Mr. Chakrabortty on the economy

Take the golden age we apparently enjoyed under Tony Blair. Let me quote again here the finding from Manchester University\’s Centre for Research on Socio-Cultural Change that in the Midlands, the north, Wales and Scotland between 1998 and 2007 the private sector created almost no net new jobs. North of the Watford Gap, it was left to the state to provide employment, and effectively cover up for the inertia of businesses.

OK, that\’s bad.

Meanwhile, new recruits to the workforce were told they had to get a degree – and a shedload of debt – to get ahead, only to come out and find there weren\’t the commensurate jobs for them. Sure, Oxford mathematicians could toddle off to Barclays Capital. But a graduate with a history degree from a former poly soon learned the truth of this verdict from Ewart Keep, economist at Cardiff University: \”Statistically, he\’s unlikely to earn any more than if he\’d simply left school at 18.\” And that was before the slump.

Yup.

As for their parents, take this finding from the Resolution Foundation: between 2003 and 2008 when the economy grew 11%, the typical English worker outside London saw their disposable incomes actually fall.

Indeed, rising total incomes swallowed by house price rises.

So, we\’ve several things wrong with hte economy. And things that we\’d like to solve.

We want to make housing more affordable so that disposable incomes will rise. Great, the latgest component of a house price in the South is the value of the planning permission. So, let\’s issue mroe planning permissions to bring that price down.

University? Why not make the price of it explicit. So that those thinking of doing history at a former poly realise that it really is about personal development, not a financially astute move.

Government crowding out private sector job creation? Why not have less government so as to reduce the crowding out?

So, current government policy is along the right lines at least to solve all three of these problems.

And aren\’t people like Mr. Chakrabortty complaining about it?

25 comments on “Mr. Chakrabortty on the economy

  1. “…in the Midlands, the north, Wales and Scotland between 1998 and 2007 the private sector created almost no net new jobs.”

    Does anyone have any idea of working age population expansion/contraction in those areas in the relevant time? Just wondering if it’s private sector being crowded out, or just not lack of bodies. I don’t get the impression that people from the South East are flocking north.

  2. “…in the Midlands, the north, Wales and Scotland between 1998 and 2007 the private sector created almost no net new jobs.”

    Because outside of the South East, relatively speaking the state pays a good wage. So why take the risk and work in the private sector.

  3. “Government crowding out private sector job creation? ”

    rather pulled that diagnosis out of your rear end, haven’t you?

    (although I am loathe to defend the execrable Mr C. Why oh why can’t The Guardian hire better economics writers)

  4. “Why oh why can’t The Guardian hire better economics writers”: because of the risk that they’d leave the party line?

  5. Luke @ 1,

    I have only anecdotal evidence, but I know plenty of southerners who went to northern universities and decided to stay there after graduating because of the cushy jobs available. Equally I know plenty who moved to London after graduating and who complain incessantly about the high cost of living.

    Time was when northerners (and Scots) would flock to London in search of work; today the Jocks & Geordies are staying put, while the jobs they traditionally took in London are instead taken up by foreign immigrants.

  6. When I’m in a generous frame of mind, I tend to think that politicians are liars or idiots.

    Most of the time, I think they’re liars and idiots.

  7. @ Luke
    Blair’s National Minimum Wage destroyed the British textile industry. The overvaluation of sterling due to Eddy George being ordered to restrain inflation while Brown was running an inflationary fiscal policy and Blair/Brown was generating inflation by raising public sector pay faster than either inflation or private sector pay clobbered export-oriented manufacturers (who just happen to be mostly in the old industrial areas of the North and midlands). Excluding these private sector employment rose significantly, just not by enough to compensate.
    The rise in working age population was not the same as the number of those available to work because kids were kept in school and/or sent to so-called universities to reduce the supply of labour and push up its price (i.e. wages) while hiding the effects of New Labour policies on unemployment.
    Tim is too generous when he talks of crowding out

  8. Sent to university only moves the problem 3 years down the line. Even less really, as some drop out every year. Not sure if 18 year olds finishing school going to uni reduces the supply of labour – common for students to work part time or full time.

  9. Because outside of the South East, relatively speaking the state pays a good wage.

    ^^This.

    If you’re planning on a career in academia, teaching, medicine, the emergency services or local govt you’d be mad to work in the South East.

  10. @Martin Davies
    “Not sure if 18 year olds finishing school going to uni reduces the supply of labour – common for students to work part time or full time.”
    Less common for those who actually attend lectures to work full time.
    Of course it reduces the supply of labour.

  11. Same old/ same old: developers are going to reduce price of houses by flooding the market with cheap houses and not make the same amount by selling a restricted number of more expensive houses and not devaluing their land banks. .Perhaps the high price of houses (land) is crowding out mass spending on other things?You never know. Its only what economists including the lauded Smith have been saying since forever.And which Chakrabortty repeats here.

  12. Martin Davies (8)
    Raising school leaving age 1 year, leaving retirement age unchanged, reduces the employment pool by (e.g.) 1 / 40 .
    Equally, raising retirement age expands the labour pool.
    Sending 50% instead of 10% to uni for 3 years will equally have a permanent effect on the labour force.
    Arithmetic, eh? Like Barbie says Math is Hard!

  13. @ dbcreed
    There is actually competition in the private sector, difficult though it may be for a conspiracy theorist to believe.
    I was somewhat surprised to find that my favourite local (self-employe) butcher was selling pheasants at a price that worked out cheaper than beef or lamb: he explained that he buys direct from the gamekeeper (on behalf of landowner) and he could maybe sell 50 at £10 each or hundreds at £6. He selects (a) bird(s) for each customer to suit their preference including how they intend to cook it. Likewise housebuilders with a large supply of building land will maximise their profits rather than the profits of their rivals.

  14. BlokeinFrance – taking the students out for 3 years just moves them 3 years down the line. After 3 years they leave and are part of the pool again. As we’ve had students leaving for some centuries now the labour pool should be used to it.

    john77 – its not that hard, really. Several at my uni managed it that I know of, including me and my wife. With 4 – 6 hours lectures a week in total, sometime between 9am and 10pm, its easy enough. Plenty more students worked part time – 20+ hours a week was common.
    Any lectures I missed were down to disability or being a carer, none missed due to work.

  15. Basic economics: if supply increase outstrips demand, prices fall e.g. more people graduating but no comparable increase in demand for graduates.

    Not strictly true of course because there is a demand for maths, science and modern languages graduates to take up teaching but the big expansion in graduate numbers has been in softer subjects which are less rigorous and demanding. Those who have good degrees in “hard” subjects can get well-paid civilised jobs in other professions and so avoid our Mickey Mouse state schools.

    Having said that, taking hours and conditions into account, teaching is a relatively well-paid career outside London and the S East.

    Here’s a thought: back in the 1930s my dad got an LEA university scholarship on condition that he taught for at least five years after graduation.

    We could try that today – not just in teaching but in other shortage areas. Equally we should tell young people that, considered as an economic investment, most non-vocational degrees are a waste of time and money because there are just too many graduates for too few “graduate”jobs.

  16. @ Martin Davies
    “With 4 – 6 hours lectures a week in total”
    You are joking, aren’t you?
    I had more than twice as much – I think more than three times but I can’t remember enough detail after 40 years to certify the latter. Science students had to undertake practicals as well.
    It’s not just a generation gap: my elder son had more than 15 hours of lectures.
    What do you claim to have learnt from that? It’s not that much more than I have to do as CPD (most of the useful CPD doesn’t get recognised for the bureaucrats’ tickboxes).

  17. @ Manatbay
    Some of us are not equipped to teach. I, and my elder son, find it difficult to envisage how some people fail to do elementary sums. In order to teach idiots it is necessary to visualise where they fail to understand elementary concepts so that one can tackle the problem. Both of us have been asked, several times, to explain how we got from A to B by those expecting us to go via Z,Y, X, W, etc

  18. Don’t always agree with him of course.. but Larry Elliot is the only Guardian columnist worth reading on economic matters afaic.. come to think of it, he’s the only Guardian columnist worth reading full stop.. unless it’s comedy you’re after, in which case Monbiot takes some beating….

  19. Oxford Historian – Two hours of lectures a week, both of which were much less useful than staying in the library and reading something relevant. Went to about eight hours of lectures in my three years.

    Scientists, on the other hand, live in the lecture theatre. And have no life.

  20. @john 77#13
    A quite delightful wind-up comparing buying houses to buying pheasants at your local butchers.I am a fan of Lord Emsworth but you are stretching an indulgence of rural eccentricity a tad far here.You do not seem to be aware that the season for pheasants ends on Friday: the butcher will have to sell them all tout de suite.
    Of course if you were to apply the lessons more generally you might conclude ,like Silvio Gesell, that the sense of time running out should be induced in all markets and that a land tax might be set ticking under developers to stop them sitting on all the land they’ve got banked and make them start building.Or more outlandishly you could make money deteriorate in value unless you spend it.This is quite fun too and funnily enough has worked when its been tried.

  21. “The largest component of a house price in the South is the value of the planning permission. So, let’s issue more planning permissions to bring that price down.”

    I’m not sure why national UK policy should be dictated by the concerns of those living in the South (East). To them I say tough shit – move North.

  22. @dbcreed
    He was selling them at the same price at Christmas.
    So your attempt to explain away an inconvenient example by making up “facts” is demonstrably tripe.

  23. Contrary to what DBC Reed says, john77′s butcher will be in no special hurry, since the sale of (legally obtained) pheasants is permitted at any time of year. But we digress.

  24. Oh well: I make gentle fun of the idea that the economics of the housing market can best be explained by reference to the sale of pheasants in shops .And the denizens of this blog get hot under the collar about the pheasant part of the comparison!( In which regard I would point out that any pheasants on sale from here onwards would have to have been stored or, otherwise ,taken illegally)

Leave a Reply

Name and email are required. Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>