Yes, yes, we know this

Putting together official figures and the Bank of England’s own calculations, it looked at regional GDP per head from the capital up to Scotland. And it showed that only two regions of the total 12 were actually richer than they were before the credit crunch. Those two regions were London and the south-east. Nearly everywhere else was poorer than in 2007 – sometimes, as in Northern Ireland, a lot poorer.

It’s also true that the UK has one of the greatest (second largest I think) differences in regional GDP in the EU. That’s because we’ve got London, which is a global city, part of the global economy and rich because of it, then we’ve got the rest which is pretty much a mid level European economy and all rather Meh.

However, there’s another way to look at the same figures. If you map GDP per capita across those regions, then public sector as a percentage of GDP by region, you’ll see that the poorer areas have more public spending.

That is, government makes you poor.

A bit of proper economics

Gravity modelling is Newtonian physics adapted for economic forecasting. Just as the attraction between two heavenly bodies is directly proportional to their masses and inversely proportional to the distance between them, so the volume of trade and the amount of foreign direct investment between two countries depends on how big and how geographically close they are.

Using this approach, the Treasury says there would be a 43% loss of trade with the EU were the UK to revert to WTO rules, and because almost half the UK’s trade is with the EU this would result in a 24% loss in total trade. The assumption is that there has been a 76% increase in UK trade as a result of membership of the EU and that all of these gains would be lost. There would be no gains in trade with non-EU countries to compensate for the loss.

The gravity model is the standard trade model. And I don’t think it’s right. As in an email I’ve just sent:

Small thought about the gravity model of trade.

Historically geographic closeness might have made sense as a measure. At some time that is. But if we cast further back not so much. Say, just to invent an example, trade over the Pennines was at one time much smaller than trade over the Irish Sea. Ship and river transport was much more important than road (there were no roads).

Or coal from Newcastle to London by ship but near nothing from Newcastle to Carlisle.

The gravity model should thus be tweaked to measure economic geography, which methods of transport are in use? Or, how close is somewhere in travel days, not miles? Travel cost perhaps not miles.

At which point much more makes sense. The container network will move 30 tonnes of anything anywhere for under $5,000 these days. Geographic proximity, what that gravity model assumes, is rather less important.

In fact, transport costs between Birmingham and Barcelona, Birmingham and Birmingham AL and Birmingham and Brisbane are not notably different these days.

Gravity as measured by trade costs rather than geography would make much, much, more sense.

There’s a great deal of truth here

Almost a decade later, the Queen might be tempted to lob another grenade at the economics fraternity: why did you get it wrong again about Brexit?

In fairness, the economics profession had its Cassandras in the run-up to the financial crisis and not all economists thought a vote to leave on 23 June meant instant Armageddon. Even so, it is a valid question. How can it be that the Bank of England, the Treasury, the IMF, the OECD, not to mention the vast majority of academic economists, all predicted so confidently and yet so wrongly that the UK economy would plunge straight into a stonking great recession after a Brexit vote?

On both occasions, economists have been guilty of groupthink. On both occasions they pretend to have forecasting powers that don’t really exist. As the economist Paul Ormerod points out, in the short term it is nigh-on impossible to sort out genuine information from noise.

But is everyone going to learn the right lesson from this?

If we cannot forecast what is about to happen then how in fuck can we plan the economy?

Well, quite, at this macro level we simply cannot, can we, because we simply do not know what is about to happen nor can we accurately model the effects of whatever we might do about it.

So much for the Curajus State then, eh?

And, of course, that kills off absolutely everyone further left who wants a properly planned economy, doesn’t it?

Well, yes, quite so

The Brexit forecast was in a different category. It was like the “dodgy dossier” of the intelligence community on Saddam’s weapons arsenal. It was experts distorted by politics, consciously or unconsciously saying what they or their paymasters wanted to hear. It was “sexed-up” science.

The reasons given by economists for their Brexit forecast are feeble. It did not take account of “inherent momentum”, of international factors or of government remedial action. That is surely inadequate. The true reason is that Project Fear, the Treasury-orchestrated attempt to frighten voters into the remain camp, consumed the political and intellectual establishment. It blighted the judgment of social scientists. It not only failed in its purpose of instilling fear, it appeared to validate a bogus reason for voting Brexit – that all experts are mendacious toffs.

As some of us were saying at the time. Policy based evidence making.

Socialist thinking

‘The five biggest French banks made a profit of 25 billion euros last year, so I propose a supertax of five billion euros,’ said Montebourg.

Big pot of money! We’ll have some!

With no thought whatsoever as to what that big pot of money currently does before it is taxed.


Blimey, this is a surprise, isn’t it?

Britain’s wealth gap will be passed down the generations as well-off older people bequeath property to their already thriving offspring, according to new research from one of the UK’s leading thinktanks.

The Institute for Fiscal Studies (IFS) found that today’s young people were likely to inherit more wealth than their predecessors but the benefits would be skewed to those who were already well off.

Rich people are rich.

Alert the media!

There’s a solution to this you know

More than 2.3 million families are living in fuel poverty in England – the equivalent of 10% of households, according to government statistics.

Stop making energy more expensive with green taxes.

And an interesting question to which I know the answer but cannot actually prove so.

If we take the definitions of adequate heating of today (there are details of how much of the house should be heated to what temperature for what period of the day, no, really) and that definition of fuel poverty, no more than 10% of income being spent to reach it, well, how many households were in fuel poverty in 2000? 1990? 1980? 1900?

At some point going back we find that the Duke of Westminster was in fuel poverty. And at some interim point we find that just about everyone else was and so on decreasing, perhaps, to this 10% today.

The question, in the end, being well, when was fuel poverty lower than it is today? By today’s heating standards that is?

This is actually in a purported economics column

The Japanese are famous for their savings and investments. But middle-income families can only save because they don’t pay enough tax for officials in Tokyo to provide basic services. Every year the Japanese government runs a 10% budget deficit, such that its accumulated debt is worth almost 250% of GDP.

The Japanese government considers that Japan suffers from a deficiency of aggregate demand. As do all sorts of other people like Paul Krugman, the IMF, OECD and so on. The solution to which is a Keynesian boosting of said demand. By government spending more than it taxes and borrowing the difference.

In what is supposedly an economics column a certain Mr. Inman tells Observer readers that in reality the Japanese government shouldn’t be doing that at all. It should, instead, be running a balanced budget and should thus raise taxes.

Just like he hasn’t been saying about the British economy this past decade.

Do these people just never bother to connect the dots?

The rest of the column is worse of course. It’s the starting gun in the argument that we’re all saving too much therefore the government should tax our wealth off us. The Spud will love it meaning all rational people will hate it.

Stop talking rot PwC

Britain’s biggest 100 businesses collected and paid £82.3bn in taxes this year, up from £80.5bn in 2015 and the highest level ever.

The firms paid £23.7bn directly, according to figures from PwC, and collected £58.6bn in the form of charges such as PAYE income tax and VAT.


The so called “direct” taxes are not incident upon the firms either. All taxes lead to the wallets of some live human beings getting picked. Simply because there’s only us humans here to pay taxes.

Just as Ritchie continues his illiterate screeds about how “companies” should pay MOAR TAX we must continue to point out that those direct taxes are incident upon investors and workers, not the company.

Fuck Paul Mason, now he’s being dangerous

We all know that the ex-music teacher doesn’t know a rabbit’s fart about economics. But it’s fun enough to see him mobilising the masses, getting the would be Wolfie Smiths all orgasmic at overthrowing The Man. And then he descends into something actually dangerous:

The free-market economic model, combined with a globalised labour market, has produced a kind of reverse industrialisation.

because the entire economic system is geared to distributing the proceeds of globalisation upwards and its costs downwards.

the response of policymakers has been to prescribe simply more of the things that caused it: more free markets and more globalisation.

Carney is the first person with significant power in the western world to say that the medicine cannot work. It delivers slow growth, stagnating wages, falling productivity and rising inequality.

Call it what you will, it would no longer be globalisation as we know it, and it would reverse 30 years of free market labour reforms.
So in a situation where global growth is stagnant, providing your own population with decent jobs means attracting them from somewhere else.

That, in turn, will mean enacting a controlled, limited and reluctant step back from freemarket globalisation.

A new kind of capitalism, whose aim is to put the cheap labour exploiter out of business and promote high wages, will provoke howls of indignation from the economics profession and the asset-rich classes of the West. They revelled in the race to the bottom, as long as they got the upside of it. To unleash technology and revive productivity will take a big and careful rethink, above all about what redistribution policies work best in a highly complex and individualised consumer economy.

The flaccid little cunt.

Look, saying you’re going to tax me a little more, or a lot more, in order to raise the booze allowance on the dole is tiresome but not actually dangerous, even if you get to enact it it’s just tiresome, not dangerous. Shouting that there should be more investment, stronger unions, blah, blah, blah.

But you go messing with free market globalisation and you’re being dangerous. And we will look for you, we will find you, and we will kill you.

Because it is that free market globalisation which is bringing industrialisation to those peasant economies out there. Which, in turn, is what is lifting the tail end of humanity out of peasant destitution. As Branko Milanovic has pointed out the people who have really benefited from this process are the global poor. Which is why the past few decades of this free market globalisation have led to the largest fall in poverty in the history of our entire species.

Now the suggestion is that we, here in one of the richest countries in the world, where just the fucking dole (and it is just the fucking dole too, this is without any other benefit like housing, kiddies, whatever) puts you into the top 25% of global incomes, we should prevent, stop, reverse, this process just because there’re people working at hand car washes?

Fuck you Mason and the ideology you rode in on.

And if you really do try to slow down this free market globalisation thing I really will hunt you down. Jeebus man, the best thing that’s ever happened in the global economy and you want to stop it?

Bollocks matey, bollocks

Problem gambling costs the UK up to £1.2bn a year, according to a report that its authors say should serve as a “wakeup call” to the government.

Gambling, whether problematic or not, costs the UK entirely and absolutely nothing at all. It’s just money circulating around between different people.

The IPPR said the largest costs were racked up in the health service and the welfare and criminal justice systems, which even the report’s most conservative estimates pitched at £260m.

Those are costs to the government of the UK. And amazingly enough, the government is not the country nor the economy.


Ignorant fucking twat

“Dirty fuel” has earned the name because it is imported diesel with sulphur levels as high as 3,000 parts per million when the European maximum is 10ppm. To be clear, “African quality” fuel, is fuel not fit for European humans. Racism has always been about the sanctioning of exploitation. How else can one justify one nation siphoning the wealth of another thousands of miles away if not by believing “those people” are inferior and thus “deserving” of servitude?

It’s cheap. Which is why Nigeria uses it, because Nigeria is a poor country.

Dear Lord, not everyone in Nigeria has the equivalent of a two up two down either, nor three squares. That’s not racism, that’s poverty.

Well done Mr. Chakrabortty, well done here

Outside was panic. Barely a couple of hours after Donald Trump had been declared the next president of the United States and even the political columnists, those sleek interlocutors of power, were in shock. At the National Gallery in London, however, one of the few thinkers to have anticipated Trump’s rise was ready to see some paintings. Over from Germany for a few days of lectures, Wolfgang Streeck had an afternoon spare – and we both wanted to see the Beyond Caravaggio exhibition.

Nothing in his work prepares you for meeting Streeck (pronounced Stray-k). Professionally, he is the political economist barking last orders for our way of life, and warning of the “dark ages” ahead.

Streek is a sociologist, not an economist.


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.