Wednesday, 11 August 2010

Do we need to become less efficient?

Yesterday's story about the continuing increase in the number of NEETs is something which should worry all of us. To have so many people, especially young people, who see no hope of gainful employment in or near their communities is a depressing situation.

The traditional answer of the political right has been to encourage people to 'get on their bikes'; to become more mobile and move to where the work is. It's a solution which makes sense only to those who see people as a labour pool for the economy rather than as members of a community. It's the right answer for some individuals; but the wrong answer for a society or a community.

A more enlightened approach has been to lay on ever more training and education programmes, so that people are ready for work when it's available. But once people have been on one or more of these courses, and are still out of work, it's easy to see how the attraction starts to fade.

We've had a policy of trying to attract industries to the locations which most need the employment opportunities, albeit that that policy has been followed on an intermittent basis, with differing levels of enthusiasm depending on the state of the economy and the party of government. It's brought some jobs, and some of the companies have stayed and made a success of their investment. Others have proved to be more transient. The apparent successes of the boom years can quickly look hollow when things turn bad.

One of the most obvious responses to the economic downturn in the private sector - shortly to be imposed on the public sector as well through budget cuts – is to try and do more with less. Generally that means trying to achieve the same or more output with lower input; usually fewer staff working longer hours (or for lower wages, often by moving factories lock, stock, and barrel to lower cost countries).

That isn't just a product of the recession, though; it's a long term driver of a competitive economy to try and reduce input costs. The economy is built on an assumption that 'economic growth' will soak up the excess labour. That doesn't always happen in the good times; it certainly doesn't happen during a recession.

But if continued compound economic growth is ultimately unsustainable, as I believe it to be, then depending on growth to solve the problem of unemployment is a strategy which is doomed to failure. The current recession should have served as a warning to us, but the powers that be seem determined to ignore that warning and rush back to 'business as usual' as rapidly as possible. The outcome will inevitably be that we have a persistent and growing number of people who remain economically inactive for the foreseeable future. 'Efficiency' may make narrow economic sense, but it doesn't always make broader social sense.

There is an alternative though. If instead of employing fewer people to work longer hours we were to employ more people working shorter hours, we would be more effectively 'sharing out' both the available work and the rewards for doing it. (And, in the process, cutting the levels of tax on those who do work which currently go to support those who do not.) We'd also have a more equal society, and probably a happier one to boot.

No doubt many, especially those who do not yet understand that the dependence on growth is unsustainable, will see this as unrealistic. Or maybe just plain undesirable. My response would be that more equality is inherently a good thing. And the alternatives facing us if we wait until growth actually hits its limits are likely to be far, far worse.

3 comments:

Plaid Panteg said...

"But if continued compound economic growth is ultimately unsustainable, as I believe it to be, then depending on growth to solve the problem of unemployment is a strategy which is doomed to failure."

Exactly. I share that view, particularly when you factor in externalities like environmental damage.

Take food production. Might we benefit from returning to less intensive, less efficient ways of food production? Of course we would. The 'loss' of increased growth would surely be offset but the growth in food security and loss of environmental and health damage?

To me it is vital that we put forward and alternative, local and native Welsh economy that produces a happy, healthy and green society; where productive work is available, but we don't see GDP as some panacea.

The reduction of our societal health to merely an economic numbers game is to our detriment.

James D said...

It's certainly not an original idea that people should work fewer hours – it's what Bertrand Russell was getting at in In Praise of Idleness.

But we should also focus on encouraging genuine enterprise. It is a bad attitude to expect the big company to come in from outside Wales and create a few hundred jobs. Welsh people can succeed, but are being held back by the English-imposed tax system penalizing the profit margins of small businesses, knocking some activities from being marginally profitable to marginally unprofitable. We need to move away from the idea that it is anything other than economic suicide to tax success: this means that we in Wales should seek the powers to abolish VAT, National Insurance, Corporation Tax, Income Tax, Capital Gains Tax, and Inheritance Tax. The only commodities that should be taxable are (1) those that have an environmental or health impact (e.g. aeroplanes, drugs, and gambling); and (2) land.

It is only with a tax system primarily based on land (as we so very nearly got in 1909, thanks to David Lloyd George, the last politician to command support in all parts of Wales) that the word "efficient" begins to make sense: a small business run out of someone's back room is efficient (and also, as Jane Jacobs reminded us in the Economy of Cities, where innovation takes place); the sort of waste of urban land that consists of large foreign-owned single-storey buildings in an ocean of surface car parking is not. It is just madness that we currently over-tax the efficient, whilst the inefficient are able to hide in tax havens. Worse still that we enforce this with an out-of-control planning system that seeks to stifle small enterprise with use categories, whilst having quangos to bend to the whims of those large inefficient parts of the economy and to ignore democracy.

So, yes, people should share in the benefits of modern technology and work less, but we should absolutely not resign ourselves to the ongoing destruction of the Welsh economy. It is good to choose idleness; it is obscene to have it forced upon one by an illiberal state intent on sucking the life out of Wales.

John Dixon said...

James,

I agree that we should focus on encouraging genuine enterprise within Wales, of course. But that doesn't get us off the hook that 'growth' is ultimately limited where it depends on finite resources.