Despite the major economic news being manufacturing is growing at its fastest rate in eight months the BBC was pretty much ignoring that and instead is blitzing us with stories about productivity, or the lack of, in the economy and are trying to present it as a result of ‘Austerity’….that’s despite the lack of productivity being a very old story. Robert Peston was on the R4 news telling us that if we hadn’t had austerity growth would have been 15% higher…and so would wages….a Labour narrative and pure speculation…there is no counterfactual, Peston is claiming something he can’t prove…and therefore should not be saying it.
But who did he get that figure from in the first place? An economist named John Van Reenen, who was an advisor to the Labour government and has always opposed austerity...even before it began...
Van Reenen, John (2010) Extreme austerity is the wrong medicine British Politics and Policy at LSE (28 Jun 2010)
Here is his thoughts on the Labour economy in 2007…..just before the SHTF….(not saying that he’s a bad economist but he had no idea that the worst recession in one hundred years was about to hit)
Labour’s Economic Legacy
John Van Reenen
The economy is probably the most successful legacy of the Blair years. Ironically, New Labour’s economic policies have been set by his heir, chancellor Gordon Brown. Blair leaves behind an economy in better shape than any previous Labour leader.
Here we see where Peston gets the figure of 15% from…and it is the worst case scenario…why did he pick that?…
John Van Reenen of the LSE, who also disagreed with austerity, said “UK GDP is about 15% below where we would have expected on pre-crisis trends… Premature austerity has damaged UK welfare and, as I and others argued at the time, delaying consolidation would have left the UK in a much stronger position than it is today.”
Note that Peston’s article is one of those rapid rebuttals the BBC issues when things are going pear shaped for Labour…such as one hundred businessmen writing in the Telegraoph that Labour’s economic policies will damage the country just as Miliband is trying to say he is business friendly…
Who to trust – business leaders or economists?
Peston says…
On the day that more than 100 past and current business leaders have written to the Telegraph that the “Conservative-led government has been good for business and has pursued policies which have supported investment and job creation”, a survey of academic macro-economists has come up with a different conclusion.
Trouble is it wasn’t ‘on the day’...it was last Saturday this poll was released….the letter in the Telegraph appeared on Wednesday.
Here you can see the cogs working and evidence that he is trying to counter the Telegraph letter…
Now to be clear, this is not a scientifically robust poll of those who know best. But nor is the Telegraph’s letter – and those those who took part in the economists’ survey are no less distinguished in their field than the business signatories.
Who would I trust? I’d follow the money and the people who make the money not those who have political axes to grind and don’t dirty their hands actually producing the stuff they talk so knowledgeably about.
Here is Peston’s unemotional report on productivity…
Weep for falling productivity
We should be both grateful and worried that British productivity has been so lousy since the great crash and recession.
Lousy only since the crash? Hmmm…productivity in the UK in comparison to other countries has always been ‘lousy’…here’s what the IFS says……
The UK–US productivity gap narrowed over the late 1980s and early 1990s but has widened slightly since 2004. In 2008 – the latest year for which international comparisons are available – US worker s were 33% more productive than those in the UK. The UK’s lower level of productivity has contributed to a lower level of GDP per capita. In 2009 GDP per capita, measured in US dollars, was $37,391 in the UK and $46,008 in the US .
GDP was growing under Labour but what was the cause of that? Was it productivity? or was it merely the huge number of immigrants flooding here increasing GDP but lowering wages and not actually adding to the economy overall? The London School of Economics tells us that it was not a rise in productivity…..
Since 1997 total GDP growth has been driven mainly by increases in employment and capital (especially information technology) rather than increases in overall efficiency.
Even Peston’s new friend, John Van Reenen, admitted in 2007 that UK productivity was low under Labour…
Gordon Brown and British business leaders alike have jealously eyed the US “productivity miracle” for more than 10 years – after 1995 US output per hour growth doubled compared to the previous 20 years.
The US continues to lead in productivity, the measure of output per employee. According to the Office of National Statistics, GDP per worker in the US was 27% higher than in the UK in 2005.
Yet the UK is showing little sign of catching up.
Peston tells us…
The point is that a big contributor to the absence of any growth at all in output per worker and output per hour is that employment has grown much faster than national income….Lower productivity undermines the competitiveness of British firms in the global economy.
And the absence of productivity growth undermines the ability of British firms to increase our pay.
Many issues with that…first…we’ve always been less competitive as the IFS showed and Van Reneen admitted…second Peston claims lack of productivity undermines pay growth and that output per worker and output per hour are the measure of productivity.
Another way of measuring it would be to assess output per pound paid in wages….employers are keeping people in jobs at lower wages…but they are still producing the same amount….for less money…so productivity per pound is probably still good….or else why would employment be rising so fast? After all employers are not charities they employ someone for a good reason, a reason that will result in profits for the business.
There is no ‘puzzle’ to the apparent lack of productivity…it is just that the wrong measure is being used.
Wages are part of the equation when measuring productivity….maybe not in the textbooks, or in BBC studios, but on the factory floor it is.
One reason wages are so low is because of the mass immigration and flood of cheap labour that means employers don’t have to compete for workers by offering higher wages.
Wonder why Peston doesn’t dwell on that?
Peston’s thinking somewhat cloudy since his bouffant haircut ?
Other reasons that UK productivity is technically less than, say, France are that 1. French employers just refuse to employ low-wage/low productivity labour (hence France’s dire employment record under its Labour Party equivalent administration) because of the inordinate costs to the employer – both monetary and bureaucratic – of employing anybody, and 2. in GDP calculations public sector workers are deemed to produce the equivalent of their cost (wages etc).
Accordingly, if you want to boost “productivity” in the economy all you need do is take on a few more drones at the Department of Climate Change. To the credit of the coalition, they got rid of 500,000 public sector parasites (taken on by Labour) at no productivity cost to the country. Meanwhile IIRC France has 5 million+ “employed” in the public sector thereby arithmetically (but not materially) supporting France’s GDP. Despite Peston’s pretty good recent documentary do we hear any of this from him or his mates at the BBC (or on his speed dial) now that the BBC
effort to get Labour into governmentelection coverage has started in earnest? Do bears sh . . . . .?It was noted, not long after the financial crash, that people were taking less time off work through sickness. We all throw ‘sickies’ from time to time, but when faced with the job insecurity brought about by Labour’s ‘no more boom and bust’ economic complacency, we all think twice about taking time off. Not only that, but the workforce suddenly became more flexible and loyal to its employers. Staff turnover reduced, therefore lowering company costs.
It is a fact that immigration has had a negative effect on wage levels. But don’t think for one minute that any of the mainstream parties can reverse this trend unless we pull out of the EU.
I heard the exchange too and remember thinking that Peston must have been wheeled onto the programme as part of Labour’s rapid rebuttal unit to counter the previous good news. However, he rather undermined his case by referring to the views of the ‘academic economists’. My mind went back to the time that a large number of ‘academic economists’ (presumably a euphemism for people who don’t understand practical economics) wrote a letter criticising Mrs Thatcher’s policies. She proved them to be completely and utterly wrong.
‘Academic economists’ seem to be a pretty flaky bunch; it was Lord Stern who sought (and still seeks) to promote the Anthropogenic Global Warming scam on very dubious economic grounds.
The ususal rubbish being spoken about this.
If everyone is slagging Peston off then you are bias. If you are biased then you immediately render yourselves as unable to carry a rational discussion.
No change there then.
Productivity is the ratio bewteen
Cost per unit of output/Costs of input.
It has absolutely nothing to do with foreigners,reds under the bed etc.
You will note that if wages are lowered then productivity will go UP!
As to economists being a flakey bunch ypou are probably right in the main . This is down to mainly the economics of Milton Freidman who espouses greed as the motive of economic life. He also espouses the withering of the state despite having scant evidential proof of such claims. Since Neoliberalism has become ascendant ,Friedman’s philosphy has neatly dovetailed into its social and academic hegemony such that it is almost exclusively taught at Universities as the defacto economics. I think the key word here is greed and the ability for the greedy to define it as everyones reality. Pretty cool eh ;you can play the money markets and call it work! Thats why you generally are hard pushed to find any Keynsian sense these days.
Do you read your comments before submitting them?
Peston was a Labour tool, literally and figuratively, during the last government.
Why no “scoops” since 2010? I look forward to his autobiography telling us who tipped him the wink on the Northern Rock and Lloyds / Halifax debacles.
Is Peston the Beeb’s most prominent supporter of Common Purpose? Certainly he’s the one mentioned in this BBC article:
A secret society?
“I think the key word here is greed…”
If your world-view is limited to Hollywood movies, then you are correct.
MotCO “The ususal rubbish being spoken about this. // Productivity is the ratio bewteen (sic) Cost per unit of output/Costs of input.”
Or possibly earnings divided by manpower. Or net earnings divided by directly engaged producer manhours. Or …..
You get the idea? There are many ways to skin that particular cat.
If wages are lowered and workers are on piecework & have no other opportunities to work and still have the need for their former income, then yes – productivity should increase. However, demotivated workers with no need for their former income may let their productivity decrease. If they do need more money, they may do so in the hope of being offered overtime work at higher rates to bring output up to its former level.
“This is down to mainly the economics of Milton Freidman who espouses greed as the motive of economic life.” Economic life, not economists, flaky or otherwise. Are you confusing or conflating the two?
Economics is both an art and a science and thus attracts many ‘types’ to its discipline & practice. For sure, the major stand out names of the past have their schools of disciples but again that doesn’t make them – the names or the disciples – any more or less flaky than any other profession.
Peston “leaked” a VAT rise in the 2008 Budget. Having tested the water Big Gordon bottled it, leaving stool pigeon Bob with egg on his face.
Not a very nice thing to do to your official biographer!
Now who would you get to author a book about you if you were a colossus on the world stage like Big Gordon – a card carrying Conservative?
“hegemony”
LOL
So we have a Marxist defending the BBC. Now why would that be?
Productivity in Britain is low becuase we have a large supply of cheap labour via immigration. If there were fewer people available then employers would invest in machinery and other ways of increasing the output of their employees because it would be more cost effective than employing more high cost people to do the work.
Consequently , as UKIP say, allowing millions of low skill low cost workers into the country results in low output per person ie productivity.
So one of the major causes of low productivity in the UK is the influx of low skilled immigrants. No one in their right mind can possibly deny this, except of course if you are a Labour politician or a BBC presenter.
I see UKIP are pushing for a St Georges day and that to be a Bank Holiday. A celebration to be English.
And the online article carried a bizarre headline along the lines of “Bosses’ letter fuels Election Debate” – a classic BBC headline that doesn’t actually give you an idea what has happened, and relies on you having read about the news elsewhere, before coming to BBC Online to get their take on it. Why don’t they actually report the news first – i.e. tell you that Business Leaders issue a Letter backing the Conservative economic policy – then go into the politics of it (including the Labour rebuttal).
Peston’s blog did read like a rebuttal of the letter rather than an overall analysis of the news – highlighting the arguments for anti-austerity, without the suggestion that anti-austerity might make things even worse (e.g. France)
And whilst we are on the subject, there are plenty of progessive politicians on the BBC that like to argue that austerity has failed (Labour, SNP, Plaid Cymru) – have you ever seen one of these been challenged on this assertion? Because I haven’t. They are just allowed to state it as fact – are Labour ever asked “wouldn’t things be worse if we’d followed anti-austerity?”.
By contrast, the Conservatives can’t even say Tax cuts for middle income earners without someone leaping down their throat with “yeah, but how are you going to pay for it”. Nor is the idea that tax cuts might actually help the economy, by putting more income in people’s pockets (especially the squeezed middle classes), ever explored
We are going to witness Pesto the Clown contorting himself into ever more amazing shapes as he strives to play down good news about the economy and play up the bad.
Hopefully, at some stage before the GE, the contortions will become so severe that his head actually disappears up his own Labour loving fundament.
Well the manufacturing of Jihadis and lies to cover it all up does certainly appear to be coming on in leaps & bounds !
Please help me here – genuine
If I make high value chairs , one a day , would an economist say I increased productivity if I lowered my standards and materials and produced two chairs a day ?
No. An economist would only be interested in the value of the goods leaving the factory.
So if your one good chair cost more than the 2 lower quality ones productivity would have gone down, and vice versa.