Tuesday, 28 June 2016

Some Dismal Science

My economist friend Dr Abacus responded to my previous post in such an interesting way that I thought I would present their comments, before I make my next grandiose statement.

"I agree that many people have gotten little out of the last forty years - but that isn't entirely for want of politicians trying. Labour created the national minimum wage, and spent a fortune on tax credits. They also hugely increased pensioner benefits. The coalition raised the tax allowance, to try to change the distribution of income. They also spent a fortune on pensioners, so that today - for the first time in history - you are less likely to be poor as a pensioner than as someone of working age. The current govt has announced big rises in the minimum wage - by almost 50% by the end of the parliament. 

"I agree that this doesn't recreate the jobs that once existed. Mechanisation can be brutal to livelihoods, as machine breakers have known throughout history. The Luddites, those who broke the new cotton machinery; containerisation destroyed the port jobs and self-driving cars will destroy the livelihoods of many Pakistani and Bangladeshi minicab drivers, as well as white working class London cabbies. (Note that the benefits of these changes are often the poorest - cheap clothes matter most to those with least money). I think we could go further to redistribute income. But bringing back the pride of earning a good income is tougher. It was easier 1900-1960, because in that era technology replaced skilled labour with unskilled - skilled bootmakers replaced by machine operators. This was tough on the few, but created well-paid jobs for the many. Since then we have had the reverse, with technology destroying low skill high pay jobs (train drivers are left, not many others). We don't know why technology has changed from being skill-replacing to skill-biased, but it has, and this has affected all of the developed world.
"I think Labour did try to help people through the dislocation of economic change. The deal was that rather than have a something for nothing welfare state, benefits would be much more generous to those in work, and crucially would be paid through the tax system to the main earner. So they would look and feel like earnings. The idea was to create some of the dignity of labour that comes from being able to provide for your family. You work, you get the self-respect. Furthermore, they deregulated the labour market so that pretty much anyone who wanted to work, could work. Very different to continental Europe, and to the US (where the indignity of being poor is called food stamps, and is explicit).

"Now that didn't work, but that was the plan. And it wasn't a bad one, compared with either the US or continental model. But it still wasn't good enough."

I thought this look back at the recent history of government's attempts to approach the dislocations whose results have been revealed in the referendum was enlightening. My beef with the political class is that they haven't proved capable of helping disadvantaged communities to work through those dislocations psychologically and culturally, as well as financially, a thought which will lead into my next set of musings. Perhaps that's not a realistic request to make of politicians and the media, but it seems instructive that although I'm a moderately well-informed person I have never thought of the actions of the Blair-Brown administration in the terms Dr Abacus describes; and if I haven't, it wouldn't be a surprise if the people intended as their beneficiaries haven't either. 

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