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Wednesday, 6 September 2017

Neither Econocrats Nor Brexiteers Understand Productiveness

The Archbishop of Canterbury had significant business experience in a major company before he was ordained, and can therefore speak on economic matters with at least equal authority to most Members of the House of Commons. As a member of a commission whose interim report has just been published, he has issued his own statement that declares the British model of managing the economy to be 'broken'. Living standards for the mass of the population have been static [on the average] and declining [for many] since the financial crisis ten years ago; and this is noted to be the longest period of stagnant earnings since the 'great depression' around 1870.

The interim report highlights the fact that has frequently been referred to in this blog: this issue of productiveness. It is well understood that productivity in British companies is some 20% below the more advanced European economies, and a greater productivity gap exists between the UK and the USA. Successive government members have wailed about it, and promised to do something about it; and they have not done so. The more important fact about productiveness has been ignored: and it is brilliantly summed up in the commission interim report. The British economy as a whole is recording more depreciation of productive resources than investment in new plant and equipment: if you tot up the notional 'value' of the  amount of equipment that is abandoned or accepted as becoming obsolescent [and thus recorded in company and government accounts], that total exceeds the total spend on new equipment.

In real terms, in its capacity to support living material human beings, the British economy is shrinking: FACT!

But the government asserts that there is constant economic growth. Only a couple of years ago Britain's reported growth was boasted to be the fastest in the group of advanced economies. This blog pointed out that what is recorded in these figures is the fact that more money is spent on more transactions, at higher prices; and an increasing majority of these transactions that include a material component in the goods traded are handling imported commodities. Thus the balance of payments deficit increases.

Confronting the evidence accumulated by the commission, Treasury spokespersons affirm the growth rate, the fact that on the basis of national income figures the UK still is the 'fifth largest economy in the world', and the assertion that 'inequality' between socio-economic groups is reducing. You can claim anything with statistics, of course: but the issues of productivity and productiveness are fundamentals to an understanding of the economic system: which is certainly failing in Britain.

Two groups of people who ignore the concept of productiveness are the Econocracy - the professors of Economics, as characterised by a group of dissident students - and the 'hard Brexiteers' who lurk within the Conservative Party. These are they who encourage each other to believe that the economy will automatically grow much faster if Britain is freed from the constraints of the European Economic Area.They are utterly wrong. The world does not conform to Economists' models: all countries and communities are heavily protectionist when it suits them, not least in their protection of agriculture. All the evidence of real-world activity by human animals, as opposed to the specious models that can be produced from statistics of turnover in a UK economy whose money supply has massively been inflated by a decade of Quantitative Easing, is of dereliction, decay and decline.

Regrettably, this truth has to take a major part in the blog. One could hope that things were different: but they aren't.

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