Grasping the Nettle Now

So President Francois Hollande has not given up on his election promise to levy a 75% tax on those who pay themselves, or get paid, in excess of €1m (£840,000) pa. The French high court rejected his original proposal, but it seems the revised version, to levy the tax on the payers rather than the recipients, may well prevail. The promise is that it will only be for two years, but Pitt said much the same when he introduced the first British income tax to pay for the Napoleonic wars. If it works, it will no doubt stay and perhaps be built upon

Taxing the income of the very high paid at a higher rate than the low paid is part of what made the French vote for Hollande as President. The people want it. They apparently don’t like the idea that the wealthy are sneering contemptuously from their tax avoiding havens at the poor who are being clobbered left, right and centre. And in that respect the French are probably not much different from the Brits. If a British political party were to advocate a 75% tax rate, with no escape, for those earning a million or more, would it gain support from the mass of people?
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The FTSE100 and the UK Economy

Every day, the BBC – in fact the whole media circus – faithfully report the progress of the FTSE100 share index, as though it were a portent of our economic future. Every day so called “experts” explain in detail the reasons for FTSE100 movements seemingly on the assumption that it still relates to the UK economy. But recently some mystification has been expressed over how, when the UK economy is doing so badly – resolutely refusing to respond to the inspirational George Osborne, even losing its triple A rating – yet the FTSE100 is doing so well, already up 8% this year following 5.8% rise last year, threatening to follow the Dow to hit an all-time high. There is a definite disconnect between FTSE100 share values and the real economy. Bank of England governor Sir Mervyn King’s enthusiasm for quantitative easing only further emphasises that disconnect, boosting share values but having no effect at all on the real economy and jobs.

The FTSE index no longer reflects expectations about the UK economy. So what does it reflect? There must presumably be some connection between share prices and expectations of future gains. But those future profits no longer relate to what’s going on in the UK. The FTSE has become a global index, comprising companies like the dreaded Glencore, Anglo American, Serco, Xstrata, and like global companies. Oil and gas and pharmaceuticals account for nearly 30% of the FTSE’s value. Basic resources (mining), banks and financial services make up another 30+%. And an increasing number of foreign companies find a London quotation beneficial, such as the recent Russian additions, steelmaker Evraz and gold and silver producer Polymetal International. Around two thirds of FTSE100 companies have limited relevance to the real UK economy.
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Centrica and the Existential Lie

The media expressed shock and horror that Centrica should jack its prices up to its customers and pass £1.3bn of its surplus profits back to its shareholders. But why? That’s what Centrica’s directors think they are there for. And the media and most everyone else appears to share that misunderstanding that it’s the legal duty of company directors to maximise shareholder wealth. But it’s simply not true. It’s based on a lie. The capitalist system was much more soundly based than that, but is currently being destroyed by such dishonest, even criminal corruptions of the truth.

In real competitive markets, exploitation of customers, employees and the rest, for the sole benefit of shareholders, is constrained by competition. So everyone benefits. But where a market is carved up between a small number of monopolistic giants, exploitation is inevitable. Some markets are like that. Gas is one. So are most privatised markets because government attempts to create pseudo competitive conditions invariably fail, succeeding only in establishing an additional layer or two of bureaucracy to handle the unavoidable extra regulation.
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