Like my BlogComrade Dave, I don’t have a great deal of time for many liberal intelligentsia members of the UK broadsheet press corps.
Indeed, it’s been interesting to note how, on at least a couple of occasions over the last few months, reporters from the scuzziest of the tabloids have got it much, much righter than the broadsheet wafflers.
First, there was the Daily Star, calling it right over the East Lindsey strikes, and now in the last few days there’s the News of the World, with a mix of brave undercover reporting and an editorial line smacking of basic decency, sticking it to the BNP better than any well-meaning but essentially middle-class oriented hope not Hate campaign has been able to.
Given the ever lower esteem in which I hold Guardian/Times commentators etc., therefore, it will come as little surprise that I find the latest CommentisFree piece by commentariat queen bee Polly Toynbee a tadge disappointing and, erm, wrong.
In today’s piece, Polly turns her attentions to the Compass-led campaign for a High Pay Commission, presumably having taken a few days looking to see which direction the bandwagon was rolling.
Fair play to Compass – they’ve got it to roll in the pro-Commission direction, and in so doing they have raised some useful debate about wealth distribution, albeit within the usual limited confines, and so Polly’s gone with it and decided she supports a High Pay Commission too.
Her problem, though, is that there’s been a lot of broadsheet/blog comment about it already, and she’s a bit stuck for anything original to say.
Having chewed her pencil for a while, she’s gone for the idea that a Commission would go around ‘challenging the self-serving myths of mega-earners’, and sets out the myth she thinks will be challenged by it. The Commission, she says, would give us all information about how much high earners really earn, and that would enable voters to make decisions about distribution.
Or at least I think that’s what she says. To be honest, it’s not very clear precisely what she thinks the existing myth(s) is/are.
The problem with this myth, though, is it’s not a myth. Anyone you ask anywhere knows perfectly well that rich people earn/have a lot and that there’s a very wide gap between the biggest earners and the lowest earners. What’s mythy about that? It’s wrong, but it’s not a myth.
So Polly misses the bandwagon, and that if you like your self-serving myths served up on CommentisFree, is a shame.
Because there is a very big mega-earner self-serving myth which, whether through rank ignorance or choice, she doesn’t mention.
This myth is best expressed by one of those mega-earners. Here’s one Andy Jarm commenting in a right huff at Liberal Conspiracy:
‘I am a banker and trust me – this is the tip of the iceberg, thousands of bankers and other professionals are preparing to leave this country (it takes time to up-root and move your wife and kids abroad) – they will soon be doing the same jobs, servicing the same clients but from abroad and paying tax revenues to foreign governments instead of ours. There is only one result – the UK will lose immense tax revenues that are unlikely to come back.’
Now that, Polly, is a myth, and a very self-serving one at that. Andy reckons if he doesn’t earn loads, he’s off, and thousands like him will join him. Bollox!
To prove it’s not just Andy saying this, but that the whole thing’s got proper myth status, here’s someone else, John this time, at Iain Dale’s site, saying the same:
‘Labour’s attitude to high earners is what pisses me off the most.They just openly ignore the fact that the high earners are the one’s running the business’s (sic) that provide their jobs, and that generate the most cash for the economy.
If we don’t look after them, or worse, target them like Labour want to, they’ll just bugger off elsewhere and it’s the people who will suffer the most for it.
After all, it’s the high earners who are the most mobile.’
Equally bollox!
Much as though I’d really love Andy and indeed John to bugger off elsewhere, and though it may possibly be true in Andy’s particular case, his argument is essentially (as I think I may have noted) bollox, put forward in order to scare us all into thinking they will go, a bit like Paul Daniels or whoever it was who threatened to emigrate if Labour came to power, but never actually quite got round to it.
Let’s just look at the claims they’re making.
Are they really suggesting that a wealthy person earning, say, £200,000 per year will actually decide to remove her/himself from the UK lock stock and barrel because s/he is required to pay 5% extra on the £50,000 earned above the threshold, that being £2,500?
That’s the cost of a weekend skiing trip or some other luxury, and it would cost an awful, awful lot more than than that in terms of the costs ‘sunk’ in living in the UK, plus the new costs associated with a move abroad, to take their bat and ball and skis elsewhere.
And where would they go? I’m not going to bother with detailed research on personal taxation levels in other parts of the world, but have a quick look at wikipedia and see if there are any genuinely attractive options in the countries with lower tax regimes than ours for your average £200,000 earner. Moldovia and its flat tax rat really that attractive an option?
There’s a reason rich people choose to live in London. It’s London.
They might try a London-like tax haven to save their £2,500, the nutty commenters may say. Try checking out how much it costs to buy permanent residency on Jersey, and see if that equation stacks up except for the ridiculously rich (that’s the way the States of Jersey like it).
So why then is the right, and the rightwing press, so fixated with what in reality is this ridiculous idea that ensuring total flexiblity of pay at the high end, and keeping tax for upper earners low, is what keeps the wealth in the country?
It’s because it’s a convenient fiction, that’s why. It’s because it suits those high earners – who don’t want to pay a bit more tax into the system they depend on to keep their labourers serviced and health and in a position to make them even wealthier – to have us think that they and their fellow high-earners will be off at the drop of a hat or a Commission
Of course they won’t. They’re here either because they’re from here, and for all the usual reasons don’t want to live somewhere else, but also because this is where the vast majority of them skim their surplus value.
What the right says about high taxation and the exodus of personal wealth is essentially bollox, and it’s time to call their bluff, whether through a High Pay Commission or through – my preferred route – collective action.
This is of course just the personal taxation issue. Of much greater economic significance for the economy as a whole is the matter of the tax regime as it affects corporations.
Again, the right would have us believe, because it suits them and their capitalist friends, that if the tax regime is too burdensome, then all those lovely companies that bring us jobs will just up sticks and head off elsewhere where the government is more ‘understanding’ of the needs of big business, and corporation tax is lowered to suit.
This all sounds a bit more plausible than the notion of rich individuals buggering off abroad because they’re asked for a couple of grand as a contribution to the poor.
But it’s still not true. There is simply no empirical evidence to support the claim.
Indeed the reverse is true. As my favorite academic Colin Hay puts it in Why We Hate Politics:
‘Predictions of the hemorrhaging of invested capital from generous welfare states are almost certainly misplaced. A combinations of exit threats and concerns arising from the hyper-globalisation thesis about the likelihood of exit may well have had an independent effect on the trajectory of fiscal and labour market reform…….. Not only have the most generous welfare states consistently proved the most attractive locations for inward investors, but volumes of foreign direct investment (expressed as a share of GDP) are in fact positively correlated with levels of corporate taxation, union density, labour costs, and the degree of regulation of the labour market (2007: 131-132)’
The key words here are the ‘hyper-globalisation theory of exit’. Hay goes on to argue that empirical findings simply do not back up this thesis, and that, just as with personal taxation, the notion that businesses always go to the lowest taxed economies (and by extension the least well-funded welfare states) is simply a convenient fiction, designed by capitalists to drive down their costs, increase their surplus value, while at the same time freeloading on welfare states for healthy, well-educated labour.
There isn’t space in even this longish blogpost to go into all the empirical findings, but Hay relies particularly on the superb research set out in Duane Swank’s ‘Global Capital. Political Institutions and Policy Change in Developed Welfare States (2002)’, in which the myth of the ‘flight of capital’ is debunked with evidence the right is keen to ignore. Probably the best summary actually comes on the back cover of the book, which, though it’s a little wordy, is worth quoting in full:
‘This book argues that the dramatic post-1970 rise in international capital mobility has not, as many claim, systematically contributed to the retrenchment of developed welfare states. Nor has globalisation directly reduced the revenue-raising capactiies of governments and undercut the polticial institutions that support the welfare state. Rather institutional features of the polity and the welfare state determine the extent to which the economic and political pressures associated with globalisation produce welfare state retrenchment.
In nations characterised by majoritrarian electoral institutions, pluralist interest representation and policy making, decentralistion of policy-making authority, and liberal program structure, the economic and political pressures attendant on globalisation are translated into rollbacks of social protection.
In systems characterised by inclusive electoral institutions, social corporatist interest representation and policy making, centralised political authority and universal and social insurance-based program structures, pro-welfare state interests are generally favoured.
Consequently globalisation has had the least impact on the large welfare states of Northern Europe, and the most effect on the already small welfare states of Anglo nations.’
(See also, amongst other sources, Cooke, W.N.; Noble, D.S. 1998. ‘Industrial relations systems and US foreign direct investment abroad’,in British Journal of Industrial Relations, Vol. 36, No. 4 for research on the more specific positive correlation between foreign direct investment and ‘progressive’ labour relations.)
In short, the right is trying to sell us a lie when it talks about the mobility of capital (and high earners), and the need to keep taxes down. And as the OECD itself neatly summaries in this short book, what we end up with in neoliberal orthodoxy is a ‘race to the bottom’ on tax rates, as exemplified in the rock bottom rates in East European countries (look at the Wikipedia entry on tax rates in Europe again).
The myth that low taxes are needed to make wealth happen – a myth not even believed by Multi-National Corporations when their bluff is called – becomes a self-fulfilling prophecy, where labour suffers most.
And that, is what Polly should have said, though I accept it would have needed a bit of editing for CommentisFree. Then she’d be a proper commentator like me.
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