A tale of two Gordons: why Gekko is right and Brown is wrong

Rudy Rencoret

You are so right Mr. Nelson.
During the 70s the Australian Labor party rose the top tax to 65cents in the dollar. I, with many others, made the conscious decision of not working hard and doing better, as a result, than the hard workers. When the Liberal Party brought the top rate down, I started working hard again for myself and my family not for the Australian Government. The Labour Parties never learn what incentive is all about.

cuffleyburgers

Kindly make this argument to your colleague the communist Bright who seems to think that working for the taxman is a noble obligation.

Peter Farrington

There are two things wrong with this article, which is of course sound in principle. One is that greed is not the same as running a successful business and being successful in business. Greed is actually morally bad and corrosive - MPs have given way to it in spades as has been seen in the Expenses Controversy. And secondly politics is not the same as economics. There is very little political capital in majoring on the removal of this stupid tax at the moment. So why major on it. It wopuld only give Labour some ammunition. Much better to major on the general economic incompetence of this government and when in government to remove the tax rapidly as part of a wider scheme to deal with the outcome of that incompetence.

HF

We cannot change this if we are not in Govt.

Gavin

If the weak Tory government insists on retaining the 50% tax rate and the bizarre loss of tax allowance on earnings above £100,000 will they at least recognise the iniquity of the new tax arrangements. The Labour plan penalisies the family with one high earner and one non-earning carer while having no impact on the household where the combined income of the parents is in excess of £100,000 but neither earn six figures on their own. This is another attack on the family and the concept of voluntary work.

The truth is that Cameron does not need to worry about the Gekko tag. Taxes on wealth creators must be seen to be fair and effective. And spending must be cut, drastically. ID Cards, Trident, Tax Credits and Child Benefit are all expensive and unnecessary. The best that can be said about thm is that they are unaffordable.

But I fear we will have a 'New Tory' government that will mirror the 'New Labour' government of 1997. Too scared to be true to its roots. Too timid to do what is right and what is necessary. And the memory of the 1980's will be rejected in favour of some spurious middle ground or, God forbid, "Third Way".

Major Plonquer

The Laffer curve is just common sense. However, I've completed a full mathematical treatise on Laffer's work that clearly demonstrates the impact of taxation on the British economy. This is a bit technical.

The optimum tax rate occurs at what Laffer calls T* where the government doesn’t take too much money and people are left with enough to encourage hard work. Above T* the economy as a whole suffers as people slack off and decide its not worth working. Of course not all parts of the economy suffer. At rates above T* it pays to be a bookie.

But there are other points on his curve that Laffer didn’t understand as much as the singularity at T*.

F* for example is the point where we see the implications of Fiscal Drag where the impact of moving allowances upwards actually has a negative positive effect on tax revenues.

K* is a point on the curve that represents the median between 0 and T* where the curve slopes away faster than 45% and is the point where the economy can be said to be out of the control of the government.

Let's call the point on the curve where Alistair Dalek has chosen to tax the British public D*. At this point the net impact on the economy can be calculated with the formula:

UK(GDP) = F*K*D

A full explanation can be found on my blog at

http://plonquer.blogspot.com

You couldn't make this up.

lawrence greek

I agree with everything in this article other than the bit about Gordon's trap being a double bluff. The man just isn't capable of such insight.

The other intersting thing that you touch on Fraser is the bit about tax rates at the bottom. We need to engineer a tax and benefits system that leaves people in work significantly better off than on benefits. Now that would save the country money.

oldrightie

You've been at the bottle again, Fraser. Looks as though the geen eyed monster is beginning to rear it's ugly head as a Tory Government seems more and more likely. Greed is NOT good.

AH

A good article and I agree with it's sentiments. However, there must also be a tactical element to all of this. if the Conservatives oppose this now, then they fall into the trap left by GB for the election. It is, as you say a populist measure. However, once elected they can happily reduce the rate and make the case. Surely this is all about timing? There is no need to march to Gordon's tune.

AWoodward

Another well written piece Fraser - whilst I don't necessary disagree with a lot you have said, as an ordinary voter I'm afraid we don't think about these issues in this degree of depth. Lets just get to the finishing line next June before you start piling the pressure on David Cameron. I strongly suspect Gordon Brown is going to 'jump ship' before then as he looks knackered.

donald fraser

“Greed is good” works best against a background of good but old regulations to “greedily pull apart”. Free-market progress is most rapid when at timely moments key technological innovations arrive and entrepreneurs are given the green light to exploit them. Government then acts to liberalise those markets, “rules are bad” and entrepreneurs are legally permitted to pull apart old working practices.

Awkwardly for the UK economy, dependent on the City of London’s performance, there are few key technological financial world innovations “in waiting” at the moment. However counter-intuitive it may appear, regulation of financial markets alone will not provide the new ground rules in which economies can flourish. Yes, some new financial regulations are required to mend the parts of it which flagrantly failed. However the main thrust of the new rules need targeted at “sunrise industries” which are outside of the financial sector.

“Greed is good” can work equally well as an incentive to impose new regulations in the correct industries for the correct reasons. Keynesian, if it were proposed as the all-encompassing economic management theory as it once was, must past the test of “greed is good”. The “sunrise industries” which require “new regulations for correct reasons” are not yet championed by our economic experts in a way politicians can act to propose new policies. Did Google, Youtube, Twitter, Yahoo or EBay emerge from the UK? Neo-Keynesian might be called a “global web 2.0 regulatory framework”. Greed will work here as motivating incentive, provided legislative policy is designed to encourage the integration of technological innovations with the social and political fabric.

The UK has two comparative advantages in this sector: a traditional concern with individual privacy and a high IPR (intellectual Property Right) stake in the entertainment industry. Our economic future thus depends on the scope and detail behind regulatory proposals, from wherever they come, and the ability of our nation to implement it. Success will be gauged by the green light it provides entrepreneurs to “be greedy” and how water-tight they are to shut-out “greedy lawyers”. Gekko did not mean by “greed is good” to mean “feeding the lawyers” is permitted. The lack of a coherent regulatory policy is stifling innovation and entrepreneurship in Web 2.0 but no government is capable of tackling that without an adequate school of economic thought to back it up.

Tradebot

hmm, could you guys please explain - if Brown calls the election by May 2010, then his last budget will be passed in March / April 2010? How does that work? Will it have time to go through parliament?

Pat

Greed is usually seen as wanting more than I envision getting- thus I know of a junior clerk spending part of her first pay packet on nice clothes being accused of greed by elders who couldn't have spent their first pay packet thus. No-one admits to greed- they just want a little more, not a lot (of course that remains true after they've got a little more. Greed is just an emotive term to denigrate other's ambition, but niceties aside everyone has some ambition.
To fulfill people's ambitions we need everyone to produce as much as possible, and as you rightly say taxing GG types out of the country, into retirement, or into the hands of accountants goes against this.
But taxing people whose wage is below the official poverty line similarly reduces incentives for the less talented- and doling out benefits for form filling encourages people to focus on gaming the system rather than producing more.
So how about a tax free allowance at or above the poverty line introduced at the same time as a flat tax for all earnings above that line. The poor workers get an immediate benefit, which will counter the poor publicity from the reduced upper rate, and the admin cost of taking their money will be less (a small but welcome cut in HMG's outgoings. It would seem sensible to roll NI into income tax at the same time- and maybe mandate a pay rise equal to the employers contribution at the same time.

David

You are a journalist, surely you have some idea of how the media works? No matter what the Tories say, the headline will be "Tories to scrap tax on rich."

Your argument is, simply, one of purity versus electoral pragmatism. Politicans have to work with the grain of the people. Even Thatcher knew that, hence her refusal to privatise Royal Mail.

David

"On this occasion, Mr Cameron walked into Gordon’s trap, which was not that the Tory leader would oppose the measure, but that he would accept it"

Oh, that's just utter, utter tosh. The word tortured logic doesn't begin to describe this. Come on. Really.

London Calling

Greed is Good?

For whom…The Greedy?
Hardly the Mantra for our times, a pig in a suit.

Greed is not Good, it has destroyed parts of our planet, corroded moral judgment
And all that is good.

If Greed is the template, evil is its architect. Do not confuse ambition and success with the Me,Me,Me,Mantra, it has failed and always will.

hadrian

The Politics of Envy which is what Broon is peddling here, along with his 'other sources of MPs' income' stinks to high heavens. Of course wealth creation is good; of course sensible market risk taking and enterprise is vital; of course thrift and equity reward for service/work rendered is right.
However when capitalists PLAY THE SOCIALISTS' game and crow/bray like some hooray henrys that 'greed is good' they are just plain stupid. Greed, as opposed to responsible aspiration with commensrate rewards for work input, such greed is exceedingly bad. The love of money is the root of all ( kinds of) evil. No wiser words can be uttered. Greed is not the true capitalist's character but the socialist's, oddly enough. Greed demands more than what it earns and cannot rest till it gets it.
Greed trusts in raw material possession for fulfilment. That is utopian socialism. What a stupid, stupid watchword!

David Short

Perhaps Fraser Nelson overlooks, or did not know, that Gordon Gekko in 'Wall Street' was a crook and at the end of the film looked set for jail.

Unless there is a puppet master at the Spectator who lovingly remembers the red braces and free market days of the Eighties, I cannot understand why a respectable magazine can fete a criminal and his philosophy.

Margy

Greed sows the seeds of armagedon

Fraser Nelson

Thanks for your comments - for the record, I didn't say that greed is good and don't believe it. We often use cartoons to grab attention, and thought we'd have some fun with the iconic figure of Gordon Gekko. I do realise he's a crook, David Short, which is why I called him an anti-hero. I hoped I'd made my position clear in the piece: I completely agree with Peter Farringdon. We at The Spectator believe that wealth creation, not greed, is good - and that, as JFK said, a rising tide lifts all boats. The more the rich earn (and pay in tax) the lesser the burden everyone else as to pay. We are against vindictive taxes, especially ones like the 50p tax that will lose the Exchequer money and increase the burden on the poorest.

David Short

Thanks for the explanation, Fraser Nelson, but perhaps you guys need to control the people who write your intros better, or make them read the piece first:

"The Eighties mantra ‘greed is good’ may be unfashionable, says Fraser Nelson, but it is still true. "

You might not have endorsed 'greed is good' but someone at the Spectator did.

Bob T

Article headline:
"The Eighties mantra ‘greed is good’ may be unfashionable, says Fraser Nelson, but it is still true"

"Fraser Nelson" in comment column:

"for the record, I didn't say that greed is good and don't believe it"

Could the real Fraser Nelson stand up?

Peter Simmons

Quite the longest load of garbage justifying greed ever, which is not to say it has any validity. I suggest the writer go back to studying rather than thinking his deranged, simplistic neocon nonsense is worth reading. It's also totally inappropriate at a time when greed has virtually destroyed the world economy, or do you maintain the present situation is a result of socialism? Pathetic, must try harder. 2 out of 10.

Ronnie

Substitute 'a an overriding emphasis wealth creation' for 'greed' and we are just about there.

Greed has delivered us the worst financial crisis in living memory and made the general creation of wealth virtually impossible, over a period of at least two years.

I think we know what we mean.

Ben

If ever you were looking for an example of the woeful slide into which party politics has descended this is it. With the gloabl economy hanging in the balance Brown crawls into the gutter to satisfy his grotesque political machinations by imposing a 50% rate, knowing it's going to screw the economy, but believing it to be popular and more important embarrass the Conservatives.

And Cameron/Osborne are liable for their rank cowardice in refusing to oppose it.

It's worth repeating: raising the top rate to 50% IS BAD FOR THE ECONOMY!!!

ATFlynn "Norfolk's Mutineer"

Thank you for the article, but I would point out the fact that if the Taxpayers both employers and employees, changed the way they work and are paid, they need never again pay one penny in Taxation to Westminster.
Last year, 2008, I spoke at the April meeting of the South Norfolk District Council, suggesting that all Taxation was paid locally and a structure of Public Service funding was put in place so that
Public Service spending was the product of Taxation. As things stand, Taxation is the result of Public Service spending.
I received a standing round of applause for my effort. Later I had a meeting with Daniel Cox, Leader of the Norfolk CC. He was
sympathetic to this idea and as far as I know, made plans for the rolling back of costs, across the County. Some few hundreds of GB£. The local Conservative Party de-selected him as a councillor. I have no confidence in the Conservstives to do anything about the bloated spending of this Labour Government. Very few people seem to understand the vast amount of debt or the time scale that is covered. I have a copy of one PFI contract that runs from the 14th. August 2001
until 14th. August 2061. And even then it can be extended. A
989 bed Hospital, cost of build, £129 million, plus £100 million at hand over.Refinanced after five years on 14th. Aug. August 2006, for £116 million. Total paid after five years, £345 million. And this goes on in this fashion for Sixty Years. To cap it all, there are some Eight Hundred contracts like this up and running. And more under construction and on the drawing board. That one Hospital will cost you Taxpayers some billions of GB£. Most people alive today, will never see it paid for, and I should think a lot of people not yet born, will have the pleasure of picking up the pieces. Still it's only a game of Politics, isn't it ?
Regards, ATFlynn, "Norfolk's Mutineer"

hadrian

Well, I'm pleased to see the very infantile attitude behind this shallow catchphrase no longer resonates in public esteem- if it ever really did.
However I WILL say this- sure, as one poster points out, the worst financial crisis for decades may have had raw, unvarnished greed behind it but it ALSO has a bloated messianic State feeding into it as well. Blair and Broon and their statist welfarism/control freakery have contributed like some evil conspirator with Greed to the present emergency. The Report today laying all the blame at the Financiers' feet is far too convenient a whitewash for all those high spending socialist politicians and they shouldn't be getting off so lightly, the utter hypocrites.

By the way, on a droll note, I had been under the impression the cartoon figure on the front of the Spectator was supposed to have been Mr Fraser Nelson!! Glad to learn it isn't, given the hairdo, awful braces ans swaggering arrogance apparent in the pic!

paul gilboy

excellently stated. Not only should lower taxes be a totemic principle of conservatism, but makes economic sense.
If Mr cameron can't forget that he is a wealthy man and rule in the interests of all the people he should step down. His class cannot be allowed to hinder what is right for the country.
The only qualification you need to be P.M is your english, second thought you don't even need to be that. Thats how liberal we are

John Page

Disagree for once. The formulation of 50% finding its place in the queue is good. There will be no manifesto commitment to keep it, so it will be open to the Tories to repeal it in their first budget.

Nimble politics, for a change.

Jack

Well i guess i am beyond the pale as far as New Labour is concerned being bothing in banking and being a proud tax exile. I jumped ship to Singapore after finally growing tired of seeing (after all the other stealth taxes are concerned) over 50% of my hard earnt money going to prop up the failing welfare state and corrupt politicians.

Now i pay around 10% tax p.a and live a wonderful life in a very safe and very clean tropical Singapore. I won't be returning to the UK anytime soon.

Dirty Euro

Greed is not good. That is like saying gluttony is good. Friedman derivatives have been a disaster.

David Bouvier

Tradebot - the budget speech coincides with a bunch of announcements and orders using existing powers and shortly after that the publication of a Finance Bill that implements those measures requiring legislation.

This years timetable has the finance bill passed in June and being given Royal Assent on 20th July, from an April budget.

If it had to be foreshortened my understanding is that lots of the technical stuff that is bundled into the bill would be dropped so that a minimal bill could be passed quickly.

I happen to have a significant interest in one of the technical matters this year, so have been looking into this issue.

Michael Petek

"So put to death your worldly impulses: sexual sin, impurity, passion, evil desire, and greed (which is idolatry)"
(Colossians, 3:5)

Wilfred

Fraser, much as I admire your writing, I'm afraid you've walked right into Brown's well-named elephant trap. The thing you have to know about Brown, and obviously haven't yet, is that he is thinking long-term strategy at the same time as he's being petty and short-term. Cameron has avoided the trap (not walked into it, as you suggest) by down-playing the 50% tax hike. In fact, he played it brilliantly in the Commons, spotting immediately that he had to ignore the provocation.

But you, dear old Fraser, after years of intelligent writing and positioning, have finally succumbed to Gordon's siren call. He wanted you to shift rightwards (and you're important, though not yet a politician, because you have influence over the Notting Hill set). But Brown never dreamed that not only would you tack to the right, but you would embrace the Ayn Rand/ Gordon Gecko manifesto in its disgusting and vile entirety.

What you've done, Fraser (and I mourn for you as a person, while rejoicing politically) is that you've had political equivalent of a manic episode. At this time of public disgust with the excesses of some elements of the financial sector in ruining many a good saver and investor, how can a normally intelligent commentator lead with the thesis that Greed (Gecko's type of Greed) is Good?

As a supporter of New Labour (and therefore a bit dismayed about Broon's trajectory at the moment), I am of course delighted at your error.

Essentially, you've just walked into Gordon's elephant trap. And I never thought you would do it.

Wilfred

Jack, dear old Jack, you are deluded. I worked for seven years in Singapore and had a good life there. But to deliberately go and live there rather than Britain just for tax purpose is - what can I say - a tad idiotic?

Most business people would recognise that you have to pay for something good.

So why do so many normally intelligent business people allow ideology to blind them to the obvious fact that tax is just a payment for something good.

I like living in Britain and I am happy to pay my taxes to contribute to the goodness that is Britain.

To nip off to Dubai would be both pathetic in moral terms, and not a very good life for me in human terms.

Rashide Mohammed

Sir- Your analysis and conclusion remain sound. Yet, you appear to have confused correlation with causation with respect to the effect of lowering the top rate of tax on Britain's economic growth in 1979 and 1988. You have discounted other more potent drivers of economic growth such as privatization, the signing of the Single European Act or the abolition of exchange controls, and have given the rich perhaps more than their due in your fervent( and justified) opposition to the higher tax rate for the rich.

Michael Duffy

The 50p rate is political and should be opposed by Cameron on that basis. Yes, argue the economics, but argue also that Brown is willing to meddle with the economy for a political wheeze. Show him up: the electorate should not be under-estimated, and don't let fear of headlines guide policy or response; just say it won't be implemented and have done with it.

It is time that Cameron took some political risks, and stood up for his principles and values in contrast to Brown and New Labour who have none. He has a year to show that he has the mettle (or bottle) to be PM.

Rupert Pitt

What an absured piece by Fraser Nelson who normally writes well.
Greed got us into the scrape we are in now, with 4 banks reluctantly being nationalised.
My investments, managed prudently by Rathbones have shrunk massively. I am £7000 down from the holdings in RBS alone. I am reminded of a quote from 1987 when my Uncle a History Don at Oxford remarked of the Tories "The Government has no moral theme apart from individual competing against themselves to get richer. They are not corporatists, it is impossible to imagine them making anything like the BBC." True then and now. Where is any insight as to how this credit crunch arose from Nelson?
If he were to do so he would have to withdraw his article.