The UK, in common with all rich nations and some poorer ones too, faces an ageing population. The health and social care needed to support this needs to be well-funded, which requires sufficient wealth creation across the country.
At the moment, the UK’s productivity lags significantly behind other rich countries and needs to be seriously addressed by whichever government takes office after the upcoming election. The growth of productivity, or how much output is produced from given inputs (land, labour, capital, entrepreneurship etc), is the key to a rising standard of living. It makes possible choices between, for example, more work for a higher income, or more leisure for the same income.
The Guardian’s economics editor Larry Elliott here discusses these issues and makes a strong case for an ambitious industrial and regional policy to boost productivity growth. As he says, the average productivity in the UK’s Greater South-East, including London, is higher than that in Germany. If the average productivity of the UK as a whole is well behind that in Germany, as well as France and the US, this means that there is a strong regional dimension to the problem. The rest of the UK lags well behind the Greater South-East, and this is a major reason for the country’s high level of regional income inequality. Continue reading →
A link below to Michael Roberts’ blog post on the Koreas. It focuses mainly on some analysis of the post-Korean War economic history of the North, but also some comparison with the capitalist South and his desire to see the two of them reunified under centrally-planned socialism, something that I cannot see being a success.
The diverging fortunes of North and the South in terms of economic (and political) development illustrate the potential dynamism of capitalism versus largely autarkic socialism. But it does not lend support to an idealised and unfettered free-market capitalism either. Continue reading →
Some UK politicians happy to walk away from the Brexit negotiations without a deal have brokered the idea of turning their country into a minimal tax, minimal regulation economy, and have cited Singapore as a model to follow. They should look more closely.
As James Crabtree wrote in yesterday’s FT:
“Many things the Brexiters think they admire about Singapore also turn out to be only half-true. Singapore is indeed a competitive market economy with relatively low tax and a threadbare social safety net. But rather than a model of laissez-faire capitalism, its state is actually highly interventionist, from its famous chewing-gum ban to wide-ranging public ownership of everything from banks to airlines.
Its success as a financial hub, meanwhile, is based not only on openness to capital and goods, but also people. Extraordinarily high immigration has seen the island’s population double in 30 years. Today, not far off a third of its 5.8m people are foreigners, from Filipino nannies and Bangladeshi builders to Japanese bankers. The government has tightened migration rules recently, but still expects to add 1m to its population by 2030 – hardly a policy migration-averse Brexit backers would want to copy.”
State intervention in the market, widespread public ownership, mass immigration. These are not the sort of policies supported by Brexiters, at least those on the right of the political spectrum. Continue reading →
There is a disconnect between economic growth and living standards in the UK and ordinary workers are bearing the brunt. While politicians seize on data showing that the economy is growing at a reasonable pace, average real wages have largely stagnated for the past decade.
Simon Wren-Lewis illustrates here the uniqueness of the UK economy among rich countries, in that it experienced positive overall GDP growth and falling real wages between 2007 and 2015. This implies of course that job growth has been strong, and indeed it has, with record numbers in work. Unemployment has fallen, but there has also been significant population growth. So while our political masters crow about record employment levels, they keep fairly quiet about the fact that this has been made possible by the immigration flows that they claim will slow after Brexit. Continue reading →
My former tutor, SOAS Professor Mushtaq Khan, on the difficulty of industrial policies in developing countries. Political, economic and technological conditions are specific to each country and to different stages of development, and this should be borne in mind when designing and implementing such policies, if they are to have a good chance of success. Such an outcome is badly needed to help the poorest on our planet improve their situation.
This short video introduces industrial policy and argues for its importance in a capitalist economy and society. There is a plug at the end for the discussants’ book, but don’t let that put you off. They offer some refreshing ideas on why industrial policy needs to be talked about more openly in policy debates in countries both rich, poor and everything in-between.
This short interview from the Real News Network illustrates the progress of clean energy generation in the US, compared with dirtier sources. The argument is that the cost of renewables is falling fast, such that they are becoming cheaper than coal-fired generation, which Mr Trump has promised to support. Cleaner sources also have positive spillover effects on health, known in economics as a positive externality.
The logic of market forces has probably been helped along by industrial policies, from Obama’s Clean Power Plan to the Chinese government, which has promoted the development of its solar panel industry. But if clean energy becomes cheaper than dirty energy, surely a Republican president looking for a good deal can’t argue with that.