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Over half of all new British jobs being created by the state

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Telegraph:

NEARLY three-fifths of the growth in jobs under Labour during a decade in power was directly or indirectly created by the state, new research shows.

Across the country as a whole, it says 57% of new jobs created during the period 1997-2007 were state or “para-state” — dependent on government spending.

In the West Midlands these jobs accounted for all of the rise in employment, with no new private sector jobs generated overall. More than 80% of new jobs for women nationally depended on the state.

[...]The researchers define para-state employment as activities such as rubbish collecting or nursery education which depend for revenue on government funding, together with parts of private healthcare and other sectors partly dependent on government support.

[...]In the northeast, 79% of new jobs were state-dependent, compared with 41% in London and the southeast.

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CMike's picture
Submitted by CMike on

Brad DeLong writes:

... Why shouldn't I say that [Steve Horwitz] is an ethics-free partisan hack. He writes things like:

Government can only spend what it takes from the private sector one way or another, either through taxation, borrowing, or the redistribution effects of inflation. For every dollar that government spends, there is one less dollar being spent somewhere else in the economy...

That's certainly hackish--so false that nobody who has thought for ten minutes about the issues can believe that it is true. And as an attack against Obama's fiscal policies it's certainly partisan.

... [R]eplace "government" by "Larry and Sergei's internet company." It then reads:

Larry and Sergei's internet company can only spend what it gets from other businesses and consumers one way or another, either through sales or borrowing. For every dollar that Larry and Sergei's internet company spends, there is one less dollar being spent somewhere else in the economy...

Horwitz has just proved that the funding and creation of Google did absolutely nothing to increase the flow of spending in the economy: if [certain venture capitalists] hadn't funded Google, they would have funded somebody else, and if consumers didn't buy services from Google, they would buy services from someone else.

It generalizes: if Horwitz believes what he says about how government decisions to spend don't change the total flow of spending, he is thereby committed to believing that nobody's decisions can change the flow of spending--and thus that the flow of demand (whether nominal or real isn't quite clear) is always constant.

Fifteen years ago Jeremy Rifkin authored The End of Work. Here are the two "Editorial Reviews" posted on that book's Amazon page:

In this challenging report, social activist Rifkin (Biosphere Politics) contends that worldwide unemployment will increase as new computer-based and communications technologies eliminate tens of millions of jobs in the manufacturing, agricultural and service sectors. He traces the devastating impact of automation on blue-collar, retail and wholesale employees, with a chapter devoted to African Americans. While a small elite of corporate managers and knowledge workers reap the benefits of the high-tech global economy, the middle class continues to shrink and the workplace becomes ever more stressful, according to Rifkin.

As the market economy and public sector decline, he forsees the growth of a "third sector"-voluntary and community-based service organizations-that will create new jobs with government support to rebuild decaying neighborhoods and provide social services. To finance this enterprise, he advocates scaling down the military budget, enacting a value-added tax on nonessential goods and services and redirecting federal and state funds to provide a "social wage" in lieu of welfare payments to third-sector workers.

**************************

Global unemployment is now at its highest levels since the Great Depression. Rifkin argues that the Information Age is the third great Industrial Revolution. A consequence of these technological advances is the rapid decline in employment and purchasing power that could lead to a worldwide economic collapse.

Rifkin foresees two possible outcomes: a near workerless world in which people are free, for the first time in history, to pursue a utopian life of leisure; or a world in which unemployment leads to an even further polarization of the economic classes and a decline in living conditions for millions of people. Rifkin presents a highly detailed analysis of the technological developments that have led to the current situation, as well as intriguing, yet alarming, theories of what is to come.

Submitted by [Please enter a... (not verified) on

Horwitz has just proved that the funding and creation of Google did absolutely nothing to increase the flow of spending in the economy

Well, then I guess we'd better hope that the state is creating wealth just like Google did. ...I'm sure they are.

I'm not sure what your point is about the second book, but it sounds interesting.

Submitted by lambert on

I'd say that Google is extracting wealth. But then, I'm just a digital sharecropper.

CMike's picture
Submitted by CMike on

I'm not sure what the point was that you were making in your original post.

Does the state create wealth like Google did? The state seems to have done so with its development of, among others, computer, computer soft-ware, nuclear, aero-space and container shipping technology, its development of medicines and agricultural products, and its infrastructure projects including road building and maintenance, water works, and electrification programs.

The Google founders Page and Brin developed their early ideas while "working" in - or benefiting from - the non-profit sector, that is to say, they were Ph.D. students.

I mentioned the Rifkin book to make the point that in the future, either more and more of the goods and services produced in the most developed economies will come from the non-profit and government economic sectors or their societies will degenerate.

Submitted by [Please enter a... (not verified) on

Does the state create wealth like Google did? The state seems to have done so with its development of, among others, computer, computer soft-ware, nuclear, aero-space and container shipping technology, its development of medicines and agricultural products, and its infrastructure projects including road building and maintenance, water works, and electrification programs.

Well, then I'm sure they need every dollar of their budget, don't they?

The truth of the matter is that although what Delong says is true, that occasionally government spending does lead to wealth production, it's just as narrow minded to totally discount what the other guy says. The more that you take from the private sector and put into the public sector there is less of a tax base there is to fuel the public sector.

That government money is only good insofar as it creates actual wealth. If jobs in the private sector aren't productive, as long as there's no government intervention, I think you'll shortly find the assets of those unproductive companies are redistributed elsewhere.

more and more of the goods and services produced in the most developed economies will come from the non-profit and government economic sectors or their societies will degenerate.

No, I'm sorry. Although I agree with Rifkin that there essentially is a war on for the existence of the middle class, or just the right for people to live in non-debt slavery, I don't think the only way to do it is through government intervention, which seems like a brief segue to government control of industry.

What this person at least seems to miss as far as I can see is the possibility of massive co-ops performing virtually every function of the state. These co-ops will have the incentive not to overcharge or export their jobs overseas because they simply exist to benefit their participants which presumably are American citizens.

What else is the government, ideally, except an extremely large co-op? The only difference between the ideal socialistic and capitalistic systems are control of these co-ops. In capitalism, although you may have only one company in a field, there is always at the bare minimum, the possibility for another company to come into the field. In socialism, there is one centralized entity with control of the entire field. If another person wants to enter to compete, because they think they might be able to improve what's going on, they're out of luck. The government has a legal monopoly.

That's force, and that shouldn't be the way we conduct business.

CMike's picture
Submitted by CMike on

In a perfect world the worker can force General Electric and Standard Oil to bid against each other for his services. And the consumer, looking for transportation, can choose a General Motors car or a Ford or a Honda or a BMW! That decision's easier for her to make than it would have been had GM et al. not bought up the trolley companies in cities around the country years ago and shut them down.

I'm getting ready to order How Markets Fail: The Logic of Economic Calamities:

Market disasters—and the cycle of delusions responsible—receive lively, engaging analysis by John Cassidy, a journalist at the New Yorker. The author focuses primarily on the rise and fall of free market ideology and the mostly unrealistic ideal of a self-correcting marketplace. An excellent comprehensive history of the economic thought that led to this kind of utopian economics provides a refresher course in Adam Smith, Friedrich August von Hayek, Kenneth Arrow and Hyman Minsky.

Both a narrative and a call to arms, the book provides an intellectual and historical context for the string of denial and bad decisions that led to the disastrous illusion of harmony, the lure of real estate and the Great Crunch of 2008. Using psychology and behavioral economics, Cassidy presents an excellent argument that the market is not in fact self-correcting, and that only a return to reality-based economics—and a reform-minded move to shove Wall Street in that direction—can pull us out of the mess in which we've found ourselves.

Submitted by [Please enter a... (not verified) on

You know, I'm actually surprised that you know that's Hayek's argument for capitalism, not that I really know anything about you (You also quoted Brad Delong, so that's pretty good), but it's just not something that I think most people know. That's why it's pretty disappointing for me to see you not really seem to take it seriously.

Please let me know if there are any examples that you find where a monopoly or some distorted market occurs without government intervention, which includes some subsidy or not enforcing a law equally, etc. I highly doubt you'll find it. Of course, there's fractional reserve banking and the Fed, which are the ultimate giveaways to banks, but even with those I still find it hard to believe that you won't find some sort of government action (or deliberate inaction) at the heart of the problem.

Submitted by lambert on

Your theory of the state, Josh, seems to be that the state controls capital, rather than the other way round (with due allowance made for factionalism among our rulers). Surely, with the Obama administration, that is rather obviously not the case?

Submitted by [Please enter a... (not verified) on

The small part of me that thinks I might at least have some inkling of what you're talking about thinks that you're making a vast over-generalization, but then again, what you're saying is so unclear to me, I'm really not sure.

CMike's picture
Submitted by CMike on

There are well known examples of market failures in modern industrial economies including;

  • discrimination in hiring practices which have victimized blacks, other minorities and women despite the economic inefficiencies of such practices;
  • employer indifference to work place safety issues illustrated by, for instance, the death rates in the mining industry before government intervention;
  • consumers unaware that some of the products they buy are unsafe, a sensational example being the lack of sanitation in the meatpacking industry which was exposed by Upton Sinclair a hundred years ago and, no doubt, has returned;
  • oligopolies arising in economies to scale industries, as seen in the case of the U.S. auto market after WWII followed by the failure of U.S. automakers to compete successfully with East Asian government/private sector auto manufacturing partnerships;
  • oil pricing strategies available to petroleum exporters, until recently anyway, which have blocked the development of alternative sources of energy;
  • costs born by communities due to externalities like pollution or their largest employer suddenly relocating business operations to distant locations;
  • manipulation of the consumer's psyche and the spreading of misinformation by sophisticated advertising techniques;
  • the conflicting interests between principals and agents, including stock holders and management;
  • individuals and institutions with reputations as the most esteemed among financial fiduciaries turning out to be crooked or easy prey, themselves, to swindles.

Hard to blame these types of market failures on intrusive governments. (Libertarian claims, along the lines, that we just need consumers to better educate themselves don't wash with me.)

Instances of government grants of civil and criminal immunities, privileges, and unnecessarily lucrative contracts have not been the result of activist governments going out and arbitrarily picking random private parties to assist. Instead, these favors by government usually can be traced to moneyed interests purchasing political influence or benefiting from conflicts of interest, arising from class loyalties and peer networks, that affect the actions of legislators, jurists, government executives and bureaucrats.

That's the way the world works, that's what empirical evidence shows. Libertarians have no examples of economically developed (i.e. modern industrial) societies where capitalism operates differently in the absence of government intervention.

Submitted by [Please enter a... (not verified) on

Um, I don't know. You can tell me if you like.

Is this some sort of trick question? Are they mutually exclusive?

Submitted by lambert on

... here and at Avedon's place, I'm thinking there's one trick questioner here, and it's not CMike. So, I suggest you answer. And not with another question.

(My answer is that happiness is what matters. The question is, is it measurable?)

Submitted by [Please enter a... (not verified) on

I suggest you not speak for CMike. The question really isn't relevant to me, and I can't particularly say that I have any opinions on it.

Submitted by lambert on

... for Mike" and was, in fact, speaking out of "my own experience" -- amply confirmed by your response, I may say -- why on earth would you say that I am?

Surely on a purely tactical level, that's foolish?

CMike's picture
Submitted by CMike on

Why did my question seem like a trick one? I mean, this is a comment thread and you are free to elaborate. Obviously, you don't have to answer with either as a one word answer.

I thought the Libertarian view was that free markets are the route to maximum economic growth; the wealthier the society the more choice, or freedom, its members have provided that the government role is minimized in areas not related to contract enforcement, the defense of borders, and policing crimes of violence or theft; and, in a true free market, the poor are impoverished either as a result of the choices they have made or because of their very nature.

Because we are in a mixed, tending to a socialist economy, our government loots the productive members of society by collecting taxes and provides incentives for people to become unproductive. This is the wrong way to organize society and we should transition, forthwith, to a free market economy. Of unfortunate necessity, this will require that we ignore the plight of the poor during the transition period. Gov. Schwarzenegger is an example of someone who came into office with the right idea.

Would you correct me or fill in some of the essential details that I might be missing?