Posts Tagged ‘Britain’

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Technology is not always a good thing, it depends. Technology can kill jobs. As a result, fewer jobs may mean less demand, which may lead to less output. Innovation can lead to recession. This may have happened in 1930s. After all, the US Great Depression followed (with a time a lag of 16 years) the greatest 50 year period in innovation that has ever been known. Innovation is back in vogue. Now a company which specialises in finding jobs for young people has warned that automation is killing jobs. Is it right?

Will Davies, is the managing director of aspect.co.uk, a company which claims to be a pioneer in providing job training for young people.

Mr Davies said: “The growing number of unemployed young people in Britain is a major problem but, unfortunately, its causes run deeper than any short-term cause, such as a recession.” Almost one million people aged 16 to 24, 20.9 per cent, are unemployed across the UK, which is one of the highest rates since record keeping began in 1992, and Mr Davies says: “Automation is displacing traditional jobs – whether or not we are coming out of economic crisis.”

The Davies remedy is for the government: “to incentivise the private sector to develop new industries that have a need for manual labour.” He also says: “Young people’s minds are being cluttered by the Internet and their attention spans shortened. Many of them simply are not equipped to take the jobs that do remain out there.”

He makes good points.

But be careful not to view the future from the very narrow perspective of a country coming out of a very deep downturn. There is evidence that companies are re-shoring – that is to say, returning their manufacturing to home territories. That will help.

The government can also help by trying to create a more entrepreneurial minded country. New businesses create jobs. At least some unemployed people have skills and hobbies that could be translated into business ideas. But the money available is pitiful. It is odd that the Bank of England and UK government are willing to take the risk of creating a recovery from rising household debt, and house prices, but say using QE to fund investment into entrepreneurs is too risky.

It was also told today how there is evidence that graduates are good for the economy. See: We don’t need no education, we don’t need no thought control, well actually it appears we do. If nothing elsea good education, and especially an education to degree level, can help to overcome the problem Mr Davies alluded to – that of the internet shortening attention span.

And yet for all that, the problems and opportunities of innovation is not being grasped by economists. It does not help that they don’t seem to realise we are in the midst of a quite remarkable new technological revolution; one that may easily surpass the greatest era of innovation seen to date. See: Age of Symmetry

Economists are busy denying that innovation is having much impact, busy ignoring what’s staring them in the face because their faces are averted and they are immersed in theory. Consequently they miss the remarkable revolution that is occurring. They are letting us down. The near one million young Brits who are unemployed are among their victims.

© Investment & Business News 2013

Britain is a nation of shopkeepers, or so claimed Napoleon Bonaparte. It was not meant as a complement. It appears that today, the UK is a nation of online shoppers. It is not so certain that it is a nation of online shopkeepers, however.

By 2018, claims the Centre for Retail Research, online retail is set to account for 21.5 per cent of total retail sales in the UK, from 12.7 per cent today, which is the highest online retail share in the world.

That may not be such good news for jobs. The Centre for Retail Research says that job losses could be around 316,000 compared to today, as total store numbers will fall by 22 per cent, from 281,930 today to 220,000 in 2018.

A number of retailers have discovered a High Street presence can complement online sales. Customers are going into John Lewis, for example, and then going home and buying products from the John Lewis Web site that they saw in the store. Some even go online while they are in the store. But the numbers speak for themselves. “With such a high number of transactions carried out online, retailers with a strong web offering now need just 70 high street stores to create a national presence compared to 250 in the mid-2000s,” says the Centre for Retail Research.

In many ways the move from High Street to online illustrates both the opportunity and the challenge. Online shopping opens up a market for what is called the long tail. Someone specialising in a niche product can find that their web site promotes their products to a global audience, making it viable for them to sell their wares, whereas in the pre-Internet days the numbers were just not there to justify making the effort, or investing money for such a business.

On the other hand, online shopping is creating fewer jobs than it is destroying, and not all former sales assistants can work in coffee shops. As we move further towards Internet sales, it will be even easier for companies to plough their profits into subsidiaries where corporation tax is lower, which is yet another reason why global cooperation in taxation is so essential.

© Investment & Business News 2013

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When you read this, the story may be even more positive. But at the time of writing the FTSE 100 is just half of one per cent shy of a millennium high. In other words, it is just one day’s worth of modest rises from passing the level it last reached back in 2007, before the economy went into a nose dive. The index is also just 3.5 per cent short of passing the all-time high set on December 30 1999.

If – and it’s a big if – stock markets are a good gauge of the wider economy, and if their value is reflective of the underlying strength of the economy, then that may provide reason to celebrate.

Here is another indicator for you: house prices. Okay, view this next statement with a large pinch of sodium chloride, but one key indicator may be pointing not only to recovery in the UK housing market, but in the economy too.

And finally, there is hard data. That is not half bad either – actually, it is a little bit bad, but it is a good deal better than it was.

Here are a series of articles which leave just one question: Is the UK finally on the mend?

FTSE 100 moves to within an inch of passing millennium high 

Are the stock markets set to crash? 

Japan’s miracle cure has been tried before in Britain – and it worked 

Economic recovery says Bank of England inflation report.

UK wages fall in the year to March 

© Investment & Business News 2013

According to data from Lloyds TSB, the sales of homes worth over one million pounds hit 7,397 in 2012, which was the highest level since 2007. Is this a sign of a recovering economy or is it a case of economics for the one per cent?

Nobel Laureate Paul Krugman excelled himself this time. In his latest column for the ‘New York Times’, ‘The one per cent’s Solution’, he said: “The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top one per cent wants becomes what economic science says we must do.”

He continued: “The years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers. The one per cent may not actually want a weak economy, but they’re doing well enough to indulge their prejudices.”

And finally: “We have a policy of the one per cent, by the one per cent, for the one per cent.”

Do you agree with that? Or is Paul Krugman getting a bit extreme?

To change the mood a little, Lloyds TSB says: “The total number of sales of properties that cost at least £1 million in Great Britain rose by 2 per cent from 7,270 in 2011 to 7,397 in 2012.” By the way, in case you are interested, in 2007 sales of one million pound plus houses hit 8,233.

The growth in sales of these more expensive homes has been skewered towards London. Lloyds TSB said: “London and the South East continued to account for the overwhelming majority (85 per cent) of all million pound sales in Great Britain in 2012. Million pound sales are a much greater proportion of the market in London than elsewhere in Britain, representing 5.6 per cent of all sales in the capital in 2012. Scotland (14 per cent), the East Midlands (12 per cent) and Greater London (6 per cent) were the only regions to see a rise between 2011 and 2012.”

It continued: “The remaining eight regions in Great Britain recorded a fall in million pound sales in 2012. Wales saw the biggest drop in million pound sales (-71 per cent), followed by the north east (-40 per cent).”

So how do we interpret these figures? Are they a sign of Krugman’s theory about an economy that only seems to be benefitting the one per cent – although in London, of course, one million pounds for a home is not that out of the way. Alternatively, are the figures just indicative of the London/South East divide with the rest of the country? Or maybe, just maybe, it is a sign that the housing market is turning; after all past housing market booms have begun with the more expensive properties.

© Investment & Business News 2013

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Different times call for different remedies. Depending on your own interpretation of Mrs Thatcher, she either saved or destroyed Britain. She may have put the ‘great’ back in Britain, or put the ‘greed’ back in Britain. But whatever your conclusion, it does not mean the UK needs Thatcherism today and here is why.

The period 1868 to 1914, was a golden age for the UK economy. See: The Age of Symmetry. It was a golden age because it saw more innovation than any other period in history. It was not that golden for economic growth, however.

That’s the thing about innovation. It can sometimes have the effect of destroying jobs. An economy that has seen a burst of innovation has to learn how to ensure demand is there to meet all the potential supply. After World War I the global economy struggled to learn how to adjust. In the US a boom followed, but this was built on leverage to a large extent. World War II changed things. After the war, the UK became a more equal society partly because those who had fought for King and country demanded something in return. In part it was because of ideas of Keynes had become widely adopted.

In a more equal Britain, and an economy dominated by Keynesian demand creation, the UK finally learnt how to make use of that legacy of innovation, and the UK boomed as it caught up with potential. The UK was not alone; the post war period lasting around 25 years saw the highest levels of growth ever recorded. Germany learnt a different lesson from Britain, however. To a large extent it found a way to catch up with potential by selling its products overseas. Germany still relied on growing demand but the growth in demand came from outside its borders.

By the mid-1970s, all the potential growth coming from previous innovations had pretty much been used up. The UK went from high growth to playing with recession and stagnation. Something had to change, and change came in the shape of Mrs Thatcher. In many ways Thatcherism seemed to sound the death knell of Keynesian economics. Under her the UK learned to see the economy in much the same way that a savvy housewife managed the finances of her household.

The UK switched from being a country dominated by economic policies designed to increase demand, to one that emphasised supply-side. As part of this adjustment, taxes were cut, and especially for those on higher salaries. The UK became less equal. But this may have been what the UK needed for that era.

It is not like that today. Innovation is all around us. Jobs are being lost to automation. Corporate profits to GDP are at a new record. See: US corporate profits to GDP at all-time high 

Many of the larger companies do not know what to do with their mountains of cash. Money being generated by the corporate world is not being spent. The UK has become a far more unequal place, and that lack of equality has meant lack of demand to buy the products that business is capable of producing.

Keynesian economics may have lost its relevance in the 1980s, but that does not mean it is not relevant today.

And things are different in another way. The UK is now more reliant on the rest of the world than ever before. Globalisation has changed the shape of the global economy. The UK is virtually impotent. The UK government can implement measure to stimulate demand, but needs other countries to adopt similar policies or the result will be a rise in imports and the UK government may run up even bigger debts.

Mrs Thatcher became Prime Minister at a time when the global economy was changing in quite a profound way. She was more than the UK’s leader; she influenced world opinion. Thatcherism and Reaganomics were adopted internationally. Maybe Thatcherism and Reaganomics were responsible for ending the Cold War.

In one sense we need another Mrs Thatcher. We need a Prime Minister who can galvanise world leaders. It is just that we need our new Mrs Thatcher to hold quite different views from the first version. We need someone who supports measures to stimulate global demand, more equality, but as a global mantra, and indeed someone who supports minimum international taxes, such as a minimum corporation tax, so that governments can tax company profits without running the risk that companies will set-up shop elsewhere.

We need a system for addressing global imbalances as was proposed by Keynes in 1944 at Bretton Woods. And we need charismatic leaders who can light the way. Yes we need another Mrs T, but just not her ideas.

©2013 Investment and Business News.

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