Let's not let politicians get away with crying 'immoral' to justify their prejudices

It is always a worry when politicians start invoking morality in the promotion of their particular policy or prejudice. It doesn't matter much which side you're on, the objective is always to try and make out that those who support what you oppose are bad people. This applies as much to William Hague going on about the moral case for low taxation as it does to the latest piece of moralising from Labour's 'business spokesperson', Rebecca Long-Bailey:

Ms Long-Bailey told Today: "I don't personally use Uber because I don't feel that it is morally acceptable but that's not to say they can't reform their practices."

She added: "I don't want to see companies model their operations on the Uber model."

The objective here is to make you feel bad when you choose to use Uber - or, by implication, any other business using the 'gig economy' model. Obviously, Ms Long-Bailey has every right to choose the (usually) more expensive option of a hackney carriage or traditional private hire, but when she claims this makes her morally superior she is changing the argument entirely. Where we had an argument about working conditions and business models, we now have one based on making people who don't agree with Ms Long-Bailey feel bad.

Morality is a tricky area for politicians - after all arguments based on morality kept homosexuality illegal, brought in prohibition in the USA, helped keep women out of the workforce, and resulted in the unwarranted stigma of illegitimacy. In this case the appeal to morality is based on an assumption that Ms Long-Bailey knows precisely the minds and motivations of those people who drive for Uber.

The thing is that we know one thing that makes Ms Long-Bailey's argument false - no-one is forcing anyone to be an Uber driver. More to the point, the employment basis of most taxi and private hire drivers is pretty much identical to that of Uber drivers - they are self-employed. And Uber across most of the UK is licensed in the same manner as a private hire vehicle. This company is no more exploitative of its drivers than the typical Leeds, Bradford or Manchester private hire business.

What Labour and Ms Long-Bailey are saying is that it is morally wrong for a new business employing people on pretty much the same basis as the businesses it competes with to charge less money. This is about is protecting the local authority taxi monopoly and the excess rents earned by that monopoly and its employees - this is not about morality but about competition and the desire to protect one section of the market. All at the expense of the consumer - you and me.

Labour are entitled to make the argument for this protectionism using grounds such as safety, tradition, market stability and so forth. I think these sorts of arguments are wrong but that's an opinion. What is wrong here is that Ms Long-Bailey wants to make out that my opposition to her position on the technological disruption of public transport is somehow immoral. It clearly isn't.

This approach represents an unhealthy trend in recent left wing politics. It used to be the conservative right that would invoke morality as justification for policy but today we find this moral imperative used by socialists like Ms Long-Bailey. Whether it's the defence industry, disruptive digital technology, online distribution or Brexit, elements of the left turn quickly to an argument based on morals. We see this starkly with Ms Long-Bailey's unjustified attack on Uber but it's familiar to those who've witnessed arguments for 'ethical' procurement or investment, arguments based not on a real moral code but on the translation of political credo into an ethical platform. If I oppose 'Fairtrade', fossil fuel disinvestment or bans on tobacco advertising then I am a bad person because such policies are 'ethical' - opposing them makes me, in effect 'unethical'.

We need to start kicking back. Using Uber is not immoral, the 'gig economy' business model is not unethical, and to say so is to corrupt the meaning of ethics and morality by twisting it to serve a political ideology. Ms Long-Bailey's argument cannot be allowed to stand there without challenge, to become the presumed truth about self-employment in the UK because it is simply not true that it is immoral to use Uber, it misrepresents the business model and rather insults the folk who earn a decent crust driving for that company.

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On the moral rightness of markets

This quotation comes, via Cafe Hayek, from Pope John Paul II's encyclical Centesimus Annus from 1991:

In this expanding economic community, the pope observed, a market system encourages the virtues of “diligence, industriousness, prudence in undertaking reasonable risks, reliability and fidelity in interpersonal relationships, as well as courage in carrying out decisions which are difficult and painful but necessary, both for the overall working of a business and in meeting possible set-backs.”

Too many people spend too much time trying to tell us that markets are some sort of moral vacuum and that, for all their usefulness, markets are essentially a necessary evil. Or even that they don't exist at all.

Truth be told markets are, as Pope John Paul II recognised, one way in which humans interact and for most exchanges in most markets the principle of the handshake applies. I recall a friend who provided legal support for the Showman's Guild describing a land deal between two showmen and how the seller, having spat on his hand and shaken with the buyer, would not even meet with another man who wanted to offer more money.

When I think of all the transactions and exchanges - whether or not money is involved - that rely on a high degree of trust in the other party (trust taken on faith not through some lawyer's contract), it seems to me that the market is a powerful force for goodness, for those virtues the late pope named. There are billions of exchanges and transactions every year, all taking place in a market, and a vanishingly small proportion of those events are corrupt, exploitative or unethical. It is, perhaps, this truth that we should focus on rather then the dry, utilitarian benefits of the market the economics text books speak of.

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Socialism turns people into cheats...

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Or so Alex Tabarrok reports:
 

From 1961 to 1989, the Berlin Wall divided one nation into two distinct political regimes. We exploited this natural experiment to investigate whether the socio-political context impacts individual honesty. Using an abstract die-rolling task, we found evidence that East Germans who were exposed to socialism cheat more than West Germans who were exposed to capitalism. We also found that cheating was more likely to occur under circumstances of plausible deniability.

Of course here we are not at all surprised. We know that non-market systems protect privilege and promote favour-mongering even in law-abiding and mostly non-socialist Britain.

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From 1961 to 1989, the Berlin Wall divided one nation into two distinct political regimes. We
exploited this natural experiment to investigate whether the socio-political context impacts
individual honesty. Using an abstract die-rolling task, we found evidence that East Germans
who were exposed to socialism cheat more than West Germans who were exposed to
capitalism. We also found that cheating was more likely to occur under circumstances of
plausible deniability. - See more at: http://marginalrevolution.com/marginalrevolution/2014/07/moral-effects-of-socialism.html#sthash.4w1nOOS1.dpuf

Bitcoin threatens government ergo Bitcoin is evil

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This is the essence of Paul Krugman's argument suggesting Bitcoin's sinful nature. And this evil is defined in a quote Krugman takes from Charlie Stross:

BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions. 

It is on this basis that Krugman makes the judgement that Bitcoin is evil. Indeed, he recognises that the debate about the morality of private money is very different from the debate about how (or whether) the private money actually does the job that state money does.

Krugman's core criticism of Bitcoin - and one assumes other means of exchange (or value storage) that aren't controlled by government - is that is undermines big government. Moreover, if private money succeeds (and the jury is out on this) then there is no foundation for monetary systems that drive these big state, big corporation systems - what we can call 'national accounting arithmetic' or 'magic money tree' models.

This is only a moral question is you accept that there is a moral basis for taxation.

Since I don't believe there is any moral case for taxation (as opposed to pragmatic, practical cases) then I see no reason at all to be concerned that private money makes it hard for the government to monitor my financial transactions.

What happens under this system is that government has to make the case for raising taxes - to set the price of government at a level where people willingly pay. Just as importantly, such a change more or less destroys the use of  income taxes to promote 'equality'. Taxes become what they should always have been - means for government to provide the services that people require of that government rather than a blunt instrument of social control.

We still have a way to go - these private monies are risky and unproven. But if the direction is towards a smaller, less intrusive and consent-based government then, far from being evil, Bitcoin is a source of moral salvation.

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There is no moral basis for taxation...

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This isn't an argument against tax but a simple statement of fact. We pay taxes because we have to and, possibly, because we get some sort of benefit from the payment of those taxes. And in paying those taxes it is entirely proper for us to arrange our affairs so as to pay only the tax that is due and nothing more. I would add that it is for the tax authorities - and no-one else least of all parliament - to assess what we pay and determine whether we have complied with the rules parliament has prescribed.

If parliament believes that I do not pay enough taxes (and assuming that I am not guilty of evading taxes which is a crime) then parliament has it within its power to change the rules that determine how much tax I pay. None of this is about any sort of moral duty or responsibility. Taxation is merely expedient - the means whereby government secures the revenues that government needs to carry out its purpose.

It rather worries me that - for reasons of political opportunity rather than good government - politicians (aided by their friends and relations in the broadcast media) have decided to whip up some sort of mob, to conduct a sort of moral crusade targeted primarily at large corporations.

Why does it worry me? Quite simply because corporations - businesses of one sort or another - are what will lift us out from the ire of recession. It won't be government however much they wish to scatter the magic fairy dust from the basement of the Bank of England across the land. It won't be shiny new value-destroying railways, ridiculous floating airports or delving ever more tunnels under London (there is something wonderfully Swiftian about today's infrastructure schemes) that will provide that elusive growth.

Yet every politician is now dragged into condemnation of tax 'avoidance' - from committees of MPs asking impertinent questions of people who actually contribute to the economy (unlike those MPs) to cabinet ministers writing pleading letters to jurisdictions with tax regimes that have met with disapproval. All to pretend that somehow this attack will help make the economy better and, worse still, accompanied by words like 'evil', 'corrupt' and 'immoral'.

There is no moral basis for taxation - government imposes a levy on our incomes, wealth and expenditure because it can do just that. But this is not a moral act and seeking to reduce how much tax we pay is therefore not immoral. What we see in a ghastly ignorant mob egged on by politicians and other hacks who point at businesses and successful men crying: "look there, wealth and money! We should have more of that for us to spend. These people are moral pygmies for not paying more tax than they owe!"

And the business people are dragged before the media - the court of mob rule - and accused of what? Essentially of complying with the rules set down by parliament, the European Union and contained in solemn treaties between sovereign nations.

Put yourself in the place of those businesses - international in scope and purview. Do you decide to develop your UK business? Or do you go somewhere else? Perhaps China, Brazil or Indonesia - places where the government welcomes your acumen, investment, jobs and wealth.

There is so moral basis for taxation - saying so is stupid and damages our economy.

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On taxes, morals and practicality

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Once again tax has become a matter of moral debate. Rather than asking the sensible and practical questions – “how do we raise the amount of money we need to deliver those ‘vital’ public services?” or “what is so ‘vital’ about this or the other bit of public spending?” – we are debating whether it is or isn’t morally repugnant for a person to use the rules to minimise the amount of tax they pay.

And the target for all this is “the rich”, a group of ill-defined, nameless, faceless individuals onto whom we must heap opprobrium if they have the audacity to move their money around so as to pay a little less tax. Every now and then one self-righteous newspaper hack or other latches onto a particular person or a specific company and calls down the anger of the gods upon them – how dare they not hand over nearly all their income and most of their wealth to the government, how dare they!

And so the game goes – today The Guardian latches onto a dead man so as to have a pop at that dead man’s son. Nobody is suggesting that the son has done anything wrong but the sins of the dead man – reducing his tax bill by moving his money around – must mean that the son is a sinner too! And, sadly, the response of many is not to castigate the values that led to such an attack on a dead man but to accuse the paper (and others) of hypocrisy since they too indulge in such international money management for the purposes of tax minimisation.

This way madness lies! We do not have taxes as some form of punishment for those who have the gall to be very rich. Nor do we have taxes so as create some form of “morally beautiful” status of equality. We have taxes to pay for government. That’s it. No other reason is remotely defensible. And the job of the government is to raise those taxes efficiently.

Nowhere in this is there any matter of morals. Merely a set of practical issues: what is the best rate of income tax; what should the balance be between direct and indirect taxes; should reliefs be offered for desired actions such as philanthropy, business investment or saving for retirement?

However, those who cheer at the attack on a dead man choose to make this a debate about morals. So let's respond.

I do not believe that we have any more moral duty in paying taxes than to comply with the rules set down by the government. And if that means that a very rich man can avoid paying tax at the same rate as a much poorer man, the fault lies with those who set the rules not with the man avoiding paying the tax.

Instead we should ask why it is that very rich men – and others who are far from very rich – put such effort into avoiding taxes? Could it be, perhaps, that these men feel that rates of taxation are too high? Perhaps – and it’s hard to take issue with this sentiment – the very rich man believes that it is wrong for the government to seize more than half what he earns? Maybe, the very rich man believes it to be morally wrong for government to take such a large proportion of someone’s income?

We have got ourselves into such a state – with politicians forced into publishing tax returns and hints that ministers will be expected to do the same. I cannot but think that the idea of a very rich man giving public service – as rich men have been wont to do throughout history – is likely to become just that, history. Why should that man bother when his reward will be sneering attacks on him for the apparent sin of being rich? Instead, the man heads to his private island or grand house, shuts the gates and perches on his pile – having first ensured that only the smallest possible part of it goes to the government in taxes.

And the fault for this separation from public service will not be the rich man’s. The fault lies first with government for demanding too much of that man’s income and secondly with the frothing mob led by hypocritical journalists who castigate him and his sort – even beyond the grave – merely for having money.

Attacking the rich may make some of us feel a little better, perhaps more able to tolerate less pleasant personal circumstances. But it does not help the government in that task of raising taxes efficiently and it is not the championing of some moral righteousness. Taxation must be a matter of practicalities not moralities. If we get to the stage of shouting about morals then the only conclusion is that our tax system is not fit for its purpose of raising the money the government needs for its business.

And so it is. Taxes are too high on the rich and too high on the poor. In the former case we can see they are too high because of the lengths that rich men go so as to avoid those high rates. And in the latter case because we have to tax the poor because the rich aren’t there to be taxed.

I don’t know the right answer – the system that would work – but I do know that the current debate misses the point entirely. Taxation must be a practical matter if it is to work. Moralising about it just makes things worse.

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Who are the undeserving rich?

In today's Daily Telegraph, Peter Oborne returns to his well-rehearsed subject of the rich and the poor. Or more precisely the evils of those Mr Oborne defines as the "overclass":

Senior bankers, private equity moguls and hedge fund managers appear cut off from the rest of us. They often pay little or no tax, increasingly live in heavily guarded enclaves, and some have little or no real allegiance to Britain. The sources of their wealth are often mysterious, and appear unrelated to merit. These feral rich pose, in their way, every bit as much of a danger to society as the rioters who stole and pillaged London streets last August. 

Nothing new in this argument - it is a familiar traditionalist conservative viewpoint that sits with the idea of "one nation" and the concept of duty. Indeed, part of Mr Oborne's revulsion at the "feral rich" is their very internationalism, their independence:

Among both the very rich – the “overclass” – and the very poor – the “underclass” – the idea of responsibility, duty, patriotism and neighbourliness has been destroyed. 

The men who Mr Oborne demands are reined in have no desire for the state, we might almost observe that their wealth enables them to break free from the state. And Mr Oborne dislikes this. It cannot be allowed since it is tearing away at the fabric of society. And such sentiment echoes past views on the wealthy - or more particularly on the need to make a distinction between the rich we approve of and the rich we disapprove of:

...it is right that men and women who have made a fortune through ingenuity and hard work – such as writer JK Rowling and inventor Sir James Dyson, for example – should be allowed to retain their wealth. The question is how to create a set of rules which achieves that aim while penalising the greedy and rapacious.

You see here how Mr Oborne has framed the argument? Somewhere we require a means of making some sort of moral judgement between the deserving and undeserving rich. So smiling actresses, trendy musicians, slightly wacky inventors and tieless entrepreneurs might be allowed their riches but others - carefully ill-defined here - who are merely "greedy and rapacious" must have their riches seized for it is the proceeds of "bad" capitalism.

So who is included in Mr Oborne's parade of sinners? Is it just those whose sources of wealth "are often mysterious, and appear unrelated to merit"? And how in all this do we define whether riches are deserved - presumably the scrapping of the national lottery is an imperative in Mr Oborne's New Britain. What better definition of unmerited wealth is there than winning £40 million from a £1 stake?

We are grasping at straws - almost floundering - here. While we can appreciate why Mr Oborne is so cross about the "feral rich", he fails to answer the big question - who is undeserving of their riches? Now, it seems to me that the solution to Mr Oborne's problem isn't to indulge in some form of moral distinction but to recognise that the problem with capitalism lies not in the wonder of free markets but in their corruption by the choices of government.

The undeserving rich are those whose wealth derives from exploiting regulation and government rather than from creativity, enterprise and innovation. In alluding to crony capitalism, Mr Oborne hits the nail on the head - this is at the core of the problem. Many business sectors - aerospace, pharmaceuticals, transport, construction and, of course, finance - have worked hand-in-glove with government to create wealth for the owners of those businesses. Legislation and regulation is used to protect the interests of existing operations, to favour the state's interests over the innovator and to allow many businesses to become little more than rent-seekers dependent on the political class.

And the political class is likewise dependent on these rent-seeking businesses - for politics is a poorly paid business. You need only look at the immense wealth accumulated by Bill Clinton and Tony Blair so see how crony capitalism works for the political class.

I fear, however, that Mr Oborne's arguments will be taken as an incentive to regulate and control. To set rules - probably unenforceable rules - about the remuneration of company directors and the payment of bonuses. Speeches will be made announcing endless crack downs on "abuse" with a new collection of regulatory bodies set up to police this system. Each of these will have a board of well-padded felines and a chief executive earning half-a-million. Politicians will announce that something has been done!

And the rich will remain as they are today - free from the state. Not individually free from the moral imperative of duty or any responsibility for others but free from the state. For my part I see this as a growing up process - we should aim for a place where everyone is able to live like the financier Mr Oborne describes:

"The only time that I use the state,” one financier worth an estimated £500 million confided in me recently, “is when my driver drives on public roads from the City to my country estate."

Is this not a good thing? If we are wealthy enough to no longer to require the soft cushions of the welfare state surely that is something to be celebrated, not something worthy of condemnation?

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The solution to Mr Oborne's challenge is fewer rules, less government and more free markets. Somehow, I suspect we'll actually get more intervention, more regulation and less free markets.  And we'll be poorer for it (unless we have the right connections, of course!)

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All business conducted within the law is good business...

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What is it about politicians wanting to pass moral judgement about business? Today it’s Nick Clegg’s turn:

The Deputy Prime Minister will launch today a campaign for a “well-rewarded workforce”, saying that businesses owned by their staff are more dynamic and have higher morale.

He wants to encourage companies to follow the model of John Lewis, the department store group which is owned by its employees and distributes its profits between them.

Mr Clegg’s call for “responsible capitalism” will come as City firms are preparing to pay executives billions of pounds in bonuses, despite pledges from politicians to curb excessive pay and growing hardship among ordinary families.

Those words – “responsible capitalism” – echo the sentiment of interventionist politicians down the years.  From Heath’s “unacceptable face of capitalism” to Miliband’s crass distinction between ‘producers’ and ‘predators’, we find politicians seek political capital from the making of moral distinctions between ‘good’ and ‘bad’ businesses.

None of this is to say that it’s a bad idea to reward employees with shares – this cements their interest in the firm’s success and acts as a spur to profitability. But it is a matter for the owners of businesses not a concern of government – granting some sort of “right” to demand that the company gives shares to employees is a pretty gross intervention in those businesses however much we might think it a good idea.

It is simply not the role of politicians – however well-qualified we make think we are – to pass moral judgements about capitalism. I can respect someone who believes that capitalism is immoral – they are wrong but honestly wrong – but the person who says that some capitalism is bad and some capitalism is good is trying to have his cake and eat it.

For my part, I believe that capitalism is inherently moral since it is the only form of economic organisation that reflects the primacy of individual choice and preference. All other forms – those imposed by governments in a futile search for man’s perfectibility – are immoral since they require that some people are told “no you can’t make that choice”.

And when we look at the distinction made between ‘good’ and ‘bad’ business, it has more to do with the effectiveness of the different firms’ public relations than a real understanding of the morality or otherwise of that business. We like John Lewis because it does nice advertising and runs Waitrose (where the supermarket-hating commentariat prefer to shop) – if Provident Financial adopted the same ownership approach would we suddenly approve of selling expensive loans to poor people?

People start businesses with the intention of making themselves some money not as some noble social project. If people didn’t do this all the lovely stuff we take for granted – you know, the schools and hospitals – wouldn’t be there. If smart young people didn’t work eighty-hour weeks on trading desks the City of London wouldn’t be the world’s biggest financial centre producing £100 billion and more in added value.

If we start pretending that business isn’t about earning a living, if we begin to force our prejudices onto business owners, we set off down a road to a less wealthy, less creative, innovation-free society. Rather than condemning the city trader for his money, we should celebrate the fact that an ordinary guy from Dagenham or Sidcup can make that kind of cash and enjoy the good life that goes with it. It is wrong to make some moral distinction between the hedge fund manager and the artisan baker, to pretend that one is ‘good’ and the other ‘bad’.

All business conducted within the law is good business and the only irresponsible businesses should be businesses that fail.

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On corporate social responsiblity...

I’ve always had something of a problem with “corporate social responsibility” – the idea that business has a wider duty beyond its purpose as a business. I have a still bigger problem with the confusing of this concept with “ethical behaviour”. Here’s Ken Costa, the man charged with finding a form of “ethical capitalism”:

“The present duty – on all boards to maximise shareholder value as the sole criteria for satisfying the return to shareholders – cannot continue... I am aware that this is a big change that will need detailed discussion, but we need to start with big ideas.  For some time and particularly during the exuberant irrationality of the last few decades, the market economy has shifted from its moral foundations with disastrous consequences. I cannot recall when public feeling worldwide has run so high, and even if only a minority takes its anger on to the streets, no one should imagine that the majority is indifferent to their cause.”

Now there’s a place for shareholders to discuss their expectations from Boards of Directors – those they appoint to represent their interests as owners of the business. It’s called the Annual General Meeting and, at that meeting, shareholders can appoint a board or directors that can take a different view that maximising the return on the investment those shareholders make. I’m pretty sure it won’t happen because the reason why shareholders invest is to secure a return on that investment – and we expect it to be the maximum possible.

The point I’m making here is that the corporation exists to serve the purposes of its owners and investors and that such activity is entirely ethical and moral. Indeed, were Directors to take it on themselves to reduce the returns to investors because of some other purpose – some wider “social responsibility” – they would be acting unethically. This is the dilemma of corporate social responsibility – if it is more than trading honestly and complying with the law, then it must be against the interests of the shareholders unless it is merely a marketing strategy or corporate positioning.

In all of this bear in mind that the owners of a business (or to be accurate 50% plus 1 of those owners) can do what they wish – including reducing financial returns in the interests of a wider social purpose.  But it would be wrong if directors acted without the approval of shareholders in taking such a course.

Ken Costa is right that many people are angry about a system they feel led to the problems the world faces right now. However, I am sure that the duty to secure returns for shareholders wasn’t the cause of those problems or the creator of some crisis in capitalism. What is central to all this debate is for us to rediscover the joy of the marketplace and to recognise that, for markets to work, people have to behave (in the strict sense of the word rather than its modern corruption) ethically. Ken Costa gets close to this concept:

Our task is thus to build up trust, both within and beyond the financial world, a slow, bottom-up, trade-by-trade business. It is to rebalance the equilibrium between risk, responsibility and reward. It is to re-embed the financial spirit, our drive to do well, with the moral spirit, our desire to do good. Above all it is to reconnect the various different silos of our humanity – economic, moral and spiritual – so that we live as whole people all the time and not simply as money-makers on weekdays and morally concerned citizens at the weekend.

For me the question is how do we have a system where the right behaviour – moral, ethical or whatever – secures the greatest reward. This isn’t about corporations or institutions but about people changing their behaviour. We cannot legislate for morality but we can educate people so moral and ethical behaviour is second nature.

Finally, we must stop seeking to condemn people for their success, good fortune or wealth – the “bash a banker” or “pillory a politician” approach. Nor should we turn our back on the idea or markets, enterprise and trade – these are fundamental elements of our humanity not some creation of mankind. Rejecting them would be as immoral as was their corrupting through the hubris that was the end to boom and bust.

Above all we must not place on corporations duties we do not place on ourselves – which is what “corporate social responsibility” means and it why it is wrong.

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