Three lessons about public policy from Beatles songs

NEIL IRWIN
Last updated 09:14 13/01/2014
beatles

POPULAR SHOW: The Beatles on the Ed Sullivan Show.

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Fifty years ago next month, the Beatles piled onto Pan Am Flight 101 out of Heathrow, and a few hours later descended on America. As the anniversary approaches, expect to see a lot of iconic old video: of John, Paul, George and Ringo flopping their mop-tops on "The Ed Sullivan Show," of onlookers crowding what was then Idlewild airport, of adolescent girls screaming at Shea Stadium.

But forget the pop culture history for a minute. What has always stood out to us about the Beatles' oeuvre is what it teaches about crucial concepts in public policy. After careful review of every album from "Please Please Me" to "Abbey Road," here are the three most important policy lessons to be gleaned from the Fab Four.

The song: "Taxman"

The Lesson: The Laffer Curve is real.

The 1966 song from the "Revolver" album is the Beatles' most explicit commentary on public policy. The lads from Liverpool were starting to come into serious money at this point - only to realise that the policies of the post-war Labour governments would mean that their British tax bill would add up to a 95 per cent (by some accounts 98 per cent) marginal rate.

As the anger-filled lyrics by George Harrison convey, this pleased the Beatles not at all. "If you drive a car, I'll tax the street./ If you try to sit, I'll tax your seat./ If you get too cold, I'll tax the heat./ If you take a walk, I'll tax your feet."

Fast-forward a decade. American economist Arthur Laffer popularised the Laffer Curve - the idea that increasing the tax rate can, paradoxically, result in the government making less revenue.

When you're in that portion of the Laffer Curve, an increase in, say, income tax rates results in would-be taxpayers either not earning the income at all (why bother working if you're going to be taxed at 95 per cent?), or going to extreme lengths to shelter or shift the income elsewhere to avoid taxes.

The Beatles took the latter approach. They realised that the best way to avoid exorbitant income taxes on their musical royalties would be to, through some legal magic, turn that into capital gains instead of income. The British capital gains tax rate at the time was only 30 per cent.

"They were the most famous people in the world, and they were making a lot of money, but they were not seeing any of it," Peter Brown, one of their managers, said in an interview with Bloomberg last year. "So capital gains was the obvious route to go."

They formed a company, Northern Songs Ltd, which owned their compositions and listed shares on the London Stock Exchange in a February 1965 public offering.

"The London financial community wasn't quite sure what to make of a company whose only assets were the songwriting potential of two Liverpudlian twentysomethings," Bloomberg noted. It came at a cost, too: The fact that the songs were owned by a publicly traded company rather than the songwriters as individuals allowed them to eventually be sold not back to Paul McCartney and John Lennon's widow, but to Michael Jackson. But that's a whole different story.

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Side note: If you have followed the debate over "carried interest" rules in the United States, you may be struck by the similarities. Those allow managers of hedge funds, oil and gas partnerships, and real estate investments to convert income into lower-taxed capital gains. The Beatles exploited the original carried interest loophole. The Beatles were the Mitt Romney of the 1960s.

But, more broadly, their experience - and the sense of anger and protest expressed musically in "Taxman" - show why governments can't continuously raise more revenue by pushing tax rates up. An important caveat: There is a big difference between top tax rates in the 90 per cent-plus range as in 1960s Britain and the current US top rate of under 40 per cent. The Post's Dylan Matthews surveyed several economists on where they think the Laffer Curve bends -- at what point tax increases result in less government revenue -- and many answers were in the 70 per cent ballpark.

The song: "When I'm 64"

The lesson: Improving life expectancy requires rethinking of pension systems

When Paul McCartney wrote this diddy for the "Sgt. Peppers' Lonely Hearts Club Band" album, he was an impetuous 24 years old, and surely thought of age 64 as being one of dotage. He muses, hopefully, that he will still have some use as a human at that age. "I could be handy, mending a fuse/ When your lights have gone" and "Doing the garden, digging the weeds."

"Will you still need me, will you still feed me/ When I'm 64?" he asks. From a 2014 standpoint, that sounds insane. Sixty-four-year-olds in advanced countries don't need somebody to feed them. They can do much bigger jobs than fixing a fuse or piddling in the garden. McCartney himself is now 71, released a new album last fall and still tours!

Here's the thing, though. From the vantage point of the Beatles as young men, thinking of 64 as old age wasn't so ludicrous. The life expectancy for a male born in Britain in 1942, the year McCartney was born, was 60.65 years, according to the Human Mortality Database. (It was only a bit higher than that in the United States). The Beatles' parents and grandparents had lived through devastating world wars. The polio vaccine was a decade old. The world they inhabited was one in which 64-year-olds really were long in the tooth.

This has broad implications for society, and in particular how we structure programs for retirees. Pension systems designed for an era in which people die in their mid-60s will tend to be chronically underfunded when life-spans rise. As people are more active in their 60s, 70s and beyond, they can work longer, though with important exceptions for those who do physically demanding jobs.

A person who retires at 65 and lives to age 97 or so will spend a third of his or her life receiving pension benefits. We're no longer in a world where a 64-year-old is in the final days like the imaginary future that McCartney envisioned in the song. And we need both public and private pension systems designed in a way that reflects that reality.

The song: "Revolution"

The lesson: Incremental policy improvement trumps grand theories

In 1968, when "The White Album" was released, revolutionary fervour was in the air. Vietnam protests were at a high ebb; there was violence in the streets, and there was a sense that the old order was fundamentally broken and needed to be brought down by any means necessary.

The Beatles' song "Revolution" combines an almost bombastic revolutionary tone with a more subtle message. "We all want to change the world/ But when you talk about destruction/ Don't you know that you can count me out," John Lennon wrote. "You say you got a real solution/ Well, you know/ We'd all love to see the plan."

Lennon seems to have meant the song as a rebuke of would-be revolutionaries who, in their dislike of how things worked in the Western democracies, blinded themselves to the brutal realities of rule under Communist regimes ("You say you'll change the constitution/ Well, you know/ We all want to change your head" and "if you go carrying pictures of Chairman Mao/ You ain't going to make it with anyone anyhow"). But there are some themes in the song that apply more broadly to policy.

It's easy to look around the world and see all the things that are going wrong, and to want to tear up the system in its entirety. What's a lot harder is the messy work of identifying concrete, practical action that might make peoples' lives better, all the while respecting existing institutions and interests enough to actually make positive change happen through democratic means.

In other words, it might be nice to say: The US health care system is a disaster and should be replaced with a state-run system like in Britain or Canada. But if you want to ensure more people can get coverage at less cost, and to get it through America's messy constitutional system, what you actually need is less a revolution and something more like the Affordable Care Act.

The banks helped cause the financial crisis, and you want vengeance, right? Well, nationalising the banks might sound good, but could stand in the way of an economic recovery and exact a tremendous financial and political cost. Maybe it's better to rein in the banks with the complex but expansive Dodd-Frank Act to try to ensure they are better regulated.

You say you got a real solution. Well, you know, we'd all love to see the plan. But sometimes it's better if that plan is something concrete and actionable, not a pie-in-the-sky vision of how you might reshape policy by revolution.

AND THERE'S MORE

Here are more potential public policy lessons you might learn from various Beatles songs:

"Eight Days a Week"_ The case for the 40-hour workweek.

"Paperback Writer" - How copyright law can paradoxically stifle innovation.

"Eleanor Rigby" - Clearly about Meals on Wheels.

"I Am the Walrus" - The advantages of human-animal hybrids.

"Back in the USSR" - In support of track-two diplomacy and soft power engagement.

"Her Majesty" - A subtle critique of Commonwealth republicanism.

- The Washington Post

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