The world as seen through the clarifying lens of the 9th Edition of the Encyclopaedia Britannica (1875-1889).

Sunday, 21 September 2008

31. We are all to blame

In these dark days of credit crunches and global financial meltdown, you may well have considered the price of eggs in your local supermarket and thought to yourself, Why, it seems that only a year ago this product was considerably cheaper. You may have found yourself wistfully recalling the turn of the century abandon with which you once consumed omelettes.

Occasionally the accounts one reads in the newspapers of this phenomena of the price of food tending to increase somewhat have verged on the sensational : The Guardian compared the cost of a loaf of bread in 1998 (10p!) with 2008 (120p!), neglecting to observe that the first price was for a Tesco Value loaf made with bleached sawdust, the second being for one of those loaves fortified with Omega 3, pro-biotics and steroids marketed at √úbermensch-rearing parents.

Property prices, having increased by approximately 14,000% over the last ten years or so, partly on the back of the Halifax's very popular buy-one-get-one-free mortgages, have now actually begun to sink a little, to widespread woe, garment-rending, and the gnashing of teeth.

I heard from two different commentators on Radio 4 yesterday that we are all to blame for this lamentable state of affairs, so for my part I here offer my humble apologies and heartfelt contrition.

Our shared responsibility allows a certain degree of sympathy with poor Mr Bush, who began his entertaining run in the role of Joe President announcing $1.6 trillion of tax cuts and refunds, and now finds himself, in the twilight days of office, having coincidentally spent about that much on a war against Terror (there have been those unkind enough to suggest that Mr Bush would have been better advised to target Mild Discomfort, or perhaps Acid Reflux), and buying the bad debts of the various crashing financial giants of Wall Street. Fiscally speaking, Bush Minor's actions were nothing more than the geo-political equivalent of taking four years with nothing to pay at Sofas Direct in the January sales - and then turning your home over to chainsaw-wielding crocodiles with pet hyenas, just as the first installment is due. To quote the Odyssey's famed author : D'oh.

Although financial institutions such as the Lehman Brothers themselves predate the publication of the ninth edition of Encyclopaedia Britannica, it cannot be ignored that there have been changes since that time. The FINANCE article, by J. E. Thorbold, M.P., Professor of Political Economics, University of Oxford, outlines the history of the manner in which British governments have raised revenue. How were government's coffers filled at the height of Empire?

It will be seen [...] that the continuity of the present system of British finance depends upon a continuity in the habits of the people. The revenue derived from alcoholic liquors and tobacco amounts annually to about 42 millions. That which is supplied from articles of voluntary consumption, the use of which is wholly innocent, is about 4 1/2 millions, the principal contribution to this head coming from tea. Purely direct taxation - the land, house, and income tax on the one hand (the last named at 3d. in the pound), and stamps, probate, and legal duties on the other - yield nearly equal sums, a little short of 8 millions each. The security, then , of the English revenue depends on the extent to which the habits of consuming alcoholic liquors and tobacco are permanent. The consumption of the former is threatened by a powerful and apparently growing organization and agitation, and it can hardly be doubted that, should those who demand that the control of the traffic in alcoholic liquors ought to be transferred from the present licensing bodies to a direct popular vote be successful, the dimensions of the trade would be curtailed and the revenue diminished. One cannot otherwise account for the alarm which is felt by those interested in the success of the trade at the activity of their critics, and the process by which the advocates of restraint believe that they can compass their ends. It is possible, also, that in the future the poorer classes, whose consumption is the cause of so large a revenue, may imitate the temperance or moderation of those who are better off, and whose habits are to all appearance in marked contrast to those of their progenitors two or three generations ago. Should such a change ensue, it is not easy to determine what would be the direction taken by the financiers of the future [...]

The direction of the financiers of the future was to tax everything to the hilt. As fortune would happily have it, the conspicuous consumption of alcohol and tobacco have not notably declined over the years, but their place in the raising of revenue have been overshadowed by income tax, National Insurance and VAT. Just to underline the rate of income tax in the 1880s quoted above - 3 pennies in the pre-decimal pound being 1.25%. Punitive taxation regimes like that were what had sparked rebellion in the North American colonies. Still, it is a curious point that when Britain was the workshop of the world, it was the habits and luxuries of the feckless poor which paid the expense of government, whereas today, no small amount of the national expense goes towards subsidizing indigence and the excesses of the moneyed and unmoneyed alike. We are all to blame, as they say. Shame on us.

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