Friday, 13 July 2018

There's been plenty of economic progress since 2008 - you're just not measuring it

The problem with economics, I find, is that too often it becomes trapped inside the limits of what it measures. If we haven't attached a specific monetary value to something then the economist's assumption all too often is that this something therefore has no value. Take childcare for example - government recognises that looking after young children has a cost but only when that looking after is done by an agency external to the family. We therefore provide subsidy to people using that external agency but not to the people who choose to provide the childcare themselves. I may be wrong but it does seem that the driver here - glossed over by debates about getting women back to work (as if looking after children isn't work) - is that the only measure that counts is GDP. And there's a double win by the parent returning to work by using a childcare agency - not only does her return raise GDP because she's in the part of society we measure but the purchase of childcare raises that GDP too. It's taking in eachothers washing on a grand scale but it make the figures look good. Better stills we can throw chaff about women's equality into the mix to make it look like a social good.

One theme popular right now with some economists is the argument that there has been no "progress" since 2008's great crash. Those economists point to per capita GDP proclaiming 'look no increase in productivity' because those figures seem to have stagnated. The problem here is that it's a one-eyed look at people's lives - measuring only the money income and not what that money income gets us. It's true that average incomes haven't risen but to say there has been no progress ("the final crisis of late capitalism") is hard to argue.

Until recently I was a director of a large social housing organisation and, in preparation for the shift to universal credit and the digital-by-default approach it uses, we looked at how ready our customers were for the change, the degree to which they were digitally-enabled. What we found was nearly 9 in 10 of the tenants had access to the Internet, most commonly using a smart-phone. Bear in mind that we are literally dealing with the poorest in society - three-quarters of our tenants relied on benefits. I realised why when I dropped my (expensive) phone in a car park and it smashed.

My temporary fix was to buy - yes buy - a phone for £20 and stick a sim card in it. And this wasn't the cheapest smart-phone. For £25 I had a phone allowing me access (albeit slightly slow) to the whole of the Internet's wonders. I'd venture to suggest that this wasn't possible in 2008 and those poor and vulnerable people in our flats and houses have had their lives made significantly better by being able to afford the benefits of Internet technology previously only available to the wealthy.

Take a walk round your house, look at the things that have changed - become cheaper and better in equal measures. Televisions, fridges, microwave ovens, dishwashers. Open the apps on your cheap smart phone and see the things you've got for free - music streaming, social media, football scores and updates, bus timetables, maps, radio. I've a super little bluetooth speaker, better sound quality than any transistor radio of my youth - cost me £9.99.

Pop down to the supermarket and walk round. Tens of thousands of lines, produce from across the world and at prices little higher than a decade ago. Add in cheaper taxis from Uber, cheap home delivery takeaway food, online retailing driving down costs and prices. Thousands of small changes each one providing a little more value to us as people often for a little less cost.

So when people say "there's no productivity growth" are they really telling the truth? Perhaps - hallelujah - the productivity growth is coming in people's private lives not in the dull Taylorist world of the workplace. The last ten years have seen massive advances in people's lives, what we get for our money means we're better off even if that money's still the same. Today's TV isn't the same as the telly of ten years ago (it's flat, smart and hung on the wall). Today's mobile phone isn't really a phone, it's a computer more powerful than the PCs and laptops of ten years ago.

All this is hard to measure (how to calculate the benefit I get from wasting so much time on Facebook and Twitter) so mostly we don't bother. And this lets people get away with spouting manifest nonsense like this from Delphine Strauss in the FT:
Absolute social mobility — people’s chances of living better than their parents — has worsened almost everywhere since the financial crisis.
Our children and grandchildren are likely to enjoy a vastly better life than us enjoying things we can only speculate about. For sure there's an outside chance of the Marxist wet dream coming about and capitalism completely collapsing but it's one of those sort of outside chances that brought Ford, Zaphod, Arthur and Tricia together - damned close to infinitely improbable. And so long as capitalism continues it will carry on creating, innovating, initiating - doing the thing it has done for three hundred years: making us all happier, healthier and wealthier. Long may it continue.


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