Monday 11, July 2022
Last week wrap (late)
Rates are going to continue rising. Stron jobs report confirms this. Crypto may have some spillover effects, but doesn’t seem to be likely to cause contagion. Business seems very negative, but pro
Organic farming as cause of Sri Lanka coup
In Sri Lanka, Organic Farming Went Catastrophically Wrong is an article in Foreign Policy. I don’t know much about the publication, so the account may suffer from bias. But the facts seem to be clear: organic farming is woefully unproductive. In the West, farming is increasing an excercise in extracting rents from the state. In the UK, net value added by agriculture rounds to zero percent of GDP. Nevertheless, it’s a huge factor in politics, as you’d expect. (the UK’s 50 biggest landowners are mostly not members of the Labour Party.
The direction of UK policy seems to be in the direction of becoming more ‘ecological’. I hope that the damaging policies of Sri Lanka are not followed, but at least we still can import the food we need to eat.
Revolutions are hard to start. Mostly, citizens just want to get on with their lives but when they face starvation which is clearly the fault of egregiously bad policy choices made by their rulers, they decide that they have no option but to take matters into their own hands. If the price of food continues to increase, we will see this type of revolt spread. The driver of all this is energy prices. Governments will try to hold them down, but its really unclear whether they can.
Today’s Wrap
Stocks were down, yields were down, the dollar was up, commodities were mostly down, but the backwardation in oil lightened a bit. The putative reason was the earnings season ahead. Google, Tesla, Amazon, Netflix are about to post results. The consensus is, presumably, that things will not look so good for lockdown winners, which now have such a heavy weighting in the index that it really doesn’t matter what energy or transports do. Actually, they were both down.
Crypto, as usual, followed stocks down.
A young Rishi Sunak admitted he has ‘no working class friends’ in a cringe-worthy clip being shared online.https://t.co/xmHRC5bCFw
— James Foster (@JamesEFoster) July 11, 2022
From that fine paper, the Metro
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Political debate
It’s too late for me to write much, but I had to say something about the low quality of the candidates pitches to become leader of the Conservative Party (and thereby Prime Minister). They all promise a radical departure from the past, but, presumably, leading an unchanged parliamentary party. They either want to raise taxes (Rishi) or lower them (everyone else), but they won’t say how they’ll fund spending, or what the distributional impact of their plans will be on family income and wealth. None seem to dare propose anything remotely original in terms of policy. I don’t expect a Tory leader to start proposing a Universal Basic Income, but I was hoping for something a bit more creative in terms of taxes, benefits, devolution, human rights, climate change. They suffer from the delusion that the economy is ‘run’ by ministers. I seem to recall that Belgium was without a government for around a year, and the country’s economy did absolutely fine, in absolute and relative terms. The UK has had a thousand years of tweaking of tax policy. It seems unlikely that it’s even possible, within a couple of parliaments, to do more than tweak a few parameters characterizing the current system.
The overall rate of tax as a percentage of GDP rarely changes much, whoever is in power. It seems odd that opposing parties pretend that their are offering something radically different to their predecessors. OK, it doesn’t really seem odd. Politics is mainly about pretending to do stuff which those pretending is virtually impossible. We now have taxes around the level that Clem Attlee had to raise them to pay for the Second World War. As a percentage of GDP, the total tax rate has drifted up and down by a few percent over the decades, but really hasn’t had anything resembling a major excursion. We’d need some sort of apocalypse to get to Singapore levels of taxation, and electorally catastrophic cuts to welfare payments. I guess none of them are going to be elected with a pitch like “Vote for me, I’ll be much like Theresa May, but a tiny bit less awkward.”
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