It's the first morning back at work. What has 2016 to offer? A bumpy ride, at best.
UK stock markets were down 5% last year. Expect the same again: commodity prices are not going to recover.
US markets would, as the FT points out this morning, have been in slump territory last year but for a few tech stocks.
Retailers had a poor Christmas.
China and the emerging markets remain in the doldrums.
UK wages will have their worst decade for almost a century.
UK investment is falling because of European uncertainties.
The government will tear itself apart over the EU referendum.
There will, of course, be a lot of cuts in government spending.
OBR forecasts on the deficit will be massively wide of the mark.
And, OK, fuel prices have dropped.
If you can make a pretty picture out of that, well done. I can't.
All that I can hope is that this crisis does not go to waste.
Surely, this time it will have to be different?
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Falling oil prices are bad news for one of Britain’s few remaining strengths in heavy industry: deep-sea drilling and ‘recovery’ technology for partially-exhausted wells. It isn’t worth doing when oil is cheap.
Agreed
But the green economy is worth doing
Yet the Government still wants to pursue its insane fracking programme, when the price of oil is dropping, and when fracking has been shown to be shockingly destructive to the environment, and when it is agreed internationally that 80% of known carbon reserves must stay in the ground, if catastrophic global warming is to be avoided.
There has been a particularly nasty start to the year from Tim Worstall on Forbes.
“Given that I’m against the very existence of the minimum wage itself, unless that is to be one set at $0, it might come as a surprise to find me welcoming the introduction of as many as 14 different higher minimum wages as we enter 2016. But welcome it I do, for all the pain that I think it’s going to cause to the younger and less trained workers out there in the economy.”
So not only does he begrudge low paid workers getting slightly higher living standards. he will celebrate their misery in the unlikely event that his misguided predictions come true.
http://www.forbes.com/sites/timworstall/2016/01/01/let-us-celebrate-the-rising-minimum-wages-the-new-year-brings-in-different-states-and-cities/
Tim, thankfully, has remarkably little impact
There would be no need for minimum or maximum wages if workers owned the means of production. They would agree an optimal reward for everyone, without savaging each other in the process, exporting their own jobs overseas, avoiding paying their dues to society in taxes or paying external shareholders for the privilege of risking their own capital.
If we continue to leave the economic system to the law of the jungle (run by the private financial apes), then we will all end up living like caged animals.
It won’t be long before the next financial crisis and this time there will be no bailouts, just complete nationalisation and socialisation of the remaining financial capital and bankrupt assets.
That was interesting lionsafterslumber, thanks. I must say in all candour that I’d never heard of Tim Worstall before your contribution. He seems quite a character almost salivating over the likelihood that the evidence base for his view would expand. That risible view being that government should not set a value at which the least productive can enter the regulated labour force.
If Tim Farron got his suggested £12/hr minimum wage in place, Worstall would probably have something rhyming with a spasm.
Could have been useful to include the next sentence in that quote:
“Because we’re now going to have at least 14 different natural experiments which we can study to really get to the bottom of whether rises in the minimum wage do indeed cost jobs, as theory would insist that they do.”
Or as the same piece explains at more length:
“The economic theory here is really very simple indeed: demand curves slope downwards, raise the price of something and people buy less of it. So, insist that the price of labour rises and there will be fewer jobs. There are theoretical arguments running the other way, that poorer people spend all of their income instead of having savings so redirecting money from richer to poorer people will increase aggregate demand, for example. But while that effect is true it’s not a strong enough effect. It’s just not large enough.
The empirics of this are a bit more complex: we tend to see small or even no statistically significant effects of the minimum wage rises we’ve had in the past. The general agreement among scholars now being that modest minimum wage rises have modest effects: whether on poverty, incomes or unemployment. What we’d really like to know though is what is the effect of rises which are immodest? As a rise from $7.25 to $15 would be, well outside our historical experience?
And that’s what is to be welcomed here.”
But, you know, whatever
Tim
With respect, I would not trust your view on what scholars found on any issue
Or that you had read appropriate scholars in the first place
To put it another way: I attach no weight to anything you say, and never have found anyone who does
But you know, whatever
Richard
Oh dear.
Perusing this contribution, along with the entire Forbes article, it is little wonder that Dan Hind bemoans the current state of our Enlightenment heritage.
Like most peddlers of what Hind refers to as ‘folk enlightenment’ what is presented here is long on conclusion and short on evidence. You really need to do a whole lot better than “But while that effect is true it’s not a strong enough effect. It’s just not large enough.” Because that is not evidence, in fact it’s not even argument. What it is, at best, is supposition and at worst the sort of wooly wishful thinking you see from what passes for conventional economics these days where the rhetoric assumes what it aims to deduce.
To be frank, this is little short of snake oil salesmanship in which a conclusion is put forward on the basis that this is so because the writer says it is so. More often than not this is down to the writer wishing it were so and puts those who practice it on the same side of the room ad the Karl Rove’s of this world.
The rest of us prefer to operate in the reality based community.
Of course we are dealing with a wage of <0 if you considered 0 as a 'break even point where the basics were covered. (Food, clothing, Housing, transport).
I suspect that the only reason TW has settled on £0 here is because he has not heard of negative numbers – which probably will not endear him to the readers of Forbes whose world view such articles are meant to champion. Missing such an obvious profit stream will not go down well.
“really get to the bottom of whether rises in the minimum wage do indeed cost jobs, as theory would insist that they do.”
That’s why I suggest we should have a Job Guarantee scheme where the state guarantees that some sort of ‘useful work’ will be available to everybody who needs it, as they need it and for as many hours as they want.
Working full time for such a Job would be paid the living wage, which would be the minimum required to be out of poverty.
When someone who wants a sensible paid job also easily can get one it also makes people in general more tolerant against those who still won’t or can’t fit into that scheme mainly because it isn’t seen as a big problem for society as a whole. When people have their life sorted the way they want it they are more likely to look kindly on others.
Imagine how much more generous they would be with a Job Guarantee in place — that allowed them to work in areas like theatre, singing or looking after their own children. A Job Guarantee that allowed them out of their ill-matched private sector job.
All benefits and minimum wages would then be scrapped and people would be required to be engaged in ‘useful work’ if they want any money at all. And that would be it – no specific benefits. Pensioners, sick and disabled people would be treated as working full time.
Where the ‘minimum’ lies and what is ‘useful work’ is up for debate. And at what point would you be expected to give up your kids for adoption because you can’t afford to bring them up?
“really get to the bottom of whether rises in the minimum wage do indeed cost jobs, as theory would insist that they do.”
That’s why I suggest we should have a Job Guarantee scheme where the state guarantees that some sort of ‘useful work’ will be available to everybody who needs it, as they need it and for as many hours as they want.
Working full time for such a Job would be paid the living wage, which would be the minimum required to be out of poverty.
When someone who wants a sensible paid job also easily can get one it also makes people in general more tolerant against those who still won’t or can’t fit into that scheme mainly because it isn’t seen as a big problem for society as a whole. When people have their life sorted the way they want it they are more likely to look kindly on others.
Imagine how much more generous they would be with a Job Guarantee in place — that allowed them to work in areas like theatre, singing or looking after their own children. A Job Guarantee that allowed them out of their ill-matched private sector job.
All benefits and minimum wages would then be scrapped and people would be required to be engaged in ‘useful work’ if they want any money at all. And that would be it – no specific benefits. Pensioners, sick and disabled people would be treated as working full time.
Where the ‘minimum’ lies and what is ‘useful work’ is up for debate. And at what point would you be expected to give up your kids for adoption because you can’t afford to bring them up?
I think he’ll find that isn’t simple. It’s simplistic.
The Sonnenschein-Mantel-Debreu [SMD] conditions within neo-classical theory prove that the ‘law of demand’ does not apply to the *market* demand curve. The market demand curve can have any polynomial shape at all except one that doubles back on itself.
In particular at market level the quantity demanded can rise as the price rises. That is perfectly valid (and would be a correct assumption given that wages are a source of turnover for businesses).
Tim you don’t even understand the theory on which you are relying. Read up:
https://en.wikipedia.org/wiki/Sonnenschein%E2%80%93Mantel%E2%80%93Debreu_theorem
I’m pretty sure I’ve posted this before, but if not, Mr Worstall might care to read this. Unless he’s already read it, when he would therefore be guilty of suppressing the evidence.
http://m.huffpost.com/us/entry/6737786
Even better is the comparison between Wisconsin (following Mr Worstall’s orthodoxy) and Minnesota (decidedly NOT following Mr Worstall’s prescriptions)
https://alternativeeconomics.co/blogline/26112-the-minnesota-wisconsin-divergence-in-family-income-continues
IMHO, these two examples constitute something close to valid experimental “proof” of the correctness of the hypothesis that raising the minimum wage actually boosts an economy.
Looking at the Huffpo piece, from Feb 2015, I would note the following.
MN unemployment rate down from 7% to 3.6%. Sure, that’s good. But the national economy has rather changed from Jan 2011 to Feb 2015 too. National unemployment rate over that time is down from 9.2% to 5.5 %.
MN is now 1.9% below national unemployment rate instead of the 2.2% it started at. Or, another way to measure the same thing, national unemployment rate is 59% of what it was, MN’s 51% of what it was.
As above, sure, it’s a good result. But it’s hardly evidence of massive outperformance due to local tax and or minimum wage policies, is it?
Why, we might even think that national economic performance had something to do with it.
Tim
There is no evidence in that MN did what you claim
The evidence is that things are working
But that there are may be limits to the benefit – it’s called marginalism
Now stop wasting our time
Richard
In which case Tim why is it that neighbouring state Wisconsin, which took the trickle down snake oil path which you are selling, did not do so well in comparison as a result of this national trend?
You might be able to get away with presenting selective statistics for your clientele at Forbes but you really do need to up your game when you step outside the safety of your comfort blanket.
Richard,
I hope you’re right in saying:
“All that I can hope is that this crisis does not go to waste. Surely, this time it will have to be different?”
But I fear you might not be. We’ll just be told that these crises and crashes are the inevitable result of running too large a budget deficit. That if we’d tried harder and achieved a budget surplus we’d have “saved up” enough extra money to see us through the difficult times.
We’ll be lied to, yet again, in other words!
The question is whether peole will believe that
One of my interests is the consequential manifestations of the application of neoliberal policies. It is becoming increasingly clear to me that consequential risk (known by neoliberals as externalities) is not being adequately assessed. In this I am not alone, the International Risk Governance Council have produced a number of studies on Cascade Failure of Infrastructure. Read Richard Little’s paper on the causes and effects of Hurricane Katrina on New Orleans and you will see how wilfully blind political strategy over the years caused more of the devastation than the storm itself ( http://www.irgc.org/wp-content/uploads/2012/04/R.-Little_Risk-of-Aging-Infrastructure_revision-Nov2012.pdf ). Whilst Little’s work addresses physical infrastructure I believe social infrastructures are comparable. They are networks of connections and failure of one connection places stress on multiple others perhaps pushing them beyond design parameters. The list of issues you provided Richard is optimistically brief in my opinion.
To take a look at one group of issues, one group of many. Yesterday we had a report of families skimping on heating http://www.bbc.co.uk/news/education-35205076 . The use of food banks is up 400%. We also had a glimpse of the neoliberal approach to managing the introduction of the Tory ‘living wage’ http://www.bbc.co.uk/news/uk-politics-35221168 . Add into this equation the 64000 families in long term temporary accommodation and the housing benefits being paid directly to slum landlords. Add to that, policies designed to criminalise people to deal with the doubling of rough sleeping over the last five years. The government response (13000 new homes) is yet another PR stunt, inadequate, inept, insulting. Why should those thousands of people continue to conform to the norms of a society that clearly demonstrates it doesn’t want them? What will they see as their legitimate recourse to justice, respect, fairness in the face of perceived tyranny and lies by those they should be able to trust?
To quote a libertarian defender of freedom (for some) “I tremble for my country when I reflect that God is just; that his justice cannot sleep forever” Thomas Jefferson, President, slave owner, hypocrite.