Collusion, Treason, Evidence of Interfering With Elections

Yes, I know you have heard all this before, but maybe this is different? The last Presidential election in the US has a lot to answer for, but wait, there’s more! And with evidence to go with it! First, some background. New Zealand has a law that states that anyone with one New Zealand parent is automatically a New Zealand citizen. Australia has a law that states that to be a member of parliament, you must not be a citizen of another country. It turned out that an Australian reporter found out that the father of Barnaby Joyce (the Australian Deputy Prime Minister) was a New Zealander and therefore Joyce was a New Zealand citizen by descent. Barnaby Joyce was born in Australia and as far as we know has never been to New Zealand. The journalist wrote to Joyce’s office, the New Zealand High Commission in Canberra, and the New Zealand Department of Internal Affairs for clarification and got no response. A further relevant piece of information is that New Zealand is shortly to have an election and very recently, thanks to appalling poll results, the leader of the Lahour Party here, who are in opposition, was replaced by Jacinda Ardern, who is somewhat younger and more vibrant. Two weeks into the job the following mess descended on her.

It is less clear exactly what started this, but the New Zealand MP Chris Hipkins raised the issue of dual citizenship by submitting questions to the New Zealand Parliament, which is in its dying stages. Exactly why he did this is the unclear part. One story is that an assistant to Penny Wong, the shadow foreign affairs spokesman for the Australian Labour Party, primed Hipkins. Whatever the source or the reason, clearly Hipkins had a brain fade. You don’t start commenting on the constitutional aspects of another country if you are in Parliament; you don’t raise an issue formally (had he really wanted the answer as opposed to making a public statement he could have asked one of the legal aspects available to Members of Parliament) unless you have an objective, and finally if you don’t know where an issue might go, you do not raise it about six weeks before an election, especially with a new leader struggling to find her way. Ardern quickly lashed Hipkins, verbally at least, as soon as she had found out, but the fuse had been lit.

The Australian Prime Minister immediately accused Bill Shorten, the leader of the Australian Labour party, of conspiring with a foreign power. That accusation may have been the first Shorten knew of the issue. However, it left the average New Zealander in a funny position. On the whole, leaving aside sporting contests, we consider ourselves rather friendly with Australians, although I suppose the temptation of either side to give the odd raw prawn is still there. But fancy that – we are accused of being a power. First I’ve heard of that one. Then, obviously having got the rhythm, the conspiracy is to undermine the Australian government, and that is treason!

There was more stuff for this fuse to ignite. The Australian Foreign Minister, Julie Bishop, could not be restrained, and accused the Australian Labour Party of trying to use the New Zealand Labour Party to undermine the Australian government. Collusion and treachery! She was also quoted on TV (evidence!) as saying “New Zealand is facing an election. Should there be a change of government I would find it very hard to build trust with those involved in allegations designed to undermine the government of Australia.” That is effectively the Australian government intervening in the New Zealand election.

So, what of Jacinda Ardern? She seemed somewhat unfazed by these accusations. She certainly sent Hipkins to the dog box and she tried to diplomatically engage with Ms Bishop, so far with no luck. But she refused to apologise. So, will this have any effect on the election? We have to wait and see, but my guess is the only effect will be from Ms Bishop’s attack, and that will help Jacinda. As one of our previous Prime Ministers once said, New Zealand politicians don’t lose votes by refusing to bow down to Australian politicians. As for the Australian Labour politicians, I understand their response to accusations of treachery and collusion was to sit back and laugh, which is probably the only response worth making.

I have no idea what the average Australian thinks, but my guess it will be either shaking the head in disbelief or laughing. And in New Zealand? This morning’s newspaper had two items that probably represent our feelings. The first was a cartoon with an aboriginal sitting outside a hut and being told about this electoral law fiasco. His response” Wow! Pity they didn’t have that law 200 years ago.” There was also a letter to the editor, with the proposal that, in the spirit of good relations and friendship with our Aussie neighbours, that New Zealand immediately convey New Zealand citizenship on all Australian politicians.

Science and Sanctions

This may seem an odd title in that most people consider science far away from describing human activities. I am not suggesting the scientific method should govern all of human activities, but I think that a little more attention to its methods would help humanity (and I try to show a little of this in my novels, although I am unsure that most would notice). The first important point, of course, is to clarify what the scientific method is. Contrary to what you may see on TV programs, etc, it is not some super geek sitting down solving impossible mathematical equations. Basically, the scientific method is you form propositions, perhaps manipulate them, then check with reality whether they might be correct. The most important feature here is, check the evidence.

What initiated this post was news that the US House of Representatives has passed a bill that will impose new sanctions on Russia, including (according to reports here) the forbidding of any help with Russia’s oil and gas industry, and President Trump has signed it into law. So, what are the premises behind this?

The first one is that foreign countries will oblige and help carry them out.

The second, presumably, is that Russia will now fall into line and do whatever the sanctions are intended to make it do.

The third is, if Russia cannot export more oil or gas, their prices will rise.

The fourth is, removing Russian hydrocarbons from the international market will lead to further markets for US hydrocarbons. Note the US now has the capacity to be a major exporter, thanks to fracking.

The first two depend on each other, and obviously, seeking evidence of the future is not practical, nevertheless we can look at the history of sanctions. Are there any examples of countries “bending the knee” in response to sanctions when they probably would not have done it anyway? I cannot think of any. Obviously, sanctions are less likely to effective if foreign countries refuse to cooperate, which is why the two are linked. The two most recent examples of sanctions are Iran and North Korea. Both have been imposed for sufficient time, and the question is, how effective are they?

In the case of Iran, one objective is claimed to have been met in that Iran argues it no longer has the capacity to make nuclear weapons, however it also claimed that was never its intention. Everyone seems to delight in arguing whether either of those statements is true, but in my opinion nuclear weapons are a poor strategic objective for Iran. I also believe they are a poor option for North Korea, but seemingly someone has to show Kim that is so. For either of them, what would it gain? Iran has opted (if truthful) to avoid nuclear weapons, but then again, what has it gained from doing so? The sanctions America imposed are still largely there. As for the effectiveness of sanctions, it appears that Iran is doing reasonably well, and a number of countries are buying its oil, including China. So I conclude that sanctions are not particularly effective there.

North Korea does not seem in any immediate hurry to “bend the knee” to the US and while it has suffered the harshest sanctions, apparently over the last few years its exports have increased by at least 40%, mainly to China. President Trump has accused China of not helping, and he is correct, but being correct does not get anyone very far. The obvious question is, why is North Korea chasing after better weapons? The answer is obvious: it is at war with the US and South Korea. The Korean War never ended formally. The sides agreed to a ceasefire, but no permanent treaty was signed, so one of the actions that America could have taken in the last sixty years or so would have been to negotiate a formal peace treaty. You may well say, the US would never launch a preemptive strike against North Korea. You may well be right, but are you that sure? From North Korea’s point of view, the US has launched cruise missile attacks frequently against places it does not like, it has significant military bases in Syria, it invaded Iraq, and so on. You might argue that the US was justified because these countries were not behaving, and you may well be right, but from North Korea’s point of view, it is at war with the US already, so it has decided to do what it can to defend itself. One approach to end this ridiculous position would be to at least offer a treaty.

The third and fourth premises are probably ones the US Congress does not advertise, because they are full of self-interest. Apparently there is enough liquefied natural gas able to be produced to substitute for Russian gas in Europe. So, why don’t they sell it? Competition is a good thing, right? The simplest answer is price and cost. Europe would have to build massive lng handling facilities, and pay a lot more for their gas than for Russian gas. And it is here that these sanctions may run into trouble. The Germans will lose heavily from the loss of Russian gas, in part because their industries are involved in expanding the Russian fields and pipelines, and of course, they would have to pay more for gas, and some equipment would need changing for the different nature of the gas.

So, if we return to the evidence, I think we can conclude that these latest attempts at sanctions are more based on self-interest than anything else. There is no evidence they will achieve anything as far as pushing Russia around goes. It is true, if imposed, they would hurt Russia significantly, but they would also hurt Europe, so will Europe cooperate?

The Grenfell Fire, and the Logic of Plastics in Cladding

For me, the most depressing recent news was the London fire, in which a high-rise of flats (apartments for Americans) somehow caught fire, and once it did, it spread like crazy. There is a lot of blame to share around for the death toll. Apparently people were told to stay in their flats, but that advice was given by firemen who were unaware that the building had no useful fire doors, or the other usual means of containing and retarding fires. After all, if the building is concrete, and there is no easy way to spread the fire, it should be able to be kept local. So what went wrong? We don’t know about why the interior of the building seemed to burn very nicely, but it seemed that the outside burned furiously. The outside had an aluminium cladding, apparently to make it look more attractive. The aluminium tiles were backed by polyethylene, which is essentially a solid hydrocarbon of structure similar to diesel, but a much larger molecular weight. That burns very well, and if you saw video of it, you would see great globs of fire falling off the building.

We don’t know exactly why the polyethylene was there. Some say heat insulation, others say to give the cladding rigidity. Much has also been made of the fact that for about $3 a tile more, the backing could have been fire resistant. I am not sure what that backing is as the maker’s website does not say, but would guess it is some sort of polyamide or polyurethane with non-flammable filler. These certainly do not catch fire as easily, but there is another catch with some of them: in a fire they do burn, and while not as well, they tend to give off some rather poisonous gases. There is another catch. According to the manufacturer, the fire resistant tiles passed ASTM E 84 tests, which are the standard tests for surface burning characteristics, but so did the polyethylene backed tiles. That sort of lab test does not represent a real fire.

This brought back memories of my past, when I got involved with two structural foams that could be suitable for building cladding. One was a glass foam, originally intended to be made from waste glass. This would make quite a good wall cladding without the aluminium, except possibly on the bottom floor because it does not have very good impact resistance. Thin glass shatters on impact, but it does not burn or corrode. You can also have a wide range of colours. The other is a plastic foam, for which you do not even need fillers to make it fire resistant.

The story of my involvement with that goes back to the late 1970s. In the late 1960s, New Zealand discovered a large offshore natural gas field, and the government took it upon itself to enter a “take or pay” agreement so the field would be developed. It was not clear what their idea was, but presumably electricity generation was one of them. However, when the first energy crisis struck, about 1972 from memory, there was a sort of panic, and after a lot of deliberation they decided to construct a synthetic fuels plant at Motunui, which was to use a process developed by Mobil. I was on a committee to advise on the science, and I advised this was a bad idea because they could not build it for anything like the costs presented to them. As it turned out, my projected cost was out by $200 million, but no site had been chosen, and my estimate was “plus site development”. (In the end, the site development would have been about $130 million, so I was rather pleased with myself.) However, at the committee, I was about 4.5 times greater than the figure they were comfortable with (and note the government was going to pay) so I was never asked to be on such committees again. However, when that process was chosen, I knew that there was one byproduct they would not know what to do with: 1,2,4,5-tetramethylbenzene. The reason: it is a solid, which is not good in petrol for cars. The good news from my point of view was that it could be oxidized to pyromellitic dianhydride, which would be a precursor to stepladder and even ladder polymers, and in particular to polyimide plastics. The bad news was that the top public servants did not want their synfuels project upstaged, and the politicians were unenthused, probably because they were totally out of their depth.

So to get rid of the road blocks, I needed a stunt. As it happened, the fire hazard with plastic foams was to be the subject of a half-hour nationwide TV program, and I was invited to comment as a scientist. I agreed, provided I could have a few minutes for a demonstration of fire resistant foams. That was agreed, so I made myself some polyimide foam. This was rigid, and not much use for furniture, but you can’t really do much development work with one day’s notice. So I turned up, and at the end of the program, which had the dangers of fires, and of the poisonous gases drilled into everyone, I had the cameras turned on me. I put a bit of home-made foam in the palm of my hand and directed a gas torch at it. It glowed a nice yellow-hot under the flames, and I just sat there. Eventually they got bored of watching this, and they turned off the torch, then made the comment, “It still stinks, though.” So, with a bit of acting here, I held the plastic up to my face and sniffed deeply, and made no expression. Since there was no fire, while the plastic was ablating slowly, once the torch was taken away there was no more reaction. Unfortunately, my wife forgot to record this so I can’t actually prove it.

The whole point of this, of course, is it is possible to make very fire resistant foams. Without the type of chemical plant I was proposing, such foams would be expensive, but the question then is, is preventing x number of deaths worth spending a few extra dollars (or in this case, pounds)? In my opinion, there is no real excuse. Yes, the foam I made was rigid, but as building insulation, so what? While science can provide answers to many problems, there is not much point in it if nobody in power takes any notice.

UK Election Fallout and Qatar: what would you do if in charge?

Suppose like me you are an author of fiction. Given the following situations, put yourself in someone’s shoes and ask yourself, what next?

The first event was the rather unfortunate end result of the UK election. What was delivered was what I consider to be the worst possible outcome. The problem is, voters are sucked in by “jam today”, or “I am annoyed about something.” So, what now? First, some background. The national debt of Britain now stands at £ 1.73 trillion, and the interest payment on this debt is about 6% of revenue. That might seem to be reasonably sustainable, but there is the overall issue of Brexit looming. The UK has apparently had a recent surge in GDP, despite the threat of Brexit, but it is not clear that will last, and interest rates will probably grow from their record low. Suppose they double, which is easy from such lows. 6% suddenly turns to 12%, and that is ugly. (The existing loans will stay at their agreed rate, but can you pay them back when they mature? Otherwise you have to borrow at the new rate.) It appears that Jeremy Corbyn was promising a lot of spending, together with an unspecified increase in taxes. My guess is a lot of the youth vote that went to Corbyn thought the rich would pay. The usual problem with that assessment is that while the rich can be made to pay significantly higher taxes, to get the amounts needed to make a significant difference in revenue tax rises have to go a lot deeper. There are just not enough rich to soak. On the other hand, people may well argue they needed more money to go to health, education, or whatever. The question then is, can you pay for what you want?

May was apparently promising austerity. That is hardly attractive, but it was also put forward in a rather clumsy way. Cutting out school lunches is not only hardly a vote winner, but it is also never going to make a huge difference. Putting that up front is a strange way to win an election. It seems that the Tories were so convinced they were going to win that they decided to put up some policies that they knew would be unpopular, so they could say later, “You voted for them.” The two who are believed to have largely written the manifesto have resigned (really, pushed by angry senior Tories) but the question remains, why were they left to write it? Why did the senior Cabinet Ministers not know what was in it, or if they knew, why did they not do something about it? There’s plenty of blame to go around here, folks, nevertheless there are two hard facts: if Britain and the EU cannot manage Brexit properly, there will be severe economic problems, and economic problems seem to be like a very active virus that goes everywhere very quickly. The second is, if debt gets out of hand, the country spends so much on interest repayments that it ends up in the position Greece is now in. Anyone want that?

So, put yourself in some position: what would you do? My opinion is the Tories should realize that Corbyn has no chance currently of forming a government (because he needs every non-Tory vote) and get on doing something that has at least some public appeal. May either has to go, or learn oratory and get some empathy for the others.

The other event is the Arab attempt at isolating Qatar, on the grounds it is financing terrorism. Actually, the Saudis are almost certainly the biggest such supporters. The real reason appears to be either Qatar is friendly with Iran, or alternatively Qatar is the home of al Jazeera, a TV network that tries by and large to report the facts, warts and all. The US position on this is obscure. President Trump has lashed out against Qatar, without any particular evidence, although Qatar is known to have given refuge a number of Egypt’s Muslim Brotherhood. The US is also bombing Assad’s troops in Syria to prevent them getting at fleeing ISIS fighters; it seems that terrorism is being actively supported by the US, which make no strategic sense. At first, it looks as if Qatar could be quickly invaded from Saudi Arabia, but whoever does that would have to be very careful because Qatar houses the biggest local US base in the region, and has 11,000 military personnel there. To add to the complications, Turkey has promised to send troops. Fighting Turkey should mean fighting NATO, although with President Trump nothing automatically follows.

So, imagine you are the leader of Qatar, what would you do? Return the Muslim Brotherhood members to Egypt where they would probably be tortured and/or executed? Promise to stop funding terrorists? (If you really are not, this is easy to keep, but maybe not so easy to convince others that you are keeping it.) Remember, whatever you decide to do, you have to be prepared for whatever consequences follow. Not easy working out what leaders should do, is it? Writing fiction is, of course, easier, because you control what happens next. But if you want that fiction to have some relation with reality, what happens next has to be plausible, so here is your chance to get some practice.

The Trump Enigma

They say truth is stranger than fiction, and I am starting to wonder if “they” are on to something. In my novel “Dreams Defiled”, one part of the plot involved one of the protagonists put into one of the most powerful governing positions on the planet, and of course part of the story involves how she fell from that position. One of her problems was she wanted to get things done, but she did not bother too deeply about building the necessary political links to get things done. She was her own woman. Sound familiar, other than the gender? There were two major differences, though, between her and Trump: she had no ego, and she restricted herself to simply doing. One of the criticisms of her was she did not pay enough attention to her public image.

Which gets me to the James Comey sacking. Look at the uproar, especially from the Democrat politicians that not so long ago were baying for Comey’s blood. Now as far as I am aware, there was nothing illegal about Comey’s sacking. As far as I can make out, major appointments in government agencies in the US are political. However, in my view, Trump showed serious failings in the way he presented this accomplishment. In my opinion, this is an example of when less is more. My recommendation is that Trump should have announced something like this: “I recently sacked General Flynn because he made statements that he admitted misled the Vice-President. James Comey admitted giving misleading evidence to Congress, even though under oath, and the Director of the FBI, above all else, must follow the highest standards of legal procedure. Therefore I have no option but to also sack James Comey. If Flynn does not get the benefit of any mistake, neither does Comey.” After that, say nothing. But instead, Trump and associates gave out a strange mixture of various explanations. What Trump needs more than anything else, in my opinion, is a strong disciplinarian as Chief of Staff, who will tell people, including Trump, when to shut up, and when they are speaking, make sure what they are saying is self-consistent.

So, what follows? People are claiming Trump did that to shut down the investigations into his Russian connections. I doubt that, but if he did he was wasting political power. One of the pieces of advice my fictional protagonist was given is that when put into a very high position you are given a bag of power. The more you use it yourself, the more that power gets depleted. The more you can get others to do what you want done, the fuller that bag becomes. I think that is good advice for Trump. (If you take it, Donald, an acknowledgement would be gratefully received.) As for the investigation, surely nobody thinks Comey was investigating personally? At the Director level, his job would be to ensure that his immediate underlings were ensuring major projects were being carried out, and making sure the political reporting was appropriate. The actual investigation would be done several levels lower, and that will not stop. In fact it is probably out of the hands of the FBI now that an ex-director of the FBI has been appointed as a special Counsel toinvestigate whether there was cololusion.

Following that, there was the tweet where Trump seemingly threatened Comey if he went public. That was appalling, and, for that matter, stupid. Much better would have been for Trump to have reminded Comey (publicly) that his employment contract included confidentiality clauses, and he would expect those to be honoured. Yep, more advice: stop tweeting. It does you no good at all.

Not that it stops there. As expected, Comey took hand-written notes of a discussion with Trump, and these have been leaked to the NY Times. In this, Comey was apparently “asked” if he could put the investigation into Flynn to bed. The significance of that depends on what “asked” actually means. Trump would be out of bounds to order the investigation to stop, but it is not necessarily wrong to ask Comey to hurry up and get to a conclusion. The FBI must only investigate crime, not political “appropriateness”. Meanwhile, how come the FBI is leaking a Director’s confidential notes? That itself is a crime, so who is investigating?

Then, even more bizarrely, the Washington Post, using an anonymous source, claims Trump gave the Russian Sergei Lavrov classified information about ISIS, specifically about ISIS preparing to attack aviation using laptop computers, presumably modified to contain explosive. National Security Advisor General H R McMaster denied anything classified was discussed. My first response to this is that Trump has recently banned laptop computers from being taken on board aircraft destined for the US, so that is hardly secret. But wait, there’s more! Seemingly the Democrats have finally realized that maybe the information was not that confidential, so Nancy Pelosi went on the attack and said Trump had no right to give the Russians information, even if it were in the public domain. I suppose there is something in that; the news media is so full of fake news and political speculation, why give the Russians clues as to what is true? Of course it may have eluded the baying horde that Russia and the US are supposed to be fighting ISIS, not each other. However, now there is more still: the information was not Trump’s to give – it belonged to Israel. Presumably it is better to kill some Russians than get the ownership rights wrong.

Meanwhile, I am somewhat critical of the activities of US agencies. As most will be aware, there has been a major outburst of cybercrime in the form of ransomware. I suspect anyone unaware of this has been living under a flat rock and won’t be reading this, but the point I want to make is that critical pieces of code for this attack were apparently stolen from the NSA. Stealing from the National Security Agency? How secure! After that, it was apparently sold on the web. Did the NSA not know about the theft? Are they not monitoring the web? Exactly what are they surveilling? Perfectly legal (or questionably illegal) discussions between Americans and Russians? Meanwhile, their code helps create the tools to bring havoc to hospitals, etc, around the world. If they are watching all the web why can’t they detect who was using their code and bring the miscreants to justice? This is not one of the highlights of NSA activity.

Why Are Countries Separating?

In many of my futuristic novels, I have selected a form of government to be in the background. Thus I have had a theocracy, a dictatorship, essentially no government (for the initial settlement of Mars), anarchy, crumbling “democracy” (i.e. our representative republic), real democracy, and finally, something else that I shall call federalism. The concept behind federalism is that a number of countries willingly join a Federation, and on most issues they continue on as they have always done, but there was also an over-riding Council whose function is to set a limited number of rules, and act as referees to make sure the various politicians in the countries behave. Another function is to provide factual information, and prevent political movements from achieving goals by lying. (Hey, I thought about “fake news” before it was popular, but that of course is hardly true either. Telling lies to get votes was bread and butter for the politicians of the Res Publica, and many of the inscriptions on the walls of Karnak by Ramses II had little relation with the facts.) This Federation also has to deal with the futuristic problems that we can see now, such as energy availability, resource allocation, climate change, etc. Interestingly enough, at least for me, the problems upon which the novels depended invariably arose from a similar source: people gaming the system. That may merely reflect my lack of imagination, but I rather fancy that any system will work well if all the people try to make it work. Most Romans thought Augustus was a great leader, even though he was effectively a dictator and probably the greatest manipulator ever.

The plots of these novels focused on how people were trying to get around the various rules. If there were an underlying message here, it was that rules only really work when people can see the point in them. A classic example is road rules. I suspect most of us have, at some time broken the speed limits, and while I have no intention of being specific and attracting unnecessary tickets, I know I have. I actually try to obey parking limits, but some times, well, something happens and I can’t quite make it. However, wherever I am, there is a rule on which side of the road I should drive on, and I keep to that assiduously. There is no specific preference – some countries drive on the right and others drive on the left, but a country has to choose one and stick with it, otherwise there are messy collisions all over the place. Everybody sticks to that rule because they see the point. (Confession time – once I did not. I came over a rise in Czechoslovakia, it was pitch black, and there was a little fire to my left. Suddenly, I realized the problem – there was a tank with camouflage netting parked in the middle of the road. I evaded around the left, not the right, because being in a British car I could better see the space I could use on my right, and also because I was better trained in sliding on gravel, etc, at speed and getting back on the road from that side. Must have given the tankers a bit of a fright. They would see a car first coming straight at their tank at 100k, then it would evade towards them and start sliding sideways, sending up showers of gravel from the side of the road.)

However, the point is, in general people will happily accept such rules if they see a point to them. Which side of the road you should drive on has a very clear point. The speed limit, perhaps less so. We recognize that road construction usually requires speed limits but I know that in some hilly terrain, overtaking a truck would be more important than sticking to a number. The problem with such rules, though is the rule makers seem to get carried away and think there should be rules for everything.

Some may recognize this Federal system. I made it up in the 1980s, and I was inspired in part by the European Union. You may recall at that time there was talk of the currency being the ecu, or European Currency Unit. Accordingly, in my novels I invented the fecu, however I put in one rule that Europe ignored. (They should have consulted me!!) In the novels, the fecu is used for transactions between companies and major corporations, and has a fixed value, a sort of resource standard. However, salaries in different countries, and goods in different countries, are paid in dollars, drachmas, whatever, and the average citizen never sees a fecu. I think the euro is a weakness of the EU because I don’t think you can run a common currency when countries have different economic policies.

Another question is whether the UE, through Brussels, has too many rules. Some say yes, others say no, but in the various discussions on Brexit, there is a lot of talk about untangling the thousands of rules. If that is a problem, there are too many of them. Good rules have a wide acceptance, and they could stay.

Which naturally brings me to the French election. All the commentators I have read say the French were upset over EU rules, and wanted change. So, what do they do? They elect a plutocrat, a banker! Trust the French – reminds me of “plus ça change, plus c’est la même chose” (Jean-Baptiste Alphonse Karr) which translates out as “the more it changes, the more it is the same thing”. So, how do you get rid of the rule of plutocrats? The French elect one. The British go the indirect way and try the “go it alone” way. Neither will probably work, but in answer to the title question, I think it is because so many voters have given up on traditional representatives acting in the interests of the population at large they are prepared to try anything.

Trump on Taxation

President Trump has announced the intention to make sweeping tax reform, and a significant tax reduction for companies, at present reducing from 35% to 16%. His argument is that by doing this, he will encourage multinational companies to stop hoarding money in offshore tax shelters and bring it back to invest in the US. So what to make of this? The tax reform is an extremely good idea. The simpler and more transparent the tax law is, the less time everybody wastes on minimizing tax and the more they devote to actually earning money. Everybody accepts tax reduction is good for them, but the problem then is, does the government earn enough money to pay for what it wants done? That is a detail that has to be left because it depends on what is available to tax, and how much the government wants to spend.

Company tax is an odd animal because one argument is that you collect more or less the same tax irrespective of the rate. It goes like this. A company earns money, but those earnings are spent in four basic ways: investing in new plant; buying goods/services from other companies; paying staff; paying dividends. Looking at these in inverse order, money transferred to dividends becomes personal income, and that is taxed, so what we are avoiding is double tax. Many countries avoid such double taxation by giving company tax credits with the dividends, and while I am unaware of US tax policy on this, as a general rule as long as there is no double taxation, lowering the company tax rate has no adverse effect on dividends because those on the low tax rates in general cannot afford the stock. The important thing is that unlike people, companies do not spend on themselves, leaving aside “perks” such as company jets. My view is such “luxury expense” for senior staff should be taxed as a personal benefit to them.

Paying staff means the staff pay tax on their earnings. Now, if the staff are low paid, lowering company tax does reduce the tax collected, because most staff do not pay the 35% rate, although some may be on a higher rate. Similarly, buying goods and services from other companies simply transfers the taxable profits, although if the goods are imported, the profits go elsewhere. The question here is, then, will the US increase local production? The reason many multinationals manufacture offshore is that wages there are seriously lower, and they do not have to pay benefits and compliance is less strict. There is rationality in thinking that such goods manufactured offshore should be taxed as if the company met home compliance and had paid home benefits and wages because that levels the playing field from the “own country” point of view, but of course it hurts developing countries.

The virtuous part, according to Trump, is that by lowering company tax, multinationals will bring back more of the offshore funds accreted, and all companies will have more money to invest and create new jobs, or pay dividends. The next question is, is this valid reasoning? I am not so sure. The problem with investing to create new jobs is you have to have something to invest in. That is not so easy to find. There is no real evidence that company tax is inhibiting investment because there is no real evidence that, leaving aside small individual companies in trouble, there is a widespread shortage of money. What I see is more a general shortage of ideas. Thus we see the new product is another mobile phone that is only a little bit different from the last one. Ask yourself this: what would you really want that is not currently available if you had the money to buy it?

What that suggests is the economic slowdown is not caused by higher corporate tax, but more through inequality. Those with money already have most of what they want, and those without money cannot afford much of what is there. If we really want to promote growth, then I am afraid the poorer have to have more purchasing power, because they are the only ones at the moment who could power acceleration in sales. Of course the rich will keep on buying, but only at their current rate, and that will not power the growth President Trump wants. So my question is, will President Trump do anything to reduce inequality?