Latest post on Left Futures

Productivity is central flaw in Tory economic argument

Productivity - multitasking workerOne of the company bosses signing the Telegraph letter sought to clinch his case by saying it was ‘madness’ to abandon the government’s economic policy since it was only half done and they needed to ‘finish the job’. But what is half done?

  • Not reducing the deficit since it was £118bn when Alistair Darling’s two expansionary budgets had worked their way through the economy by 2012 and it’s only been reduced now to £92bn this year, so that only a sixth of it (from its peak of £157bn) has been reduced by Osborne and three-fifths still remains.
  • Not business investment which has been disappointingly anaemic for the last 3 years., and actually fell by 0.9% in the 4th quarter of last year.
  • Not the balance of payments, which measures how far Britain is paying its way in the world (i.e. how far we cover the cost of imports by the exports we earn), when last year has seen the worst trading deficit in our history, with a deficit rising from £77bn to £98bn in just the last year.
  • Not the raising of household incomes when the latest ONS figures show GDP per head was 1.2% worse than it was in 2008. It’s not ‘job not finished’ so much as the wrong job has been put in place at the outset and every key economic indicator is still getting worse.
  • And all that still leaves out the slump of productivity.

The productivity record can only be regarded as disastrous. Productivity is a measure of national output divided in one of two ways, either by the number of people employed or by the amount that these people produce per hour. Out put per hour is the better measure, and on that basis productivity in the UK is 27-31% below that in Germany, France and the US. Up until the crash caused by the bankers and the international recession, the efficiency of British workers tended to increase by 2-2.5% a year. If that trend had continued, UK productivity would have been 15% higher now than before the recession. In reality UK productivity, so far from rising by 2%, actually fell by 0.2% at the end of last year.

Productivity is key because living standards can only rise when goods and services are produced more efficiently. If Tory economic policy forces more people into jobs (or what passes for jobs, in the form of self-employment) by sanctioning and cutting benefits, but that growing workforce then produces less output than a smaller workforce produced in 2008, living standards cannot rise. That is the economic future which the Telegraph’s company bosses are inviting the nation to endorse and take further since we’re only half way there!

Image copyright: / 123RF Stock Photo

6 Comments

  1. John Problem says:

    “George?”
    “Yes, Dave.”
    “Have you seen this list?”
    “Is it that long one from – whatsis name?”
    “Yes. What do you think?”
    “Too many items. All rubbish.”
    “What if the voters reads it?”
    “Who cares? Come on, Dave, you’re getting paranoid!”
    “Yes, but. The bloody polls show Ed is level with me. After all I’ve done for the country. Not fair. And I’m worried.”
    “Don’t be. See Lynton.”
    “Sam doesn’t like him. She thinks he’s creepy.”
    “She’s not the only one. Anyway forget that list. We need to bury it. I’ll call GCHQ.”

  2. Barry Ewart says:

    I just wish Labour would nail the Tories on the debt caused by the bankers mess.
    Labour has admitted it should have regulated the banks more and in the leaders debate did Miliband get a good hit in on Cameron who had wanted less regulation at the time!
    Labour was competent in bailing out the banks to save people’s wages, savings, benefits & pensions or there would have been chaos – if people couldn’t have bought food for heir families from supermarkets with cah machines were frozen there would have been panic and possibly food riots but what would the Tories have done – not interfered in the market and let the banks fail?
    So was it LABOUR COMPETENCE v TORY POTENTIIAL CHAOS?
    Of course the Tories and Lib Dems may have done exactly the same as I think quantitative easing of £1.3trillion suggests.
    But, “No good deed goes unpunished.’
    But I would hope Labour would refer people to the historical evidence showing that the bankers were to blame for the financial mess – sub prime lending in the US – see Freddie Mac, Fannie Mae, Lehman Bros et al but as the Tories and Lib Dem pump out the line that Labour was to blame unfortunately for them history keeps throwing up more evidence -JP Morgan Chase fined 13b dollars in 2013 in the US for their role in sub prime lending and Ciity Group fined £4b in July 2014!
    Time to nail the Tories!

  3. J.P. Craig-Weston says:

    Too me and to most of the people I know, both political parties, (increasingly completely indistinguishable from each other and both led by sleazy overpaid spivs with zero experience of or interest in normal people or of real life,) seem equally vile and repellent; grounded as they are in our completely broken, rotten to core and dysfunctional post-Blair parliamentary democracy.

    As friend of mine commented, “I’m reluctant to vote because I might catch something nasty.”

  4. Gary Brooke says:

    Well, don’t vote but then don’t blame anyone but yourself if you wake up on May 8th with Mr. D. Cameron as the PM.

  5. David Ellis says:

    Monopolies have no incentive to invest. The opposite in fact they try to prevent it and Britian’s cash rich corporations have had no intention of investing since 2008. Productivity as a result declines and the economy contracts. It is a death spiral.

  6. David Pavett says:

    The public is currently being bombarded with statistics, of varying reliability, about the economy. It is safe to say that most of the politicians wielding these numbers have little idea how they are derived. They jump at numbers which favour their case and that is about all there is to it.

    It concerns me that Michael Meacher thinks that it is okay to write article in which quote statistics which are not common knowledge without giving their source(s). This is easy to do with hyperlinks and in my view it is negligent not to do so. “Michael Meacher said so” is probably not sufficient for most people one would like to convince.

    Terms like “national output”, “trade deficit” and “productivity” are very difficult to appreciate in connection with an economy like ours in which financial services make such a large contribution to the total figures. Thus a fall in overall “productivity” could mask both an increase in the “real economy” (making things) and a fall in the fortunes of the financial sector. Is it not important to keep an eye on this distinction?

    The numbers and argument in the penultimate paragraph seem to me to be both confused and confusing.

    If it is the record of this government that is being assessed compared to Germany then it is not enough to say that productivity is 27-31% below that of Germany. We we need to know what it was in 2010. Morever, if it has worsened then we would need to see if it was already worsening under Labour (almost every indicator I have looked at gives such a result) and we would need to have a reason for believing that a Labour government would have produced a significantly different result.

    Up until the crash caused by the bankers and the international recession, the efficiency of British workers tended to increase by 2-2.5% a year. If that trend had continued, UK productivity would have been 15% higher now than before the recession. In reality UK productivity, so far from rising by 2%, actually fell by 0.2% at the end of last year.

    The problem with this is that a significant part of that increased productiviy was produced by the activities of the self-same bankers while manufacturing continued to decline. This sort of data really does need to be unpacked if it is to make any real sense.

    It is also confuses the long and short term to say that a the normal increase in productivity would have been 2.0-2.5% p.a. but that last year it was -0.2%. These figures always fluctuate and what matters is the data for the whole period discussed.

    In no way do I want to defend what the Coalition has done but I think that if we are going to use economic indicators this should be done as fairly and as objectively as possible. We should also look at Labour’s post-crash record for the same trends – I am afraid that the latter exercise would be rather deflating for quite a lot of Labour rhetoric.

© 2021 Left Futures | Powered by WordPress | theme originated from PrimePress by Ravi Varma