Wednesday 13 April 2016

Simon Jenkins on top form

Ever keen to annoy as many people as possible, the main thrust of his article in yesterday's Evening Standard was that homes in the private rented sector are probably used more efficiently than owner-occupied or social housing. Which is probably true.

He redeems himself with this though:

Rich cities such as London should stop moaning that “my children can find nothing affordable in Camden” and think of less fortunate parts of the country — or indeed London. The capital keeps demanding and winning ever higher subsidies for trains, runways, academies, museums and garden bridges. More ridiculous, it demands and wins subsidies for “first-time buyers”. These subsidise demand rather than supply, driving prices even higher.

Some ancient Whitehall statistician, constantly quoted, says London “needs to build” 50,000 new houses a year “to meet demand”. This is illiterate. Londoners probably demand a million houses, or two million. Demand for space in a city is infinite and impossible to satisfy. Everyone always wants somewhere better to live — and if asked will “demand” it…

What role is there for government in all this? One is to keep the property market as open and flexible as possible. Taxation should do everything to induce empty space into use. But government should also care for those in acute housing distress. Neither role is being performed in London…

London’s curse, geographer Danny Dorling has written, is “space hoarding”. Whether the so-called bedroom tax is the answer — or perhaps a more steeply graduated council tax — all surplus living space should be taxed. London’s hidden and least expensive housing surplus is in houses already built, not unbuilt…

The Government’s current attempt to extend right-to-buy to housing associations should increase, not decrease, rental supply. There is nothing wrong in right-to-buy but there is everything wrong in the proposal to discount prices and subsidise them from social housing budgets. It is a cross-subsidy from poor to rich and indefensible.


Which I have been saying for years.

40 comments:

L fairfax said...

One simple solution as well as changing tax would be to not pay people who don't work to live in London. If Prescott had moved single mums from London to empty houses in Liverpool rather than knocking them down it would have been a lot better for everyone.

Lola said...

Writes well, does Mr. J. and 'mostly' talks sense.

Bayard said...

LF, it is odd, is it not, that it is considered normal for someone to move themselves and their family to another town or city to become employed, whereas it is considered cruel and inhuman for someone to have to move to another town or city to find state provided accommodation. In both cases the same ties with friends, family and neighbourhood are being stretched or broken.

L fairfax said...

@Bayard
Yes. It is even worse than that I once heard a programme about the benefit cap and the recipient of housing benefit said "My friends who work had to move away because it is too expensive here for them".

mombers said...

It's tricky with the long term unemployed. How many of them are unemployed because of dead-weight costs from taxation? How many are unemployed to keep inflation down? LVT would sort this all out of course. Those who really don't want to work can move somewhere with rents significantly below their CI.

Lola said...

M. And how many of them are unemployed because they are forbidden by law to offer their services to a willing employer at less then the Minimum Wage?

Anonymous said...

Stronger unions would negate need for minimum wage legislation and a whole host of other employment related legislation.

Lola said...

P156. Actually the reverse is true. Unions are very good indeed at getting higher wages - for their members, most of whom earn way more than the minimum wage anyway. The strongest unions also have the highest paid members. (The reverse is also true). Unions also look after their officers, very well indeed. What unions do not do is look after the low paid or workers who aren't their members. Furthermore by means of special membership requirements they keep their membership relatively small, in order to restrict supply and push up wages. By their actions they make other workers worse off. I saw a study somewhere (I think it was in the US) that over a certain period of time unions had raised the pay of their members by about 10% to 15%. Over the same period the living standards of non-union people had fallen by about 6%, (some of that reduction would of course fall on the union members). Someone always has to pay. Unions represent a minority of workers, and it is often not clear that a workers organisation is a union. The BMA for example.

Essentially unions are all about special privileges. Just the same as bankers. And special privileges are always bad for everyone that doesn't enjoy them.

If you want to do away with low wages, scrap union special privileges and closed shops and the like. The best way to secure, real, high wages is when employers have to compete for labour, and labour has to compete for jobs.

Bayard said...

We need minimum wage legislation to avoid the usual consequences of the Speenhamland System, aka Working Tax Credits. Without the minimum wage, employers would pay unskilled employees very little, knowing that the slack would be taken up by the state. Of course, you could always get rid of both. It depends if you want a lot of unemployed people or a lot of people working part time. There are advantages to employers to having a lot of part-timers.

Random said...

"We need minimum wage legislation to avoid the usual consequences of the Speenhamland System, aka Working Tax Credits. Without the minimum wage, employers would pay unskilled employees very little, knowing that the slack would be taken up by the state."


Well one alternative to both is the Job Guarantee, where the state offers a living wage job to everyone (incl any spare hrs) fitted to the person working for the public good near where they live.


The private sector cannot and should not employ everyone if it wants to be efficient. Ideally replace unskilled employees with machines.


The basic problem is that once people are out of work, they don't have the income to demand the goods that the machines could produce.


With JG they do something for the money which satisfies quid-pro-quo, and they spend the money, which is the signal the system needs to produce the stuff for them, which then generates the turn that causes more of them to be employed.

Involuntary unemployment is a systemic thing - there are 9 bones and 10 dogs.


Government spending creates the additional flow that keeps people employed that wouldn't otherwise be employed, and the machines moving that would otherwise be stood idle. It's a win-win.

When we get rid of bullshit jobs in finance, PR and advertising, then I'd suggest there is even more productive capacity to go around.


So the question then boils down to whether you think these people at the low end deserve output to consume or not. Or whether you'd rather not produce it at all just to spite them.

What's amusing is that when you increase the flow rate like that from the bottom end, businesses create more output over the same fixed costs and actually generate more profit.

So they get richer as well, and the cost of goods falls due to greater amortisation.


But the reason society doesn't do this - besides widespread lack of understanding of feedback within dynamic non-linear processes - is that although it increases absolute wealth for everybody it reduces relative wealth within the society.

And it turns out that humans prefer to have the largest mud hut on the Savannah than a marginally better Leah Jet in the airport.

Lola said...

B. I don't agree with that. There are very very few truly unskilled workers. We are all blessed with some degree of cognitive ability and an opposable thumb. And we do not have a low wage problem. We have a rent and high tax (also rent) problem. Without the enslavement of the benefits system (deliberate in my view) and with only LVT and complimentary taxes (e.g. bank asset tax) the cost of living and especially rents will reduce relative to wages. If you add the Citizens Income / Dividend to that there would be no need for a specific minimum wage.

R. In a proper free market you just don't get unemployment, in they we have it now - institutionalised.

paulc156 said...

Lola. Yeh probably an American study. Well of course weak unions get weak settlements fir their members...who still get better settlements than non unionised workplaces. (see Walmart for example). And the conclusion is thus...erm , no unions. Hmm. Well you mention lower rates of pay for weaker unions, but there's the small matter of stagnant median hourly pay in the US over the last few decades, which coincides nicely with the steady erosion of unionised labour in the States. Preferring to continue that trend seems analogous to doubling down on the application of leeches to the poorly patient.

Anonymous said...

Yes, you've been saying to for years. And if it didn't get through the last time, try try again. Right? But never look deeper.

Mark Wadsworth said...

LF, yes, taking Georgist logic to its conclusion, there would certainly be no "Housing Benefit", there would be a flat rate Citizen's Income instead. Councils would charge full rent for their homes, so unemployed people would gravitate to cheaper areas. That's all fine by me. The problem is the Homeys start at the wrong end and fail to see that this logic extends up the chain to home owners - if they can't afford the rent/LVT in their area, then they have to downsize.

L, yes.

B, good point.

M, most unemployed are priced out of the system by VAT, NIC, minimum wage laws, means testing of benefits, lack of housing etc. A few are lazy sods, but only a few.

PC, R, no evidence for anything of what you say, at least L comes up with some. It is quite simple, the best guarantee of workers' rights is full employment (and a Citizen's Income) . And 'workers' includes small businessmen etc. The key is getting full employment in the first place.

B, yes, WTC is a really shit kind of welfare, you can't cite that in evidence of anything, it is just inherently shit. The NMW is inherently shit as well, just in a slightly different way. The two shit-nesses do not cancel each other out.

RS, I have been saying "to" for years? So have most people, the word "to" it is part of English verbs or commands.

Lola said...

P156. Stagnant US wages are not down to the free market, quite the contrary. They are down to massive state interventions, bad money (made/encouraged by the state), lots of rules, cronyism etc etc. It is precisely because of the absence of the free market.

Tim Almond said...

Unions were about demanding better pay and conditions from monopoly employers in that era (who also had limited choices about where they could get their workforce).

The decline of unions (and this happened across Europe) strongly correlates with better transportation, allowing people to change jobs. Don't like your job, you don't go on strike, you go and find a better place to work.

A few places still suit unions, like Airbus and Rolls-Royce. They need lots of people with very unusual skills, and those people can only work for one place.

Random said...

"In a proper free market you just don't get unemployment"

Yes you do. It is a matching problem. Read the link in my above comment.

The list of vacancies is the *unmatched* list - jobs requested for which there is no match. It's like the list of share offers on the stock market for which there is no bid:

What you call the 'price' is determined from the list of bids and offers. Many bids and offers are unfilled (that's what limit orders are). A deal is only struck when there is a bid come in for offers that exist below that price, or vice versa. When you buy at 'market price' you're saying take the lowest offer(s) available - similarly when you sell you say take the highest bids available.

When the bids and offers separate then the spread widens and the liquidity vanishes. If you trade on alternative markets without market makers they are often stuck in a 'no deal' land where the bids and offers necessary to make a trade don't exist. That's what a 'thin market' is.

You have the same with labour markets. Hence why you have a list of vacancies and a list of people, but no deals.

The Job Guarantee solves the matching problem by coming up with jobs that match the people that want them - taking them as they are.

Lola said...

R. No. you do not get unemployment in a proper free market. As labour is mobile there can be no 'matching problem'. What you are advocating is precisely not free market. It is a scheme to keep people unemployed by encouraging them to remain where there is no longer any productive employment. In large part LVT/CI would address this as a lot of the frictions that now exist in moving home would go and you would get your CI whatever. The US had enormous labour (or should I say labor) mobility for most of its history, which made sure that labour would move to where there were productive jobs, or more accurately away from where there were no productive jobs. Until the welfare state got going that is.
Take the lead miners in NE England. There was a thriving lead mining industry https://en.wikipedia.org/wiki/North_of_England_Lead_Mining_Museum This mine was out-competed by less costly richer seam lead mining in other places, USA for example, ( http://www.thenorthernecho.co.uk/history/mining/lead/ ) and a lot of the Killhope workers and capital emigrated to USA to work those new more productive mines. They took their skills with them. There was no unemployment as we would understand it today.
Your argument is false.

Anonymous said...

"PC, R, no evidence for anything of what you say"
...yeh right Mark.
More unionisation/stronger unions begets less regulation/red tape/mimimum wage diktats:
https://ideas.repec.org/p/iza/izadps/dp3680.html

You might be referring (when you claimed:"no evidence for anything of what you say") to my comment "stagnant median hourly pay in the US over the last few decades, which coincides nicely with the steady erosion of unionised labour in the States":
http://www.epi.org/publication/ib330-productivity-vs-compensation/

Scroll down (in the above link) to figure A and then B (A is for Growth of real hourly compensation for production/nonsupervisory workers) which shows broadly flat hourly compensation over the last four decades or so. In B you can see real hourly median pay for male workers is 0.1% higher in 2011 than in 1973. Or 10% higher if male and female are included. In the same time unionisation has collapsed. I presume you don't doubt that last point.


Further to that I'd point out that there's evidence to suggest that outside of the US stronger unionisation is correlated with greater productivity...which begs the question as why CEO's don't welcome it? CEO compensation is inversely correlated with stronger union presence:
http://econpapers.repec.org/paper/ehllserod/19865.htm

" It is quite simple, the best guarantee of workers' rights is full employment (and a Citizen's Income)". I don't dispute that.

mombers said...

@L what about a couple where A is in a job but there are no suitable jobs locally for B? It's not a case of B taking any job there is on offer locally, they have A's income to sustain the family and anyway taking an unsuitable job has opportunity costs in terms of having time to keep looking for better ones or training for what is there. While B is still searching for a suitable job locally, they are surely counted as unemployed, hence there can be unemployment in a 'free' market.

Re unions depressing wages for everyone else, this isn't such a big problem if large parts of the workforce are unionised, like they were at times of good wage growth in the past. Now that they are a shrinking minority, looking after their members' interests has a much more damaging effect on everyone else.

Lola said...

M.

In the case of the couple you describe, the unemployment is 'chosen'. So yes, there can be unemployment, if it's 'chosen'. B could move to an area where there are productive employment opportunities for his (her?) skills. But choose not to. I agree that this sounds harsh - breaking up families and all that. In any event in joint employment households it is mostly the case that there is one major earner and one minor earner. The minor earner is often un-skilled or semi skilled, so the circumstances you describe arise rarely.

As to retraining, until the retraining is complete the worker is in - training. Not unemployed.

The point I am making is that if we concentrate on liberating production then that is the most certain way to enjoy full employment (not forgetting that there will always be a float of labour as there is a float of capital, between employments). As part of this labour has to be mobile - which it largely was until the introduction of welfareism, i.e. not freedom and the market.

Lola said...

P156.

First link. What the authors have stumbled upon is the competition for a constituency. If the Unions don't assemble the workers to segue their power the State will.

Second Link. This looks a bit like Piketty to me, which / who has also been disproved.

Third Link. Maybe, but is that a good thing? It might be that great CEO's can't really be arsed with dealing with all sorts of collectivism which they may consider inhibits their ability to add shareholder value. It looks like an effect not a cause.

I have not seen any evidence anywhere that strong unions improve productivity. My impression is quite the reverse.

Random said...

"I agree that this sounds harsh - breaking up families and all that."

Wouldn't it be easier to have business go where people live?

Businesses only turn up when there is money to be made. And that only happens when people have money in their pockets to spend.

To get businesses to turn up and stay you need long term sustained *current* spending in an area. And that means spending money on improvements in public services in those areas - things like elderly care and education.

Once businesses see that the flow of money in an area is sustained, then they pop up to take advantage of it and a virtuous cycle can begin.

And I still don't see how you compete away rubbish jobs with no floor.

Random said...

Chris Dillow has an excellent post on this very subject

Most people will be unhappy out of a job, because they were trained by the school system to be happy within a job.

Replacing the extrinsic motivation of a job with the intrinsic motivation to do something else is not something the majority of the population can do. To a greater or lesser extent they need to be told what to do - because that is their training.

We need to restructure the school system away from its current factory model and develop (or more accurately don't destroy) individual's ability to self-determine before that can work.

Anonymous said...

Lola?
The first link establishes in the absence of unions one should expect much more in the way of red tape/regulation. No evidence was offered up in my first post since it is stating the bleeding obvious!
The second link and certainly the charts (and accompanying texts) 'A' and 'B' I referred to, has nothing to do with Picketty and I could just as easily found numerous other sources that would confirm the same findings (neither I nor you were talking about inequality) but was cited by me as evidence of the relative stagnation of hourly pay even whilst productivity has increased markedly during that period that unionisation had declined. That was al I had claimed.

"It might be that great CEO's" Talk about begging the question! 'great' CEO's?

Strong unions improving productivity?

Plenty of evidence in a six nation study here:
http://cep.lse.ac.uk/people/vanreenen/lecture_notes/handbook_metcalf.pdf
(though not good for profitability)...some good anecdotal on the UK motor industry from this article by Professor David Bailey of the Aston Business school here:
http://www.birminghampost.co.uk/business/business-opinion/uk-car-output-up-down-9902855
To be honest I'm surprised you haven't seen evidence linking strong unions with increased productivity. Even libertarians have no problem with accepting this:
http://econlog.econlib.org/archives/2008/06/unions_and_prod.html
More here: http://eid.sagepub.com/content/early/2014/12/17/0143831X14555707.abstract

Random said...

"The point I am making is that if we concentrate on liberating production then that is the most certain way to enjoy full employment"

Yes but we have to consider human needs as well. Business should certainly be able to hire and offshore. You seem to be trying to squeeze humans into your system rather than the other way around.

Switching to a bottom up system starts to move the income distribution curve back to where it should be and the production curve back to where it should be - dealing with *needs firsts* and then wants.

Wealth is redistributed because the rich suddenly have to start providing services for the poor if they want to earn the money.

Once you have a JG and the 'business confidence' bogeyman that Kalecki mentions is laid to rest then you can be far more aggressive pushing up the living wage. At the top end you give the Ministry of Competition real jack boots to stop oligopolies forming.

Businesses actually hate competition but of course they are supposed to be supporters of it. So you exploit that Janus issue to the full.

"Re unions depressing wages for everyone else"

It is important not to put trade unions on a pedestal as miracle workers. They are not. They are just as likely to be destructive as the corporations they oppose (one of the reasons for small corporations is so you can have smaller unions. Unions have to be the same size as the corporations they sit in - otherwise you end up with the 1970s).

Trade unions are an important part of the controls structures in the labour market, but forward progress is via the politicians the unions help elect to parliament, and by ongoing social education.

Lola said...

R.
"Yes but we have to consider human needs as well. Business should certainly be able to hire and offshore. You seem to be trying to squeeze humans into your system rather than the other way around.
Eh? Precisely the reverse. It is as the man said all about human action.

Mark Wadsworth said...

PC, I am not dismissing everything you say about unionisation, but I don't think that you have the causation the right way round.

I will have to do a post on this, but in brief, what happens is you get high unionisation where there is a large or monopoly employer and employees cannot be replaced easily or are highly skilled. The opposite applies where there are lots of smaller or competing employers and workers can be easily replace and/or trained up.

So doctors and London train drivers are highly unionised. People who work in corner shops or Amazon warehouses are not.

So you see, high productivity is just as much a CAUSE of unionisation as an EFFECT.

R, I do not accept JG as anything more than a temporary sticking plaster with ultimately disastrous unintended consequences. At least PC156 has come up with some facts (we argue about chain of causation is all). You don't have any good examples of it working outside tightly knit societies like South East Asia, in the free west it never works.

Random said...

"You don't have any good examples of it working outside tightly knit societies like South East Asia, in the free west it never works."

Not idea where that comes from. It's just a job like any other job.

A mini job guarantee has been implemented in the US:

http://bilbo.economicoutlook.net/blog/?p=32287

Check out the impact of Gordon Brown’s Future Jobs Fund:

http://cesi.org.uk/blog/2012/nov/future-jobs-fund-worked-we-shouldnt-bring-it-back-%E2%80%93-we-can-do-even-better

The main weakness is the ideological obsession with the private sector being involved.

And you haven't answered the question:
"What are you going to do with them instead?"

These are real people, with real lives and real hopes and aspirations. They are not just some number on a spreadsheet.

I always marvel at how the private sector is supposed to sort all this out magically all by itself, and yet that is impossible when you just suggest that the state pays for that to happen.

Throwing your arms up in the air and saying it can never happen just shows a lack of imagination - and a lack of understand of how systems operate.

We implemented universal health care and universal education. The naysayers said that was impossible at the time too.

We have systems in place to deal with 3 million sign ons - including regular interviews. We have social work systems, young offender systems and probation structures. In other words we can find lots and lots of work for criminals to do for nothing. Think how much can be achieved by those who are merely down on their luck who are getting paid!

You deal with this issue the way you deal with all system problems. You sort the easy issues out first.

And the Job Guarantee does not harm anyone's freedom. It is totally voluntary. I don't see your point. If South East Asia was full of Martians then maybe ;)

paulc156 said...

MW. Yes causation probably runs both ways but some studies from economists at Warwick U. find that even in the same country and same industry (India / textile mills) unions secure higher wages than non unionised mills which leads to more capital investment and thus higher productivity...in that order.

http://www2.warwick.ac.uk/fac/soc/economics/staff/bgupta/wp/cotton_mills.pdf

Random said...

Mark, haven't you noticed all the calls to nationalise steel due to the job losses?

The trick is that the government doesn’t have to get excited about people dropping onto the JG as it does unemployment, since by definition they have a job (or at least an income while the JG buffer system starts its scale up process).

Aggregate demand is maintained and you can wave your hands and mutter something about ‘business cycles’ and ‘readjustment’. You don’t have to panic as soon as unemployment goes up say 20,000 and start spraying discretionary public spending all over the place.

Lola said...

P 156 @ 19:53. It will almost certainly be the other way about. The particular mills attract higher investment and therefore pays higher wages. Interestingly I have a mate who imports lots of kids-ware from places like China and India. Invariably his orders lead the manufacturer to invest in better machines (my mate requires specific manufacturing standards and is known throughout China / India since he's been importing since the 70's) and because the worker productivity is therefore higher they get higher relative wages. You cannot get more pay than the value you add. If you do you will bankrupt your employer - British Leyland?

Anonymous said...

L.
In fairness I'm open minded enough to accept it is possible since I have said above that though unionisation correlates well with increased productivity it varies inversely with profitability. So whilst it is perfectly feasible that a 'great' CEO [or mill owner] might be able to attract more investment than other mill owners hence improving wages and productivity it is just as feasible that unionisation will secure greater wages thus driving increased investment and ultimately productivity. Me thinks you 'might' be suffering a bout of confirmation bias? See here, emphasis on the last sentence:

"This paper uses a new data set of cotton mills from all regions in India. Unionisation and worker militancy differed greatly across the regions. I use the regional variation in unionisation to test if the militant workers in Bombay cotton mills were less productive. I find that regions with higher wages had higher labour productivity.These were also regions where the workers were unionised. The presence of unions did not lead to lower productivity. On the contrary, by raising wages the unions contributed to raising labour productivity in the region. This reinforces the argument
that the causality may go from wages to productivity."

Bayard said...

"And you haven't answered the question:
'What are you going to do with them instead'?"

There's the nub of it. It boils down to do you want the "unemployed" to be idle or to be working doing things that don't need to be done. They can't work for ever on things that need to be done because i) these will run out or ii) they will be unfairly competing with people who were doing those things before JG came along. In addition, an awful lot of "things that need to be done" either need to be done by skilled people, who tend not so often to be unemployed, or need the input of skilled people at some point in the process.

"In other words we can find lots and lots of work for criminals to do for nothing. Think how much can be achieved by those who are merely down on their luck who are getting paid!"

That is a complete non-sequiter. The fact that we can find lots and lots of work for criminals to do" means that it is less likely for there to be work for the unemployed to do, because much of it is already being done by criminals.

"Mark, haven't you noticed all the calls to nationalise steel due to the job losses?"

So in effect, turning Tata steel into some vast JG scheme, producing steel nobody wants. It would be cheaper, but just as productive, to get everyone digging holes or filling them in again (you don't want the hole diggers to be the same as the hole fillers, because that would be dispiriting).

DBC Reed said...

Rather than the antique argument about digging holes and filling them in again, the argument for Tata steel is that, should steel-making continue with British labour, it will be more expensive than that dumped by the World's largest command economy. So the private sectorists twist themselves in knots to back the Statist Chinese rather than attend to lowering the House Price/ Earnings Ratio in this country in order that British people have more to spend so they can afford steel at the local price.Similarly something decisive ( and terminal) should be done with those who insist on lowering wages (and public sector spending power) below the value of the goods and services produced by the British economy at full capacity. These people are jihadis.

MikeW said...

DBC Reed 10:18,

Agreed, even the 'antique argument about digging holes and filling them in again' is still to the point: JMK mean't it with some venom. He was being deeply sarcastic, if the government elite were so dull minded and could not imagine themselves what you may do with the unemployed then just dig......

Of course I agree the structural problems caused by the rentier Bank/land class mean that unskilled labour cost is far too high in the UK as suggested by our free market friends here.But we are not allowed to retreat back into small scale holding farming, when unemployed, and now neither are the Chinese I notice. To starve people out or Poor House them is, in my opinion a declaration of war by the elite.In those circumstances you can forget your market anyway! This is the central 'contract' problem at the heart of the state.

Bayard said...

DBCR: point taken about hole digging. I was trying to make the point that the calls to nationalise steelmaking were not so that it could be turned into some form of JG scheme, but, as Mark has pointed out, it's all very well assuming that the state can simply employ people in "works of public good", but there needs to be some consideration of what those "works of public good" will be, whether they really need doing and whether there is enough work to provide continual employment to all those who would otherwise have no work. Otherwise you are indeed reduced to employing people to dig holes and fill them in.

"in order that British people have more to spend so they can afford steel at the local price."

How much raw steel do you buy? I know that I have bought very little in my lifetime. Surely you should be directing your fire on the evil capitalist manufacturers of finished goods who insist on buying steel at the best price possible? Even if the buying power of the GBP were increased, it wouldn't help the steel industry if manufacturers went on sourcing their steel on the world market. If you think that the ECMOFGs are buying Chinese steel simply to back the "statist Chinese", there is something deeply wierd about your world view. In any case I doubt the Chinese care one way or the other whether British manufacturing buys its steel from them or someone else; I doubt that our consumption of raw steel is so large that it makes much of a dent on the world price. Also it's not as if the British are the second-cheapest steel producer in the world: if the ECMOFGs were'nt buying from China, they'd probably be buying from some other Johnny Foreigner.*

Your argument sits very poorly with British steel production. It sits much better with those other examples of job losses that The Stigler posited in his post and where no fuss at all was kicked up. Why should steelmaking be subsidised by the state when raincoat making, or any other of the many industries you have quoted as being lost to abroad were not?

In many ways it is the lower skilled industries that we should be paying to stay in the UK, because those have the greater capacity to employ the unemployed, not favouring particular types of skilled workers.

*As an aside, my uncle was firmly of the opinion that customer loyalty was the death of the British car industry as it allowed it to persist with crappy managerial practices until the product was so poor not even the British would buy it any more.

Random said...

"So in effect, turning Tata steel into some vast JG scheme, producing steel nobody wants."

Ersatz Job Guarantee instead of a real Job Guarantee. That is a problem. You get the same thing with nominations of friends and family for certain positions.

IMV, have a separate JG outside your efficient sector. Then that sector has to compete away labour at the living wage, so a one off effect is the bottom feeders are eliminated. Since there is an alternative that sector will start to value labour.

DBC Reed said...

Can't help feeling that the CH Douglas analysis still applies: you take the economy's total production of goods and services working at full capacity and subsidise the entire population with spending-power by nationalising the commercial banks and creating money the way they do to fill the gap between present production and its unrealised potential.
It doesn't matter if some parts of UK plc are not profitable: it is a matter of making the whole system break even.
Loads of departments in a firm do not show a visible and accountable profit-but they make their contribution (questionable in the case of management!). Similarly a town might benefit from a loss-making art gallery as well as schools, universities, courts etc. Why is subsidising Tata to produce good steel worse than supporting all those tower blocks full of private sector bureaucrats in London?
NB "1984" which is a kind of reference point for this blog is a Douglasite tract which shows governments doing everything to avoid a world where machines do the work and former workers are paid National Dividends to consume the output.

Bayard said...

"Why is subsidising Tata to produce good steel worse than supporting all those tower blocks full of private sector bureaucrats in London?"

But does Tata produce good steel? Possibly better than some of the Chinese steel currently on the market (mind you no-one has mastered the art of producing "insta-rust" steel quite like the Italians) but I very much doubt that the Port Talbot Steelworks has had much invested in it for years. However, at least Tata produce something, all those bureaucrats produce worse than nothing, but the fact that they should have gone years ago is not a reason for subsidising steelmaking over any other failing business. Once again I see your argument as being more about keeping the employers of the unskilled and semi-skilled going than the employers of the skilled.