If you’re looking for an interesting read over the weekend might I suggest you pay some attention to a new paper from the White House? Yes, as in the MAGA. But fear not, it is not by Trump but by his Council of Economic Advisers. This usually fairly conservative and austere bunch of dismal academics has sparked an interesting debate by analysing the “Opportunity Costs of Socialism”. On the surface, it looks and feels a tiny bit like a cheap shot at universal health care and Senators Sanders and Warren. But if you bother to read on it’s actually a very interesting analysis which deserves some consideration.

The authors of the report have clearly read their socialist and Marxist primers and although there’s a few sloppy bracketing together of people – I’m really not sure that Mao, Marx, Warren and Sanders share too much in common with each other – the authors do take the time to seriously analyse the distinct claims of democratic socialism as opposed to Marxism/communism. I’ve never felt that the conflation democratic socialism with Marxism helps – there is clearly a difference.

But the report does make what I think is the crucial point – that the road to socialism probably always ends up with something that looks a lot like Marxism. My guess is that if Allende’s “brave” experiment in democratic socialism had been allowed to continue – and not been brutally terminated by the Generals – it would have in fact ended up looking a great deal like Venezuela today. It’s becoming almost a running joke amongst Corbyn sympathisers that they think that socialism hasn’t ever been “properly” tried out before. But their messiah has in fact already pointed to a modern experiment – the failed South American petrostate. Repeatedly so, in fact.  The fact that Corbyn’s Marxist clique have now gone quiet on the subject doesn’t mean that they didn’t at one stage sing its praises. And Venezuela is a classic example of what happens when socialism is finally let out of the box. Chaos. The White House report makes this very clear – once price signals break down and we have proper planning everything crumbles. Clever apologists such as Paul Mason in his tome Post Capitalism – well worth a read and very persuasively argued – might allow a transition period where market signals are allowed to continue but the end destination is always clear. The Marxian labour value measure of output and productivity with ‘democratic control’ over resource allocation eventually wins out, helped along by a surfeit of free goods produced by the new digital economy.

The White House report rightly lambasts this thinking. This isn’t a form of magic money tree, more a deadly elm tree disease that rots the economy from the inside and eventually poisons everything. I realise that harping on about Corbyn and Venezuela isn’t effective retail politics but is nevertheless a clear and present warning. Maybe if we had a few more Louis Theroux visits and more YouTube spoofs about the benighted disaster zone, the message might get through to more libertarian-inclined millennials that this really isn’t what a ‘progressive’ future looks like.

Anyway back at the Dismal Science gathering at the White House – you can download it HERE – there’s a rather weird diversion.

To the Nordics. Having, I felt, quite sensibly demolished socialism, the authors then take on mighty Norway, Sweden, Denmark and Finland. The authors accept that these are not socialist countries but merely bracketing them together with socialist panaceas is a rather cynical exercise. They are clearly welfare focused social democratic capitalist states. One might disagree with some of their policies but these are profoundly capitalist societies who happen to have different political and moral priorities. Socialist, they are not. Nor have ever been bar perhaps Sweden in the mid-60s and 70s.

What’s obvious here is that we are in fact in the midst of a hatchet job. Sanders and Warren have said they like the Nordics, so let’s duff up their model. Except that its fairly hard to ridicule the Nordics. As I said they’ve got quite a few things wrong and their model isn’t easily exportable but these are clearly not unhappy discontented societies. They have their issues with immigration and integration but so does the US.

The problem with the Nordics

But the White House report does nevertheless make a powerful point – which relates back to the Corbyn argument. These societies have made a conscious choice to tax more heavily. More pertinently they tax the middle and lower classes more heavily. They’ve also not chosen to tax heavily capital and wealth – something I’d disagree with. But the point is that if you want excellent public services, EVERYONE has to pay for them. Not just the rich.

This is the killer Corbyn message. We’d all love to lavish money on everything and then get someone else to pay for it. Who wouldn’t? But the bitter truth – as evidenced in the Nordics – is that it’ll be ordinary working people not the rich who will pay for these lavish promises. Stop deluding yourself that adopting a punitive taxation system on globally footloose corporations and UHNWs will deliver the hard cash. It won’t. They’ll simply leave. That’s good for virtue signalling – “we’ve kicked those filthy rich out” – but it won’t solve your fiscal problems.

As it happens, the Great Middle of Britain probably is willing to pay a little extra for more police, more soldiers and better schools but it won’t suffer too much. It’ll also want evidence that the extra dosh is being well spent. And with all due respect, handing money from the struggling workers to middle-class university students and already well-paid health professionals (I exclude nurses and allied professions from that observation) isn’t great retail politics.

Ultimately these are all moral and political decisions, not hard economic claims. The White House report dodges this criticism – it is about policy choices. Economics can be used to justify many things but eventually, politicians and voters have to make choices. But the Report is right to say that better public services mean everyone paying more in tax.

Overall though this is an intelligent if flawed analysis which takes democratic socialism seriously – and then sensibly rebuts it.

Arguably though what we really want from these kinds of senior academic advisers is less criticism and score-settling, and more new ideas.

If you’re looking for really radical thinking I’d direct you instead to the excellent Ed Conway, economics editor of Sky News and a columnist in The Times. Along with Philip Aldrick, he’s been quietly pushing a more radical agenda which is all about rethinking our way through the coming fiscal nightmare. It involves borrowing from both Left and Right and coming up with practical ideas that might just work in government. Eric Posner and Eric Glen Wyel have been doing some similar big-picture thinking on the right as has Paul Collier on the centre-left. How do we make capitalism work for more people and get government balance sheets in sensible shape?

Anyway if you haven’t read his column it is HERE – its entitled  “Here’s the radical bucket list budget we need” and should have a subtitle – “the policies we won’t get”.

Conway suggests some or all of the following:

  • A Proper rethink on wealth tax – tax capital more, income less i.e introduce a wealth tax
  • Bring in a new Property tax which will replace stamp duty and council tax with new top bands
  • Merge income tax and NI
  • Abolish inheritance tax and replace it with a lifetime gift allowance
  • Stop debt being written off against company taxes
  • Corporate tax relief for lifetime training and learning
  • Introduce a Land value tax
  • Negative income tax instead of universal credit
  • Proper localisation of taxes including corporate taxes
  • Regional policy – relocate the Treasury and the Bank of England
  • Prioritise HS3
  • Cancelling road and rail projects in the London and the South East
  • Proper strategic coordination of local bus networks – an excellent idea I am very keen on. Outside of London, bus networks are a shambles. Competition has not worked and ordinary working folk are forced to own expensive cars just to get to a job. We need to stop our obsession with railways and rethink bus policy.

This is a long list that I think any common sense voter can eventually be persuaded to agree to by politicians with real conviction and a belief in radical change i.e, not Hammond. No political party is even close to doing this thinking but we live in hope. I would add some of my own radical ideas to the Conway list, including-

  • Radically simplify reliefs for savings, merge ISAs and pensions and abolish higher rate tax relief. Michael Johnson at the CPS has been doing a lot of the heavy lifting on this.
  • Embrace a tax on London and the South East which can be redistributed to the North and the Midlands – Paul Collier at Oxford is right to argue that rethinking economic geography is one way of saving capitalism
  • Radical decentralisation of power with local authorities given real control over what they spend their money on and how they tax – we need to break the centralisation agenda of England
  • A carbon tax gently implemented over the next 15 years, designed to force us to a zero emission economy by 2040. This is a proposal that virtually every economist I know thinks is the ONLY way to properly address global warming.
  • Set up an NHS owned mutual called The People’s Health Data and make money out of our collectve national gene pool. We, the people, charge for access to our data and plough the money back into cutting edge new treatments. Set up a series of national health missions rather like the Cameron government’s moves on cancer. Let’s attack dementia and work out a cure as a National Mission a la Mariana Mazzucato and her entrepreneurial state.
  • On the same theme, borrow from Estonia and insist that our data is owned by us individually ina safe digital space  – and we determine who we share our data with. This isn’t about nationalising public data, more about privatising it so that you and I benefit from our digital value.