We do so enjoy the New Economics
The world has entirely changed, so we’re told in The Guardian:
Their problem is that many of the issues exacerbated by the pandemic, such as wage stagnation, precarious work and rising inequality are not bugs in an otherwise well-functioning system, but inevitable outcomes of the way that western economies are now organised. So a business-as-usual approach simply won’t work. Much more fundamental change is needed.
Global neoliberalism hasn’t produced much growth so we must have a different system that produces growth. Well, OK, not much growth except for the greatest reduction in absolute poverty in the history of our species.
Still we must have change:
Unlike his predecessors, Biden is pursuing large-scale public spending and taking advantage of ultra-low interest rates to borrow for infrastructure investment. His stimulus plans target the climate crisis while creating green jobs and expanding health, education and childcare – the “social infrastructure” that is essential to the economy but has often been ignored by mainstream economists.
That’s more generally called current spending rather than investment in infrastructure. But, change!
This was followed by long years of austerity and slow growth, stagnating wages, stalling productivity and extreme inequality.
We must have that more growth!
As long as low interest rates keep the cost of borrowing affordable, and borrowing is used to fund investment (which raises future national income and therefore brings in more taxes), the ratio of debt to GDP will ultimately fall.
Not just will the growth pay for all these lovely things, we need the growth in order to pay for the lovelies.
We’re really pretty sure this has all been tried before. Sweden quite famously retreated from it a few decades back. But still, the true glory of the New Economics argument is here:
Above all, many are starting to realise that economic policy needs to end its fixation with growth. Growth was never the only aim, but economists long assumed that it would solve most other problems. It’s now clear this was never the case. New ideas for “post-growth” economics are emerging, which focus on environmental sustainability, reducing inequalities, improving individual and social wellbeing and ensuring the economic system is more resilient to shocks.
As well as complaining that global neoliberalism doesn’t produce growth, therefore we need more government to have more growth and, also, we must invest to get the more growth to pay for the investment, we don’t need and shouldn’t have growth anyway.
Believing entirely contradictory things is oft taken as a sign of a certain mental fragility and we used to have comfy places for people to recover from such. That system was abandoned but we were unaware that it was replaced by positions in economics departments:
Michael Jacobs is professor of political economy at the University of Sheffield, and managing editor of NewEconomyBrief.net
Ah, that’s right, political economy isn’t economics is it? Nor, apparently, is it constrained by basic logic.
The British chip industry benefits from the Cowperthwaite approach
Sir John Cowperthwaite was sent out to aid in running Hong Kong after WWII. So the story goes it took him some months to get there and found it thriving without his guiding hand. Therefore, he concluded, his job was to make sure this continued by not allowing anyone else to try to be that guiding hand.
Asked what the key thing poor countries should do, Cowperthwaite once remarked, "They should abolish the office of national statistics." He refused to collect all but the most superficial statistics, believing they led the state to fiddle about remedying perceived ills, thus hindering the working of the market. This caused consternation: a Whitehall delegation was sent to find out why employment statistics were not being collected, but the financial secretary literally sent them back on the next plane.
So it is said, he refused even to collect, or to allow to be collected, GDP statistics on the grounds that “some damn fool will only want to do something with them.”
Hong Kong remained, until just very recently, the most classically liberal free market economy in the world and thereby became one of the richest.
Which brings us to the British computer chip industry:
Britain’s first-class chip industry must be protected
Indeed so.
This century, Bath and Bristol, the latter home to Inmos’s design team, have spawned successful conventional microprocessor companies such as Picochip (sold to Intel) and the latest tech Unicorn, Graphcore. British chip companies have had to be resourceful – our most successful today is Arm, which was unable to secure funding for a fab, so instead pioneered the model of licensing its designs.
Today a new and exciting nationwide ecosystem is emerging in the new field of advanced, post-Silicon electronics, components with science fiction-like properties, but an awful name: “compound semiconductors”.
.....
For commercial success, you need three things near each other, says Dr Andy Sellars of the Compound Semiconductor Applications Catapult: researchers, the chip design teams, and the fabs, and Britain has all three.
“We’re world leaders in this niche,” says Rupert Baines, formerly chief executive of the British chip company UltraSoc, which made a successful exit when it was acquired by Bosch for £150m last year.
...
So why is SW1 so oblivious to it?
The contrast is made between this current success, where SW1 does not just leave the industry to its own devices (sorry) with a policy of benign neglect but one of active ignorance, and the failures such as Inmos when government was more deeply involved in subsidy and direction.
Which leads to the obvious point that protecting the industry should be done by the Cowperthwaite method. It is the absence of government or political involvement that has led to the thriving and world class sector. The task is therefore to continue the policy of not allowing a guiding hand.
Policy becomes obvious. Not that we’re supposed to use quite such incendiary language and we do mean this in a metaphorical sense only, but protecting Britain’s chip industry is best done by shooting any politician who even so much as expresses an interest let alone has suggestions for policy.
Fiddling while Rome burns
39 Victoria Street,
London SW1
“Humphrey.”
“Yes, Minister?”
“You seem to be concerned that the 2014 Care Act is not part of everyone’s holiday reading. Is that why you have issued a ‘List of changes made to the Care Act guidance’?”
“Well, we like to keep up to date, Minister.”
“Isn’t 2014 a bit passé?”
“Study guides are still being produced for Virgil’s Aeneid. Great works of fiction, I mean great literature needs to be re-interpreted as times change.”
“I think we would rather know, Humphrey, what the Care Act was supposed to achieve and whether it did so.”
“Indeed. In 2016 we produced no less than 12 ‘Factsheets’ which review the Act.”
“Yes, but none of them address what the Act was supposed to achieve nor whether anything changed.”
“We only have to specify, Minister, what should happen and leave it to local authorities to make sure it does.”
“Have we ever actually enforced the Care Act?”
“As we are not responsible for local authorities; the Ministry of Housing is, we have no records on that. We do know that eight councils in the last year applied a moratorium on the Care Act due to workforce shortages and the pandemic.”
“Does that mean all local authorities could claim a moratorium, given the nationwide carers shortfall?”
“Very possibly, Minister.”
“So our response to that is not to do anything substantial but just to fiddle about with our guidance on how to interpret an Act which, so far as we know, has proved completely useless?”
“I know it will not accompany you to the beach, Minister, but August is a good month for tidying things up. And the 2016 Factsheets are also helpful guides as to desired outcomes.”
“One example of something that we should address, Humphrey, came up on the Today programme on Monday. Apparently, those staff members in care homes in November still refusing Covid vaccination must be sacked but if the same people are working in NHS hospitals, they can carry on infecting all and sundry. The irony is that care home deaths are now rare whereas hospitals are dangerous places to be.”
“Minister, really! Care home workers are not employees of ours, so we can set the rules. NHS staff, however, are our employees and the unions would object if we made jabs a condition of employment.”
“A ridiculous argument, Humphrey, but let’s look at the actual changes you have made to the Care Act guidance.”
“The new paragraph 2.60 is exactly the same as the one it replaces, except the words are in slightly different order. Paragraph 6.71 has been split into two separate paragraphs 6.71 and 6.72. Paragraph 6.121 is also basically unchanged except it is now eight sub-paragraphs of outcome criteria for eligibility, rather than 16.”
“Humphrey, is fiddling about like that really useful?”
“Meat and drink to professional civil servants.”
“Paragraph 6.128 has moved from ‘Outcomes’ ‘Wellbeing’ and paragraph 8.34 now distinguishes ‘short term’ from ‘temporary’ residents of care homes. That is an important distinction.”
“Your staff must have been working long hours to achieve these results, Humphrey.”
“Indeed we have – and during August too, when the Foreign Office was spread across the Mediterranean.”
“Should I also be impressed by making the maximum interest rate payable on deferred payment agreements more specific? Paragraph 9.64 sets it at 0.15% above the market gilts rate. Rather superciliously, it spells out the arithmetic: ‘for example, gilt rate 1% plus 0.15% equals a maximum interest rate of 1.15%’”
“Thank you, Minister. We thought that even an other-worldly judge should be able to grasp that.”
“Humphrey, I was rather puzzled by the new para 18.5 which is identical to the old one. It has the same 147 words in the same order.”
“After considerable thought, consultation and analysis, Minister, we felt that the original could not be improved. Surely we deserve credit for that.”
“Well, I had to read it several times before I realised how clever it was.”
“’Chapter 19 has been updated to include our position on where people live, following the Supreme Court judgment in the case of Cornwall Council v Secretary of State for Health and Others (Cornwall).’”
“Humphrey, really! That tells us nothing. How do we decide where people live and how has that changed?”
“We have not yet actually reached a conclusion on that matter, Minister. We had to leave ourselves with work to do.”
“The last chapter certainly gives the flavour of all this. The only change is replacing 2016 by 2020 as the date from which the guidance applies and it makes no difference anyway.”
“I hope I do not detect a note of dissatisfaction, Minister. That could be construed as bullying.”
“What you are detecting, Humphrey, is astonishment that our department can be wasting time on this drivel, when we should be sorting out the chaos in our whole adult social care system. We have too few carers, and they are not paid or recognised enough. The population is growing and the numbers of young and old needing care are growing even faster. No one has sorted out how the costs of caring for the elderly should be split between the taxpayer and those being cared for, or between central and local government. A substantial rise in homelessness is predicted, boosted by the inflow of refugees, and yet, so far as I know, we have no plans to address that either. No doubt you will tell me that that is the Ministry of Housing’s job. But when I get volunteered onto the Today programme by Number 10, I’m going to have to explain why we are fiddling around with the wording of our Care Act guidance when we should be addressing the big issues.”
”I am sure you will do that very well, Minister.”
But government appointing their own is the point of having elections
We’re fully in favour of Katherine Birbalsingh:
Katharine Birbalsingh, the founder of the “super-strict” London-based Michaela community school,
We’d not say “super-strict” we’d say she has founded and runs a super-successful educational establishment. By which we mean that it educates the pupils of it, no other definition of success really comes usefully to mind.
However, the bit in this story that interests is this:
Birbalsingh’s appointment would raise eyebrows, following previous claims that the government was placing hand-picked allies into key public roles.
This is rather the point of having elections, no? The people, that’s you and us and me, decide that the path of government has become unrighteous and we’d like a change. If enough of us do so at an election then the change of government does happen. The manner by which the path then changes is that government appoints people it agrees with, likes, to those key public roles.
If those key roles, even after that change in government, continue to come from the same previously approved ideological class then what value that democratic decision?
If every victims’ commissioner, child poverty commissioner, social mobility commissioner, online hate commissioner and Uncle Tom Cobbleigh commissioner continues to come from the same small pool of those who agree with the ancien regime then how much overthrowing - in accordance with that democratic vote - of the anciens is going to happen?
The answer being, of course, not a lot. Which is why these reports of unnamed eyebrows being raised. To try to fend off that change in defiance of the expressed views of us mere peasantry out here. Don’t we know that whoever we vote for, whatever it is that we desire, we should continue to do what we’re told by the same establishment that we’ve rejected?
The entire point of elections is to be able to change who rules us. That includes who gets appointed to key public roles.
Fortunately we know how to solve this problem - global neoliberalism
Kenan Malik tells us that global inequality is just ridiculously high and something ought to be done about it. He’s right of course:
The 30 poorest countries in the world, with a combined population of almost a billion, have vaccinated on average barely 2% of their population. In the Democratic Republic of the Congo the figure is 0.1%, in Haiti 0.24%, in Chad 0.27%, in Tanzania 0.36%. “Living with the virus” will mean something very different in such countries than it will in the west.
There is though a problem with this observation - why is this true? Not that it is true, but why?
For the same inequalities exist for other forms of health care. The same inequalities exist in the calories on the table each evening, in the lack of or existence of holes in the ceiling that let the rain in and the number of shirts available to clothe nakedness. The reason being that some places and people are very much poorer than others.
We do not face simply a vaccine inequality, but a more general economic one. That more general problem being the one to solve as each of the individual inequalities will close as we do that. As Robert Colville points out:
Indeed, when the UN millennium summit set a target of halving extreme poverty (an income of below $1.25 a day) by 2015, it was through the opening of developing countries to global trade that this was achieved five years early. It was growth led by a mixture of western consumerism and developing world industrialisation, not “degrowth”, that transformed lives for the better in the poorest nations.
That being the great truth of these recent decades. It’s the one large and important truth of recent decades in fact:
If you care about people, the economic growth over the last generation is one of the most important stories in all 5,000 years of human civilization. Every economic issue discussed in our recent election cycle pales in comparison.
....Our world has, over your lifetime, undergone the greatest reduction in poverty and misery in human history. Heck, more people have been lifted out of poverty over that time than in all the rest of human history.
We can see this in the tabulations of how many poor there are out there. We can also note what it was that caused this. As Colville is far too polite and refined to point out in these words it was that globalised neoliberalism red in tooth and claw. The gross exploitation by the capitalist classes of the consumers of the world in pursuit of profit. These are the things which have reduced that absolute and abject poverty. In order to do more such reduction we need to do more allowing of those powerful economic forces - the forces which achieve the goal it is at least claimed we desire.
Global inequality has indeed fallen these recent decades as a result. And, by the very nature of these things, as that does then all the more specific inequalities - of gender, of access to contraception, vaccines, health care, education, nutrition, of life - reduce too. For that’s what economic growth is, the ability to have more of these things.
To reduce inequality further we need to have more of what has been reducing inequality - globalised neoliberalism.
We already have a Department for the Future
“The Department of the Future would set in motion a realignment of priorities in all aspects of society,” proposes geology professor Marcia Bjornerud in her compelling book Timefulness. “Resource conservation would again become a core value and patriotic virtue. Tax incentives and subsidies would be rebalanced to reward long-term stewardship over short-term exploitation.”
We already have such a Department for the Future. It’s called that capitalist free market out there.
For example, which organisations have the longest planning timelines? It’s not governments, run as they are by politicians whose horizons extend just beyond the next press conference all the way to the next election. It’s almost certainly the oil and mining companies who regularly plan and make 50 year investments - that’s their planning horizon.
We can also approach this another way, the current value of an organisation is the net present value of all future income streams from it. In capital markets concentration upon short term gains is also known as capital destruction and valuations do fall as a result.
Perhaps the only human institution that plans longer term than corporations is the family. By a likely time of death these days one might well have met one’s own great grandchild - a pretty direct link to thinking about another 80 years into the future when they’re likely to still be going.
But say that this isn’t enough, that we must reorder society once again to gain that longer term view. That means the abolition of inheritance taxation. Remove economic resources from that terribly short term politics and retain it in the human institution with the longest planning horizon. We can even test this. The Ottoman Empire had, over large economic resources at least, effectively a 100% inheritance tax. Everything belonged to the Sultan and those lifelong leases granted to pashas and deys and viziers reverted upon their death. This is not a system which, to put it mildly, led to economic vibrancy over those generations.
That is, even if we were to think we should have a department of the future we’d not then locate it in government, our most short term institution of all.
We do love the smell of a free market in the morning
That this particular example comes from restrictions upon the freedom of entry into the market doesn’t change the underlying lesson - markets work:
Pay for HGV drivers jumped by more than a tenth in just five months as the industry struggles with severe worker shortages that are straining Britain’s supply chains.
The “staggering” rise from February to July, shown in figures from jobs site Indeed, is almost double the rate of increase across all driving jobs. The increase is more than 13 times the 0.8pc average rise across all jobs during the period.
Supply has changed, so prices have.
As to why supply has changed there are different arguments put forward. Test centres being closed because of the lockdowns has meant no new entrants on the supply side. However, when we look at what the industry is blaming it upon it seems Brexit is the issue. Some large portion of drivers were EU nationals who no longer have the right to work in the UK economy. As we pointed out elsewhere:
Brexit is about to give us a problem with this, though. Karl Marx was right: wages won’t rise when there’s spare labour available, his “reserve army” of the unemployed. The capitalist doesn’t have to increase pay to gain more workers if there’s a squad of the starving eager to labour for a crust. But if there are no unemployed, labour must be tempted away from other employers, and one’s own workers have to be pampered so they do not leave. When capitalists compete for the labour they profit from, wages rise.
Britain’s reserve army of workers now resides in Wroclaw, Vilnius, Brno, the cities of eastern Europe. The Polish plumbers of lore did flood in and when the work dried up they ebbed away again. The net effect of Brexit will be that British wages rise as the labour force shrinks and employers have to compete for the sweat of hand and brow.
It’s entirely true that the standard economic assumption is that immigration doesn’t lower local wages. Because those immigrants bring with them their own demands as well as the supply of their labour. This might need a little modification to point out that this is only true of settled labour, not transient.
Our major point here though is that one that markets do in fact work. Circumstances have changed therefore prices have and in doing so the price changes have adapted the whole to the changed circumstances. Higher pay will call forth more supply of drivers at which point we’re done and dusted, right?
This lesson being true whatever we think of either Brexit or the free movement of labour. Even if we think that one or both is a gross mistake prices still allow the economy to adapt to even calamitous errors.
Pretty good system, eh?
Venning's Law
“The correct answer to a question containing the word “surely” is “No””
Venning’s Law being what we require to evaluate this claim from Owen Jones:
Surely here is an opportunity to help define a new deal for the post-pandemic workplace.
By which he means, as an example:
But it’s not just the free market that denies workers power and control in their jobs....(...)...But a new settlement for the workplace must also be more democratic. ...(...)...The case for workers’ democracy is overwhelming
It is the free market which allows that power and control. Because it is exactly that free market which produces choice in which job it is that is applied for, or left if it doesn’t come up to scratch.
Democracy produces the tyranny of the majority, where all must work to the job rules that the plurality decides upon - this not being freedom nor power and control.
Yes, of course democracy is a good thing in its place - bloodless changes of power perhaps, decisions upon the overarching matters that must be taken at that national level. But working hours - say - or which flavour of pizza is to be produced (or even ordered or eaten), what combination of wages, benefits, services and goods in kind should make up labour compensation, these are all things that should be decided in a more fine grained manner than whatever the majority thinks they should be.
The reason being that we all have different desires about such things. Some prefer the certainty of a fixed wage, others the freedoms - and variabilities - of the freelance life. It is exactly that free market which produces the 30 odd million differences which make up the 30 odd million jobs in the country. The where, the what, the wages, the hours, the side gigs, the pension, the other compensations. That multivaried series of differently shaped holes into which we get to try and jam our own shaped pegs to maximise utility.
The imposition of majoritarian rules reduces that glorious freedom and liberty provided by that free market. Or, to put this another way, the free market enables us to vote with our feet, a much more powerful force for liberty than merely waving ballot papers.
The core lesson of economics
The number of women drinking at “high-risk” levels rose by 55 per cent during the first lockdown, while the number of young adults smoking rose by one quarter.
A study funded by Cancer Research UK found that among men, prevalence of high-risk drinking rose by 31 per cent during the period, with a more steep rise seen among women.
At the same time, there was a 25 per cent increase in 18 to 34-year-olds who smoke, which translated into a rise of more than 652,000 young adults, the charity said.
Not that we particularly believe those figures. “High-risk” drinking for women seems to be in a week what journalists know as lunch. Nor is this to say that lockdowns were or were not proportionate.
It is though to insist upon the base lesson of economics. Many things have benefits, all things have costs. The trick is to try to find the right balance. Yes, lockdown might well have increased drinking and smoking. It certainly left cancers untreated and all three of those will lead to deaths that could have been - well, not avoided as none of us do get out of here alive - delayed.
If this were about the Black Death and graveyards overflowing with a third of the total population then proportionality would be obvious. It’s possible to mutter that perhaps it isn’t at present. But again that’s not quite our point here.
The true cost of anything is what is given up to gain it. As it appears in the textbooks, opportunity costs. This means that we cannot gain anything - say, a low death rate from an endemic or pandemic disease - without bearing the cost of some of something else. The message here being more deaths from some other cause.
It’s a harsh truth and one brought to us by economics but it applies to life in general. There are no solutions, only trade offs. The game is to find the best one of those available.
The European Union misses the point of trade once again
The EU is working on proposals to jump-start home output of a type of specialist magnet vital in electric car motors by offering support to local producers so they can compete with Chinese rivals, sources close to the situation said.
Ooooh, that’s exciting. We do know our way around the rare earths world here so we welcome that as very good news. So, the EU is going to reduce the start up costs of mines for rare earths, is it? Possibly lighten the regulatory load to do so? Also, actually allow people to set up rare earth separation plants? Sort out the Reach and thorium disposal regulations that make those cost so much? Generally stop doing the things that stop people mining and producing the necessary metals?
Making the magnets is a trivial task once that’s sorted out.
Ah, no, as you were, that’s not what they’re going to do at all:
The proposals being considered by the EU include both cheap financing and compensation for higher raw material costs, said two sources who have seen the plans but were not authorised to speak publicly about them.
They’re going to throw taxpayer money at the costs they themselves create.
A viable magnet industry in Europe would also need the support of customers, such as automakers, who must agree to pay a slight premium
Oh, consumers are going to get whacked as well. They are doing well, aren’t they?
Here’s the thing. Rare earths aren’t difficult they’re just tricky. The trick being to be able to navigate through the regulation that surrounds their mining and separation. Make that less of a problem and more of it would be done.
Or, of course, we could turn to trade:
"Chinese permanent magnet producers get raw materials at 25% below the price I can get them," said Bernd Schleede, head of permanent magnets at VAC.
"To reach a level playing field either the EU should compensate for this gap, or should consider penalties on the import of magnets. I personally would prefer the first option."
Why not, you know, just buy them from those foreigners? That is the purpose of trade after all, to get our hands on those things that J Foreigner makes better or cheaper than we do.
One of us did, at one point, do serious work on a rare earths separation plant - even if it wasn’t for these magnet materials. A true story from that little adventure. The EU environmental paperwork process took longer than the entire drawing board to production process in China. Amazingly, and we’re sure this will shock, the EU plant never got built and several Chinese did.
Funny that, isn’t it?