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Thursday, 13 July 2017

Good Jobs?

Yesterday the Right Honourable Damian Green, for the first [and perhaps the only] time stood in for Theresa May to answer Prime Minister's Questions in the House of Commons. As is common, he had been fed with various points to include in his responses: regardless of whether those points actually fitted with the run of the questions that were put to him. Thus he challenged the opposition to agree that the employment statistics that had just been issued were a very positive indication of the strength of the economy. He did not get the answer that he was supposedly seeking, but that did not matter as the boast about the state of the jobs market was entered into the records of the House.

Only in the most superficial sense are the data positive. The number of people recorded as being employed had gone up, and the recorded number of unemployed had gone down; which meant that on those measures the figures are the most positive for more than forty years.

Forty years ago, in 1977, the Thatcherite destruction of the real economy had not begun and the mixed economy was essentially in good shape. There was an economic crisis nevertheless, due to the effects of failed neo-Keynesian economic policy in stimulating inflation and a consequential wage-price spiral that was causing ever-more-disruptive strikes.

During the nineteen-sixties the Economics profession was dominated by self-styled neo-Keynesians who believed that they could advise the government so precisely on using the 'tools' of macro-economic management that the economy could be 'fine-tuned' to produce a high level of employment without shortages of specifically skilled sets of workers that could became so severe that wages would rise due to the competition by employers to attract those skills.

During the nineteen-fifties there had been willingness among the general population to develop the economy step by step to repair the ravages of the Second World War both in terms of direct damage [especially by bombing] and the exhaustion of industrial plant due to it being run hard for a decade with absolutely minimum investment. Thus a massive house-building programme was given high priority both in the public sector of council homes and in the private market where the building societies were flourishing. It was also accepted by trade union leaders as well as by company directors that Britain was a trading nation, highly dependent on imports. This had been emphasised during the war by the U-boat threat: everyone knew that the country would have been starved into surrender if the German navy had been able to cut off imports of essential foodstufs and other commodities. So it was easy for people to understand that in peacetime it would be necessary to build up the export markets that alone could pay for the imports the UK would continue to need.

But the workers were also consumers, who were informed by mass media [among which television was emerging as probably the most important] as to what was fashionable as well in the USA as on this side of the Atlantic. Most of continental Europe was more damaged and run-down than Britain, so it was to the prosperous North American markets that Britons looked for examples of what was fashionable. American films were the principal content in the cinemas, and there too people saw what a relatively-affluent community of consumers could have. Twenty-first century people will find it hard to understand how desirable nylon stockings and simple make-up were to women, and why their menfolk accepted and accommodated those 'needs'. Thus scarce foreign currency, especially dollars, had to be spent importing those things, and many others. Consumer goods were far more prominent among imports than economic planners had anticipated during the war. Thus less machinery was imported to develop the exporting industries, so that more could be spent on consumer goods; and once that trend was accepted it came to dominate the pattern of economic evolution.

Fast-forward sixty-odd years and we see that the balance of payments is hopelessly adverse for Britain. Industry is still important as provider of goods for export, but massively overshadowed by service trades. Tomorrow I will develop this theme further.  

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