Author Archives: Matthew Green

Productivity isn’t everything: understanding the growth debate

Economic growth is at the heart of the current political debate. And yet growth is a complex aggregate statistic, and few people take the trouble to pick apart what is actually happening to it, as opposed to speculating what in theory might be happening. That has created a vacuum into which think tanks, economic commentators and politicians project their own hobbyhorses without fear of serious challenge. So what really is going on?

The main mistake people make is to assume that the main driver of growth is productivity. This is exemplified by the famous quote from American liberal economist Paul Krugman: ”Productivity isn’t everything, but in the long run it is almost everything.” Cue a furious debate on a “productivity puzzle” or “gap”, especially here in Britain – supported by  unreliable productivity measurements. Productivity is such a heterogeneous and hard-to measure phenomenon that measurements depend heavily on assumptions – and it is hard to understand their significance anyway. Prior to the crash, for example, improvements to Britain’s measured productivity depended almost entirely on two narrow sectors: financial services, whose profits proved largely illusory, and “business services” a shadowy sector the real value of whose output is hard to be sure of.

But help is at hand. American economist Dietrich Vollrath decided to pull apart growth figures to settle the debate on why American growth had slowed so much in the 21st Century compared to second half of the 20th – this debate isn’t just a British thing. As it happened, he had his own hobby horse which he was convinced was behind the issue – the growing market power of large companies. Vollrath found that two thirds of the decline in growth rates (1.25% per annum per capita at the time he was doing the work – a very similar figure to the UK) was down to demographics – the proportion of working people to the population as a whole, which has been declining as the dynamics of the baby boom work themselves out. Nearly half of the rest was down to what economists call the “Baumol effect” – named after an economist who pointed out that increases in productivity lead to a shift to economic sectors with lower productivity. As we get more efficient at making mobile phones, for example, we don’t buy more mobile phones – we spend the surplus on things like healthcare or designer clothes instead. Incidentally, he found little evidence that his own hobby horse, market power, had much effect, and none that tax changes and deregulation did – except changes that restricted worker mobility, and especially restrictions to house building. He called the two principal phenomena the problems of success and published his findings in a book: “Fully grown: Why a Stagnant economy is a Sign of Success.” This was rated as one of The Economist magazine’s books of the year for 2020, though its writers have failed to take its findings to heart.

Posted in Op-eds | Tagged and | 22 Comments

Tooting: success from fusing the old with the new

Tooting bdy

Yesterday we had the best by election result in Wandsworth for the Lib Dems in many a year. A solid third place with 10.6% may not look like much, but it is a significant and positive step. It shows that the EU referendum has given the party a new opportunity. It also shows that contesting “hopeless” elections can be fun, and you can learn much in the process.

Why I am so pleased? I have been part of the Wandsworth Alliance/Lib Dem scene since 1984 – pretty much the moment that fortunes turned against us. We have always been the underperforming local area. Neighbouring Lambeth, Richmond and Kingston moved on to great things; even Merton and Hammersmith achieved the odd breakthrough; we had no electoral success whatsoever. In terms of members and money we were never especially weak by Lib Dem standards, but we struggled to make any impact whatsoever. Unless we committed heroic amounts of effort (notably Graveney ward in Tooting from 1966 to 2010 – hanging on to a second place) activity generated no noticeable impact in votes cast.

Posted in Council by-elections | Tagged | 9 Comments

Opinion: Our NHS – the good, the bad and the ugly

nhs sign lrgIt is a week since Robert Francis’s report on the Mid Staffordshire NHS Foundation Trust exposed massive failures in the NHS, from top to bottom.

The silence from the political left is deafening. Of course there has been the usual horror and condemnation, and calls for heads to roll. But this wasn’t just a case of lax professional standards, which can be sorted out with a bit of culture training, it was complete system failure from cleaner up to Prime Minister.

Posted in Op-eds | Tagged , and | 23 Comments

Opinion: We need better housing for a better Britain

Want to make a real difference to the country’s problems? Commit serious resources to social housing.

Being in government doesn’t half expose the difficulties of politics. The easiest things for politicians to change are laws, taxes and benefit entitlements. But these seem so ineffective against the major problems that our society faces.

Reforming taxes does little to rebalance inequality – an inadequate treatment of the symptoms that does nothing to change the causes. Raising benefits does little to help the wellbeing of those trapped in poverty. Cutting them does not so much restore incentives as kick people while they are down. Talking about it just makes …

Posted in News | 25 Comments

Opinion: The Lib Dems need to move into the 21st Century

I attended my first English Council at the weekend, the little-known body nominally supervising the party’s administration in England. Amid the constitutional amendments and letting off steam about the evil Federal party, it was possible to reflect on the huge challenges the party now faces. Inevitably most of the attention is on policies and messaging. This is vital but not sufficient. But we also need to catch up with the way politics is now done. I don’t think enough people appreciate the implications of this.

We can overdo the analogies between politics and warfare, but some …

Posted in Op-eds | Tagged | 20 Comments

Opinion: Liberals shouldn’t be scared of Murdoch

Trying to stop Murdoch from consolidating his hold on BSkyB was always going to be difficult. That is mainly because the case for stopping him was rather weak in the terms that governments are allowed to intervene in such matters. Murdoch already has practical control; he does not dominate the total television market, with the BBC and ITV still strong. The case rested on the proposition that he would further dominate the news market as a whole. But what really drove the campaign against Murdoch was fear and loathing. Liberals should have no difficulty with …

Posted in News | Tagged and | 18 Comments

Opinion: issues around sex offenders need better political leadership

David Cameron is “appalled”. The Supreme Court has ruled that those that get put on the Sex Offenders Register for life should have a legal right of appeal to be taken off it, if they no longer present a threat to the public. Or “Paedophiles win right of appeal against offenders’ register” as I thought I heard BBC Radio 4 News say this morning. At least the BBC don’t seem to be repeating their provocative headline in their online news coverage. What are we to make of this?

There are more difficult issues …

Posted in Op-eds | Tagged | 10 Comments
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