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@Neil Wilson, "large businesses get any productivity effects largely from oligopolistic practices". Oligopolistic (or monopolistic) practices can boost profits, and this can be misinterpreted as an increase in productivity, however this tends to be a one-off (you maximise your gains early) and can thus be distinguished from steady productivity growth. You're also implying a narrow measure of productivity - i.e. profit rather than turnover. On average, larger firms have higher rates of productivity growth than smaller firms because of higher levels of capital utilisation, more skilled workers and economies of scale. Yes, they suffer from bureaucracy and other structural inefficiencies, but this is outweighed by the advantages of size. Old firms can suffer from entropy, but they can also take advantage of deep tacit knowledge, established market relationships and employee loyalty. There are pluses and minuses. Most young firms fail because of incompetence - i.e. they're not sufficiently good at what they do to supplant incumbents. What you want is a mixed economy in terms of firm size and age, as much as a mix in terms of sector and skillset, as this provides the greatest aggregate resilience and flexibility. The imbalance of the UK economy today is not just about London or financial services, or productive vs distributive, but the growing share of small, inefficient and unprofitable firms. Our creative destruction is insufficiently creative.
Toggle Commented 7 days ago on Blair vs the Blairites at Stumbling and Mumbling
Encouraging smaller businesses will, ceteris paribus, depress aggregate productivity. Also, bear in mind that most unskilled migrant labour is employed by small firms, not by large ones. What we need are more large worker-controlled businesses, but that would require a degree of market intervention that is well outside the Overton Window. If Blair's triangulation sought to reconcile big capital and labour, the current mood (essentially manoeuvring ahead of the EU referendum) appears to be focused on reconciling big and small capital. I think Kendall reflects this zeitgeist, rather than any misundertanding of Blair's record.
Toggle Commented May 22, 2015 on Blair vs the Blairites at Stumbling and Mumbling
A workers' cooperative is a business. A prosititute is a business. Russell Brand is a business. Noam Chomsky is a business. The point, of course, is that we interpret "business" to suit our interests. For some, pro-business means less "red tape" and fewer labour regulations. For other businesses it means the opposite - e.g. EPL footballers or Hollywood actors. One of the ideological tricks of the "business" trope is to obscure the different interests of different forms of capital. @Metatone, the standard credit days (28 or 30) haven't changed in a century. This is despite telegraphy, telex, email, BACS, SWIFT etc, not to mention ERP and accounting systems. A change would produce winners and losers (i.e. who gets more days of earned interest), so the dominant party (the buyer - which, at an aggregate level, means big business) will not countenance change. This is not about capability but power. You probably knew that. @Matt Moore, your claim, "the defining feature of the market is actually cooperation", only makes sense if you beieve that transactions tend to be mutually-beneficial. But this assumes that markets are essentially neutral - that they do not encode any prior advantage or systemic bias - which experience would suggest is an optimistic belief at best.
Toggle Commented May 22, 2015 on Pro-growth, anti-business at Stumbling and Mumbling
Metatone makes a plausible case for what is essentially a managerialist tactic (albeit an effective one, in Chris's terms), namely the appointment of an interim CEO. I suspect this may happen anyway, for structural reasons. Labour's problem is that the Blair years have weakened the institutional capability of the party to listen to both members and supporters, having replaced an active (and therefore troublesome) organisation with a passive one, and having made autonomy suspect (thus handing the SNP a gift in Scotland). The legacy of Philip Gould is a party incapable of generating new thinking from the grassroots, as opposed to taste-tasting the output of thinktanks and the media bubble. As a post-democratic party, Labour finds itself lacking a democratic culture at precisely the point when it needs one most. The decision this week to have a four-month leadership election process is an obvious compromise between the Blairite desire for an early coronation by acclamation and the non-Blairite desire for the party conference to act as a hustings. It would have made more sense to adopt a split strategy: appoint an interim leader now (if Harman isn't up the job, why was she appointed Deputy in the first place?); and spend the next 2-3 years rebuilding the party's democratic capability from the ground up. Of course, the very idea of democracy will give some grandees the heebie-jeebies, but if there is one cause that is genuinely common to the fragmentation of Labour support across the SNP, Greens and UKIP, it is the failure of representation.
@Steven Clarke, John Locke's theories on property conveniently denied rights to the land to Native Americans, on the erroneous basis that they did not cultivate or enclose it, and thus did not "mix their labour", in his narrow definition. You can take it as read that the "others" referred to in his caveat did not include either Native Americans or African slaves (Locke was an investor in the slave trade and was involved in the drafting of Carolina's slavery-friendly Constitution). Locke stands in a long line of philosophers, historians and anthropologists who have excused the theft of land from indigenous peoples by denying their agency, denigrating their technology and insisting on their essential childishness or fecklessness - i.e implying that they did not deserve to own land. You'll also notice that his theory privileges first-movers. For example, if I invest more of my labour in a small area of another man's field than he does, by cutting the grass with a pair of scissors and removing every pebble with a pair of tweezers, this does not give me a superior claim to that land. Locke is defending existing property distributions generally, and the seizure of America specifically.
Toggle Commented May 16, 2015 on Hating libertarians at Stumbling and Mumbling
Caplan gets closest to the truth when notes that intellectually-coherent libertarians (who he describes as "self-conscious") are vanishingly few in number. The problem is all those other bastards who claim to be libertarians but are just reactionary poltroons or instrumental neoliberals advancing corporate power. What many people despise about self-identifying libertarians is their insincerity.
Toggle Commented May 15, 2015 on Hating libertarians at Stumbling and Mumbling
@Ehsan, so you're equating voter turnout at a constituencey level with apathy as it pertains to a specific party? Presumably this apathy is contagious, otherwise highly-motivated Tories could have won Manchester Central etc. Labour seats usually have a lower turnout than the national average. This is because of two correlations: labour seats tend to be more working class (and thus urban); and working class people tend to turnout less than the middle class. There is nothing new in this, so you cannot interpret the 2015 result as indicating an increase in apathy among potential Labour supporters. You can find a turnout breakdown by constituency for earlier elections at
Toggle Commented May 12, 2015 on Wanted: a new Blair at Stumbling and Mumbling
@Luis, re "Does anybody actually do things like talk to voters ... to ask them why they voted as they did?" This will be going on now. The earliest feedback I've seen is from the Tories' favourite pollster, Michael Ashcroft. The "reasons" and "issues" questions are an obvious case of selection bias, but the data on vote-shifts (pg 14 of the 2nd doc) is interesting, mainly because it gives the lie to a few of the immediately popular interpretations.
Toggle Commented May 12, 2015 on Wanted: a new Blair at Stumbling and Mumbling
@Phil, re the "Great Mystery Tory Swing of 2015". There really is no mystery about this. The Tories increased their vote share by 0.8% nationally (1.5% in England), whereas Labour increased by 1.5% nationally (3.5% in England). The "swing" was from the LibDems to (in descending order of the quantum of votes shifted) UKIP, Labour and the Tories. The reason this translated into a Tory majority was because they picked up lots of LibDem seats in the South and South-West, whereas Labour's improvement was too weak to pick up enough of their target marginals. The election was won and lost in Torbay and Twickenham. It is possible their inhabitants are particularly keen on one-party government, but a more likely explanation is that they were just Yellow Tories all along.
Toggle Commented May 12, 2015 on Wanted: a new Blair at Stumbling and Mumbling
@Luis, re "Guardian columnists that are not Blairites". Do you mean Matthew D'Ancona, Simon Jenkins, Ian Birrell, Melissa Kite et al?
Toggle Commented May 12, 2015 on Wanted: a new Blair at Stumbling and Mumbling
@Ehsan, re " the north is primed for a takeover by UKIP - they came second in the majority of the northern constituencies". UKIP did indeed come 2nd in many northern constituencies, but Labour typically increased their vote in those same constituencies, so "apathy was highest in Labour heartlands" isn't right. In net vote terms, UKIP's rise was largely at the expense of the LibDems (with a little bit of erosion of the already low Tory vote in the North). This could mask lots of Labour voters heading to UKIP being backfilled by incoming LibDem refugees, but that in itself is not a portent of doom for Labour unless you think both that the LibDems are going to bounce back in 2020 and that the EU referendum will not have happened (i.e. keeping UKIP going).
Toggle Commented May 12, 2015 on Wanted: a new Blair at Stumbling and Mumbling
I think you can interpret Johnson's use of the word "aspiration" in two ways. The generous interpretation is that it is a synonym for hope: a better tomorrow, opportunity for all etc. The less generous interpretation is that it is code for business/rich-friendly. The comment by Ben Bradshaw, that Labour needs to "celebrate our entrepreneurs and wealth creators and not leave the impression they are part of the problem", would suggest the latter interpretation is the more likely. Like the Bourbons, the Blairites seem to have learnt nothing.
Toggle Commented May 9, 2015 on "Aspiration" at Stumbling and Mumbling
I'm dubious that a decline in commitment among the young and poor since the 80s can be explained as "learned helplessness". Before you know it, you'll be claiming that there are families who haven't voted in three generations. Allowing for the structural factors of education and wealth, I suspect a lot of the "tuning-out" (as the IPPR put it) reflects the shift in the popular political agenda since the 80s, notably the focus on house prices and tax cuts. I think the "I'm not interested" response is closely related to the "politics is not for the likes of us" response. The root issue is representation, which perhaps explains why the SNP appears to be doing a lot better in attracting the young and the poor to the polling station. Like Dennis, I will be interested to see the turnout breakdown in Scotland on Thursday. The lesson for Labour is that traditional bankers like the NHS are not enough (not least because the NHS discourse has always been dominated by the middle class). Wages and welfare are the core issues for both the poor and the young (even middle class youth are likely to have some exposure to the welfare system early on), which is why Reeves's comments were so tin-eared.
@Steven Clarke You appear to be equating economics with "the market". They are not the same thing at all. The former can be thought of as the justification for interventions - i.e. the admission that something can be done - which presumes that all markets are embedded within society and thus subject to human control. The latter is a metaphysical concept that assumes a clear separation between the spheres of society and the market, with the presumption that the latter is beyond our full understanding or control (the invisible hand, the coordination problem etc).
Toggle Commented May 2, 2015 on "Serious" politics at Stumbling and Mumbling
Re "one might ask why there is no political party with entirely sound economics" Politics can be thought of as an argument about the rightful place of economics in public affairs, relative to morality, security etc. The uber-right would argue a minimum (laissez-faire); the uber-left would argue a maximum (economics is social). Short of full socialism, economic debate will always be subject to subversion, e.g. the "maxed-out national credit card" trope and other mediamacro classics. The competition for power produces a maximum of understanding (I'm sure George Osborne understands and accepts the paradox of thrift) and a minimum of admission (he acts as if he's never heard of it). No party can be too explicit about its understanding of economic theory as that would restrict its room for manoeuvre when allocating economic privileges. You don't want to be hoist by your own petard. Politicians generally treat economics instrumentally (Thatcher's admiration for Hayek and Friedman was philosophical, not technical). Since the Lawson/Walters farce, politicians have been careful to keep economic theory off-stage, unless it can serve a narrow, tactical purpose (e.g. Reinhart/Rogoff). There is an informal agreement across all the main parties to keep it this way (arguably, a key part of the neoliberal code), safe in the knowledge that fringe parties can be relied on to sabotage their own advocacy (e.g. the Greens bollix re a basic income). In the circumstances, it is surprising we don't have more parties that deny the very existence of economics (mind you, UKIP comes close).
Toggle Commented May 1, 2015 on "Serious" politics at Stumbling and Mumbling
@Steven, the comparison between Tesco and Google is revealing. As gastro george noted, the driving force in retail is selling customers to suppliers. This was the dynamic behind the introduction of loyalty cards in the 90s and Tesco's notorious charges to suppliers. Their problem was that they were simultaneously persisting with an older and more expensive form of information-gathering, i.e. opening up new superstores, while the competition were diverting their capital to online shopping. Though home deliveries and click-n-collect are more expensive for supermarkets (estimated to be about £15 a load), the quid pro quo is a huge improvement in customer data and thus the potential for greater lock-in. The recent decline in loyalty card schemes, like the replacement of superstores with "dark stores", shows the extent to which the lock-in dynamic is shifting from loyalty (i.e. customer familiarity with a retailer) to expectation (i.e. retailer knowledge of a customer). The cost of retail logistics continues to fall, as does the cost of acquiring customer data. In parallel, the market for goods (i.e. the global middle-class) continues to expand. For this reason, the future actually looks as rosy for Tesco as for Google. Both are data mediators. Tesco's recent mistake (perhaps polluted by UK ideology) was to think it was also a property magnate.
Toggle Commented Apr 27, 2015 on The knowledge problem at Stumbling and Mumbling
@Steven, there are two tendencies at work here. The fall in traditional transaction costs has allowed many corporations to shrink by making outsourcing and sub-contracting easier. But the same forces that have enabled this (IT and the legislative framework of globalisation) have also made it cheap to gather the sort of information that was once prohibitively expensive (e.g. customer preference data). A good example of this is Google Street View. The camera-car drivers are subcontractors; Google now has a dataset of images that hitherto would have been unfeasible to create. In terms of reach and market dominance, Google is a lot bigger than GE, Ford or US Steel ever were.
Toggle Commented Apr 25, 2015 on The knowledge problem at Stumbling and Mumbling
Dmcdougall says "a well-run small company should have certain advantages against a larger competitor because it can gather and act on information more efficiently". But the evidence, in terms of profitability and productivity, is that large companies are more efficient - that's why they get to be large. We shouldn't be distracted by the ideological fluff of "nimbleness" and "disruption". The economy is dominated by large businesses that have become larger over the last 40 years not because of globalisation (which is symptomatic) but because they have become more efficient as bureaucracies. Hayek (like von Mises) is of declining relevance because his pessimistic worldview was the product of Hapsburg bureaucracy as much as a fear of communism. He was unable to appreciate the impact that information technology would have on (commercial) central planning. Instead of Gosplan we got Google. The "Hayek threshold" sounds like a variant on Coase, given that the transaction costs of a firm are largely the costs of information-aggregation - i.e. knowing what is going on in a timely enough manner to take action. When businesses talk about "focus" or "control" when making out/in-source decisions, they are usually talking about the cost of information. As technology has driven the cost of information down, and allowed the exploitation of whole new classes of data, so the size of big business (in terms of reach and market dominance) has increased. Ironically, this has also allowed the boundaries of the business (in terms of beneficiaries) to be reduced, which means that a global corporation can still pretend to be an upstart.
Toggle Commented Apr 25, 2015 on The knowledge problem at Stumbling and Mumbling
Most people think of politics as a spectrum of social attitudes, the poles of which can be described in a variety of ways: soft/hard, altruistic/misanthropic, people-centred/money-centred etc. Granted, this is largely nonsense in party political terms, but it makes emotional sense. Nick Clegg seems to have misunderstood that bragging he is in possession of both a "heart" and a "brain", which he can apparently turn off and on at will, is not a claim to be a fully-equipped human so much as an admission of bipolar disorder. The LibDems have completely failed to understand that opportunism is what has brought them low.
Toggle Commented Apr 21, 2015 on Heartless, clueless? at Stumbling and Mumbling
As Matt notes, the Laffer curve is a simple political misdirection that causes us to obsess about a top tax rate that is marginal to revenue (though emblematically important to morale). But rather than putting up taxes on the immobile poor, why not increase taxes on land? Not only does it have the virtue of immobility, but a land value tax is an incentive to productive use and carries no deadweight loss.
Toggle Commented Apr 17, 2015 on Note on Laffer curves at Stumbling and Mumbling
@Steven Clarke, Government debt can be financed indefinitely so long as we can service the interest. In contrast, a trade deficit is an IOU. Over the short term, you expect deficits to be balanced out by surpluses, as trade ebbs and flows. If the imbalance looks semi-permanent, you need to settle up. The major factor in the worsening balance of payments since 2011 has been the fall in income earned by UK companies on foreign assets relative to income earned by foreigners on UK assets (i.e. more cash is going out than coming in). Chris's chart suggests that UK companies have maintained earnings by drawing down their cash surpluses. A large government debt plus high interest rates has (depending on fiscal policy) the effect of crowding out public expenditure or prompting compensatory tax rises, both of which depress aggregate demand. A large balance of payments deficit has the effect of draining income out of the country and thus lowering total investment (even if some is recycled as foreign direct investment). If the interest rate on government debt is low, a government deficit is preferable to a balance of payments deficit.
Toggle Commented Apr 1, 2015 on The other deficit at Stumbling and Mumbling
I think its commonly recognised that deficit fetishism has caused the UK media to lose its collective marbles, but I was still surprised by the acceptance of George Osborne's recent claim that "paying your way in the world" means cutting the government deficit rather than balancing the current account. It says something about the degradation of politics that you have to rely on a hereditary peer (Viscount Hanworth) to point this out. I don't see the quality of debate improving much over the next 5 weeks.
Toggle Commented Mar 31, 2015 on The other deficit at Stumbling and Mumbling
Will Davies has an interesting post at Potlatch that intersects with this topic.
Toggle Commented Mar 26, 2015 on The Clarkson problem at Stumbling and Mumbling
I think you're mixing two different things here: the satisfaction that comes from completing a task well (running a marathon); and the degree of control wrested from your work situation. Bureaucrats (and that includes all species of management) are happy in their work not because they are getting things done, but because they can exercise control. Of course, they may be deluding themselves about the extent and permanence of it (think of the Tom Wilkinson character in The Full Monty). The politically important bloc in the workforce is no longer made up of alienated production line drones, or even of call-centre operatives or warehouse fulfillers, but of "facilitators" and "analysts" and "team leaders", all busy filling their hours with email. Their limited autonomy keeps alienation at bay, but it also undermines productivity. Neoliberalism, with its focus on continuous performance management (close inspection, targets, data analysis etc), and its valorisation of human capital (HR, attitudinal training etc), breeds corporate bureaucracy. This is an acceptable cost for business (i.e. big capital) as it creates a common culture with the state, but it's also exploited as a "counter-movement" (a la Polanyi) by the middle-classes. The modern industrial issue is not alienation but parasitism (rent-seeking, if you will). As job polarisation advances, this will only get worse.
Toggle Commented Mar 25, 2015 on Alienation: the non-issue at Stumbling and Mumbling
Rogerh says "our consulting firms are in international demand". Maybe, but most UK-based business consultancies focus on tax, audit and financial services - they're not actually in the business of improving productivity. Consultancies that focus on actual productivity improvement (as opposed to cost-cutting through outsourcing), such as process engineering and lean manufacturing, tend to be American subsidiaries or their offshoots. Over the long run, productivity growth tends to differ across sectors due to capital composition. Manufacturing has high rates (lots of capital), business services has so-so rates, and consumer services have low rates (lots of labour). As we shifted from manufacturing to services, our productivity growth was flattered by a) the shakeout of under-capitalised manufacturing in the 80s, and b) the amplification of business services growth in the 90s by price inflation. Manufacturing is now too small to drive aggregate productivity growth up much, while the business services gravy-train appears to have temporarily halted, initially because of the 2008 crisis and subsequently due to weak global demand (reflected in our worsening balance of payments). A lot of recent growth in the economy has been down to consumer services, which acts as a drag on productivity growth because of its high-labour/low-wage composition. Our fundamental problem (reflected in low levels of capital investment, stagnant productivity growth, and a worsening balance of payments) is the imbalance in the economy. There was a lot of talk about this in 2009, but there has been no material attempts to address it since.