Martin Wolf has one of his, usual, excellent columns in the FT this morning. I recommend reading it in full, but the nub of his argument is a simple one.
Evidence suggests that we're 14% down on GDP now from where we would have been if we'd not had a crash. The big debate is whether we have we lost this growth permanently i.e. we're down because there is no capacity in the UK economy to recover, or whether we down because this is a cyclical downturn and we just need a recovery for us to bounce back, productivity to rise again and unemployment to fall.
Wolf argues the latter, of course, and so would I. We have about 9% unemployment. More importantly, as he notes, we have massive underemployment i.e. people doing part time work who want full time work and, as importantly, there are employers still keeping staff rather than sacking them in the vain hope that things might turn round despite George Osborne. I believe in the strength, ingenuity and skill of the UK work force in other words, as does Martin Wolf.
The government and the Office for Budget Responsibility do not. Their argument is that the capacity of the UK economy has been permanently impaired and, in effect, these unemployed people aren't going to get back to work again as they are effectively unemployable. They don't actually see an upturn coming (links in his paper).
This is a vital understanding. If you think we can employ the currently unemployed and underemployed in the UK then what we need to get out of recession is a stimulus to demand. So we would need, as I have long argued, a boost to investment in infrastructure, a Green New Deal and a temporary increase in government borrowing to start that process working so people get back to work, pay their taxes, get off benefits and so net contribute to repaying the deficit.
Alternatively, if you think that such spending won't create a boost because the people unemployed are unemployable then you have instead to clear the deficit using tax rises and spending cuts - which is Osborne's Austerian plan.
It's a stark way of explaining the pathways to the policy choices we face.
I believe in the people of the UK.
The Tories and other Austerians don't.
So what do you think?
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Some of the unemployed are unemployable.
Some of the unemployed are employable.
Simples.
Well, yes
Some are unemployable because of disability, for example, or sickness
And the government denies that
Others have child care responsibilities
And the government denies that too
And some, yes, are unemployable. I accept some do make themselves so. It’s a price we have to pay for a civilised society that we accept that free-riding – although why anyone would choose it defeats me
But for the majority – they are employable
Or age, which usually encompasses disability and sickness.
But then, people dying at 65 is a win-win situation for the government.
You are correct, as always.
The language of ‘unemployability’ is becoming more common – did you see the report of that car firm that had tried to employ more apprentices but found that didn’t care/were illiterate/were too lazy etc.
This narrative of ‘the unemployable’ is, of course, just part of the Tory/employer strategy to further drive down wages/conditions of work. It is closely connected to the narrative of ‘the scrounger’ who needs to be driven to work by interviews and reduced payments. Osborne made it explicit in one of his speeches months ago – the east have people who work much harder for much lower wages, and we are going to have to go there if we are to ‘remain competitive’.
… by which he means that – if we reduce the workforce to a low-paid, terrified body which will do anything for nothing – we can still maintain company profits despite the lower turnover.
I have developed my ideas here, for what they are worth; http://bit.ly/KDnRPs
Thanks!
I wonder what the difference is between an Austerian and an Austeian, Richard. A subtle one, no doubt 🙂 (Ed note: typo now corrected!)
Seriously, and as you’d expect, I follow your line on this. Of course the vast majority of the unemployed and underemployed are not unemployable. But lets be frank, the Tory way is not to be too concerned about that – at least not as long as such people can be made to pay (punished) for being in a position most of them didn’t chose through enforced participation in any one of a number of unemployment schemes of highly dubious worth.
And beyond that we have to remember that there are some gains in other policy areas. For example, less growth/output means less carbon produced, which means the UK gets closer to hitting its EU emissions targets. I’d argue (as George Monbiot has documented twice in the The Guardian this week) that this has been reflected in the energy policy produced this week, and specifically in the acceptance (some would even argue promotion) of the need for new coal fired power stations regardless of whether they utilise carbon capture technology or not.
This is, of course, all good stuff in terms of energy security. In short, think of this from the perspective of a Daily Mail reader. What’s more important: a few 100K/million un/under employed people; or keeping the lights on? It’s a no brainer.
I know you’ll say I’m being cynical again, but after watching Jeremy Hunt at Leveson yesterday and knowing how close he is to Osborne and co I’m confident that however cynical I become I’ll never match them for their capacity to cynically manipulate their public positions for the benefit of themselves and the elite.
Re your cynicism: I agree; you’re a novice!
As for the rest – agreed too
If the government really does believe that people are unemployable – is the next step eugenics (or Douglas Adams’ Golgafrinchan B Ark)?
Interesting stuff here. There are lots of people who are educated for jobs that are not there – education, particularly at the university level, has no connection with the requirements of business. The solution is the German model: lots of stable, locally/family owned businesses with clear requirements that the education system meets.
It remains bonkers that the UK has an unemployment problem while having shortages of engineers and nurses. It is heartbreaking to see so many graduates, £30,000 in debt, who are no better equipped for the jobs that actually exist in the workplace than they would have been had they left school at 16.
Lower wages doesn’t necessarily mean a lower standard of living. Other countries have different banking systems, the BRICS in particular have publicly-owned banking systems where interest on monies created by and for the community are returned to the community instead of being creamed off by the privately owned banks as they are here. This is the heart of the matter. This system creates inequalities and Osborne, Cameron et al are the products of that inequality. We may be assured then that even in debate they’ll never go anywhere near the reality of the situation. Everything is to blame except the system which has promoted them to their wholly undeserved postions of authority, positions which they manifestly cannot even begin to fill. This is the support of privilege for its own sake no matter how damaging this may be to the rest of the comunity. They’ll fight to the last of the rest of us rather than lose the grip they have over the rest of us. Our best weapon is education on the matter of banking reform, what it means and why it’s necessary. Or, detonate a small tactical nuke right in the heart of the City. That would work too. It’s probably more practical to work on education though 🙂
There was a very interesting moment during a debate on Newsnight last week – Ken Livingstone diagnosed the loss of full employment (“when I left school with 2000 other boys my age in Brixton, every one of us had a job to go to”) whilst the wingnut entrepreneur sitting alongside Livingstone replied: “we don’t need government spending to create jobs, setting up a business now requires very little capital indeed – young people should be encouraged to just get on with it.”
Aren’t these positions the two sides of the same coin? Spare capital with nowhere to go (interestingly, that Newsnight exchange took place on the same day that German debt was sold at near-enough a 0% coupon) and spare labour with no work to do (a few days later Facebook was valued at over $100m – and it only employs around 3000 people). If the capital-labour relation is essential to the capitalist economy (on that principle read this: http://endnotes.org.uk/articles/2 ) then any aggressive concept of “spare capacity” must surely address the apparent difficulty that the capital-labour relation has found itself in.
I saw Krugman on Democracy Now last week saying that this is an “easy economic problem” to solve and the only thing in the way is right-wing politicians insisting on austerity. I really don’t buy it. In fact, I’m going to get myself one of those RepRap self-replicating, open-source 3D printers which will soon provide everyone with the power to create their own commodities (from simple plastic objects to, one day, basic electronics such as mobile phones) at the touch of a button. So fairly soon I won’t be buying anything at all. Capitalists of the world, the open source movement will eat all your “spare capacity”!
I’ve just watched Krugman on Newsnight – he (and they) should have been given longer, but it’s a start. This obsession with the state as an economic inhibitor in the Tory Party goes back, I think, to when Thorneycroft spoke to Lionel Robbins late August 1957, after which Thorneycroft stopped seeing inflation as being caused by the private and public sector to inflation being a problem that can only be fixed by the limiting of the public sector i.e. that government spending not wage-push was the motor for inflation. It was but a small step to seeing the ‘small state is always better’ simplism of the modern day Tory, New Labour, and Orange Book Liberals. And Robbins’ solution to the Great Depression was a return to the Gold Standard!
This is not a new narrative: the narrative which underpins it has been developing for far longer than the current crisis. It is a necessary adjunct to the tory (in which I include new “labour”) agenda. That is true for a number of reasons
In the first place it is necessary to “divide and rule”. From Thatcher’s accession the objective of full employment was abandoned. There is no doubt about that: it is quite explicit and it is not confined to the UK: it is part of the neoliberal economic project. Initially disguised as a temporary evil needed to produce the “leaner fitter” UK, which had been inhibited by “dinosaur” industries and trades unions, they fostered the expectation that once the restructuring had been achieved there would once again be work for all: and better work. They say the same thing now: get rid of the public sector, and private companies will fill the employment gap. They have had more than 30 years and this does not work. It is not intended to. A frightened workforce keeps wages down: the abyss under the feet of workers needs to be deep according to their analysis.
To achieve divide and rule they had to “other” the poor. That took some time but they managed it, by the time the true purpose became obvious. From being “us” the poor are now “them”. That is two fold: it means that those who are the victims of the fear engendered can pretend to themselves that there is some substantive difference between themselves and those who have been impoverished. That gives some comfort in a nightmare world of insecurity: you see the same process in the “blame the victim” thread in rape cases. It is a way of reassuring yourself it will not happen to you. Skilled workers now see themselves as middle class and are persuaded, in large numbers, that they have worked their way out of the underclass because of their values: they were “poor but diligent” not like the current crop of workshy losers.
That narrative is easier to swallow because those just above the poorest did benefit in some ways: sale of council housing is one part of that bigger story. Some of the buyers knew that they were stealing directly from the poor: but they had little choice when rents were rising to “market levels” and housing stock transferred to the private sector. We cannot live with that kind of knowledge: so the next generation incorporated it into “we are the respectable working class and those others are scum” tale: though the fact is that many suffered adverse consequences directly: that part of the consequences is seldom discussed.
The drive for “efficiency” in public service is part of the same story. It is an aim which is not often challenged in principle though it has effects which touch directly on what you are saying. In the past big departments provided just the kind of niche employment you mention. There were roles which were assuredly not very efficient: but if it was someone’s job to hand out stationary that person had a job. And that was replicated throughout the big public service departments. We made it more “efficient” and put those folk on the dole. All the while talking of “inclusion”. It is a wonder to me that our heads did not explode, but we are not encouraged to think of issues as inter-related and that seems to work for some reason.
Then there was the whole “withered flowers” narrative: comprehensively debunked as far back as 2003 at least (longer if memory serves)
http://www.econ.cam.ac.uk/cjeconf/delegates/thomas.pdf
But the “evidence based” crowd don’t like this kind of evidence it doesn’t suit their faith and greed based agenda:
The fact is that the poor are us. That is true at an ethical level and it is increasingly true at a practical level for the newly self identified middle class (the ones who are no such thing but pretend to themselves that they are). For they are next. There is always a bottom run to the ladder, and when you can take no more from the poor you must needs take from the next group up.
Those who have been demonised are no different from their parents and grandparents: in great swathes of the country their jobs were dismantled and never replaced. We did not alter their genes, though to read the coverage of this class you would have to conclude that we did.
There is a very small group of people who do not work because they do not wish to: those are damaged people, and in times of full employment is made abundantly clear that they are few indeed: the rest are the victims of our collusion with the neoliberal agenda. The irony is that the people who voted for this fail to realise that it not only “could be you”: it “WILL be you”. The lottery is a tax on desperation: the unemployment level is a tax on fear
As I scan my shelves I notice I have two kinds of books on employment/unemployment issues. Those pessimists such as Jeremy Rifkin et al, who predicted the sort of political, robot and computer engineered unemployment and under-employment we now see becoming solidly embedded, and the optimists such as Robert Reich who predicted an almost workless on-line utopia where ‘trickle down’ worked and we all became leisurely rich. The pessimists were right. Nothing less than a whole new social contract with capitalism and the sold-out political flunkeys we get to vote for will do.
This is not capitalism. In capitalism, businesses fail when they deserve to. In what we’re having foisted upon us, the banks carry on regardless, the rest of us being required to fund their mistakes. That isn’t capitalism, it’s neofeudalism.
Unemployable – but through no fault of their own. If Paul Krugman is right (Ch4 News, http://bcove.me/h9dezco0 ), and I fear he is, then the current depression will continue and project low demand, high unemployment and hence low tax revenues well into the future (just like Japan over the last two decades), with a lack of career opportunities for youngsters leading to a shortage of relevantly trained young people, savings locked up for lack of profitable investment opportunities, certainly none but the most dewy-eyed risking starting a new business in a no-demand economy (see Krugman on Newsnight), and governments unwilling to recognise that state investment raises more money (because it creates taxable income and assets), and so brings down a deficit faster than trying to tax the under- and unemployed. The domestic analogy that does apply to the current economic situation is, if you’re in debt and can’t afford Norman Tebbit’s bike to get yourself working, you need to get a loan to buy one, not the coalition’s’ simplistic ‘when you’re in debt you don’t borrow more’ nonsense. You borrow to earn (to reduce debt) instead of to spend. That’s the no-brainer Osborne misses. And if you and your neighbours won’t even borrow from yourselves at ridiculously low interest rates to achieve that, well . . . That’s not cyclical. That just kills the capacity to produce, trade and recover. When’s the next election?
What does it matter when the next election is? You don’t get to vote for the true power because politicians have abdicated their mandate to the market.
You’re right of course. Stupid question.
There are an awful lot of unemployed buildings and unemployed sites where people could be working. We rarely hear about that. Take a look at your local high street or industrial estate.