The start of 2013 has brought more mild, cloudy and [here in the Peak District] drizzly weather. Just a dawn on which to take the BBC's TODAY Programme with the morning tea.
One of several depressing items was a discussion by Economists about the phenomenon that is thrown up by British economic statistics. Employment is at its highest level in recent decades: but perceived productivity has declined and the national product is not increasing significantly [indeed, it may just have 'flatlined' over the whole of 2012].
Wages are increasing overall at less than the government's indexed figure for 'inflation', and a high percentage of the workforce are attending their workplaces for less than the 35 hours a week that sensibly can be classified as full-time employment. Some firms have put reliable, trained employees on 'short time' to keep them on-side in case business improves; but the majority of part-timers are engaged on that basis. Many of the part-timers receive only the statutory minimum wage per hour; and for the majority there is no pension provision. The new catch-all pensions legislation will draw many such people into basic schemes: which implies that a further deduction will be taken from their wages and put into a pot with a promised yield in retirement that will be derisorily small. The loss of even a couple of percent of an exiguous wage will have a depressing effect on overall 'cansumer demand' in the economy, when multiplied by millions of affected individuals; but the sums gathered for investment by the pension providers will not be sufficient to create investments that will absorb significant numbers of the unemployed into new jobs and thus increase demand through their enhanced spending.
Wage-earners are still buying imports on an heroic scale: everything from East African fruit, veg and flowers to web using technology from the Far East.
Any increase in the real wages of empoyed people, or in the number of employed people, would most likely increase the deficit on the balance of payments: so in a seriously depressing sense the government is contributing to its target of deficit reduction by keeping a pretty tight cap on incomes.
This is the context in which the Economists this morning discussed these recent economic data. One of them had recently publiched a Paper with a mind-blowingly complex title, replete with pseudo-scientific terminology adding up to zero usefulness. They spoke of productivity as if there was no qualitative difference between the various categories of output: as if it did not matter what was the level of notional value-added by different firms' plant. This is in line with the textbook assumption that all output is of widgets: it is almost impossible for non-Economists to understand the primitivism of this lack of thinking.
To say that "the productivity of the British economy is declining" is to say that products and services are sold for a declining number of money-units per unit of output. This means that prices of goods made in British factories are falling. This does not necessarily mean that fewer units of output are being sold; it can equally mean that goods are being sold for lower 'factory gate prices'. How could such a thing occur?
A] It could mean that global competition is forcing factory owners to lower the prices at which they sell their branded goods Or
B] it could mean that firms have been bought by foreign owners who buy the output as being part-processed [though it is physically complete] and then ship it to the export markets where it will be sold, and the magic transformation by which a pile of coats or a cartoon feature film becomes a branded commodity [in the terms of my own analysis, a quon] takes place outside the UK - it may even notionally be reinported to the UK as a quon - so that the final, most significant 'addition of value' is ascribed not to the UK factory but to the corporate owner's success in transfer pricing the product offshore. Or
C] it could mean that rising wages and other industrial costs in China are making it viable to start or restart or increase the output of basic industrial products in the UK; which only have modest price tags such that an increasing proportion of British factory output is of modestly priced goods [what I describe as marcoms].
All those three possibilities point to a sharp decline in the profitability of British industry, and in the taxes that firms can pay to the state, and the level of wages they can pay to employees: all of which presage declining investment, declining public and social services, and diminishing real wages.
The policy options that are being presented to the government, and to the opposition, and to the Bank of England display the economic ignorance of Economists.
Hard times are ahead of us: and mitigation will only become feasible when the proven principles of Political Economy are reinstated as the basis of policy.
Showing posts with label marcoms. Show all posts
Showing posts with label marcoms. Show all posts
Friday, 4 January 2013
Monday, 5 March 2012
China: More Good News
China's Premier has announced his expectation that economic growth this year will fall below the amazing 8% average of the past 25 years: to about 7.5%. Behind the raw number - which is still massively greater than the world's average rate of growth - is the important fact that this is a period of consolidation and change in patterns of consumption.
In the terms of Personal Political Economy the great shift is that there is an increasing number of empowered consumers each year: people with greater disposable income [and in some cases borrowing power that enables them to make bug purchases] are able to move from subsisting only on marcoms [basic commodities that meet needs] t being able to enjoy the experience of consuming quons. Just a few western Economists, including notably Harry Johnson, recognised in broad terms the difference between quons and marcoms. Johnson called quons 'positional goods' but he did not live long enough to develop any significant theory; and it remains probable that the mainstream of his 'profession' would not have accepted the concept. In the decades since that aborted airing of the issue, naive Economists have continued to treat 'goods' as a whole; while Chinese economic planners - in particular - have recognised the significance of the differentiation and the importance of fostering a shift of consumption from having more 'essentials' [which in excess can make people obese] to being able to acquire quons which embody consumer experiences that invoke a different sense of satisfaction.
As Chinese consumers gain flexibility over spending their increased wages they acquire the power to make a different sort of choice. In their millions they have opted to acquire different sorts of meat as well as computer games and, more recently, a whole range of 'aps'. Higher up the income scale, people have bought hundreds of thousands of quintessential quons: new apartments. Financing the boom in property has led to a huge extension of borrowing, both overt and illicit, and the authorities have not been completely successful in controlling that expansion. In periods when restraints on funding property purchases have really bitten, the market has lost momentum; then measures have been found for expanding credit again and restarting the building and the sales - and confounding the western Economists who have seen the 'property crunch' as evidence of the fundamental instability of the Chinese economy and an imagined 'need' to move to a neo-marginalist market model.
China is a much more rational system than those Economists can understand. People rising from abysmally low standards of living have been brought in their hundreds of millions into a market economy, where at first they receive subsistence wages [which a majority of urban workers still receive]. Then their productivity rises to enable them to be paid enough to become highly selective consumers of quons. The first little luxuries are the most highly prized, as they open up a new horizon for the individual. The payment made for them is sacrificial, and the satisfaction received is incalculable. Of course, if the buyer is cheated and receives consumption that is not what they had been led to expect, the anger and disappointment experienced by the consumers is also incalculable: which justifies significant control of products and markets.
The best way to raise workers' productivity in an already-industrialised country is by adding quon production to marcom production. If China can produce the majority of the quons that spread over the country from its own industries, that is the best way of combining the dissemination of quons with spreading around the incme that enables more people to consume more quons. This is precisely what is happening: and the slight reduction in reported economic growth while an increasing commitment to quon .is implemented will be followed by a period of rapidly rising productivity and then of incomes. Once Chinese quons are well proven in the home markets they will be ready for export: often under established western trade marks, which the Chinese have assiduously been buying over recent years.
Those who choose not to recognise what is happening will suffer when the development of the Chinese economy faces them with further reductions in their western standards of living. The sadness is, that Economists will not bear the brunt of the impact: that fate, as usual, falls to the poor who have been so appallingly deceived by the politicians who remain deluded by market models.
In the terms of Personal Political Economy the great shift is that there is an increasing number of empowered consumers each year: people with greater disposable income [and in some cases borrowing power that enables them to make bug purchases] are able to move from subsisting only on marcoms [basic commodities that meet needs] t being able to enjoy the experience of consuming quons. Just a few western Economists, including notably Harry Johnson, recognised in broad terms the difference between quons and marcoms. Johnson called quons 'positional goods' but he did not live long enough to develop any significant theory; and it remains probable that the mainstream of his 'profession' would not have accepted the concept. In the decades since that aborted airing of the issue, naive Economists have continued to treat 'goods' as a whole; while Chinese economic planners - in particular - have recognised the significance of the differentiation and the importance of fostering a shift of consumption from having more 'essentials' [which in excess can make people obese] to being able to acquire quons which embody consumer experiences that invoke a different sense of satisfaction.
As Chinese consumers gain flexibility over spending their increased wages they acquire the power to make a different sort of choice. In their millions they have opted to acquire different sorts of meat as well as computer games and, more recently, a whole range of 'aps'. Higher up the income scale, people have bought hundreds of thousands of quintessential quons: new apartments. Financing the boom in property has led to a huge extension of borrowing, both overt and illicit, and the authorities have not been completely successful in controlling that expansion. In periods when restraints on funding property purchases have really bitten, the market has lost momentum; then measures have been found for expanding credit again and restarting the building and the sales - and confounding the western Economists who have seen the 'property crunch' as evidence of the fundamental instability of the Chinese economy and an imagined 'need' to move to a neo-marginalist market model.
China is a much more rational system than those Economists can understand. People rising from abysmally low standards of living have been brought in their hundreds of millions into a market economy, where at first they receive subsistence wages [which a majority of urban workers still receive]. Then their productivity rises to enable them to be paid enough to become highly selective consumers of quons. The first little luxuries are the most highly prized, as they open up a new horizon for the individual. The payment made for them is sacrificial, and the satisfaction received is incalculable. Of course, if the buyer is cheated and receives consumption that is not what they had been led to expect, the anger and disappointment experienced by the consumers is also incalculable: which justifies significant control of products and markets.
The best way to raise workers' productivity in an already-industrialised country is by adding quon production to marcom production. If China can produce the majority of the quons that spread over the country from its own industries, that is the best way of combining the dissemination of quons with spreading around the incme that enables more people to consume more quons. This is precisely what is happening: and the slight reduction in reported economic growth while an increasing commitment to quon .is implemented will be followed by a period of rapidly rising productivity and then of incomes. Once Chinese quons are well proven in the home markets they will be ready for export: often under established western trade marks, which the Chinese have assiduously been buying over recent years.
Those who choose not to recognise what is happening will suffer when the development of the Chinese economy faces them with further reductions in their western standards of living. The sadness is, that Economists will not bear the brunt of the impact: that fate, as usual, falls to the poor who have been so appallingly deceived by the politicians who remain deluded by market models.
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