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March 29, 2013

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George Hallam

"Yes, New Labour got the answers wrong. But it got the questions right."

No. It failed to ask the right questions.

gastro george

Hopi does sound like an idiot sometimes. Does he actually believe this as an excuse for New Labour's neo-liberalism?

"For all the brave talk of changed paradigms, the left response to the crash is still requires free movement of people goods, and money. Once that is granted, liberalism prospers, neo or otherwise"

FromArseToElbow

"What to do about falling demand for less skilled workers?"

We need to recognise that this isn't a fall in demand for a type of labour, with fewer miners compensated by more quants analysts, but a decline in absolute demand. We can argue about what is causing this (technology and/or globalisation), but the consequence is that supply-side reforms (create more jobs or reskill labour) are barking up a dying tree. The solution has to be a revolution in respect of work time.

"How to raise investment?"

Traditionally, investment means concentrating capital. When the opportunities for concentration decline, we should think about diffusing capital (see below) rather than have it diverted to speculation or wasteful consumption. This is still an investment, but more along the lines of "cast your bread upon the waters".

"How to raise public sector productivity?"

You've already mentioned one obvious approach: workers' control. Another would be a citizen's basic income (a form of capital diffusion), which would reduce bureaucratic overheads and increase social resilience.

Blissex

I find it amazing that as usual in the narrative 0f this blog the two largest aspects of UK political and economic life in the past 30 years are gleefully omitted:

The first is that during New Labour's ascendance there was the biggest benefit on public income and the strength of the pound by export of British oil, as my usual graph makes stunningly obvious:

http://mazamascience.com/OilExport/output_en/Exports_BP_2012_oil_bbl_GB_MZM_NONE_auto_M.png

Tony Blair resigned as prime minister more or less the month that exports turned into imports, leaving the task to manage the consequences to his less lucky successors.

The second is that New Labour rode the "aspirations" of "strivers" who had the good fortune to inherit or buy for cheap a house 20-30 years ago to let rip one of the biggest house price bubbles in the world, sponsoring massive upward redistribution of income, and I'll omit for one to mention the pretty gigantic numbers it produced for dozens of millions of happy middle income profiteers.

Perhaps New Labour had the good/bad things in this blog post, but perhaps they are not quite as important as the enormous luck of having been in power during a period of massive oil exports and having sponsored a gigantic credit-fueled house price bubble.

Julijuxtaposed

"The road to Hell is paved with good intentions"? ;-)

George Carty

And the house price bubble is itself probably the main obstacle to the kind of work-sharing that FromArseToElbow believes must be the solution -- especially when the typical London household spends more than half of its total income on rent!

Chris

There was nothing good about New Labour. We'd be infinitely better off if it had never happened.

Blissex

Well, the housing bubble not only preventing work sharing, but its main effect is that it has been preventing investment in productive activities.

In the past 25-30 years investing in creating or funding businesses was half as profitable as speculating on real estate price increases.

http://www.telegraph.co.uk/property/buyingsellingandmoving/9959021/Budget-2013-winners-and-losers-of-Osbornes-Help-to-Buy-pledge.html
«Halifax reckons the average house price was just £2,200 when Her Majesty ascended the throne, but is now nearly £164,000. That is more than three times the increase in inflation, as measured by RPI, over the period.»

That is around £8,000 per every £100 "invested".

«By contrast, £100 invested in a basket of shares representing the changing composition of the London Stock Exchange in 1952 would have grown to just £4,430. Bank deposits lagged even further behind, with a total return of just £250.»

Interesting asides gleaned from The Economist: 40% of England's local councillors are estate agents, and 60% of Conservative Club chairmen are the owners of the local insurance/finance shop.

Only fools have been investing in non-property and non-financial business activities in those decades.

Part of the result is that as some economist noticed in the 2-3 years in which the UK pounds has fallen by 30% exports have also fallen (only a few %), which is entirely amazing.

For the past 30 years the UK have been living it large by exporting oil and debt... The bill is coming due.

Blissex

«There was nothing good about New Labour. We'd be infinitely better off if it had never happened.»

I think that is very wrong...

New Labour happened because it was *very popular* with all the aspirational rentiers in the country, and they succeeded by pandering to every base wish of the aspirational rentier voting class (in particular middle aged and older, and female, with property, in the South East).

If new labour had not happened, it would have been some other party or faction that would have pandered to that huge voting constituency.

The partially saving grace of New Labour was that because they still had some "labour" oriented culture they also introduced some moderately progressive policies, like EITCs and SureStart, even if in an awkward and secretive way to avoid frightening their new supporters in middle England's grottily reactionary rentier wannabe lords-of-the-i90manor class.

I remember that The Economist was really amused by that, mentioning that those policies, however sometimes poorly implemented, had a transformative effect on the lives of the working poor and their children, and yet New Labour was not boasting about that to avoid scaring the "get lost, I got mine" constituency.

FromArseToElbow

@George Carty/Blissex,
I'm not envisaging work-sharing, which is a bit "oldthink" and has an obvious totalitarian implication (everyone must work, no matter how unproductively).

The revolution in work time I was thinking about means remitting productivity gains through reductions in hours as much as through increases in wages (i.e. a bit of both). What we need to more equitably share is free time, not work.

In this respect, a universal, unconditional CBI is critical to breaking the boundary between the employed and the unemployed. We all need to be hybrids, not exclusively one or the other.

High house prices (and mortgage repayments) are obviously a massive economic and social distortion. We need to rebalance through increased supply (specifically social rented housing), an LVT (downward pressure on prices and a disincentive to land banking), and a decade of 4-5% inflation (I think a CBI could result in productivity growth at this level or better, meaning no fall in real wages).

This could take the air out of the property ballon. The alternative is that it bursts, and we end up like Cyprus, but without the good weather.

rogerh

A question re education - is it sensible to spend a great deal educating more UK scientists and engineers when Asia is turning them out by the million?

Worse, out of say 1000 UK graduates only about 5 are likely to have any chance at all of making an economically useful technical advance - with a lag of about 15 years. About half will do routine work and the rest are likely to languish in regulatory work or leave the technical field altogether.

The Americans seem better able to couple their technical education system to their economy. Is this merely a result of size or something else.

Blissex

«is it sensible to spend a great deal educating more UK scientists and engineers when Asia is turning them out by the million?»

There is a large misunderstanding here, which is about the main purpose of the enormous expansion in higher education input both at the undergraduate and graduate level.

The main purpose is not to ensure that even shop assistants are graduates, it is to reduce the official unemployment statistics.

People who get an undergraduate degree disappear from the labour force for 3 years (4 with a sandwich year), those on a graduate degree for a few more years, and also pay (on credit) to employ university academic and clerical staff.

It is the successor to the policy of granting invalidity benefits on a low threshold to the (mainly northern) unemployed to lessen the impact of the policy of destroying unionized industries in the 1980s.

The overall effect of undergraduate and postgraduate mass "education" is to decrease the official unemployment rate by some percent points, and it has almost no effect on productivity or growth.

The USA use also another technique, which is to incarcerate for many years their underclass, which also reduces the official unemployment rate, and generates new employment and profits for prison guards and prison companies.
At least the UK elites have seen adopted that far more horrible technique.

Metatone

Chris, could you stop uncritically quoting the Propper study as justifying choice as a mechanism. It's bad enough that the media have seized on it in general, it's depressing when someone as smart as you does so.

The evidence in the study is actually very ambivalent about choice actually working in real situations - and the way they mangled the health evidence to try and gerrymander some positivity for choice (they excluded a number of important contemporary influences) is rather misleading.

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