IMF raises UK growth forecast
It now expects the UK economy to record growth of 1.8% in 2008, up from April's forecasst of 1.6%. It expects 2009 growth to be 1.7%, up from 1.6% in April. Q4 on Q4 growth, which might give a slightly better representation of the slowdown was 2.8% in 2007, and is forecast to fall to just 1.3% this year, then rebound to 2.2% in 2009.
Labels: economics
The price of petrol and time
The petrol price has risen from 80p a litre at the start of 2005 to around 114p today. That's an increase of 42% in three and a half years. If the average driver does 12,000 miles a year, and his car does 35 mpg, that's an increase in his petrol bill from £1,234 to £1,758 (this doesn't allow for any decline in driving due to the higher price).
Now one simple way to cut fuel consumption is to
slow down - from 40mph onwards every 20mph subtracts about 6-10mpg from your fuel consumption. So for a 60 mile journey on a motorway, doing it at 60 mph rather than 80 mph (I'm going to ignore the issues of the law and traffic) and assuming fuel consumption falls TO 35 mpg FROM 27 mpg will typically mean a petrol saving of £2.8 - what would cost £11.9 at 80 mph costs £9.1 at 60 mph in a typical car.
However it also takes longer - one hour rather than 45 mins. It's difficult to exactly know how people value their time in this situation, but essentially if you value your time at more than £11.2 an hour you are still better off driving quickly.
Of course there are a lot of other factors to consider.
Labels: economics
The 10p starting rate
Robert Chote, of the IFS, has a
good article on what is going on. Basically its the policy that Labour have followed since 1997 - support for pensioners and households with children, at the expense (or at least without benefitting) single adults. There is of course a good case for this as Chote notes -pensioners and children have the least ability to do anything about their own income. But it perhaps doesn't feel like that if you are a poor to relatively poor single person.
Labels: economics, Taxation
"This is a very difficult decision"
Here is a heartrending
story about how the cruel hand of the State can lead to families having to split up. Dermot Smurfit, an Irish paper tycoon and part of a family worth £500m, is facing an additional £30,000 tax bill as a non-domicile. He feels he might have to leave the country:
"This is a very difficult decision, since I would be leaving my wife and children behind," he said.
The hardest decision, one might think, but utterly understandable given the circumstances. George Osborne - who electrified the political debate with the idea to tax non-doms a flat rate - should hang his head in shame. God knows or cares what Darling should do.
Labels: economics
Consumption v Income
Interesting
article in the NYT on how income equality is radically narrowed when you instead compare consumption equality. The top 5th (in 2006) of households had income of $149,963 a year in 2006, whilst the bottom 5th had income of $9,974, a ratio of 15 times. In ters of expenditure, however, the top 5th spend $69,863, whilst the bottom 5th spent $18,153, slightly less than 4 times as much.
The reason for this is partly higher taxes, but mainly, as shown in the first chart - 'financial flows'. For the top 5th these were a positive $47,171, whilst for the bottom fifth they were a negative $10,716.
What are these flows? Asset sales, dissaving and insurance policies, apparently. Here then lies the rub - to the extent that one's income doesn't vary much from year-to-year, then asset sales and dissaving (and to some degree insurance policies) of an amount higher than your income is clearly unsustainable. Furthermore savings of $47,000 a year are clearly available future consumption. So to what extent this really represents more similar consumption patterns probably depends on the churn of income distribution, which most reports say is pretty low in the US [1]
The article also has an excellent graphic showing the adoption of various consumer goods by the US population this century. It rather loses its way in explaining the point of this chart:
To understand why consumption is a better guideline of economic prosperity than income, it helps to consider how our lives have changed
which they say is basically cheaper consumer goods. But I don't think that makes sense, consumption is
always a better guide to living standards than income, at least in the short run, if you could consume without any income you'd be fine. The issue more seems to me that perhaps financial liberalisation means income and consumption can more easily get out of line, or if it is to do with consuming more than your income in bad times and vice-versa then it is to do with greater income variability.
But anyway the chart is fascinating. I'm not sure it shows as strongly as the authors think that consumer goods are adopted quicker nowadays, although it does to some extent. Certainly the cellphone and internet have been, but so was the radio, color TV, and I would suspect b&W TVs (which oddly are missing). So perhaps people just like communication goods (although telephones themselves weren't adopted that quickly).
[1] Another factor is to what extent these figures are really showing up massive saving by the top 1%, something the article doesn't go into.
Labels: economics
More on the professional poor
The Telegraph
today covers a new study by the Centre for Policy Studies that claims median household incomes have fallen by £1,300 over the past four years. This is a more credible survey than the uSwitch one which was the Telegraph's background to the 'Coping Classes' article, and in fact it completely contradicts the Telegraph's interpretation of that survey, as it shows (using the same method of calculation) that average household disposable income has risen from £12,603/year in 1997 to £15,231/year in 2007. Using an average, not median, and not taking off costs (just taxes) they have it rising from £22,578/year to £34,751/year.
The claim that disposable income has fallen since 2002 essentially rests on three rising costs, as earnings have risen from £23,378/year to £27,557/year. These are taxes (including council tax), which they estimate have risen by about £1,700/year, other household expensives which they have down as rising by about £700/year, and finally mortgage interest payments, up by a whopping £3,800/year. The argument is that on an average £125k mortgage, payments on interest (they correctly do not look at repayments) will have risen.
But how do they arrive the average mortgage figure? Table Four gives average mortgage debt per household as being £46,671, a rather different proposition. The average mortgage
advance in 2007 was around £125,000, but that's also not the same as an average mortgage. Thus it should be noted that their figure is the average mortgage of owner-occupiers who have mortgages, which is about 40% of total housing. This will underestimate the impact on first-time buyers, and overestimate it for those who have owned housing for longer.
The level of mortgage debt has risen because of the tremendous rise in house prices. The survey sees this as all cost, and no gain. The gain comes to those who either are in recepit of inheritances or who have sold their houses and rented. This should really be included in the figures, and the survey clearly acknowledged to be of a sub-set of the population.
Labels: economics, Surveys
Sovereign wealth funds
My favourite site for business and economic news is
Felix Salmon's Market Movers site over at Portfolio.com. I can't really stress how good it is for keeping one informed of such news.
Anyway sovereign wealth funds are a hot topic. Views on these seem to be mixed - some people, such as Felix and also Tim Worstall, seem to see them as simply a player, albeit it a large one, in the financial markets. They take the view that their principles are profit-maximising, so don't compare to other government intervention. Other peope, me included, think it's perhaps a bit worrying to have governments, and unelected governments, controlling large parts of your fincial and (one assumes to come) business sectors. Larry Summers seems to want it both ways - in the post Felix links to
here he describes them as 'terrific' but believes they should sign up to a list of principles, mainly that they don't use their political influence.
Brad Setser has made the good point that they way they have arisen was through government intervention in the markets - in China's case through an undervalued exchange rate, whilst in other cases through oil industry nationalisation (or onerous taxation). The most likely outcome is some funds (Norways for instance) are trusted and some aren't - Russia springs to mind. The important issue will be in which category China's ends up.
Update: Liam Halligan
says that the attitude of some in the west is hypocritical, and you see his point. But some of his other points I couldn't agree with - I'm not sure whether one should welcome SWF as 'active investors', I don't believe the Chinese had the ability to 'drive the US economy into oblivion' and I don't know whether one should refer to 'our' investment banks.
Labels: economics
Housing survey
This
article is by no means the worst culprit - the headline is to some degree sustainable - but the statement:
House prices across the UK tumbled in December at the fastest pace in more than 15 years
I don't think is. The survey reports that the number of surveyors reporting falls is larger than the number of surveyors reporting increases by the largest margin ever. It is possible that the falls they are reporting are very small. In fact given the evidence of the other housing surveys, that must be the case.
Labels: economics, house prices
Shocker - UK booted out economic freedom club
So says
Ambrose Evans Pritchard. Taking these kind of surveys seriously is pretty silly - they are incredibly sensitive to small changes in subjective criteria, and their record for predicting economic success is small (for example see here on a
competitiveness survey).
Also what AEP doesn't tell his readers is that this is the UK's third highest score since 1997, beaten only by the 2006 and 2007 survey. We're doing much 'better' than in the late 1990s, and early 2000s, not that I believe you can draw anything like that conclusion from it.
Labels: economics
Blair to be paid $5m a year
Robert Peston
claims the £500,000 figure was about five times out. $5m is a lot of money (even Nick Cohen would probably concede it was 'middle class') but sounds more reasonable than £500,000, which I can't imagine Blair would have been chuffed at.
Labels: economics, Income
Currency speculation and Britain's economy
The pound has slipped to around $1.95, which makes my long-running and modest currency speculation firmly in profit (I think mine averages about $2.04).
The pound's fall has been more pronounced against the euro, where a pound now buys only 1.32 euros, its lowest since the single currency's launch in 1999 [1]. Whilst the euro is probably overvalued at these rates worldwide there seems little reason to believe it is going to fall against the pound over the next year. This has prompted a lot of bizarre comments about GDP - last week we had the
news (now not true) that the UK had overtaken the US in GDP per capita, and now we have the news that the UK has
slipped below France in total GDP. The explanation in both cases is the exchange rate, when converted into PPP it is not true in both cases [2] [3]
[1] Around the time the euro notes and coins were introduced the pound traded at around 1.62. This also happens to be the number of km in a mile, and thus a few simple remembered conversions - 50 to 80, 66 to 100 - were useful. When a bit later the pound had fallen to 1.4 I remember driving in France and converting km to miles at that rate too, and was surprised to arrive earlier than expected.
[2] There are reasons to believe that Eurozone GDP might be understated. Tim Worstall has shown that there is more unrecorded domestic work in many of those countries than the US, and the UK probably leans to the US model.
[3] When comparing GDP of nations in power terms then market exchange rates are probably better than PPP. However while I think criticism of PPP on the grounds that it is difficult to compare consumption habits across countries is valid, it is also difficult to compare consumption habits across time, and yet there is a reasonable consensus that someone who earned £10,000 in 1970 had a higher income than someone who earns £10,000 today [not totally as some things were clearly worse in 1970].
Labels: currency speculation, economics, pound
You read it here first
Some economic thinktank has woken up to the old news that measured in a common currency using the market's exchange rate UK GDP per head is higher than US GDP per head. It's reported (correctly)
here and (incorrectly) in the Observer, which I can't find the link for now. Update: Oh dear the Telegraph's is the
worst of them all.
The figures are not wrong, I've been banging on about this myself for a long time (see links below), and there are reasons to prefer either PPP or market exchange rates, but you need to be careful not to assert things about 'living standards' if you are using market exchanges rates, as they definitely don't describe that for countries that have not too dissimilar spending habits.
http://fistfulofeuros.net/afoe/political-issues/its-expensive-but-were-rich
http://www.matthewturner.co.uk/Blog/2007/07/british-higher-dollar-income-per-head.html
http://www.matthewturner.co.uk/Blog/2007/07/it-keeps-rising.html
http://www.matthewturner.co.uk/Blog/2007/11/getting-richer.html
It won't last, as I've been banging on about for almost as long. Larry Elliot
sets out a case for a weaker pound.
Labels: Dollar, economics
Won't the poor just shut up?
After all they
have a refrigerator and TV.
Incidentally doesn't their argument support moves to greater income equality, i.e. redistribution of wealth on a grand scale? If utility is (say) the square root of income, so an income of 10 is about 3.2, 100 10, and 1000 32, which seems to be what they are saying, then taking 400 off the 1000 earner only reduces his utility by 7, or less than a quarter. You could then give 40 people on 10 another 10, which would increase their utility by 1.5 each, or nearly 50%. Total utility would rise by an enormous 53.
Labels: economics
Pension nonsense
The figures in
this Daily Mail article, partly (I think not wholly) based on
this Lib Dem release, are absurd.
First, pensioners do not "now receive less than in 1950" - they receive, if you believe the numbers (and they seem reasonable) a smaller
proportion of the average wage. We might - I do - think it should be higher, but we shouldn't pretend it actually means a smaller amount of money.
Second, their conversions to today's money should hae alarm bells ringing. Can it really be true that the average wage, apparently 7.08 pounds a week in 1950, is equivalent to 499 pounds a week today, only slightly less than the current average wage of 549 pounds a week? Of course it isn't, even allowing for a smaller % of people in the labour force (and hence higher wages for those who were). In fact the correct figure is that 7 pounds a week is equivalent to 165 pounds a week today, and the pension of 1950 equivalent to about 31 pounds a week, less than half today's level.
Labels: economics, innumeracy
Dollars
The Independent has one of its
front-
pages today on the dollar. Pretty superficial stuff, and I'm not sure whether I agree with the usually good Hamish McRae's argument that one reason for dollar weakness is declining US share of global GDP, which seems to me to be more a function of dollar weakness rather than its cause.
My own currency speculation, now up to something near $2,000, has obviously a negative return so far. It's going to get worse, probably, as McRae points out - even if the dollar is undervalued it can get more undervalued. I wouldn't say I was worried particularly as I've always valued the saving part of investment more than the return - an investment with a 10% negative return is still worth 90% more than if the money had been used for consumption.
Anyway I'm off to India to check out the rather more laggardly rising star of the economic world. Back Wednesday.
Labels: Attempts to talk up the dollar, China, economics, india
Maybe they shouldn't have bought an Ipod?
The
"Ipod generation" are having a bad time of it, according to Reform.
Of the average graduate's salary, which stands at £27,155, £4,608,40 now disappears in income tax, £2,432,21 in national insurance contributions, £3,043,15 in indirect taxes such as VAT, £1,493.53 in pension contributions, £1,093.95 in compulsory student loan repayments, and £618.50 in council tax.
This leaves them, excluding VAT, £16,905. Diddums. It's worth noting that if that really is a graduate's starting salary (see below), then that's a lot more than I and most graduates I knew had to spend (allowing for inflation) in 1996 after direct taxes, council tax, pension contributions and student loan repayments.
Slightly bizarrely, the report then demands (well, the Daily Mail report of the report says it does, which might not be the same thing):
Strict public spending curbs, tax cuts and more private contributions to healthcare and pensions were needed to allow resources to be redirected, he said.
Er..private pension contributions are what they say play a factor in reducing disposable income.
Update: Reading the actual
report adds to the confusion. Of course new graduates don't have an average starting salary of £27k, it's an average of those aged 21-35. So it includes me! The average for new graduates is given as £14,515.
This though is puzzling, as they say the average 21-35 year graduate old has to repay £1,100 of student loans this year. Can that be right? It assumes surely that every ex-graduate aged 21-35 is paying back a student loan (at 9% over £15k)?
Labels: economics, healthcare, Yoof
Quick links
Hurrah! Apparently men can
drink 63 units a week without any negative health effects.
John Lewis is to narrow its price promise of 'never knowingly undersold'. I suppose the advantages of it are that only a few people have to do it for us all to benefit, as I was going to say I don't know anyone who has ever used it.
The Telegraph says
Chinese growth will overtake US growth in dollar terms at market exchange rates for the first time in the modern era. I don't know if this is absolutely correct - did America not have negative GDP growth in 1980? Anyway you know what they mean.
Back at home the
economy is still growing at a rate of over 3% a year, or at least was in Q3 07.
Labels: Alcohol, economics
North South divide in tax and spend
The
Daily Mail has some figures (not necessarily correct, however I find the Mail more accurate than say the Telegraph in these matters). There seems no recognition, however, that the differences between areas might to some extent reflect difference in income, and what is seen as regional transfers are also income redistribution. You might not agree with that, but it should at least be referred to.
Labels: economics, Taxation
Tax and Smith & Williamson
"Familes pay 50% more tax under Labour", screams the Daily Telegraph, repeating (I assume, as the conclusions seem as absurd) an updated version of the completely flawed analysis undertaken by Smith & Williamson three (can it really be? - must be because of the prospect of an election). As I noted last year, here and here, the implications of this analysis are either that the average family buys a £1m plus house, or they move house every year.
More based in reality is the Sunday Telegraph's rather similar story, which is that "income tax had doubled under Labour". By this the mean twice as money is now collected by income tax than it was in 1997. This seems plausible. However they then say:
Official figures show a 100 per cent increase in the tax burden faced by wage earners – whose income has only risen 40 per cent since 1997.
This is less defensible. The wording 'burden' implies usually the % paid in tax, rather than an absolute figure. In any case it is only correct if 'wage earners' means ALL 'wage earners' as collective group, not an average individual. As the article notes later there are more 'wage earners' than there was in 1997. Finally, that 40% figure looks very suspect. It would mean that average earnings have risen by 3.4% a year since 1997 - in NOMINAL terms. So less 2.5% inflation, that would be real wage growth of just 0.9%, which I think is too low. The National Statistics data suggests more like 50%.
Labels: economics, Taxation
Northern Rock and the Taxpayer
Press coverage of the Northern Rock, credit crisis, etc has been all over the place. Business editors of newspapers are suddenly experts on monetary policy, able to tell Ben Bernanke how it should be done. There's been almost no consistency either, with sometimes the same article appearing to both demand government intervention, and attack it. On the whole there has been much criticism of the Fed -
This was a particular favourite.
Alan Greenspan, the Fed chairman's celebrated predecessor, spent 20 years putting off the day of reckoning by cutting the cost of money at the first whiff of trouble.
TWENTY YEARS putting off the day of reckoning? So it should have been in 1987, 1988, 1989 and so on? Given the US economy must have nearly doubled in size in those 20 years I suspect almost everyone would take the putting off, rather than the apparently desirable pain.
This story quotes the Taxpayer's Alliance. I have some sympathy for their view, although the political realities were such that I doubt any government would follow the course they suggest. My concern though is that the Times calls them an 'organisation representing British taxpayers'. I think this should be 'organisation that purports to represent British taxpayers' at the least, unless they have a huge mass membership I am unaware of.
Labels: economics, finance, monetary policy, Taxation
Northern Rock...
is not apparently as hard as we'd been led to believe. At present we have an old-fashioned bank run, and Robert Peston at the BBC suggests it can go on for almost as long as there are savers with money left in Northern Rock, as it just about has enough cash available. Surely then however the Bank of England would end up as the de facto owner of a huge chunk of Northern Rock's mortgage business, which is perhaps not the situation it wanted itself to be in.
The one thing I don't understand is whether these savers know that bank deposits are guaranteed by the government up to £2k for100% and then 90% on the next £30k or something like that. Sure there are still pretty good reasons to get your money out if there's no major penalties, but you'd think it might be worth the government pointing this out a bit more. I suppose to do so would imply they think there's a chance of it going bust.
At this point, those who aren't shouting 'Land Value Tax' or 'Citizen's Basic Income' start to go on about moral hazard, but I suspect that wouldn't go down to well in the Northern Rock panic withdrawals queue*.
* If you were wondering whether people really were walking around with thousands of pounds in cash on them, then it appears probably not. Most of the 'run' was done via the bank's website. That must be a first in UK history.
Labels: economics, Posts with too many in-jokes
US Treasuries
Over
here, rather inconclusively, I've been arguing whether the US would be able to renege on its public debt (US Treasuries) held by China in the event of a war between the two countries. I'm not sure how practical it is, as in whether the Treasury knows which bonds are held by China (although it must know where to send the coupon payments) and of course what the impact would be on the reputation of Treasuries as a safe asset.
There must have been something similar, if one a much smaller scale (gold was stil the reserve asset of choice) during World War II, but I can't find anything on the internet about it. I've just bought a book about the Nazi economy in WWII so maybe that will mention it.
You can get too bogged down in financialmarketism here, and forget the basic problem, which is the US Treasury would be paying large amounts of money (if it's 5% p.a on $500bn that's $2bn a month) to a country it was fighting a war against. I can't see how that would be allowed to happen.
Labels: China, economics, usa
More on Nick Cohen's 2002 suggestion that it was because we owed the US money we fought the Iraq war
Thinking some more about
this idea of his, it just doesn't seem plausible for another reason. Presumably the British government can borrow at dollars at LIBOR, or perhaps better. The rate in 2002 when Nick Cohen advanced this interesting and novel suggestion was just over 3%, so the government could have simply borrowed the money, paying an interest burden of around £14m a year - and repaid the US. Sure there would be a small loss due to the US loan being on better terms, but a tiny price in order not to have fought what Nick then called a 'needless' war?
Of course in fact we didn't need to borrow the money at all. Our dollar reserves were much larger than the remaining loan.
Labels: economics, Nick Cohen
Was the Iraq War fought because Britain still owed the US £243m from its post-WWII loan?
I'm not sure I agree with
this argument of Nick Cohen's from April 2002. £243m just wouldn't be enough money, not given the war must have cost a multiple of that (and that such a cost was easily foreseeable).
Ruth Kelly, the Treasury Minister, told Parliament the other day that Britain still owed £243 million. Rather than relieve the debt of Third World peasants, Britain, she said, intended to meet the bill in full by 31 December 2006. Ms Kelly is a revelation. Until her statement, Blair's sudden enthusiasm for a needless war against Iraq was a mystery; his failure to tell Bush that British troops can't be both peace-keepers and combatants in Afghanistan, a dereliction of duty; his inability to force a concession from Washington on any issue from Kyoto to steel tariffs, a national humiliation.
Now what was baffling is clear. Debtors are in no position to demand concessions from creditors. They must do as they're told. According to the Treasury, Britain will be free to have an independent foreign policy on 1 January 2007. I'll leave it to you to imagine how many wars Blair will have fought by then
Labels: economics, Iraq, Nick Cohen
US economic decline and the dollar
Anatole Kaletsky
here and Ambrose Evans-Pritchard,
here, discuss whether the dollar's collapse is a symptom of US economic decline.
I disagree with various bits. Kaletsky's is the more sensible, though I do wonder what he is on about with "European policymakers, by contrast, seem to have no idea of how currency markets operate." The Euro is the most free-floating of the world's three major currencies, and it's not really the fault of the ECB that it is currently so strong - you can lay the blame where you like, but the refusal of countries with major trade surpluses to revalue seems a much better place.
Kaletsky suggests the ECB should lower interest rates to reduce the value of the euro, a strange suggestion given much of the point of a single currency is to insulate monetary policy from such considerations, and given many say policy has been too loose anyway. Further, to what degree does the exchange rate matter? Clearly a strong currency is not always in a country/economic bloc's best interest, but people have been fretting about the euro's overvaluation since it went above parity (Kaletsky included) and my copy of
The Economist tells me that the Euro Area has a current account suplus of $8bn, which it helpfully adds is 0% of GDP, and the IMF said today growth will be 2.4%, which is reasonable.
Evans-Pritchard has a track record of believing everything in Europe is close to collapse or in chaos, and here is no exception. The strong euro is going to cause an economic 'collapse', 'depression' etc, particularly in Spain. Spain does have a huge current account deficit, 8.6% of GDP, but then again so does Australia (5.5%) and New Zealand (10.2%) both of which have floating currencies and an independent monetary policy. Spain's GDP growth in Q2 was 3.9% annualised, and 2007 growth is set to be higher than earlier estimates of 3.4%.
So if an economic depression is around the corner, it's keeping itself well hidden. This kind of uber-pessimism about the European economy is an exact mirage image (though in much larger supply for various reasons) of some you get about the US economy, where the commentator seems to think that a continental-sized economy, containing most of the world's most successful firms, is going to collapse because some poor people were wrongly sold mortgages. "House of Cards", how are ya?
Anyway, I would overall actually agree with both of them, and be reasonably confident about the long-run prospects for the dollar and the US economy, mainly because (as Pritchard says to a bit) population growth estimates are in the US's favour compared with Europe, China and Japan. Furthermore the US has all the military power, good universities and many other natural and man-made advantages.
Labels: Attempts to talk up the dollar, economics
The Empire too, can we depend on you?
Interesting
review of three new books on Empire in this week's LRB (subscribers only).
It got me thinking how the UK's economic output compared with those of the Empire. In 2006 taking all the countries that were in the Empire (including Canada, Australia etc) in 1925 (with some exceptions for which I could not find data, but the error caused will be relatively small), I get this* - the UK is almost exactly 50% of the size of the rest of the Empire, and so 1/3rd of the total, which accounts for 15% of world GDP, about 2/3 of the rest of the EU15 and 3/5 of the US].
UK GDP = $2,661bn
Rest of British Empire = $5,323bn
Rest of World = $45,827bn
[Nb: US = $13,742bn, EU13 = $11,487bn, Japan = $4,302, China = $3,088bn]
If you make the Dominions a separate category, you get UK = $2,661bn, Dominions $2,724, Rest, $2,598bn, i.e., three with almost exactly equal economic output.
In terms of size, the top 10 are:
UK 2,661
Canada 1,266
India** 1,197
Australia 822
South Africa 272
Ireland 250
Hong Kong 202
UAE 186
Egypt 129
Nigeria 127
* All figures using current dollar exchange rates at market values, at PPP the UK would lose some ground mainly to India.
** Pre-1947 borders.
Labels: economics, empire
China largest contributor to GDP growth
So sayeth the IMF, in current dollar terms. This is the table I have derived from their data showing increase in GDP this year in current US dollars. I have updated it in line with their new growth forecasts, that China is still in 2nd is presumably because I haven't taken into account exchange rate movements (small, but there, in the case of the Yuan). Note our own proud nation in third place, enjoying semi-robust growth, high inflation, and a strong (and this doesn't take into account the 2.05) exchange rate. [Oh, look, it's hmtl table with the world's biggest header - I have no idea why]
| GDP | $bn |
| United States | 498 |
| China | 458 |
| United Kingdom | 287 |
| Germany | 205 |
| Russia | 188 |
| France | 175 |
| Italy | 141 |
| Spain | 135 |
| Brazil | 110 |
| India | 97 |
| Others | 1,118 |
Labels: economics, GDP
It keeps rising
Not the water, which now seems to be affecting Oxford, but the pound. A few weeks ago I
noted that on current trends UK GDP per head measured in any currency in the world would be higher than that of the US, perhaps for the first time since 1880.
The dollar then was trading at 2.03 and a bit to sterling, and today it
is around 2.06. So there's no question now that UK GDP per head is higher than the level in the US. In fact, and I'll have to look this up, I think it must be in the top 5 or even 3 in the world.
Alistair Darling is truly a remarkable man.
I also think it can't go on much more. I have a US dollar bank account, which apparently does commission free transfers from sterling to dollars (the sting is if you then try to get it out in sterling I think, but haven't looked too closely) and I've decided to try my hand at currency speculation by depositing some money each week. We shall see - I tried this with all of £50 back in 2002, when it was 1.9 to a pound, and now have about £45 in there.
Labels: Dollar, economics
Nationalisation of UK companies by foreigners
We've been discussing this over at
Tim Worstall's in response to
this Observer editorial.
The Observer's argument is that very few people desire major nationalisations by the UK government of leading British companies, so why is it ok for foreign governments? Tim says he's fine with almost any such deal, and the distinction is that these purchases are for profit only, and thus mimic a market transaction, whereas a domestic nationalisation is usually for wishes to politically direct the company or (and also this is missing from from foreign control) a whole industry.
This is the main issue - in the 1990s governments used to fret about the bond market, but now although China owns a fair chunk of US public debt the US government seems quite relaxed (at least publicly) - presumably because it doesn't seem to sell them or threaten to sell them again. But can we be that relaxed about equity ownership, particularly as it is likely to grow as countries try to diversify from US Treasuries? Tim himself draws the line at defence contracters (presumably not the US or other allies though) and North Korea (for anything). Issues of national security led some commenters to say they wouldn't want Russia to be in charge of our energy generation. Hands-off governments could become hands-on ones if it comes to a decision between shutting a factory in the UK and one in their home country.
National security is a grey area. In a sense the UK as a country has ultimate control of corporate assets within its borders, foreign-owned or domestic-owned. It can alway nationalise foreign assets, and there's little the other government can do (remember Suez), although presumably there could be damage done before that.
Political interference of an economic or financial sense in those companies owned by foreign investment funds looks unlikely at the moment. It cannot be ruled out though, and even a minor level one would imagine is as bad as the British government doing it (assuming you are a free marketer). And how do you then stop it?
I also wonder whether the source of funding is as irrelevant as Tim says. What if British companies start lobbying (or bribing - illegal I think but Tim would say it shouldn't be) the Chinese or Russian government to help them in takeovers of other British companies. Surely that isn't a level free-market playing field and the outcomes (from a market point of view) could be very unsatisfactory.
Update: Well look at that - an
example turns up as I'm writing the post.
Labels: economics, finance
Brands
A new
survey says the most loved and hated brands in Britain, for men and women. Take with a pinch of salt as we don't know the methodology. But the most loved are:
WomenNokia
Google
Amazon
eBay
BA
MenGoogle
Nokia
Amazon
M&S
Tesco
I think BA's a bit odd. I quite like BA flights, but I couldn't say they stand out from other airliners, except perhaps if you are used to flying on the budget ones. And M&S and Tesco in the men's section?
The most hated:
McDonald's
AOL
Pot Noodle
Sunny Delight
Novon
Weirdly these are identical for men and women. I've never heard of Novon, so how that can be so hated I don't know. I can't even find it on the internet.
It's very amusing to note that in 6th place is Manchester United. Although their relative lack of success, and the arrival of Chelsea, have made me dislike them more than in the past, I was still jumping (literally) for joy when they went out of the Champions League.
Labels: economics
Not this year thanks
I don't really understand
Oliver's point here. Is he really going to turn down any offered pay rise from
The Times and his other employers for the good of the country?
Update: Bizarrely, for someone who I tend to agree with, I find his next two posts hard to understand. First, in a piece about blogging, he
says that a serious argument in defence of blogging is
this by Stephen Pollard (a man who wants the US Marines to invade Spain because they wouldn't invite George Bush to a parade), in which he says that "I do think the fact that without blogging we would not have beeen able to access the opinions of writers...Scott Burgess is a strong positive in favour of the medium itself". What can you say?
Second, Oliver links to
this Marcus Linklater article. He says:
Would gun control in America have prevented the carnage at Virginia Tech university? Probably, yes. Does that mean that tighter controls will reduce gun crime? Almost certainly, not.
Well ignoring one's view on gun control, this doesn't make sense. If (as he does in the article that follows) you believe that gun control would stop these kind of massacres,
and have no other impact, then by definition it would cut gun crime.
Labels: economics
Tesco
As readers will be well aware, this blog played a key role in inflicting one of the few defeats Tesco suffered in recent years - the removal of that stupid lower case 'e' on their Express stores' frontage.
I don't, however, think I can summon the energy or time to join sum of the people of Sheringham, Norfolk, a place I have been on summer holidays, in
their campaign against a Tesco opening. In fact, as the article says, public opinion appears to be in favour of getting a Tesco supermarket - the only indicator of opposition is 'letters to the council' which is not a particularly reliable one. There are issues about traffic, apparently, but they sound a bit bolted on, and furthermore if traffic to the supermarket is going to be so high, it's hard to say it's not necessary.
This is unfortunately the position in which I find myself - desiring high streets full of local shops, but unable to find any reason to oppose Tesco opening up in every town.
Labels: economics, Tesco
Paul Wolfowitz
As Nick Cohen noted, there is no quicker way of silencing a London literary dinner party than telling a story about Paul Wolfowitz. Unlike Nick's story, however, the one in which Wolfowitz became the boss of his girlfriend at the World Bank and then got her repeated pay rises is
true.
I think I was vaguely in favour of Wolfowitz's World Bank appointment, on the grounds at least it meant the Bush Administration would take it seriously. It has not, however, been particularly distinguished, and I can't see any reason he has for staying in the position. First, this matter concerns him directly - it is not as if he is being asked to take responsibility for the organisation's failings. Second, his defence seems incredible. He correctly noted the relationship to the board, and so her supervision was moved away from him. But then he interfered directly, in her pay - anyone, without knowledge of any rules, would see that was improper. Finally, the World Bank needs to be tough on corruption, and it is hard to do that when you are compromised in this way at the top.
Labels: Decent Left, economics
The cost of living
Nick Cohen in last week's Evening Standard (not online, I think) returns to one of his favourite themes, the rising cost of living in London. He quotes Martin Amis[1]:
"In the 1960s you could live on 10 shillings a week: you slept on people's floors and sponged off your friends and sang for your supper," Amis remembered. " Then , abruptly, breakfast[2] alone cost 10 shillings. The oil hike, inflation and stagflation revealed literary criticism as one of those leisureclass fripperies we would have to get along without."
and adds himself:
Class is once again dominating London's culture because the extraordinary house price inflation is pricing graduates from ordinary backgrounds out of intellectual life.
There is clearly something in this, with many salaries in these types of jobs failing to keep pace with the general rise in income, and house prices in any case have exceeded the rise in income [3]. And yet the example chosen is not a good one (and it's worth recalling that Cohen means couples on £100,000 a year when he talks about these things)
Ten shillings in 1969 is equivalent to about six pounds today. That doesn't sound very realistic, even for the 1960s. But of course Amis is remembering those days as sleeping on people's floors, sponging off friends, and singing for your supper. Obviously this means a low cost of living as
everything there is free. The cost of doing that today is identical. Zilch. Furthermore, Nick Cohen's interpretation makes no sense at all, because house price inflation is essentially irrelevant to Amis's story.
You could argue that higher house prices mean people have smaller houses, and thus less room for people to crash on their floors. But really the lesson of this is what we were discussing the other week, which is what Cohen and Amis mean is no-one (and particularly one assumes not people of their age) would put up with the deprivation that they did then. This is essentially at the heart of middle-class whinging - they want foreign travel (vastly cheaper) and new TVs, etc, when their parents probably holidayed in Devon, and made do with a single black and white set until it stopped working.
[1] The choice of Amis as an example of better days in piece about how nowadays people can't work in the arts unless they have rich parents is amusing.
[2] Cohen's genius for misquotation continues, unless there are two version of War Against Cliche. It's a
bus fare that now costs 10 shillings in my version (but his italics).
[3] Although houses are investment goods, and so the cost of buying a house contains implicitly a positive amount of saving. People should really look at the cost of purchase using an interest-only mortgage.
Labels: economics, London
James Rogers
James Rogers, who we last heard of declaring that "Britain is unquestionably the second most powerful country in the world" now
writes (in an article that reminded me of the old story that Berwick upon Tweed was once at war with Russia) that:
[Russia] has an economy little larger than a European city like Paris or London
How can a man with so many academic qualifications be so ill-informed? I thnk that might have almost been true of GDP statistics about a decade ago, when the economy was at rock bottom and the rouble undervalued. But even then the comparision would have needed some explanation. Today, it's far from the truth. As of 2006 the IMF estimates that Russian GDP was $975bn, with UK $2.4 trillion. This makes London's GDP about $400bn, ie just over 40% of Russia's. For 2007 the estimate for Russia is nearly $200bn more, for London just $20bn. That mean's Russia's economy is not 'a little larger', it's a lot larger. PPP estimates, which have at least as good a claim to accuracy in this (and often a better guide to the future) are $1.7trn to $1.9trn, making London about $320bn, or 1/5th the size of Russia.
Labels: Decent Left, defence, economics
Newsnight debate on Road Pricing
I think they must have chosen two people (one for, one anti) designed to make those who support or oppose it change their mind when hearing their own argument made. Who was that dreadful man? And who was that awful woman? Then there's that interior designer, who seems to have all the ills of the world on her shoulders.
I was a supporter of the congestion charge extension when I lived in the zone (though I was somewhat concerned about what happened if you were forced to move your car during the day because the parking bays were suspended) and I still support it now I live outside (but on the edge). However I think the critics have some valid points which haven't really been answered.
Most people, despite what you might read in the newspapers, don't drive into Inner London on a weekday. So this is really a bit of a sideshow. Proper road pricing however will affect, at least at some point, most people. I haven't really made my mind up about it. On the one hand, I think congestion is a problem, with much of the costs hidden (by forcing one to change one's habits) and (I think it was David Aaronovitch who pointed out) the motoring campaigners do appear to believe that we are still living in the 1950s. But on the other hand I imagine road pricing will be implemented badly, and I have some qualms, which I can't quite explain, about charging people to move around the country. Also given the supply of roads is essentially fixed I'm not quite sure markets will work as well as everyone seems to think.
Labels: economics, England. environment, Technology
Non-Jobs in the Society page of the Guardian
A bit of 2003/2004 is about to leap into 2007 - I'm going to take issue with a Cuthie post. This
one, and in particular this question.
Q. Why should these [positions advertised in the Guardian's Society section] positions pay an average salary that is £11,400 more than the average private sector job?
First, let's note there are national statistics, and they say that in 2004 the mean full-time salary in the public sector was
£499.5/week and in the private sector,
£509/week. Essentially no difference then.
So the £11,400 difference Peter has come up is not due to a diffence in public/private salaries, but a difference in samples (one the
Guardian's Society page, and the other the entire country. It's clear it was unlikely that Society was typical of the public sector - the entire TPA extrapolation is for a wage bill of £767m, whereas the entire sector must be (a rough guess) more like £125bn (
6mn multiplied by £25,000 pa). It's only slightly more than half a percent.
On the other hand Peter's question was about
Society, not the public sector. So then why do these positions in
Society pay more than the UK average?
A. Because jobs that are advertised in national newspapers pay more than the average.
Let's give another example. I surveyed last week's
Economist for jobs that gave salaries, and came up with average salaries for the private sector of £46k (only three, most of them were too well paid to say), the public sector of £42k (mainly the international public sector), and academia of £41k. These are all higher than average salaries in those areas.
So the sampling method is wrong. It needs to be changed to compare public sector jobs advertised in
Society to private sector jobs advertised in
Society or other newspapers (whilst they're at it, I suggest that the
TPA, if it believes it is going to be around this time next year, just choose a few more months as well as November (say February) or even one week per month, just to be on the safe side).
That jobs advertised in national newspapers aren't average answers the other two questions as well, I would suggest. Particularly if those perks themselves aren't average - taken together they seem a little too much for a £36k job, but not for jobs of around £50k.
Labels: economics
The Top Dog Index
Despite my predictions, the Henry 'Scoop' Jackson Society haven't come up with this yet, so I've made a stab. The idea is twofold - first, to try to justify their famous statement, that Britain was 'unquestionably the world's second most important power', and second, to provide an index for global power comparable to what the World Economic Forum's
Global Competitive Index does for, er, global competitiveness. So far I've concentated on hard power, ie military spending, but I've also included economic power in that (though not trade yet, which I might include in soft power - you can't expect consistency, I'm afraid).
As I'm pretty sure the World Economic Forum knows, you can just about get any result you want in these things by choosing your inputs, and as importantly, your weightings. I've gone for seven categories - Population, GDP, PPP GDP, Military Spending, No. of troops, Aircraft Carriers, and UN SC permanent membership. Clearly there is some overlap here - GDP for instance with population, but also things like troops and military spending. But hey-ho. The weightings I began with are 18% for population, 30% for GDP, 5% for PPP GDP, 15% for troops, 25% for military spending, 5% for aircraft carriers and 2% for UNSC membership.
Of the seven categories the US scores highest for four categories, China two, and all Permanent Members in one. For each category I take each country's ratio of the highest value, and then multiply it by the weighting. So for GDP, for instance, the US has the highest at $13.26bn, and Lebanon's is $0.022bn, so Lebanon's score is 0.22/13.26 which equals 0.2% of the US level, and then for both the US and Lebanon it is multiplied by the 30% weighting for that category. These are then summed across the categories to give a total score out of 100.
Anyway, drum roll (note the category scores are before weighting...
Top Dog Index | Country | Pop. | GDP | PPP | Troops | Mil. Ex | A/C | UN | TOTAL |
| United States | 23% | 100% | 100% | 63% | 100% | 100% | 100% | 80.58 |
| China | 100% | 19% | 81% | 100% | 16% | 0% | 100% | 48.77 |
| India | 85% | 6% | 30% | 59% | 4% | 8% | 0% | 28.82 |
| Russia | 11% | 7% | 13% | 46% | 28% | 8% | 100% | 21.17 |
| Japan | 10% | 34% | 31% | 11% | 9% | 0% | 0% | 17.15 |
| United Kingdom | 5% | 18% | 15% | 8% | 9% | 17% | 100% | 13.31 |
| France | 5% | 17% | 15% | 11% | 9% | 8% | 100% | 12.95 |
| Germany | 6% | 22% | 20% | 13% | 7% | 0% | 0% | 12.25 |
| Italy | 4% | 14% | 13% | 10% | 5% | 8% | 0% | 8.93 |
| Korea | 4% | 7% | 8% | 30% | 4% | 0% | 0% | 8.65 |
| Brazil | 14% | 7% | 13% | 13% | 2% | 8% | 0% | 8.18 |
| Pakistan | 12% | 1% | 3% | 27% | 1% | 0% | 0% | 6.91 |
| Indonesia | 17% | 3% | 8% | 14% | 0% | 0% | 0% | 6.41 |
| Turkey | 6% | 3% | 5% | 23% | 2% | 0% | 0% | 6.09 |
| Spain | 3% | 9% | 9% | 8% | 2% | 8% | 0% | 5.76 |
| Iran | 5% | 2% | 5% | 24% | 1% | 0% | 0% | 5.68 |
| Mexico | 8% | 6% | 9% | 9% | 1% | 0% | 0% | 5.31 |
Pretty damn exciting, eh? Anyway on the current hard-power version of the "
Top Dog" index, I'm afraid, at least for the H'S'JS, that the UK is not 2nd, at least not 'unquestionably'. The United States is the clear leader, with 81%, followed by China, 49%, then India, 29%, Russia, 21%, Japan 17%, then us, on a respectable 13%, slightly higher than France and Germany. Italy just pips Korea and Brazil.
Update: In response to Nick's comments, I've changed it about a bit, lowering population, adding a Nuke's column (you can see the weights at the top of the table)
Top Dog Index | Weight | 13 | 30 | 5 | 10 | 25 | 5 | 10 | 2 | 100.00 |
| Name | Pop | GDP | PPP | Troops | Mil.Ex | A/C | Nukes | UN | Total |
| United States | 23% | 100% | 100% | 63% | 100% | 100% | 100% | 100% | 86.28 |
| China | 100% | 19% | 81% | 100% | 16% | 0% | 100% | 100% | 48.77 |
| India | 85% | 6% | 30% | 59% | 4% | 8% | 100% | 0% | 31.65 |
| Russia | 11% | 7% | 13% | 46% | 28% | 8% | 100% | 100% | 28.33 |
| United Kingdom | 5% | 18% | 15% | 8% | 9% | 17% | 100% | 100% | 22.66 |
| France | 5% | 17% | 15% | 11% | 9% | 8% | 100% | 100% | 22.13 |
| Japan | 10% | 34% | 31% | 11% | 9% | 0% | 0% | 0% | 16.13 |
| Pakistan | 12% | 1% | 3% | 27% | 1% | 0% | 100% | 0% | 14.95 |
| Israel | 1% | 1% | 1% | 7% | 2% | 0% | 100% | 0% | 11.64 |
| Germany | 6% |
