Policy Paralysis?

World economy - stuck fast, going nowhere.Copyright, Philippa Roberts 2012.

I saw a fascinating article online at the FT this morning - fascinating in part because of the comments section - about the lack of confidence in policy makers going into the G20 Forum today in Mexico.


If you think the news is grim when you here about the ongoing recession here in the UK, or the European debt and currency crises, it all starts looking even worse when you look at the figures coming out of the rest of the world, especially the BRICs.


Merryn Somerset Webb recently wrote about why China is a bad place to invest in right now, listing 17 reasons.  The FT article points also to the slowdown in other large developing economies and the fact that US growth could be slowing.


The FT/Brookings Institution Tiger Index of world economic conditions is showing that the recovery is stalling, because of a lack of confidence in the policy makers ability to get their economies growing again.


But if we look at the range of options; we have seen technocratic governments in Greece and Italy.  Since the start of the crisis in 2008, the left has lost General Elections in the UK, Portugal and Spain, the right in the US, France and Denmark.  There will be another election in the Netherlands in September as the austerity measures could not be agreed by the ruling 'coalition' parties and in Belgium, records were broken in 2011 when it took 541 days to form a government.


All of this could point to a lack of anyone having a solution.  Or it could point to the fact that the public do not believe their politicians and the solutions they have been given thus far.  In 2008, many spoke of the fact that this could be the start of a no growth decade, rather like the one experience by Japan in the 90s.  So far, 4 years in, it looks like this is going to be the case.  But many of the policies that are being suggested and the structural reforms that are needed will take longer than an electoral cycle.  Some of these decisions will be the sort that Sir Humphrey would tell his Minister are 'brave'.  Some, and these is where I thought some of the comments were interesting, will question how on earth we stimulate demand when real incomes have fallen so much, and if that's the case, should we be stimulating consumer demand at all?


The policy reaction over the last 4 years has been fire-fighting, because the fires have been springing up all over the place and the priority must be to put them out.  I think though that there is still a lack of a coherent vision about what a different economic future will look like.  Until we have that, and know where we are headed, then the lack of confidence in policy makers will continue.

Glas Half Full

River Lugg, Herefordshire. Copyright Philippa Roberts

Glas Cymru, the not-for-profit parent company of Welsh Water has announced a massive spending programme for the next three years, which it says will create 1,500 jobs.  Chris Jones from the company says it is able to do this in part because of its not-for-profit model in an article in this week's Guardian.


Welsh Water's press release says that not only is this £100 million more than they originally planned to spend, but that 50% of it will be spent with local companies.  This is exactly the sort of investment I've talked about in a previous blog here, that I think we need to get the economy going.  It's productive investment, rather than speculative investment and it's interesting that Glas Cymru think this is possible because of their unusual ownership structure.  They are the only water company that is a not-for-profit and not state owned.


Obviously at this point I should declare an interest and say that not only do I live in Herefordshire and so am a Welsh Water customer, but I am also a member of Glas Cymru.  I feel proud to be part of such an innovative company and the reason why I became a member was because of this ownership structure.  (All of which doesn't mean that I think privatisation of the water companies was a good idea in the first place.)


Personal involvement aside, I think you'll agree that this is refreshingly good news when so much else is bad at the moment.  Only time will tell if it's going to be money well spent, but I think it's exactly what we need to do right now.

Podcast: Changing the Way We Think About Cars- Forever

Copyright Philippa Roberts 2012 Riversimple's car will be a whole lot more efficient than this

A discussion with Hugo Spowers from Riversimple about the hydrogen fuel-cell powered car of the future.  But you can't buy it!


Start: Who, or what are Riversimple?
5min: What is a hydrogen fuel cell and how does a hydrogen fuel cell car work?
9min: Mass decompounding explained
10min: The car company that doesn't sell cars
12min: Car materials - carbon fibre versus steel
15min: Business risks
17 min: End of life vehicles (ELV) - disassembly and recycling cars
19min: Open source design
23min: Company structure and innovative governance

Underemployed?

ONS May 2012

I keep hearing commentators on the radio talking about our 'weak growth' and am getting fed up shouting back at them.  For it was only last month that the ONS figures showed the current recession is slightly worse that we thought, with GDP shrinking by 0.3%.  That's shrinking, not weakly growing, a distinction that seems to be lost on too many broadcasters at the moment.




So while we wait for the Government's Plan A.5 (it can't be B because that would imply that Plan A wouldn't have worked), involving some investment apparently (which is what they said all along but we might have missed that bit), I thought a quick look at employment data would be interesting.




Again, thanks to the ONS, especially their youtube channel.  I thought that there would be a limited market for this, but it does have over 500 subscribers so I am clearly wrong and I can happily recommend it.




The unemployment rate is currently 8.2% and has fallen slightly recently, with employment increasing by 105k based on figures in May 2012.  However there was a 13k reduction in full time jobs and the entire rise in employment resulted from an increase in part-time jobs.


Now we are lucky in the UK to have a minimum wage, so those in work 'should' be able to keep above the poverty line.  In the fact the number of people at risk of poverty and in poverty, when defined as having less than 60% of median national household disposal income, has fallen since the recession started in 2008.  However this is because of the dramatic fall in the median household income, not because of any improvement in the circumstances of those who have less than £9000 income a year in their households. 


Poverty levels aside, the percentage of people in part-time work who want full-time work is increasing, suggesting that people are taking whatever job they can find, regardless of hours.  In fact, one of the unusual characteristics of this recession has been the fact that unemployment hasn't skyrocketed in the way it has in past recessions.  Tied to this, there hasn't been the large increases in home repossessions we saw in the recessions of the early 1990s.  If we are 'all in it together' at all, it appears that people are working better with their employers and, much as I hate to say this, banks with their customers, to find more flexible ways to cope.


But coping may be all that some families are doing.  Going back to the poverty figures briefly, the two age groups most at risk are those aged 18-24 and the over 65s.  This can be seen in the table at the top of this blog.  Across most of Europe, women are far more at risk than men, perhaps linked to the fact that they are far more likely to be in part-time work.


The ability to work and earn enough money to support yourself is really a basic human need.  Early in the recession I heard a commentator on the radio talking about structural unemployment in the USA; they said that it was too low and should be a higher figure.  I found this shocking at the time, to think that you could increase the percent of 'structurally unemployed' and with a couple of strokes on a keyboard wipe out the hope of any decent future for hundreds of thousands of people.  


It's important to remember that behind every employment statistic is a person; and that every part-time job may be a person moving closer to poverty.  

Austerity versus Investment - the double dip answer

ONS GDP and the Labour Market - 2012 Q1 - April GDP update

Last week the ONS released the official statistics that show we are once again in recession.  As the table I've copied here, and the explanation summary that goes with this table state:

"..total output has declined by 0.5 % over the last two quarters.  The economy has not expanded at all over the last year.  Since 2010 Q3, when the economy had grown for five consecutive quarters following the 2008-09 recession, real GDP has contracted by a total of 0.2%."

Now as a Keynesian, I unashamedly will see this as an example of how the austerity package isn't working, especially when compared to the current performance of say, the USA.  However I believe it also demonstrates the importance of one of the key characteristics of collaborative capitalism - long-term sustainable investment.


When I talk about sustainable investment, I am of course talking about triple bottom line investment, but with the environment as perhaps the most important of the three factors.  The last Government invested heavily in our social infrastructure - in rebuilding schools and hospitals in particular.  What I believe is now needed is an investment in our environmental infrastructure, if we are to be truly competitive and have an economy that has a chance of being successful over the next few decades.


At the CIWM Midlands AGM last week, Martin Brocklehurst gave a great presentation about the importance of resource security and how that is currently driving the EU environmental agenda.  It is an argument I have mentioned before; one being made by the Green Alliance and the Ellen MacArthur Foundation in this country.  But it is one that our policy makers talk less about.  If we want to 'rebalance' the economy then we need to make sure that our manufacturers have a secure and price-stable source of the resources they need.  And the thing we know about most of these resources, if they are raw materials? That despite the dismissal of the limits to growth arguments, they will run out (in an economic, if not a real sense).  


Right now, China produces over 90% of the world's heavy rare earth metals which are used in mobile phones, computer screens and hybrid car technologies.  Until quite recently US demand was met by its domestic supply, now that demand is met by China.  This oft-cited example is a snapshot of potential future resource security issues, but there are many more examples on our doorstep.  In the waste and resources sector we collect valuable materials for recycling, and then send them abroad for processing, while domestic companies struggle to find the same clean materials as feedstocks for their processes.


Environmental investment would be investment in these areas.  We must support the infrastructure that will allow us to keep these valuable resources and materials in the UK, beingprocessed here and made available for manufacturing.  This is how we will support business and job growth in the future.


It's not just waste and resources infrastructure that needs the investment.  In environmental investment I also include energy, water and transport.  We have benefitted hugely from the Victorian legacy of infrastructure built to last and benefit future generations, not just this week's shareholders.  This is the type of investment that should be at the heart of Government policy right now.  It's a key part of Collaborative Capitalism and a should be top of George Osbourne's to-do list.

Moving the goalposts - again!

At the beginning of this week DECC published its timetable for implementing the RHI or Renewable Heat Incentive.  It's a great incentive because it works in the same way as Feed-in Tariffs and ROCS - it pays you to produce, and hopefully use, renewable heat.

And yet, in the same ways as they dramatically changed Feed-in Tariffs at short notice, the Government have now announced a delay of the second phase of RHI till 2013.  The disappointment within the renewables industry is palpable.  The Solar Trade Association, ABDA (the anaerobic digestion industry body) and the Renewables Energy Association have called the changes "premature", "unhelpful" and a "source of huge frustration".

The sting in the tail, however, is the small part of the announcement that stated the Government is proposing a policy of "cost control".  In other ways, it is keeping the door open to do what it did with FITs, dropping the level of incentive at short notice.

While the talk this week has been about panic buying petrol, pies and postage stamps, the serious issue is the lack of growth in the economy.  There is little plan for growth and absolutely no plan for sustainable growth.  This change, once again, to existing schemes continues to undermine the fledgling green industries that should be at the centre of our economic strategy.  People will not invest when the future is so uncertain.  A depressing time for all of us working in this area.