“This is now deemed a radical economic plan in this age of neo-liberal Groupthink”
After I piped up earlier today saying Balls’s ideas seemed sensible enough, here’s an economist to put a torpedo straight through them. I have to admit that a lot of this is hard for a non-economist to understand and Mr Mitchell’s words could benefit from a few footnotes, but it is still well worthwhile to see what an economist thinks of this Labour Shadow Chancellor’s position. I have no idea what Mr Mitchell’s political persuasion may be.
Thanks for the reblog Mike. Mr Mitchell’s political leanings are shown here:
http://bilbo.economicoutlook.net/blog/?page_id=2
Left-Libertarian – lovely!
It is not hard to understand. There are two points he raises.
Firstly, if Balls restricts himself – as a Labour Chancellor – to similar austerity policies as the ConDems, Mitchell is pointing out that total demand within the economy will continue to shrink, thus ensuring that the demand for labour will also remain at the same low level – meaning a continuation of insecure and low paid work for many.
Secondly, he – I think – is concerned about the low and falling level of GDP per head.
This is an indicator of low productivity for every working person on average.
This reflects low levels of training for the modern working world coupled with very low levels of investment in modern productive technology by employers.
What both Balls and Mitchell should be advocating is improved worker training in new technology and greater investment by employers in the new technologies.
All employers above a certain size – say medium-sized and above employers – should be levied a training tax, with refunds being available for those employers who send their employees on well-designed training courses for new technologies on a day-release and/or evening class basis which are funded at central government cost.
All employers should also be granted special allowances for investment in newer forms of technologies.
To the second point, isn’t this what Balls advocates where he writes: “We need to create more good jobs and ensure young people have the skills they need to succeed when technological change is hollowing out middle-income jobs”?
To the first point, of course it is a fallacy to believe that Labour will restrict itself to similar austerity policies as the Coalition. There are good reasons to keep spending down, which have been rehearsed on this blog over the last few days, but that doesn’t mean spending should or will stay the same. And after that first year, anything goes.
The last Labour government stuck to the previous Tory spending plans for two years.
I do not believe government can create ‘more good jobs’ in a capitalist economy.
Only employers can do that and they will certainly expect something back in return.
That is why I suggest taxation allowances be given to companies that invest in new forms of technology.
How can Balls ‘ensure young people have the skills they need to succeed….?’
In the 1960s, Harold Wilson introduced a Selective Employment Tax (SET) on employers who cherry-picked employees who had been trained by other employers by offering them fractionally better pay rates.
Employers who worked with local FE colleges in providing appropriate training courses run on day-release and/or evening class basis received SET refunds.
Something like a modern refundable SET or Training Tax is now required.
Otherwise, everything Balls says is just so much hot air without relevant policies.
The last Labour government stuck to Tory spending plans for two years because that’s what it promised. The current Labour Party has promised to stick to Coalition spending LIMITS for one year only. A limit is not a plan.
There is an economic theory which argues that “achieving full employment again is very much a realistic and achievable goal, but it means abandoning modern notions that ‘governments don’t create jobs’, and accepting that capitalism left to its own devices will never employ all those willing and able to work. A key tenet of this theory is that governments should act as the ‘employer of last resort’, offering work to all those who are willing and able to work, but unable to find a job” (Thanks to the alittleecon blog for the above). Never forget that the government IS an employer.
I like the idea of incentives for employers to send employees on training courses – vocational training is important and should never have been abandoned. I think Labour is already on this, though.
If employers need trained staff, they should train them themselves, not sit around expecting the taxpayer to foot the bill and then after the event shovel their increased profits into the nearest tax haven so the taxpayers never get repaid. Employers already have incentives to get their staff trained up to scratch as they’ll be out of business pretty quickly if they don’t. They want to accumulate, let them speculate.
The problem is: most employers will not provide training for their employees but will instead rely on skimming-off employees from those who do provide training.
The sole way to remedy this is to have a training tax so that all employers may benefit from having a well-trained workforce, paid for by those employers who do not provide proper training aopportunities for their staff.
More importantly, it is in the national interest to have a well-trained workforce and it is in the best interests of individual workers that they are well-trained as well.
Everyone wins.
Remember: the present “recovery” is being marked by very low productivity; Britain cannot do nothing about this.
Capital and social investment must be increased if Britain is to take its place in the modern world and prosper.
Simply leaving this situation to a vague chance that some employers may put in the investment in machine and personal investment is no good for the national interest.
That’s true about the present recovery – the Tories want that because they DON’T want the UK’s manufacturing industry on the rise again; they want to keep working people insecure. This is why they are a danger to the country – they put us all in jeopardy so they can be considerably richer than us.
you all talk of but isnt it the fraud caused by all those banksters who lost trillions but hold on it wasnt our monies was it but the rich so we get to put back whot they lost isnt life strange when the those below pay for their mistakes bil correct employers should train their workforce because now we have crapita a4e and the likes taking from the tax payers pot who by the way cant foi now has they private yet has bill stated vast profits being fed into offshore accounts so isnt it strange when before all this most of these jobs were run under government but now been given to their mates who allow them a seat on the board and labour is going the same way unless ed does rid himself of the tb jeff3
[…] Originally posted on alittleecon:Pre-empting the release of today’s growth figures (which showed GDP is now above its 2008 peak*),… […]