The Prime Minister was in Manchester this week. The Tory party conference theme - building a country that works for everyone. The keynote speech was important, championing the cause of capitalism and free markets... renewing the British dream of home ownership, fulfilling the hopes of greater wealth creation for successive generations.
To be fair, it wasn't a bad speech. "That's what I am in this for", the Prime Minister explained, a strong commitment to justice, equality and fair values.
OK a few contradictions, a champion of free markets with price caps on energy and subsidies for housing. A champion of business, with salary caps in the board room and an end to "rip off energy prices" by the big six. There are a few anomalies in Theresa May's thought process, the hard right in the party eye with suspicion.
Above all the delivery created the problem. Stage management and security were lapse. The persistent cough, the P45 incident and the letters falling from the stage, were all many will remember from the speech. According to a YouGuv poll, 15% of voters thought the speech went well! So much for the Tory diehards.
The mood in the conference hall during the week was flat. A "barely live" Conservative party conference the caption on the BBC broadcast should have read. It was as if, on the eve of St Crispin's day, rumours were circulating, the long bow arrows were stuck in traffic, Henry V had lost his voice and the cavalry had caught an early ferry back to Folkestone.
Conference needed a rousing speech! "We few, we happy few, we band of brothers.Tories in England now abed, shall think themselves accursed they were not here". Not so accursed as them that were. This was not Agincourt and Henry V, this was more like the Peterloo massacre with Theresa May in the crowd scene.
What next for the leadership? Boris Johnson, Hildegaard from the North and Jacob Rees-Mogg are in the line up to take over from the Prime Minister. It is not a great choice, with the Mogg brought in to capture the youth vote presumably. "Leave my despicability to one side for the moment" I might be electable as leader of the party, would be his campaign theme perhaps.
So what of Brexit negotiations. In the EU it is said, to start a fight in the Tory party shout "Europe", then offer the European Court of Justice to arbitrate. If that's not enough, propose the unification of Ireland to avoid the hard border problem in Ulster and begin backdoor talks with Corbyn to smooth the process.
It is now over one year since the referendum decision. The Barons and captains of industry look on in confusion as to what is set to happen. David Davies is announcing his withdrawal from the battle. The Prime Minister is set to struggle on, offering "calm" leadership. The latter a tribute to medication perhaps after a very difficult week struggling to deliver the dream, building houses and a country that works for everyone ...
So what of productivity ...?
If I were Prime Minister, I would ban the ONS from issuing data on UK productivity, especially the international comparisons with France, Germany and Italy. It is an affront to every business and worker in the UK. It is nonsense to suggest the Europeans can achieve as much by Thursday as we achieve in the complete working week. Just look at the achievements in Nissan North East or BMW in Oxford. Travel to East Lancashire and robots working twenty four seven toil without sunshine to achieve output targets.
When someone suggests the French or Italians are more productive, then ask which exchange rate did they use? Productivity is a function of output divided by labour input. The size of the cake divided by the number of bakers. To measure the size of the cake or GDP output, the key parameter for international comparison is the exchange rate multiplier. The ONS are using the OECD Purchasing Power Parity values from 2014. The cross rate against the Euro is just over parity. Use the cross rates before the referendum and the productivity disparity disappears.
Complaints about UK productivity are long in the history. In the 1930s, work at NIESR found that productivity gaps as large as 60% between British and German firms could result from a skills shortage. "The aversion to all things technical were revealed as a source of weakness, threatening the very existence of the nation." "In all key industries, there was a shortage of skilled workers. The inadequacy of scientific and technical education in Britain, compounded by the withering away of apprenticeships in trades hit worst by the great depression had created the paradox of skills shortage amidst mass unemployment."
Here we are talking about the great depression of the 1930s not the comparatively modest slow down in 2008. Over eighty years later, economists are still fascinated by "productivity". It's just a residual after all. Output divided by labour with something in between. Low growth begats lower productivity, higher growth generates higher productivity. No magic moon dust. In the UK and in the US for that matter, we should celebrate the growth in output and in jobs. The fashion for self flagellation about the lack of productivity growth will get us nowhere.
If there is a productivity problem, it lies not with within family business and UK ownership. It begins with government investment in transport, infrastructure and telecommunications supported by spending on health, education, skills, training and apprenticeships. Saddling our newly qualified with hefty student loans is not part of that solution. That's all for this week ... Have a great week-end ...
© 2017 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
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The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment advice.
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