Professor Worstall

Today I sat a test to benchmark my knowledge on business, finance, economics, organisational behaviour, etc. at the start of my course. The idea is I’ll sit the same test at the end and see whether anything has sunk into my thick skull, or it all went in one ear and out the other.

I’m not sure how I did because they don’t give you the results, but some questions I had absolutely no idea about. Of the ones I did, I’d say a good three quarters I was able to answer mainly because I’d spent the past ten years reading Tim Worstall’s blog. Perhaps we should start calling him Prof.


An Optimistic Request

Good luck with this, then:

President Tayyip Erdogan told Turks to exchange gold and hard currency into lira on Friday as part of a “national battle” against economic enemies he said have irreparably ruptured ties with Ankara.

The very reason Turks would be hoarding gold and foreign currency was to give them a route out in the event he cratered the economy. Middle class Turks must be fleeing in droves right now, particularly when their president makes statements like these:

On Thursday, he urged supporters not to worry, saying that while overseas investors had dollars, Turks had Allah.


Early last month, he claimed the exclusive power to appoint the bankers that set interest rates – and to cement his control he has put his son-in-law in charge of economic policy.

So Turkey is well on the much-predicted path to becoming a nasty Islamist basket-case. But if they weren’t in NATO, would anyone care?


Burning Burberry

This is interesting from an economics point of view:

Burberry, the upmarket British fashion label, destroyed unsold clothes, accessories and perfume worth £28.6m last year to protect its brand.

It takes the total value of goods it has destroyed over the past five years to more than £90m.

Fashion firms including Burberry destroy unwanted items to prevent them being stolen or sold cheaply.

Someone has obviously done some calculations and estimated the damage done to the brand’s image by selling their products at a discount is greater than £90m. So, it’s cheaper to burn it.

Burberry is not the only company having to deal with a surplus of luxury stock.

Richemont, which owns the Cartier and Montblanc brands, has had to buy back €480m (£430m) worth of watches over the last two years.

Analysts say some parts of those watches would be recycled – but much would be thrown away.

Better than being flogged second hand on eBay, obviously. Naturally:

Environmental campaigners are angry about the waste.

Those last three words feel superfluous.

“Despite their high prices, Burberry shows no respect for their own products and the hard work and natural resources that are used to made them,” said Lu Yen Roloff of Greenpeace.

You can imagine the mental gymnastics they went through trying to put their knee-jerk objections into vaguely-coherent words, can’t you?

“The growing amount of overstock points to overproduction, and instead of slowing down their production, they incinerate perfectly good clothes and products.

Are they still producing the same line of clothes they’re burning? Unlikely. And since Lu Yen Roloff brought up thrift:

Maybe we can get Burberry employees and shareholders to comment on her lifestyle?


Harley-Davidson and Tariffs

There’s an irony here which has largely gone unmentioned:

U.S. President Donald Trump on Monday slammed Harley-Davidson Inc (HOG.N) after the motorcycle maker said it would move production for European customers overseas to avoid retaliatory tariffs that could cost it up to $100 million per year.

Trump said he has fought hard for the company and was surprised by its plans, which he described as waving the “White Flag.”

Harley-Davidson, the dominant player in the heavyweight U.S. motorcycle market said earlier on Monday it would not pass on any retail or wholesale price increases in the EU and instead focus on shifting some U.S. production.

So, Harley-Davidson doesn’t like tariffs and will re-arrange its operations to avoid feeling the consequences of them. Fair enough, but:

With an economic recession causing sales of all motorcycles to slide, with even Japanese manufacturers like Honda Motors (NYSE:HMC), Kawasaki, and Yamaha overestimating demand, Harley’s delicate financial condition couldn’t afford the discounting the oversupply was causing. Despite the Japanese bike makers offering to help Harley make it through the crunch by giving it technological assistance and providing tens of millions of dollar in loans to keep it going, Harley instead chose protectionism and petitioned the Reagan administration in 1982 to raise tariffs.

As it had been since the 1940s, Harley-Davidson was the U.S. bike industry, being the lone American bike maker left in the market, although Honda and Kawasaki did have a single plant each located in the U.S. But with Harley’s global market share slipping, the U.S. International Trade Commission determined that Honda, Kawasaki, Suzuki, and Yamaha had hurt Harley’s business, and advocated a tariff hike. Reagan ended up raising the tariffs from 4.4% to 49.4%, though the rates were to fall by a set amount each year thereafter, with their removal or extension decided after five years.

The article goes on to suggest the tariffs on Japanese motorbikes didn’t save Harley-Davidson, but it did give them a much needed shot in the arm.

However, Harley-Davidson staged a dramatic recovery, with sales rising so fast that after just four years it petitioned the government to lift the tariffs, saying it no longer needed protection, making this a simple success story of targeted trade protection.

I don’t know if Trump is aware of the history of Harley-Davidson and tariffs; if he is, it might explain why he’s rather annoyed with them.


Scottish Stupidity

This amused me:

The Scottish Parliament has become the latest building to introduce free sanitary products for all staff and visitors.

The move follows concern over the accessibility and affordability of tampons and towels.

The decision from the all-party Scottish Parliamentary Corporate Body means free sanitary products will be available in all 42 women’s toilets.

It was hailed as a “win for gender equality” by MSP Kezia Dugdale.

The cost of providing the free sanitary products is expected to be between £2,000 and £3,000 a year.

Ms Dugdale, who is a member of the corporate body, said women often found it difficult to access sanitary products during the working day.

Basically, the taxpayer is subsidising the grocery shopping of those who work in the Scottish Parliament, most of whom will be rather handsomely paid in comparison with said taxpayer. For instance, the annual salary of an MSP such as Kezia Dugdale is over £62k per year (.pdf); the median wage in Scotland is just over £23k.

This isn’t the first time a government policy has been aimed at subsidising the lifestyles of the wealthy middle classes (which coincidentally includes those making the policy) at the expense of the poor. In fact, it pretty much defines most policies these days.

Despite half of the population experiencing menstruation at some point, very few workplaces have taken steps to become period-friendly and that’s why I’m pleased the Scottish Parliament is leading by example.

Many of those women experiencing menstruation will be poor, single mothers who don’t work at or visit the Scottish parliament, and who no doubt struggle to purchase groceries thanks to their taxes being frittered away by grifters in Holyrood.

Her Labour colleague, Monica Lennon, is bringing forward a member’s bill to create a statutory duty for free provision of sanitary products.

Ms Lennon also welcomed the move and called on other parliaments, buildings and employers to take similar action.

It’s not just the economics that are stupid here. I can guarantee that within a very short period (ahem), these free sanitary products will be snaffled in bulk, leaving none available or costing a fortune to replace. You cannot leave boxes of sanitary pads and tampons lying around in a staff toilet any more than you can install a machine on the street which dispenses cans of Coke for free. Perhaps this would work in Japan, maybe in a select few other countries, but the UK isn’t among them. And what’s amusing is you can be damned sure the sort of women who will fill their handbags with these items for use at home, thus wrecking the system, will be the right-on lefties who dreamed it up in the first place. Modern lefties always strike me as the sort who’d steal the sugar sachets from Little Chef while lecturing the rest of us on how selfish we are.


Rent Seeking in Palma

I like this:

The Spanish resort city of Palma, on the island of Majorca, is to ban flat owners from renting their apartments to travellers, becoming the first place in Spain to introduce such a measure.

The restrictions follow complaints from residents of rising rents due to short holiday lets through websites and apps.

Palma’s mayor says the ban, to be introduced in July, will be a model for cities suffering with mass tourism.

Suffering from mass tourism. Just as Rotterdam suffers from mass shipping and Las Vegas suffers from mass gambling.

Now having your hometown invaded by tens of thousands of knuckle-dragging grockles every summer can be annoying, but on aggregate the positives outweigh the negatives – especially on an island without much else other than tourism. But I don’t buy into the premise either:

The restrictions follow complaints from residents of rising rents due to short holiday lets through websites and apps.

Bollocks. Residents won’t be renting on a short-term basis, they’ll be on long-term leases at a much lower rent. Here’s the real reason:

Palma, like many other cities around the world, has seen an increase in visitor numbers driven, in part, by private rental accommodation offered through websites and apps.

Officials from the local left-wing governing coalition cited a study suggesting that the number of non-licensed apartments on offer to tourists increased by 50% between 2015 and 2017.

The left-wing government isn’t getting its cut.

Locally, there is resentment over tourism pushing up prices – rents in Palma have reportedly increased 40% since 2013 – but also about deteriorating conditions in neighbourhoods popular with travellers due to noise and bad behaviour.

This I can believe, but they could always stop advertising for more tourists, or increase local taxes to push prices up thus cutting numbers in favour of getting a better quality of clientele.

“Palma is a determined and courageous city,” Mayor Antoni Noguera said.

I’d be curious to see this chap’s property portfolio, wouldn’t you?

José Hila, Palma’s chief of urban planning, said: “There is a parallel between the evolution of vacation rentals and the rise in rental prices.

“All European cities are being transformed overnight by this type of offer. We need some order. There will be vacation rental in Palma, but only where there needs to be.”

Urban planner believes he knows which rental accommodation is needed where better than tens of thousands of people voting with their wallets.

Last year, Palma banned the advertisement of non-licensed flats, including hefty fines for owners and apps flouting the rules. Barcelona has taken similar action.

Did the people doing the banning have a personal financial interest in the licensing system?

But Pimeco, a local organisation representing small businesses, said the holiday rentals had “boosted consumption” and were an “important source of income” to many flat owners.

The holiday rentals association, Habtur, said not only owners would be affectedbut also restaurants and shops, warning that jobs could be cut.

This is basically the ruling classes protecting their rents, isn’t it? Naturally, the reporters at the BBC can’t see this and take the whole thing at face value.


A shortage of land, or economic sense?

This story amused me, doubly so because it was being shared approvingly by people on Facebook:

WA’s port city is rolling out a new breed of infill that will cap house size at 120sqm, encourage smaller homes of less than half that size and mandate green space to stop the loss of trees to infill.

At 120sqm the maximum house size will be less than half the size of the average home being built in WA.

The plan is initially earmarked for pockets in Fremantle, White Gum Valley, Hilton, O’Connor, Samson and Beaconsfield. However, if successful it could be rolled out more widely.

A ban on building houses over 120sqm in a given neighbourhood will absolutely delight those who already own houses larger than this, as their value will increase considerably. I wonder how many people behind this decision stand to benefit in such a manner?

City of Fremantle mayor Brad Pettitt said it would be “radically different” from conventional infill.

“It’s very smart planning and at the heart of it is trying to match what is Fremantle’s existing demographics with what we’re building,” Dr Pettitt said.

Do you think Dr Pettitt, who draws a salary from the taxpayer, lives in a home smaller than 120sqm?

“Your average house size is 2.2 people but you’re building on average a house that is four or five bedrooms. We’re keen to get young couples and young families into the area.

So why isn’t the market providing them? I don’t know, but I suspect a plethora of planning rules and regulations make building small houses economically unattractive. If only a small percentage of the overall costs of a new house is in the land, materials and construction, why not build bigger houses which can be sold at a higher price?

“Your average standard house in Fremantle is $800,000-plus, that’s pretty hard on an average income. But also we’re really keen on ageing in place. We’d love this to expand beyond Freo and for it to become the norm across the metropolitan area.”

As in the UK, house prices in Australia have rocketted beyond the reach of many people, especially youngsters, because of government policies intended to hoodwink the middle classes of a certain generation into thinking they are wealthy as a result of shrewd investment rather than dumb luck. Naturally, the solution is for the government to interfere further in the housing market by capping house sizes in certain neighbourhoods.

The maximum size of any dwelling would be capped at 120sqm but Dr Pettitt said they would also encourage homes of 50sqm.

All the joys of living in a something the size of a Paris studio, in an Australian backwater. What’s not to like?

Car bays would be capped at one for every new house and two for existing houses.

What’s this got to do with making housing affordable? Nothing whatsoever, it’s just some green shite tacked on the end by lunatics in the local government who want to virtue signal. What it means is any household where both adults work will be put off buying one of these new houses. Bear in mind this scheme is supposed to help young couples.

Ms McKenzie, who is working on a prototype for compact, affordable and moveable housing, said different solutions were needed to address Perth’s urban sprawl.

“The consumption of land here in Perth is far greater than anywhere in the world,” she said. “I take my hat off to Fremantle: they’re doing something and it’s new and it’s different.”

There was an old joke that the Saudis were so dysfunctional they could run out of sand. I think it’s time to update that joke to Western Australians running out of land.


Trump on Trade

He’s a funny fella, Trump. With a single tweet he’s got everyone denouncing tariffs and other protectionist policies, with even the BBC writing articles on how damaging they are. Suddenly everyone is a proponent of unfettered free trade, which until last week was the preserve of libertarians versed in Austrian economics and fans of Tim Worstall’s blog.

I mean, up until a few days ago we had the EU mandarins and Remainers assuring Brexiteers that tariffs will be implemented once Britain departs without anyone from the mainstream media pointing out this will hurt the EU more than it will Britain. In fact, most were insisting the exact opposite. Yet with a single tweet representing perhaps three seconds of thought, Trump has inadvertently got everyone agreeing on how stupid import tariffs are. Not that anyone running the EU, which operates some of the most protectionist policies anywhere in the world, understands free trade. But it does give the Brexiteers some ammunition with which to respond to the threat of tariffs in ongoing negotiations.

Tariffs don’t make economic sense of course, and free trade does make us richer on aggregate. But the ZMan makes a reasonable point here:

The hidden cost of free trade is a lot of people you don’t know losing their jobs or seeing their wages cut. When you’re the guy getting the pink slip, the cost is not hidden and that has a social cost, as well.

This is a point many Remainers miss about Brexit: not everything is about economics. Britain may well be worse off economically after leaving the EU, but many British people don’t believe wrecking whole communities through mass immigration (which is often highly localised) is an acceptable price to pay for half a percentage point increase in GDP. Of course, the financial gurus in London don’t mind because it’s not their communities being wrecked. Note that the strongest proponents of open borders work in professions which are closed shops, hence immune from the influx of cheap labour. If Polish accountants, Portuguese doctors, and Romanian law firms could compete freely for business in London, we’d see a wholesale change in attitude from the ruling classes.

The ZMan goes on:

The fact is, a nation is its people. What defines France is the shared character and shared heritage of the people we call French. What defines a people is not the cost of goods or the price of labor. What defines a people is what they love together and what they hate together. It is the collection of tastes and inclinations, no different than family traditions, that have been cultivated and passed down from one generation to the next.

Perhaps mass immigration has brought economic benefits to Europe, but it has also brought about an erosion of social trust, particularly in certain areas where unskilled migrants are concentrated. Did anyone ask the people who live in these areas their approval before upending their society? Or did we all assume that provided everyone gets richer on aggregate, such societal costs are acceptable (particularly if you and I don’t actually have to pay them)?

It’s the same with trade. I am all for free trade, and I don’t believe in tariffs for the reasons people say. However, there needs to be an acknowledgment that there are both winners and losers of free trade, and even though the winners vastly outnumber the losers, we should not glibly deny that losers exist. For decades, the consensus among the ruling classes has been that the losers of global free trade shouldn’t be considered at all – unless they can cause political trouble like farmers in France, or have family and friends in government like lawyers everywhere – and they are acceptable casualties in the battle for economic growth. Well, regardless of what the solutions to their plight are – assuming there are any – I believe we should start by acknowledging that there are losers of free trade, and understand their concerns. It’s easy to wave a hand and say “they can do something else” and make references to blacksmiths and motorcars, but retraining is pretty difficult in a town flooded with low-skilled migrants. And blacksmiths didn’t go out of business because the state encouraged cheap car plants to be built next door while punishing those who used anvils.

Consider NAFTA, for example. This has allowed Chinese companies to set up in Mexico with no intention whatsoever of supplying goods and services to Mexico, instead using it as a back door to the USA while bypassing their environmental and social regulations. Sure, the US now gets flooded with cheap goods making everyone richer on aggregate, only swathes of the country now consists of condemned towns perishing under an unprecedented opiate crisis. This is progress how?

A big part of Trump’s presidential campaign was acknowledging the losers of free trade and globalisation, which went a long way to propelling him into the White House – while his rival hob-nobbed with billionaires and poured scorn on the unemployed working classes. His latest comments on Twitter have now got everyone discussing the folly of tariffs in general, but also forcing them to acknowledge the social costs of free trade policies and the people who’ve found themselves disenfranchised. While this remains just a tweet and doesn’t translate into bone-headed protectionism, I don’t think this is a bad thing. Hopefully some sensible policies will come out of this, not least between Britain and the EU.


Earth to Earth

When I was a child my parents, in lieu of a television, used to listen to Radio 4, especially at meal times. My mother hailed from Sidmouth and so took interest in a radio series that concerned a remote farming family in mid-Devon who one day blew their own heads off with a shotgun. Chez Newman was a barrel of laughs, I can tell you. I remembered the series, which was called Earth to Earth, and the book of the same name that someone gave my mother shortly afterwards. For no particular reason I tracked it down on Amazon and bought a secondhand copy (it’s now out of print).

The Luxton family had been farming in Devon for around 600 years, and by the 19th century the various branches pretty much owned everything within a day’s ride of Winkleigh, the village around which the events took place. The author of the book, John Cornwell, noted that marrying between cousins was common among the Luxtons simply because the family was so large it was pretty much impossible to cast one’s net beyond their geographical spread in the days when people’s worlds were very much smaller than they are today. Things looked good for Robert George Luxton, born in 1818: he inherited six farms and plenty of assets in the form of stock, dwellings, furniture, and paintings and was the undisputed head of the local aristocracy. Being a rich chap, he indulged in foxhunting, gambling, womanising, and drinking along with his pal the Fifth Earl of Portsmouth, who was even richer and built himself an extravagant mansion in 1854 to which he would invite hundreds of his friends to engage in hunting and pissing it up.

At the same time, Robert George embarked on a large program of upgrades to his farms, investing heavily in new machinery, rebuilding barns, acquiring better breeds of livestock, and adopting more intensive farming techniques requiring large outlays on seeds and fertilisers. A lot of this was financed through loans, which the banks were only too pleased to extend at seven percent interest. His sons and daughters were given expensive educations and preferred to play sport or idle rather than work the land, and soon he began to lose control of his workforce. But what happened next was worse:

The catastrophe, when it came, was more widespread and appalling and permanent than any could have guessed. The background to the agricultural depression of the latter half of the nineteenth century was the influx of cheap food from the United States, Russia, Argentina, Australia and New Zealand. Steam navigation and the relentlessly spreading tentacles of the railways in every part of the world brought speedier, cheaper transport. The Americans had pioneered the mechanization of crop farming on an unparalleled scale to open up and exploit the vast and fertile prairies. Inevitably the food markets of the world were transformed. It was an era of aggressive free trade and British farming was brought to the edge of collapse. Throughout the 1870s North American grain pushed prices down to levels unknown since before the year 1700. The populations of the manufacturing towns were being fed on Argentine beef, Australian mutton and bread made with American wheat. In the 1880s the cost of a loaf fell to half its previous price. Denmark counteracted the changing market forces by rapidly switching to dairy produce. The Danish farmer fed cheap imported grain to dairy cattle and pigs, and exported high-quality standardized bacon to England.

Many British crop farmers converted their farms to grass­land, hoping to redeem their fortunes by investing in milk production. As a result there were huge milk surpluses and plummeting prices meant they failed to cover their invest­ments. Their attempts to break into the cheese markets were frustrated as they watched American cheese drop to twopence a pound. No British farmer could produce good cheese for less than fourpence a pound.

Compounding the misery of British farmers was the appalling weather I described in this post. The upshot was that many farms went bankrupt, sending thousands of farmers and agricultural workers to all four corners of the globe to seek better fortunes – including many who bore the Luxton name. Robert George was forced to sell land and other assets to pay his debts, before breaking his neck in a hunting accident in 1902 aged 84 and penniless. His pal, the Earl of Portsmouth, killed himself in 1906.

Observing all this, and taking careful notes, was a cousin of Robert George’s by the name of Lawrence Luxton of West Chapple farm. Although the two had grown up together, he was highly critical of Robert George’s extravagant ways, himself eschewing modernisation and spending almost nothing. When the crash happened, Lawrence Luxton was determined to survive with his farm intact. Believing the real danger to a farm lay in outside forces such as markets and money-lenders, and understanding that a farm can be almost entirely self-sufficient, Lawrence Luxton simply shut the farm gate and rode out the storm. Their main contact with the outside world was to barter produce in exchange for items they couldn’t make themselves, such as clothes and boots. What is astonishing is that the family carried on like this for two more generations.

A hundred years later, in the 1970s, West Chapple farm was owned and occupied by the last remaining members of the once-enormous Luxton clan: brothers Robbie and Alan, and their sister Frances, Lawrence Luxton’s grandchildren. Their father, Robert John, had been raised by Lawrence to run the farm and view the outside world much as he did, and Robert John in turn passed this outlook onto his own offspring. As such, the Luxton’s farming practices remained unchanged from those of a hundred years before: everything was done by hand, there was almost no machinery, they used draft horses in place of tractors, and there was no mains water or electricity (at least, according to Cornwell’s book: this is disputed). By all accounts they were excellent farmers, producing good animals and taking tremendous care of their land, and they didn’t spend a penny more than was absolutely necessary. When WWII arrived, and brought with it thousands of American and Canadian soldiers, the world opened up a little for Alan, the youngest of the three siblings. He joined the Young Farmers club and, after long days in the fields, would scrub down, head into Winkleigh, and go drinking in the pub.

When the war ended Alan tried to persuade his elder brother to modernise the farm but Robbie, wedded completely to his father and grandfather’s methods, refused. He allowed the lane leading to the farm to grow over, claiming he wanted it for grazing, and erected gates at either end. Anyone driving by on the public road would just see a meadow on the other side and never guess there was a farm in the valley beyond, hidden completely from view. The family fortunes changed dramatically when Alan met a local woman and became engaged. He approached Robbie and said he wanted to sell his share of West Chapple so he could buy a small property of his own and raise a family, but again Robbie refused: he couldn’t afford to buy Alan out of his share, and to split the farm up was unthinkable. Furious rows ensued and even physical violence, with Frances – who was older than them both – caught in the middle but sympathising with Alan. Eventually, unable to win his brother over, Alan called off his engagement and returned to the farm. He then suffered a complete mental breakdown, locking himself in his room and hurling abuse at everything and nothing, roaming the farmyard dressed only in sacks and incapable of doing any real farm work. He was to remain that way until his death years later.

Frances had a few romantic liaisons but none developed into anything serious, probably because her brothers were so dependent on her staying at the farm. Once it was clear Alan’s condition wouldn’t improve, her fate on the farm was sealed. Robbie, for his part, was uninterested in women believing his sister was all he’d ever want or need. As the siblings grew older the farmwork grew more difficult. They began to think about succession but had nobody to pass the farm onto. Deeply aware they were the last remnants of a great Devon farming family, Frances took to researching their ancestry in the hope of finding a suitable heir. But as time passed and none was forthcoming, the weight of family history bore more heavily upon them. By the time Robert and Frances were in their sixties, and the erratic Alan in his mid-fifties, the farm had become too much for them and they agreed to sell it. Then they changed their minds, then they found a purchaser and agreed to a sale, but immediately regretted it. Witnesses say Frances spent her final days in a sort of delirium over the sale of the farm, repeating over and over that they should stay and die in West Chapple.

One morning, in the autumn of 1975, a grocer’s delivery man approached West Chapple and found Robbie, Frances, and Alan lying dead in the yard with massive shotgun wounds to their heads. The police quickly ruled out the involvement of a fourth person and concluded that Alan had probably committed suicide first, with Robbie following suit an hour or so later having first dispatched Frances who didn’t appear to offer any resistance.

Suicide rates among farmers still remain high everywhere, including in the UK, France, and USA. While most observers focus on economics and isolation, there is often also a great weight of family history pressing down on the shoulders of farmers whose forebears have worked the same land for sometimes hundreds of years before. As the case of the Luxton’s shows, this can exert an enormous psychological pressure on farmers faced with no choice but to sell up. If they have nobody in the family to hand over to, this pressure can become unbearable. Having grown up in a rural area and known several farmers who died early from heart attacks (although thankfully, none through suicide), I can relate to the pressures they are under even if none is exerted on me. Back when I was a kid listening to Earth to Earth on Radio 4, I thought the story immeasurably sad. Now I’ve read the book as an adult I still do, particularly the Luxton’s despair in a world which had passed them by, leaving them stranded on an island able only to look backwards. There is nothing as relentless as the passage of time, and nothing so unforgiving as the march of progress.


Who benefits from cheap labour?

One of the points Tim Harford makes in his excellent book The Undercover Economist is that the person who benefits the most from a busy cafe is the landlord of the premises in the form of rent. I think he used a coffee shop in one of the London railway stations as an example, but he made the point that if the outlet is in a very busy place full of wealthy customers, the business itself isn’t the goldmine you’d think it is. Sure, the business owner will put the prices up to reflect market rates but the increased revenue will be passed straight to the landlord in higher rent. This is why coffee shops everywhere run on slim but broadly similar margins, even if some are located in busier and more prosperous spots than others. No matter what the business owner does, the bulk of any additional monies will end up in the landlord’s pocket one way or another.

I was reminded of this when I turned on some news channel this morning and caught a man grumbling about how it was becoming difficult to recruit staff in London’s cafes, bars, and restaurants with Brexit looming. He ran some sort of posh cafe in a building I’m sure he doesn’t own, and was saying 85% of his staff come from overseas and applications for new positions are already down. He wailed that there wouldn’t be time to train up an entire new army of baristas and waiters within 5 years. He was also complaining that businesses aren’t having expensive breakfast meetings in his cafe any more, because Brexit is raising prices everywhere. The chap in question had a Scandinavian name and an accent, and if I’d been holding the microphone I’d have asked him why he’s not busy running overpriced cafes in his own country.

Okay, firstly he’s talking nonsense and is simply rent-seeking: if people aren’t applying for advertised jobs then he needs to improve the terms and conditions until they do. Secondly, businesses being unable to have trendy, overpriced breakfast meetings while being waited on by foreign hipsters is hardly a hill on which to fight Brexit. But more importantly, who is benefiting from these low-wage foreign employees? It’s not the customers: they will be charged what the market can bear. And Tim Harford’s case would suggest it’s not the business owner, but the landlord. Now I suspect in the short term business owners will have to take the hit of higher costs – which is why one of them is on TV complaining – but eventually the rents on the premises will have to come down if the businesses cannot maintain their minimum acceptable margin. In other words, the people who will suffer the impact of waiting staff becoming more expensive as a result of Brexit are landlords renting commercial property in London. I’ve just checked my heart and it isn’t bleeding.

There’s another point I want to make here, too. I’m no communist and I believe property owners should be free to do whatever they like with their property and charge what they like for people to use it, but there is something seriously out of whack in modern Britain (and in many other places, I suspect). If the way to make serious money – indeed, the only way – is to simply own property and rent it to those who are actually producing something, and those doing the producing see the fruits of their efforts siphoned off to the property-owning classes, things will eventually get ugly. For a start, the incentive to actually produce something will be severely diminished: why bother trying to run a business providing a service if the landlord will take the lion’s share of the proceeds? Better just to do something else – like work for the government. Another effect is that everyone pours money into property, causing inflation, which is exactly what’s happened in Britain’s housing market. If property is the only realistic investment option, what are people supposed to do? Thirdly, the situation will eventually become politically unacceptable and people will vote against the property-owners.

Now I know that the owners of city centre commercial properties are most probably large public corporations with shareholders, many of whom will hold stock in their pensions, but in politics perceptions matter. One of the issues on which I agree with Corbyn’s supporters is that the older generation have inflated and captured the wealth inherent in property for themselves and ring-fenced it to ensure its value will never fall. The younger generations have been priced out of owning property indefinitely, and with the massive levels of public spending and debt their meagre salaries are now paying for, it’s not surprising they’re quoting Marx and voting for Corbyn. Not that Marx didn’t write drivel and Corbyn won’t be a disaster – he’s not a solution to anything – but that doesn’t really matter in politics. What does matter is that a lot of people have a genuine grievance, and they will vote for whoever listens and pretends to do something about it. It’s easy to dismiss Corbynistas as batshit insane, mainly because most of them are, but deep within their grievances there are a few nuggets of truth, and they are important ones that highlight colossal failings of Cameron, Brown, and Blair.

I don’t know what the overall solution is, but if British youngsters now have an opportunity to work in London’s bars and cafes without being undercut by cheap labour imported for the benefit of wealthy landlords, I don’t think it’s a bad thing.