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Insights 22: 17 June 2016
Roger Partridge: Auckland - unleash your planners
 
Wellington's 'Deadly Heritage'
 
Thursday 14 July - Dinner Lecture with Stephen Jennings - Auckland

Jo Cox MP (22 June 1974 - 16 June 2016)
At The New Zealand Initiative, we are shocked about the death of UK Labour MP Jo Cox. She was murdered while doing her public duty as the representative of her constituency of Batley and Spen. Our thoughts are with her husband and two young children.
 
Especially on a sad day like this, we should be thankful to all those who are prepared to take responsibility in public life.
 
The articles about British politics below were written before we heard the terrible news. It really puts everything into perspective. We are still running them because democracy, not hatred or violence, should always win. 


Brexit is a question of liberty
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
Groucho Marx did not want to belong to any club that accepted people like him as members. Next Thursday, the British will have to decide if they feel the same way about the European Union.

Geopolitically, it is perhaps the most significant event of 2016, rivalled only by the US Presidential election.

Britain will not only seal its own fate but also the fate of the EU. Should it remain, the project of European integration will continue as it has in the past. If it pulls out, everything is possible.

A potential British withdrawal comes with risks and side-effects. For a start, it would take London and Brussels years to prepare the divorce papers. Everything in the relationship between Britain and its European neighbours would have to be renegotiated.

Brexit could also spook finance markets. This is a major worry especially since Britain is dependent on foreign capital to plug its large current account deficit.

The EU would be severely damaged by a British withdrawal. Brexit would be a humiliating defeat, and it would encourage other countries to consider their relationship with Brussels.

So with all of these adverse effects, how could anyone make the case for Brexit?

Well, one could just enumerate the failings of the EU that even its supporters cannot deny. Europe does not have the best track-record for creating economic growth. In fact, it is the slowest growing continent other than Antarctica. Its monetary union project, the Euro, has been an unmitigated disaster.

One could also point out that Europe has been an irritating source of news laws, regulations and bureaucracies. The ‘acquis communautaire’, which is the body of EU law, now comprises an estimated 170,000 pages. Or think of the more than 10,000 EU bureaucrats paid more than the British prime minister.

Heavier than these irritations and failings, however, weighs the EU’s anti-democratic nature. In any functioning democracy, it is possible to have public debates, kick out the government, or at least campaign for change.

Unfortunately, the EU does not allow such basic democratic procedures in any meaningful way. It is, essentially, an anonymous power.

No wonder the British struggle to reconcile their individualist tradition since Magna Carta with the EU’s construction.

The referendum’s real question is whether in its current state the EU is a club that freedom-loving democrats happily want to belong to. Next week we will find out the answer.


Philadelphia soda tax is liquid gold
Jenesa Jeram | Policy Analyst | jenesa.jeram@nzinitiative.org.nz
Comments sections are hardly the place to go for well-considered musings on topical issues. They are, however, a repository for the layman’s understanding of complex issues.
 
Consider Eric Crampton’s opinion piece on hypothecated sugar taxes. To liven up a dry topic, Eric uses the example of taxing hipster beard oil to fund Tieke (native bird) recovery. The point is that ring-fencing revenue, even if it is to fund virtuous projects, will break our tax system.
 
Commenters complained that the example was ridiculous because it bundled two unrelated activities. No government would push such frivolity in the real world.
 
Except Philadelphia just has.
 
Philadelphia’s new soda tax doesn’t save the Tieke, but it does offer universal pre-kindergarten, which may be just as popular with voters.
 
After failing to persuade voters on public health grounds, Philadelphia switched up the soda tax rhetoric from a health initiative to a lucrative source of government revenue. The soda tax includes both sugary drinks and diet drinks, and was presented as “a big untapped source of revenue that could be used to pay for popular initiatives...”
 
The soda tax now has a much loftier goal: alleviating poverty. Voters were told that the money would be invested in universal pre-kindergarten. Details are emerging that other projects will also be funded that were not mentioned in the original proposal.
 
The most obvious trouble is that the revenue will be unpredictable. In fact, if soda taxes work the way public health experts anticipate, then revenue for these projects would decrease over time.
 
Besides, there are endless bundles of things that could be taxed and endless programmes that could be funded. The trick is to pick a programme that no one but a cold-hearted economist could object to.
 
Out of all the products that could be taxed, choosing soda also is rather short-sighted. If the aim is to raise revenue to address poverty, taxing soda is not exactly the nectar of the rich. The amount of middle class churn this redistribution generates surely does not justify making the poor poorer.
 
Meanwhile, those who dare speak out against the tax must now deal with the accusation that they hate children, or do not care about poverty.
 
A hypothecated soda tax may not ease obesity or poverty, but it is a great way of distracting voters from the fact their government cannot deal with a limited budget or manage trade-offs.
Should they stay or should they go?
Jason Krupp | Research Fellow | jason.krupp@nzinitiative.org.nz
Covering the same topic twice in the same edition of Insights is generally not done at the Initiative, but with all the colourful commentary on the Brexit it is just too good an opportunity to pass up. It is a once in a generation event, or so we’re told.

Two commentators in particular caught my eye in recent weeks. One was a near-200 year old business publication, and other a comedian famed for his silly walk. One of these parties expressed a view based on longstanding principles and a rational argument, the other delivered a long string of scaremongering that can best be summed up as a joke.

Okay, fine, maybe John Cleese wasn’t being entirely rational, particularly his call to hang EU Commission President Jean-Claude Juncker. But he made as strong a case as you can via Twitter for why the EU was reform-proof, and that the Brussels Bureaucracy made a mockery of democratic accountability.

The Economist, meanwhile, warned that a vote for Brexit would have dire consequences for the ease of travel that business class customers currently enjoy when flying to continental Europe. With unlimited access to sparkling wine while in flight, however will these well-heeled types cope?

The self-described newspaper also warned that if the general public chose not to listen to advice from an alphabet soup of experts (Bank of England, IFS, IMF and OECD) they would have to live the rest of the lives with “we told you so” ringing in their ears. That is sure to persuade voters.

And perhaps most flabbergasting of all was the argument that British farmers would be severely hurt if Britain left the single market. Why? Because 54% of UK farmers’ income comes from EU subsidies. Well, forgive me for thinking that this was a title committed to free markets and opposed to cartels, which the EU is starting to resemble.

With only days to go until this historic vote, one can only wonder at what hyperbole this esteemed title will come out with next. While we wait, I think I’ve found the perfect soundtrack for the Brexit vote: The Clash’s ‘Should I stay or should I go?’
 
On The Record
 
All Things Considered
  • Graph(s) of the week: Walkability is a premium good - see the top 30 US cities.
     
  • Brexit: Ambrose Evans-Pritchard on why he's voting to leave the EU.
     
  • Dealing with Auckland Council: From Coco's Cantina Sisters.
     
  • Meanwhile in Canada: A fiery end to a family argument.
     
  • Big Brother is out there: And he can tell landlords if potential tenants will pay the rent on time.
     
  • Dating Apps: All you need to know about finding a potential soulmate.
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