Britain’s White-Collar Cops Are Getting Too Good at Their Job
bloomberg.com
bloomberg.com
On the one hand whenever there's another leak of all the lengths people have gone to avoid/evade taxes (e.g. panama papers) the government will pledge to "get tough".
But then when it comes to practical measures like reining in the tax havens which are used to hide the details of people's finances, they seems to throw up their hands and say "nothing we can do" despite the fact that many of these havens have strong connections to the UK and there is a level of pressure that could easily be exerted by the UK government for more transparency.
The dissembling you see from government ministers when asked to explain why these tax havens are so popular for company formation if it's not for tax evasion reason is comical.
It's very strange how they turn such a blind eye to massive tax avoidance (or even tax evasion?) schemes from large businesses, while simultaneously leaning on by far the largest part of the business economy. Leaving aside the ethical considerations, I have never understood how this makes much economic sense either.
Here's the problem: very large companies have very expensive accountants. These accountants are quite often ex-HMRC so know tax law very well. They know all the loopholes and how to play the system. They also have a big budget for political 'donations' which those in power don't want to lose. Plus a lot of very expensive lawyers to defend them from charges.
All of this makes it much more difficult and expensive to investigate and prosecute large companies for tax dodging.
Small companies, on the other hand, are a fruit ripe for the picking. They don't have much money for fancy accountants and lawyers so it is easy to create legislation to make them pay more money and know that they will have to cough up - or face the consequences.
The final piece of the puzzle is that a lot of the top MPs have 'Directorship' positions at the big companies, so have an interest in protecting them. Plus a lot of them are taking advantage of tax loopholes themselves, so have a vested interest in not closing them. (Remember Cameron being outed for being in a tax scheme that was legal, but not entirely ethical?)
It's just incredibly naive in the longer term, because the alternative for founders of new businesses typically isn't hiring expensive accountants of their own, it's just not bothering at all.
Why should anyone risk their savings and give up the security of a well-paid job (which people in a position to start a viable new business very often already have beforehand) if in return you get all the costs and overheads of running a small business to deal with and then the government is going to impose a very high tax rate on the profits as well?
If they had imposed a sudden 7.5% increase on the general rate of income tax, they'd have been out of power for a generation.
I used to be a self-employed consultant. The number of my peers who set up one-man companies, stayed (or claimed to stay) just a whisker outside IR35 and paid themselves in dividends was astonishing.
I see no reason why dividends from a company with no fucking capital should be seen as anything other than regular taxable income.
Not once you take the already applied corporation tax into account, though. Then the overall tax rate is around 5% above regular income tax, with the exact difference depending on which tax band you're looking at.
Of course you can argue that employees also pay NI on PAYE salary, but if you're going to go down that path then really you also have to consider that employees get paid time off, pension contributions, etc. that their employer is footing the bill for. Again that leaves the balance quite heavily in favour of being employed rather than going independent, even if the employer provides only the statutory minimum PTO and pension contributions.
Operating through a limited company wasn't particularly cost-effective even before the dividend tax change if you were actually running a real business and taking on the usual costs/overheads/risks of any other business, unless you were able to take advantage of something like Entrepreneur's Relief following an exit (and willing to accept the slightly strange limitations that come with that).
Otherwise, it mainly only worked in favour of people like the ones you mentioned, who weren't running a real independent business at all and were simply skirting the law in an effort to abuse the tax system -- effectively, taking most of the perks of being an employee, yet getting the tax advantages of not being one. If the government had any idea what it was doing with the small business sector, it would surely have dumped IR35 and brought in a more suitable replacement to deal with that situation long ago. There was no need to hit all the legitimate businesses as well.
That's right, but you don't have to pay yourself a dividend. If you pay yourself a salary you are taxed exactly the same as any employee. The salary is of course a business expense reducing the corporation tax base.
So taxes plus NI contributions paid by regular employees is your upper bound as a business owner as well. The whole dividends question is purely about how much less you pay than regular employees.
Right, but then if you go from being someone's employee and performing some work for them to being an independent performing the same work for the same fee, the only thing that has changed is that now you're also paying all the employer's overheads and taking on all the employer's risk. This makes no sense.
So taxes plus NI contributions paid by regular employees is your upper bound as a business owner as well.
No, taxes + NI paid by regular employees + NI paid by employers + employers' obligations in terms of paid time off, pension contributions, and all other overheads is your upper bound.
The whole dividends question is purely about how much less you pay than regular employees.
You don't get a dividend for being an employee, you get a dividend for owning a business, as compensation for investing so that that business can exist. The two are not equivalent in any meaningful way.
>You don't get a dividend for being an employee, you get a dividend for owning a business, as compensation for investing so that that business can exist. The two are not equivalent in any meaningful way.
The two are very much equivalent for a large number of small businesses, such as software development and consulting services (not just single person companies). Investment is negligible and the only thing you own is your own reputation.
But I get your point that the distinction does matter for other types of businesses, and I agree that the dividend tax increase makes investing in (or starting) these types of businesses less attractive. I'm not too happy about it myself to be honest.
In time, that may become true, assuming the market will bear the higher rates. Even that won't necessarily happen, because at some point the higher direct costs of bringing in flexible labour may start to outweigh the benefits of not hiring in-house staff. And as you say, in some industries, there is also the risk of being undercut by cheaper competition working in lower tax environments abroad.
In any case, in the shorter term, you can't just turn around to existing clients and say you're putting their rates up because your taxes changed. You've already got contracts in place and agreements made, and the risk of the business environment changing is borne by the contractor/freelancer/consultancy.
The two are very much equivalent for a large number of small businesses, such as software development and consulting services (not just single person companies).
I don't think that's entirely true even if the direct financial investment in starting the business is low. There is still some overhead, because you have to deal with business paperwork, preparing and filing annual financial statements, in many cases administering a pension scheme these days, handling all the tax and accounting overheads, etc.
More importantly, when you go independent you take on a lot more risk and give up a lot of the security and benefits that come with being an employee. The benchmark of 50-100% higher fees than salary for a similar position is mostly not caused by direct financial differences, it's caused by the uncertainty and inefficiency that come from working from one gig to another, needing to take time out to find new clients and set up new contracts, and so on. In other words, you have to cover the fully loaded cost of an employee to an employer, and you have to do it without the economies of scale of a larger business when you first start (and possibly for much longer).
So even for those businesses with relatively little up-front capital investment, there is still a lot of investment in other respects that goes into getting a business started and keeping it going. And this brings me back to my basic point that if you try to equate income received by an employee with income received through an independent business, even if you allow for the direct financial effects like employers' NI contributions, it's still very hostile to small businesses to increase dividend tax dramatically as the UK government did not long ago.
Profits sourced from retainers, from sales/licensing of software, from offering support contracts, and the like I could easily see as being "different from wages".
It's important to remember that in places like the UK, there are very different ways to offer that labour. In particular, as an employee, you have considerably more protection and are entitled to considerably more in other benefits than a freelancer or contractor who operates independently.
As a reference point, you might expect an independent professional to charge roughly 150-200% of the equivalent salaried position in fees to compensate for the uncertainty, loss of benefits, overheads and other downsides that an employer takes care of for its employees. (This is of course ignoring the whole issue of now dealing with clients on a B2B basis instead of an employer-employee relationship, and therefore potentially pricing according to value rather than time, as often discussed elsewhere on HN.)
Treating the income from dividends as if it were equivalent to a salary just means that either it's not cost-effective to go independent or clients have to bear the extra cost. Either way, someone is paying the difference if the work is still getting done at all, and like any activity that is taxed, that is an economic barrier that is not necessarily helpful if you're trying to promote a business environment where there is a flexible supply of labour through freelancers and where new businesses can start and grow.
I suppose there are two basic reasons.
The first reason is that the two types of income derive from different mechanisms, and have different contexts. If you're working as an employee and receiving a salary through PAYE, then in places like the UK that comes with many rights and protections. Those are supported by legal obligations and risks borne by the employer (and to some relatively small extent the government). In contrast, if you're working through your own company, you take on all the risks and overheads of the employer as well as the employee. More generally, if you're receiving income from dividends whether from your own company or someone else's, it's because you have invested in one way or another in supporting that company. The dividend is your reward for taking that risk if things work out, and unlike PAYE salary, there is no guarantee that you will get that money, or even get back whatever you invested in the hope of receiving that return.
The second reason is that as a practical matter, it is necessary for the health of the economy to support the creation and growth of new businesses. That requires a mechanism for progression: someone has to stop being an employee of someone else's business and transition instead to either being self-employed (which is OK for very small businesses, but limits growth in many practical ways) or forming a separate legal business entity (typically a limited company or partnership in the UK). But if you start your own company, its profits are already going to be subject to corporation tax before you can pay out anything left over as a dividend. If you also imposed the same income tax on the dividends themselves, you would essentially be saying a solo founder or small group must accept being double-taxed on the money the business makes in return for operating through a legal entity, which in itself already comes with various overheads and costs. Clearly that is a huge deterrent to anyone taking the step from operating solo to creating a more robust and scalable business structure, which is something that needs to be incentivized for the general development of our economic and business environment.
In short, the reason you get some income via PAYE salary is completely different to the reason you get it from dividends, so there's no reason the tax treatment should necessarily be the same. Attempting to equate the two scenarios penalises investment and heavily penalises setting up new businesses, and if people aren't willing to take on those risks and overheads, you won't have businesses creating new jobs and opportunities that will support tomorrow's PAYE employees either.
By creating a complicated system like they have it seems like they just invite people to create structures to pay themselves in dividends and reduce the tax they should pay.
This is a real danger, and the government has repeatedly tried to clamp down on "disguised employment", for example via the IR35 rules that essentially say if you're working like an employee, you get taxed like an employee, even if your contract claims you're a freelancer or contractor. These measures were spectacularly unsuccessful for many years, essentially just creating a new industry around insurance for legitimate independent workers that was a drag on the whole sector, while pulling in very little extra money from those who really were abusing the loophole before.
A lot of people in the independent sector believe that the massive increase in dividend tax was basically the government giving up on IR35 and just hitting every small business without discrimination. Of course, while that certainly pulls in a lot of extra tax money that the government wanted, it also hurts all the people who were quite legitimately operating as independent businesses that just happened to have only one employee but otherwise still had all the normal control, risks, overheads, reporting, etc. like any other business.
Your premise seems to imply that every such business can afford to lose 20% or so off its margins and still remain viable. (Or that the market will bear all such businesses increasing their prices accordingly, but in that case, we have to ask why they have not done so already.)
That's one possible factor, but not the only one. Otherwise any business with no direct competition could increase its prices arbitrarily, and clearly that's nonsensical.
That's the entire theory behind why monopolies are bad. It's not nonsensical at all. Monopolies can increase their prices far beyond what the market would bear if they had competition.
Obviously, they can't increase their prices without any limit at all, because at some point people would decide to do without instead of paying the higher prices, but they can increase their prices far beyond what a normal business with competition could.
Monopoly suppliers of something essential can do that, and that is why we tend to have stronger regulation of such "markets". However, if you're offering a luxury, customers can simply choose not to buy if they don't think the price is worth it. So again, where does this magical ability to knock 20% or so out of existing margins and continue trading viably come from?
Right, but the market price usually isn't exactly the same as the maximum price customers would be willing to pay, because competition between suppliers forces suppliers to set their prices lower than that. This is referred to in economics as the consumer surplus[1]. So that is where the "magical" 20% comes from: from the consumer and producer surplus.
I think the point I'm trying to make here is that you are characterising businesses having such competition as being the norm. I'm not sure that's a valid assumption in the market today. Contrary to various traditional economic theories, it's pretty obvious by now that there are plenty of niche markets in the online/digital era that can support a viable small business but where competition will not automatically follow.
I have businesses that do things that, as far as I'm aware, no-one else is trying to do in anything like the same form. There are some services that we in turn use that also provide unique abilities where as far as I'm aware there's no-one we could readily switch to offering a similar facility in a similar way that provides direct competition. In effect, their competition is that if they become too expensive or too much trouble to use, we will do it ourselves instead of outsourcing.
I'd say this sort of situation is not particularly unusual today, at least in some "broad but shallow" sectors. The pricing we set (and, I have to assume, that the services we use set) is based on experimenting with what our customers are willing to pay. As such, we know that we couldn't just increase prices by say 20% to cover higher overheads. And even if we could reduce margins by 20% of revenue to absorb the cost instead, that would have a crippling effect on growth.
More fundamentally, we would probably never have started some of these businesses in the first place. The risk of losing our money before they became established enough to cover their costs would simply have been too high.
There is no justification for differential taxation of business structures. Competition should determine the appropriate form.
And never forget that to pay tax you are in receipt of recycled government spending. In other words your income is higher than it otherwise would be. Government doesn't save. It spends.
I'm also not sure what point your final paragraph is trying to make. It looks like the standard socialist/big-government argument to justify arbitrarily high taxation, but obviously that argument is controversial and in any case it doesn't seem to inform any decisions about what an appropriate level of taxation actually is.
For example, take employee options, typically EMI in the UK. The tax advantages only exist for 10 years from option grant, and only while you continue to work for the company that granted them - the employee needs to maximize their value to the owners of capital. People with lots of capital already, OTOH, get tax incentives to invest.
The last time there was taxation that was genuinely order-redistributive on a large scale was death duties before the war on hereditary landowners who'd not yet figured out how to avoid them.
__
¹ http://www.financialsecrecyindex.com/PDF/UnitedKingdom.pdf
Do you have any evidence of that or are you just confusing evasion and avoidance, the latter being by definition legal?
All the official statistics (from HMRC, not the government) on the matter point to the overall tax-gap doing down steadily over the past 10 years, as well as the proportion of that classified as either tax evasion or avoidance.
Unsurprisingly I don't have obvious evidence of the UK government breaking UK law.
However what I would suggest as evidence of ambivalence is the fact that several jurisdictions which are considered friendly to tax evasion and avoidance (so called "noncooperative tax jurisdictions") are UK dependencies.
The UK could, if it really wanted to, crack down on the tax and company formation regimes in these locations, but they choose not to.
That, to me, is evidence of ambivalence.
My point was more that this "battle of wits" cops vs robbers narrative is just Hollywood nonsense.
Do you feel the same about MI6/GCHQ (organisations staffed to a large degree by Cambridge grads) vs ISIS (an organisation staffed mainly by idiots and conspiracy theorists)?
Clearly the two sides are not playing the same game, and any disparity in ability will be completely overwhelmed by structural differences in their respective challenges.
The uninformed opinion you're spreading is damaging because it implicitly implies that these crimes wouldn't happen if only our cops were a bit brighter.
If only they were as clever as those City boys! Too bad old chap, better luck next time, all's fair in love and war etc etc.
But it's not just cops. It's also internal compliance. The truth is money attracts people. A front office person offered 40% more starting salary than compliance will attract the top performing grads. Lower paying jobs will get second pick (barring exceptions where people are committed to a career due to passion, regardless of payoff).
So I guess it's incumbent upon the person who understands such things to report them to the appropriate regulatory authorities rather than downvoting random people just hearing about them for the first time.
Putting people from Cambridge and Oxford on the pedestal is yet another example of what's wrong with Britain.
This also shows in the way they work: people from Europe get the work done and move on to the next task. People from Cambridge and Oxford try hard to be smart and come up with solutions so complex that, when they work at all, have the net effect of slowing everyone down.
Also, to say it's what's wrong with Britain is a tad hyperbolic! I've generally found my Oxford degree to be excess baggage when trying to get a job with someone who is not from Oxbridge/Ivy league - often because they have a similar attitude to yours.
This is really not accurate. You can certainly have a career as a solicitor that specialises in prosecutions, the Crown Prosecution Service employs vast numbers of them. You can also have a career as a criminal defence solicitor. The barristers are there to present the case in court.
Hopefully the next leader of this anti-corruption agency will continue to be effective as David Greene.
This isn't a quandary: No, we don't need corrupt companies. Corrupt blue-chip financial companies rob people and benefit themselves. The loss of the rule of law would reduce returns in markets and reduce liquidity by scaring away investors. Corrupt blue-chip financial companies cause financial crises.
Who would have thought.
Dirty money: http://www.independent.co.uk/news/uk/crime/london-is-now-the...
But a search engine will give thou many many hits on 'money laundering London'
Russians buying property in London : https://www.theguardian.com/cities/2014/may/09/rich-russians...
> Evidence for either of these claims?
If you really just wanted sources I'm guessing thou would have phrased that differently? If you want to dispute the points then please post a counter argument instead. I am a UK citizen and I felt the points I made were very well known. The relative importance of each is a matter of opinion of course.
Oh, the hypocrisy. White collar criminals get by just fine if they play by certain rules there just as well.
>Green acknowledges the quandary. “You can detect a certain ambivalence about corporate crime,” he says. “You can see people wondering, ‘Why on Earth are you investigating blue chip, listed companies? Don’t we need those?’ But we’re one of the richest countries in the world. We have a responsibility to do business ethically.”
Again, oh the hypocrisy. Britain became one of the "richest countries in the world" by supporting sea piracy, the East India company, the colonial plundering of the third world, the Opium trade, and so on...
At the time of the plundering, the countries that the East India Company plundered were not the third world. They were literally wealthy self-sufficient countries that had not seen famine or serious poverty. It is not an exaggeration that the EIC brought those countries to their knee.
Eg:
"A country that was the world leader in at least three industries- textiles, steel and ship building. A country that had everything... And after 200 years of exploitation, expropriation and clean outright looting, this country was reduced to one of the poorest countries in the world by the time the British left in 1947," he said.
https://www.huffingtonpost.in/2016/12/21/poverty-was-unknown...
https://blogs.timesofindia.indiatimes.com/aakarvani/dear-sha...
Additionally, the linked article itself is guilty of lots of omissions. For example
> Europe went to a different level in that period, particularly England after the Restoration and the forming of the Royal Society and the genius of Boyle, Hooke, Newton and all the rest of it. We remained where we were
Fails to mention that the Industrial Revolution didn't reach India for a long time because colonial government taxes on domestically produced goods stunted the growth of Indian industry.
In fact the only substantive argument the article makes is that various armed forces in India and the colonial Indian army was a professional fighting force that went to battle for whoever paid them. And that the British took over India by playing one rival faction against the other and ultimately screwing over both. Which has very little to do with the reasons for India's relative lack of development.
On balance I'll still admit that the British were responsible for making India a united nation. And India after independence adopted less-than-ideal economic policies, and suffers from lots of corruption that hobbles growth. But to pretend that looting isn't a legacy of colonial rule is wilful blindness.
I view constructs like the EIC or The Empire much like waves on an ocean - functions of their time, circumstance and fortune - so don't see much point in specifically apportioning blame or contemporarily-ascribed guilt. For sure these were not entirely saintly enterprises and did indeed result in misery and misfortune for untold millions of otherwise-deserving people. But as much abroad, as at home.
As much as the wave that was Empire screwed over natives in subjugated colonies, it screwed its own at home - Britain's underclasses sacrificed at the altar of industrialism and history.
If it weren't England tramping over the various bits of Asia, it would've been its imperical antecessor. If it was not to be England's time, then their descendant. America took over from England, China might in turn America. Each Imperium is an evolution of that to which it was at first mere reaction.
These are functions of reality, and everything and everryone plays its part.
I don't see the point in creating monolithic scapegoats, because in apportioning specific blame to abstractions, we ignore the underlying causes and diminish what should be learnt.
The link you gave does not substantiate that claim at all.
> is known to have a bit of an axe to grind where the Raj was concerned.
I would not be surprised that someone who is a victim has an axe to grind with a genocidal expropriative regime. What is surprising is that there are colonial apologists still around and pushing typical justifications for slavery, genocide and other crimes against humanity.
No, which is why I didn't [link] it - I gave it as an example of internal criticism which postures an alternate reason for some of India's woes.
> I would not be surprised that someone who is a victim has an axe to grind with a genocidal expropriative regime
Thank goodness we're not resorting to hyperbole here. I'm not sure how much of a victim he is given his status and the historical gulf of time before his birth and the period in question.*
> What is surprising is that there are colonial apologists
Zzz, I think I tried to state I wasn't comfortable framing my response in terms endearing towards some of The Empire's worst excesses. A shame criticism must remain so rigidly polarised - I am sure that's how history was too, hard aligned and absolute.
[edit: * as a Scot with family originating from the Highlands am I ok to play the victim card for much of my ancestry moving to the other side of the Atlantic?]
The person's country is the victim the parent referred to, not the person.
A person's whose country or community has been wrong will also rightly have an axe to grind with the aggressors, whether the person is a Black, Jew, Native American, Indian, etc.
The British aggressively codified, intensified and encouraged increased enforcement of the caste system in India in order to facilitate their divide-and-conquer strategy. Did you really not know that?
https://repository.upenn.edu/cgi/viewcontent.cgi?article=101...
This is a scary take-home message for us in the US.
There was an attempt to import this system to the UK, in the form of "police and crime commissioners" - an almost total failure. They're extremely highly paid, ineffective, and elected on turnouts of about 25%.
Preventing stuff like this is essential to a working stock market. How can anyone invest in any company, if he has to fear that the companies assets he supposedly owns a share of, are given away in exchange for buying stock, so that the managers can get a bonus for the rising stock price, instead of the company getting raided and the managers replaced with better ones?
There's no detail about the other cases, but at least in this case it's clear that there's no dichotomy at all between the UK's economic interest, jobs, the free market and ethics, but rather between those things and the upper management of a single company.
> Bankers who manipulate markets ought to be charged, he said, but “simply ratcheting up ever-larger fines that just penalize shareholders, erode capital reserves, and diminish the lending potential of the economy is not, in the end, a long-term answer.”
"penalize shareholders" Shareholders are supposed to invest in sound businesses. There's nothing wrong with them being "penalized" by fines, anymore then there's anything wrong with them being "penalized" if a companies new product fails.
There's a long history of contempt for people outside te establishment, from simple rent seeking through to out and out fraud, hopefully the SFO starts to send a message.
"Its budget has been slashed steadily over the years. In 2008 it stood at £52m, while last year (2016) it was £35.7m"
[Paywall] https://www.ft.com/content/8751e754-6e3e-11e7-bfeb-33fe0c5b7...
More depth on the same report here:
https://www.financierworldwide.com/white-collar-crime-enforc...
As has just about every government department, I'm not sure you can read much into that.
Unfortunately, there is an (economically self-defeating) incentive to cripple the SFO beyond mere cost-cutting measures. The same incentive is not true for reduced budgets at other organs of government.
The scale of damage is jaw-droppingly huge and largely unacknowledged. Whilst the media are weirdly obsessed with street crime, white collar crime in the US (and one suspects, in the UK) is bigger than all other crimes combined:
"Contrary to the common perception, the most dangerous criminal is not a youth in a hoody, but a middle aged man in a suit."
https://whistlinginthewind.org/2013/06/24/the-other-kind-of-...
It's more than a little depressing to see Britain slumping into corruption - or as Pope puts it
“Vice is a monster of so frightful mien As to be hated needs but to be seen; Yet seen too oft, familiar with her face, We first endure, then pity, then embrace.”
- Alexander Pope, Essay on Man (1734)
However, they seem unwilling to pay for the rope themselves ...
This is such a teriffic argument. The mafia also employs people. If a company that employs people that earns money with fraud, not by doing anything productive goes bankrupt, that just means that those people will now have to work for a company that does do something productive, which is a good thing.
[1] https://uk.reuters.com/article/uk-britain-eu-trade-competiti...
They lead with the idea that this obviously couldn't be suicide - playing up the role he played in the Litvinenko murder investigation, the supposed suspicions of the US intelligence services, and the fact that some friends and family members shared those suspicions. It took until the 28th paragraph for them to mention that he had been showing signs of depression for a while, and the 33rd to clarify that his wife had apparently caught him trying to kill himself the week before his death. They then explain that doesn't matter because a former Scotland Yard counter-terror officer told them this could just have been the result of secret mind control chemicals. (Seriously.)
Their explanation of his role in the Litvinenko investigation is also just plain wrong from what I can tell. He and another scientist re-calculated polonium-210 intake and lethal dose in 2010 based on the discovery that Litvinenko has been exposed twice, rather than once[1] (which made little difference to the results). He doesn't seem to have had anything to do with the original 2006 investigation, which was carried out by a number of other scientists[2]. All of the things Buzzfeed attribute to his work - the discovery of a lethal amount of polonium, the HPA's public statement, suspicion falling on Russia, and Scotland Yard finding a radioactive trail all over London - in fact appear to predate his involvement by years.
It's been rather disappointing seeing them gain further credibility and attention these past few days.
[1] http://webarchive.nationalarchives.gov.uk/20160613093928/htt...
[2] http://webarchive.nationalarchives.gov.uk/20160613091729/htt...
The rest is a matter of opinion. They obviously have no definitive answer, so it's all speculation. Their point is that his personality changed after these trips.
Maybe I would be more inclined to agree with you if I hadn't seen a Channel 4 documentary on Litvinenko [1] where one of the Scotland Yard detectives recounts lots of strange things happening on their separate trip to Moscow: parts of their group fell ill, they thought they were being followed, and they were driven aimlessly around before they could see one of the suspects.
[1] http://www.channel4.com/programmes/hunting-the-kgb-killers
[1] https://www.ncbi.nlm.nih.gov/pubmed/16410294
[2] https://www.ncbi.nlm.nih.gov/pubmed/17132655
Damn, that's almost Stallman level of clairvoyance :-)
But I agree with both of them, so I call it "clairvoyance" instead of "lack of pragmatism".
Clairvoyance generally involves some kind of prediction or guess about the future and I'm not sure that makes sense with the context you provided.
I agree that's a very indirect demonstration. But I wanted to 1/ share my idealism and 2/ explain that I know that's idealism.
I think letting big companies do shitty and shady things is in the name of GDP is utterly bonkers and almost unbeliveably simplistic, so kind of faith-based, almost like a wishful idealism.
The powerful people who support Brexit most visibly in the media are not themselves concerned with immigration or the working man's difficulty competing with global labour and capital; but they leverage those fears effectively.
This piece is obviously part of a PR effort to try and reduce the appeal of that path. What happens next with the office will be a decent indicator of the prevailing winds.
Corporate interests know that, in a struggle, size is what matters. Multi-national corporations can effectively bully the governments of individual countries far more easily than they can a supranational collection of governments who resist being played off against each other. Faced with a lack of success forcing the EU to deregulate, these interests have instead switched to trying to undermine the institution itself, by funding populist campaigns that blame economic problems on the EU, even though it was under-regulation of finance (championed by the UK) that lead to the 2008 crisis.
A break-up of the EU will lead to outcomes a thousand times worse for poor and working class people throughout its member nations, and consequently around the world. There will be a race to the bottom in terms of regulatory protection and labor rights. There will be massive declines in average standards of living. There will be a rollback of democracy, as strongmen and autocratic governments re-emerge in Europe. There will be a return to war between European states, and pogroms and ethnic cleansing as nationalist governments cast around for scapegoats for their own failure.
If you think the pre-Brexit economic model had "serious faults" then believe me, you ain't seen nothing yet.
Low wage immigration from Eastern Europe has put downward pressure on UK wages. Except in certain sectors wages haven't actually gone down, but they would have gone up a lot more without the competition, and relative to things like rent and educational costs they really have gone down.
I think Remainers' persistent refusal to acknowledge this played right in to the hands of the pro-Brexit lot.
>Brexit supporters are in favour of more global trade with countries like China, and lower environmental and labor standards. They hated the EU because it was precisely the opposite: A self-sustaining trading bloc made up of mostly successful, developed democracies, with (relatively) strong regulatory protection for workers and the rule of law.
Brexit supporters were largely just angry with the status quo and were essentially casting a protest vote.
It's all very well telling people that that was the "wrong" way of registering their protest but British democracy didn't really provide a lot of options in that respect.
Except we already have the powers to stop this low-wage immigration. The EU allows member countries full ability to protect their borders from these immigrants, we just choose not to.
Look at France, Germany, etc. for countries that properly enforce their borders.
In addition, if a proper living wage were enacted for all residents of the UK, including recent migrants, then companies would not be able to pay migrants less for their labour, and companies would no longer favour economic migrants. Although to be fair, the sort of work that economic migrants do is usually considered to be below the capacity of the average British person.
> Brexit supporters were largely just angry with the status quo and were essentially casting a protest vote.
Indeed. But you cannot say that there was no warning at all. The London School of Economics and many others openly stated that leaving the EU would be disastrous. Instead, these people decided to listen to the likes of... Boris Johnson. Someone who has a long history for making openly racist towards other countries.
How can that be? Doesn't freedom of movement imply freedom to live and work wherever you want?
In the UK it seems the government felt it was cheaper to lay off the border control officers and let people do what they want, but then complain that they are doing whatever they want.
Baring a few exceptional cases such as criminal activity, I am not aware of any limitations the UK can implement to control this (for now).
You are correct of course that extra people coming into a profession could cause stagnation of wages, but it is usually far more complicated than that. In the UK, despite all of this immigration we have rather low rates of unemployment, marginally lower than before the 2004 expansion of the EU. This seems counterintuitive if wage growth is an over-supply problem. It is also not true to say that an industry will just keep paying more and more to attract workers from other sectors. This soon hits the point in the modern globalised world that the industry just becomes uncompetetive and closes down, outsources, invests in labour reducing machinery, or moves. Wage stagnation is very real in Britain however, and for pointers to the cause you might want to look at why non wage inflation has been so low for so long, putting aside the last 18 months of FX driven inflation caused by comparatively weak sterling post Brexit vote (This adds around 15% to most imported goods).
[0]:https://en.wikipedia.org/wiki/Freedom_of_movement_for_worker...
It's not fallacious and the UK did do that [0] for 7 years after they realised that the A8 migration estimates were incredibly wrong.
> In the UK, despite all of this immigration we have rather low rates of unemployment, marginally lower than before the 2004 expansion of the EU
First of all, no one here said immigration is causing unemployment, just wage stagnation for certain industries.
Second of all, it's not "counterintuitive", immigrants tend to move to areas with low unemployment so I would expect the above to be the case anyway. Most immigrants wouldn't come if there were no jobs.
> This soon hits the point in the modern globalised world that the industry just becomes uncompetetive and closes down, outsources, invests in labour reducing machinery, or moves
But that's not what's happening here, as you said, the jobs are still here (low unemployment). They're not automated or outsourced, they're done manually for minimum wage (or lower) by hard working immigrants from poorer countries.
I have to say, you kind of changed the topic. We were discussing about the existence of limitations for low skilled workforce, not whether or not Brexit was a good idea.
If this new labour force had not appeared are you seriously suggesting that UK employers would just have paid more and more to attract workers from other sectors? How would they remain competitive?
> If this new labour force had not appeared are you seriously suggesting that UK employers would just have paid more and more to attract workers from other sectors?
Yes?! That's how it works... You literally agreed in your previous comment that part of the reason for wage stagnation was the extra new labour force.
> How would they remain competitive?
The same way they were competitive before 2004 I guess.
If your company relies on low skilled manual labourers working 12h a day for minimum wage or you go bankrupt... You should go bankrupt. It stops you from modernising and increasing productivity long term.
Yes they would go bankrupt or move production or automate...like I said originally. Perhaps this results in less jobs in the economy and the low skilled get paid less, the economy shrinks and every one gets poorer?
There is an interaction between immigration and wage growth but it is not a simple or linear one.
Yes you did. Did you miss the part where I replied to that?
> Perhaps this results in less jobs in the economy and the low skilled get paid less, the economy shrinks and every one gets poorer?
I'm sorry but what are you talking about?
Shitty companies going bankrupt does not mean less jobs or lower wages, in fact the opposite. It's natural and a good thing in a free market. So I don't know what you are on about here.
> There is an interaction between immigration and wage growth but it is not a simple or linear one.
Oh for sure. Immigration can definitely increase wages and the economy and create jobs. But you forgot the low skilled part.
Look, this thread has gone long enough and you're not addressing most of the things I write, so I don't see the point of this.
All I wanted was to clarify that the UK did not in fact have any power to limit freedom of movement of workers from the EU, that's it. I never wanted to argue about anything else.
That's fallacious. Perception of a market does not always match actual figures about that market.
As an EU citizens, I have a right to go there and work. Work requires a tax code. Tax code requires a permanent address in Germany. Most places you can live require a job and good credit history.
I could bootstrap that by buying a place in Germany, and I might still do that if I am confident I understand foreclosure auctions well enough, but it’s amazing what a little creative bureaucracy can do to slow things down.
Requiring a work permit for EU citizens (like the UK did) is a better example of a bureaucracy designed to limit immigration but that doesn't generally fly with the EU.
It's pure madness. I actually run a blog documenting the (sometimes insane) German bureaucracy. It's not nearly as bad as people think, but things like getting an Ausländerbehörde (immigration office) appointment can be a real pain.
Fortunately, it has improved a lot in the last 3 years. The Settle in Berlin article is completely outdated.
http://allaboutberlin.com/guides/berlin-auslanderbehorde-sam...
That's plain wrong. Every EU country must allow freedom of movement for workers from other EU states.
https://en.wikipedia.org/wiki/Freedom_of_movement_for_worker...
> Look at France, Germany, etc. for countries that properly enforce their borders.
Germany currently doesn't even enforce its borders for immigrants from outside of the EU. For immigrants from the EU, it is simply not allowed to just like every other EU country.
Much of what you just wrote is incorrect, please see jimnotjim's comment: https://news.ycombinator.com/item?id=16558745
I know. Nonetheless, nobody who runs a media outlet actually wants to acknowledge this and elites on both sides Brexit campaign didn't either, so it was always going to remain largely unknown to the general public.
>In addition, if a proper living wage were enacted for all residents of the UK, including recent migrants, then companies would not be able to pay migrants less for their labour
Yep, but that would savage profits. Elites on the pro-Brexit side didn't want this, elites on the anti-Brexit side didn't want this. Tories don't want it and centrists in the Labour party didn't want it. The only person with any power who actually wants this is Corbyn and in 2015 almost nobody paid him any attention.
>Indeed. But you cannot say that there was no warning at all. The London School of Economics and many others openly stated that leaving the EU would be disastrous.
Pretty much anybody who claimed to know the effect of Brexit prior to the referendum was lying. Nobody knew. The outcome would be dependent upon the shape of a deal that hadn't yet been made. It was shocking the number of economists who came out with actual numbers. Monumentally stupid and played right into the Brexiteers' hands. sigh...
It's not at all irrational to disbelieve out of touch elites when they tell you that things that they believe will be bad for them are actually bad for you.
The number of times we've been condescendingly told by lying elites that jacking up the minimum wage will only trigger mass unemployment is a testament to that.
Except the groups I referred to were university establishments and thinktanks. Much of the outroar came not from the 'elites', so much as middle and lower class professors...
> Pretty much anybody who claimed to know the effect of Brexit prior to the referendum was lying. Nobody knew. The outcome would be dependent upon the shape of a deal that hadn't yet been made.
No. The main facts that were known before the referendum were:
We do not have enough legal staff in the government to handle such a large negotiation. Thus we would have to borrow or outsource much of the more backbreaking legal work to other countries.
The implication of leaving the EU implies that we must renegotiate a trade deal with every single country that we are parting with, something that took the EU as a collective _decades_ to do.
Britain would be put on the back-foot in any future negotiations, given that other countries are not at risk from completely and utterly losing trade with most of the world given a failed deal, but we are. Strategically it makes sense to not put yourself in such a position.
Britian would have to adopt the regulations that many claimed were harmful, if it wanted to trade with the EU, just like every other country that has trade with the EU.
It doesn't take a genius to see that this is not a beneficial position to be in as a country.
> The outcome would be dependent upon the shape of a deal that hadn't yet been made.
The deal still hasn't been made, but we can still predict that the outcome of this will be negative based on facts that are clearer to us now, but were present before the referendum took place.
The fact that a large proportion of people admitted that in retrospect they did not know what they were voting for, should have been the point at which we started backpedalling and figuring out where we are.
The official response from the establishments of elite universities and the output of think tanks is almost the definition of "out of touch elites", no?
>Much of the outroar came not from the 'elites', so much as middle and lower class professors...
Not in the media read by people in Lincolnshire. They don't hear the outroar coming from those middle and lower class professors going on strike either.
I appreciate that you might have had mates who were postdocs who had legitimate reason to be worried about science funding (so do I!), but not everybody does.
>It doesn't take a genius to see that this is not a beneficial position to be in as a country.
What you described above was the effect of hard Brexit. Hard Brexit wasn't even on the cards until some time after the vote, and is still not confirmed even now.
>The deal still hasn't been made, but we can still predict that the outcome of this will be negative
It's entirely possible to extract some good from this process even if it was better that it was never started. However, paying little attention to the actual shape of the deal, which is highly mutable, and simply re-iterating that any kind of Brexit is the worst possible thing that could ever be happening to us isn't going to do that. One way or the other it's happening.
It doesn't take a genius to figure that out.
There are only three real options:
- retain some kind of single market, which requires retaining freedom of movement; this is the Norway option, where we give up our vote but continue paying. Hard to see what the advantage of this is, and it will not give the government the right to deport Polish plumbers and nursing home workers that so many people desperately want to do. This is "pointless Brexit", where we become marginally worse off but the Leavers aren't satisfied.
Care home worker availability is already becoming a problem: http://www.independent.co.uk/news/business/news/brexit-care-...
- Hard Brexit. No freedom of movement, customs barriers, no free movement of services. Some sort of fiasco on the Irish border, the M20 is turned into a lorry park ( https://www.ft.com/content/7ff7c97c-b33c-11e7-a398-73d59db9e... ), and the UK's financial services and just-in-time manufacturing businesses start having to move to Europe.
- Disaster Brexit. The UK persists, Greece-style, in asking for options which the EU has already agreed not to give them. No decisions are made and no planning is done. Home Office issues "go home" notices to the 3 million EU nationals here informing them that they are now illegal immigrants and it is illegal for them to have a bank account, be a tenant, be employed or go to the doctor. Those who have not yet fled, perhaps because they're married to UK nationals who no longer have the right to move to the EU, start mass demonstrations. Retail logistics snarls up and empty shelves start appearing on shops. We go back to the Winter of Discontent.
Hah. No. I was talking explicitly about the many professors that specialized in law and economics relating to the EU explicitly raising their voices that this would put the UK in a terrible financial and political position.
> What you described above was the effect of hard Brexit.
No. What I described above is the effect of Brexit.
> Hard Brexit wasn't even on the cards until some time after the vote, and is still not confirmed even now.
Eh? Teresa May has been consistent that she wants a "hard brexit", to the point of calling for it months before she defined the fucking term!
(Finally defined in http://time.com/4635762/theresa-may-hard-brexit-britain/)
You seem to be at a severe information deficit concerning the information available to the public about brexit, before the brexit process was enacted. Please read https://voxeu.org/article/economics-brexit-pre-referendum-vi...
Who couldn't be more out of touch. In 2008 the Queen was at the LSE talking to exactly these kinds of people and, quite famously asked "why did none of you see the financial crisis coming?". None of them had a good answer.
Their reputation is literally "the guys who were completely blindsided by the last economic storm". In 2016 they staked their reputation on there being another storm - high unemployment and recession to follow the vote. Two years later we can look back and confirm that once again, they were wrong. We still haven't had a contractionary quarter and unemployment is slightly down.
Now they are telling us that once we finally exit that the promised spike in unemployment and recession will happen. Frankly they might be right this time, but they'll still simply be useful idiots.
>No. What I described above is the effect of Brexit.
No, you didn't. Among other things, you mentioned negotiating a trade deal. If we stay in the common market there is no need for that. That option was firmly on the table during the vote and even now it still hasn't been taken completely off.
>Eh? Teresa May has been consistent that she wants a "hard brexit"
No she hasn't. Originally when she asked what Brexit meant she famously said "Brexit means Brexit" much to the chagrin of... well, everybody.
She's flip flopped all over the place since then.
>You seem to be at a severe information deficit concerning the information available to the public about brexit. Please read https://voxeu.org/article/economics-brexit-pre-referendum-vi....
Yeah? Try reading your article from 2016. Pay attention specifically to the bit where they promised high unemployment and recession following the cataclysmic effect of the vote and went "this is probably right, but it's too early to tell". Well, it's 2018 and it's no longer too early to tell! Unemployment went slightly down and we've yet to experience a single quarter of contraction (and it's not like those are rare, I think 2013 was the last one?).
Try comparing your economists' predictions to reality once in a while. You might be surprised.
Ironically, I find a lot of people who are pro Brexit to be less surprised about the facts I've just shared. That's not because they're smarter, it's just because they are fed a different kind of propaganda.
How is this Europe's fault? That was a decision made by the UK, not the EU.
The parent is absolutely correct that the pro-Brexit politicans are using the working poor as their useful idiots.
Usually trade policy is an attempt to reconcile two conflicting goals:
1. To protect your own industries/producers
2. To grow your export markets abroad
They are conflicting, because growing export markets (by striking trade agreements) often requires concessions that may damage sectors of a state's internal market. States attempt to strike the right balance of protectionism and free trade.
The Brexiteers' trade policy seemingly values neither protectionism nor free trade. They do not care if they damage UK producers by flooding the UK market with cheap imports. And they do not care if they damage UK exporters by throwing away all the UK's trade agreements and reverting to WTO terms.
Why? Because they do not care about trade or industry. For ideological reasons they wish to turn the UK into a low-tax, low-regulation state. Trade and industry are a mere inconvenience to them.
The irony is that the UK was already becoming such a state while it was in the EU, and the loss of financial passporting is extremely damaging to the City and thus to the Brexiteers' project. They just haven't realised yet.
This would probably be true in 2001, but these days most Chinese stuff in my home is of high quality and extremely durable.
Like my smartphone, my furniture, my hobby drone.
Yup. It keeps inflation in check, and allows them to buy more stuff with their salary, including investing into improving their education and don't actually having to work on low paying jobs.
Sometimes I wonder if David Ricardo was from Mars.
Cheap labor keeps inflation in check by keeping the salaries low. The upper middle and upper classes reap those benefits, not the people whose salaries were kept low.
Repressing lower-middle class and working class salaries low to keep inflation in check is how you end up with Brexit, Trump, Le Pen, Golden Dawn, etc. This is a global phenomenon.
You don't need to be posh to benefit from migrants cheaply building your home, cleaning your bathroom, or taking care of the children and the elders.
In America, the options for these folks are basically disability, jail (for men) or being a state supported baby machine. We also offer opiates to help.
I have a hard time being sympathetic to folks that were born in a stable an generally safe country, with access to decent (if not prime) education. And all they care during their school years is girls and pot/meth.
Than they blame their unemployment on piss poor migrants that can't even speak the language, or asians that studied their asses off with the little they could make.
There are good people becoming unemployed due to tech advances. The solution is having them learn new trades - not expelling migrants so they can clean bathrooms for $15/h
Like it or not, representative governments are supposed to represent their countrymen. While the plight of the 3rd world is awful in many ways, I’ll assure you that the policy positions have nothing to do with people seeking a better life.
Natives who were more educated did reap the benefits and they don't want to roll things back to how they were in 2003 when slightly more expensive natives did those jobs.
The educated upper middle classes are, however, a minority.
>You don't need to be posh to benefit from migrants cheaply building your home, cleaning your bathroom, or taking care of the children
Maybe not posh but you do need to be upper middle class. If you're actually doing those jobs you are not benefiting from your wages being suppressed.
Some types of workers, most notably existing immigrants do suffer... in the short term... particularly from migrants from outside the EU.
https://fullfact.org/immigration/immigration-and-jobs-labour...
I think this study is the key, to be honest "Research from University College London finds that an inflow of immigrants the size of 1% of the UK-born population leads to a 0.6% decline in the wages of the 5% lowest paid workers and to an increase in the wages of higher paid workers." (http://www.ucl.ac.uk/~uctpb21/Cpapers/CDP_03_08.pdf)
The actual effect is not large, but the relative increase in distance between very low earners and middle/upper-middle earners is what offends... and the likes of Murdoch are only too happy to stir up that resentment in exchange for keeping their tax loopholes.
Also many of those same leave politicians want more trade with the former colonies, not less.
You could also describe the institutions creating regulatory arbitrage opportunities as “parasites”. In fact, I think it would be more accurate, since arbitrage increases societal efficiency whereas the conditions that create arbitrage opportunities decrease societal efficiency.
For example want to reduce inport duties on African farmers and Chinese shoe manufacturers; the complete opposite of beggar thy neighbour, and does nothing to make rich people richer.
If you believe the basic purpose is to provide capital for enterprises from the savings of individuals and the earnings of other businesses, insider trading is probably a bad idea. It erodes trust in the system and makes suckers out of the people with 401k retirement savings. It eats into the returns that can be earned by competent fund managers for savings.
If you believe that the stock market's primary purpose is enabling arbitrage then insider trading is a good idea.
Legalizing insider trading would make it very hard for managers of public companies to do their work. As things stand today there's a "blackout period" each quarter. That's the time when the managers of the company know the results of the previous quarter, but they haven't yet told the public. Legalizing insider trading would eliminate the blackout period. The market would be flooded with rumors and speculation. "An assistant comptroller at QRS Corporation says they lost a big customer. He's a friend of a friend." What a mess that would cause! It would make it even more attractive for companies to go private and remove the ability of the public to invest and share in their success.