Wednesday, Jul 15, 2009
"Less wealthy people are more pessimistic"
BBC News: Job cuts 'hit two in three' in UK
Maybe less wealthy people are always more pessimistic but long before this crisis developed I thought that it might cause a widening of all the old class, wealth and social divides. Maybe a poorer distribution of wealth is necessary for a more sustainable Britain but it'll cause some trouble along the way. A widening divide also goes some way to explaining why upmarket areas have seen very little of the HPC
Posted by flashman @ 08:37 AM (1104 views) Add Comment
41 Comments
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1. krustyatemyhamster said...
"The key signs the public will be looking for are people spending more in the shops (70%), a rise in house prices (69%) and a rise in share prices (68%). "
I'm old enough to remember when people used unemployment figures to measure the depth of recession and the wellbeing of the economy. The fact that such a high proportion think rising house prices are a sign of recovery is hardly suprising, but no less depressing - all it shows is how easy it is to warp the minds of the general public in buying into the ponzi scheme.
"Least affected was the North of England where just 60% knew someone hit by unemployment. "
The North's revenge for Thatcherism. Hardly surprising - can't imagine there's many a tear being shed in Middlesbrough, Doncaster, Birkenhead, Wallsend, etc. Stuff the North with public sector jobs and leave those in the South in the remaining industries to suffer the full effects of recession. Thatcher stuffed one half of the Country, now Labour have stuffed the other half. Now we're completely stuffed.
@flashman
So the growing inequalities in wealth over the last decade need to increase further to get us out of this mess?
2. Powerofnow said...
@flashman: the notion that keeping the wealth in the hands of the few is the root of all this. Fair distribution of land values gains is the only way out of this mess.
3. flashman said...
Krusty: "So the growing inequalities in wealth over the last decade need to increase further to get us out of this mess?"
It is not something I would wish for but there are many people who advocate a better balance of manufacturing/service industries. The Germans have attempted to overcome their high wages and social costs by manufacturing capital intensive goods and by keeping up a high productivity rate. It worked for a while but it is unraveling now. Realistically, if we are to become more successful manufacturers/exporters, we will have to have lower wages and a lower pound.
I would rather we invested every penny in research and technology. Of course we’d need to improve education standards but it beats going back to the future with heavy manufacturing.
4. flashman said...
Krusty: Of course, if we went down the research and technology route, there would be many people unable or unqualified to contribute. What are they going to do?
5. denzil said...
flashman said.
"Maybe less wealthy people are always more pessimistic "
Interesting point!
I don't think I have ever met a wealthy pessimist. I'm sure they must exist, just never met one.
6. flashman said...
denzil: Whatever happened to the old people who regularly said, "we were poor but happy"? Maybe they never existed outside of Hovis adverts but I suspect unrealistic aspiration is a serious cause of modern unhappiness
7. flashman said...
powerofnow: "Fair distribution of land values gains is the only way out of this mess"
Yes, but how does that improve our education standards or the service/manufacturing balance? Long before the housing boom, we had post industrial decay and structural imbalances in our economy. Oil masked things for a while (it's how Thatcher got away with so much), but now we must face up to the root causes. Distributing land value gains is very nice but its a bit like putting perfume on a turd
8. Denzil said...
flashman said
"I suspect unrealistic aspiration is a serious cause of modern unhappiness"
I'll second that. It probably in part stems from that little cathode ray tube in the corner of the room that portrays the lifestyle that we "must" lead and what we must buy to achieve that lifecycle. Realistically, not everybody afford to buy the lifestyle but easy credit of the last few years has enabled many people to get close to that wonderful TV image but are they happy? The others who can't afford that lifestyle are often envious and bitter because they cannot live the TV lifestyle.
When considering a purchase, just ask yourself whether it will improve your life or make you happy. Am I stating the obvious there?
Friends keep asking me when I'm going to buy an HDTV. I have an old CRT that works very well indeed. In the persuit of happiness, I'm sure we have been following the wrong path.
The problem of writing things like the above is that people will categorise me as being a tight arsed pessimist, which is crazy as I've always been an "glass is half full" person. I just don't need to buy an HDTV and an Iphone to prove it. I'm certainly no luddite either.
I think those "we were poor but happy people" were the same people who were described by others as, "the salt of the earth".
9. denzil said...
flashman said
"I suspect unrealistic aspiration is a serious cause of modern unhappiness"
I'll second that. It probably in part stems from that little cathode ray tube in the corner of the room that portrays the lifestyle that we "must" lead and what we must buy to achieve that lifecycle. Realistically, not everybody afford to buy the lifestyle but easy credit of the last few years has enabled many people to get close to that wonderful TV image but are they happy? The others who can't afford that lifestyle are often envious and bitter because they cannot live the TV lifestyle.
When considering a purchase, just ask yourself whether it will improve your life or make you happy. Am I stating the obvious there?
Friends keep asking me when I'm going to buy an HDTV. I have an old CRT that works very well indeed. In the persuit of happiness, I'm sure we have been following the wrong path.
The problem of writing things like the above is that people will categorise me as being a tight arsed pessimist, which is crazy as I've always been an "glass is half full" person. I just don't need to buy an HDTV and an Iphone to prove it. I'm certainly no luddite either.
I think those "we were poor but happy people" were the same people who were described by others as, "the salt of the earth".
10. letthemfall said...
One of the reasons people are more unhappy these days, we are told by those who study these things, is the growing inequality in society, such that some people are overvalued - bankers and the like - while many are paid low wages for skilled and valuable jobs, eg nurses, engineers. A sense of fairness is important to a thriving society and, following progress after the War, we seem now to be backsliding. The trashy celebrity culture, banking crash and BTL are all part and parcel of society's failure to understand where true value lies. Education and other public services are more important than ever but attacks on them seem to intensify.
11. stillthinking said...
There is a kind of conspiracy of wealth. I always wonder who and where are the high money earners.
This morning I was looking at a copy of NottingHillHousingTrust which sent out a flier of resale homes for shared ownership. Helpfully they had put down salary requirements. These ranged from 30K to 50K per annum requirement just to -share- ownership, but this is a Housing Trust !!
12. will said...
The wealthy areas will be the last to fall, but eventually they will. Common sense really.
13. Mr Plumbase said...
We could have a viable manufacturing base, but overpriced land, commercial property and homes means that much of the wealth created from produtive work ends up in the pockets of those that sit back and speculate, time for Britain to grow up and pay it's way in the world again? Don't hold your breath!
14. flashman said...
Any worker with a skill that will help Britain have a future should be very highly paid. We should pay banker style wages to these people (scientists, innovators, engineers and cutting edge educators) and pay through the nose to poach them from other countries. After WW2 Japan identified 5 strategic industries and did whatever it took to promote them. We should do the same. My 5 industries would be renewable energy, pharmaceuticals, genetic research, nuclear fusion and financial services
15. flashman said...
stillthinking: "There is a kind of conspiracy of wealth"
A conspiracy of wealth suggests that there is some kind of deliberate barrier to entry. Perhaps this has some truth to it but it's my observation that most wealthy people have a good nose for the honey pot. This is why some students choose subjects that are more likely to result in higher earnings. Some doctors deliberately choose to specialise in more lucrative areas etc etc.
Other people instinctively gravitate towards other wealthy or influential people because they know that it is more likely to help them in their pursuit of wealth.
I think the only barrier to entry is a lack of the gene that causes a person to gravitate towards the honey pot. Talent, graft, education, luck etc all help but they are probably ancillary to the honey pot gene
16. krustyatemyhamster said...
@flashman
"We should pay banker style wages to these people (scientists, innovators, engineers and cutting edge educators)"
Thanks. If I give you my address can you send me a cheque?
17. flashman said...
krusty: It'll have to be IOU's, California style cos we're a bit skint at the moment
18. nomad said...
My son was helping me put a wardrobe together at the weekend and the bit from my electric drill kept falling out. He produced a cylindrical magnet about two centimetres long that fitted over the end of the drill holding in the bit and gripping the screw - simple genius that cost a couple of quid from B&Q. Can I nominate the designer of that for a banker size bonus.
@ 4 we should be growing much more, if not all of our own food.
@ 8 Lord of the Rings on a large flat screen TV with surround sound - awesome!
19. mander said...
People are loosing their jobs because the easy money dissapeared.
Our children (specially working people's children) will have to work hard to pay for the engineered wealth of the elder. So what do we do? Print money to save the engineered wealth or we get back to real economics including real house values?
20. denzil said...
nomad said:
"Lord of the Rings on a large flat screen TV with surround sound - awesome!"
I don't dispute that statement.
Lord of the Rings "The Return of the King" on my 4 year old 14" Toshiba Laptop whilst sat in bed with the missus was awesome too. Absolutely brilliant, one of the best films I've ever watched! The tosh generates income for me too.
21. timmy t said...
Flash... "My 5 industries would be renewable energy, pharmaceuticals, genetic research, nuclear fusion and financial services". I can see where your first 4 come from, basically industries that bring benefit to mankind through innovation, but FS stands out as not doing the same. Not being argumentative just curious on your reasoning.
22. flashman said...
timmy: I almost didn’t include it for obvious reasons but….
The financial services industry only employs 4.5% of the UK workforce but it contributes 14% of the total UK tax take. This figure becomes even more significant when you consider that the UK tax take includes VAT and all the hundreds of other duties and taxes. A more revealing stat is that the financial services industry (remember only 4.5% of the working population) contributes 27.5% of the total corporate tax take. Additionally, individuals working in the financial services industry paid £14.9bn in personal income tax through PAYE and £3.2bn in employees’ NICs.
Out of my 5 industries, it the only one that has already achieved its' desired world leading status, so why not improve it rather than chuck it out.
23. still renting said...
@timmy t
A breif defense of the industry I work in... I know it's fashionable to bash financial services, but it's not all about dodgy derivatives. Where would we be without current and savings accounts, mortgages, pensions, insurance, capital for business investment, etc? Innovation includes internet banking, contactless payments, and offset mortgages, as well as the more dubious financial instruments.
There are at least two sides to most industries:
- Nuclear fusion: H-bombs or clean energy?
- Genetic research: Cures for cancer or biological warfare?
- Pharmaceuticals: Medicine, poison or overpriced cosmetics?
24. timmy t said...
Flash, where am I going wrong with this overly simple analysis...
The reason the industry pays so much tax is because it makes so much money.
The reason it makes so much money is because it deals in complex financial instruments.
These instruments create asset bubbles.
When the bubble bursts the banks need bailing out.
The bailouts cost hunderds of billions in taxpayer money.
I don't see how that is "world-leading"
Wouldn't we be better off with 'old-fashioned' banking where banks make less money, pay less tax, but don't need bailing out?
Economies are like companies, only bigger. The FS industry should be the finance department (A support function like HR or IT). It shouldn't be the core business (in my view). Our economy is built on these support services to the extent that we don't have much of a core business left (Manufacturing, R&D etc.).
I'd stick with the other 4.
25. flashman said...
timmy: I am determined not to allow myself to be the pantomime villain, but how much do you really know about the financial industry? Most of the financial services industry has nothing to do with complex financial instruments that cause asset bubbles and a negligible number of firms needed bailing out. Clients from all over the world come to London and pay for a service because we are the best at what we do. This is precisely the export business that this country needs.
"Our economy is built on these support services to the extent that we don't have much of a core business left"
Other industries died because they weren't any good. They didn't die because someone else was good. British Leyland made shite cars and our ships were always late and over budget. This is not the City's fault.
We have a structural imbalance in our economy but it is entirely illogical to solve it by reducing the big bit. We need to grow the small bit
26. timmy t said...
Flash - agree with everything you say. And you're right - I don't know enough about the FS industry to fight my corner confidently. But it does feel like the tail is wagging the dog a bit, in that all our attention seems to be on continuing to grow the FS industry when we are already over reliant on it. I once worked for a company which was over reliant on 2 big customers - when they went down, we went down with them. I fear our economy is suffering the same for the same reason.
It might have only been a negligible number of firms that needed bailing out, but surely the amount of pounds required is the important number. It was that bit of FS I was digging at. Like Still Renting said - most industries have a good side and a bad side and FS is no different. The last thing I would want to do is clamp down on the profitable, ethical work that the city does.
27. flashman said...
timmy: you're a gent
28. shipbuilder said...
Flash, I think that in you're assessment of the wealth divide, you are making a couple of mistakes. Being in the 'academic' side of things, you seem naturally predisposed to believe that this is where much of the value will come from in any future scenario - more bluntly, that such academic skills are 'talent', while those with practical skills are simply those who failed academically.
I am from an engineering background and as such have always understood that the practical matters as much (and requires as much skill) as the academic, so I don't understand this idea that the 'smart' ones will be stuck in front of computers, doing R&D and whatever else, while the rest run around looking for something to do. Both go hand in hand, always have, always will.
There have been many fantasy scenarios floating around for a while regarding people multi-careering in the new virtual economy and I always laugh at how far the are away from reality outside the London media. Perhaps I am the one behind the times, but I suspect not. While the wealth and transfer of information around the globe is without doubt a good thing, the physical reality of declining fossil fuels and so on will mean that one half of the globe doing the brain work and the other half the heavy industry - the globalisation fantasy, will never come true. Modern manufacturing techniques call for factories close to markets, for one thing. For another, I know from experience that it doesn't work.
In addition, one of the problems with many companies that struggle is that they are run by people with business and accounting degrees and not those with skills that match the core skills of the company - in my opinion we are heading towards, not away from, the realm of the craftsman.
29. flashman said...
ship: I included engineers in my list
"Any worker with a skill that will help Britain have a future should be very highly paid. We should pay banker style wages to these people (scientists, innovators, engineers and cutting edge educators) and pay through the nose to poach them from other countries. After WW2 Japan identified 5 strategic industries and did whatever it took to promote them. We should do the same. My 5 industries would be renewable energy, pharmaceuticals, genetic research, nuclear fusion and financial services"
I have replied to you many times that engineers are indispensable. You seem to want to shoehorn my views no matter what I say. I have worked with technology and manufacturing companies for more than 20 years and very aware of what skills are required. Of course if you are talking about relatively low skilled craftsmen, then they are not strategically important to the future of the UK. It doesn't mean that they don't have a job to do but they are not going to save us from ruin either.
30. shipbuilder said...
Part of the problem that we face at the moment is that jobs in engineering and other similar sectors have been actively dumbed-down, are poorly paid and unattractive to school leavers. They do not fit into the fantasy service, finance and media-based economy of the western globalisation dream. The doers have become second-rate in a world where one can sit back and watch one's wealth rise at the well-timed stroke of a key or signing of a cheque. Hence why we have a mass of people who would have fitted into the important, but now disappeared, skilled practical sector going into non-degrees or mcjobs - this is why is might look like there are the talented academics and the unskilled masses.
31. shipbuilder said...
29. flashman said...
"I have replied to you many times that engineers are indispensable. You seem to want to shoehorn my views no matter what I say. I have worked with technology and manufacturing companies for more than 20 years and very aware of what skills are required. Of course if you are talking about relatively low skilled craftsmen, then they are not strategically important to the future of the UK. It doesn't mean that they don't have a job to do but they are not going to save us from ruin either."
Just making the point that engineers cannot exist in separation from practical work and therefore the UK will not do without practical work in any realistic future, even relatively low skilled. Many of those in low-skilled jobs are there not because they cannot do any better, but because the high-skilled practical jobs do not exist any more. In my vision of a sustainable future, I think that those jobs and therefore people will be required. Not trying to shoehorn anything, just putting across my point.
32. shipbuilder said...
Flash, I think the essence of our discussion is that i'm agreeing with you, but I would see those with practical skills, who have been under-educated and under-utilised over the past few decades, being required again.
33. letthemfall said...
It's true that a wide range of skills and occupations are needed by an economy, including financial services, despite the outrageous behaviour of some parts recently. The question is more one of apportioning wealth. Not so long ago bankers were paid wages similar to other professional occupations. Now they are paid very generously, a fortune in some cases, but they are not producing any more wealth; on the contrary. Scientists, on the other hand, have had to put up with a real decline in income over the last 40 years. This all has very little to do with wealth creation, however that might be measured. It is about the ebb and flow of economic power, the ability to grab a larger slice of the cake rather than bake a bigger one. Financial services have excelled in this, but I doubt they add any more to the economy than in the past.
34. flashman said...
Watching ones wealth rise with a well timed key stroke is a bit of a Hollywood fantasy. It doesn't reflect the reality of the financial industry in any way. Why are British people so quick to disparage or marginalise things they don't understand? I think it helps people o avoid taking responsibility for their own actions or performance.
One of the problems facing UK school leavers with engineering aspirations is that other parts of the world are churning out engineering graduates at a prodigious rate (literally millions of them). These foreign engineering graduates are cheaper and better qualified than the typical UK school leaver. It's a hard world and being British is not enough any more, no matter how 'fairly' we arrange our society.
One of the reasons that the 'skilled practical sector' disappeared was that we were crap at it. Our goods and workmanship became an international joke. That is why we lost it...not because we value all the wrong people. Some national soul searching is in order, me thinks
35. flashman said...
letthemfall: Yes, the ability to grab a slice of the cake has skewed things way too far. I think this was facilitated by Thatchers' wanton destruction of our manufacturing base. We literally had no choice but to cosy up to the 'bankers' because they were one of the only things left standing. I think the only way to redress the balance is to have a strategic plan (at government level) for other industries. We need to pay serious money to he people I mentioned in an earlier post
36. shipbuilder said...
Flash, I agree - my comment on watching wealth rise at a key stroke was about the general fantasy that seems to have gripped the nation over the last number of years, led by Tony Blair, who thought that we could all be property developers or Nathan Barley. This includes the fantasy that we can all, with no experience, do a bit of trading on the markets and make it rich with little effort. This site is a perfect example of people who saw through the housing nonsense yet can't see the parallels with amateurs wanting to buy into gold or whatever the next bubble might be and make a killing. I know one or two people working in financial services and so it would be rather silly of me to imagine that it is all easy money.
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38. flashman said...
ship: I think we agree on most things but maybe our 'culture' and terminology obscures our communication. I have an ambition to one day set up a factory in the UK but am often exasperated by the attitudes coming from inside and outside my industry. The truth is that I probably hate bankers more than most on this site but find myself periodically defending them. It's a funny old game
39. shipbuilder said...
Flash, I would agree with your point about Thatcher's wanton destruction of our manufacturing base rather than that we were crap at it. Blair, Thatcherite to his very core, simply continued the theme.
40. flashman said...
ship: Nathan Barley! Absolutely brilliant. That and Rab C Nesbitt are my favourite shows from the last 10 years. Never come accross anyone else who remembers Nathan Barley.
41. shipbuilder said...
37. flashman said...
"ship: I think we agree on most things but maybe our 'culture' and terminology obscures our communication. I have an ambition to one day set up a factory in the UK but am often exasperated by the attitudes coming from inside and outside my industry. The truth is that I probably hate bankers more than most on this site but find myself periodically defending them. It's a funny old game"
It's a skill to be able to communicate clearly one's meaning with words only (80% of communication is body language and all that, if I remember) - one that I haven't mastered just yet. The great thing about the internet and sites like this is that there's plenty of opportunity for practice.