Europe’s Low-Wage Economy

 

There are few examples (certainly in the developed world) of countries choosing to be low-wage economies and it’s safe to say, usually, the economic goals of governments are quite the opposite.

 

Regimes which have actively pursued penury in the past have almost always been feudalistic despots and oligarchs – Yelstin’s Russia (which wasn’t really Yesltin’s),  the extractive fiefdoms of Africa, the banana republics of Central and South America.

 

To hoard profits at the expense of investment and development has, however, been a growing trend in the financialised economies of Europe over the last few decades, but nowhere is this more crude, or the hoarders more empowered in and by the legislature, than in the Sick Man of Europe (soon to be the Sick Man of Nowhere), Britain (oh, sorry Great Britain).

 

In the endless debate over what caused the Industrial Revolution – something of a Holy Grail for economic historians – one of the more substantive arguments comes from Bob Allen’s The British Industrial Revolution in Global Perspective. It’s argument is quite simple, “The Industrial Revolution, in short, was invented in Britain in the eighteenth century because it paid to invent it there”.

 

To summarize, taking “macro-inventions” (like the spinning jenny, Arkwright’s mill and coke smelting) and investing in them, innovating them, till they were commercially viable was a worthwhile investment in GB because of its historically high labour costs and relatively cheap coal. While “macro-inventions” occurred throughout Europe, a French entrepreneur, for example, would never rationally make such a large and uncertain investment because labour was so cheap and readily available (they did not need to be replaced or made more productive to be competitive). In Belgium, while labour was also costly, so was coal and so went any incentive to replace the former with the latter.

 

While there were many other essential prerequisites, such as the preceding agrarian revolution and the development of capitalists in the colonies, Allen’s factor price assessment certainly makes for some interesting incites as we look at the sorry state of Britain today and its chronic productivity.

 

While claims that the employment rate is at a “record high” are clearly misleading (the population is at a record high), there is no doubt that unemployment is incredibly low – its 4% being the lowest since 1974/5.  Even involuntary part-time employment is lower in the UK (10.5 per cent of the total employment figures) than the EU average (26.4 per cent) and has fallen in recent years.

 

Brits reading this, however, may be forgiven for not feeling all that optimistic. Orthodox economics decrees, in its infallible wisdom, that low unemployment (and, thus, a scarcity of labour) should permeate wage growth but Britain is currently enduring the longest period of wage stagnation since the Napoleonic Wars and, among OECD countries, only Greece and Mexico fared worse in wage growth since the financial crisis.

 

Of course, we are all aware of this and, as Planet Money listeners among you will attest, so is the economic orthodoxy – which has been trying to wrap its head around the problem for the last year or so. One of its great obstacles, though, is that it is missing an important observation, the separation of wages from productivity precedes 2008.

 

Since about the 1970s, in most developed economies productivity has risen faster than wages. This meant shareholders and corporate executives keeping more of their businesses’ profits for themselves. In the US, for example, wages ground to a complete halt under Clinton with real median household income in 2014 barely any higher than in 1990, despite GDP growth of 78% since 1990 and labour productivity growth of 85% since 1980 (This, for my money, is the predominate cause behind Trump’s success). In the UK, though many workers at the bottom of the income spectrum are paid less than their marginal productivity, many at the top are paid more.

 

What does all this have to do with Bob? Well, the separation of profits from wages is, in turn, separating profits from productivity.

 

Before the 2008 crisis, much of Britain’s productivity growth was driven by illusory gains in financial and professional services, which have now evaporated. The financialised growth model gave rise to a highly imbalanced economy, with the finance and property sectors sucking in capital from the rest of the world, driving up the value of sterling and damaging our more productive manufacturing exporters. These sectors have also attracted the highest-skilled workers and domestic investment, leaving less for knowledge-intensive industries. The result has been a preponderance of low-paid, low-productivity employment in the services sector.

 

Combine Britain’s lack of knowledge-intensive industries, its low wages and its staunch ideological opposition to either public investment or incentivising private sector investment and employment increases suddenly become less a sign of productivity growth than of under investment. With labour so cheap, many businesses have chosen to hire more staff rather than invest in new machinery, thus burning a new economic path for Britain; one whose trend growth and opportunities will be, perhaps irrevocably, downgraded.

Dani Rodrik discusses Hyper-Globalization and its Discontents.

If you don’t know Prof Rodrik’s work, you’re welcome.

There’s no shortage of criticism of the 21st century’s globalised form of feudalism we know as neo-liberalism, but to take it down so cogently, authoritatively and with such a ceaseless grasp of the economic facts is music to the ears.

As I grapple with my ingrained support for free trade; Rodrik’s words are never too many.

Enjoy,

 

Dani Rodrik (and Mark Blyth) – From Globalization to Hyper-Globalization and Back

Shall we all Fuck Facebook in the Face?; or, The Shit Eating Grin that Defined an Age

It’s been a while so, to liven things up and treat my one loyal follower (Mum), I thought I’d try a different approach and go with a list:

 

To get me started, I asked my brothers to give me single word descriptions of Facebook. The responses were:

“Connection”, “Events”, “Photos”, “Data”, “Controlling”, “Time Wasting”, “Addictive”, “Anti-social”, “Unrealistic”, “Fake”, “Connection”, “Reminisce”, “Depressing”, “Withdrawal”, “Membership”, “Propaganda”, “Supercilious, “Stalkers”, “Pernicious”, “Insidious”.

 

So, let’s give this a go…

 


Greater Connection


Pros


  • Keeping in touch with old associates is difficult. As the trajectories of our lives pull us further and further away from one another, it is not surprising that the fragile strings of relationships often snap. This is often no-one’s loss. The greater the stratification, chances are, the greater the schism in personalities. However, as Mary Schmich put it, “the older you get, the more you need the people you knew when you were young”; and as a stereotypical ‘man’, useless at keeping in touch, Facebook has provided a wonderful “cheat” to remind me, to prompt me. This is not merely because these friends possess the treasure of knowing past yous, but because, as the divergence of your roads increases, so does the heterogeneity of experiences and the amount you can learn from one another.

 

  • As my general misgivings of Fb have grown over the last couple years, I have found that the major pro, restraining my finger as it hovers over the “Delete account” button, has been “Events”. Over the years, I have collected a personalised blend of institutions to follow and of friends to emulate. Consequently, my Home page is awash with events’ bulletins for all manner of nights out, lectures and seminars, special offers and novel adventures.

 


Cons


  • As much as Fb has provided valuable connections to otherwise lost associates who have enriched my life, even including these, I would say the number of Fb “friends” is double the number I actually talk to (and this is in spite of the occasional culling). The ratio is considerably worse once you detract those Facebook friends I talk to exclusively off Fb, via (oh, I donno) the phone! For the most part, anyone important to you, you should have the number of, message, call, write to, see in person even! The others are, for most of us, kept around in some strange attempt to quantify our social lives, to validate ourselves via the ostensible strength of our online Sims or because we like spying on them to compare how your lives are panning out. This competitiveness is pathetic and the sign of an unhappy life. “Happiness comes from within” may be a hack line but, if you must look abroad for affirmation, you clearly know looking inwardly would only upset you.

 

  • ‘Positive violence’ is not the violence of chains, but that of blindness. It is not violence by restricting you from doing something, but by encouraging you to do something else and preventing you from ever realising the alternatives. The point must be made that, while Fb may not have banned me from looking up events by myself or using other forums to find them, it has fostered a path dependency. Who knows, perhaps if I had to look up events by myself, I would find more, break beyond my echo chambers more, be invested to go to the damn things more often. Who knows whether my friendships would be stronger without Fb. If I couldn’t feel closer by seeing friends existence on my Profile, I might have to actually speak to them instead, to make an effort, to replace keeping people on ice with “we should get a drink sometime” and, instead, go and get a drink sometime.

 


“Information”


Pros


  • Facebook doesn’t just increase our connections with old associates, it connects us to the world. Never before has it been to easy to access news of all kinds, from all places. Of course, the internet has brought most of this change, but Facebook can personalise your updates and “democratise” information, giving us a tool to produce information almost as easily as we consume it.

 

  • Fancy your own personal shopper, who can suggest a variety of products specifically tailored to you? Simply provide them with your information and Fb will show you a world of products you may well, god forbid, never otherwise know about. As facetious as that last sentence may have been, there is obviously a legitimate benefit to greater information in an economy. It helps us choose the best products, the best companies and avoid inertia.

 

Of course, having said that, your Fb personal shopper will never tell you that perhaps you need to try a new style, that perhaps you spend too much on clothes anyway, that you read too many populist economics books and you should try something heavier. As they do with your news sources and general worldview, algorithms stereotype you; and so you reproduce yourself as farce. Oops, I’ve strayed into cons!

 


Cons


  • There’s a reason broadsheets haven’t traditionally been free. It is a full time profession being an investigative journalist and a life long vocation differentiating opinion from argument (the latter being opinion backed by facts and the weighing up of possible alternatives). News shouldn’t be free, nor should it be something you are unwilling to pay for. Yes, echo chambers existed before, but they were not nearly as insidious. Buy a “Left” wing broadsheet, for example, and it will be pretty hard to miss the greater number of Right wing ones (at least if you’re from the UK). As strong as your echo chamber may be – as a result of reading predominantly from one angle and associating disproportionately with people of similar backgrounds and views – rest assured, nothing will tweak your perception of reality quite like seeing the world almost exclusively through a 30x20cm square of artificial light whose pixels vomit out unverifiable information sources chosen specifically to corroborate your opinions and feelings – especially when there is no regulation, no standard to abide. What you consider the ‘Centre’ will be utterly shifted away from reality.[ How Duterte Used Facebook – Davey Alba; Brazil Battles Fake-News “Tsunami” – Dom Phillips]

 

  • The greatest misinformation surrounding the above topic is that the easily accessible news of Fb is “free”. With every click, every browse and every second spent reading a particular article or on a particular website, you are paying with your data. From the moment my 15 year old self joined the new fad of Fb, I had signed away all rights to my online information to Fb, whomever they sell it on to or whoever steals it from their not-so-carefully-guarded vaults.

 

What a moron! Surely, any 15 year old in 2007 should have known what that meant! Should have read the small print. Should have foreseen the future of Analyticas and Palantirs harvesting said information to sell in-depth psychological profiles of me to corporations and political campaigns, domestic and foreign. It was all explained in the T&Cs, right!?

 

It should have been obvious, as I’m sure it is to all of us, that when Fb describes us as “customers” what it means is “suppliers”. Supplying the “goods” of our information to their corporate customers – just that Fb keep all of the money (cos they’re “just like all about bringing people together, maaaan”).

 

  • In One-Dimensional Man, Herbert Marcuse borrowed the psychoanalysis of Freud’s Civilisation and Its Discontents to explain how we internalise the norms of society – specifically, Consumerism, Materialism and the needless flogging of overproduction’s surplus. Instagram is an even more insidious and terrifying harbinger of this excess, with close correlation to young people’s growing anxieties and unhappiness amid the bombardment of beautiful, bikini clad, 6-footers living a life of 5 star, luxury travel and enforcing the message that this should be the benchmark for a happy life, and that “Bali Body” and “Gym Shark” will help you get there.[see Jean Twenge’s iGen].

 

With breaking news of our encroaching apocalypse amid Capitalism’s systemic environmental destruction, I wonder, wouldn’t we all be better off without Fb advertising that “thing“, selected with algorithmic precision, I didn’t even realise I wanted but then was convinced I needed?[IPCC – Global Warming at 1.5; Disposable coffee cups – George Monbiot]

 

Whilst we’re on the topic of apocalypse, how much longer are we going to let the likes of Cambridge Analytica (reincarnated as Auspex International, for anyone interested in committing a mass shooting) aid corrupt elites and allow fascistic despots to strangle Freedom out of the life of the Developing World before we realise it really does us (“The West”/”The First World”/”The Developed World” – basically, anyone who caught the industrialization wave in the nineteenth century and aggressively started colonising everyone else) no favours in the long run.