Читать книгу From Here to Prosperity - Thomas Burgess - Страница 14

On 25th July 2014, George Osborne, the UK Chancellor of the Exchequer was excited: ‘Thanks to the hard work of the British people, today we reach a major milestone in our long-term economic plan.’ That milestone was that the UK economy had returned to pre-crisis levels by expanding 0.8% in the second quarter of 2014. On an annual basis Gross Domestic Product (GDP) had expanded by 3.1%. The figures showed the economy was then worth 0.2% more than it was at its peak in 2008. (source: Office for National Statistics). This was hollow optimism; it has been very slow progress, with dire consequences for millions of people hit by persistent and ill-conceived austerity measures. So six years of ‘hard work’ many were worse off with stagnant wages and higher prices when in fact a more proactive progressive approach could have meant faster progress and less hardship.

A rise in GDP may be good for a country as a whole but it is only good for its people if they actually benefit, and not just the few. Then after all this time, the UK economy was forecast to be the fastest growing among the G7 developed nations, according to the International Monetary Fund (IMF), predicting that the UK would expand by 3.2% in 2014, up from a previous forecast of 2.8%. But would this mean the people would be better off?

Unemployment had fallen. But there were still not enough jobs or, more importantly, there are not enough jobs that pay a decent, living wage. Meanwhile, the USA reported adding 288,000 jobs in June 2014, making the unemployment rate 6.1%, the lowest since September 2008; not as bad as the most recent high point of 10% in October 2009, but nowhere near the 4.4% rate in May 2007 which was preceded by three years of only ever reaching a maximum of 5.6%. However, these slightly improving figures do not give the whole story, as there was a big shift to part time jobs, which accounted for two thirds of all new jobs in June. More companies are shifting to part-time work as it allows them to avoid paying overtime or health insurance and gives them more flexible options to meet demand.

Even when a person has a job with a decent wage, disposable income is decreasing as living costs rise. In addition, in the UK, the average citizen pays over 50% of his or her income in tax (income and consumption related). So this leaves very little disposable income for most people. The average young family in London in April 2015 only had £347 left a year after essential spending and mortgage payments, according to estate agent Hamptons’ Ability to Buy study, a points-based index which measures house prices, incomes, interest rates and the cost of living. It suggest this was due to a 17% increase in house prices combined with a 9% rise in childcare costs and a 1.6% fall in average incomes.

A large number of people are under constant pressure to make ends meet; there is no spare cash to save and little prospect of financial security. It need not be like this. The reduction in disposable income for many is a direct result of government action. Budget cutbacks are creating a new group of people, the ‘new insecure’. Weaker life-chances, lack of opportunity and increasing insecurity are no longer afflicting only the most excluded groups. Declining real wages and incomes means more people are suffering from uncertainty. The new insecure have to cope with global economic forces and the spread of technology. They struggle to adapt to the social realities of falling living standards, feel the growing pressures of ‘earning’ and ‘caring’ in family life, and fear that life for their children will not be as good as for them in the face of pressures on pensions, access to decent health services, the costs of going to university and house price inflation.

The dominant trend in the last two decades has been towards the creation of a ‘5–75–20’ society in the developed western economies: Roughly 5% are enjoying ‘runaway’ rewards at the top, as asset prices and returns to wealth soar. This group is largely composed of professionals working in finance and property, the corporate elite and successful entrepreneurs, as well as those who inherit significant wealth.

Some 75% in the middle are either in work or have a retirement income, but are relatively insecure and often anxious about the future. Large parts of this group consists not only of ‘blue-collar’ industrial workers threatened by outsourcing to Asia, but also groups of middle-class professionals who fear their jobs will be next as the emerging ‘MINT’ economies (Mexico, Indonesia, Nigeria, and Turkey) move up the economic value chain. Once secure professionals, such as academics, mechanical engineers and scientists, who are relatively worse off than their counterparts a generation ago and may be struggling to sustain their standard of living, may also fall into this group.

The 20% at the ‘bottom’ of society struggle in a vicious cycle of low-wage, irregular work, unemployment and limited access to welfare. Arguably, they are ‘outsiders’ in the labour market and victims of entrenched social immobility. It does not take much for many families to go from a relatively well-off, comfortable existence with a bright future, to poverty. There was a moving story told by Darlena Cunha in the Washington Post in July 2014 about her experience back in 2008 as a young college educated couple who were bringing in a combined income of $120,000. They bought a house for $240,000; three weeks later it was worth $150,000. She became pregnant with twins which meant leaving her job as a TV news producer. Then, her husband lost his job. Within just two months they had gone to making just $25,000 a year, of which a large amount was going to pay the mortgage they could no longer afford. Their savings dwindled, then disappeared, and she was on welfare, Medicaid and collecting food stamps. ‘The reality of poverty can spring up quickly while the psychological effects take longer to surface,’ she said.

When you lose a job, your first thought isn’t, ‘Oh my God, I’m poor. I’d better sell all my nice stuff.’ It’s ‘I need another job.’ We didn’t deserve to be poor, any more than we deserved to be rich. Poverty is a circumstance, not a value judgment.

Six years later, they have now sold that house, her husband found a job that pays well, and they have enough left over for her to go to grad school. As she says, ‘President Obama’s programs-from the extended unemployment benefits to the tax-free allowance for short-selling a home we couldn’t afford – allowed us to crawl our way out of the hole.’ It may be a story with a happy ending but it arose from financial mismanagement – not on her part but on the banks’ – and it took much longer to reach a conclusion than it should have because of the way the recovery was handled, again not by her but by government and financial institutions.

A plane that flies too slowly will stall. An economy with slow growth will increase the concentration of wealth and make capital more dominant, according to Thomas Piketty. He adds that other things being equal, faster economic growth will diminish the importance of wealth in a society. There are, however, no ‘natural forces’ pushing against the steady concentration of wealth; only a burst of rapid growth (from technological progress or rising population) or government intervention can be counted on to keep our economies from drifting into patrimonial capitalism, an economy driven entirely from the top. Piketty recommends that governments step in now, by adopting a global tax on wealth, to prevent soaring inequality contributing to economic or political instability further down the road. In the 18th and 19th centuries western European society was highly unequal. Private wealth dwarfed national income and was concentrated in the hands of the rich families who sat atop a relatively rigid class structure. This system persisted even as industrialisation slowly contributed to rising wages for workers. Although the Great Depression and two world wars that bracketed it disrupted this pattern, a combination of taxes and the creation of the welfare state ushered in a period in which both income and wealth were distributed in relatively egalitarian fashion. On many measures, however, Piketty reckons that the wealth gap is returning to levels last seen before the First World War.

Not only is economic growth dismally slow and well behind our true capability, our infrastructure is crumbling. In the USA, total public spending on transport and water infrastructure has fallen steadily since the 1960s and now stands at 2.4% of GDP. Europe, by contrast, invests 5% of GDP in its infrastructure, while China is racing into the future at 9%. America’s spending as a share of GDP has not come close to European levels for over 50 years. Although it still builds roads with enthusiasm, according to the OECD’s International Transport Forum, the USA spends considerably less than Europe on maintaining its roads. In 2006 America spent more than twice as much per person as Britain on new construction; but Britain spent 23% more per person maintaining its roads. From personal experience, the UK may have potholes and cracks thanks to its changeable weather, but the roads in California seem no better.

There is little relief either for the weary traveller on America’s rail system. The absence of true high-speed rail is a continuing embarrassment to the nation’s rail advocates. America’s fastest and most reliable line, the north-eastern corridor’s Acela, averages a sluggish 70 miles per hour for the 454 miles between Washington and Boston so it is not technically a high speed train by European standards. The French TGV from Paris to Lyons runs at an average speed of 140mph. America’s trains are not just slow; they are late. Where European passenger service is punctual around 90% of the time, American short-haul service achieves just a 77% punctuality rating. Long-distance trains are even less reliable. But while the Federal Government seems to understand the necessity of the rail network as it allocated $8 billion for high-speed rail projects as part of the 2009 stimulus, at least three states (Florida, Ohio and Wisconsin) sent the funds back, claiming it was wasteful spending.

This is born out by recent personal experience, travelling on the regular regional Amtrak service from New York to Boston. The train was two hours late leaving New York so in the end it took over seven hours instead of four and half (which would be an average speed of 60 mph) to cover the 265 miles. The week before I was on a train from London to Preston, 225 miles, it took 2 hours 10 minutes, and arrived on time, averaging over 100 mpg). Now, I am lot letting the rail system in the UK off the hook because it leaves a lot to be desired. The system is crowded, and also suffers from delays, and it has just 68 miles of high speed line, one of the lowest in Europe.

Although the accepted version of history is that the railways were a product of gritty, maverick free enterprise, in reality the US and state governments played a huge role from the very beginning by enabling the rail barons to sequester land from native Americans and by using the army and the law to enforce ‘progress’. The term ‘railroading’ for bullying through a plan did not come about by accident. However, towns and cities grew alongside the railways and they were essential to commerce, and it could be argued that the railways gave a point to some territories seeking statehood and admission to the USA, whose growth in turn created a world power.

At roughly the same time, in the UK, despite the scale of the British Empire, poverty and starvation at home were rife. Agricultural productivity was high, money was pouring into Victorian cities such as Manchester, Bristol and London. But parish and town records show that within miles of major towns, bodies were frequently found whose stomachs, on post-mortem examination, contained little more than grass. One reason was poor communications. Food grown in one county simply couldn’t get to people in the next. Then came the railways, or more accurately, the railway mania of the 1830s and 1840s. An astonishing 272 Acts of Parliament were passed permitting the construction of 9,500 miles (15,300 km) of new railways. The government’s role was to permit almost every plan (many Members of Parliament were investors themselves) and leave the railways to sort themselves out: ‘laissez-faire’, let them do what they wanted. It allowed riches for some and ruin for many investors. It was a free for all, a bubble that burst, leaving a third of the proposed railways un-built, often because companies were taken over by rivals and construction was choked off. Nevertheless all those Acts of Parliament created rights of way over land, changing its use and its value, leading eventually to the building of suburbs and, much later, enabling the expansion of the telecoms network that is integral to today’s economy.

Despite apparently being ‘hands off’, the mid-19th-century government of capitalism’s golden era played a massive role both literally and metaphorically in changing the landscape of Britain. After the devastation of the Second World War, the socialist Labour government, swept to power in a landslide election, saw that the railways would be essential to rebuilding the country. The US government was to recognise the importance of investing in infrastructure as well as to feeding and keeping free the people of Western Europe through the Marshall Plan. In Britain this was the job of the government, which, along with other essential industries such as coal and steel, took over the railways, worn out and war weary like the populace, though they were.

By the 1960s the state, not private industry, had made a vast investment of £1.2 billion in replacing steam with electric and diesel locomotives, while the network of rail lines had been rationalised, the amount of rolling stock reduced and the workforce cut from wartime levels. However, investment in the railways and the service they provided to state and private sectors alike came to be regarded as losses. This mindset also affected the view of other strategic areas such as the state-owned (and rescued) airline, the ferry services to mainland Europe and Ireland; the National Grid supplying power to homes and industry, the gas supply, the General Post Office telephone system, Royal Mail postal service and so on. Framing investment in these as losses provided part of the rationale for the privatisation of publicly owned assets and services at knock-down prices often set on the self-serving advice of very large-scale institutional investors. This intervention by government was driven by neo-liberal beliefs. It was intended to engineer a property and share-owning democracy under the flag of popular capitalism; creating a nation of small investors was in part aimed at curbing state control. Instead, it both resulted in weakening what little influence taxpayers and voters had over the economy and failed to spread private ownership or investment. Ownership of stocks and shares in Britain, like other forms of wealth, is concentrating in fewer hands. According to the Office of National Statistics, UK individuals owned 11.5% of the value of the UK stock market at the end of 2010, down from 16.7% in 1998. Nor have taxpayers been freed from spending on the industries whose ownership they have lost. Aside from paying fares, guaranteed – by the state – to rise at rates higher than inflation, taxpayers also subsidised the UK’s private train operators to the tune of £4 billion in 2013. To add insult to injury, the operators then paid their shareholders dividends of £200 million. The Office for Rail Regulation has called the way the UK’s railways are now run ‘the economics of the madhouse’.

The government – our representatives – should be responsible for infrastructure investment: not just transport infrastructure but education and health, as well as energy and electronic communications. All these make the economy work, connect and grow. Yet, government has lost sight of its vital role in making infrastructure happen, because ‘it is too expensive’, missing the point that investment increases growth and generates government revenue. This does not have to mean the state paying for it all, but government certainly needs to create the environment for genuine investment. True, building new infrastructure and rehabilitating existing works are costly. Projects must compete with other needs in the budgets of revenue-strapped federal, state, and local governments. And the return on investment in infrastructure can take many years – beyond the planning horizon of many elected officials – so the temptation is strong to delay infrastructure maintenance. However infrastructure is an investment that brings returns over five, ten, twenty or fifty years.

The relationship between infrastructure development and economic growth has not gone unnoticed by the world’s two most populous countries, China and India, which have a combined population of almost 2.5 billion. The experience of these two rapidly growing nations illustrates how different the paths to growth can be. Living standards in China, as measured by GDP per capita, overtook those in India more than 15 years ago. Since that time the Chinese economy has grown nearly twice as fast as India’s, and its GDP per capita is now more than double India’s. Investment in infrastructure is recognised as one of the main ingredients of China’s success. China’s most visible infrastructure investment, however, has been in roads and highways. By 2020 China plans to build 55,000 miles of highways, more than the total length of the US interstate system, which was 46,385 miles in 2004, according to the Federal Highway Administration. The Chinese are also building 8000 miles (12,900 km) of high-speed rail line and have plans to double that in under a decade, whereas the whole of Europe has only 4148 miles. Currently, the UK operates 68 miles of high-speed rail and even when the new route from London to Birmingham comes into full operation in 2026, this will only double that.

There are other forms of transport and other examples of intellectual stagnation breeding economic stagnation, such as the constant vacillations over the future of London’s airports. The UK government said in 2012 that it wanted to defer the decision to expand London’s airports until after the election in 2015, but nearly a year later there is still no decision. For 50 years, governments of one stripe or another have been sitting on a proposal to build a major airport in the estuary of the River Thames east of London that could grow without causing urban upheaval. The prevailing wind in the UK comes from the southwest. Heathrow’s location west of London ensures that incoming flights pass over the capital and their frequency is such that planes appear from the ground to be on one another’s tails. London’s main airport has two runways; Amsterdam’s has six, built on reclaimed land.

There is a lot more than transport that is crumbling and not keeping up with the demands of today and the needs of tomorrow. Schools, university, public leisure and recreational facilities are all suffering from reduced budgets due to short-sighted views and a lack of radical thought as to how all this could be funded and effectively pay for itself from the increased national and local wealth that would result.

Throughout history, transportation has been the facilitator of trade and the engine of the industrial world, yet this perceived wisdom is being ignored to the detriment of economic growth. If we want economic growth we need to invest in infrastructure especially transport and it has to be available to all. Though it is not just inadequate infrastructure that has been slowing economic growth, it has been the policies of government that have had a significant negative effect. So unless there is a bold strategic and radical vision on economic policy and infrastructure development, we are going to be confined to the slow lane, which benefits no one. And as has been demonstrated, even with good economic growth the benefits can go to the few, not the many.