Saturday, 5 March 2016

Osborne Gets Bitten in the Arse By Thatcherism

Thatcher was of course very right in taking the view point that a soveriegn state should concentrate on balancing its books. This can include of course, having a national mortgage and paying it off consienciously while also like the Uk managed in some years in the mid eighties, to be a national creditor and have a surplus like Norway of course does.

Osborne has the difficult job of fixing this again post Thatcerist 'revolution'. The wheel of capitalist systems has revolved maybe its full and inevitable course to the western societies which embraced the Neo Conservative mantra of low tax low wages, high freedom for business to organise internationally. High unemployment and massive under-employment as industry organised to relocate production and entire brands to Socialist Command Capital China. The anarchy of the global financial system has had nearly a decade of ruin and coroporate and banker welfare in its wake.   Let run free by the Laisez Faire and later confusion governance in the US in particular, but the weaknesses of all soveriegn states, it came back to bite the countries which had levered too much money through their national banks and allowed merchant banks to follow. Ireland, Spain and Greece have just impossible debts to ever realistically pay off within any normal commercial terms.

Also the Thatcherite Neo Conservative philosophy has been firmly bitten by its own rabid dogs - the financial system, the mega billionaires and the mass under-employment we see in the west today. Instead of creating less socialism and state intervention, the revolution has created new, huge forms of socialism in order to avoid social unrest and collapse in trust within the anarchic financial markets. Instead of paying manufacturing industries to survive and perhaps modernise, they now pay for service industries to have a super flexible, disposable, cheap workforce. Instead of increasing public spending on better schooling for all, better health care and better public sports facilities and preventative medicine, they have bailed out the same banks, financial institutes and uber-wealthy oligarchs who demanded they stop bailing out manufacturing industry and opened up trade to China. We see also that former public utilities and privatised services command far higher sums from either the public purse or in comparison to RPI, from the consumer than they did when they were publically owned. While the worker gets most often less take home in these industries, and profits are exported.

George Osborne then finds the biggest sump of money for working age, healthy workers in the public spend is in what Labour tried to address - getting people out of dependancy culture by making work always pay more than not working - in work benefits and tax credits, which by in large now prop up part-time, temporary work or extremely low wages and lack of access to overtime payments. The trouble being that these also prop up bad management practices and marginally profitably business models. In turn his problem is that these are in consumer services, privatised public services and some business services which are all the growth potential areas for the UK as more manufacturing leaves for China. (for example the remnants of the steel industry - Trident 2 will be built from Chinese steel mills)

On the other hand, the years of subsidising and spending on R^&D Linked to supposedly new business creation has turned out to be very closely linked to public spending anyway- a huge proportion is towards defence and health care which in the UK and indeed the US via public employer contributions to health care, are the largest single spends , as for western nations by in large.

If you look at the FTSE top one hundred and other listings, you find that a large proportion of companies are linked into public spending - defence, pharma and of course the propped up financial sector whose debt to societty should be seen as staggering and should be reigned in with new payments. Also we then see the formerly public utilities, who have been exacting above inflation price rises via confusion marketing for two decades now.

Osborne opens Pandoras box  with ideoligical mittens and discovers that his economy is running in a crypto Keynsianist nightmare with money circulating through the state as almost never before. Despite trying to find the usual 'blame Labour' rhetoric, he should really reflect on the Thatcher Revolution being a wheel which will break the back of its own ideology.

Thursday, 3 March 2016

Osborne and the Armies of Under-Employed

The chancellor has come round again to of course "Blame Labour", as is the long lasting and middels successful approach to bolstering Tory vote in times of adversity. Now he is trying to firmly pin under-employment and the large social benefits bill which accompanies it, on Labour policy on 'in work benefits and tax credits', known at the time as 'making work always pay'.

As with privatising the Police or bothering to invest in Trident 2 when the Russians or Chinese could buy out the Tory party if they wanted to, the Chancellor will feel the irony of the free market bite him if the Tories live out another parliament and see the fruits of their drive to economically marginalise more voters. What he forgets is the very reasons why 'making work pay' was made policy.

Back in the 1990s Britain was in two transitions- the long term de-industrialisation continued while the privatised service sector grew rapidly and started devaluing work. New enterprises within consumer services blossomed partly by metropolitan and shopping centre demand, but also on the availability of cheap, part time, temporary labour which lowered their cost base significantly. There was of course both a need to have part time staff, and a ready supply from students in particular, or people locked in low wages looking to work harder in job number two.

The problem was that these type jobs came to predominate many areas of the country because of the savings to be made by employers on inconveniences like pensions and redundancy money which permanent staff used to enjoy. Graduates found themselves in the mid nineties that the market for their 'breeze block' university degree skills was saturated. They competed with unqualified school leavers for flipping burgers and cleaning offices. Under-employment became the new hidden social ill. The sickness spread from fast food and shop-jobs to everything from hospital hygeine, life gaurds, supply teaching, agency nurses and airline cabin staff.

The unemployed long before 'in work benefits' could work part time and as long as they kept under 50% and a certain earnings limit, they could claim the dole anway. What Labour tried to do was to coax people off this 50% margin, where many would actually avoid working too much because they would then fall off benefits, while in good knowledge that their employers would cut their hours at a later date or lay them off altogether. Thus they avoided the paper work and bad cash flow of waiting for both their last pay cheque and their first new dole money.

Labour also wanted people to get used to asking for more work, and hoped that as the economy grew, more of these jobs would become less marginal and go over to full time. The trouble was, that both Blair and Brown also wanted to continue and even extend the 'flexible portfolio career' so did not tamper with enmployment laws weakened under Thatcher and Grey Man Major. There was no real economically meaningful improvements in maternity leave, it just got better for some in permanent employ, who may well have had such terms offered as loyalty 'credits' from their better employers anyway. No improvements in the rights to a permanent contract or extended hours.

For people with young families, the benefits culture became all too attractive in comparison to low paid, part time, temporary jobs with no hope of maternity, and the single mum in the council flat became both a small but expensive phenomenon, and a Tory stereotype to bash the welfare state with. The Tories would rather today, forget that Labour tried to reverse this trend by making-work-always-pay more than sitting on purely benefits. Now though they suddenly see that 38% (need citation, it may include tax credits which are not necessarily in the departments budget) of the under pension age social welfare pie goes to these type of benefits.  They suddenly see this as a suibsidy to industry! Wallmart in the USA, have long realised this and have an army of employees who are cheap and readily available, topped up with state benefits.

Now George Osborne run on a knife edge of not being able as a Tory, to weigh down business with a less flexible work law which would favour workers right to full time, permanent employment. While on the other hand he wants to cut this bill and get people off these benefits. He wants to then offer no other incentive than 'go find a full time job' in effect, because by nature of where they stand now, they are in those positions because employers prefer them and can get a virtually endless supply of either UK or now EU and refugee workforce to fill them regardless of benefits on the side.

The heart of the matter is that these benefits are caused by the nature of the post industrial economy and the deskilling of the workforce into a service economy, and privatisting public services with their 'expensive' full time, unionised workers. It still remains pro-rata cheaper to employ part time and/or temporary staff than take on people permanently to longer guaranteed hours.

The old argument of the Tories was that there will always be a demand for out of office hours part timers, seasonal workers and peak hour supplementary staffing, and that indeed there are many students, house wives and early retired people who get real income from these jobs. Also that rather false holy cow of the modern, Eatonite Tory party, THe Small Business, who are always talked of being the future, may be dependent on part time workers to get a foot into growth beyond being one man bands. The trouble is that too much of the economy has gone this way, and the last Tory government let the bill for part timers only rise as we entered the recession aka the finance crisis.

Any UK chancellor in the next parliament has to rather recognise that Capitalism is inherently unbenevolent, and needs democratic laws to reign in its excesses of exploitation. Blair and Brown tickled the situation and cajoled some part time workers and long term marginal benefit workers into working a little more or into taking up those rather low level  jobs that were available. As stated above, the Tories initially did not want  However what is needed is the reduction  or removal  of the pro-rata per hour on costs advantages of part time, temporary staff so that employers face no barrier in how they choose to cover requirements, and gain loyalty and productivity from full time, permanent staff in greater numbers.

Tuesday, 1 March 2016

Adam Smith's Division of Labour Hits the Buffers

It would seem that Scottish Entrepreneurs are somewhat turning their back on the received wisdom that was once Adam Smith.

As part of a dissertation -part thesis on economics and society I have embarked upon, i am going to compare and contrast two great works in the light of the modern global economy down to the granular, personal economy. Firstly appraising ".....The Wealth of Nations" and then "Das Kapital " with what will - me being me- be taken together and in a modern hiatorical comparisonm as a critical consideration of ideology versus reality.

Adam Smith both observed early pratcices in industrialisation as well as theorising what would come to prevalence - in particular the division of labour in manufacturing processes and its relation to productivity and wealth creation. His theory would suggest that wealth generation grows as the division tends to zero- further division leads to further productivity gains to the point where the smallest practical component or value adding process is commanded by a single worker.

Marx and the Luddites took a partisan view of this particular pratice in jndustry, which they both saw as reducing the skill of a worker and rendering them automatons, and thus reducing their net personal value.
There is a contradiction in Adam Smith's own works regarding this- he viewed on the one hand cottage industries as the example of wealth limitation, as also per sum of output, national wealth, yet he identified that the real denominator in any exchange of value is that of labour rather than money per se.

The conflict here being with the Marx-Luddite view - a worker commands less value for their labour in the infintesimal process,  and is exposed to being overworked due to pressure to produce more or rapidly made obsolete by new machines, or competition from other workers prepared to work for less or forcing down the value of the process in other companies who enter the market.

Today we see a return to see exactly this dilema in western societies - skilled labour for a vast amount of products and primary extraction, are cheaper elsewhere, unskilled process workers also are cheaper, and the remaining unskilled service jobs have a virtually limitless supply of labour in populated areas. However there is a more or less natural movement away from this 'natural' process of finding the lowest common denominator in a global market. This is mannifest in different economical phenoma.

Firstly there is the huge push for qaulity and safety, which both the moderate right and socialist unions and left have driven forward in policy, while many reaponsible corporates have followed in order to avoid current day litigation and future policy shock costs. A big topic, suffice to say it employs cross process highly skilled HSEQ proffessionals, amd empowers operational workers with a higher skill set and hence value.

Secondly you have those areas which are highly linked to national public spending and protected markets - be that by tariff or cultural resistance. The biggest two areas remain defence and health-care . the supposedly private US health care system is arguably dependent on the large, high margin contributions paid for public workers, such as the  police and postal workers.

Getting closer to my otherwise pico-rant-point, the next is where cross process IT and financial market - sector  workers deliver a range of skills across a range of high value industries, projects or transactions and thus command a high price on their head. 

Finally we get to Scottish Micro Brewers, organic ski manufacturers, gin 'instillers', guerrila restaurants and personal therapists ....the nouveaux artisan, the modern craft business, the hipster we are back to piss on the chips of Adam Smith.

We have reversed the process of wealth creation he described, in that in order to command a higher price for their wares while reducing cost to market by being local, the new cottage industries have evolved. Here workers carry out a broad specteum of operations and have an interest and ownership of the product and its high qaulity.

The free market dogmatists have relentlessly moved production to lower-labour-cost-countries, even from profitable western manufacturing companies, or centralised and scaled production, curtting out regional and even national  brands in the name of profit.  Now many skilled graduates and craftsmen miss out the corporate career ladder - moving to the super brewery in Belgium or the desing offixce in Shanghai, and get into these craft companies,moften negotiating share pay, stock options and cheap private equiuty buy in early.

New middle sized, regional brands with some kinds of authenticity, terroir or taste, will emerge and be inevitably sold out to big capitalism, but are likely to last longer and have higher worker equity ownership. Craft delivery and whole supply chains- twee shops, farmers markets, real ale bars, organic restaurants, the wee pie van....people will have less discretionary income if capitalism continues unabated to restrict the metropolitan property markets and lever it into being endless rental for many educated people, and there ia a trend to spend it on local experiences and quality food and drink.

Adam Smith of course didn't get it wrong- he could summise very well the lead indicator and peri-indutrial trends for the times, and in being observative and creative he thought through much logic in what was happening and the shape of things to come. An irony for his staunch ideological followers however, is his anomalous view on the fundamental time over nominal monetary value.

This is a comparative value of labour which has both a truth as an economic principle, while also fights against the way the capitalist system trends to accumulation of wealth and the reduction of value of that labour hours.