Idiocy and inflation

The Bank of England governor told us this week there has been a “lost decade” of wage growth. But is the truth really a lot worse than that?

By chance it was the same week my 90-year-old father decided to show me his carefully filed tax returns from the 1960s (yes, that’s what counts for fun in the Collinson household). In 1963-64 his pay as an accounts clerk in London was £1,357 a year. In today’s money that equals a little over £25,000 a year once inflation is taken into account.

In some ways that £25,000 doesn’t look so great. After all, someone working in a similar role with his level of experience at the time might expect £35,000-£40,000 today. But then look at what an income of £25,000 bought in 1963 in London.


You don’t compare incomes over time by looking at inflation. You look at incomes. Depending upon how you do it £1,357 then is £48-60k now. Which, agreed, is no great fortune in London but it’s not £25k in today’s money either, is it?

His granddaughter now works in the same city, London, for the same pay, £25,000. But what does an income of £25,000 buy you in 2016?

Well, actually, it buys you a basket of goods worth exactly the same as £1,357 bought you in 1963. Because that’s how we work out what the inflation rate is you gigantic, enormous, mong.

To put that decline of UK manufacturing into context

We all know there’s been a catastrophic fall in manufacturing in the UK. Everyone to the left of Attila the Hun has been telling us so for four decades now.


Manufacturing output in the three months to October was 5.7% below its level when the economy nosedived into recession in the first quarter of 2008.

Somewhere around 2006/2008, was when UK manufacturing output was at its, inflation adjusted, peak output.

Myself I tend not to think that 6% off the highest ever is best described as a collapse.

Memo from Cuba

… but not this week, because I spent much of it in Havana … It’s hard not to strongly approve of capitalism and free markets, for all of their flaws when left unchecked, after you see people excitedly queueing to buy tomatoes on one of the world’s most fertile islands.

This was rather the problem, wasn’t it?

What was Castro’s proudest accomplishment? Did he talk about anything in particular?

“Chica,” said Mr Hernandez, with a laugh, “Fidel was into everything.

“Agricultural reform. Housing. Workers. Unpicking the problems of capitalism – the inequality. I always think that Fidel saw the problems of the modern world coming, and worked to stop them.

“I can only tell you what I saw. And that was that he was involved in every detail.”

A nation of 11 million ruled in detail by one man. Bit Curajus State really, isn’t it?

And obviously also going to be a terrible failure. Simply because one man cannot know in detail what 11 million people want nor desire.

This from that bint who did the report on Castro’s Cuba below

This is not easy given that Marxism, if it is to be a living and revolutionary method, must be
concrete. Concrete conditions must determine the approach taken to analysing and changing
reality. This is the essence of “praxis.” Guevara’s contribution in Cuba was decisive and impressive
precisely because of his capacity to devise practical policies, which were appropriate to Cuba’s
concrete conditions and operated within a Marxist theoretical framework. For Guevara, the
problem of socialist transition was how to achieve economic development with equity from a position
of underdevelopment without relying on capitalist methods that would undermine the collective
consciousness and the new social relations necessary for socialism and later communism.5
This article does not claim to present a solution to the problem of building “socialism of the
21st century,” nor to present an economic history of Venezuela or predict its future. The purpose is
to discuss the issues that were encountered through my work with the VMCE—just one state
institution among many. It is not claimed that that experience was representative; it was influenced
by the focus and political and ideological commitments of the compan˜eros (as socialists and communists)
of the VMCE. It is important to recognise that within the government, and the governing
United Socialist Party of Venezuela (Partido Socialista Unido de Venezuela, PSUV), there are
significant conflicts and contradictions representing different political agendas and interests.
Nonetheless, given the strategic importance of the CES in the endeavour to introduce socialist
forms of production to Venezuela, there are lessons and implications that merit careful analysis.
Clearly, as my invitation confirms, Venezuelan government teams are interested in, and influenced
by, the experience of socialist transition in Cuba and Guevara’s revolutionary Marxism, so it is
important to understand what this implies for the process.6

She went to Venezuela to teach them how Guevara had aided Cuba’s development.

No, really. And she’s at the LSE….

Dear God Allfuckingmighty, has the bint actually done this?

So, sadly from the Alma Mater, we have some bint arguing that Castro’s economic performance in Cuba wasn’t half bad, given the circumstances.

Look at her first chart, of GDP.

She’s used gross GDP. Not per capita. That’s not just misleading that’s casuistry to the point of fraud. And don’t forget, those Cuban numbers are the ones Cuba itself reports.

From the same data set, here it is per capita:

And her chart again:

Just so we know where this bint is coming from:

In 2013 I spent time in Venezuela, advising a government ministry (Ministerio de Poder Popular para las Comunas y los Movimientos Sociales) on a new economic management system they were developing and gave a series of lectures and presentations about my work on Cuban & Latin American political economy.

Ecks? When’s your purge starting?

This is a fun one

So, the OBR is telling us that Brexit blows a hole in the public finances. Some differ:

Britain’s official economic forecasts are regularly wrong and should not be taken seriously when they predict a negative impact from Brexit, according to Boris Johnson’s former economic advisor Gerard Lyons.

“The margin of error on these budget forecasts is very high. They are sensitive to economic forecasts and also, as the OBR itself has previously stated, its judgment on fiscal policy,” he said in a letter to the Daily Telegraph.

“The ‘cost of Brexit’ highlighted in the Autumn Statement will undoubtedly be wrong.”

Yes, that’s obviously true. Apart from anything else there’s spurious accuracy in there. Even if we knew all the effects and knew their size, could calculate them, there would always be uncertainty, a range for each of them, yet the final result is a point result. Just cannot really work out that way. But more than this:

Dr Lyons, who was chief economist at the global bank Standard Chartered and is now chief economic advisor to the think-tank Policy Exchange, said his own research shows Brexit should be good for the public finances.

“My detailed research shows that leaving the EU and taking a global approach produces higher growth and more employment than remaining in an unreformed EU,” he said.

“Far from a cost, Brexit is more likely to produce a significant gain.”

There’s nothing wrong with either Choate or Lyons as economists. Both are rather good ones in fact. But we’ve got an argument here not just about the size of the various effects but even the sign!

And that’s what puts paid to the little fantasies of the likes of the Spudmonster. We simply cannot plan the economy at the sort of level of detail he desires to tinker because we cannot even calculate the economy at that level of detail. Something as basic as Brexit we really don’t know whether, in macroeconomic terms in the medium term, it is positive or negative. How in buggery can we plan therefore?

Oh dear

Eventually the anger that cannot be assuaged through policy will be turned outwards, towards other nations. Faced with a choice between hard truths and easy lies, politicians and their supporters in the media will discover that foreign aggression is among the few options for political survival. I now believe that we will see war between the major powers within my lifetime. Which ones it will involve, and on what apparent cause, remains far from clear. But something that once seemed remote now looks probable.

A complete reframing of economic life is needed not just to suppress the existential risk that climate change presents (a risk marked by a 20°C anomaly reported in the Arctic Ocean while I was writing this article), but other existential threats as well – including war. Today’s governments, whether they are run by Trump or Obama or May or Merkel, lack the courage and imagination even to open this conversation. It is left to others to conceive of a more plausible vision than trying to magic back the good old days. The task for all those who love this world and fear for our children is to imagine a different future rather than another past.

It’s because there won’t be any jobs you see. Thus anger, fighting!

As so often, Monbiot is just not getting the point that Matt Ridley does. There will be jobs for humans as long as there are unmet desires of humans. And if all human desires are being met then who gives a shit about jobs?

What’s worse, given the political proclivities of Monbiot and the likes of Paul Mason, they’ve managed to forget the most important part of Marx. Solving the scarcity problem is the precondition for the emergence of communism. You’re all supposed to be happy about the damn robots!

No, not quite Mr. Newman, not quite

Oh dear. Expert Market don’t appear to have much expertise if this is what they’ve gone and done, and nor do journalists from The Independent. Revenue divided by number of employees doesn’t tell you much: the company might be making catastrophic losses for all we know, meaning all those employees aren’t adding much value at all.

It is profit, not revenue, that is the measure of a company’s added value and therefore to work out what each employee is worth on average you’d need to divide profits by the employee headcount. Here’s what they’ve done with Shell…..

Profit is indeed the company’s added value. But the employees’ value is what they must be paid to add value plus the profit made from employing them.

If it costs £100k a year to employ Mr. Newman, and Total makes £50k a year profit per employee, then Mr. Newman must be adding £150k a year of value through his labour.

This also balances our GDP accounting. GDP is the measure of all value added in the economy. GDP is also all incomes – all incomes to both labour and capital. Thus all value added must be equal to all payments to people, whether labour or capital holders.

Hunh, tsk, these youngsters trying to invade on the turf of us old timers.

Well done to the Independent for this economic analysis

The big figure is the predicted rate of growth of the UK economy for next year, which was 2.2 per cent in the Budget in March. It could go down to about 1.3 per cent. The Treasury’s own prediction of the effect on the economy of the referendum vote, simply by denting confidence in economic prospects, turned out to be embarrassingly pessimistic, but the devaluation of the pound is bound to start to have effects next year, first on inflation but then on growth.

A falling exchange rate is contractionary upon the economy?

Who knew?

The butcher and the baker

Now Facebook is evil because neoliberalism:

But the fact is that rather than serving this goal, Facebook’s AIs are servicing a far older and more well-established social goal, which was designed for the betterment of mankind. This is the goal of maximising value in pursuit of economic self-interest.

Neoliberal economics is based on the idea that the pursuit of individual, economic self-interest leads to the creation of greater value, which benefits society and results in the emergent betterment of mankind.

And people say that American academia isn’t crazily left wing.

This first para explains it all

Childcare workers are underpaid because we’re women. We are the working poor
Margaret Carey
Women are exploited because of our capacity to put others’ needs ahead of our own. We are underpaid because we care – and we’re angry

So that’s the description from the subeditors. The first para reads:

I first began working in the childcare sector in 1990. As a recent graduate with a degree in visual arts, it was the obvious career path to become a cook in a long day care centre for toddlers! It was a non-profit community-based service and resonated with my values and beliefs.

Getting a job that resonates with your values and beliefs is pay luvvie. And perhaps the degree and career choice could have been more closely aligned?

When I began to have children of my own, the position became untenable. Around the birth of my first child I discovered a couple of things that really unsettled me.

First, as a spouse, I was not considered by society as an individual at all. I was without independence and completely financially reliant on my partner. I had never been without the ability to earn some money, and the feeling that I was now individually penniless was a humiliating discovery. To be clear, it was a feeling of my own doing as my partner had no qualms about being the breadwinner and did not in any way play a guilt trip on me but I profoundly felt as if I had been robbed of something.

Err, yes, the family is the primary economic unit among us humans. Not unusual among viviparous mammals either.

Oil giant Exxon Mobil is trying to win a reduction on a massive $74bn fine it has been hit with by a Chad court in a row over oil royalties.

Don’t think so, really.

What I can’t work out though is who is making the mistake here.

Chad’s oil exports are some $2.5 billion a year. Sure, the price was double a couple of year’s back, but they’ve only been pumping since 2003. and that $2.5 is all oil, not just Exxon.

The argument appears to be about a 2% or 0.2% royalty.

And yes, fines there are twice whatever the sum in dispute is.

But $74 billion still looks more like the total value of all oil ever pumped than any sum that could possibly be in dispute.

So, who has fucked up here? Bloomberg, the original source of the report? Or Chad?

By request

While we’re off-topicking this post, and in the vein of stuff-I’d-probably-pay-you-for-if-it-was-easy, I’d be interested in Tim’s take on Chris’s ‘defence’ of globalization here (or rather on his list of alternative culprits)

Hmm, well, my arguing economics with Chris is one of those things where I’m not going to come off well. The reference is to this post.

And my problem is that I disagree with the basic premise. I don’t think real wages have fallen in the first place. I agree that inequality has increased, that certain wages have stood still over the decades. But not that real wages have fallen for any interestingly significant group.

Thus the why real wages have fallen for some groups argument doesn’t make sense to me.

For example, WhatsApp for a time there charged no fee and carried no advertising. So, we’ve three ways of measuring GDP. Production – WhatsApp appears as zero here. Consumption – zero again. Only in incomes does it appear, the whatever, $20 million a year the engineers were getting paid.

And yet 1 billion people were getting some or all of their telecoms needs from WhatsApp.

We’re not measuring GDP right in this digital age – real wages are not falling.


Customers are being lulled into believing they are getting the best deal from retailers on Amazon when the product can often be bought cheaper elsewhere online — including on the retailers’ own websites.

A Sunday Times investigation has found a number of cases where rival independent retailers who sell on the Amazon Marketplace platform are offering the same product at the same lowest price on Amazon, suggesting fierce competition and a bargain for the shopper.

In fact, the products can often be bought more cheaply at other online stores. In some cases, the retailers offer the same product at a cheaper price on their own websites.

Prices vary?