• Thanks for stopping by. Logging in to a registered account will remove all generic ads. Please reach out with any questions or concerns.

Politics and Policies that affect private busines, the economy and impact on GDP

daftandbarmy

Army.ca Relic
Reaction score
14,737
Points
1,160
Saw a Brit article telling Britain they can be as successful as California....

Got me looking - And Canada's most productive people are in the Northwest Territories - Nova Scotia trails the pack. Most of Canada is less productive than America's least productive State.

Yeah, about that British productivity thing ...

Britain’s productivity problem is long-standing and getting worse​

Many culprits and few easy answers​


In the classic short documentary “Powers of Ten”, made in 1977, the point of view steadily pulls back from a picnicking couple in a lakeside park to show first the Earth, then the solar system, and eventually the entire universe. An expanding field of view brings home the scale of things. So it is with the challenges facing Britain.

In the week that Boris Johnson scraped through a vote of confidence in his leadership, the narrowest field of view focuses on the prime minister: how wounded he is, and how long he will survive. Zoom out a bit and you can see the immediate issues facing an enfeebled government, from a creaking health service to the rising cost of living.

Zoom out farther still, though, and one problem fills the screen: the country’s anaemic growth rate. A healthier economy would raise people’s living standards; faster growth is the way to square the circle between lower taxes and better public services. Yet the oecd, a club of rich countries, reckons that only heavily sanctioned Russia will fare worse in the g20 in 2023. And whereas average annual gdp growth over the decade preceding the 2007-09 financial crisis was 2.7%, the Office for Budget Responsibility (obr), a fiscal watchdog, predicts the new normal is closer to 1.7%.

The political debate is moving rapidly onto this terrain. Mr Johnson says growth is his top priority. Cabinet ministers are urging tax cuts. The Labour Party is working up a growth strategy. But talking is a lot easier than delivering. Zoom out again, and it is clear that Britain’s growth problem is long-standing and getting worse.

In the coming months we will publish a series of articles on how to get Britain growing again. But first it is vital to understand how bad things are. That means focusing on one issue—productivity.

Over the long run productivity growth, or the ability to produce more with less, is all that really matters for rising living standards. Although in theory economies can grow when people work longer hours, at some point that strategy is limited by employees’ health and the number of hours in a day. Raising labour productivity, or the amount workers can produce in an hour, can happen with investment. Or it can happen with greater total factor productivity (tfp), a measure of the overall efficiency with which capital and workers are used. tfp can be traced to factors like better management practices or stiffer competition.

Britain once set the pace in productivity. At the start of the 19th century it overtook the Netherlands as the world’s “productivity frontier”. A century later, America was in the lead. A study by Stephen Broadberry of Oxford University and Doug Irwin of Dartmouth College has documented how in around 1850, American workers produced roughly 10% less than their British peers. By 1910 they produced 25% more.

Britain never regained its lead. Two world wars hit hard; at home, meanwhile, domestic competition waned. European peers industrialised behind protective trade barriers. By the end of the 20th century Britain’s labour productivity was below that of America, France and Germany (see chart 1). Although it matched France’s gdp per hour at the beginning of the 1970s, by 2000 it trailed by over 10%.

20220611_BRC641.png


This century started promisingly. Between 1997 and 2007 British productivity growth was second only to America’s within the g7 group of countries (see chart 1); output per hour grew at an annual average rate of 1.9%. Over the course of that decade Britain’s gdp per hour grew from 88% of Germany’s to 93%.

But then, disastrously, the global financial crisis struck. The productivity slowdown that followed was global, but Britain’s was particularly dramatic. Between 2009 and 2019 its productivity growth rate was the second slowest in the g7 . A study by Nick Crafts at the University of Warwick and Terence Mills of Loughborough University calculated that Britain’s shortfall during this period, compared with the pre-2008 trend, was the worst in 250 years.

There is no doubt that the cost of this lost decade was huge. Had Britain’s productivity growth rate not fallen after the global financial crisis, gdp per person in 2019 would have been £6,700 ($8,380) higher than it turned out to be. But there is fierce debate over what exactly went wrong. Diane Coyle, a director of the Productivity Institute, a research consortium, likens the search for a source of Britain’s weak productivity growth to the conclusion of an Agatha Christie mystery. “Everybody turns out to have done it.”

Several enormous shocks hit the British economy over the course of that decade, even before the pandemic delivered another. The financial crisis curbed the flow of credit. One study published in 2020 found that companies with weaker pre-crisis balance-sheets that faced a particularly severe reduction in credit saw sharper reductions in tfp growth, partly because they cut back on innovation. Drooping demand crimped incentives to invest and innovate: around half of European economists surveyed in February 2020 attributed Britain’s slowdown to weak demand associated with the financial crisis or austerity policies.

And then there was Brexit. On one estimate, uncertainty caused by Britain’s departure from the eu depressed business investment by as much as 11% in 2019, relative to what it would have otherwise been. Erecting trade barriers with Britain’s biggest trading partner has eaten up managers’ time, made supply chains less efficient and added costs. None of that has helped.

Industry-level data yield further clues as to what went wrong. The slowdown in tfp growth within financial services and insurance contributed as much as a third of the economy-wide drop between 2007 and 2019, according to Jonathan Haskel of Imperial College London and Peter Goodridge of Manchester University. Information-technology services, transport-equipment manufacturing and pharmaceuticals also contributed—all industries typically thought to be among Britain’s strengths. Overall, they find that intangibles-heavy and technology-intensive industries were harder hit during the 2010s.

 

Kirkhill

Army.ca Relic
Subscriber
Donor
Reaction score
4,696
Points
1,060
Britain once set the pace in productivity. At the start of the 19th century it overtook the Netherlands as the world’s “productivity frontier”. A century later, America was in the lead. A study by Stephen Broadberry of Oxford University and Doug Irwin of Dartmouth College has documented how in around 1850, American workers produced roughly 10% less than their British peers. By 1910 they produced 25% more.

1667347234274.png

In 1750, there were 6,000 to 8,000 windmills in the Netherlands, in 1850 there were 9,000 of them. For comparison, this is almost 5 times as much as there are wind turbines in the Netherlands today (1,974 turbines as of September 2009). In the UK there were 5,000 to 10,000 windmills in 1820. France had 8,700 windmills (and 37,000 watermills) in 1847.

Germany had 18,242 windmills in 1895 (compared to around 18,000 wind turbines today) and Finland had 20,000 windmills in 1900.

Steam engines were England's gift to the world in the eighteenth century. Thomas Savery began it all with his steam pump in 1698. He was followed by Thomas Newcomen's first real steam engine in 1711. When James Watt sold his first engine in 1769, steam engines had been around for seventy years. Almost 600 of them had been built.

What Watt did was to make improvements that left steam engines four times more efficient. His first engines put out only about six horsepower -- not much more than the first Newcomen engines -- but they were smaller and they ate far less coal. And in less than 20 years he'd increased the output to as much as 190 horsepower.
By the end of the century, over 2000 steam engines had been built in England, and fewer than 500 of them were Watt engines.

Actually, steam engines never did become the major power source during the eighteenth century. Most of the power still came from waterwheels and windmills.

Steam engines became the major power source in Britain in the nineteenth century - lots of local iron to build the engines, lots of local coal to fire them and with the engines lots of more efficient blast furnaces to make more exotic alloys to make more efficient engines.


The US advantage in the 20th century?

1667348055197.png 1667348121164.png1667348215260.png1667348301489.png

Electricity from hydro

On top of abundant reserves of local iron, coal, oil and gas.

In other words - the key to productivity is dirt cheap energy. SFA to do with better management of slaves.
 

Navy_Pete

Army.ca Veteran
Subscriber
Reaction score
2,567
Points
1,040
I still don't get Brexit; now any imports/exports from/to the EU are subject to a lot more paperwork, effort, and uncertainty (ie customs delay) for the same product.

Even if they increase prices, they are basically working harder to do the same thing, which inherently drops productivity for most of their economy and is driving massive cost increases.

Maybe the real estate and banking sector will keep growing (especially for money laundering/tax evasion) but for everyone else it sucks.
 

Colin Parkinson

Army.ca Legend
Reaction score
4,893
Points
1,160
I still don't get Brexit; now any imports/exports from/to the EU are subject to a lot more paperwork, effort, and uncertainty (ie customs delay) for the same product.

Even if they increase prices, they are basically working harder to do the same thing, which inherently drops productivity for most of their economy and is driving massive cost increases.

Maybe the real estate and banking sector will keep growing (especially for money laundering/tax evasion) but for everyone else it sucks.
The EU had moved from a Trade agreement to a Central government dictating to it's member States. I don't blame the UK. Once the EU gets over the desire for revenge, trade ties can be sorted out. But for now the EU feels it must punish the UK, so as to keep the other States in line. right now the UK needs to focus on Free Trade with the ROW, making the UK to important for the EU to ignore.
 

daftandbarmy

Army.ca Relic
Reaction score
14,737
Points
1,160
I still don't get Brexit; now any imports/exports from/to the EU are subject to a lot more paperwork, effort, and uncertainty (ie customs delay) for the same product.

Even if they increase prices, they are basically working harder to do the same thing, which inherently drops productivity for most of their economy and is driving massive cost increases.

Maybe the real estate and banking sector will keep growing (especially for money laundering/tax evasion) but for everyone else it sucks.

It's good news for the USA... a major competitive trading block is falling apart:

How Did Brexit Impact the US?​

Brexit threw into uncertainty the status of London as a global financial center. U.S. stability, though, means London's loss could be New York's gain.

The long-term effects of Brexit could be positive for the U.S.

The day after the Brexit vote, the currency markets were in turmoil. The euro fell by 2% to $1.11.26 The pound fell by 8% to $1.36.16 Both increased the value of the dollar. That strength is not good for U.S. stock markets. It makes American shares more expensive for foreign investors.

A weak pound also makes U.S. exports to the U.K. more expensive, although that hasn't slowed exports. In 2019, U.S. exports to the U.K. were $147.4 billion, up from $141 billion in 2018. That's created a $21.8 billion trade surplus. Meanwhile, imports were only $125.6 billion.27

Brexit dampened business growth for companies that operate in Europe. U.S. companies invested $851.4 billion in the U.K. in 2019. Most of this was in the finance and insurance sector, as well as manufacturing and nonbank holding companies. These U.S. companies previously used the U.K. as the gateway to free trade with the EU nations. U.K. businesses, on the other hand, invested $505.1 billion in the U.S. in 2019, up 1.7% from 2018. Most of this was in manufacturing, wholesale trade, and finance.27

The U.K. was in the process of negotiating a trade deal with the U.S. in early 2021, but these negotiations have since been on hold. The biggest stumbling block is agriculture. The U.K. requires greater food safety and animal welfare regulations than the U.S. does. U.K. farmers are concerned about inferior, cheaper agriculture products putting them out of business.28

 

dapaterson

Army.ca Relic
Subscriber
Donor
Reaction score
9,754
Points
1,090
London is a banking centre because they have easy access to the money laundering of the Channel Islands.
 

Navy_Pete

Army.ca Veteran
Subscriber
Reaction score
2,567
Points
1,040
London is a banking centre because they have easy access to the money laundering of the Channel Islands.
Also all the real estate, I think there may be some legitimate white collar folks that wanted out of the EU before their rules on money laundering and tracing kicked in pushing things that way.
 

Navy_Pete

Army.ca Veteran
Subscriber
Reaction score
2,567
Points
1,040
It's good news for the USA... a major competitive trading block is falling apart:

How Did Brexit Impact the US?​

Brexit threw into uncertainty the status of London as a global financial center. U.S. stability, though, means London's loss could be New York's gain.

The long-term effects of Brexit could be positive for the U.S.

The day after the Brexit vote, the currency markets were in turmoil. The euro fell by 2% to $1.11.26 The pound fell by 8% to $1.36.16 Both increased the value of the dollar. That strength is not good for U.S. stock markets. It makes American shares more expensive for foreign investors.

A weak pound also makes U.S. exports to the U.K. more expensive, although that hasn't slowed exports. In 2019, U.S. exports to the U.K. were $147.4 billion, up from $141 billion in 2018. That's created a $21.8 billion trade surplus. Meanwhile, imports were only $125.6 billion.27

Brexit dampened business growth for companies that operate in Europe. U.S. companies invested $851.4 billion in the U.K. in 2019. Most of this was in the finance and insurance sector, as well as manufacturing and nonbank holding companies. These U.S. companies previously used the U.K. as the gateway to free trade with the EU nations. U.K. businesses, on the other hand, invested $505.1 billion in the U.S. in 2019, up 1.7% from 2018. Most of this was in manufacturing, wholesale trade, and finance.27

The U.K. was in the process of negotiating a trade deal with the U.S. in early 2021, but these negotiations have since been on hold. The biggest stumbling block is agriculture. The U.K. requires greater food safety and animal welfare regulations than the U.S. does. U.K. farmers are concerned about inferior, cheaper agriculture products putting them out of business.28

I think generally Brexit is great news for anyone who trades with the UK, who has very little negotiating power. Anyone already set up to meet the EU standard for exporting things is easy, but now the UK has lost a lot of leverage and is probably more desparate to get some trade deals in place for political reasons that they'll eat things that never would have gotten signed off by the EU. And with their currency dropping they should be more competitive exporting UK products, but honestly aside from UK candy, how much do they actually produce any more that anyone wants?
 

Brad Sallows

Army.ca Fixture
Reaction score
4,091
Points
1,010
Hard to tell the reasoned analysis from the wishful they'll-be-sorry thinking.
 

mariomike

Moderator
Staff member
Directing Staff
Subscriber
Mentor
Reaction score
852
Points
1,260
Not being stress tolerant, or as I put it "emotionally resilient", is not a moral failing any more than lacking physical strength.

Cumulative stress wears emotional resilience down.

In my former workplace, paramedics have options now. They are no longer forced to tolerate operational stress.

With 40,000 employees, and almost every job classification imagineable to run a city, paramedics who have run out of "emotional resilience" can be accomodated.

Now, thanks to presumptive legislation, they can be permanently transferred to a "suitable" job. No loss of pension, sick bank, benefits, seniority etc. They remain at their "pre-injury" pay rate, and receive the same raises as if they never left their old job.
 
Top