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February 19, 2021


Ralph Musgrave

So Chris Dillow thinks some sort of subsidy or artificial preference for SME loans will raise productivity. The problem with that idea is that banks have ALREADY expanded the amount they lend to SMEs to the point where the marginal SME borrower is, in the eyes of banks, only just viable.

If Chris has a good reason for thinking banks have got it wrong and that the marginal borrower is much more productive than banks think, I’m sure banks would love to hear all about Chris’s evidence on that score. But Chris does not give any actual evidence in the above article.


"Instead, it’s because productivity has stagnated: in the 12 years to the start of 2020, output per worker-hour grew only 0.2% per year, compared to 2.2% per year in the previous 30. And in fact in the last 20 years productivity growth has been lower than at any time in the last century."

Remind me again how many people have been imported into the UK in the last 15 years? How likely is that massive increase in the amount of labour available (much of it low skilled) to have made wages stagnant especially at the bottom end, and thus meant that investment in mechanisation etc is less likely?

If you operate a vegetable packing factory in Lincolnshire for example, has the existence of a vast army of cheap Eastern European labour to man your factory meant you are more or less likely to invest in new automated sorting and packing equipment?


While Jim is right GDP per head is likely to make depressing reading combined with the looting by finance, the real GDP per head (non-finance) must be dire, but this has been true in the North since 1980 (or earlier).

But the consensus is: that Keir Starmer and Annelise Dobbs, in fact the whole shadow cabinet are 'no marks'. So expecting an economic policy that does not reflect Rushi Sunaks "We have a sacred duty to balance the books" is unlikely to say the least.

Big idea - more debt for SME's and retail Government bonds.

With vision like that who needs a blindfold.


Christopher is wrong productivity gains have been captured by the rich. i.e looted by finance.

You will like this one:

Productivity is the hobgoblin of little minds (economists).

Exhibit One:

"Productivity is considered by some to be the most important area of economics and yet one of the least understood."

Dave Timoney

Starmer's speech didn't merely omit to mention productivity, it focused on solutions that would likely further depress it. Governments have consistently encouraged SME growth since the 1980s but this has not helped. The obvious reason is that SMEs in aggregate tend to have below average productivity.

Ceteris paribus, expanding the small business sector depresses total productivity and thus wages. What we need are more large businesses that, through higher wages and subcontracting, create the demand for an expansion of SMEs.

The proposed bond also has the potential to further entrench rentierism at the ideological level. If the state wishes to mop up domestic savings to fund infrastructure investment then it can either borrow or tax. It's high-time we redressed the under-taxation of capital in the form of property, gains and dividends.


Phil Mullens has an interesting piece on Spiked


I have several issues with it.

However it concludes with:

"Decision time beckons

While the need for a state-led economic shake-up is now evident to many – and not just to those suffering the consequences in unemployment or in low-paying insecure jobs – governmental reticence and procrastination have become well entrenched over the past decades. Although substantial change within the economy is long overdue, government obduracy could still prevail.

On top of the influence of a conservative culture, the parallel practice of outsourcing state responsibilities to commercial or non-profit bodies reinforces government’s reluctance to act. Governments today sense that this process has hollowed out the state’s capacity to act. This makes taking action even more daunting for the political class, reinforcing the course of hesitancy and indecision.

Hence there are concerns that governments could again miss the opportunity for real change. For instance, Nobel laureate Angus Deaton, who for years has been highlighting the human damage caused by capitalism’s social and health iniquities, worries that governments might still fail to take appropriate measures. He says that his ‘overarching worry’ is that ‘voices against active government, temporarily stilled or overruled by the crisis, will return loudly. They will enjoy strong financial and intellectual support, and the pandemic will leave enormous debts used to justify their favoured austerity policies.""

So in the Blue Corner we have Rishi Sunak of the Austerity school, and in the Red Corner, Empty Suits of Austerity allied with Cancel Culture.

Please vote now, your vote doesn't matter!

Jan Wiklund

Swedish website builder Jonas Söderström has thought a lot about the phenomenon of diminishing productivity and writes it off to digitalization. He talks about "peak IT".

Digitalization contributes to diminishing productivity because
- it makes an ever-increasing bureaucratic control over the workers possible, and
- it becomes increasingly complicated, so that small construction errors cause increasingly big consequences.

In case you understand Swedish (and thanks to google translate it should not be too hard) you can read what he says at http://javlaskitsystem.se/2018/03/bill-gates-har-fel-om-produktivitet/, with a lot of links.

Jan Wiklund

And in case you don't want to struggle you can read an article in English about the bureaucratic bloat, empowered by IT, at https://hbr.org/2017/08/what-we-learned-about-bureaucracy-from-7000-hbr-readers

Jan Wiklund

I would also like to point at Joseph Tainter: The collapse of complex societies, and its thesis that collapse of a culture is a result of a compexity that has gone so far that the transaction costs eat whatever productivity there is in the society in question.


It may be that we are there.


My usual point is that no discussion about UK productivity makes sense without mentioning that according to an ONS research piece by Philip Walea (noticed by F Coppola) the major "productivity" factor in the past 40 years has been scottish oil extraction (and secondarily finance rent extraction), and without that...




«In case you understand Swedish (and thanks to google translate it should not be too hard) you can read what he says at http://javlaskitsystem.se/2018/03/bill-gates-har-fel-om-produktivitet/»

It is interesting but where it says that it is correct that automation increased productivity "for tractors and looms" that is true and incomplete: it was the switch to coal and oil powered tractors and looms that increased productivity, by a process of replacing vegetable-fuel muscle power with mineral-fueled engine power and its diffusion across the political economy. That process plateaued in the 1970s because no fuel cheaper and more energy dense than petrol has been found yet, and oil-fueled machines replaced coal fueled and vegetable fueled alternatives pretty much everywhere it mattered during the "thirty glorious years" of the post-WW2 boom.

Automation as such gives some improvement, but using vegetable (or even water/wind) fueled automation is nowhere as huge as using coal and then oil as fuel.

IT and the Internet in particular do increase a lot productivity but only where their impact is direct, in "mental" product, and we do not consume much in the way of "mental" products, most people spend most of their income on housing, food, clothing, holidays, transport, all pretty "material" things.


> most people spend most of their income on housing, food, clothing, holidays, transport, all pretty "material" things.

Totally ignores the popularity of robinhood.com.

Stock market capitalization has increased some 30 times since productivity started declining in the 1980s.

The rich have simply created money in financial markets much faster than the real economy has grown.


The more Britain is isolated, the more I would guess productivity growth will be limited. Brexit has to be counter-productive and so does the maniacally disdain for China. China should be cultivated at every turn, as a spur to productivity growth.



Are we due a stock market crash?

They always take longer than you expect?

Food for thought:


"You may think that such a crisis is unlikely, with memories of the 2008 crash still so fresh. But banks learned few lessons from that calamity, and new laws intended to keep them from taking on too much risk have failed to do so. As a result, we could be on the precipice of another crash, one different from 2008 less in kind than in degree. This one could be worse."


"So the blame for the enormous risk appetite out there, the reckless leverage, the crazy trading strategies by hedge funds, and the huge incentives to manipulate goes to the Fed.

It printed $3 trillion in a few months – and $6 trillion in 12 years – to create exactly those kinds of financial markets where no one cares about anything anymore, where everyone is just chasing after the wildest returns, and where investors that follow prudent strategies are ridiculed and earn near-zero returns. And that’s what the Fed got. That’s where the blame is. The Fed is the biggest market manipulator out there."


"What all this shows, for all to see, is just how massively the stock market has been manipulated, from the Fed on down. Most of these manipulations attempt to manipulate prices up. But some manipulations are aimed at pushing prices down. What the millions of people conspiring on WallStreetBets to the exact their pound of flesh accomplish was nevertheless enormous: They showed for all to see just how completely broken the stock market is."

Also see Robinhood in the above:

"Robinhood is free for its users. It makes its money from selling its users’ order-flow data to investment firms."

You are the product.

Allan Wort

I applaud the intention, Chris, but 'productivity' (as your commentariat is saying) is not the stick with which to beat the Tories. There are some very useful links posted by commenters above.

Possibly the issue is 'lawfulness' as in 'Have they done anything provably dishonest?'. The answer to which is 'Yes, many times'. As an ex-Director of Public Prosecutions Starmer should be expert in this field and make hay.

However his performance and position as revealed on the Sunday morning politics shows was 'I will not oppose the government on law and order while there is a national emergency on'. Which to my mind should be treated as his resignation letter from the leadership of the Labour party.

It won't be and that's why the despair will continue, possibly until no alternative to Tory rule is allowed at all.


The Labour right wing are not socialists and will not adopt socialist policies.


"The constraints constructed by the Right do not, of course, come out of nowhere; the balance of class forces does create real limits on what a Labour government might be able to achieve when in office and what it can conceivably demand while in opposition. But the Labour right has often uncritically reproduced an ideology that delimits the scope of action much more narrowly than what might be expected, given the objective conditions at any one time. This ideology reflects both the power of neoliberalism on the right of the Labour Party and the proximity of its members to various elements of the ruling class — notably financial and business interests and various elements of the British state. Many on the party’s right genuinely do believe that it is impossible (and, indeed, undesirable) to challenge the dynamics of, for example, neoliberal globalization — a view that is consolidated by their proximity to the UK’s highly internationalized capitalist class."

It's the lack of intellectual curiosity that is damming.


@Ralph - The banks' records of stupendous losses in real estate vs their (comparatively - none of them have ever gone bankrupt from it) negligible losses in SME lending over the last 50 years suggests that they have very little understanding of either local or systemic risk in their business. SME lending is way too conservative and the quality of mortgage lending is idiotic.


Keir Starmer is in effect a Tory, which is why Starmer finally needed to ruin Jeremy Corbyn. As for me, I prefer working directly with the Tory leadership to effect policy rather than the false Labour leadership.


As other have pointed out the UK has imported relatively large volumes of foreign labour to build and maintain a low productivity economy. It's a point that left leaning economists like Portes have tried their very best not to arrive at. Whilst economic migration may on balance have been positive for the UK, that's not the same thing as saying this was the economically optimal approach. Many on the left seem to have a reluctance to rigorously analyze economic migration as an economic activity on both sides of the transaction.


@derangedlemur ...but the banks know that residential property is in effect underwritten by the Gov. (Help to buy...stamp duty holidays...council tax bands set in aspic...taxes on income preferred to taxes on property...)Not so SMEs which wax and wane with business cycle. Losses small because SME portfolio is small. Banks bailed out when international derivatives crashed. So perhaps they are simply doing what they should do to secure their colossal wages bonuses and dividends. No downside risk for execs and CEOs.


International derivatives are back. Mortgage defaults reached or exceeded 2008 levels recently, without the same effect, because the insurance piece has been fixed: the Fed supplies liquidity when private provisioners freeze up.

@aragon: what is wrong with rising financial markets? You can use options to clearly define risk. You can trade bear markets.

Banks these days make more as market makers for repo trades, and from outright trading, than from loans. Ya'll livin in an economic fairytale. In the real world, options markets form prices.

James Charles

“But this is evasion and deception. The mass immigration of the past decade wasn’t caused just by the absence of transitional controls on new EU member states. It was the result of a policy of encouraging immigration to generate economic growth – a policy NuLab copied from Bill Clinton’s America. In a speech about the policy, then Home Office minister Barbara Roche said:
‘The evidence shows that economically driven migration can bring substantial overall benefits both for growth and the economy. In the United States, as Federal Reserve Chairman Alan Greenspan has commented, the huge recent inflow of migrants – 11 million in the 1990s – has been key to sustaining America’s longest-ever economic boom.’”

Jan Wiklund

Söderström's point above is of course just a special case of the "bullshit job" phenomenon, studied by David Graeber, https://en.wikipedia.org/wiki/Bullshit_Jobs. I.e. jobs that don't add to the production.

According to Graeber those jobs amount to about a third of all work. Perhaps the decreasing work productivity isn't that odd.



With oil rigs, isn’t their high productivity linked to their massively high capital investment per worker?

I googled some information which may not be entirely accurate for the North Sea, but hopefully it’s right in crude terms (sorry for the pun). An oil rig capable of operating in the North Sea costs USD 500m to 1bn in modern prices. Typically there are around 20 workers operating the rig at any one time. So, very crudely, you have a capital investment of around USD 25-50m per worker. The only other business I can think of with a comparably high capital investment per worker is a nuclear power station. I wonder what the capital investment per worker is in a car plant.

While I have your attention, one other point. We’re increasingly a service economy, and some services just aren’t suitable for industrial revolution type productivity rises, regardless of their energy source. Customers go to hairdressers and nail bars for a social interaction. They probably don’t want to use a hair robot that can cut and style 100 heads of hair in an hour.


The Fed has assets of $7.5 trillion, produced by 25,000 employees, or a productivity of $300 million per worker. Of course, GDP ignores monetary production, which is what really makes the world go round.


The Fed has assets of $7.5 trillion, produced by 25,000 employees, or a productivity of $300 million per worker....

[ Forgive me, but this is not in any way a reflection of productivity. ]



January 30, 2018

Manufacturing and Nonfarm Business Productivity, * 1988-2020

* Output per hour of all persons

(Percent change)


January 30, 2018

Manufacturing and Nonfarm Business Productivity, * 1988-2020

* Output per hour of all persons

(Indexed to 1988)

Talking Head

Productivity data are poor and economists have nothing useful to say about the topic anyway, so I’m with Sir Kier on this one.


"Forgive me, but this is not in any way a reflection of productivity."

It should be. In capitalism, supply chains are payment chains in reverse. Money is produced first, then output follows.

James Charles

" . . . what really makes the world go round."?

“A barrel of conventional crude oil contains the equivalent of roughly 4.5 years of continuous human labour; or around 11 years at 35 hours per week, 48 weeks of the year.  But the capitalist doesn’t pay for the value of the fuel, merely the cost of extracting it.  For a mere £49 (at pre-pandemic prices) the capitalist purchases £330,000 worth of work (at the current UK median wage).  It is the exploitation of fossil fuels rather than the exploitation of labour which generates the vast majority of the surplus value in an industrial economy. . . .

As Nicole Foss once put it – if conventional oil was like drinking draught beer from a glass, fracking was the equivalent of sucking the spilled dregs from the carpet.”


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