Frances Ryan and numbers

As food and rent prices rise,

Hmm.

Private rental prices paid by tenants in Great Britain rose by 1.8% in the 12 months to May 2017; this is unchanged from April 2017.

Inflation’s higher than that. Rent is falling in real terms.

This isn’t simply an issue of years of “benefit scrounger” narrative. It’s a symptom of the capitalist belief that a person’s contribution to society can be judged by their use in the labour market. This shuts out entire sections of society: the people who, owing to caring responsibilities, lack of opportunities or health problems, can’t earn a wage.

It’s not the capitalists who espouse the labour theory of value love, really, it’s not.

Yes, that’s our one

I once researched some American writers who had been influenced by Henry George and discovered that his “single tax” on land values was considered a heresy among “proper economists”. As John Rapley remarks, Milton Friedman was then “one of the most influential economists of the late 20th century” but his belief that the single tax on land values was “the least bad tax” went unnoticed by admirers Margaret Thatcher and Ronald Reagan, and their countries subsequently suffered near terminal property price crashes.
DBC Reed
Northampton

Strangely, Maggie brought in the poll tax which was rather close to the idea of LVT.

Property tax in the US is for counties and cities, not the Feds.

This is a bit of a stretch

In 1996, only five years after the end of the Soviet Union – with Russia’s once-protected markets having been forcibly opened, leading to a sudden decline in living standards – a communist won 40% of the vote in Russia’s presidential elections.

The post-Soviet decline in living standards is grossly overstated. Among other things they went from a system which didn’t count economic output nor consumption to one that did. Seriously, Soviet GDP accounting was dire, even counterproductive.

But even so, blaming this on the country’s openness to trade is ridiculous.

I have to admit that I’ve never really gelled with this idea of Rodrik’s:

For Rodrik, it was “the process that has come to be called ‘globalisation’”. Since the 1980s, and especially following the collapse of the Soviet Union, lowering barriers to international trade had become the axiom of countries everywhere. Tariffs had to be slashed and regulations spiked. Trade unions, which kept wages high and made it harder to fire people, had to be crushed. Governments vied with each other to make their country more hospitable – more “competitive” – for businesses. That meant making labour cheaper and regulations looser, often in countries that had once tried their hand at socialism, or had spent years protecting “homegrown” industries with tariffs.

One reason being that globalisation was at least in part (and I would argue more than a minor part) a technological issue, not a policy one.

As an historical example, post Civil War US import tariffs doubled, at least upon manufactures. Yet imports kept going up by leaps and bounds. This is because trade barriers are not just tariffs, policy. They are those plus transport and logistics costs. The ocean going steamship lowered transport costs by more than the rise in tariffs – trade barriers actually fell (See O’Rourke and someone, The Power and The Glory).

What has also been happening since the late 1950s? Container ships and cheap flights and telecoms. It is vastly, hugely, cheaper now to go look for, find, and transport goods and services from other countries. Add the internet more recently. Actually, I was using the internet to do international trade in the early 1990s (shipping code from Moscow to Silicon Valley).

The point being that in order to have a neutral stance upon trade, or globalisation, policy against trade would have had to be enacted. Substantial levels too. Think about it a little. Alibaba has made it vastly easier to buy from mid and low level Chinese firms. Sure, there are problems etc. But how much higher would trade barriers like tariffs have to be to overcome that greater ease of trade?

Globalisation was and is at least partly a technical matter, not a policy one at all.

These moves were generally applauded by economists. After all, their profession had long embraced the principle of comparative advantage – simply put, the idea countries will trade with each other in order to gain what each lacks, thereby benefiting both.

Christ. Can we even get Ricardo right? That’s absolute advantage.

This then descends into gibberish:

While many economists attributed much of the insecurity to technological change – sophisticated new machines displacing low-skilled workers – Rodrik suggested that the process of globalisation should shoulder more of the blame. It was, in particular, the competition between workers in developing and developed countries that helped drive down wages and job security for workers in developed countries. Over and over, they would be held hostage to the possibility that their business would up and leave, in order to find cheap labour in other parts of the world; they had to accept restraints on their salaries – or else.

Entirely true. If there are losers then it’s going to be the low skill workers of the rich countries. Adding a couple of billion low skill workers to the global labour force will do that.

Over the course of the 1990s, an unwieldy international coalition had begun to contest the notion that globalisation was good. Called “anti-globalisation” by the media, and the “alter-globalisation” or “global justice” movement by its participants, it tried to draw attention to the devastating effect that free trade policies were having, especially in the developing world, where globalisation was supposed to be having its most beneficial effect.

That’s the idiocy. Because the people who undoubtedly benefit are those couple of billion low skill workers being added to the global labour force.

Activists were intent on showing a much darker picture, revealing how the record of globalisation consisted mostly of farmers pushed off their land and the rampant proliferation of sweatshops.

People sucked off their land by the greater opportunities of the sweatshops. Corrected that for you.

The rest of it is how evil the Washington Consensus was and the merits of infant industry protection behind tariff barriers. The bit being missed is that the second was tried and the outcome was it didn’t work. But apparently we should abandon the system which has, these past 40 years, caused the largest fall in absolute poverty in the history of our species and go back to something which provably doesn’t work.

Ho hum.

Well, if you’re going to ignore what economists say then

The idea that population growth is essential to boost GDP, and that this is good for everyone, is ubiquitous and goes largely unchallenged. For example, according to the Treasury’s 2010 intergenerational report:

Economic growth will be supported by sound policies that support productivity, participation and population — the ‘3Ps’.

If one defines “economic growth” in the first place by saying that’s what happens when you have more and more people consuming, then obviously more and more people produce growth.

The fact that GDP, our main measure of growth, might be an utterly inadequate and inappropriate yardstick for our times remains a kooky idea to most economists, both in business and government.

Economists always, but always, distinguish between GDP and GDP per capita. Which neatly takes care of this particular whine.

Interesting economic thought

Earlier this year, the Resolution Foundation reported an increasing divide between the rich and poor in Britain. To reflect upon emotional wellbeing in the round we should note the work of Professor Angus Deaton, awarded the Nobel prize for economics in 2015. In a co-authored paper in 2010, he noted that emotional wellbeing increases along with rising income, but only up to an annual income of $75,000 (£58,000). While austerity and poverty increase levels of distress for many, the escalating wealth in some areas of society would appear to make the recipients no happier. Surely this in itself makes a sufficient case to redress the balance to a certain degree?

That £58 k putting you in the top 5% (by individual earnings, or thereabouts). And of course we do already do a lot to redress the balance. Going by household incomes, top 20% average (note, mean average) is £80 k or so and 12 times the bottom 20%.

After taxes, benefits, the consumption value of government services like the NHS and education, the consumption gap is 4 to 1.

That’s redressing the balance to a certain degree isn’t it?

There’s also another way to read Deaton’s result. If emotional wellbeing is to be out goal then we should not tax anyone on less than £58 k, should we? As they’re still short of that maximum. Meaning that we’ll be able to afford only as much government as we can squeeze out of the top 5%. Fine by me of course.

No

Productivity fell at the start of 2017 as rising employment outstripped growth in GDP, indicating that each worker was producing less in each hour that they worked.

Jeebus, no.

Billy No Skills getting hired to mop the Maccy D floor with a toothbrush doesn’t make me write fewer articles. It does bring down the average productivity in the economy though.

Sigh

The Government have been accused of “failing” young people and families after it emerged that nearly half a million new homes proposed for development on Green Belt land will not be “affordable”, but will be built for the “top end of the market.”

Over 70 per cent of the 425,000 new homes expected to be built under regional planning policies will not be accessible for those struggling to get onto the housing ladder.

If there’re half a million new homes then all homes will be worth slightly less, won’t they? Less than they would be in the absence of half a million new homes at least. That’s just how markets work, increase supply at a constant demand and prices fall.

Sigh.

Umm, isn’t this what is wanted?

House prices are teetering on the brink of a crash that could be as bad as the bust of the early 1990s, a leading expert has warned.
There are already warning signs that prices are heading towards a near 40 per cent plunge, warns Paul Cheshire, Professor of Economic Geography at the London School of Economics.
It raises the alarming spectre of the return of ‘negative equity’ – when a house falls so far in value it is worth less than the mortgage – which hit one million people at the worst point in the 1990s.

She’s not going to be a good economist, is she?

As if five jobs weren’t already enough, it was announced yesterday that the former chancellor George Osborne has been appointed as an honorary professor of economics at the University of Manchester. Osborne will not be leading any courses but will be expected to deliver guest lectures. The appointment of an economic policymaker who is not an economist by training makes a bold statement about the way the university wishes to approach the teaching of the subject.

The Post-Crash Economics society of which I am a part has been campaigning for a more real world-focused economics syllabus, and therefore welcomed Osborne’s comments in a recent interview with Research. The former chancellor stated that the “teaching of economics has become a bit too science-like and a bit too theoretical”, and that “people don’t always look for the maximum utility”. Given that one of the main things that we have been asking for in our economics education is for more real-world application, Osborne clearly has common ground with our efforts for this part of curriculum reform.

While Manchester University has stated that Osborne’s position will be unpaid, we still argue that his appointment is a questionable priority. Time and resources should be devoted to expanding the economics syllabus instead. Osborne’s track record demonstrates that he, like the economics curriculum at Manchester, lacks a holistic approach to the economy. While he was chancellor, fiscal economic policy in the UK became very focused on GDP and unemployment levels, which do not take into account inequality, health indicators, educational standards, environmental degradation, job security and many other things that are essential parts of the economy. His austerity policies and legacy have received much criticism from academics and economists for worsening the economic recovery.

His austerity policies have received much criticism from academics and economists for worsening the recovery
We welcome economic policy practitioners into the department who seek to challenge the unrealistic assumptions the models that we are taught often make, but we do not think it goes anywhere near solving the problem. As well as being divorced from the real world, economics degrees are narrow and uncritical, and do not give students sufficient tools and skills to deal with contemporary economic problems. Economics degrees currently train students in neoclassical methods, focusing on individuals and their utility maximisation, rather than encouraging them to critically engage with a range of schools of thought, and making informed, independent decisions about which methodologies are most appropriate for our modern world.

So she welcomes real world practitioners, welcomes inputs not based upon pure theory. But doesn’t welcome a recent Chancellor to give a few unpaid lectures.

Basic logic is one of those things needed to be an economist…..

Isn’t this just fascinating?

The consumer-driven momentum that has kept the British economy afloat since the Brexit vote is declining rapidly, with new data showing households in the grip of the most protracted squeeze on living standards since the economic crisis of the mid-1970s.

Against a backdrop of rising prices and stagnant wage growth, incomes adjusted for inflation have now fallen for three successive quarters, the first time this has occurred since the International Monetary Fund had to bail Britain out in 1976.

We should obviously be celebrating then, no? Because 1976 was when we were most equal, also when the Labour Share of the economy was at its highest ever. And yes, I really have seen articles from some, including Polly, making exactly that argument, that 1976 was the best year for just those reasons.

At the same time, the amount being set aside as savings has now slipped to just 1.7% of disposable income – the lowest level on record, and a fraction of the near-10% average for the last 50 years. Just a year ago, it was more than three times the current rate.

And isn’t that actually the point of Keynesian economics? Recession are when people are saving too much, so to get out of one we should encourage people to stop saving?

Or is that all in reverse now we’ve Tories in office?

So just why is Africa poor?

Why is Africa so poor? You asked Google – here’s the answer
Eliza Anyangwe

As you might have guessed, it’s tax avoidance, private companies and slavery. This is The Guardian after all.

The actual answer is “Because they’ve not had an industrial revolution yet.”

The only thing we know of that makes the people rich is an industrial revolution. In the absence of one the people will be poor.

QED.

Sigh

You Don’t Want to Buy Groceries From a Robot

Well, maybe I do and maybe I don’t. Wonder how we could work out whether I do?

What’s good for business is not always good for people. We need to consider the trade-offs of increasing automation and use our dollars to push for the kind of shopping experience we want and the kind of communities we want to live in.

Ah, yes, that’s right, consumer sovereignty in the marketplace. Those who want robots can use them, those that don’t need not.

UN population predictions

The world’s population is projected to
increase by slightly more than one billion people over the next 13 years, reaching 8.6 billion in 2030, and
to increase further to 9.8 billion in 2050 and 11.2 billion by 2100

OK.

….as well as a slight increase in fertility in countries where women have fewer than two live births per lifetime.

Ah, no, so I don’t believe a word of it. There ain’t a single rich country above the replacement rate. And there’s nothing in any human history to suggest that any ever will be either. And we do know that poor places are getting richer at a very encouraging rate…..

Not sure what the right economic word for this is – derived demand maybe?

A lettuce growers says he is concerned high tomato prices may be putting consumers off salads altogether.

Victorian lettuce grower Wayne Shields said his sales of lettuce had dropped by about 30 per cent in recent months.

Mr Shields said he normally did not have a problem moving his stock, but he had to drop his prices recently to get things going again.

Oz has a tomato shortage as a result of the weather. And lettuce demand seems to be dropping. No toms so why bother to have a salad sort of thing.

I think there’s a word of phrase to describe this but I can’t recall what it is. Hot dog roll demand falls when there’s no hot dogs…..derived demand? Dependent? Summat…..

Pure idiocy

Many economists warn of a classic mismatch of incentives. Governments may have good reason to invest in projects that yield no profit, building roads to nowhere that ultimately open up undeveloped land for job-generating commerce. Government alone has the incentive to upgrade shoddy wastewater treatment and supply systems for drinking water. Absent public guarantees for profits, private companies have no inducement to bring such works into creation.

“Private investors need to have a decent rate of return,” said Louis Kuijs, head of Asia for Oxford Economics, based in Hong Kong. “They cannot wait 40 years, and they are simply not able to take into account the additional tax revenues for the government.”

Complete twattery in fact.

Did water investment go up or down upon privatisation? Up.

Further, we do not control prices to guarantee a profit, we control them to stop a natural monopoly ripping the consumer off. And what the fuck is this guy at Oxford Economics on about? He’s living in a place where the metro system funds itself from the rise in land values around a new station.

Jeepers.

Quite remarkable

Jeremy Corbyn has called for the empty homes of rich people in Kensington to be seized for Grenfell Tower residents who have been made homeless by the fire.

The Labour leader said that the London Borough was a “tale of two cities” between a wealthy south and a rich north.

He suggested that “requisitioning” expensive vacant properties could help ensure that residents are housed locally.

Yes, that’s great, isn’t it? Local council conspires to burn people to death and the solution is to confiscate private property.

News Just In!

Alia makes the legal minimum wage for her job in her province: 2.3 million rupiah, or about $173 a month – but that legal minimum is among the lowest in Indonesia as a whole, and as much as 40% lower than in Chinese factories, another labour source for the Ivanka Trump brand.

Poor people in poor countries make shit wages.

Film At 11!

They do rather bury Paul Krugman’s point:

And Yuma, a young unmarried woman, said, “I’m glad that I work at Buma now, because my parents are farmers and it’s a tiring job. Here, at least there is air conditioning.”

Yep, sweatshop[s are shitty but they’re still better than a life of staring at the south end of a north moving water buffalo.

Those Satanic Mills weren’t too great either but they were better than what people left to enter them.

Dear God this is appalling economic analysis

And from a Nobel Laureate no less:

When Obamacare was enacted, Republicans had some claims, almost a theory, about why it was a terrible idea. It would, they claimed, fail to improve coverage. It would be a massive “job-killer”. It would cost far more than predicted, and blow up the budget deficit.

In reality, the percentage of Americans under 65 without insurance fell from 18 percent in 2010, the year Obamacare was enacted, to 10 percent in 2016 (and less than 8 percent in Medicaid expansion states). Unemployment was 9.9 percent when the ACA was passed, 6.6 when it went into full effect, 4.8 by January 2017. Costs have come in well below expectations.

The comparison is not what happened coincident with Obamacare, it’s what actually was the effect of Obamacare. That is, what would have happened to unemployment with and without it, not observing that the economy was recovering from the worst recession of modern times coincident with the introduction of Obamacare.

We want to know the effect of the change in health care insurance, not the effects of QE, ultra-low interest rates, the business cycle and all the rest. The analysis being offered here is about as useful a noting that Greggs now has cheap breakfasts and look, renewables output is rising!

Sigh.

Sadly, we don’t get to see Dr. Farnsworth’s research this time

Something bigger is happening here than the usual Punch v Judy. Kevin Farnsworth, a social scientist at the University of York, has put the manifestos for the two main parties from every election since 1945 through a cutting-edge piece of software – then asked it to assess how alike they were in concepts and phrases. The result? The Conservative manifesto is closer to Labour’s than at any point since the second world war.

Rhetoric as a guide to policy. Yep, good on that. Sadly, I can’t see the research itself. Which is a pity really. As it was Farnsworth who told us that depreciation allowances were a subsidy to corporations, recall?

Interestingly, something also flagged up by Chakrabortty. Are these two getting it on or something?

Nope, Ellie May doesn’t get it either

But actually, a country’s whole economy can grow more money if it needs to. Since 2009 the Bank of England has created £453bn of new electronic money to buy debt from the private sector using a mechanism called quantitative easing. Yes, you read that right: the Bank of England has created £453,000,000,000 of new money in the last eight years. Turns out the magic money tree is pretty big.

Yep, quite so.

The issue isn’t whether we can grow money or not (we can – that’s just a fact), it’s where the money goes once it’s been grown. And the problem is that it doesn’t go to nurses, teachers or the public services they work for. It goes to institutions such as banks.

Nope, it didn’t go to the banks. They were net short of gilts when QE started. They’re now net long. The one group of people that QE absolutely didn’t go to are the banks.

The nurse in the BBC debate was highlighting a problem that exists across the whole economy: real wages haven’t increased for more than a decade, and this has meant more people have been relying on credit cards, with personal debt now higher than it was before the 2008 crash.

That personal debt number is casuistry verging on a lie. Note the emphasis on “real” wages there. As a real number, adjusted for either inflation or as % ge of GDP household debt is well below those previous peaks.

And back to that magic money tree. The reason we don’t invent money to spend upon nurses is because that’s not QE, that’s monetisation of spending and is highly inflationary. Zimbabwe and Venezuela here we come time…..