Re: footnote 2, I remember the Guardian really disgracing themselves on this one; they did a deep dive into p.-n. e. g. t., which consisted mostly of (a) abbreviating it to 'poncendogrot' (hilarious because it starts with 'ponce' and ends with 'grot') and (b) tracing it back to Ed Balls, setting him on the road to Strictly and daytime TV stardom. Then Michael Howard said "these ideas aren't Brown's, they're Balls'" and no further discussion was possible.
The pity of it is that a theory about economic growth is obviously a good thing for the Treasury to have, and if we can have conditions that promote endogenous growth, so much the better - if this is Economics, it's Economics For Dummies*. The only part of that phrase that's at all obscure or 'technical' is "post-neoclassical", and any generalist journo should be able to get someone to explain that in a sentence. John Birt was right all those years ago, and the bias against understanding has only intensified.
If immigration was as straightforwardly positive as your blanket statement suggest, why won't HMT publish the lifetime tax receipts? The country is tearing itself apart over the issue, the majority are supposedly wrong, Denmark, Netherlands and others have published receipts.
«why won't HMT publish the lifetime tax receipts? [...] Denmark, Netherlands and others have published receipts.»
Apart from the comically silly demand to publish "lifetime" receipts when most immigrants are well away from pension age, there is also the impossibility for HMT to publish receipts for immigrants for VAT and other indirect taxes, they can only be estimated and quite approximately also because many immigrants have "moderate" wages and so pay a larger proportion of their income in VAT and other taxes than other residents.
Note: it is usually malicious propagandists or the gullibles they fool that use "tax" or "fiscal" as if income tax was the only tax when in the UK it accounts for less than 1/3 of tax receipts.
Plus of course there is also the bigger impact of wage "moderation" on spending and not just on NHS labor costs and education spending (immigrants come educated at the expense of foreign taxpayers) but also on the costs of local councils, for example here is an estimate by an investor in care and nursing homes:
“One of the biggest names in European private equity said that Brexit will be good for his business, but will mean a 30% wage reduction for UK workers. [...] He added that EU immigration will be replaced with workers from the Indian subcontinent and Africa, willing to accept "substantially" lower pay.”
For the NHS, education, local councils the fiscal benefit of labour cost "moderation" is probably a few dozen billions per year in total.
While our blogger complains about "Wallowing in poverty" the incomes, wealth and living standards of middle-class and upper-class native citizens have been booming for decades also thanks to large labour cost "moderation" from mass immigration.
«If immigration was as straightforwardly positive»
Consider a major example: In London over 40% of residents is immigrant and over 50-60% of workers is immigrant.
Try to imagine how much higher the costs of deliveries, cleaning, nursing, gardening, etc. would be in London without that 50-60% and how much lower incomes (from housing rents and capital gains) would be without that 40%.
Worker/tenant quantitative easing has a huge impact on living standards.
It's a fantastic thesis - thoughtful, with plausible mechanisms. Really insightful.
But if it was also *true*, my guess is HMT would have published the receipts in a heartbeat. Unless you're saying HMT secretly want fascism and are withholding this data enable conspiracies and a lurch to the far hard right?
«my guess is HMT would have published the receipts in a heartbeat»
But there are extensive studies that investigate the net tax impact of immigration and the conclusions are the same:
* Currently overall immigrants pay more tax than they receive in government services because they are almost all quite younger than the average native and in particular few of them are retired and anyhow when they retire they will have much smaller pensions than current native retirees.
* Low paid immigrants net tax is slightly negative, which is a subsidy to low-wage employers (same for "income credits" and "housing benefits"), and middle and higher paid immigrants usually pay a lot more than the spending they get.
But the overall tax advantage of immigration is small, and much smaller than the effect of higher housing incomes and of "moderating" wages (most property owners and employers are natives). Middle-class and upper-class living standards would be significantly lower without immigration. The english dream is to live in comfortable affluence thanks to big property gains and to having cheap help and immigration has helped a lot to achieve it.
«If immigration was as straightforwardly positive»
Mass immigration is a win-win: it achieves both higher incomes (from housing and business) and lower costs (from labor); actually it is a triple win because these big advantages are achieved with no spending and no investment, which means the productivity of housing and businesses increases.
T. Wrigley, "Energy and the english industrial revolution", page 142
“However, when population growth exceeded 0.5 per cent annually, real wages plummeted”
“But let’s track back to 2004 when Blair took the decision to open the UK Labour market without any transition period to the citizens of the A8, and you have a decision – I was there, I know… - taken on both moral and domestic macro-economic grounds. None other than Mervyn King at the Bank of England, was personally pushing hard the need to address skills shortages and bottlenecks to head off the risk of inflation [...] this was a policy on borders and free movement driven by the perceived need to address those shortages and to try and drive the UK’s trend rate of growth higher.”
I'd love to think mass migration is a win win. I mean every neoliberal economic theory says it *should* be. Lots of policy papers conclude it *could* be.
But after 80 years, you don't think it's odd we don't have receipts?
Why would we not want to shoot Farage's fox? Is it cos we're worried it'll produce the same answers as Denmark and Netherlands?
«But after 80 years, you don't think it's odd we don't have receipts?»
So in 1995 the total price of UK residential property was estimated at around 900 billions (the average house price was around £54,000) and for 2025 over 8,000 billions (the average house price is around £290,000).
That is conservatively a profit of over 7,000 billion over £230 billions per year and since in 1995 there was only a small percentage of immigrants those massive gains have gone almost entirely to native citizens. Even more so looking at the south-east and London where most of those gains have happened.
Without immigration the prices of property owned by native citizens would have actually fallen because of lower natality rates as had been feared at the time (even if that has been countered by shrinking household size).
And that is without counting the also huge benefit of cheaper plumbers, carers, drivers, nurses, doctors, etc.; no surprise that most native citizens have kept voting for parties that have ensured that there was a big stream of immigrating workers and tenants to maintain a high demand pressure on jobs and properties.
The fiscal position by contrast is rather smaller than that and even if net positive to HMRC (thanks to VAT and NI taxes paid by the lowest income immigrants and to income taxes paid by the higher income, almost all of them young and healthy and in work) that matters a lot less.
It is indeed a win-win for those natives who want bigger incomes (from ownership) and lower costs (from labor). Not so much for the others but obviously they do not matter.
It is also a win for the immigrants, here is an example related to another country:
“Nishant lives in Dubai and has 296 followers on Instagram, but for reasons I can’t explain I’ve been getting regular updates on his life. He lives in a dormitory for migrant workers. A lot of his videos are filmed in a large, long room with two long benches where about a hundred skinny South Asian men stand, each bent over a small gas cooker, each frying their own chapati to eat with their own little pot of chana masala. No air conditioning in there; great sweaty patches on everyone’s sleeveless tops; fat drops of sweat dripping into the food. Later Nishant’s in his bedroom, which he shares with five other people, doing his laundry in a plastic bucket on the floor between the two stacks of bunk beds. Then he sleeps. He is not posting this as an exposé. He is not lodging some kind of protest against his living conditions. The captions all say Dubai ke ladke followed by lots of heart and money emojis. In some of his other videos he’s lip-syncing to Bollywood songs on a rooftop at dawn, with that hypodermic skyline all pink and glowing across the desert behind him. Nishant is from Arrah in Bihar, and I’ve seen what it’s like there. He’s bragging about his enviable life abroad.”
«asking the actual incurred fiscal costs and benefits in the UK»
«Let's just share the actual lifetime data openly»
Just to be sure: these are two *very* different requests and the "incurred fiscal costs and benefits" would be rather significantly positive for the immigration case (however they would still small relative to GDP). And again that would not consider the very significant benefits in terms of lower spending because of wage "moderation" due to a much larger labor supply.
However there are some studies about the lifetime net fiscal impact of UK native citizens and that is several dozen thousand pounds negative on average; for the lower income ones it can reach several hundred thousand pounds negative over a lifetime. Resume deporting the poor and beggars to Australia? :-)
«I'm asking the actual incurred fiscal costs and benefits in the UK. Someone in HMT has that data. Why the multi-decade hesitancy?»
Because the data would show that overall immigrants are getting squeezed by VAT and NI taxes at low incomes and by income tax at the middle and high incomes and being mostly young adults they tend to be far more in work than native citizen (many more of which are children, retired or unemployed, even in percent) so they get very little in pensions and social insurance. Immigration is a great deal as to making money for native citizens who are retired, employers or property owners (the others do not matter).
After a lot of pushing this (Leicester MP) blogger has managed to get with a FOI request significant amounts of data from HMRC as to the far more important issues of wages and property prices:
I think that if one consider lower wages to be a win, one has to be a capitalist. And not even any capitalist, because capitalists in the domestic industry need purchase power.
«one consider lower wages to be a win, one has to be a capitalist.»
We live in the era of mass rentiers plus small capitalists ("petty bourgeois") still are around 20-40% of the voters. Most pensioners, owners of property in a good area, small-size employers (dentists, doctors, garage owners, many plumbers and electricians, shop owners, ...) are rentiers or small capitalists who benefit from wage "moderation".
«And not even any capitalist, because capitalists in the domestic industry need purchase power.»
Worker/tenant quantitative easing has the win-win that both labor costs are "moderated" and the number of workers increases; so the mass of spending actually grows, plus demand pressure increases so prices can increase too.
Somehow you managed to write this without mentioning class war, which I believe was deliberate, and I'm curious as to why. Most of the other commenters will be aware that we are not talking about "stagnation" here; what's happening is that the ultra-wealthy are stealing everything and imposing poverty on the rest of us. It is deliberate, and "growth" is not the solution.
«the ultra-wealthy are stealing everything and imposing poverty on the rest of us.»
It is not just the "ultra-wealthy", or even the 1% or even the 10%, it is the majority of the middle class who want to make big profits on their houses and stocks that are redistributed from the lower classes. We are in the era of mass (20-40% of voters) rentierism.
Acknowledging this is very important politically: the task for social-democrats is not fighting the "ultra-wealthy" but persuading that 20-40% of reaganista/thatcherite voters that good secure jobs and decent reliable public services and social insurance are better for them in the long term than huge property and stocks profits.
“a 79-year-old retired carpenter in Cornwall, who bought his council house in Devon in the early 80s for £17,000. When it was valued at £80,000 in 1989, he sold up and used the equity to put towards a £135,000 fisherman’s cottage in St Mawes. Now it’s valued at £1.1m. “I was very grateful to Margaret Thatcher,” he said.”
You're suggesting that the social democrats should lead the working class to fight the middle class, and you ignore the 1%. This is one reason I'm not in or for the social democrats. Skewed perspective. Here in the US, the 1% has gained about 50 trillion dollars at the expense of the lower classes - we'd all be much better off if they hadn't. The next 20% has scarcely gained anything. Looking (from afar) at the UK and European systems I can see you have the same problem. The OP says the political class is not concerned about this or that but does NOT, and should, say that's because they've all been bought by the rich. Your politicians are no more interested in you than ours are in us.
I was one of these. I bought an central town apartment in Stockholm for 700.000 SEK in 2000 (approx 60.000 GBP) and sold it for 3,5 million in 2015. I had 2 million left when I paid back the loan plus taxes.
I would however had been happier if I had got a decent retreatment pension, which I hadn't; decent pensions were scrapped in 1989 for financial reasons. It was for that reason I had to sell, to move to a small town, I couldn't afford to live in Stockholm where I was born and where all my friends live.
«decent pensions were scrapped in 1989 for financial reasons»
Not for financial reason: because the only options are whether taxpayers and/workers fund a state/company pension or fund their own pension, and for most is the same cost and benefit. Decent state/company pensions were scrapped for other reasons:
* Those on high incomes were afraid that some of their state or company pension contributions would got to low income people.
* It is better for the elites when citizens feel insecure for their future they become less uppity.
* Since most people seem to have an absurdly high rate of discount for future income streams (except from property) most did not complain against a big cut in their future pensions.
* Surveys have proven that people with state/company pensions tend to vote for left wing-parties and those with personal pension accounts (or cars or property) tend to vote for right-wing parties.
Perhaps you refer to the British pensions case, I refer to the Swedish.
I would have been happier if the financial setup had been about what it was in the 70s, when the market prices of housing was ridiculously low. In that case, I would have been able to stay in my hometown. Even with a low pension. I could then, even with a low beginner's salary.
As it was, almost half of our combined pensions, i.e. my wifes and mine, would have been used to pay the interest on the loan. What is the use of a high price of a flat in that case?
And what is the use of a high price of one's flat if one has no intention to leave? And what is the use of a high price of one's flat if one has to buy another equally expensive flat if one sells it?
Rise of housing prices is pure inflation, of no use for anybody except the sharks.
There are certainly hoarders who like feeling the imaginary value of their housing go up, just to feel the bliss of imaginary wealth. There are always people living in dream worlds. I don't think, though, that they are so numerous that they can influence government politics, except perhaps in momentary panics. But most wake up. And what governs government politics is not majorites but the tiny minorities that live exclusively from wealth.
How does more immigration increase per capita growth? Surely more immigration lowers it unless there is some productivity benefit to importing cheap labour which I’m missing? It’s also not clear what is meant by growth here? All things being equal, you can increase growth by e.g. having more people invest in capital markets. Or by Government spending a lot. But if that all leaks to import consumption or debt financing, it’s not clear what has been achieved? Our problem is not growth. It’s productivity. And that isn’t about vested interests or bad people etc; It’s about the fact that the cost of debt presents an arbitrage against productive business. Why would you invest £100 into your business to spend on training or R&D when you can return 100 to shareholders who can then invest it in markets at a risk free rate (thanks to the central bank) >10% & pay only 4% on your debt? It’s a no brainer.
I think, based on other things he has written, that there are not enough unemployed people who can be employed in the NHS or construction for example (unless you can fire the many surplus (I think he would say) finance guys. The country would benefit from more housing construction and more NHS workers. I could be wrong.
I know. I’ve read his other stuff. I simply can’t agree with any line of argument that says importing more people for ‘growth’ will do anything about productivity & redistribution (through higher wages). It won’t. And his point about a tight labour market is correct - but this idea that you just force people to switch jobs by bringing on a recession was rejected by Keynes 80 years ago. I really don’t think we should re litigate it.
In the UK we have c.1.5m unemployed, plus another c.1.2m economically inactive and looking to work. That's nearly 4 people for each of our c.0.75m vacancies.
«This means that our real incomes are indeed 30% lower than they would be if that trend had continued. [... graph ...]»
Unfortunately our blogger here falls victim to "centrist" propaganda as the orange-colored exponential line is highly tendentious as it is based on assuming that the peak of the 2001-2007 bubble was the "normal" state of business; also as a nice visual trick the orange-colored line has been drawn particularly thick to obscure that in the period between 1955 and 1997 it lies mostly above the middle of the GDP-per-head line. A more realistic interpolation is the thin black line in this update:
It makes clear that the 1997-2007 period of "centrist" glory was a giant bubble created by extraordinarily loose central bank policy helped by significant oil extraction revenue (too bad that in 2007 the UK became again a net oil importer):
I think that our blogger also falls victim to right-wing propaganda when he uses "our" in “our real incomes are indeed 30% lower” as if "we are all in the same boat" (David Cameron) even after he warned against using overly aggregate terms like "the country" in his November 28th post: while the incomes of the top 20-40% of the UK voters have been booming since 40 years ago thanks to massive increases in property gains and rents and in finance incomes for executives and traders and related sectors; all those gains have been redistributed from the lower classes thanks to sustained government policies to buy the voters from "Middle England" for thatcherism with large property gains.
As a victim of propaganda our blogger ends up repeating the usual "centrist" points that all was well when ZIRP made property and finance incumbents so much richer and "on average" those incumbents and middle and low income workers did well.
«A more realistic interpolation is the thin black line in this update»
I confess that line is also tendentious: I drew it as an alternative to the orange "exponential debt-fueled growth" line following the same conceit that there is no change in overall economic structure.
A better description of GDP-per-head data is that there are actually two distinct periods with two different slopes: 1950-1980 the rate of GDP growth per head was roughly twice as high as after 1980. The near halving of the rate of GDP-per-head growth since 1980 is the signature success of thatcherism and "centrism": such achievement has meant much lower wage inflation and much lower pollution both thanks also to the export of most unionized factory jobs to other countries.
The immigration issue won't go away because the level in recent decades is historically unprecedented in the history of the British Isles, both in relative and absolute terms. And no matter how much people are told it is racist to notice the problems caused it is very difficult to stop when they are in plain view. The apologists for mass immigration do not, indeed cannot, address the problematic parts, all they can say is on some kind of balance, some of the immigration is positive. Which is an argument for a selective immigration policy; we want immigrants from cultures that are compatible with modern, Western, liberal, democratic, secular leaning culture (this is the society the immigrants are seeking to live in), and we want them to be of higher economic value. Their colour and religion is irrelevant.
The footnote about 1974 is telling, the UK was more culturally homogenous then, there was still immigration, just not at at later levels and certainly not at Boriswave levels. If you're an older UK native, of whatever ethnicity, there's every chance you may have seen the place you grew up change beyond recognition due to mass immigration. If that area has seen huge third world immigration you may feel you're now the 'outsider', and you may have to adjust to the imported third world cultural practices or you're the racist. Bizarrely enough I know families of West Indian heritage where the third and fourth generation complain about competing for social housing and services with much larger numbers of recent arrivals from the third world.
One dubious feature about the GDP count is that there are no minuses in it. It’s like Soviet bookkeeping: the more you do the better. The legendary Swedish environmentlist Björn Eriksson said: GDP is about how much we exert ourselves, not about what we get out of it.
Much of the economic work we do is simply waste. The less we do it, the better we will live. But it is not obvious how.
Douglass North found that while transaction costs in the US by 1900 was 25 % of the total, they had grown to 50 % in 1970. Much of it was simply costs that had become visible. In a society of family farmers there are lots of costs, primarily adjustment time to new tasks that are carried out in the household and not counted. When labour is divided they become visible because they are invoiced. But nevertheless, much of the increase is probably unnecessary. And North calculated 50 years ago, it has probably increased much since.
The most prestigious economists in Sweden in the 50s and 60s was Erik Dahmén. He made his spurs examining what he called industrial blocks, industries that grow because they cooperate and stay close to eachother. His first study object was about ASEA, present ABB, that grew because it provided the iron industry in central Sweden with electricity, solving their energy problem. They, ASEA and its customers, made up a block because they were located close to eachother. ASEA would have had a harder time if the iron industry had been located in e.g. Japan, something to think of in a globalized world. It succeeded because it could cut transaction costs and create synergies.
But the same principle is valid at the very local level too. This was the object of study for Jane Jacobs. She found that the closer businesses and customers are to eachother, the more they prosper. When labour is divided, it is an advantage that the participants in the division sit close to eachother; it’s for that reason division of labour spawns towns. Her findings were confirmed when Fed made an investigation on all American cities and found, very neatly, that the more spread out a city was, the worse was its economic development (Abel et al: Productivity and the density of human capital, 2012). Distances are expensive. In an economy, much work is simply there to overcome distances that have been deliberately created because of a pernicious city planning ideology (and because of outsourcing).
It is even possible to see the numbers in one and the same city. Another study concerned a middle sized US city, Lafayette, Florida, and found that only the city center brings a net value for the municipal economy, all the others had too much expensive infrastructure due to sprawl (Strong Towns 10.1.2017). It would have been more economical with a 19th century structure without suburbs.
Distance is of course only one case of waste; there are others. One is what historians call protection costs, i.e. what you have to spend to keep predators away. These protection costs tend to creep upward due to sheer unsubstantiated fear – ”Fear begets suspicion and distrust, and evil imagining of all sorts”, according to the memoirs of Edward Grey, the British foreign minister who accepted and argued for Britains participation in WWI. And evil imagining is certainly the reason why the Nato countries think it is necessary to increase defence spending to 5 % of GDP. See there an unnecessary need for GDP growth!
These kinds of waste is part of what is called social traps. One does what one thinks is best for oneself, but added it makes society horrible to live in. Not least because you have to work so much to cut corners and get the values out of the traps. Social traps are in reality ubiquitous (Bo Rothstein, Social traps and the problem of trust, 2009), particularly when politics retreats and all power is given to the market.
Social traps are addressed by politics. In the distance case by consciously shrinking the distances, the armament case by creative negotiations about cheaper solutions to the security issue. Politics may sometimes reduce the waste of social traps, and so make a lot of GDP unnecessary.
Perhaps these things are what David Graeber called ”duct tapers”: being busy making makeshift solutions that don’t work in the long run, and are only there because of bad organization and bad politics.
If there is anything I feel ambivalent to it is GDP. We know all that the only advantage with the concept is that it is easy to measure. But if it is good or not is not that sure.
Richard Layard (Happiness, Penguin 2005) found that what causes happiness is primarily family, friends, security, safe jobs, trust, health and personal values. Most of these are considered to stand in the way of GDP rise. Jobs are considered the more unsafe the better. Family and friends are considered as something one should leave because of economic restructuring. Health services are cut to give money for GDP rise.
Of course, "all things equal" as the economists say, it is of course better to have an extra pound than not. But if it has to be paid for with a diminishment of things that causes happiness I feel doubt, indeed.
I think that one should strive for things one really need, and if that causes an increase (or not) in GDP, so that be it.
Perhaps one can say that it for a country it is equally good to maximize GDP as for a business to maximize profit. But many economists, including Jack Welch, ex-CEO of IBM, think that is "the dumbest idea in the world". Profit is the result, not the strategy. It is what you get if you focus on the right thing. It is not what you focus on. Doing that is just a diversion.
Western businesses have been focussing on profit, exclusively, since the rentiers took control in the 70s. Before that they focussed on market shares, technological development, investment for the future, etc etc.
They have focussed on profit to the extent that they have disappeared, like for example RCA, once the leader of the world's radio business, that succumbed to the short term profit fad in the late 60s and sold off itself to fulfill that goal. They were gone in 1986.
For a country I suppose it has to keep up productive power not to be a victim of predators. It is not sure that this is the same thing as GDP, even if one consider all what GDP doesn't measure. This because it is not indifferent what productive power one has. Productive power in growing sugarcane is worthless, productive power in microelectronics is probably necessary nowadays.
But apart from that, from the citizen's point of view what promotes happiness is the most important.
«For a country I suppose it has to keep up productive power not to be a victim of predators.»
For the UK and western Europe that is too late: vassalisation to the USA was inevitable after their defeat in WW2 and also today as all the critical supplies of fuels and foods that they need are via overseas routes that can be choked at any time by the USA Navy.
«It is not sure that this is the same thing as GDP, even if one consider all what GDP doesn't measure.»
«Adam Smith himself supported the Navigation Acts – which regulated trade and shipping between England, its colonies, and other countries – despite the fact that they mandated that goods be transported on British ships even if other options were cheaper. “Defense,” he wrote in The Wealth of Nations, is of much more importance than opulence.”»
But that is not an point that matters to people who can buy citizenship (or private islands) wherever they want. Or to people who can sell their property and with the big realized gain they can retire to Dubai or the Philippines etc.
«This because it is not indifferent what productive power one has. Productive power in growing sugarcane is worthless»
Even if it used to be very profitable 2 centuries ago when sugar was scarce and before sugar could be extracted from beets.
«productive power in microelectronics is probably necessary nowadays.»
D. Landes, "The wealth and poverty of nations", 1998: “The gains from trade are unequal. As history has shown, some countries will do much better than others. The primary reason is that comparative advantage is not the same for all, and that some activities are more lucrative and productive and than others. (A dollar is not a dollar is not a dollar.) They require and yield greater gains in knowledge and know-how, within and without. [...] Comparative advantage is not fixed and it can move for or against.”
I know, it is good to have productive powers. But I'm not that sure it's the same thing as GDP, at least in the higher ranges of both.
And to be sure against predators it is important what you are able to produce, not only how big amount you are able to produce. It seems that the West is quite powerless face to the Chinese, not because China has a higher GDP than the West combined (it hasn't), but because they focus on dominating the most important things. "Important" in this case meaning a. things that may keep the predators away, and b. things that are important for the future but not necessarily now.
One of the most pernicious things with mainstream economics is that it believes that it doesn't matter what you do, or make, as long as it can be sold on the market. I believe more in making synergies. Which is a matter of organization.
I think we paradoxically also have the opposite problem - politicians who think that merely saying the word "growth" will magic it into existence. Obviously the prime example here is Liz Truss, but the current government has picked up the baton, talking about growth while barely having a plan to generate it.
The iron grip of the counsel of despair is beyond belief. Any change proposed in local government triggers a protest. Those groups exist to oppose. An example: The Green Belt. London's 'green belt' has become a religion. This is regardless of the desperately poor state that the land is in. Notwithstanding the government's 'Gray Belt' elision the same holier-than-thou groups consume planning committees.
«The UK’s comparative advantage lies in part in higher education and the creative arts»
The story of comparative advantage is bullshit in its own terms but even accepting it the idea is that a comparative advantage in sector X by country A versus country B is one where there is a competitive disadvantage but it is smaller than in sector Y so that country B is better off just doing Y and importing X from country A.
Here my understanding of of our blogger's claim is that the UK is at a competitive disadvantage in every sector with respect to USA, EU, Japan, China, but the gap is smaller in education and entertainment so USA, EU, Japan, China should be richer exporting to the UK everything except importing UK entertainment product and education services.
I quite disagree with that because:
* Education services and entertainment products can only employ so many people. What are the rest going to do?
* Actually the UK has *competitive* advantages in education services and entertainment products: in education because of having high-prestige institutions thanks to imperial legacy and in entertainment because it seems to have quirkier people than other countries.
* However the prestige of ex-imperial education institutions will continue to fade: currently imperial prestige is stronger for USA education and soon all the ambitious parents in the world will want to send their previous children to chinese universities.
Also in some countries like Korea-south and China entertainment exports are already strong and in from Japan too if one counts console games.
* Regardless the UK has only one enduring competitive advantage: it has the same shield of sovereignty to rent for high fees to international rich people who want "privacy", the same shield that Liechtenstein, Channel Islands, Bermuda, Virgin Islands, Switzerland have, but much better scale and sophistication in London. Tjis can sustain the economy of the M25 area, but what about the rest?
«industries staffed by liberal metropolitans rather than the older less educated people who still read newspapers and so constitute what politicians regard as target voters.»
I think our blogger here is again victim of "centrist" propaganda that depicts sneeringly non-"centrists" as "less educated people" (who however "still read newspapers") and who therefore are easily fooled. Just like "centrists" depict sneeringly women who "breed" as "less educated" too.
My impression instead is that the target voters of all mainstream parties, including Reform UK, are affluent "Middle England" property owners as in the past 40 years (except for 5 years of Corbyn at Labour) and those property owners are angry that property prices have been going sideways since 2022 and are expressing that by abstaining or voting as a protest for Reform UK (or less often for the LibDems).
The Conservative were still winning by-elections in 2021 (Hartpool, Old Bexley) against a deeply disappointing New Labour and the Conservative collapse started in 2022 (Chester, Stretford) as the reality of stagnant property prices hit their wallets.
You might want to take a look at Productivity and the Bonus Culture by Andrew Smithers https://academic.oup.com/book/35230. I found it to be an interesting diagnosis of the recent economic stagnation, which places much of the blame on the now prevalent executive compensation structures in listed companies (primarily in the US & UK) that generously reward managements for achieving short term profitability and increases in share value, but thus indirectly discourage investment for long-term growth in productivity.
«an interesting diagnosis of the recent economic stagnation [...] for achieving short term profitability and increases in share value, but thus indirectly discourage investment»
Put another way executives are sharecroppers and are given large incentives to asset-strip their businesses. Plus "worker-and-tenant quantitative easing" (also known as mass immigration) has the big advantages of increasing incomes (from ownership of properties and businesses) and of "moderating" costs (from labor) without business and property owners having to invest anything so the "productivity" of mass immigration is huge.
«for long-term growth in productivity.»
To have long -term growth in physical productivity there must be two conditions: one is that there be an incentive to pursue it, but the other is that must be achievable.
The overwhelming majority of physical productivity increases in the past has been caused by the adoption of coal earlier and oil later to replace vegetables as the main source of energy and has been driven both by the wider adoption and the more efficient use of those fuels. Unfortunately in "developed" economies coal and oil are already widely adopted and already efficiently used and the rate of improvement in width and efficiency has slowed down a lot.
Re: footnote 2, I remember the Guardian really disgracing themselves on this one; they did a deep dive into p.-n. e. g. t., which consisted mostly of (a) abbreviating it to 'poncendogrot' (hilarious because it starts with 'ponce' and ends with 'grot') and (b) tracing it back to Ed Balls, setting him on the road to Strictly and daytime TV stardom. Then Michael Howard said "these ideas aren't Brown's, they're Balls'" and no further discussion was possible.
The pity of it is that a theory about economic growth is obviously a good thing for the Treasury to have, and if we can have conditions that promote endogenous growth, so much the better - if this is Economics, it's Economics For Dummies*. The only part of that phrase that's at all obscure or 'technical' is "post-neoclassical", and any generalist journo should be able to get someone to explain that in a sentence. John Birt was right all those years ago, and the bias against understanding has only intensified.
If immigration was as straightforwardly positive as your blanket statement suggest, why won't HMT publish the lifetime tax receipts? The country is tearing itself apart over the issue, the majority are supposedly wrong, Denmark, Netherlands and others have published receipts.
Why don't MHT kill this one stone dead?
«why won't HMT publish the lifetime tax receipts? [...] Denmark, Netherlands and others have published receipts.»
Apart from the comically silly demand to publish "lifetime" receipts when most immigrants are well away from pension age, there is also the impossibility for HMT to publish receipts for immigrants for VAT and other indirect taxes, they can only be estimated and quite approximately also because many immigrants have "moderate" wages and so pay a larger proportion of their income in VAT and other taxes than other residents.
Note: it is usually malicious propagandists or the gullibles they fool that use "tax" or "fiscal" as if income tax was the only tax when in the UK it accounts for less than 1/3 of tax receipts.
Plus of course there is also the bigger impact of wage "moderation" on spending and not just on NHS labor costs and education spending (immigrants come educated at the expense of foreign taxpayers) but also on the costs of local councils, for example here is an estimate by an investor in care and nursing homes:
https://www.ibtimes.co.uk/buyout-boss-says-brexit-will-be-good-his-business-will-mean-30-cut-uk-wages-1602631
“One of the biggest names in European private equity said that Brexit will be good for his business, but will mean a 30% wage reduction for UK workers. [...] He added that EU immigration will be replaced with workers from the Indian subcontinent and Africa, willing to accept "substantially" lower pay.”
For the NHS, education, local councils the fiscal benefit of labour cost "moderation" is probably a few dozen billions per year in total.
While our blogger complains about "Wallowing in poverty" the incomes, wealth and living standards of middle-class and upper-class native citizens have been booming for decades also thanks to large labour cost "moderation" from mass immigration.
«If immigration was as straightforwardly positive»
Consider a major example: In London over 40% of residents is immigrant and over 50-60% of workers is immigrant.
Try to imagine how much higher the costs of deliveries, cleaning, nursing, gardening, etc. would be in London without that 50-60% and how much lower incomes (from housing rents and capital gains) would be without that 40%.
Worker/tenant quantitative easing has a huge impact on living standards.
It's a fantastic thesis - thoughtful, with plausible mechanisms. Really insightful.
But if it was also *true*, my guess is HMT would have published the receipts in a heartbeat. Unless you're saying HMT secretly want fascism and are withholding this data enable conspiracies and a lurch to the far hard right?
Why else withhold the good news?
«my guess is HMT would have published the receipts in a heartbeat»
But there are extensive studies that investigate the net tax impact of immigration and the conclusions are the same:
* Currently overall immigrants pay more tax than they receive in government services because they are almost all quite younger than the average native and in particular few of them are retired and anyhow when they retire they will have much smaller pensions than current native retirees.
* Low paid immigrants net tax is slightly negative, which is a subsidy to low-wage employers (same for "income credits" and "housing benefits"), and middle and higher paid immigrants usually pay a lot more than the spending they get.
But the overall tax advantage of immigration is small, and much smaller than the effect of higher housing incomes and of "moderating" wages (most property owners and employers are natives). Middle-class and upper-class living standards would be significantly lower without immigration. The english dream is to live in comfortable affluence thanks to big property gains and to having cheap help and immigration has helped a lot to achieve it.
No there are not. Not in the UK anyway.
There are detailed studies of *hypothetical* immigrants from the OBR.
But there is no empirical reporting on the actual lifetime fiscal costs and benefits of immigrants to the UK.
"This analysis aims to provide order-of-magnitude estimates for the net fiscal impact of a typical migrant" for example is not an empirical answer.
I'm asking why nobody shares the *actual* data?
https://obr.uk/docs/dlm_uploads/FRS-migration-supplementary-forecast-information-release-Mar-2025.pdf
«If immigration was as straightforwardly positive»
Mass immigration is a win-win: it achieves both higher incomes (from housing and business) and lower costs (from labor); actually it is a triple win because these big advantages are achieved with no spending and no investment, which means the productivity of housing and businesses increases.
T. Wrigley, "Energy and the english industrial revolution", page 142
“However, when population growth exceeded 0.5 per cent annually, real wages plummeted”
https://www.economist.com/britain/2025/05/21/bring-back-boris
“High immigration? Blame Mr Sunak for that too. On Treasury spreadsheets, immigrants go in one end and gdp comes out the other.”
https://policyscotland.gla.ac.uk/blog-sir-ivan-rogers-brexit-speech-text-in-full-october-2017/
“But let’s track back to 2004 when Blair took the decision to open the UK Labour market without any transition period to the citizens of the A8, and you have a decision – I was there, I know… - taken on both moral and domestic macro-economic grounds. None other than Mervyn King at the Bank of England, was personally pushing hard the need to address skills shortages and bottlenecks to head off the risk of inflation [...] this was a policy on borders and free movement driven by the perceived need to address those shortages and to try and drive the UK’s trend rate of growth higher.”
I'd love to think mass migration is a win win. I mean every neoliberal economic theory says it *should* be. Lots of policy papers conclude it *could* be.
But after 80 years, you don't think it's odd we don't have receipts?
Why would we not want to shoot Farage's fox? Is it cos we're worried it'll produce the same answers as Denmark and Netherlands?
More theory.
We have run the experiment. Time to release the results.
«But after 80 years, you don't think it's odd we don't have receipts?»
So in 1995 the total price of UK residential property was estimated at around 900 billions (the average house price was around £54,000) and for 2025 over 8,000 billions (the average house price is around £290,000).
That is conservatively a profit of over 7,000 billion over £230 billions per year and since in 1995 there was only a small percentage of immigrants those massive gains have gone almost entirely to native citizens. Even more so looking at the south-east and London where most of those gains have happened.
Without immigration the prices of property owned by native citizens would have actually fallen because of lower natality rates as had been feared at the time (even if that has been countered by shrinking household size).
And that is without counting the also huge benefit of cheaper plumbers, carers, drivers, nurses, doctors, etc.; no surprise that most native citizens have kept voting for parties that have ensured that there was a big stream of immigrating workers and tenants to maintain a high demand pressure on jobs and properties.
The fiscal position by contrast is rather smaller than that and even if net positive to HMRC (thanks to VAT and NI taxes paid by the lowest income immigrants and to income taxes paid by the higher income, almost all of them young and healthy and in work) that matters a lot less.
«I'd love to think mass migration is a win win.»
It is indeed a win-win for those natives who want bigger incomes (from ownership) and lower costs (from labor). Not so much for the others but obviously they do not matter.
It is also a win for the immigrants, here is an example related to another country:
https://samkriss.substack.com/p/the-worlds-first-matcha-labubu-genocide
“Nishant lives in Dubai and has 296 followers on Instagram, but for reasons I can’t explain I’ve been getting regular updates on his life. He lives in a dormitory for migrant workers. A lot of his videos are filmed in a large, long room with two long benches where about a hundred skinny South Asian men stand, each bent over a small gas cooker, each frying their own chapati to eat with their own little pot of chana masala. No air conditioning in there; great sweaty patches on everyone’s sleeveless tops; fat drops of sweat dripping into the food. Later Nishant’s in his bedroom, which he shares with five other people, doing his laundry in a plastic bucket on the floor between the two stacks of bunk beds. Then he sleeps. He is not posting this as an exposé. He is not lodging some kind of protest against his living conditions. The captions all say Dubai ke ladke followed by lots of heart and money emojis. In some of his other videos he’s lip-syncing to Bollywood songs on a rooftop at dawn, with that hypodermic skyline all pink and glowing across the desert behind him. Nishant is from Arrah in Bihar, and I’ve seen what it’s like there. He’s bragging about his enviable life abroad.”
Maybe it's a win for Dubai. I'm not sure I care much about that.
I'm asking the actual incurred fiscal costs and benefits in the UK. Someone in HMT has that data. Why the multi-decade hesitancy?
«asking the actual incurred fiscal costs and benefits in the UK»
«Let's just share the actual lifetime data openly»
Just to be sure: these are two *very* different requests and the "incurred fiscal costs and benefits" would be rather significantly positive for the immigration case (however they would still small relative to GDP). And again that would not consider the very significant benefits in terms of lower spending because of wage "moderation" due to a much larger labor supply.
However there are some studies about the lifetime net fiscal impact of UK native citizens and that is several dozen thousand pounds negative on average; for the lower income ones it can reach several hundred thousand pounds negative over a lifetime. Resume deporting the poor and beggars to Australia? :-)
I can imagine why you'd like to talk about the natives instead.
«I'm asking the actual incurred fiscal costs and benefits in the UK. Someone in HMT has that data. Why the multi-decade hesitancy?»
Because the data would show that overall immigrants are getting squeezed by VAT and NI taxes at low incomes and by income tax at the middle and high incomes and being mostly young adults they tend to be far more in work than native citizen (many more of which are children, retired or unemployed, even in percent) so they get very little in pensions and social insurance. Immigration is a great deal as to making money for native citizens who are retired, employers or property owners (the others do not matter).
After a lot of pushing this (Leicester MP) blogger has managed to get with a FOI request significant amounts of data from HMRC as to the far more important issues of wages and property prices:
https://www.neilobrien.co.uk/p/new-foi-data-where-in-the-uk-did
Much data also here including some on the fiscal position.
https://www.neilobrien.co.uk/p/thinking-about-the-costs-and-benefits
https://www.neilobrien.co.uk/p/new-data-on-migrants-earnings
You sound like you're getting your excuses in ahead of the result.
Let's just share the actual lifetime data openly and we'll see where the chips fall. Why would we *not* want that?
I think that if one consider lower wages to be a win, one has to be a capitalist. And not even any capitalist, because capitalists in the domestic industry need purchase power.
«one consider lower wages to be a win, one has to be a capitalist.»
We live in the era of mass rentiers plus small capitalists ("petty bourgeois") still are around 20-40% of the voters. Most pensioners, owners of property in a good area, small-size employers (dentists, doctors, garage owners, many plumbers and electricians, shop owners, ...) are rentiers or small capitalists who benefit from wage "moderation".
«And not even any capitalist, because capitalists in the domestic industry need purchase power.»
Worker/tenant quantitative easing has the win-win that both labor costs are "moderated" and the number of workers increases; so the mass of spending actually grows, plus demand pressure increases so prices can increase too.
Theory, theory, theory. It's an empirical question.
Well, that depends on which side you are on. I can't see lower wages as other than pernicious. But you, of course, may have other interests.
Somehow you managed to write this without mentioning class war, which I believe was deliberate, and I'm curious as to why. Most of the other commenters will be aware that we are not talking about "stagnation" here; what's happening is that the ultra-wealthy are stealing everything and imposing poverty on the rest of us. It is deliberate, and "growth" is not the solution.
«the ultra-wealthy are stealing everything and imposing poverty on the rest of us.»
It is not just the "ultra-wealthy", or even the 1% or even the 10%, it is the majority of the middle class who want to make big profits on their houses and stocks that are redistributed from the lower classes. We are in the era of mass (20-40% of voters) rentierism.
Acknowledging this is very important politically: the task for social-democrats is not fighting the "ultra-wealthy" but persuading that 20-40% of reaganista/thatcherite voters that good secure jobs and decent reliable public services and social insurance are better for them in the long term than huge property and stocks profits.
https://www.bloomberg.com/news/articles/2020-12-22/opendoor-open-faces-an-expensive-path-to-profitability-in-real-estate
“From the minute the average couple busy a home they're constantly calculating how much they'll make when they sell it”
https://www.theguardian.com/society/2022/jun/29/how-right-to-buy-ruined-british-housing
“a 79-year-old retired carpenter in Cornwall, who bought his council house in Devon in the early 80s for £17,000. When it was valued at £80,000 in 1989, he sold up and used the equity to put towards a £135,000 fisherman’s cottage in St Mawes. Now it’s valued at £1.1m. “I was very grateful to Margaret Thatcher,” he said.”
You're suggesting that the social democrats should lead the working class to fight the middle class, and you ignore the 1%. This is one reason I'm not in or for the social democrats. Skewed perspective. Here in the US, the 1% has gained about 50 trillion dollars at the expense of the lower classes - we'd all be much better off if they hadn't. The next 20% has scarcely gained anything. Looking (from afar) at the UK and European systems I can see you have the same problem. The OP says the political class is not concerned about this or that but does NOT, and should, say that's because they've all been bought by the rich. Your politicians are no more interested in you than ours are in us.
I was one of these. I bought an central town apartment in Stockholm for 700.000 SEK in 2000 (approx 60.000 GBP) and sold it for 3,5 million in 2015. I had 2 million left when I paid back the loan plus taxes.
I would however had been happier if I had got a decent retreatment pension, which I hadn't; decent pensions were scrapped in 1989 for financial reasons. It was for that reason I had to sell, to move to a small town, I couldn't afford to live in Stockholm where I was born and where all my friends live.
«decent pensions were scrapped in 1989 for financial reasons»
Not for financial reason: because the only options are whether taxpayers and/workers fund a state/company pension or fund their own pension, and for most is the same cost and benefit. Decent state/company pensions were scrapped for other reasons:
* Those on high incomes were afraid that some of their state or company pension contributions would got to low income people.
* It is better for the elites when citizens feel insecure for their future they become less uppity.
* Since most people seem to have an absurdly high rate of discount for future income streams (except from property) most did not complain against a big cut in their future pensions.
* Surveys have proven that people with state/company pensions tend to vote for left wing-parties and those with personal pension accounts (or cars or property) tend to vote for right-wing parties.
Perhaps you refer to the British pensions case, I refer to the Swedish.
I would have been happier if the financial setup had been about what it was in the 70s, when the market prices of housing was ridiculously low. In that case, I would have been able to stay in my hometown. Even with a low pension. I could then, even with a low beginner's salary.
As it was, almost half of our combined pensions, i.e. my wifes and mine, would have been used to pay the interest on the loan. What is the use of a high price of a flat in that case?
And what is the use of a high price of one's flat if one has no intention to leave? And what is the use of a high price of one's flat if one has to buy another equally expensive flat if one sells it?
Rise of housing prices is pure inflation, of no use for anybody except the sharks.
There are certainly hoarders who like feeling the imaginary value of their housing go up, just to feel the bliss of imaginary wealth. There are always people living in dream worlds. I don't think, though, that they are so numerous that they can influence government politics, except perhaps in momentary panics. But most wake up. And what governs government politics is not majorites but the tiny minorities that live exclusively from wealth.
How does more immigration increase per capita growth? Surely more immigration lowers it unless there is some productivity benefit to importing cheap labour which I’m missing? It’s also not clear what is meant by growth here? All things being equal, you can increase growth by e.g. having more people invest in capital markets. Or by Government spending a lot. But if that all leaks to import consumption or debt financing, it’s not clear what has been achieved? Our problem is not growth. It’s productivity. And that isn’t about vested interests or bad people etc; It’s about the fact that the cost of debt presents an arbitrage against productive business. Why would you invest £100 into your business to spend on training or R&D when you can return 100 to shareholders who can then invest it in markets at a risk free rate (thanks to the central bank) >10% & pay only 4% on your debt? It’s a no brainer.
I think, based on other things he has written, that there are not enough unemployed people who can be employed in the NHS or construction for example (unless you can fire the many surplus (I think he would say) finance guys. The country would benefit from more housing construction and more NHS workers. I could be wrong.
I know. I’ve read his other stuff. I simply can’t agree with any line of argument that says importing more people for ‘growth’ will do anything about productivity & redistribution (through higher wages). It won’t. And his point about a tight labour market is correct - but this idea that you just force people to switch jobs by bringing on a recession was rejected by Keynes 80 years ago. I really don’t think we should re litigate it.
Way out of my depth here. Over to you.
In the UK we have c.1.5m unemployed, plus another c.1.2m economically inactive and looking to work. That's nearly 4 people for each of our c.0.75m vacancies.
We are not short of workers.
Really excellent - articulates expertly several lines of thinking I've had.
«This means that our real incomes are indeed 30% lower than they would be if that trend had continued. [... graph ...]»
Unfortunately our blogger here falls victim to "centrist" propaganda as the orange-colored exponential line is highly tendentious as it is based on assuming that the peak of the 2001-2007 bubble was the "normal" state of business; also as a nice visual trick the orange-colored line has been drawn particularly thick to obscure that in the period between 1955 and 1997 it lies mostly above the middle of the GDP-per-head line. A more realistic interpolation is the thin black line in this update:
https://blissex.wordpress.com/wp-content/uploads/2025/12/data_uk_gdp_head_1955_to_2025_blissex.webp
It makes clear that the 1997-2007 period of "centrist" glory was a giant bubble created by extraordinarily loose central bank policy helped by significant oil extraction revenue (too bad that in 2007 the UK became again a net oil importer):
https://blissex.files.wordpress.com/2018/04/dataukoilextrconsexpmazama1965to2015.png
https://blissex.wordpress.com/wp-content/uploads/2021/02/dataukprodbysector1970to2013.png
I think that our blogger also falls victim to right-wing propaganda when he uses "our" in “our real incomes are indeed 30% lower” as if "we are all in the same boat" (David Cameron) even after he warned against using overly aggregate terms like "the country" in his November 28th post: while the incomes of the top 20-40% of the UK voters have been booming since 40 years ago thanks to massive increases in property gains and rents and in finance incomes for executives and traders and related sectors; all those gains have been redistributed from the lower classes thanks to sustained government policies to buy the voters from "Middle England" for thatcherism with large property gains.
As a victim of propaganda our blogger ends up repeating the usual "centrist" points that all was well when ZIRP made property and finance incumbents so much richer and "on average" those incumbents and middle and low income workers did well.
Bonus graphs:
https://blissex.wordpress.com/wp-content/uploads/2018/02/dataelectreuothersconsperhead1960to2015.png
https://blissex.wordpress.com/wp-content/uploads/2025/02/inflatedexpect-831224.png
«A more realistic interpolation is the thin black line in this update»
I confess that line is also tendentious: I drew it as an alternative to the orange "exponential debt-fueled growth" line following the same conceit that there is no change in overall economic structure.
A better description of GDP-per-head data is that there are actually two distinct periods with two different slopes: 1950-1980 the rate of GDP growth per head was roughly twice as high as after 1980. The near halving of the rate of GDP-per-head growth since 1980 is the signature success of thatcherism and "centrism": such achievement has meant much lower wage inflation and much lower pollution both thanks also to the export of most unionized factory jobs to other countries.
The immigration issue won't go away because the level in recent decades is historically unprecedented in the history of the British Isles, both in relative and absolute terms. And no matter how much people are told it is racist to notice the problems caused it is very difficult to stop when they are in plain view. The apologists for mass immigration do not, indeed cannot, address the problematic parts, all they can say is on some kind of balance, some of the immigration is positive. Which is an argument for a selective immigration policy; we want immigrants from cultures that are compatible with modern, Western, liberal, democratic, secular leaning culture (this is the society the immigrants are seeking to live in), and we want them to be of higher economic value. Their colour and religion is irrelevant.
The footnote about 1974 is telling, the UK was more culturally homogenous then, there was still immigration, just not at at later levels and certainly not at Boriswave levels. If you're an older UK native, of whatever ethnicity, there's every chance you may have seen the place you grew up change beyond recognition due to mass immigration. If that area has seen huge third world immigration you may feel you're now the 'outsider', and you may have to adjust to the imported third world cultural practices or you're the racist. Bizarrely enough I know families of West Indian heritage where the third and fourth generation complain about competing for social housing and services with much larger numbers of recent arrivals from the third world.
One dubious feature about the GDP count is that there are no minuses in it. It’s like Soviet bookkeeping: the more you do the better. The legendary Swedish environmentlist Björn Eriksson said: GDP is about how much we exert ourselves, not about what we get out of it.
Much of the economic work we do is simply waste. The less we do it, the better we will live. But it is not obvious how.
Douglass North found that while transaction costs in the US by 1900 was 25 % of the total, they had grown to 50 % in 1970. Much of it was simply costs that had become visible. In a society of family farmers there are lots of costs, primarily adjustment time to new tasks that are carried out in the household and not counted. When labour is divided they become visible because they are invoiced. But nevertheless, much of the increase is probably unnecessary. And North calculated 50 years ago, it has probably increased much since.
The most prestigious economists in Sweden in the 50s and 60s was Erik Dahmén. He made his spurs examining what he called industrial blocks, industries that grow because they cooperate and stay close to eachother. His first study object was about ASEA, present ABB, that grew because it provided the iron industry in central Sweden with electricity, solving their energy problem. They, ASEA and its customers, made up a block because they were located close to eachother. ASEA would have had a harder time if the iron industry had been located in e.g. Japan, something to think of in a globalized world. It succeeded because it could cut transaction costs and create synergies.
But the same principle is valid at the very local level too. This was the object of study for Jane Jacobs. She found that the closer businesses and customers are to eachother, the more they prosper. When labour is divided, it is an advantage that the participants in the division sit close to eachother; it’s for that reason division of labour spawns towns. Her findings were confirmed when Fed made an investigation on all American cities and found, very neatly, that the more spread out a city was, the worse was its economic development (Abel et al: Productivity and the density of human capital, 2012). Distances are expensive. In an economy, much work is simply there to overcome distances that have been deliberately created because of a pernicious city planning ideology (and because of outsourcing).
It is even possible to see the numbers in one and the same city. Another study concerned a middle sized US city, Lafayette, Florida, and found that only the city center brings a net value for the municipal economy, all the others had too much expensive infrastructure due to sprawl (Strong Towns 10.1.2017). It would have been more economical with a 19th century structure without suburbs.
Distance is of course only one case of waste; there are others. One is what historians call protection costs, i.e. what you have to spend to keep predators away. These protection costs tend to creep upward due to sheer unsubstantiated fear – ”Fear begets suspicion and distrust, and evil imagining of all sorts”, according to the memoirs of Edward Grey, the British foreign minister who accepted and argued for Britains participation in WWI. And evil imagining is certainly the reason why the Nato countries think it is necessary to increase defence spending to 5 % of GDP. See there an unnecessary need for GDP growth!
These kinds of waste is part of what is called social traps. One does what one thinks is best for oneself, but added it makes society horrible to live in. Not least because you have to work so much to cut corners and get the values out of the traps. Social traps are in reality ubiquitous (Bo Rothstein, Social traps and the problem of trust, 2009), particularly when politics retreats and all power is given to the market.
Social traps are addressed by politics. In the distance case by consciously shrinking the distances, the armament case by creative negotiations about cheaper solutions to the security issue. Politics may sometimes reduce the waste of social traps, and so make a lot of GDP unnecessary.
Perhaps these things are what David Graeber called ”duct tapers”: being busy making makeshift solutions that don’t work in the long run, and are only there because of bad organization and bad politics.
If there is anything I feel ambivalent to it is GDP. We know all that the only advantage with the concept is that it is easy to measure. But if it is good or not is not that sure.
Richard Layard (Happiness, Penguin 2005) found that what causes happiness is primarily family, friends, security, safe jobs, trust, health and personal values. Most of these are considered to stand in the way of GDP rise. Jobs are considered the more unsafe the better. Family and friends are considered as something one should leave because of economic restructuring. Health services are cut to give money for GDP rise.
Of course, "all things equal" as the economists say, it is of course better to have an extra pound than not. But if it has to be paid for with a diminishment of things that causes happiness I feel doubt, indeed.
I think that one should strive for things one really need, and if that causes an increase (or not) in GDP, so that be it.
I want to double down on this.
Perhaps one can say that it for a country it is equally good to maximize GDP as for a business to maximize profit. But many economists, including Jack Welch, ex-CEO of IBM, think that is "the dumbest idea in the world". Profit is the result, not the strategy. It is what you get if you focus on the right thing. It is not what you focus on. Doing that is just a diversion.
Western businesses have been focussing on profit, exclusively, since the rentiers took control in the 70s. Before that they focussed on market shares, technological development, investment for the future, etc etc.
They have focussed on profit to the extent that they have disappeared, like for example RCA, once the leader of the world's radio business, that succumbed to the short term profit fad in the late 60s and sold off itself to fulfill that goal. They were gone in 1986.
For a country I suppose it has to keep up productive power not to be a victim of predators. It is not sure that this is the same thing as GDP, even if one consider all what GDP doesn't measure. This because it is not indifferent what productive power one has. Productive power in growing sugarcane is worthless, productive power in microelectronics is probably necessary nowadays.
But apart from that, from the citizen's point of view what promotes happiness is the most important.
«For a country I suppose it has to keep up productive power not to be a victim of predators.»
For the UK and western Europe that is too late: vassalisation to the USA was inevitable after their defeat in WW2 and also today as all the critical supplies of fuels and foods that they need are via overseas routes that can be choked at any time by the USA Navy.
«It is not sure that this is the same thing as GDP, even if one consider all what GDP doesn't measure.»
https://www.project-syndicate.org/commentary/economist-writers-last-true-believers-in-neoliberalism-by-j-bradford-delong-2023-04
«Adam Smith himself supported the Navigation Acts – which regulated trade and shipping between England, its colonies, and other countries – despite the fact that they mandated that goods be transported on British ships even if other options were cheaper. “Defense,” he wrote in The Wealth of Nations, is of much more importance than opulence.”»
But that is not an point that matters to people who can buy citizenship (or private islands) wherever they want. Or to people who can sell their property and with the big realized gain they can retire to Dubai or the Philippines etc.
«This because it is not indifferent what productive power one has. Productive power in growing sugarcane is worthless»
Even if it used to be very profitable 2 centuries ago when sugar was scarce and before sugar could be extracted from beets.
«productive power in microelectronics is probably necessary nowadays.»
D. Landes, "The wealth and poverty of nations", 1998: “The gains from trade are unequal. As history has shown, some countries will do much better than others. The primary reason is that comparative advantage is not the same for all, and that some activities are more lucrative and productive and than others. (A dollar is not a dollar is not a dollar.) They require and yield greater gains in knowledge and know-how, within and without. [...] Comparative advantage is not fixed and it can move for or against.”
https://blissex.wordpress.com/wp-content/uploads/2022/03/poliuktradeempireasymm.jpg
https://blissex.wordpress.com/wp-content/uploads/2022/03/poliuktradebuyempiregoods.jpg
I know, it is good to have productive powers. But I'm not that sure it's the same thing as GDP, at least in the higher ranges of both.
And to be sure against predators it is important what you are able to produce, not only how big amount you are able to produce. It seems that the West is quite powerless face to the Chinese, not because China has a higher GDP than the West combined (it hasn't), but because they focus on dominating the most important things. "Important" in this case meaning a. things that may keep the predators away, and b. things that are important for the future but not necessarily now.
One of the most pernicious things with mainstream economics is that it believes that it doesn't matter what you do, or make, as long as it can be sold on the market. I believe more in making synergies. Which is a matter of organization.
I think we paradoxically also have the opposite problem - politicians who think that merely saying the word "growth" will magic it into existence. Obviously the prime example here is Liz Truss, but the current government has picked up the baton, talking about growth while barely having a plan to generate it.
“Without growth, better public services require less private consumption”
Bit (actually a lot) confused about this. Likely as I’m a bit stupid, but what does this mean?
The iron grip of the counsel of despair is beyond belief. Any change proposed in local government triggers a protest. Those groups exist to oppose. An example: The Green Belt. London's 'green belt' has become a religion. This is regardless of the desperately poor state that the land is in. Notwithstanding the government's 'Gray Belt' elision the same holier-than-thou groups consume planning committees.
«The UK’s comparative advantage lies in part in higher education and the creative arts»
The story of comparative advantage is bullshit in its own terms but even accepting it the idea is that a comparative advantage in sector X by country A versus country B is one where there is a competitive disadvantage but it is smaller than in sector Y so that country B is better off just doing Y and importing X from country A.
Here my understanding of of our blogger's claim is that the UK is at a competitive disadvantage in every sector with respect to USA, EU, Japan, China, but the gap is smaller in education and entertainment so USA, EU, Japan, China should be richer exporting to the UK everything except importing UK entertainment product and education services.
I quite disagree with that because:
* Education services and entertainment products can only employ so many people. What are the rest going to do?
* Actually the UK has *competitive* advantages in education services and entertainment products: in education because of having high-prestige institutions thanks to imperial legacy and in entertainment because it seems to have quirkier people than other countries.
* However the prestige of ex-imperial education institutions will continue to fade: currently imperial prestige is stronger for USA education and soon all the ambitious parents in the world will want to send their previous children to chinese universities.
Also in some countries like Korea-south and China entertainment exports are already strong and in from Japan too if one counts console games.
* Regardless the UK has only one enduring competitive advantage: it has the same shield of sovereignty to rent for high fees to international rich people who want "privacy", the same shield that Liechtenstein, Channel Islands, Bermuda, Virgin Islands, Switzerland have, but much better scale and sophistication in London. Tjis can sustain the economy of the M25 area, but what about the rest?
«industries staffed by liberal metropolitans rather than the older less educated people who still read newspapers and so constitute what politicians regard as target voters.»
I think our blogger here is again victim of "centrist" propaganda that depicts sneeringly non-"centrists" as "less educated people" (who however "still read newspapers") and who therefore are easily fooled. Just like "centrists" depict sneeringly women who "breed" as "less educated" too.
My impression instead is that the target voters of all mainstream parties, including Reform UK, are affluent "Middle England" property owners as in the past 40 years (except for 5 years of Corbyn at Labour) and those property owners are angry that property prices have been going sideways since 2022 and are expressing that by abstaining or voting as a protest for Reform UK (or less often for the LibDems).
The Conservative were still winning by-elections in 2021 (Hartpool, Old Bexley) against a deeply disappointing New Labour and the Conservative collapse started in 2022 (Chester, Stretford) as the reality of stagnant property prices hit their wallets.
You might want to take a look at Productivity and the Bonus Culture by Andrew Smithers https://academic.oup.com/book/35230. I found it to be an interesting diagnosis of the recent economic stagnation, which places much of the blame on the now prevalent executive compensation structures in listed companies (primarily in the US & UK) that generously reward managements for achieving short term profitability and increases in share value, but thus indirectly discourage investment for long-term growth in productivity.
«an interesting diagnosis of the recent economic stagnation [...] for achieving short term profitability and increases in share value, but thus indirectly discourage investment»
Put another way executives are sharecroppers and are given large incentives to asset-strip their businesses. Plus "worker-and-tenant quantitative easing" (also known as mass immigration) has the big advantages of increasing incomes (from ownership of properties and businesses) and of "moderating" costs (from labor) without business and property owners having to invest anything so the "productivity" of mass immigration is huge.
«for long-term growth in productivity.»
To have long -term growth in physical productivity there must be two conditions: one is that there be an incentive to pursue it, but the other is that must be achievable.
The overwhelming majority of physical productivity increases in the past has been caused by the adoption of coal earlier and oil later to replace vegetables as the main source of energy and has been driven both by the wider adoption and the more efficient use of those fuels. Unfortunately in "developed" economies coal and oil are already widely adopted and already efficiently used and the rate of improvement in width and efficiency has slowed down a lot.