This is almost unheard of. Unemployment was most recently this low in December 1973, when the UK set an unrepeated record of just 3.4%.
The problem with this record is that the statistical definition of “unemployment” relies on a fiction that economists tell themselves about the nature of work. As the rate gets lower and lower, it tests that lie. Because – as anyone who has studied basic economics knows – the official definition of unemployment disguises the true rate. In reality, about 21.5% of all working-age people (defined as ages 16 to 64) are without jobs, or 8.83 million people, according to the Office for National Statistics. Continue reading
Tag Archives: Austerity
UK is the only developed country where workers are getting poorer while the country is getting richer
Explaing Brexit
Euro
Unusually perceptive of the political and historical roots of monetary union, the author begins and ends his book by reminding readers of Altiero Spinelli’s call for “the definitive abolition of Europe’s division into national sovereign states” (p. 1). The common currency, even though not specifically mentioned in the Ventotene Manifesto, may be seen as the most radical answer to Spinelli’s call to end the nation state. At the same time, the success or failure of the euro could well turn out to be the ultimate test of Spinelli’s proposition.
The book has little sympathy for objections inspired by a narrow reading of “optimal currency area” theory (interestingly, its original proponent, Robert Mundell, came out in favour of the creation of the euro). In contrast to American economists such as Kenneth Rogoff (“a giant historical mistake”) and, more recently, Joseph Stiglitz (“fatally flawed from birth”), Sandbu argues that the architecture of the common currency has been wrongly blamed for the Eurozone crisis, and has been used as a decoy by policy makers for their own unforced errors.
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How the destruction of industrial Britain casts a shadow over present-day public finances
A new report by Christina Beatty and Steve Fothergill, Centre for Regional Economic and Social Research, Sheffield Hallam University
- UK manufacturing employment has fallen from 8.9 million to just 2.9 million overthe last fifty years, and 500,000 jobs have disappeared from the coal industry. This has destroyed the economic base of many communities, especially in the North,Scotland and Wales.
- The main effect ofthis job loss has been to divert vast numbers of men and women out ofthe labour market onto incapacity related benefits, these days Employment and Support Allowance (ESA) which accounts for almost 2.5 million adults of workingage. The highest claimant rates – 10per cent or more of all 16-64 year olds – are nearly all in older industrial areas.
- ESA and the additional benefits received by ESAclaimants – Housing Benefit and Disability LivingAllowance for example – are a £30bn-plus annual claim on the Exchequer.
- Low pay in former industrial areas depresses tax revenue and inflates spending on in-work benefits. Spending on Tax Credits, for example, exceeds £850 a year per adult of working age in much of older industrial Britain – double the level in parts of southernEngland.
- The Treasury has misdiagnosed high welfare spending as the result of inadequate work incentives and has too often blamed individuals for their own predicament, whereas in fact a large part ofthe bill is rooted in job destruction extending back decades.
- The welfare reforms implemented since 2010, and strengthened since the 2015 general election, hitthe poorest places hardest. In effect, communities in older industrial Britain are being meted out punishmentin the form of welfare cuts forthe destruction wrought to their industrial base.
- Across most of older industrial Britain the loss arising from welfare reform is expected to exceed £750 a year per working age adult by 2020-21.
- There is an alternative – a genuine rebalancing ofthe economy in favour of industrial production and a revival of regional economic policy.
- Policy makers need to take a long-term perspective, look at the differences between places, and stop thinking in silos.
Real wages in the UK have fallen by more than 10 per cent
| Real wage change (%) | Employment rate change (percentage points) | |
| Greece |
-10.4 |
-9.0 |
| UK |
-10.4 |
0.6 |
| Portugal |
-3.7 |
-5.4 |
| Italy |
0.9 |
-2.3 |
| Czech Rep |
1.1 |
1.0 |
| Ireland |
1.6 |
-7.9 |
| Spain |
2.8 |
-8.5 |
| Netherlands |
3.4 |
-1.7 |
| Denmark |
4.0 |
-3.2 |
| Lithuania |
4.3 |
5.5 |
| Israel |
4.3 |
1.9 |
| Finland |
4.3 |
-3.8 |
| Belgium |
4.4 |
-0.7 |
| Japan |
4.7 |
2.6 |
| Latvia |
4.9 |
-3.0 |
| USA |
6.4 |
-3.4 |
| Austria |
6.5 |
1.2 |
| OECD average |
6.7 |
-0.6 |
| Slovenia |
7.2 |
-4.3 |
| Australia |
7.2 |
-0.7 |
| Hungary |
9.3 |
5.9 |
| Canada |
9.4 |
-1.7 |
| Sweden |
10.1 |
-0.7 |
| France |
10.5 |
-1.8 |
| Luxembourg |
11.1 |
-1.2 |
| Switzerland |
11.3 |
0.5 |
| Slovakia |
12.3 |
0.9 |
| Estonia |
13.4 |
2.2 |
| Germany |
13.9 |
5.1 |
| Poland |
23.0 |
4.5 |
The effects of poverty costs the UK £78bn a year
The Joseph Rowntree Foundation (JRF) estimates that the impact and cost of poverty accounts for £1 in every £5 spent on public services.
The biggest chunk of the £78bn figure comes from treating health conditions associated with poverty, which amounts to £29bn, while the costs for schools and police are also significant. A further £9bn is linked to the cost of benefits and lost tax revenues. …
The JRF report, called “counting the cost of UK poverty”, estimates that 25% of healthcare spending is associated with treating conditions connected to poverty.
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Brexit reading list
‘If you’ve got money, you vote in … if you haven’t got money, you vote out’
Brexit Is Only the Latest Proof of the Insularity and Failure of Western Establishment Institutions
We can’t leave the negotiations with Europe to the Tories
Labour is partly to blame for the racists’ capture of the EU debate
It’s NOT the economy, stupid: Brexit as a story of personal values
The Tory leadership election is a sort of X Factor for choosing the antichrist
John Harris’ Progressive Alliance speech
Why did we vote to leave? What an analysis of place can tell us about Brexit
Right-Sizing The Financial Sector In Post-Brexit Europe
How David Cameron’s Plan To Screw Labour Cost Him The EU Referendum
At which step do you think that this whole ‘Brexit’ farce will collapse?
A response to Paul Mason’s ‘Labour: The Way Ahead’
Labour is stuck but the people who want to leap to a new politics are scattered across the party
Austerity is the cause of our economic woes. It’s nothing to do with the EU
Post-Brexit Progressive Alliance
Brexit: ever growing economic inequality and the public spending cuts that accompanied austerity
The outcome of the EU referendum has been unfairly blamed on the working class in the north of England, and even on obesity.7 However, because of differential turnout and the size of the denominator population, most people who voted Leave lived in the south of England.8 Furthermore, of all those who voted for Leave, 59% were in the middle classes (A, B, or C1). The proportion of Leave voters in the lowest two social classes (D and E) was just 24%.8 The Leave voters among the middle class were crucial to the final result because the middle class constituted two thirds of all those who voted. Continue reading
Let’s go out into the country, and reinvent our politics.
But even so, let me make three warnings.
We’ve seen ugly things happening up and down the country, and the license given to horrible, malign forces by the way the Leave campaign conducted itself. Notwithstanding those awful events: please let’s not think of the vast majority of the people I’ve talked about as stupid, or deluded, or bigoted or hateful. I don’t believe 17 million people are like that. In fact, I think I’m confident enough to say I know that.
If you woke up on Friday morning thinking the country was suddenly in the hands of a social tribe you didn’t know much about and you were suddenly terrified about the future, bear in mind: that is how millions of people in this country have been living for decades.
Please understand that the Labour Party has left a vacuum in these places which has been growing for ten or fifteen years. And if the result is denied, certainly while all of this is still raw, Ukip – with or without Nigel Farage, or maybe something even nastier – may well sweep through a lot of England and Wales, and the terrain for meaningful progressive politics will be destroyed. That’s how high the stakes are.
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UK Child Poverty is getting worse
The number of children living in poverty in the UK has jumped by 200,000 in a year, according to the latest official data.
There were 3.9 million children living in “relative poverty” in 2014-15, up from 3.7 million a year earlier, the figures from the Department for Work and Pensions show.
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On Labour Coup, Corbyn, McDonnell
Whoever emerges as Labour’s leader after the dust has settled will be dealing with a country riven by deep inequalities and divisions, and crying out for leadership and a bold vision of how to move on from here. McDonnell’s evolving economic plan has much that Labour should develop, whatever its future leadership, just as McDonnell and his team can themselves be seen as offering not so much a hard break from the Miliband era, but a further development of some of the best ideas, of using forms of predistribution to tackle the root causes of inequality, on which Miliband’s team had worked.
McDonnell has realized that, in the post-crash era of quantitative easing, in which macroeconomic policy is made as much by central banks as by finance ministries, parties of the left can no longer leave monetary policy to the technocrats. His commission examining the workings of the Monetary Policy Committee, chaired by former MPC member Professor David Blanchflower, should be central to Labour’s future economic thinking, and should not be ignored by any post-Corbyn leader. Similarly, McDonnell has asked Professor Prem Sikka to report on the future functioning of HMRC, and Lord Kerslake, a former head of the UK civil service, to report on the functioning of the Treasury, and to investigate the case for its future division into separate ministries of finance and economic development. This fundamental work will allow Labour to think more seriously about the future of a progressive macroeconomic policy.
As well as needing to reach out to the 48% of the population who voted ‘Remain’ and the millions, especially among younger people, who wished they had done so, Labour needs to speak to those who voted for Leave out of a sense of economic desperation. The sense of economic hopelessness that drove voters into the arms of the ‘Leave’ campaign in the northeast, south Wales, parts of Yorkshire and the East of England, and in many coastal towns, can be addressed only by an ambitious return to forms of industrial policy that direct investment towards areas that need to retool their economies. Plans for regional development banks under Miliband have been further developed under McDonnell, with the thinking of his team being much informed by the work of Professor Mariana Mazzucato, and her book on the Entrepreneurial State. Any future Labour strategy for regional economic development must also follow McDonnell in supporting innovative Labour councils, such as Preston City Council, which has looked for ways to develop the local economy through growing the cooperative sector, and using the power of procurement spending by the local authority and other local ‘anchor institutions’ in order to encourage an ecosystem of local enterprises to grow and thrive.
Corbyn was the strongest candidate for the Labour leadership last year, because only his campaign of the four seemed prepared to think at the right scale about the challenges of inequality and economic marginalisation. Throwing out the best and most popular features of Corbyn’s programme now would be self-defeating in the extreme, whoever is to be Labour’s leader into the next election.
Labour After the Earthquake
http://www.versobooks.com/blogs/2730-labour-after-the-earthquake
BREXIT was about Inequality, Austerity, not Immigration
‘If you’ve got money, you vote in … if you haven’t got money, you vote out’
Great piece.
For six years now, often with my colleague John Domokos, I have been travelling around the UK for our video series Anywhere But Westminster, ostensibly covering politics, but really trying to divine the national mood, if such a thing exists. I look back, and find all sorts of auguries of what has just happened. As an early warning, there was the temporary arrival of the British National party in electoral politics from 2006 onwards, playing on mounting popular anger about immigration from the EU “accession states”, in the midst of Gordon Brown’s “flexible” job market, and a mounting housing crisis.
A few years later, we met builders in South Shields who told us that their hourly rate had come down by £3 thanks to new arrivals from eastern Europe; the mother in Stourbridge who wanted a new school for “our kids”; the former docker in Liverpool who looked at rows of empty warehouses and exclaimed, “Where’s the work?”
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The divided, angry Kingdom
The sale of the Land Registry makes no sense
So the Land Registry is a natural monopoly and, as goes the Competition and Market Authority’s main argument, these kinds of services should be publically owned. Handing a monopoly over to a private company in search of profit risks harming consumers – the new owners may simply charge a higher price for the service, or in this case put the data, the Land Registry’s most valuable asset, behind a paywall.
The Law Society says that the Land Registry plays a central role in ensuring property rights in England and Wales, and so we need to ensure that it maintains its integrity and is free from any conflict of interest. Continue reading
IMF: Neoliberalism and austerity policies don’t work
Osborne said his austerity programme would give the government more flexibility in the event of a future crisis, but the IMF said taking out this sort of insurance policy would only be worth it if the benefits exceeded the costs.
“It turns out, however, that the cost could be large – much larger than the benefit. The reason is that, to get to a lower debt level, taxes that distort economic behaviour need to be raised temporarily or productive spending needs to be cut – or both. The costs of the tax increases or expenditure cuts required to bring down the debt may be much larger than the reduced crisis risk engendered by the lower debt.”
The economists rejected the notion that austerity could be good for growth by boosting the confidence of the private sector to invest. It said that in practice, “episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1% of GDP increases the long-term unemployment rate by 0.6 percentage points.” Continue reading
Helicopter money – Inflation – Deflation
The only powerful argument against helicopter drops is the one that Heise and Hamada stress – the political risk of overuse. If monetary finance is no longer prohibited, politicians might use it to curry favor with political constituencies or to over-stimulate the economy ahead of an election. Hamada oddly suggests that proponents of monetary finance ignore this risk; but in my own IMF paper, and in Bernanke’s recent blog post, it is a central concern.
History provides many examples of excessive monetary finance, from Weimar Germany to the many emerging economies where governments have pressured central banks to finance large fiscal deficits, with high inflation the inevitable result. So a valid argument can be made that the dangers of excessive monetary finance are so great that it should be prohibited entirely, even if in some circumstances it would be the best policy.
But a valid argument is not necessarily a convincing one. After all, other policies to support demand growth, or a failure to implement any policy, can be equally dangerous. It was deflation, not hyperinflation, that destroyed the Weimar Republic. Hitler’s electoral breakthrough of 1932 was achieved amid rapidly falling prices.
Tipping Point North South 