Trump's tariffs (and other wars).

 

As a classic attention seeker President Trump must have enjoyed his day in the sun yesterday, with the eyes of  concerned citizens in almost every country in the world on him.  The Guardian’s leader predicted that ”No British retaliation [would] mean GDP 0.4%  lower this year and 0.6% next.” (2^nd April.)  By my calculations that means 40p less in every prospective £100 earned, then 60p.  The bombarded in Gaza, front-line soldiers  and citizens of Ukraine,  and millions starving in Sudan and South Sudan, not to mention about 200 other “hot” wars, would presumably give their ears for that level of inconvenience.

Be that as it may, if this is the start of the imposition retaliatory tariffs  world prosperity is at the beginning of a downward spiral similar to that of the 1930s, when one major economy after anther tried to “export its unemployment” by imposing “tit for tat” tariffs.

President Trump’s reasoning is wrong on at least two counts. First, the “rust belt” will not be rebuilt and his “left behind” supporters will not get their old jobs back.  It seems ludicrous to have to remind one of the world’s most dynamic economies that the modern economy is dynamic and countries prosper when they produce what the world is going to want tomorrow rather than what we used to want yesterday.  (Something to which Britain has had and still has difficulty in adapting.)

Secondly, the idea that tariffs generate a “nice little earner” from foreigners paying to sell their  products  in your country, is highly misleading.  A tariff is a tax at least partly and often largely  paid by a country's  own consumers.  In the jargon, a tariff raises the price to the consumer and lowers the price received by the produce, the relative incidence being determined by the relative elasticities of supply and demand.  “A” level candidates in economics are taught to draw graphs to demonstrate this until it’s coming out of their ears.

A  friend of a former  “Peace Corps” friend has just sent me a list of five conversation stoppers he suggests to throw in when stuck with MAGA relatives round the table.  No 2 is “I can’t wait for Trump’s Tariffs.  I’m sick of paying so little for everything.”

Oh, and one other thing: Trump regards countries which collect sales taxes  or VAT as discriminating against America, and believes this justifies even higher tariffs.   They don’t and it doesn’t.   These taxes are normally paid by all domestic producers so the playing field from that point of view is level.  The most marginal of GCSE candidates could have told him that.

The problem for our governments is how best to respond.  Some leaders are quite belligerent and advocate punishing America in kind.  The purpose is supposedly to  force America to back down.  But, as in the 1930s the likely result, with obstinate boneheads in charge, is to punish ourselves.

Perhaps a “softly softly” approach could be better.  Do nothing now.  Wait and see.  Maybe soon the American people will tire of paying higher prices for world products, realise they’ve been duped and, if they can’t turn Trump out, at least elect a congress that can put a stop to this cavalier nonsense. 

And in any case, Trump may very soon lose interest and move on to another fad.  If so, let’s hope it doesn’t involve nuclear weapons.

The spring statement

 

Spring Statement

 

When Herbert Morrison, deputy leader of the Labour Party during the Attlee Post War government (and grandfather of Peter Mandelson) was asked to define socialism he loftily replied “Socialism is What a Labour Government Does."

 It is hard to apply that description to the actions of the present government which could better be described as "Toryism continued," and not even all that “lite.”

 Given the present run down condition of just about every public service you can think of, and not least the prison service, it is absolute madness  for this rich country to be talking about even further cuts in public expenditure.  More expenditure is needed in almost every area.

 Nor is it in the least bit  humane, honourable or In any sense socially acceptable   to fund the additional arms expenditure now thought to be necessary on the back of the world’s poor (overseas aid) or our domestic disabled citizens.

To be fair, the government is hemmed in by four  problems:

 1.  The press is largely hostile  to Labour, and will rubbish whatever they do, even if that damages Britain (so much for patriotism.)

2.  The Chancellor of the Exchequer is female and mocked as "Rachel from accounts"  (No one ever talked of Jim (Callaghan) or Denis (Healy) from accounts, still less Sir Stafford!)

3. She is hamstrung  in raising the extra money  because:

a)  The Liz Truss legacy makes it likely  that extra borrowing would make British government debt look dodgy and raise interest rates.

b)  Labour promised in its manifesto not to increase the major revenue raisers (income tax, NICs and VAT).

c)  Labour's pollsters think that reverting to "tax and spend" will ruin their electoral chances.

4. Labour lacks confidence, and rightly so, because it knows that it lacks robust support from the public.  Only a third of those who voted supported it, which, given the low turnout, represented barely a quarter of those entitled to vote, and many of those voted not FOR labour, but AGAINST the Tories (ABC: Anyone But Conservative).

 Nevertheless I believe Labour’s wisest course is to be bold and take the “tax and spend” alternative

 There was a letter in Saturday's Guardian (23^rd March)from a  Prof Helen Goodman (a former Treasury official) which listed some of the taxes Labour could raise without breaking its election pledge, viz:

·       raise capital gains tax to the same rate as income tax (£14bn);

·       reduce tax relief on pension to the standard rate( £13bn);

·       remove loopholes for City lawyers' partnerships (£8bn);

·       tax internet giants (presumably Amazon et al) to stop unfair competition with high street traders;

·       bring council tax up to date.

 The Liberal Democrat options  appear to be to tax the big banks, the social media giants and the online gambling companies.

 Any combination of the above, or further picks from the  list  of  the founder of the Tax Justice Network Richard Murphy, would suffice to repair the public realm and play our part in the proper defence of Europe in the immediate future

The long run  we need a full scale reform our out taxation system, which should include a long-overdue Liberal favourite of a Land Tax (It is easy to move wealth overseas and thus avoid taxation, but land tends to stay where it is.)

 Naturally the hostile press would scream blue murder but the necessary revenues would still leave our tax take no higher than the average of the other large European economies.

And it’s four years to the next election.  If  by then the public realm is seen to be in spanking condition, with hospital waiting lists down, special needs children and elderly pensioners properly cared for, young people able to buy or rent a genuinely  affordable home, the BBC World Service proclaim truth  and decency throughout  the planet, criminals  being re-habilitated, the potholes filled, cheap renewable energy  on tap,  etc. etc  . . . . the list is  endless. . . . then the confected indignation of a few non-domiciled media moguls on behalf of the rich would by then be forgotten.

 The alternative, of a continued dreary downward trudge towards further mediocrity could so easily result in the return power of a lying and deceitful combination of right-wing Tories combined with Reform.

Loving our neighbours

 

On the topic of social security for disabled people my starting point is that I’m jolly grateful I was born and have remained relatively normal in both body and mind.  That’s not to say that I wouldn’t have liked a better body (better hand, foot and eye co-ordination  to make a better fist of cricket and football) and a better mind (I’ve never been very good at spelling, and acknowledge that I’m probably better at explaining other people’s ideas than having original ones myself) but I’ve managed to qualify for and hold down a job which I thoroughly enjoyed and always managed to pay my way.

That is true of the overwhelming majority of people in the UK .

So why on earth is a Labour Government – A LABOUR GOVERNMENT – seeking to balance its books by cutting the help for disabled people rather than raising  the taxes of we comfortable  so that those less fortunate  can be enabled to live as decent a life as their disabilities allow?

Surely, after eighteen hundred years of Judaeo-Christian teaching, topped up in recent years by Hindus (“dana “ and “seva”) Sikhism  (Vnda Chhakna) and Islam (alms giving) that should be a no-brainer.

To argue that we abled bodied and minded in our society can’t afford it is nonsense.    The latest figure I can find, (for 2002) states that our national income per head is £37 371.  If that were shared out equally every family of four would be receiving just coppers short of £160 000 a year.

 Of course it isn’t shared out equally, and I’m not suggesting it should be:  I’m simply using the figure to demonstrate that we are a very rich society indeed and can well afford to look after those members of our society who, for one reason or another, can’t live comfortably without help from the rest of us.

Labour should show some courage, grasp the nettle and do what it was elected to do (along with restoring the overseas aid budget, removing the two child limit, and sticking to net-zero and its green agenda). 

Instead they seem to be as desperate as the Tories to make sure that no-one at the bottom of the pile cheats  the system and gets something for nothing.  I believe this fear to be without foundation.

 Years ago I heard a Humanist on the radio argue that everyone of us has three “wants.”  These are

·     ""to know that at least someone cares what happens to us (usually a spouse, a parent or child, or maybe just a friend);

·       to be able to feel that someone else has benefitted from our having lived;  

·       and to pay our way."

No one actually wants to be a scrounger. 

OK maybe the odd one slips through (and we all have our pride, so maybe some people boast of living off the system as that seems be the only way to survive, so they pretend it’s a choice, but they would much prefer the alternative.)

Labour has argued, with every justification, that the country cannot be turned round in just one parliament.  This will be even more likely if they waste this first term. The should stop looking back over their shoulders, implement the policies for which they were elected and sow the seeds for  an even more  progressive second term.

The further calamity of UK Aid

 The last thing I expected  when I wrote the previous post condemning the cutting, indeed abandonment, of USAid by the amoral/immoral President Trump, was that i would have to follow it with a similar article on a similar decision by what I had supposed was a relatively moral and upright British Labour Government.

 A previous post, written five months ago . . .

 https://keynesianliberal.blogspot.com/2024/10/

. . .details the fifty year struggle for the British government to fulfil its promised, made by a Conservative government under Ted heath, to devote 1% of our relatively massive GDP to aid the development of the world's poorest countries.  The goal (now interpreted as 0.7% of GDP for official aid and the rest made up by private aid and charities) was not reached until 2013, again under a Conservative Government, with David Cameron as Prime Minister, probably on the insistence of the Liberal Democrats in the Coalition.

Mr Cameron's words are worth quoting again:

 "The UK will not balance its books on the backs of the poorest.”  (27^th may, 2011)  

And a year  later resolved:

 “The argument of the heart is even when things are difficult at home we should fulfil our moral obligations to the poorest of the world. There are still more than a billion people living on a dollar a day,”

 Sadly his successor, Boris Johnson, was not so high minded, and under him the aid was cut to 0.5%

The previous post referenced above, calls upon the Labour government to demonstrate its moral compass by restoring the 0.7% level. 

I find it incredible that the government has done the reverse, and cut the level further to 0.3%.  Since half of this is now used in the UK to house asylum seekers, the effective amount to aid overseas development is a mere 0.15%.

 And our national income is now about four times what it was when the promise of 0.7% was originally made.

Of course, there is a credible case for the UK and other European counties to increase our defence expenditure now that the US's military commitment has become less reliable.  And in the UK there are few if any, other areas of public expenditure that can be cut - indeed the reverse.

 So why not higher taxes?  

Even died-in-the-wool Tories can hardly object to paying a fair whack for our defence, And given that the government has a manifesto pledge not to further tax current economic activities (incomes, VAT and NICs) there are plenty of taxes (on  inheritance, capital gains, other forms of unearned income, pension contritions,  land, wealth. . .) available which the largely comfortably-off can well afford.

 Rather than ask the worlds poorest to foot the bill.

 Shame on you, Labour. 

Post Script, (added Friday 28th April.)  Three cheers for Anneliese Dodds, whose resignation as Aid Minister was announced today.  At least there's one Labour minister with backbone.  Now it's up[to the back-benchers.

The real calamity of axing USAid

 

 

If their staff have correctly reported him Britain’s Foreign Secretary David Lammy seems more concerned by the likely shift of soft power to China caused by President Trump’s dramatic closure of the US Overseas Aid Programme (USAid) than  the immediate practical consequences on the individuals who are to lose aid supplies and services.

It wold be nice to think that your government’s first thought went to 10 000 or so individuals who still die every day of hunger, the 1 000 daily toll of children under five who die of malaria and the 900 plus who die each day of diarrhoea.  Why are our government and their spokespersons so “tin eared?” 

Even if their support for the world’s poor is  primarily motivated by power politics (and I know from second hand reports that  that isn’t true of most of the officials who administer (or administered)  Britain’s aid programmes, the politicians at the top could at least pretend.

Mr Lammy goes on to pint out the when Britain’s own  Department for International development (DfID) was merged with the Foreign Office by Boris Johnson’s government in 2020 Britain’s “soft power”  received a serious blow, which was even further depleted by the reduction of funding from 0.7% of our GDP to 0.5%.  See previous posthttps://keynesianliberal.blogspot.com/2024/09/oda-test-of-labours-moral-compass.html

 What he does not say is that, so far, the new Labour government was shown no sign of resorting  DfID/s independence, or the level of aid to 0.7%.  (In fact it had risen to a little above 0.5% and they’ve knocked it back - See previous post:

 Frankly, I’m pretty sure that the overwhelming majority of Liberal Democrat and Green voters expected better of Labour, and so do a lot of Labour party members and voters too.  Yes, there have been some glimmers of hope (raising the minimum wage, better working conditions) but on the whole so far it’s been pale imitation Tories.

In a Guardian  article on 7^th February former Labour prime minister Gordon Brown shows a surer touch.  He list the programmes on which USAid had been working and which are now axed:

            Landmine-clearing work in Asia

            Drug deliveries to fight mpox,  and Ebola

            Cervical cancer screening

            Treating malaria, tuberculosis and polio

   Assisting maternal and child health

And, of course , many general  programmes in health and education.

Happily, one programme, to try to prevent 136 000 babies from acquiring HIV has been allowed to continue.

The above gives a picture of the human impact of  President Trump’s tantrum.   

A re-creation of and independent DfID and a meeting 0.7% of GDP target, for  which  a Conservative government  subscribed way back in 1970, would be a response more fitting our best values.  If our soft power also improved, that would be a welcome bonus.