ll be happy if the current generation of virtual assistants could do more than qualify if you need to speak to a human being. Forbes and McKinsey disagree about whether AI systems will impact Life Sciences with McKinsey saying it will and Forbes taking the opposite view. McKinsey also think that AI will impact the Retail sector. They both agree that one of the biggest impacts will be in software engineering, The McKinsey reports has  a chart/scattergram plotting impact in dollars vs the proportion of cost i.e. how much and how important are these benefits, the highlight being that software engineering will be heavily impacted. ( I wonder if it will increase the quantity of user authored apps, today, a source of significant risk.)

One of the curious things about this article, is that I was tidying up my office space and came across, my notes of the McKinsey webinar and also a copy of “Don’t Automate, Obliterate”,  which I read for the first time in 25 years. It seems less fearful today, I was first introduced to this paper in the 90s, where it was seen as part of a trend to “half the workforce, double the fear, and quadruple the profits”. On rereading, I see it as a call to look at process is in a holistic way and focus on outcomes. Several of Hammer’s examples of effective process redesign come from the early days of the Ford Motor Company, so they weren’t exactly revolutionary processes at the time the paper was published. The big idea that came out of the 90s and automation was supply chain management and EDI. The IT tools being produced required new skills, but not less hours. There seems to be, always more to do. Perhaps it’ll be the same this time.

It’s important that the politicians and regulators get there first. I have already mentioned copyrights, but product liability is another area of concern, and AI will require expert human supervision in the field of the professions for many years to come. Other areas of concern are surveillance, and working hours, both of which should be limited by law. It’s time to #JoinaUnion.

Featured Image Credit: Merrill College of Journalism CC 2012 BY-NC virtual human …

Ralph Miliband on Labour’s last year in opposition

But that was in 1963, sixty years ago. Due to some personal reappraisals of my politics, I have been looking at the writing of Ralph Miliband and was pointed at an article he wrote in the run up to the 1964 election, called “If Labour wins”, republished in the New Left Review. I found it worth reading to observe the parallels between then and now. Wilson’s Labour were leading in the polls, the Tories had suffered the setbacks of Suez, and the Profumo affair and replaced a popular and powerful leader with a patrician land owner who was not even an MP arguable a stalemate choice between the then two leading Tory candidates.

This article contains a number of quotes from the article, as they speak for themselves, although of course I can’t help but comment. I have collected the quotes and comments into pieces on culture and comedy, economics, foreign affairs, corruption, campaigning and hope and the Labour left. … …

Intergenerational Equity

Intergenerational Equity

In this article, in the FT, Sarah O’Connor argues that the impact of high interest rates is less effective at demand suppression than has historically been the case. The exclusion of the young from the housing market and the impact of older people having finished paying off their mortgages has led to reduction in the number of households with mortgages, from 40% to 30%. It interests me, that the author argues the purpose of increasing interest rates is demand suppression and yet its effectiveness as a demand suppression tool is less than it once was. This article also looks at the role of tuition fees in discriminating against the young and asks if demand suppression is an effective tool in reducing inflation. Fore the whole article, "read more" ...

The trillion dollar coin

Last month, the US passed through a politically created fiscal crisis; commentators were suggesting that for the third time Congress would cause the Federal Government to run out of cash and default on bond and salary payments, and 3rd party bills for goods and services. This is a tactic pursued by those who don’t like government expenditure unless its on arms. I argue that there were three ways that the Government could have sidestepped this piece of legislative extortion. The most amusing route would be to mint a $1Tn coin. I conclude, overleaf, by arguing that, progressives should be wary, this idea of legislating, or embedding fiscal policy in treaties or constitutions is designed by people who support the founding fathers, who while they opposed taxation without representation, were almost equally opposed to taxation with representation. NB The EU’s stability and growth treaty commits its signatories to a level of national debt and a level of national deficit. They need to change this, these decisions need to be under democratic control. There's [much] more overleaf ... ...

What did CoFoE say about digitisation?

What did CoFoE say about digitisation?

When socialising the CoFoE final outcome last summer, I didn’t look at the Digitisation chapter. I have decided to plug that gap. This is a personal summary of the Digitisation chapter of the Proposals/Outcomes of the CoFoE. The CoFoE was organised into streams and within those streams there were usually four citizen’s panels. This led to on occasion multiple proposals on the same topic, which have been collected together. In some cases, a topic is dealt with in multiple proposals and even multiple chapters.

There are four proposals in the Digitisation Chapter, they cover a right of access and use, the accrual of benefits to be shared by all, a safe, resilient, and trustworthy digital society covering cyber security, fake news, and data protection & privacy.  The issues of investment and citizen rights are covered in all four proposals.

The bulk of the article is overleaf, please use the "Read More" button ...

On proposals for a British digital currency

The UK Govt have issued a consultation on how or whether to implement a Central Bank Digital Currency. I have written up my thoughts on LinkedIn & Medium and have some further notes on my wiki. I look at the arguments in favour, cite some Swedish sources, who are four years ahead of the UK, and conclude, “This is ideologically dangerous, technically complex, and a solution in search of a problem.” …

On WOTCs permissive licences

On WOTCs permissive licences

Earlier this year, Wizards of the Coast, the owners of Dungeons & Dragons, bought D&D Beyond, the premiere and largest web store for the rules of D&D and they are now trialling a new version of the rules called One D&D; they are also planning to release a virtual table top solution and have a new movie in production. Also recently at a Hasbro earnings call, one of their executives stated that D&D was now a lifestyle brand and was under-monetised. This has created a sense of fear amongst 3rd party creators that WOTC will revise their intellectual property sharing agreements to the detriment of themselves and non-Dungeon Master players who have been identified as under spenders. Depending on where you look, this has created a lot of noise; I think there’s a lot of fear being generated, and it interests me to consider the issues in the context of the software industry practice. I think that software industry grew the open source models and the interaction by games vendors such as Wizards with software continues to inform good & bad practice, There's more overleaf ...

Trade Friction and free movement.

I co-authored this, published at Brexit Spotlight by Another Europe.

It is little wonder then that the Conservatives are under acute pressure to revise their trading arrangements with the EU in order to re-open access the European single market. But it seems likely that – at least for the time being – Brexit ideology will not allow any serious recognition of the economic reality.    …