As we all know Will Hutton’s basic idea for the British economy is that everyone should just shut up and get on with doing what Will Hutton damn well tells them to. Only then will we reach those sunlit uplands of an economy that works as well as the Work Foundation*. You know, safe and secure pensions for all.
It’s possible that we shouldn’t in fact be believing what Willy tells us. Take this little statistic he drops into conversation today:
Since the financial crisis, real wages have fallen by a stunning 10%.
We might think that’s not a bad idea. That’s what recessions are, falls in real wages. This can happen in one of two ways. Lots of people move to having no wages because they’re unemployed. Or everyone’s wages fall by a bit. If we’ve got a – say and just as an example – 10% fall in GDP then we’ve got to have a 10% fall in incomes. Because GDP is, by definition and construction, all incomes. Crudely this can be as above, 10% unemployment and thus 10% of the people have no incomes, or all incomes fall by 10%. Which is better, well, actually, all incomes falling is. Because unemployment does indeed have harsh effects upon the rest of life.
We’re actually rather glad that Britain now has a labour market flexible enough that this is the way it did pan out, falling real incomes generally, not cliff drops for 10% of the people.
But beyond that, an examination of whether the 10% claim is even true. From the ONS:
You can indeed defend a 10% fall in real wages. Feb 2008 had real wages at 108 and a bit on the index, today has 100.6. Yes, in journalisticspeak we’d accept that as a 10% fall.
But you’d be horribly misleading to be saying that, wouldn’t you? Jan 2008 is 104.4, March 08 104.1. It’s the blip up to the 108.2 which is the anomaly, isn’t it? Seriously, no one at all is going to base any long term measurement of an entire economy on one obviously anomalous monthly figure, are they?
Well, yes, they are – Will Hutton does. Which is why we really shouldn’t be believing anything he’s saying about the economy. Because that’s casuistry.
In any three-year period, such is the churn in the labour market that a third of the workforce find themselves in poverty.
No, even if we take that at face value, it’s still one third of the labour force find themselves on less than 60% of median household income.
Thus the business world is, at best, watching and waiting; at worst, actively taking measures to protect itself by moving activity to mainland Europe. Figures released by the OECD on Friday show inward investment into Britain slumped by $181bn over the last year; outward investment has boomed by $120bn. This is one of the biggest one-year turnarounds by any country ever recorded. But it is scarcely reported.
We can explain that by this:
The trick here being that the balance of payments does, by definition, balance. So, if our current account deficit – trade – falls, then the capital account surplus must also fall. And I’m damn certain that Willy Hutton has spent decades shouting at us that the trade deficit must close. So, it’s happening and he complains, does he?
Will Hutton’s writing columns insisting we should all damn well do as he says. And he’s writing columns that tell us nothing else either. Therefore we should take no note – as the fate of the Industrial Society tells us.
*We’re still waiting for the Receiver’s report into what happened there. Anyone any idea when it will be made public?