The wealth divide, the damage it causes and how it came about

'The poor will always be with us.' So says Jesus in the new testament gospels. Whilst surely true, the gap between the rich and the poor just gets bigger. A couple of recent newspaper articles explore this.

Apart from basic fairness, wealth that is not spread about is bad for the economy. If wealth is spread, everyone has more and so can spend it on goods and services to the benefit of all. Wealth in the hands of the wealthy is often ‘invested’ in non productive assets like residential property often left unoccupied. Investment in farm land became unproductive when the price of land rose so far above its economic value. This happened because individuals and companies could rollover capital gains into assets that would also qualify for agricultural property relief for Inheritance Tax. In past generations wealth was invested in new industrial plant or the privately owned transport infrastructure : the railways and canals. This led to the multiplier effect much loved by teachers of economics in times of gone by.In the course of my lifetime, beginning when the Second World War was still fresh in people's minds, I have seen the gap first almost shrink in the fifties and sixties, but then open up and in recent years accelerate alarmingly.

In Britain there has always been a gap - the rich man in his castle, the poor man at his gate. Land was key. With the growth of trade and then industrialisation different people grew rich. The traders, and this includes slave traders, and those who served them. Then the factory owners, the canal and railway entrepreneurs but especially the financiers, the bankers. All the time, those working in mills, factories and mines and the many thousands working from their dwellings became only slightly less poor when the economy boomed but destitute in slumps. The Factory Acts and the trades unions slowly improved conditions. Equally British manufacturing and trading companies enjoyed a strong market position really until the start of the First World War.

There were dark clouds on the horizon. In Germany, Krupp and other industrialists were creating a vast war machine. In the USA, the benefit of a large home market was reaping rewards in establishing an electrical industry which was all too happy to supply the former imperial power. Westinghouse set up in Manchester and British Thomson-Houston in Rugby.

In addition to the cost of many thousands of lives, the war drained the nation's coffers as it, and Empire nations, provided the astonishing quantity of arms and ammunition used on an industrial scale by the Allied nations. The same would have applied in Germany. Yet, the production of war materiel maintained employment in the waring nations and importantly for them in the USA.

In the UK, jobs had already been lost in textiles as the nation's near monopoly position slipped away. Similarly in the other old staples jobs were lost in iron and steel and shipbuilding as developing nations took up the baton. The USA already had a strong steel and shipbuilding industry which had prospered from the demands made on it during the war. Germany began to rebuild itself under the 3rd Reich. Jobs lost in the northern British towns, despite some government initiatives, were seldom replaced and these once prosperous urban areas became deserts of unemployment.

Newer industries prospered: motor vehicles, electronics, chemicals and consumer products. These industries also prospered in competitor nations. Britain had lost its lead.

The Wall Street crash triggering the Great Depression was devastating for workers on both sides of the Atlantic. Winners took advantage of their strength and position. Those who avoided the crash did well.

Preparations for a Second World War brought back employment to old and new industries alike. The aircraft industry, which had been in an hiatus after bursting onto the scene in the First World War, was busy again developing new aircraft.

When war came, once again the nation was busy, but once again the coffers were further drained. America provided arms and much more, at a price.

War left Britain exhausted yet it had to find the energy for an export drive in order to pay its way. Hard work created the nation that had never had it so good, but its wasn't everyone.

The fifites and sixties saw a move away from steam powered railways and the Clean Air Acts, both of which reduced the demand for coal. Mines shut with corresponding unemployment. The steel industry grew until the sixties, but then foreign competition triggered its decline. Shipbuilding suffered in much the same way. The aircraft industry, with the notable exception of Rolls-Royce, simply couldn't compete with the American giants. 

The indigenous motor industry gave way to foreign ownership. The TV and Radio industry followed suite. The coming of North Sea Oil raised the exchange rate making exports more expensive and imports cheaper; manufacturing declined. Jobs were lost with some replaced in the low pay service sector. Coalminers and steel workers had been the aristocracy in their communities, not so warehouse, call centre or delivery workers.

Computerisation hit middle management and clerical employment.

The Thatcher revolution was predicated on inequality with rewards for hard working and ability. The reality turned out to be rather different. The Financial sector became to be seen as the saviour of the economy. Banks grew alarmingly. Deregulation led to ever more risky products and reward that was disconnected from risk. Banks allowed people to borrow beyond their ability to repay and house prices rocketed. A small number of people became very rich. The argument was put forward that this wealth would trickle down.

In 2008 the banks crashed leaving savers with losses, businesses without borrowing facilities and bankers unscathed. A number of banks merged to become even bigger. The Bank of England pumped money into the economy under the label of 'quantitative easing'. This money found its way into yet higher property prices. Austerity that followed bled the public sector, losing jobs and depleting services.

The decision to leave the EU, in effect our large home market, cost a fall in growth which in turn has resulted in lost jobs or the lack of new jobs.

Covid came as very near the last straw.

The economy and indeed the fabric of the nation is now in desperate need for repair. A parallel comes to mind of that which faced the Attlee government in 1945. Yet, as then, there are grounds for hope. We are a talented nation. There are huge challenges, not least the appetite of the UK capital markets for investment. Will Hutton has much of interest to add in his book This Time No Mistakes.

The question remains of whether growing the economy can benefit all. Aditya Chakrabortty raises questions but offers no answers. This is a complex subject and so that is hardly surprising. just to add a further layer of complexity, here is a piece exploring an alternative world view.

It takes a virus for us to come clean on the shape of the economy

In 1914 government was worried that the war would lead to unemployment. In the event the whole nation came together to produce the munitions the army needed.

In 1939, all parts of British industry met the varied and massive demands of the armed forces. 

In 2020 the economy is largely based on services and, with the coming of Covid-19, consumers are deciding that they don’t need those services and the government is advising against social contact on which many services are based. We therefore face unemployment rather than people working at full tilt. This is totally  different. In parallel with the domestic service economy, there is an economy based on the consumption of largely imported products with deliberately short lives to encourage repeat purchasing.  Will it expose the 21st century economy as a con, or can we return to an economy where we each serve each other but without the manic need for never ending consumption?

The crisis is offering an insight into the actual shape of the economy. In this article in The Guardian, Richard Partington underlines the massive significance of the hospitality industry ‘Britain’s hospitality industry contributes more than £120bn a year to the economy and is worth more than the automotive, pharmaceuticals and aeronautics industries combined. More than 3.2 million people work in pubs, restaurants and other outlets, making it the third-largest sector for employment. A further 2.8 million work in the wider supply chain. In an economy no longer dependent on people making things, we are dependent upon them buying services. When they are told not to, the knock on is dreadful. I have done some analysis of the statistics 

Employment in the 21st Century

On 18 June 2019 Lincoln Drill Hall is hosting a one day symposium presented by the University of Lincoln to explore the nature of employment in the 21st century.
The numbers of people in employment are said to be at record levels, but how much of this is full time employment, how much is capable of providing a family's income and how much is fulfilling?
The arts sector is said to be a significant contributor to the British economy, but how much employment in the arts is full time and sufficiently income providing? Very few writers earn their living from writing.
Computers and robots are said to be ready to take on a great many jobs which used to the preserve of human beings. What impact will this have on employment, and on the distribution of national income?
These are some of the big questions which the symposium and the process that will follow will seek to explore.
Follow this link to find out more and to register your interest.

Productivity

Apparently it IS our problem: our productivity is stagnant. The amount 'produced' by each worker is not growing and so there isn't the money to pay people more.

Hold on. As Ian Jack says in today's Guardian, only 10% of our economy is in manufacturing where workers produce things; the remainder is all about services, people doing things for other people.

I can understand productivity in manufacturing, where the use of machines can enable a worker to produce more. The Guardian Magazine article on robots helped me to understand the application of productivity to distribution centres.

Where I struggle is how productivity relates to the rest of the economy i.e. most of it. Let's take some examples.

Ian Jack talks of Baristas. Does increasing productivity mean that a machine will serve me my coffee?

There is much talk of the care sector. Are we to be looked after by machines, rather than people? The same might be said at the other end of life; are children in nurseries to be minded by machines? Of course not. Indeed if we are to improve the quality of care, we should have more rather than fewer carers.

The creative industries are said to be economically important. As a writer of non-fiction, I can vouch for productivity improved by using Google for research and my lap top for writing. But what of those whose work is what it is, because it is made by hand: Maggie's hand blown glass. What of musicians, what of actors and other who delight audiences? What of writers?

We can all see productivity savings in retail with DIY checkouts. As the Guardian leader says, one fifth of Amazon's employees are robots. I guess larger rubbish and recycling bins are examples of productivity.

Again, quoting the Guardian leader, millions of clerical jobs are now done by machines. This image from the Army Centre for Mechanisation at Chilwell in WW2, says a lot.

I would like to understand just what better productivity produces. Is it good for the many young people who now deliver parcels for their living? Another Guardian article by Sam Knight, on the billions of sandwiches we eat, highlighted the need for robot sandwich makers when we leave the EU since, apparently, the native British worker doesn't want to.

To my mind the question is bigger, and is much more about 'what is work on a post industrial society' and the related question of how the national cake should be shared out. Robert Peston touches on this and much more in his new book, WTF The question of a universal income needs to be explored. We are heading for a society of a mix of a small amount of high paid highly skilled work and low paid work that can't be done by robots.

What kind of a city is Lincoln?

The other day I was walking down the High Street and was stopped by two students with recording equipment. They asked if I would agree to be interviewed. On saying yes, they both uttered sighs of relief; it seems I was the first and they had almost given up.

Their question was simple. Why had Lincoln been voted a top tourist destination?

My response was equally simple. It is s city steeped in history, we have it all from Romans to 19th century engineers, with Gothic Cathedral and Norman Castle to boot.

I went on my way slightly embarrassed that I had forgotten Magna Carta. It also set off a train of thought that prompted me to ask the bigger question at the head of this article: what kind of a city are we?

Some time ago I was involved in discussions about whether Lincoln should seek to be a World Heritage Site. It would put us firmly on the map and encourage even more visitors.

But is that what we are, a city that once was something.

We are much more: two universities, a college reaching out across the globe, world class engineering, an arts sector that is getting stronger all the time. All good, but are they what we are? Aren’t they rather, what we do?

I then saw on the evening television news that a famine was fast approaching in Ethiopia. I thought, oh no, not again. I would like to say that the ‘not again’ referred to the appalling famine that hit that country in the 1980s. I have to admit that it was rather, oh no, not another crisis seeking help.

Whether we like it or not, and indeed we do not like it, humanitarian crises of huge proportions are likely to characterise our world more and more, not least with global warming. It is not only global crises, there are those much closer to home, those in our city without homes, those in need. It was once said that the poor will always be with you. Too true.  

A little while ago I heard about a world wide movement called Compassionate Cities. This really is a loose collection of cities all around the world that had concluded that what they are is typified by the word compassionate.

It links to the local movement slowly emerging here called Compassionate Lincoln. This isn’t yet another organisation seeking to help those in need; there are already many of those. It is more a description of whom we all are. It seeks to draw together the strands of what is already happening to make it more accessible for both those in need and those wishing to help. It came about as a result of the frustration of seeing images of refugees in great need but without any way of helping. The feeling of compassion was there, but not the means to express it in a way that could make a difference.

#CompassionateLincoln is a campaign to encourage compassionate, positive and pro-active community-led responses to some of the social challenges that affect our beautiful city and those who call it home.

People in Lincoln are compassionate, but to be effective we need to be better joined up. More fundamental though is whether we citizens want to take it one step further and say out-loud to the world who we are?

At the end of the day, it is a choice for all of us, citizens of the Lincoln. What sort of a city are we?
     

Employment

The Graduation Ceremony at Exeter on Saturday brought it home. It is no longer numbers; it is names and faces and on Saturday they were mostly post graduate degrees.
I return to a piece I wrote with tongue firmly in cheek, as indeed we all did, as we argued that higher education should be only for the rich. Outrageous and wrong, but...
But, is it fair to take people through three years as undergraduates and then one doing a masters or solicitors exams or some such, with no real possibility of work? Or do we play a longer game and accept that first time round the right job won't come, but that there are other opportunities which will add something whilst we wait? It is the prospect of so many people educated to a level which the jobs market simply does not require. Or, again, is government thinking of a longer game? Or, as I have argued before, is it a device to massage the unemployment figures?
An honest and informed assessment would go down well.