. . . then read this from Jonathan Margolis’ fascinating story about the Wenzhou in China – the birthplace of capitalism, for them. The folk there have got very rich:

They have a particular thing about France here, which also dictates that there are more than 100 fine wine stores. The irony is that Chinese people don’t much like wine. Millions of bottles of Margaux, Château Lafite and that ilk circulate in Wenzhou as gifts – or are knocked back by the litre, made palatable with sugar or green tea.

The price of ‘fine’ items – like Hirst artwork, say – is driven by demand, not supply or quality.  If there are rich people, who have a deep need to demonstrate that they are men of wealth and taste, then the price of the items that are conventionally linked to such qualities are bound to rise – hence the existence of How to Spend It magazine.

The Chinese of Wenzhou have just proven it – they clearly increase the price of such wines, making them look even more like products of extremely high quality, while destroying any possible quality the moment they are consumed.

PS.  Am I wasting my time here?  Are all you people just hoping for defaced posters of David Cameron, and going away disappointed?

UPDATE: If you want to know what Paul and I are arguing about below, the launch of Tax Justice Focus produced some debate on his blog about the rights and obligations of corporations – – check it out

Advertisements

18 thoughts on “If you ever wanted proof that luxury goods are about display and not intrinsic worth . . .

  1. Don’t worry, there are some regular readers still here…

    Last summer, I and some friends visited Chateau Figeac in St Emillion. Our guide told us about some wealthy Chinese who bought some top quality Bordeaux (can’t remember if it was Figeac {£80 a bottle} or something more prestigious). They mixed it with coke.

    Of course, we shouldn’t forget that there’s plenty of evidence to suggest the price influences our subjective appreciation of the wine as well, which presumably puts further upward pressure on wine prices e.g. this pdf:
    http://www.wine-economics.org/workingpapers/AAWE_WP35.pdf

    1. Thanks for that link Andrew – I remember reading about it in the Economist a while ago, I think . . .

      I think the Romans used to mix wine with sea water. And the British are the reason Bordeaux was first rated so high (again, the Economist, an essay in the Christmas eddition) A lot of this tells me that the fashion for regarding wine loving as the sign of a sophistication is bunkum – it is about the new rich.

  2. Pleased to meet you, hope you guessed my name.

    (I will, eventually, reply to your uncharactetistc spate of pro-libertarianism at my place. I’m just really busy at the moment.)

  3. There’s other evidence that the more “epxert” you are in wine, the more you can tell the difference between wines and appreciate the expensive ones, the conclusion of which is that it might not be a good idea to become expert, as it’ll cost you in the long run…
    I’m in the unfortunate position of being reasonably experienced (though hope I’m not subconcsiously trying to signal my sophistication) but without the income to back up my desires.

    Sen is on top of a big pile of books to read – I take it from a couple of your recent comments that it’s reasonably hard going for a while but stick with it?

  4. Yeah, I think that is a good verdict so far. Also, I have made the mistake of starting at 10:30 pm each evening. If it were swapped with the FT in the mornings, I would fail to reach the Letters section, and have already finished Sen . . .

    I have Jury Duty starting on Monday, which I hope/understand implies a great deal of sitting around. So: Sen, Michael Sandel, Aaron Sorkin, and a few novels for once . . . here’s hoping itsnot a complicated murder!

  5. I have to read the whole of Cicero’s De Re Publica (twice, to understand it), prepare a presentation on Quentin Skinner’s methodological approach and it’s application to Machiavellian republicanism, and fill out a bunch of forms and write a research proposal to convince Cambridge university to give me thousands of pounds.

    We can’t all look at graphs about gilts all day, some of us are doing irrelevant intellectual esotericism

  6. Good luck with all that! I’m sure you’ll get it. Though, following Martin O’Neill, I hope you promise to offer some sort of social good back in return for these privileges . . .

  7. No. I aim to exploit the privileges to maximize my own profit and then invest millions to find ways to avoid my legally due, democratically determined taxes. Then I’m going to cite the fact my learning produces positive externalities for others (eg teaching ‘the skills of the future to create a diverse talent base attractive of inward investment in a competative environment’) to claim that my avoidance activities are ex post facto justified.

    (when you look at it that way, Martin’s point, however clumsily worded in the original, really doesn’t look so absurd…)

    1. Not sure I see how you leap from the privileges you are going to be granted to getting millions, unless there is some magic in the word ‘exploit’:

      “How are you going to get rich doing that course”

      “I won’t just study it, I’ll exploit it”

      If your course does in fact make you millions, this will presumeably stem from it somehow equipping you to produce something of great value that someone or other buys off you – or millions of people buy off you – that might not otherwise have been produced. Then I would not worry about having to make a convoluted externality statement to justify being rich – if you write a super popular book, and make millions from it, the benefit you have provided is right there.

      Martin’s point still sounds like one that can only be made with such complacency with the help of a long existence in academia. I am certainly not in favour of tax avoidance – but arguing against it on the basis of weak arguments, like “the only way you can do good is to give money to the state which really understands social justice” actually strikes a blow against the campaign. We need good arguments to defeat tax avoidance, surely?

      As I say, good luck. While failing to get offered an opportunity to study for a Masters in Philosophy at Cambridge was one of the best things that ever happened to me, you are way better read and commited than I was in 1994

  8. The reference to millions was a tongue in cheek pointer to the fact that my situation may be somewhat radicaly different to eg that of Barclays capital who are granted the privilege by western societies of limited liability, allowing the pursuit of enormous gain at enormous reduced risk for individuals at the top, and offer in thanks the practice of paying legal nerds more than their top traders to come up with ways to avoid tax due to the very societies that enable BC to exist, and which have been democratically levied.

     Or more short: the difference between people and trans-national capital mobile LLP multinationals is important. I wasn’t ever implying that I will be a millionaire. Clearly I won’t, lol!  

    What I’m surprised about, however, is that you’ve focused in on ONE sloppy sentence from Martin -who in an email to me yesterday readily agreed he’d made a daft mistake and ‘only’ should have been ‘inter alia’ – and are ignoring the wider structure of his argument, which is quite sound. 

    Example: you write:

    “Martin’s point still sounds like one that can only be made with such complacency with the help of a long existence in academia. I am certainly not in favour of tax avoidance – but arguing against it on the basis of weak arguments, like “the only way you can do good is to give money to the state which really understands social justice” actually strikes a blow against the campaign. We need good arguments to defeat tax avoidance, surely?”

    But that wasn’t Martin’s argument AT ALL. It’s a bad caricature at best. His argument was that 

    1) property rights are predicated upon the legal structure provided by the state THEREFORE you can’t justify tax avoidance by appeal to property rights, because property rights exist by virtue if the state legal aparatus, which includes tax law 

    and 

    2) modern multinationals only exist because of the PRIVILEGE of limited liability; society grants this because overall society does better if it grants this privilege because AS YOU KEEP POINTING OUT the benefits of private enterprise extend beyond private profit (this is why I’m annoyed with your pillorying of Martin; he is perfectly aware of the point you’re making, indeed it’s incorporated into his original argument albeit pace one sloppy sentence). HOWEVER because society grants this and other privileges (even out of collective self interest, as you rightly point out) corporations owe a duty of reciprocity because without the privilege of LLP they would stand to make very much less than they do (and admittedly, so would society). One of the duties thereby incumbent upon private enterprises that exist by privilege of the state is to pay the democratically levied and determined tax in full, and not to avoid or evade it.

    Putting 1+2 together: Corporations who shirk this duty can reasonably have their privileges withdrawn by society without infringing any ex ante property rights that the artificial person of the LLP corporation by definition cannot in fact have held in the first place.

    Or in other words: tax avoidance cannot be justified by appeals to property rights, and corporations incur a duty to pay their taxes due to the privileges they are granted by society -that society benefits (as you rightly point out) from granting these privileges in ways apart from tax collection is by-the-by regarding the issue of tax. Which is what Martin’s argument was about.

    Now, Martin went on to make further (Rawlsian) points about the capacity of the state to redistribute tax revenues in the name of justice. You may take issue with that (and powerful arguments about inefficiency, ignorance etc are available to you), and maybe you might prefer to replace them with points about eg the democratic process (who sets tax law; the elected government or PWC?) or the rule of law (why should you have to pay tax but not Accenture PLC just because they can pay millions to accountants and set up in the British Virgin Islands?). But the point about justice and state redistribution is a subsidiary point to the main argument, which is both sound and powerful.

    Damn, did that all on my iPhone. 

    Oh, and Cambridge rejected my for Mphil funding too. But London showered me with cash, so I took it.

    Have fun on jury duty!

  9. Although on reflection the dichotomy in Martin’s argument isn’t as pronounced as I’ve rendered it above ( and I’m wrong to say AT ALL in the above, which I clearly go on to contradict, bah)

    but yes, basically, Martins argument is much better than you’ve given him credit for.

    1. I’m happy to accept that, in the the light of you saying the original emphasis was sloppy and not intended. I broadly accept the thrust of the argument as you have rephrased it. As I have said, I am not in favour of tax avoidance, or evasion – I have personally spurned many opportunities to do so, and have always been disgusted, say, by people who spend their whole lives advising how to avoid tax

      . That said, I can see “this is democratically determined” failing as an reason beyond a certain level – tyranny of the majority, etc. I am thinking the 1970s though, not whatever is coming up.

      Well done on the London success, it’s much better place than Cambridge anyway

  10. “That said, I can see “this is democratically determined” failing as an reason beyond a certain level – tyranny of the majority, etc. I am thinking the 1970s though, not whatever is coming up.”

    Yes, this is a good point. “Democracy” doesn’t automatically trump other values. (but having said that, I’d rather tax-incidence was determined by an elected and accountable government than PWC, Deloitte, Ernst and Young and the rest).

    1. I was also thinking that the way feudal lords ‘granted rights’ to people to form guilds and monopolies would have captured the same logic in a sense as Prof O’Neill – but the democratically determined condition would deal with that.

  11. Cicero! poor you, i found studying him so annoying (extremely pompous!) and so hard (those sentences that go on literally for a page… with so much ellipsis and annoying word ordering… translation was a nightmare grr). and you’ll actually have to understand what he’s saying, not just regurgitate the commentary!

    1. I was hoping that reading a couple of Robert Harris novels would deal with this . . .surely they are as good as the original . .. no?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s