It’s about the distribution, stupid

by Chris Bertram on September 30, 2010

The workers’ flag is palest pink, since Gaitskell dropped it in the sink, now Harold’s done the same as Hugh, the workers’ flag is brightest blue ….

My hopes for Ed Miliband’s leadership of the Labour Party are limitedly optimistic. One of the first things I did after the result was to lift my copy of The State in Capitalist Society off the shelf, where his father wisely writes (p. 244):

“social democratic leaders in government illustrate particularly clearly the limits of reform. For while they raise great hopes among their followers and many others while in opposition, the constrictions under which they labour when in government, allied to the ideological dispositions which lead… them to submit to these constrictions, leave them with little room to implement their policies.”

Indeed. Still, Ed Miliband represents a great improvement on New Labour in one crucial respect. Blair, Mandelson, Milburn and the rest of the gang not only failed to achieve Labour’s goals concerning inequality and social justice, they abandoned them, an abandonment summed up in Mandelson’s notorious statement that he was “intensely relaxed” about people at the top becoming “fithy rich”. New Labour, taking their cue from the Clinton Democrats, abandoned the distributive objectives of the left on the basis that the rising prosperity engendered by growth, markets and globalisation would benefit everyone. Well it hasn’t. Personally I think it was never going to, for “spirit-level” type reasons, among others. But anyway, that model ran into the wall of the banking crisis and we’ll shortly see the absolute standard of living of the poorest falling as the deficit gets clawed back at their expense. The aspirational middle classes, who Blair and Mandelson wooed will also be having a tough time of it: so I’m far from convinced that a renewed emphasis on distribution will cost Labour the centre ground. A continuation of New Labour would, though, certainly doom the party with its core constituency, many of whom would lapse (further) into apathy or would be tempted by the several varieties of right-wing populism (BNP, EDL) on offer.

{ 63 comments }

1

Jim Demintia 09.30.10 at 12:37 pm

“A continuation of New Labour would, though, certainly doom the party with its core constituency, many of whom would lapse (further) into apathy or would be tempted by the several varieties of right-wing populism (BNP, EDL) on offer.”

I’m beginning to think the French are right to speak of an Anglosaxonia encompassing the U.S. and the U.K.

2

Anon 09.30.10 at 12:49 pm

The quote could apply just as well to Obama. As would your qualification. It’s one thing for these ideological dispositions to be about practical politics, compromising both halves of the loath for crackers, and all that. It’s another for the limiting ideology to be aspirational, as in ‘wow, ruling class air breathes freer.’

On the other hand, the Labor party, from which is starts, falls farther when its knees bend in the face of aspirational winds. The compromises Democrats like Obama had to make in courting the financial princes prior to his election make the aspirational the practical.

3

Marc Mulholland 09.30.10 at 1:16 pm

Chris says: “New Labour … abandoned the distributive objectives of the left on the basis that the rising prosperity engendered by growth, markets and globalisation would benefit everyone.”

I don’t think New Labour did, in fact, embrace the ‘rising tide lifts all boats view’. Wasn’t New Labour thinking based more on an acceptance that the free market is indeed naturally highly in-egalitarian, but so long as it produced steams of tax income from the City that could be redistributed to cushion the poor, this was OK? That was, after all, was the point of Mandelson’s “filthy rich” quote in context (“so long as they pay their taxes”).

Chris’s hope for the new Milliband era (“a renewed emphasis on distribution”) doesn’t sound to me like an actual break from New Labour.

In contrast, my impression of the dog-days of the Brown government, and the mood music of early Ed Miliband, is that Labour will (rightly) seek to re-position itself as a party prepared to regulate the markets more tightly and to re-balance the economy towards manufacture. Of this, I approve!

4

realdelia 09.30.10 at 1:34 pm

@2:
Half a loath is bitterer than no-one

5

Chris Bertram 09.30.10 at 2:21 pm

Mark @3

Well I guess that in an alliance as complex and opportunistic as New Labour, one can’t hope to find a consistent message on such things. I would though point to a relaxedness about the income distribution coupled with an emphasis on social mobility: i.e the gap doesn’t matter so long as everyone has a chance at the top. That’s a different point from the rising tide one, though. In that respect I think that Stephen Byers was the authentic voice of NuLab, saying out loud the things that Blair himself (and even Mandie) might not have. See, e.g.

http://www.guardian.co.uk/politics/1999/feb/07/tonyblair.andrewrawnsley

6

dsquared 09.30.10 at 2:27 pm

Yes, and Milburn, who is now apparently an advisor to the coalition on social mobility (a strange one really, as the fact that the Prime Minister only has one arse sets an obvious physical limit on the number of people who could follow Milburn’s personal route out of poverty).

7

Matt 09.30.10 at 2:30 pm

I’m not interested in promoting or endorsing the ideas expressed in the post but people (especially Chris) might be interested in this my Matt Yglesias:

http://yglesias.thinkprogress.org/2010/09/new-labour-and-inequality/

It doesn’t seem to be clearly tracked-back, so I wanted to note it here.

8

john b 09.30.10 at 2:41 pm

Marc’s basically right here, as the charts on child poverty &c show – NuLab was “Britain will be a financial centre, and we’ll use the $ to pay for the poor to not suffer like they did under Thatcher”. Now, post-Spirit Level, that might not seem like enough, but it’s a defensible enough strategy at the time, and a damn sight better than either side of the debate in the US.

Also, anyone who cites that Mandelson quote without adding his coda “as long as they pay their taxes” is being dishonest. Dsquared’s taxes pay for somewhere between 5-20 teachers; surely that’s a point that any government rightly should consider?

9

Myles SG 09.30.10 at 2:45 pm

is that Labour will (rightly) seek to re-position itself as a party prepared to regulate the markets more tightly and to re-balance the economy towards manufacture. Of this, I approve!

I don’t know what to say to this. I really don’t. I agree with you, certainly, that markets need to be more tightly regulated. Wall Street antics of recent years have been without question, excessive.

But then, suddenly, the reasonableness departs and in comes the delusion, the cognitive itch disguised as a thought: “re-balance the economy toward manufacture.” What? Are you living in the West of the 21st century? Have you looked around you? Do you apply no skill of observation to what you see? What manufacture? Why manufacture? How manufacture? Could a more manufacture-based economy even produce the same level of British GDP as has has been the case since Blair?

How different is this from conservatives looking askance at what they perceive as modern depredations, and thinking an older age was more amenable? Because during the age in which you grew up, manufacture was more predominant and simultaneously you found the age more amenable, that somehow the equation springs that manufacture = good? What sort of thought process is this? Have you seen the complaints of agrarians at the dawn of the industrial age? Do yours sound any different, and any less delusional?

And this is partially why leftism in the Anglo-American world today is such a schizophrenic movement; because of such bizarre and itch-based impulses as “return to manufacture (“return to farm”, if you just turn the clock back a couple centuries)”.

10

Salient 09.30.10 at 2:47 pm

I’m feeling cautiously optimistic about Ed Miliband now the way I felt about Obama in 2008, but with perhaps a bit more confidence. Even that recent “we’re not lurching to the left” quote of EM was, in context, specifically about his dislike of the label “left” (and left/right labels in general) and not about the actual policies he intends to advocate.

Chris, I’d love to hear your response to Matthewt Yglesias’ comment about your post: “You see here that New Labour had these (presumably finance-driven) gains at the tippy-top but also major progress for the bottom half of the income distribution. … If anything that point strengthens the case that voting Labour—even New Labour—is crucial to the interests of the British working class.” The rates of change in Lane Kenworthy’s graph look, not excellent, not laudatory, but… not quite like abandonment either. (Maybe it’s fair to say that whereas New Labour was inattentive to their own alleged inequality-reduction goals and did little to actively further them, the Tories were outright hostile to those goals and did much to undermine them.)

11

engels 09.30.10 at 2:48 pm

‘a damn sight better than either side of the debate in the US’

Talk about the soft bigotry of low expectations…

12

Myles SG 09.30.10 at 2:49 pm

And I question this not because I just want to pick on some off-the-cuff comment off some blog, but rather that this sort of mindset, this bizarre “back to the factories” fantasy, is prevalent to an alarming and pernicious extent in many people, many of them of the Old Labour persuasion. Not to smear with association, but how is this in any manner different from Pat Buchanan’s permanent campaign for the good ‘ole U.S.A to be more protectionist and more manufacture-based? How is even the cognitive itch any different? For I assume that you prefer more manufacture out of concern for the working class, and yet Buchanan’s wish arises out also of concern for (in his case, only white) working class.

13

Chris Bertram 09.30.10 at 2:53 pm

@john b Well it is hard to see how “the charts on child poverty” could “show” that Marc was right or wrong about NuLab’s aims, still, why am I arguing with someone who accuses me of dishonesty?

@Matt thanks for that. Interesting also to follow the link to Lane Kenworthy from Yglesias – since this is what Yglesias is relying one. Kenworthy is pushing back against a piece by Matthew Engel in the FT, where Engel writes:

bq. This month, it was revealed that the UK’s Gini coefficient, measuring inequality between rich and poor, had reached its highest level on record — after the longest period of Labour government ever. You do not have to be a Labour voter to wonder what, then, has been the point of it all.

Kenworthy’s response:

bq. inequality of market incomes has been increasing almost everywhere. Arguably, it has risen less, and government has done more to mitigate its impact, under Labour than would have been the case under the Conservatives. It’s impossible to know that for certain, of course,

As someone of a leftish persuasion, I’m not going to be marching under the banner “arguably mitigate increasing inequality more than under the Conservatives” any time soon. Yglesias may think of that as a win, if he likes.

14

Salient 09.30.10 at 2:55 pm

Shorter Myles SG: Why should an economy be based on making stuff?

Bonus Myles: It’s also inconceivable that an economy be based on growing stuff.

Myles, this time ’round the track, please do make an effort to use language and expression that’s appropriate for civil discussion. Did you notice everyone left the previous thread you occupied shortly after you started acting flustered and incredulous like this, and calling individuals who made different life choices from you ‘retarded’? Let’s not go quite that far again, please.

15

Salient 09.30.10 at 2:57 pm

Talk about the soft bigotry of low expectations…

…ugh, good point, I’m falling into that trap too.

16

MPAVictoria 09.30.10 at 3:11 pm

Myles if we don’t get back manufacturing how are we supposed to employ the type of blue collar worker who used to work in manufacturing? I honestly would love to hear your answer to that. Not everyone can be in marketing or website design and not everyone can go to university. If the goal of the left isn’t to provide the opportunity for these workers to find decent employment then why have a left at all?

17

Marc Mulholland 09.30.10 at 3:21 pm

Myles SG: Yeah, I did rather regret my phrasing after hitting ‘post,’ but didn’t exert myself to post a re-phrase. What I’d prefer to say is, rebalance away from credit, dividends etc, and towards wages. Having said that, such a strategy rather suggests a re-balance towards making things and diversifying services beyond the financial.
I don’t know whether you like that any better!

ChrisB: Thanks! Interesting link.

18

dsquared 09.30.10 at 3:27 pm

Dsquared’s taxes pay for somewhere between 5-20 teachers

either teachers earn a lot less than I thought, or John has awarded me an exceptionally generous bonus for this year.

19

dsquared 09.30.10 at 3:33 pm

On Mandelson and “intensely relaxed”, I think one has to look at the actual use made by Mandelson himself of that quote. The context was his campaign of sucking up to millionaires, and the context for “as long as they pay their taxes” itself was a more or less explicit promise that those taxes were going to be, well, intensely relaxed.

20

ajay 09.30.10 at 3:35 pm

What? Are you living in the West of the 21st century? Have you looked around you? Do you apply no skill of observation to what you see? What manufacture? Why manufacture? How manufacture? Could a more manufacture-based economy even produce the same level of British GDP as has has been the case since Blair?

16% of UK national output is manufacturing. 29% of German national output is manufacturing. And Germany has a higher per capita GDP than the UK. (They hide this sort of information in a secret place called the Internet.) So the answer to your question is basically “yes, of course”.

21

Stuart Ingham 09.30.10 at 4:07 pm

“I’m far from convinced that a renewed emphasis on distribution will cost Labour the centre ground.”

New Labour was explicitly interested in relative income distribution.

They were after all committed to ending child poverty in 20 years. Given that poverty is defined in Britain as earning less that 60% of Median Income they put at the front and centre of their economic agenda a commitment to increase the incomes of the poorest in relation to better off groups in society.

As of others have said their preferred technique of doing so was allowing a small elite to get extremely rich and redistribute the tax receipts (through tax credits). Utopia it isn’t but income (re)distribution has very much been on the political agenda for the past 13 years, it has just been wisely dressed up in the language of poverty.

If there is a new area of centre ground that they can claim it is in reigning in the power of the very plutocracy they have allowed to developed. Seems to me that people are pretty pissed that they are paying the cheque for the irresponsibility of the financial classes even though they have no control over their behaviour. Stakeholders without a stake. Not beyond the wit of man to come up with some solutions to that misgiving with some nice redistributive and economically stabilizing effects.

22

Myles SG 09.30.10 at 4:12 pm

Myles SG: Yeah, I did rather regret my phrasing after hitting ‘post,’ but didn’t exert myself to post a re-phrase.

My apologies.

Although I do note that wanting a more preferable balance between wage/capital gains is, to put it mildly, not the strongest justification for more factories.

Myles if we don’t get back manufacturing how are we supposed to employ the type of blue collar worker who used to work in manufacturing?

But that’s precisely the point of the technological revolution. Because of increases in technology, we will have less assembly-line blue collar workers overall, with most of them transitioned into skilled blue-collar or other sorts of work, such as the maintenance of the equipment that replaces assembly-line labour, or being engaged in services as the gains from technology allows for us to have less of the economy’s capital tied up in straight-up, assembly-line manufacturing. Just as the industrial revolution allowed us to produce more food with much less farm labour, we are still manufacturing more in absolute amounts (yes, even in the U.S.A.), as Matt Yglesias pointed out; it’s only that nowadays less human capital needs to be tied to such a process, again similarly with agriculture at the dawn of the industrial revolution.

Have you thought about the possibility that the old “working-class/manufacturing” formulation of the economy is simply obsolete? That there might not be such a thing, en masse, of the “working class” anymore? That the “blue-collar worker” as we remember him, rather than all sorts of mechanics and technicians and so on, will be a distant memory as European peasantry and villeins now are?

23

Myles SG 09.30.10 at 4:16 pm

And Germany has a higher per capita GDP than the UK. (They hide this sort of information in a secret place called the Internet.) So the answer to your question is basically “yes, of course”.

As I have pointed out about ten thousand times before, British manufacturing has not been competitive with German industry since the reign of Queen Victoria. They, both the Tories and Labour, actually made a brief go at it in the postwar era; tried to get Britain into shape as a exporting, manufacturing power

Needless to say, the whole thing was a gigantic, ghastly, unbelievable farce, so much so that they ended up electing Thatcher. Trying to make Britain switch to manufacturing from it’s prewar finance and trade primacy just made everything worse.

24

Myles SG 09.30.10 at 4:17 pm

By the way, have you thought about the possibility that given the world’s limited appetite for manufactured goods (compared to services), more British manufacturing would mean necessarily less German and Japanese manufacturing? Have you asked them if they’ll take that lying down?

25

dsquared 09.30.10 at 4:20 pm

the implicit economic theory in post #23 has a real problem explaining what’s been happening in China over the last twenty years.

26

ajay 09.30.10 at 4:23 pm

By the way, have you thought about the possibility that given the world’s limited appetite for manufactured goods (compared to services), more British manufacturing would mean necessarily less German and Japanese manufacturing?

No it wouldn’t.

Have you asked them if they’ll take that lying down?

Sorry, are you actually suggesting that trying to encourage the growth – or rather, encourage the faster growth, it’s been growing steadily in real terms since the 1950s, as you are clearly unaware – of British manufacturing would lead to war with Germany?

27

ajay 09.30.10 at 4:27 pm

They, both the Tories and Labour, actually made a brief go at it in the postwar era; tried to get Britain into shape as a exporting, manufacturing power

Yes, because before 1945 Britain wasn’t a manufacturing power. Of course.

28

Marc Mulholland 09.30.10 at 4:30 pm

Myles SG at 21: “Although I do note that wanting a more preferable balance between wage/capital gains is, to put it mildly, not the strongest justification for more factories.”

Quite.

I was conjuring with the idea of the manufacture as opposed to machinofacture, so had in mind promotion of net-worked, small-scale goods & services producers rather than belching smoke-stacks. Odd use of ‘manufacture’ is evidently reflective of too much C18th / C19th history reading for me lately!

29

Myles SG 09.30.10 at 4:31 pm

Good lord, I don’t think Britain would fight with Germany over its essentially superfluous manufacturing sector, or any economic issue really.

You can disregard post #23, if you like. I am not in a position where I can back that up in detail and convincingly, at least given my current time constraint, so I will retract it. My point was that the market for high-end manufactured products (machine tools, construction equipment, etc.) has comparatively more inelastic demand, since Britain is not about to make baby toys, but it’s not really germane to my point about the obsolescence of manufacturing as the dominant economic activity in advanced economies, and so please ignore it if you think it’s wrong-headed.

So, ignore #23.

30

Myles SG 09.30.10 at 4:36 pm

I was conjuring with the idea of the manufacture as opposed to machinofacture, so had in mind promotion of net-worked, small-scale goods & services producers rather than belching smoke-stacks.

Sorry. Just creeped out by all the “What’s the Matter With Kansas” Thomas Frank stuff floating around lately, so a bit too allergic. But I agree with you. I am completely in favour of more networked, small-scale goods & services producers, as you say. Microbreweries, individual-based potteries, etc.

31

ajay 09.30.10 at 4:37 pm

You can disregard post #23, if you like.

No, I don’t think I will, because it’s interesting evidence of how you think economics works.

32

Myles SG 09.30.10 at 4:40 pm

Yes, because before 1945 Britain wasn’t a manufacturing power. Of course.

It was only really a manufacturing power in the sense that imperial trade preferences (especially with Argentina, Brazil, etc.) made the goods artificially competitive, and even then it had a different range of industries, or rather, a different distribution of relative weights of the economy, as Germany and France. And even accounting for that a lot of it was simply “prestige” industries, for example where Argentine bourgeois families preferred to only buy china imported from England.

People dreaming about a Britain of Mittelstand are really losing it.

33

Myles SG 09.30.10 at 4:44 pm

I mean, the notion of Britain as sort of Southern German Mittelstand economy, or even a Rhenish economy of giant, capital-intensive heavy industries before New-Labour-Killed-Everything (TM) is just so ahistorical that it’s just plain weird.

Any passing familiarity with Edwardian history would reveal that manufacturing was already being viewed as passe for Britain even back then.

34

ajay 09.30.10 at 4:51 pm

Any passing familiarity with Edwardian history would reveal that manufacturing was already being viewed as passe for Britain even back then.

“Back then” being “when Britain built more ships every year than every other country in the world put together”, right? OK then.

Look, you don’t know what inelastic demand means, you don’t know much about British industry or history, you have weird zero-sum/Lump of Demand ideas about trade economics… I’d leave it there if I were you.

35

More Dogs, Less Crime 09.30.10 at 5:48 pm

Speaking of Kenworthy and the “Spirit Level”, here’s his review:
http://lanekenworthy.net/2010/01/18/inequality-as-a-social-cancer/
Surprised there isn’t a review of the book at CT.

Scott Sumner responds to Yglesias here:
http://www.themoneyillusion.com/?p=7243

36

MPAVictoria 09.30.10 at 5:56 pm

“..being engaged in services as the gains from technology allows for us to have less of the economy’s capital tied up in straight-up, assembly-line manufacturing.”
Have you compared the wages in the entry level service sector compared to what manufacturing jobs pay? Could you raise a family on 10 bucks an hour? Is that what we are supposed to go to the country with at election time? “Vote for us! We will ensure that there are plenty of McJobs to go around!”

“Have you thought about the possibility that the old “working-class/manufacturing” formulation of the economy is simply obsolete? That there might not be such a thing, en masse, of the “working class” anymore? “
It is good to know that unemployed steel workers can take comfort in the fact that they are obsolete and will soon disappear. With people like you on our side it is no wonder that the left is in such a bad state.

37

ScentOfViolets 09.30.10 at 5:57 pm

Although I do note that wanting a more preferable balance between wage/capital gains is, to put it mildly, not the strongest justification for more factories.

This strikes me as just one more way to say that labor markets are broken, and broken badly, here in the early 21st C in America. This never seems to be baldly addressed, though; even the “liberal” NPR had a story last week about immigrants are needed (even – especially – the illegals) to “do the work that Americans won’t do.”

Wrong. Immigrants are “needed” to do work at a certain low wage that Americans refuse to accept. I offer one specific anecdote about a slaughterhouse in Missouri that “had” to employ immigrants because the owners couldn’t get anyone local to do the work, “even” when they offered wages of $17/hour. Americans not wanting to cut up animals on the slaughterhouse floor in unsanitary, very dangerous conditions, and further at a pace that can only be described as killing? Say it ain’t so. Now, the owners maintain that what they do is “vital” because the customers “demand” these cuts of meat at the supermarket. Okaaay. But then the story continues that said customers also “demand” this product be priced below a certain level, otherwise, sales will slump and the slaughterhouse will go out of business. So supplying consumers with meat is “vital” . . . but not so vital that butchers are paid the $75 K/year that is necessary to attract an American worker rather than $25K/year an (illegal) immigrant will accept.

That’s just one story, of course. But it’s part of a larger pattern that whatever they do, be it the service industry or the manufacturing sector, most Americans are not paid in accordance with their work. And a very, very few are paid wildly more than they are worth. You have Angelo Mozilo raking in hundreds of millions of dollars in compensation when by any reasonable, common-sense measure, he added far less value to society than the canonical 27-year-old slacker living in his parents basement and holding down a part-time pizza delivery gig.

So all this talk about revitalizing or reorganizing certain sectors of the economy to bring back the middle-class prosperity of forty years ago just isn’t going to work until the labor markets are brought back into balance. Thinking otherwise, that you can re-engineer the economy to achieve this end is putting the cart before the horse.

38

Salient 09.30.10 at 6:17 pm

such as the maintenance of the equipment that replaces assembly-line labour

Yeah, uhh, that’s what we did when I worked at a factory that made dryer sheets for a while. That’s what quite a lot of manufacturing jobs consist of, now, and have for some time. We were working in the manufacturing sector.

given the world’s limited appetite for manufactured goods (compared to services)

People [in the U.S.] both want, and actually get, more goods per person, and more services per person, than they did in 1900. [This is a simple consequence of technological advance: we have neat stuff to acquire one per household of, that didn’t used to exist.] Taking the ratio of the rate of change of desire services/goods doesn’t make much sense, and doesn’t prove your point. Both sectors are important. No sense extinguishing one in your zeal for the other.

But yes, you’re studying to become the owner of a tech startup or something. Great to see you excited about it. Maybe, don’t disparage those who are excited about something else, and recognize its importance in the economy?^1^

The world economy is still dominated by manufacturing and will be throughout the 21st century. Maybe eventually machines will do everything and we’ll have time to do a little machine repair, a lot of leisure, and provide all kinds of awesome as-yet-unheard-of services to our fellow man. But… not any time soon.

^1^(guilty of this myself more often than I’d like to admit)

39

Myles SG 09.30.10 at 7:10 pm

But yes, you’re studying to become the owner of a tech startup or something.

I am not studying to “do” anything, to be precise. That’s vocational training. Liberal arts education is an end in itself, rather than primarily means to an end in employment or business.

My goals (as far as they can be reasonably ascertained at this point in time), in any case, is not to be a tech entrepreneur (who are wonderful and immensely creative people, I’m sure) but rather to be a financier, i.e. investment banker.

40

Myles SG 09.30.10 at 7:16 pm

Have you compared the wages in the entry level service sector compared to what manufacturing jobs pay? Could you raise a family on 10 bucks an hour? Is that what we are supposed to go to the country with at election time? “Vote for us! We will ensure that there are plenty of McJobs to go around!”

I have. And the reason such a comparison exists is because in the old industrial centers (think Glasgow, Detroit, Pittsburgh, etc.) the pre-existing manufacturing economy made the local economic structure mono-industrial/mono-sectoral, and thus there were no alternative means of employment to be found, excepting McJobs as you said, once the pre-existing industry became obsolete.

Such a situation tends not to exist in more diversified regions, such as the Bay Area, NYC/Tri-State, etc. A former factory worker, taking advantage of the growth of the FIRE (Financials, Insurance, Real Estate) economy, can become an estate agent for example and earn growing commissions as house values increased (doesn’t work so well at point in time, but long term it is probably not a bad bet). This doesn’t work in Detroit obviously. He might perhaps also train to become a financial adviser and help the retiring Baby Boomer generation manage their vast pool of capital.

41

Chris Bertram 09.30.10 at 7:45 pm

As on another recent occasion, a post of mine has merited a stinging rebuttal from Brad DeLong, this time accusing me of “innumeracy”. For myself, I’d simply want to say that all the arithmetic in the post above is correct…. Those interested in Brad’s words of wisdom should head over to his site

http://tinyurl.com/3xch6ah

42

MPAVictoria 09.30.10 at 8:12 pm

Myles
Look at the wages of entry level service sector positions even in those area you have listed. Now imagine you are a 40 year old unemployed steel worker.
Do you care?

43

Myles SG 09.30.10 at 8:14 pm

A somewhat unrelated question, by the way, is whether if there is a much lower limit on distributional economics in an extremely open economy as the United Kingdom, where both capital and labour tend to be remarkably mobile as compared to other economics. For example, it’s difficult for the average German speaker to move abroad if the German government either a) shifts the economic structure in such a way as to negative influence his income or b) takes more of his income through taxes and transfer-payment systems, as there are few other major German-speaking economies excepting Switzerland and Austria.

However, given a) the multiple number of Anglophone economies and b) the relative free-market orientation of the largest of them and c) the status of English as a world language, at least in commerce it’s arguable that severely distributional schemes are self-defeating, at least within one country. For example, the large number of British expatriates working in Dubai (ignoring the current economic condition at the moment in Dubai) would increase if the British government were to a) severely shift the economic structure away from finance to other industries or b) severely increase taxes and transfer payments (this doesn’t apply very well to modest changes, obviously). So would the number of British expatriates working in the United States and in Hong Kong.

And of course, the mobility of capital, especially between Anglophone economies, needs no mentioning. There’s a serious case to be made that a portion (not the plurality, but a portion) of the British lag in economic performance post-war is due to this sort of thing. With a twist, of course. I imagine that few Britons left Britain, but the proportion of foreigners, especially from Continental Europe, working in London, who played an immense role in the British economy, declined as working in Britain became less attractive. Conversely, the affluence of the City in the last few decades has led to an immense increase in foreigners working in Britain. One recall that a great number of prominent bankers and so on were of Continental extraction even in the late 19th century.

44

Uncle Kvetch 09.30.10 at 8:53 pm

I don’t know what to say to this. I really don’t.

Most people would take that as a sign that they should probably stop talking.

45

Jim Rose 09.30.10 at 10:39 pm

Chris Bertrum,
Your post makes some interesting points. The most interesting is the suggesting that going left will counter right-wing populism, I read you correctly.

The record on new labour on reducing inequality may be better than you suggest.

In OECD (2008), Growing Unequal? : Income Distribution and Poverty in OECD Countries, the UK country note makes the following points:

1. Since 2000, income inequality and poverty have fallen faster in the United Kingdom than in any other OECD country, but the gap between the rich and poor is still greater than in three quarters of OECD countries.
2. Income poverty – a household with less than half the average (median) income for its country – fell from 10% to 8% between the mid-1990s and 2005. For the first time since the 1980s, the UK poverty level is well below the OECD average.
3. The number of children living poverty fell from 14% to 10% between the mid-1990s and 2005– the second largest fall (behind Italy) over this period.
4. Child poverty rates are still above the levels recorded in the mid-1980s (7-8%) and mid-1970s (5%).

46

engels 09.30.10 at 10:50 pm

As of others have said their preferred technique of [‘increas(ing) the incomes of the poorest] was allowing a small elite to get extremely rich and redistribute the tax receipts (through tax credits).

‘The poorest’ among the working age population (unemployed people claiming benefits) do not get tax credits, and have seen their benefits frozen in real terms since New Labour came to power. There’s something wrong with your picture: perhaps a consequence of airbrushing several million people out of it?

47

dsquared 09.30.10 at 11:03 pm

1.Since 2000, income inequality and poverty have fallen faster in the United Kingdom than in any other OECD country, but the gap between the rich and poor is still greater than in three quarters of OECD countries.

Interestingly, the mathematics of inequality measures mean that this is not actually so surprising. For inequality to decrease, all that has to happen is the incomes of the poor to increase faster than the incomes of the rich, but this is entirely consistent with a growing gap between rich and poor. For the rich/poor gap to shrink, the incomes of the poor have to grow faster than the rich by a factor proportional to their income share.

Viz, if you have $3 and I have $100, then the government can decrease inequality by giving you $10 and me $200.

48

Alex 09.30.10 at 11:34 pm

I am not studying to “do” anything, to be precise. That’s vocational training. Liberal arts education is an end in itself, rather than primarily means to an end in employment or business. My goals (as far as they can be reasonably ascertained at this point in time), in any case, is not to be a tech entrepreneur (who are wonderful and immensely creative people, I’m sure) but rather to be a financier, i.e. investment banker.

Oddly enough, I was talking to an i-banker (at NM Rothschild, no less) earlier this evening who was a remarkably sensible person. They had had the advantages of a working-class upbringing, though. It’s like the opposite of a classical education – rather than thinking yourself a member of an enlightened elite, entitled to rule, you think yourself a member of the stinking masses, surviving by cynicism. Pick your delusion, if you have the chance.

I really think you should take an afternoon and read through your comments here.

49

Alex 09.30.10 at 11:35 pm

Jesus wept, I’m empathising with the trolls…

50

engels 09.30.10 at 11:52 pm

Gosh, have they started making ibankers? Are they by any chance vastly over-priced and over-sold and likely to pack up after only a few years?

51

jdkbrown 10.01.10 at 12:43 am

“Are they by any chance vastly over-priced and over-sold and likely to pack up after only a few years?”

On the evidence of the recent financial crisis, yes.

52

Jim Rose 10.01.10 at 12:43 am

Gender analysis, gender analysis! Where is your gender analysis?

The gender pay gap has narrowed. For full-time employees, the UK gender pay gap is 12.2 per cent in 2009, down from close to 20% in 1997. Source: http://www.statistics.gov.uk/cci/nugget.asp?id=167

Gender analysis is central to any discussion of inequality.

Women have entered the labor market in unprecedented numbers. Women’s increased involvement in the economy was the most significant change in labour markets during the past 100 years. Don’t women make up a good majority of university graduates now?

53

Brian 10.01.10 at 1:05 am

The DeLong post is very odd. The IFS study he links to says that mean income grew by 2% per year over the course of the Labour government. And the chart he links to shows that basically no one outside the 98th or 99th percentile had more than a 2% income increase.

As dsquared has noted above, a situation where the economy grows by 2%, and everyone’s income increases by 2% is not one where inequality is stable – in a real sense inequality is increasing. (It’s true this wouldn’t show up in Gini co-efficients, which seems like a shortcoming of the Gini measure.)

But what we have is much worse. Relative to the “Everyone goes up by 2%” baseline, we have a situation where the richest get much richer, and this is done by taking away from everyone except, oddly enough, those around the 20th percentile. That feels to me like a situation where inequality is getting much worse.

54

Myles SG 10.01.10 at 1:54 am

Oddly enough, I was talking to an i-banker (at NM Rothschild, no less) earlier this evening who was a remarkably sensible person. They had had the advantages of a working-class upbringing, though. It’s like the opposite of a classical education – rather than thinking yourself a member of an enlightened elite, entitled to rule, you think yourself a member of the stinking masses, surviving by cynicism. Pick your delusion, if you have the chance.

I am quite cynical enough, although nothing goods comes out of cynicism, but it arises because my family has had some rough times with shall we say, collectivist-totalitarian governments that I prefer to not engage in any industry without very high international labor mobility. This rules out manufacturing, obviously, as well as general management and probably entrepreneurial activities as well, which are heavily bounded geographically and culturally. What it does leave are: investment banking, high finance in general, strategic consulting, diplomacy (which can be transitioned into international banking if necessary), etc.

I would pretty much prefer jobs where I would be able to pack up and leave for another country/jurisdiction at a moment’s notice if I feel like my personal welfare is being threatened, whether benignly or otherwise. Thus the attraction of Dubai and the City for me. I am, in any case, one of those people who would buy a summer cabin before the main house, because I might be constantly on the move, and send my children, if there be any, to international or internationalized private schools.

One thing I am not doing is losing the family estates to some over-eager government scheme again. And thus the reluctance to invest in non-financial/non-natural-resource stocks, because they are heavily affected by national and jurisdictional economic climate.

55

Tom T. 10.01.10 at 3:16 am

Note that the report referred to in #45 also shows that in absolute terms, the income of the poorest deciles is higher in the UK than in most of the OECD. If I’m behind the veil of ignorance, would I rather be in a society where I’m likely to have a slightly higher income but the top of society is much farther out of reach, or a slightly lower income where the richest are much closer? Maybe the issue is not distribution but rather mobility?

56

Peter Whiteford 10.01.10 at 3:16 am

Re comments 47 and 53, in any study of inequality that I am aware of, inequality is measured in relative terms not absolute terms. Otherwise we would conclude that Japan is more unequal than the USA because their currency has more zeros. We would also have more inequality simply as a consquence of inflation.

Also on comment 47 “if you have $3 and I have $100, then the government can decrease inequality by giving you $10 and me $200″. Yes that’s how all standard inequality measures work – and you also need to ask where the government gest the money from to make these transfers.

57

Emma in Sydney 10.01.10 at 9:13 am

Alex 09.30.10 at 11:35 pm
Jesus wept, I’m empathising with the trolls…
Heh, Alex, that’s his schtick, and I got sucked in once too. Never mind, you’ll know better next time…

58

Stuart Ingham 10.01.10 at 10:33 am

“‘The poorest’ among the working age population (unemployed people claiming benefits) do not get tax credits, and have seen their benefits frozen in real terms since New Labour came to power. There’s something wrong with your picture: perhaps a consequence of airbrushing several million people out of it?”

Indeed, thats a good amount of the reason that Labour failed to meet and subsequently abandoned its poverty targets. 1) The misguided belief that by slightly increasing the marginal benefits of low-paid work you could solve a long term unemployment problem. Which spawned… 2) A reluctance to increase the wages of the non-working poor.

Trapped by a delusional ideological faith in the market mechanism into kicking the very people the Party spent its history protecting.

I was just making the minor point that, contrary to the original point, Ed Milliband would not being doing anything new by putting relative income distribution on the political agenda. He’d do well to concentrate on the actual mistakes in policy and ideology that New Labour made without focusing on imagined ones.

59

engels 10.01.10 at 10:42 am

Thanks, Stuart: sorry to have misunderstood you.

60

Aaron Baker 10.01.10 at 3:12 pm

Slightly off-topic, but is The State in Capitalist Society worth a read? As I’ve moved slowly leftward these last 10 years, I’ve often wondered: What lefty books should I now be paying most attention to?

61

Norwegian Guy 10.01.10 at 6:51 pm

“A continuation of New Labour would, though, certainly doom the party with its core constituency, many of whom would lapse (further) into apathy or would be tempted by the several varieties of right-wing populism (BNP, EDL) on offer.”

I’m beginning to think the French are right to speak of an Anglosaxonia encompassing the U.S. and the U.K.

Don’t really see what this has to do with “Anglosaxonia”. There process where right-wing populist parties pick up the working class voters the social democratic parties left behind when they went neoliberal, is in no way confined to English-speaking countries. It’s a reality in Scandinavia. Or for that matter in France, with Le Pen.

62

Tim Worstall 10.02.10 at 1:46 pm

“16% of UK national output is manufacturing. 29% of German national output is manufacturing. And Germany has a higher per capita GDP than the UK. (They hide this sort of information in a secret place called the Internet.)”

And 50% of China’s GDP is manufacturing and China has a lower GDP per capita than either Germany or the UK. Which would indicate that there’s not necessarily a direct link between the manufacturing share of the economy and a high GDP per capita.

BTW, to get 29% of German GDP to be “manufacturing” you actually have to define it as “industry” and by that measure 23% of UK GDP is “industry”…..well, at least in so far as the statistics used across countries by Wikipedia are consistent.

63

Tim Wilkinson 10.02.10 at 10:33 pm

Which might be a quite good point, pending some credible data, if the question had been ‘is there an iron law relating the manufacturing share of GDP to total GDP per capita’, rather than Could a more manufacture-based economy even produce the same level of British GDP as has has been the case since Blair?

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