Category: Current Affairs

Nigeria fact of the day

Last year more people were killed in clashes over land between farmers and cattle-herders than were slain by Boko Haram.

By the way:

On February 16th Nigerians will go to the polls in the largest democratic event in African history.

And:

In total Mr Buhari has delivered on just seven of the 222 pledges he made as a candidate, according to the Centre for Democracy and Development, a Nigerian think-tank.

Here is The Economist article.

The wisdom of Ramez Naam, on climate change

From his tweetstorm here are a few bits:

Our biggest climate problems – the sectors that are both large and that lack obvious solutions, are: a) Agriculture and land use changes (AFOLU in the graphic) and b) Manufacturing / Industry. Together, these are 45% of global emissions. And solutions are scarce. 11/

I’m not saying that clean electricity or transport are solved. They’re not. But in electricity, we have solar, wind, batteries growing & getting cheaper & on path for 70-80% decarbonization *at least*. Same with electric cars and trucks. We have momentum in those sectors. 12/

We do NOT have momentum in reducing carbon emissions of agriculture or manufacturing. In agriculture, livestock methane emissions + deforestation to graze livestock are biggest problems. And meat consumption is doubling in next 40 yrs. This should scare you more than coal. 13/

In industry, despite progress in recycling steel, *primary* steel production is still incredibly carbon intensive. As is cement. As is much of manufacturing. We haven’t reached the “solar cheaper than coal” or “EVs cheaper than gasoline” tipping points there. We need to. 14/

If the US is serious about climate policy, it ought to focus on these two sectors – agriculture and industry – that are soon to be the two largest emissions sources, and lack solutions. We should press to invent solutions, drive them down in price, and spread them globally. 16/

Do read the whole thing.

Stop demeaning billionaires and you were unfair to Howard Schultz

Here is my Bloomberg column on that point.  Furthermore, that tape of Schultz is much better than what many media sources reported, here is the excerpt on that:

In an interview, Schultz was asked whether billionaires have too much power. He responded by noting that the moniker “billionaire” has become a “catchphrase” and proceeded to reframe the question: “I would rephrase that and I would say that people of means have been able to leverage their wealth and their interest in ways that are unfair.” So he didn’t necessarily disagree with the premise of the question. Nor did he say that other people shouldn’t use the term “billionaires.”

For the record, he also noted that such people have “unbelievable influence,” and that speaks to the problem of inequality. And he included corporations (not just people) and the political ideologies of the two major parties as part of the problem.

Is that such a terrible answer? Not only on the merits, but also in explaining why Schultz might want to move away from the term “billionaire” as the sole locus of blame? Then again, maybe that’s just what you would expect a billionaire to say.

You can watch the interview here, and note the rest of the column is making more general points about how we should talk about people and their wealth:

My parents taught me never to ask a person how much he or she earns. I was told that it was rude, and I still believe that. It follows that we also should not ask people about their net wealth. And, out of politeness, perhaps it is also inappropriate to openly discuss the range of their net wealth.

Why have countries moved away from wealth taxes?

From the excellent Timothy Taylor:

Back in 1990, 12 high-income countries had wealth taxes. By 2017, that had dropped to four: France, Norway, Spain, and Switzerland (In 2018, France changed its wealth tax so that it applied only to real estate, not to financial assets.)  The OECD describes the reasons why other countries have been dropping wealth taxes, along with providing a balanced pro-and-con of the arguments over wealth taxes, in its report The Role and Design of Net Wealth Taxes in the OECD (April 2018).

For the OECD, the bottom line is that it is reasonable for policy-makers to be concerned about the rising inequality of wealth and large concentrations of wealth But it also points out that if a country has reasonable methods of taxing capital gains, inheritances, intergenerational gifts, and property, a combination of these approaches are typically preferable to a wealth tax.  The report notes: “Overall … from both an efficiency and an equity perspective, there are limited arguments for having a net wealth tax on top of well-designed capital income taxes –including taxes on capital gains – and inheritance taxes, but that there are arguments for having a net wealth tax as an (imperfect) substitute for these taxes.”

Here, I want to use the OECD report to dig a little deeper into what wealth taxes mean, and some of the practical problems they present.

The most prominent proposals for a US wealth tax would apply only to those with extreme wealth, like those with more than $50 million in wealth.  However, European countries typically imposed wealth taxes at much lower levels of wealth…

It’s interesting, then, that in these European countries the wealth tax generally accounted for only a small amount of government revenue. The OECD writes: “In 2016, tax revenues from individual net wealth taxes ranged from 0.2% of GDP in Spain to 1.0% of GDP in Switzerland. As a share of total tax revenues, they ranged from 0.5% in France to 3.7% in Switzerland … Switzerland has always stood out as an exception, with tax revenues from individual net wealth taxes which have been consistently higher than in other countries …” However, Switzerland apparently has no property tax, and instead uses the wealth tax as a substitute.

The fact that wealth taxes collect relative little is part of the reason that a number of countries decided that they weren’t worth the bother. In addition, it suggests that a US wealth tax which doesn’t kick in until $50 million in wealth or more will not raise meaningfully large amounts of revenue.

There are many more excellent points at the link.  Here is another:

A wealth tax will tend to encourage borrowing. Total wealth is equal to the value of assets minus the value of debts. Thus, one way to avoid a wealth tax is to borrow a lot of money, in ways that may or may not be socially beneficial.

Tim concludes:

To me, many of the endorsements of a wealth tax feels more like expressions of righteous exasperation than like serious and considered policy proposals.

Recommended.  If you would like another point of view, Saez and Zucman respond to some criticisms here.

The New Zealand real estate problem, with reference to Palmerston North

From my email, from Ryan Reynolds:

I’ve worked in Palmerston North, as well as Tauranga and Auckland (all briefly). I’m Australian too, so my perspective may be shaded vs what a Kiwi or someone from further afield might say.

The major issue is just supply of new dwellings and the permitting and development process. All the rest of the factors noted point to increases in demand (immigration, natural population growth, easy credit, real income growth, tax structures, chinese buyers) – but without a limit on supply you would have expected those factors to result in a building boom not a rapid price appreciation. That’s obviously not the way reality has played out.

From a permitting side, the Resource Management Act heavily constrains lots of building decisions and imposes a lot of bureaucracy (and time delays and uncertainty). Less specifically, Kiwi’s appear to have strong preferences for careful building and urban sprawl in lots of dimensions. That includes specific issues like building heights, overshadowing, retaining views of specific hills or valleys (including Maori heritage sites) and retaining its environmental and cultural heritage (however brief it may seem to outsiders). These preferences are captured in major urban plans which set out acceptable terms for developments, but often even urban plans won’t contain enough zoned land to meet demand (see the bun fight over the Auckland Unitary Plan from 2016), and even then those plans took years to put together. This plays out in a strong community undercurrent and politicians of both stripes use scare campaigns about the horrors of inappropriate development. Anything two stories or over can count as ‘inappropriate’.

From a policy perspective there seems to be no understanding of the practical trade off between housing demand and conservation, except from economists outside the planning departments (see NZ Initative or Michael Reddell, ex RBNZ) or from the central government threatening to unwind urban plans.

The second issue is that NZ also has a lot of partly and wholly government owned and operated utilities (water supply, networks and wastewater; electricity and gas networks; electricity generation) and services provided under government monopolies required for new developments (roads, education, healthcare, and other social services). In many cases the entities charged with providing these services are capital and/or budget constrained and they don’t have the funds to provide major new capex works in the short to medium term. Furthermore, the revenues earned from providing these services are often inadequate to cover economic costs. For instance, water supply and wastewater is provided at below cost price in many cases in NZ, and in large parts of the country water supply is un-metered. And there is serious community opposition to either privatization or changes in tariffs. As a consequence though, capex projects in the water sector are effectively large donations of capital for no return for the water corporation. As is the case for virtually all roads, schools, or hospital projects, any of which could prevent or stall major new urban developments. So even if new land was zoned as ‘fit for development’ (which it won’t be), the entities required to facilitate that development don’t have the funds to do so and nobody else is allowed to fill that gap.

And yes, Palmerston North is still dull. But then people say that Switzerland is dull too. I’ve seen much worse.

A MimbleWimble Explainer

TechnologyReview: In July 2016, someone using the name Tom Elvis Jedusor (the real name of Lord Voldemort, the main villain in the Harry Potter universe, in the French edition) posted a link to a text file in a chat room frequented by Bitcoin researchers. Voldemort’s document described MimbleWimble, a blockchain system that would hide the identifying information associated with Bitcoin transactions.

…The person who started Grin [one of the first new currencies built on a blockchain that implements MimbleWimble] is also pseudonymous, going by the name Ignotus Peverell (the original owner of Harry’s invisibility cloak), and has never been seen. Peverell recently used a text-to-speech program to address attendees at a Grin conference.

So to sum up, Grin is a new currency on the MimbleWimble blockchain imagined by Lord Voldemort and implemented by the invisible Ignotus Peverell.

…Eric Meltzer, an investor for crypto-focused Primitive Ventures, recently estimated that $100 million of “mostly VC money” has already been invested in Grin mining operations.

New Zealand facts of the day

All of New Zealand’s major cities were rated as “seriously” or “severely” unaffordable, with a house in the least expensive city, Palmerston North, priced at five times the median income.

Mr. Pavletich, one of the report’s authors, said smaller markets like Tauranga, a coastal city on the North Island with a population of 128,000, had seen an influx of people who had left Auckland in search of more affordable housing. Average property values in Tauranga had risen to $497,000 from $304,000 in the last five years, and Demographia now rated it among the 10 least affordable cities in the world — along with famously expensive locales such as Hong Kong, San Francisco, Sydney and Vancouver, British Columbia.

People, I have been to Palmerston North (though not Tauranga, which seemed too empty and remote, now the fifth largest urban cluster in a country of 4.8 million), way back in the 1990s, and I recall a feeling of dullness above all else.  If you had asked me whether this outcome was possible, I sooner would have thought Donald Trump would be elected president.

Here is the full NYT story by Charlotte Graham-McLay.  P.s. they haven’t built enough homes.

The politics of a wealth tax

That is the topic of my latest Bloomberg column, here is the end sequence:

Besides which — a fact that is getting too little notice — the U.S. already has what is in essence a wealth tax: Tax rates on capital gains are not indexed for inflation. With this nominal-based tax system in effect, it is harder to accumulate wealth over time, and the nominal-based tax erodes the real value of the asset base.

Whether or not you think this capital-gains policy is a good idea (I do not), it is striking how few Americans understand that it serves as a wealth tax. It is not marketed or proclaimed as such. And I don’t expect Republicans or Democrats to counter Warren by saying, “Don’t worry, we already have a wealth tax.” Isn’t this a sign that voters simply are not yearning for a wealth tax?

The other major form of wealth taxation in the U.S. is of course the property tax, which is paid by large numbers of Americans and used to finance local services, rather than being primarily directed against the wealthy. It is seen as a way of making local government accountable to those who vote and pay for it, not as an engine of wealth redistribution. If anything, by maintaining the quality of school districts in wealthy communities, its net distributive effects are anti-egalitarian. That system seems to be a permanent part of the American political landscape.

Finally, think about politics in the broadest possible terms. What Americans really want is for their lives, their jobs, and society in general to get better — an admittedly ill-defined but nonetheless instantly familiar concept. Americans also want their leaders to deliver such outcomes with the considerable resources already at their disposal. Is that so unreasonable?

Anyone promoting a wealth tax is in essence saying that there aren’t many ways of improving society within current resource constraints. That is a brand of pessimism which Americans voters have not often rewarded.

File under: the Twitter reactions are self-refuting.  But if you would like the opposing point of view, here is Eric Levitz.

San Francisco fact of the day

San Francisco has more drug addicts than it has students enrolled in its public high schools, the city Health Department’s latest estimates conclude.

There are about 24,500 injection drug users in San Francisco — that’s about 8,500 more people than the nearly 16,000 students enrolled in San Francisco Unified School District’s 15 high schools

Here is more, via an MR reader.

Me on wealth taxes from 2013

I don’t usually like to rerun material, but every now and then it seems appropriate.  Here is the opening paragraph from my NYT column from six years ago:

If you’d like to know where American political debates are headed, the data suggest a simple answer. The next major struggle — in economic terms at least — will be over whether taxes on personal wealth should rise — and by how much.

There is much more at the link.

One shutdown lesson is that Americans need to save more

That is the topic of my latest Bloomberg column, here is one excerpt:

Indeed a higher savings rate is possible, and not just for the wealthy. Most Mormons in the U.S., for example, manage to tithe at least 10 percent of their incomes. This suggests it is possible to curtail one’s consumption without losing the best things in life. Mormons also tend to have especially large families, making tithing all the more difficult. If Mormons can tithe so much, is it so impossible for the rest of us, including government employees, to save more?

There is also a new “gospel of savings” in the U.S., being led by such renowned (but non-mainstream) figures as Dave Ramsey and Mr. Money Mustache. They reach millions of Americans, imploring them to strip down their consumption to essentials and to save a much higher percentage of their incomes, sometimes 20 percent or more. Ramsey wrote a column giving advice to unpaid federal workers, including “sell stuff” and to cancel Netflix.

Do read the whole thing.

Eric Kaufmann’s *Whiteshift*

The subtitle is Populism, Immigration, and the Future of White Majorities, and might this be the must-read book of the year?  It is “to the right” of my views on immigration policy, but still I found it informative, fascinating, and relevant on just about every page.  Here is the author’s opening framing:

First, why are right-wing populists doing better than left-wing ones?  Second, why did the migration crisis boost populist-right numbers sharply while the economic crisis had no overall effect?  If we stick to data, the answer is crystal clear.  Demography and culture, not economic and political developments, hold the key to understanding the populist moment.

Kaufmann, by the way, is Professor of Politics at Birkbeck in London, but hails from Canada.  As for the basics, there is this in addition:

Much of this book is concerned with the clash between a rising white tribalism and an ideology I term ‘left-modernism.’

If you wish to understand “all the stuff that is going on today,” maybe Whiteshift is the best place to start?  Kaufmann, by the way, is not a mega-pessimist and he seems to think that “broadening the category of white” will lead to a “good enough” solution for many of the Western democracies.  Still, much of this book is disturbing, especially for readers who might consider themselves to be on the left.  Most of all, he sees “whiteness” as a legitimate cultural interest, and one which, if we deny, will lead to more overt racism rather than less.

Here is Kaufmann on Brexit, brutal but I think largely correct:

…many analysts bring a political lens to their analysis which inclines them to want to tell a story about wealth and power.  Over half the country voted Leave and we can’t condemn such a large group.  So we pretend populist voters are motivated by the same things we are: economic stagnation (for fiscal conservatives) or, for left-liberals, inequality and resentment of the establishment.

Kaufmann also has strong evidence for the “immigration backlash” hypothesis, for instance:

…a higher immigrant share is a consistent predictor of higher opposition to immigration over time…in Western Europe there is a .63 correlation between projected 2030 Muslim share and the highest poll or vote share a populist-right party has achieved.

On top of all of its other virtues, Whiteshift provides the best intellectual history of the immigration debates I have seen.  It also has the best discussion of why Canada seems to be different when it comes to immigration, and I may cover that in another blog post.

Kaufmann does very much argue that the left-wing values of diversity and solidarity stand very much in conflict.  How is this for an “ouch” sentence?:

Casual observation would suggest that being black in diverse San Francisco is not necessarily better than being black in white-majority Fargo [North Dakota].

By no means am I convinced by everything in this book.  I don’t think European politics can handle systematized refugee camps in Europe itself (rather than Turkey and Lebanon), and most of all I am not sure that recognizing whiteness as a legitimate cultural concern will diminish rather than boost racism.  I wish he had said much more about gender, and how immigration and gender issues interact.

Nonetheless this book has more points of interest yet, including an original and persuasive take on residential clustering, a good analysis of racial intermarriage, and a sustained argument that avoiding the “no dominant ethnic group” approach of Guyana and Mauritius is imperative.

Strongly recommended, it is out next week, you can pre-order here.