This is one of the better summaries of the impact of Tory economic policy that I have seen:
[RT]he outlook for living standards has deteriorated rather sharply since March. The OBR is forecasting both lower nominal wage growth as a result of lower productivity, and higher inflation resulting from the exchange rate depreciation. Overall real average earnings are forecast to rise by less than 5% between now and 2021. That means they will be 3.7% lower in 2021 than was projected in March. To put it another way around half of the wage growth projected for the next five years back in March is not now projected to happen. On these projections real wages will, remarkably, still be below their 2008 levels in 2021. One cannot stress enough how dreadful that is — more than a decade without real earnings growth. We have certainly not seen a period remotely like it in the last 70 years.
And that's from Paul Johnson from the Institute for Fiscal Studies, speaking this lunchtime.
There seems little to add.
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Only to add…and all the while waiting patiently, rubbing their hands together and wearing a toothy grin, will be the far right.
With comforting promises to be the best mate of every pissed off person being screwed and giving him some easily identifiable scapegoat to blame and punish for the mess.
I accept Johnson’s general point about stagnation and needless to say the OBR forecast is actually optimistic as it does not include the probability of a 2nd-phase financial crisis in the meantime.
By way of addition I would merely note 2 things:
The assumed link between “productivity” and wage growth is sadly obsolete.It has been a quite while since productivity gains were reflected in real wages.
The depreciation(albeit unintended)is supposed to bring inflation closer to the target rate. It should also act as stimulus by increasing the competiveness of exports and import-competing industries. Remarkably, it seems to have had very little impact in any of those areas. Which is interesting.
Post-Brexit, the trade deficit narrowed marginally, inflation edged up to a mere 1% (before falling again) and unemployment fell fractionally by 0.1% although the number of UB claimants increased.
http://uk.reuters.com/article/uk-britain-trade-idUKKBN1341JI
http://www.bbc.com/news/business-37986365
http://www.bbc.com/news/business-36844302 (July)
https://www.theguardian.com/business/live/2016/nov/16/uk-unemployment-rate-wage-growth-earnings-brexit-business-live?page=with:block-582c2725e4b06ac41294e187#block-582c2725e4b06ac41294e187 (Nov.)
Stepping aside from how this effects me personally all I can say is that capitalism as it is configured now has ran into the sand for the majority of people. You/We have every right to be worried.
Correct, even when all around us there are examples of how the hidden hand of the market has failed dismally (eg privatised rail companies, and the suggestion of further privatisation of this area with Railtrack!), energy companies (just try Extra Energy for a taste of Kafkaesque logic).
Regardless of the facts, the populace will always be given a reason for their situation that conveniently picks on a target unrelated to the problem. The press has a lot to answer for in this sorry tale but as they say ‘keep taking the tabloids’.
As much of the right wing, Brexit supporting, press, and Tory MPs are pointing out, this is the OBR being far to pessimistic – or ‘doom mongering’ – Richard. And Paul Johnson is just jumping on the bandwagon, which is what you’d expect of a lefty, metropolitan elite chap such as he. Heaven forbid that we’re now following the trend that’s so well established in the US of no real wage growth for decades. In any case, Johnson’s an expert, and we all now know that experts don’t know what they’re talking about. Or if they do they’re doing “policised science”, like those climate science boffins at NASA – which is why they won’t be getting any more funding to have their satelites taking pesky pictures of things they say prove there’s global warming. No, lets instead follow the example of that paragon of unbiased, factual reporting the Daily Mail, or those fine examples of post-truth politics, Boris “bollocks” Johnson, Michael “fuck the consequences” Gove, or Liam “second chance” Fox and focus on those sunny, post Brexit, uplands where trade deals with Trump’s USA will fall like confetti in our laps. And where the rest of the members of the EU come to realise that the UK is such an important trading nation, such an economic powerhouse, that they’conceded to any demand from David “what’s a customs union?” Davis and his merry band of Brexit elves.
Apologies for the sarcasm. But at times like this, when it becomes mind-blowingly evident that our government has absolutely no idea of what to do to improve the lot of the many millions of the citizens of our country, I don’t have to energy or inspiration to write anything else.
Fair enough
So times sarcasm has a job to do
” it becomes mind-blowingly evident that our government has absolutely no idea of what to do to improve the lot of the many millions”
Yes they do – they run with lightning speed toward Keynesian quick fixes whenever a serious financial crisis crashes down on them. The current stagnation doesn’t exist because the powers that be don’t how to address it. It is a conscious choice.
It suits them. You may, for example, have noticed that financial markets, corporate profits and the fortunes of the 1% have recovered quite nicely (for the meantime) despite the ongoing decline in real economy.
The legendary Michal Kalecki (1899 -1970) largely explained the logic of this with his theories on oligopoly and stagnation. Keynes himself observed that capitalism had the capacity to trundle along at a level that is well below full employment for a long and indefinite period before it eventually collapses from lack of demand.
Well, I guess that’s where we are right now and no one, at least not the Tories (or Tory-lites) are likely do anything much about it until they absolutely have to.
As for the fascist flavoured response to the decline of neo-liberalism (UKIP, Brexit, Trump etc.) Kalecki covered that beautifully in this famous 1943 essay ‘The Political Aspects of Full Employment’(brilliant and quite readable).
There are so many things that are just like the 1930’s all over again.
P.S. Here’s the Kalecki link (9 short pages & highly recommended):
http://delong.typepad.com/kalecki43.pdf
Thank you
Meanwhile in the Derbyshire Dales, the local Tory ran District Council has had a report done by some ‘consultants’ to out source the management of its leisure centres to a separate management company (whilst retaining ownership).
The investment in the leisure centre infrastructure in the Dales has come from funds raised by selling off the public housing stock and even some EU money – also managed by local groups of councillors and people.
And now some private management company and its investors will benefit from that. We know people who work there and will report back on what happens to working conditions and wages for the work force.
It’s just not right – and seems to be a symptom similar to those you have talked about on your blog Richard of the chronic under investment in the ‘commons’ for which the private sector gets the benefit but none of the risk.
It stinks.
I’m all against privatisation when it doesn’t make sense, but speaking as a former local authority officer, and having witnessed the outsourcing of leisure centres to the private sector, I think this is one of very few areas where privatisation can deliver better outcomes.
Leisure centres are a relatively straightforward commercial operation, and providing that appropriate value for money safeguards are put in place (e.g. don’t make the admission prices too high) I don’t really see much of an issue with it.
This must be another wake up call for what the young have to look forward to – as youv’e previously suggested.
What are we offering them?
They are the future and why on earth are neither Labour nor the Lib Dems offering them a very loud alternative? Do they not understand that it doesn’t have to be like this?
All this, and a continuing concentration of wealth: increasing inequality is bad at any time, and terrible in a stagnant or contracting economy.
We already have a calorie deficit in lower-decile working families and, as they have no political or economic leverage, they will lose even more.
Bear that in mind when we see headlines about the squeeze on middle-class families