Mr Cameron does something right

I know he didn't mean it, and he really doesn't understand it but Mr Cameron has finally done something that will not mess our economy up ( unlike his attempts with Gideon to help our economy by embarking on its destruction due to misguided policy).
What did he do you ask?
He didn't join in with the stupidity pact dreamed up by Merkel and Sarkosy. The reasons that he gave for not joining were that it would be against our national interest.
Specifically "Cameron demanded that any transfer of power from national regulators to an EU regulator on financial services be subject to a veto; the UK be free to place higher capital requirements on banks; that the European Banking Authority remain in London; and the European Central Bank be rebuffed in its attempts to rule that euro-denominated transactions take place within the eurozone.He also argued that non-EU institutions operating in the City but not in the eurozone, such as American banks, should be exempt from EU regulation."
Paradoxically not by joining in may the UK financial services industry may be more damaged by Mr Cameron's blundering attempts at protection. In fact "there is a new inner grouping within the EU that can potentially agree new financial regulations without the UK even being present", this could force the relocation of financial services companies to a eurozone country if they wish to trade in the currency (though I suspect that the World Trade Organisation may be the place that any such move is argued out).
One of the stated objectives of Germany and France was to introduce a transaction tax on financial operations but "The UK has long been resisting calls from other EU leaders for a Europe-wide bank transactions tax which it says would hit the City of London hardest." actually as Mehdi Hassan points out "The International Monetary Fund, the European Commission and the Gates Foundation have all released studies showing that unilateral transaction taxes are feasible and raise funds for individual countries (the Robin Hood Tax campaign says a 0.05 per cent tax on transactions could raise £20bn for just the UK alone!)."
The real reason that Mr Cameron has done us a favour is that the Euro is unsustainable. As Michael Portillo pointed out on This Week (quoting Boris Johnstone) the European countries are trying to save the cancer not the patient. In other words they are trying to save the Euro and not the European Union. The reason that Germany is such an economic powerhouse is not just fiscal responsibility ( though that has definitely helped) in Germany's case the Euro is significantly undervalued (making fiscal responsibility a breeze and not a reason for smugness). They enjoy a currency advantage against the UK of approximately twenty percent and by entering the Euro whilst the Deutchmark was undervalued they are destroying the economies of southern Europe who's currencies were overvalued at the time of adoption. Any attempt to save the Euro is doomed, the fundamental problem is that the weaker countries of the Euro can't devalue and there is no chance that Germany will redistribute the fruits of its ill gotten gains. (Incidentally that is the same reason that the North of England, Wales and Scotland are at a disadvantage when compared to London and the South East) Mr Cameron has inadvertently saved the UK by keeping us out of a doomed project but may still have damaged the financial sector that he was so keen to save.
So Mr Cameron did do something right, pity he hasn't a clue.
Quote of the week - Zac Goldsmith, Conservative MP discussing the press "if the only way a business can stay afloat is by engaging in immoral or unethical behaviour then that business should either change its model or go out of business. No one said that Auschwitz should have been kept open because it created jobs"
References / further reading
http://www.guardian.co.uk/world/2011/dec/09/david-cameron-blocks-eu-treaty
http://www.bbc.co.uk/news/uk-politics-16086019
http://www.newstatesman.com/blogs/mehdi-hasan/2011/12/facts-benefit-figures-tax
http://robinhoodtax.org/
http://www.ft.com/cms/s/0/ba7f2868-2285-11e1-8404-00144feabdc0.html#axzz1g53CaEfI
http://www.bbc.co.uk/iplayer/episode/b0187ycp/This_Week_08_12_2011/

Introduction

An Introduction

Welcome to my thought space.
I decided to start this blog because of  an interest in Economics.
Economics is a social science and in its narrowest definition can be seen as a study of ’what is’ and ‘what has been’ (though that may be used for the purpose of forecasting and attempts to influence the future). It is a study of how we share resources, some may argue that there is no need to share, that they wish to keep what they have as it is a result of their hard labour. I would dispute this simplistic view.
Let me use Adam and Eve as an example, if God placed Adam on earth and gave him a garden to work and watch over, Adam can not claim that all that he gains is simply as a result of his hard labour after all he was given the resources of the Earth and the garden to work on. Similarly those who by accident of birth were born into families with greater than average wealth, education and status and who therefore benefit from those advantages through access to a better diet, a more enlightened view of the benefits of education, help in establishing homes and businesses and access to an exclusive network of the elite in politics, society business and the media cannot claim that they are entitled to greater remuneration or wealth simply due to their own efforts. That is not to say that those who work hard should not be better rewarded than those who do not, all other things being equal.
This is a normative argument which perhaps could be described as moral philosophy, a discipline that Adam Smith is noted for. In contrast to those who promulgate the view that Smith was a proponent of ethical egoism, Noam Chomsky has argued  that several aspects of Smith’s thought have been misrepresented and falsified by contemporary ideology, including Smith’s reasons for supporting markets and Smith’s views on corporations. Chomsky argues that Smith supported markets in the belief that they would lead to equality, and that Smith opposed wage labor and corporations. Economic historians such as Jacob Viner regard Smith as a strong advocate of free markets and limited government (what Smith called “natural liberty”) but not as a dogmatic supporter of laissez-faire.( http://en.wikipedia.org/wiki/Adam_Smith#As_a_symbol_of_free_market_economics)
The Wealth of Nations includes the following statement on the payment of taxes:
“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”
Moreover, in this passage Smith goes on to specify progressive, not flat, taxation:
“The rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion”
Smith even specifically named taxes that he thought should be required by the state among them luxury goods taxes and tax on rent. He believed that tax laws should be as transparent as possible and that each individual should pay a “certain amount, and not arbitrary,” in addition to paying this tax at the time “most likely to be convenient for the contributor to pay it”. Smith goes on to state that:
“Every tax, however, is, to the person who pays it, a badge, not of slavery, but of liberty.”
(http://en.wikipedia.org/wiki/Adam_Smith)
I would therefore propose that equality is a good thing, not the kind of equality used by those on the right wing to promote their own self interest at the expense of others nor the kind of equality proposed by those on the left who favour  an all powerful state (which is simply another form of inequality). My position is most accurately represented by the views of Rawls and Krugman as illuminated in Wikipedia as follows – “Philosopher John Rawls, in his A Theory of Justice (1971), developed a “second principle of justice” that economic and social inequalities can only be justified if they benefit the most disadvantaged members of society. Further, Rawls claims that all economically and socially privileged positions must be open to all people equally. Rawls argues that the inequality between a doctor’s salary and a grocery clerk’s is only acceptable if this is the only way to encourage the training of sufficient numbers of doctors, preventing an unacceptable decline in the availability of medical care (which would therefore disadvantage everyone). Analyst Paul Krugman writing in The New York Times agreed with Rawls’ position in which both equality of opportunity and equality of outcome were linked, and suggested that “we should try to create the society each of us would want if we didn’t know in advance who we’d be. “Krugman favored a society in which hard-working and talented people can get rewarded for their efforts but in which there was a “social safety net” created by taxes to help the less fortunate.” (http://krugman.blogs.nytimes.com/2011/01/11/more-thoughts-on-equality-of-opportunity/)
In fact there is good evidence that inequality is bad for everyone in society, both the rich and the poor. Evidence which is supported by the work of  Richard Wilkinson and Kate Picket in their book The Spirit Level.
I hope you enjoy these musings and gain from them whether or not you agree with them.