Let’s start with an addled view of what it is to be human. According to economists, it is the ability to calculate. Their picture of the human is that of homo economicus ‘economic man’, a calculating machine who is always weighing up the costs and benefits of every course of action.
George Osborne is bound to crow at the Conservative party conference about the superior performance of the British economy under his stewardship. After three years of “hard slog”, there is at last some good news to report. In the second quarter of this year, the economy grew by 0.7 per cent after “flatlining” for the previous three years. The National Institute of Economic and Social Research has revised its annual growth forecast upwards twice in its latest forecasts. The British economy is now expected to grow by 1.2 per cent in 2013, 0.5 percentage points more than was forecast as late as in February, and in 2014 this will surge to 1.8 per cent. The tables, the media will gush, have been turned on Labour. George has pulled it off. And Osborne will claim a number of things that are either false or implausible.
By Robert Skidelsky and Nan Craig
Britain is a service economy with a lot of lousy services. The paradox is easily explainable. Service and cost-cutting are contradictions in terms. Good services are intrinsically expensive because they require a high ratio of labour to product; hence the old view that services could not be automated. Yet the main aim of those who run our service economy is to cut the costs represented by human labour as much and as fast as they can.
Co-authored with Marcus Miller
Across Europe, austerity policies have caused stagnation and despair. There is a more humane way to restore our fortunes.
Lionel Robbins defined economics as the study of the allocation of scarce resources among competing uses. For an economy at full employment, where the opportunity cost of government spending is the private spending it displaces, this remains a good characterisation. But what if there is a deficiency of aggregate demand, so the nation’s resources are being underused – as evidenced by significant involuntary unemployment? In this case, in so far as it employs unused capacity, expenditure by the government will add to the resources available for investment and consumption. This is conventionally measured by the “multiplier” – the ratio of extra output available per unit of government expenditure. If the multiplier is equal to one, for example, there is no opportunity cost to public spending, in effect: the resources would otherwise be unused.
Vince Cable has responded to Robert Skidelsky’s September 2012 article on the economy, ‘Go left, go right… go downhill’.
You can read Cable’s article here at the New Statesman website:
And Robert Skidelsky’s original piece, here:
In the early 1950s, Britain was an industrial giant. Today it is an industrial pygmy. Manufacturing was industry’s bedrock. In 1952 it produced a third of national output, employed 40% of the workforce, and made up a quarter of world manufacturing exports. Today manufacturing is just 12% of GDP, employs only 8% of the workforce, and sells 2% of the world’s manufacturing exports. The iconic names of industrial Britain are history: in their place is the service economy and supermarkets selling mainly imported goods. What happened? Was it inevitable? Does it matter?
Refreshed by his summer holiday, David Cameron vowed to “get Britain moving again”. A slew of kick-starting initiatives has followed, most of them the brainchild of his government’s one-man think tank, Vince Cable.