If the economy matters then so do people
(This follows on from discussion in Hall earlier (yes Chris this is for you))
It is fairly common and I think reasonable to argue that what is in the best interests of the economy (at least in the long term) is also in the best interests of the people in the long term. (There is much subtly here and I am not saying I agree)
However it is also frequently argued that what is clearly not in the interests of large groups of people is in the best interests of the economy. For example making large numbers of people unemployed overnight so as to slim down the NHS or similar.
I consider the lecture I had from a City investor this morning and the statement he made that essentially the value of the economy of a country is (modulo many other transient factors) the number of working people times the productivity of those people. In the event of making large numbers of people unemployed instantaneously the number of working people is reduced and due to the sudden influx into the jobs market not all those people will get jobs straight away as there won’t be enough available [0]. Then as a person remains unemployed their productivity decreases with time, they become progressively less useful to the economy and less employable so we have a situation where both the number of people working is reduced and where even when we get those people back into work their productivity will be reduced. So negative impact on the economy. Don’t do that. [1]
Yes management and bureaucracy breeds if left to itself and so periodically it is necessary to go around with a sharp knife, a keen eye and a steady hand and remove unnecessary things. However this should be done carefully at a rate such that those being made unemployed can be reabsorbed into working elsewhere doing something more useful.
Personally I would say that people are far more valuable than any physical thing and all structures of countries and economies and physical objects only have value when they are serving people (using a rather wide definition of both serving and people).
Yes I am procrastinating my dissertation. Well spotted.
[0]: Of course if that is not the case then this isn’t so much of a problem.
[1]: It might be possible to argue in certain circumstances that the effect on other factors (debt etc.) is sufficiently large as to outweigh this cost however I think that is likely to be rather rare.
Tags: economy, employment, government, jobs, policy, politics, unemployment, work
May 5th, 2011 at 22:31
Dealing with structural change is an old chestnut, and tough because history has been disastrously wrong on both sides. Communistic states, from Russia to Egypt, drove their productivity into the ground by refusing to retrain and regroup workers who were not working efficiently, and every modern middle-of-the road welfare state these days has similar problems, with subsidies, public spending, and equal amounts of mis-structuring privately which tap off deciles of national production. On the other side, taking firm stands does indeed lead to rewarding enterprise and capital to socially unacceptable levels while miners are failed by a society which has not moved at the right speed to equip labour with mobility or wait for it to catch up (to pick an example close to home). There isn’t really a happy medium, just an unhappy middle, because the moment an advance or change occurs which leaves someone obsolete, it’s inescapable that perpetuating the system propping him up is harmful, and chucking him out is harmful.
What are we left with? Most Western economies are still in need of restructuring now, say, 5-10% of the workforce, and we can’t simply ignore that, given the unsustainability of current consumption of labour under current supply. On the other hand, it is a horrible choice to force individuals to move when they were comfy before. It’s tough looking people in the face while knowing that, forseeably, I myself have plenty of flexibility and will never be the one paying the price of restructuring.
What’s harder to come to terms with still are the areas of need where the cuts hit. (The earlier paragraphs are looking at the supply side of labour; this is the demand perspective.) We basically have to live with the fact that the Great British Public are not willing to give up their own consumption of labour resources to favour the socially nice outcome of lavish care to the elderly, disabled, needy, lonely, and their own children. It’s tough to think how hard I find those things, and have to watch as care is cut in some areas because the necessary cut of perhaps 5-10% from each household’s expenditure (say) is unacceptable.