This is an excellent MUST READ article from the Economist. Check it out!
via Workers’ share of national income: Labour pains | The Economist.
The Economist article presents similar conclusions to well-known, macro-economist, Gavyn Davies writing in his FT blog. Let me pick up my thread from my earlier blog as it’s still valid.
I particularly liked Gavin Davies’ the focus on four fundamental economic trends, namely:
- Decline in unionisation in the major developed economies
- Rise of “financialisation”, which has increased the incentives on management to maximize the return on capital for themselves and shareholders
- Technology revolution, and
These four pivotal trends devalue the importance of labor, so that jobs have become increasingly commoditized; this is the thrust of the Economist’s argument too.
This leads me again to some important open questions:
Given the four economic trends in major business namely, declining unionization, rising financialization, technology revolution and globalization, how should Western Governments respond to:
- Take a strategic approach to economic growth, building upon strengths and cutting out public sector waste?
- Ensure effective taxation of profits?
- Increase the skill-base of the nation?
- Deploy the adult population effectively?
- Deploy Scandanavian style social policies?
Dr Alf poses 5 very difficult questions which would involve Government doing things which until now they have proved to be incapable of doing.
1) To begin with Governments do not think strategically about anything, let alone economic growth, they do not build on strengths, and they are afraid to cut public sector waste partly because the waste and lack of strategic direction allows too much money to be siphoned off into people’s pockets.
To effect change you have to:
–Reduce public sector jobs by 67% to reflect their poor productivity(32%), and to act as a wake up call to the survivors. This would mean reducing Civil Service numbers to 15000 people, eliminating District and Borough Councils and rationaliZing all County Councils, Unitary Authorities, London Boroughs and Metropolitan Borough Councils to 15 for the whole of the UK.
Then, it would mean reducing Constabularies and Fire Commands to 15 for the UK and abolishing all devolved Governments in Scotland, Wales and Northern Ireland, reducing management layers to 5, outsourcing all non-core services and establishing 7 shared services centers for the UK to deal with general enquiries, Adult Social Care pre-assessment, police non emergency dispatching, ambulance dispatching and fire commands.
Those displaced would be banned from the revolving door of interim engagement in any Central or Local Government Department, and from joining Big 4 consultancies and working in the sectors which they have helped to ruin.
If people wanted to retain devolved Government in Scotland, Wales and Northern Ireland the Barnett Formula would be abolished and these parts of the UK would be granted independence on a “sink or swim ” basis.
MP numbers need to be cut to 200, they would be required to work full time, have previous business experience and be made to take an IQ test before being put up for election and their housing allowances abolished through the expedient of a Government owned block of flats with full concierge services. Their pay would be a flat £150,000 a year free of all taxes and second homes and expenses would have to come out of that.
Radical restructuring would be applied to the NHS and there would be variable taxes on foods, a bonfire of unnecessary Quangos and the application of smart procurement and independent scrutiny of all public sector accounts, MPs’ bank accounts, local authority workers bank accounts and the bank accounts of Civil Servants plus the spouses and children/relatives of all of them
–Effective taxation of profits needs to come by lowered and simplified taxes and the UK becoming a tax haven with a stripped down Monarchy and tightly controlled costs
–The skill levels of the nation will take decades to improve but it starts with schools,then a French style training levy and until productivity rises much shorter holidays of just 4 weeks including Bank Holidays which are an expensive anachronism.
Faster progress can be made with Paul Scheele style Photo-reading courses which would be run in Further Education colleges at nights and weekends and be made mandatory by employers of full time staff and by the DWP for benefit recipients who would lose benefit if they refused.
–The Adult population can only be deployed effectively if there are enough jobs, Business Boot Camps to get people into business and enough exports and foreign inward investment to offset those jobs being lost by technology, robotics and globalised offshoring
–Scandinavian style social policies are unaffordable for the time being