Back Again To Productiveness

There has been serious panic in the Treasury, which has resonated round other government departments, about the latest 'findings' of the Office for Budget Responsibility [OBR] on the basic facts about the UK economy. With no evidence in the raw data to support the supposition, it has been assumed that the productivity of the economy is increasing. If it were true, it would mean that on average, across all sectors of the economy, the output per worker per day is increasing. For half a century until 2007, year after year, on average productivity was increasing by around 2%. This constituted the strongest evidence that the output in the economy was growing and that there was more output to provide investment in  new plant in industry and commerce, and to renew the economic infrastructure, and to improve welfare services and education, and still to afford more wages for most of the employed people year after year.

It is now admitted, rather shamefacedly by the government ministers and officials who have assumed that productivity 'must have been' rising since 2010 at something close to the historic norm of 2%, that this has not been the case. The financial crunch of 2007-8 was a huge shock to the whole economy; but it has optimistically been assumed that things have been returning to 'normal' since 2010. It is also noted that the entire world economy suffered a shock in 2007, and that most  'mature' economies' growth since 2010 has been less than the pre-crunch norm. Nevertheless, the USA, Canada, Australia and the Eurozone all have experience increasing productivity in recent years: while India and China have continued to make massive strides forward [though at an irregular rate year-on-year].

I am not alone in having banged-on since 2007 about the fact that productivity in the UK is abysmal because the people who control the country - grossly misled by the Econocracy [the professors of Economics] - are totally unaware that productivity is always dependent on the productiveness of the system; but not many people have been saying it, and nobody has been listening. Productiveness is the capacity of the system to deliver increased productivity; and it can only be increased by well-targeted investment. Karl Marx was at one with the other nineteenth-century Political Economists who saw that industrial progress [and the development of the infrastructure of railways, ships and ports, postal systems, banking and the telegraph] was entirely dependent on a surplus being accumulated from the sales of current output and withheld from consumption by the people so that it can be converted into new and improved means of production. Marx thought that he had made the discovery of the age by claiming that the accumulation of capital had been captured by a 'class' of capitalists, who were taking over the levers of economic power from the landlord/aristocratic class who had dominated Europe since the dark ages. Other Political Economists saw that the development of shareholder capital allocated the profits that were derived from from industrial and commercial activity between the controlling shareholders in firms [who could decide how they divided the dividends and wages that they received between their own consumption and re-investment of the profits to produce even higher returns from the business in future years] and the other shareholders who would decide for themselves how much of their dividend income they would apply to their own consumption and how much they would spend on buying more shares. Investors in shares could choose between all the shares and bonds that were on offer in the stock market: so provided those investors were reasonably sensible the majority of buyers would opt for putting their investment into firms that were effective and innovative: those that were enhancing the productiveness of the economy, whose fruits would be seen in terms of higher productivity and high future dividends. Workers could be rewarded with high wages [or even profit-sharing schemes] and thus the entire economic ans social systems would be strengthened.

Obsessed Marxists gained control of Russia in 1917 and it took their successors seven decades to prove decisively that a simplistic Marxist regime does not work. Mao tried the same, and drove China into even deeper poverty than had been achieved in Russia; only for China to be restored by pragmatists who know better than capitalists the importance of concentrating on the productiveness of all sectors of the economy.

Britain's 'productivity problem' arises from the failure of industry and commerce to invest since the 2007 crunch. Companies have built up cash piles, some of which has been distributed to shareholders through devices such as share buy-back; while consumers have increased their borrowing to carry on buying goods as prices rise faster than wages.

Now the Chancellor of the Exchequer has been driven into a corner by the productivity data: the entire nation is heartily sick of 'austerity', but output is [at best] stagnant. Hospitals and prisons are in crisis, schools are increasingly stressed, the police has been cut back too far. What can he offer in his autumn Budget?

Jeremy Corbyn's almost pristine Marxism cannot be any sort of solution; but at least he has adopted more reasonable rhetoric for the purposes of getting elected. Provided Labour produces - and adheres to - a rational Manifesto, they offer the best bet for the nation in the coming years. But the trust problem is probably unsurmountable.