The myth of profligate France and austere Britain

Via Steve Kates (who else!) I learn that Brian Lee Crowley of the Macdonald Laurier Institute believes that:

If the all-stimulus-all-the-time Keynesians are correct, for example, France should be the strong man of Europe, for its Socialist president came to power rejecting “austerity” and preaching the virtues of stimulus. Britain, which pursued a course of fiscal discipline under the coalition government of David Cameron, should be in steep decline.

But what does ‘a course of fiscal discipline’ actually mean? And shouldn’t we care about what France under President Holland has actually done, rather than what he campaigned on? Let’s go to the figures:

France vs UK debt to gdp


But of course, the deficit-to-GDP ratio has a numerator (deficit) and a denominator (GDP), so what if we just look at the size of the deficits without weighting by GDP?

deficit euross

(Both charts use data from Eurostat.)

As we can see, both economies went heavily into deficit as the global financial crisis struck in 2008/9. Both have since reduced the size of their deficits; however, France’s is smaller than Britain. It’s true that David Cameron’s government pursued fiscal consolidation, but as you can see, it has slackened off in the past few years, while France is increasing the pace of consolidation after it took its foot off the brakes in 2011-2.

This reminds me of another cherished myth about the Channel economies: that in the nineteenth century, France, as with other Continental powers, shut its borders to the flow of goods while Britain championed free trade. As John Nye has pointed out, this is very wrong:

tariffs britain france


(Graph from John Vincent Nye, “The Myth of Free-Trade Britain and Fortress France: Tariffs and Trade in the Nineteenth Century”. Journal of Economics History, 51(1), 23-46.)


Inequality in Australia

The Fin Review pointed out this morning that the share of national income accruing to the top 1 per cent of Australians hasn’t much changed in the past five years or so. As with some other areas of public policy, though, your view may change depending on the timescale you look at:
top incomes

Cut and Paste

Gerard Henderson on Waleed Aly’s latest column:

Aly concluded that “Palestinians are not rich Westerners, and so their lives simply don’t matter”. He went on to bag the secular regime in Egypt which is in conflict with the Muslim Brotherhood and, consequently, at odds with Hamas.

What Waleed Aly actually ‘concluded’ (emphasis mine):

If you take your cues from social media, on which this comparison is being relentlessly drawn, the reason is simple: Palestinians are not rich Westerners, and so their lives simply don’t matter. No doubt there’s some truth to this: humans are tribal animals, and we’re as tribal in death as we are in life. But it’s not an entirely satisfactory explanation because it comes from people who would likely exempt themselves from this rule.

The Australian’s editorial on the budget and proposals to scale back superannuation tax expenditures:

Likewise, suggestions that the removal of superannuation concessions would reap an extra $30 billion fail to take account of the mobility of investments.

The 2013 Tax Expenditure Statement, which estimates that the superannuation tax concessions amount to about $28 billion in 2013-4, $30 billion in 2014-5 and $33 billion in 2015-6 using the ‘revenue gain’ methodology:

The revenue gain estimates also incorporate the impact of direct behavioural responses from the change where these are expected to have a significant impact on the estimates.


The choice of a carbon tax is about efficiency

So I know there’s not much point in getting worked up about Cut and Paste, the Australian‘s rather lame attempt at a sottisier (it is compiled by someone with a very weak grasp of irony, policy, and even punctuation).

But its attempt to embarrass Christine Milne this morning gives an exhibit of a common misconception about climate change policy.

South Korea and India won’t stand for it! Christine Milne, Senate Hansard, Wednesday:

IF you think the rest of the world is going to put up with Australia behaving as a pariah, have another think. The Koreans will put a tax on coal imports. The Indians have already done it and that will be something that continues.

Is India really that committed to climate change action? Christine Milne, Sky’s Australian Agenda yesterday:

PETER Van Onselen: What about Clive Palmer’s dormant ETS policy idea? If there is nothing better on the table is that something that the Greens would consider voting for to at least get it in place?

Christine Milne: It is a mirage. The closer you get to it the further it moves away. When Clive came out this week and wanted India in it, like anyone who understands climate politics around the world knows, that means it is never going to happen.


Of course, anyone with a fundamental grasp of logic understands that the two statements are not in conflict. India’s climate abatement strategy, such as it is, does indeed rely partly on coal taxes. What Milne suggested was that India was unlikely to introduce an emissions trading scheme any time soon, which is probably correct. 

The argument for a carbon tax, or an emissions trading scheme, is not that a ton of carbon dioxide foregone by a comprehensive carbon tax is any better or worse than one foregone by a selective coal tax, or by tree planting, or whatever: it’s that it is economically more efficient to tax broadly rather than narrowly. And by ‘efficient’, what we mean is ‘cheap’.

For any given abatement target, it will cost less to achieve the target by means of a broad-based price mechanism than by ad-hoc approaches. That’s why a carbon tax or an ETS should be thought of as economic policy as well as environmental policy.


Me in Crikey on the indiluted catastrophe of British welfare reforms

I wrote a more structured piece for Crikey on the baffling phenomenon of Australian commentators thinking it would be swell if we copied the disastrous reforms Britain has made in disability support policy.