Marx and the labour theory of value
The latest extract from Edmund Conway’s new book “50 Economic Ideas” looks at the work of Karl Marx and in particular the validity of his labour theory of value
“At the heart of Marx’s theories was the labour theory of value. This idea, laid out in Das Kapital (1867), states that a commodity is worth the amount of time it takes for someone to make it. So, for instance, a jacket that takes twice as long as a pair of trousers to stitch and sew ought to be worth twice as much. However, he argued, those who ran companies pocketed disproportionate amounts of the profits themselves. The reason bosses get away with this, Marx argued, is that they own the means of production and so are able to exploit their workers.There are question marks over how well the labour theory of value holds up. However, the broad thrust remains undiminished: that there is a major divide between the wealth and opportunity of those who own land and capital and of those who do not.”
The rest of the article can be found here
Consumer Spending and Saving in the UK Economy
The decisions of millions of households about how much to spend and save and (perhaps) borrow will largely dictate where the domestic economy goes in the next twelve months. Here is our latest macroeconomic snapshot, a streamed presentation on aspects of consumer spending and saving behaviour in the British economy over recent years.
The presentation covers the latest available data on:
Consumption and GDP growth
Consumption, GDP and Interest Rates
Durable Goods Spending
Consumer Confidence
Confidence and Policy Interest Rates
Consumer Borrowing
Borrowing and the Savings Ratio
Indicators of Consumer Sentiment
Spending and Real Disposable Income
FTSE 100 and UK House Prices
Personal Insolvency and Debt
Household Savings Ratio
Savings Ratio, Interest Rates and Unemployment
Savings Ratio for Selected Countries
Status races - PTA school fete wars hot up
This delightful feature in the Times looks at the increasingly bitter battle to offer the best prizes or the most opulent home-made food for Parent Teacher Association events. The school fete provides an ideal breeding ground for Mum and Dad to display their high relative income. From the rapid bidding wars at prize auctions to organic meat providing the stuffing for £6 burgers, here we have yet further proof of the desire to be seen consuming and offering more than your rivals. It is a welcome relief that some schools are making a point of scaling back such displays of wealth and going back to basics.
Revision: Deflation in Residential and Commercial Property
Background:
There has been a period of steep and sustained deflation in the average prices of property in the UK. Commercial property is 40% down from the July 2007 peak and residential property is - on average - down by 20% since the peak in the autumn of 2007. Land Securities, Britain’s largest real estate company has just revealed a £4.7bn fall in the value of its investments. It’s retail properties fell in value by 37 per cent and fared only slightly worse than its stock of London offices, which were down by 34 per cent. The commercial property sector is suffering from a slump in demand and sharp rise in vacancy rates. Housebuilders have made big cut-backs to the number of new homes being built. Both commercial and residential property markets are experiencing excess supply.
read more...»
Trends in UK Income Inequality
Source: The distribution of household income 1977 to 2006/07, Statistics Commission, December 2008
In a week dominated once more by macroeconomic headlines it is important not to lose sight of some of the deeper structural changes taking place within our economy and society. The distribution of income and wealth and the extent to which the benefits of economic growth and development are dispersed across society remains one of the the most important issues facing every country - the UK is no exception.
The Office of National Statistics has just released the latest data on household income and the inequalities of pre and post tax income across households from bottom to top of the income scale. The figures suggest that the progress made by Labour in reversing the steep rise in relative poverty from 1977 through to the turn of the 1990s has faltered. The BBC reports that the UK income gap ‘same as in 1991’. Britain continues to have above average levels of income inequality - our gini coefficient is the 9th highest in the European Union.
The full report which is available as a pdf file can be downloaded here
Hedge trimming
I was listening to the Bottom Line a fortnight ago when one of the guests Hugh Hendry, Partner at Eclectica Asset Management and a fully-paid up representative of the hedge fund industry - made a complete horlicks of himself in the company of a fair trade social entrepreneur and some other business luminaries. His arrogance and certainty was certainly out of kilter with the mood of pessimism and fragility at the time. I cannot claim to understand completely the subtle contribution that hedge funds make to improving living standards, creating genuine and sustainable wealth and allocating scarce capital towards its most efficient use! But Robert Peston’s blog today is well worth a read as global hedge funds come under enormous pressure.
And I cannot resist a wry smile at the accompanying EcoWin chart showing a collossal fall in the value of global hedge fund assets under investment.
Investing the proceeds of the oil bonanza
This BBC article focuses on the ways in which the Brazilian government is seeking to use the revenue from oil exports to boost the economy’s long run economic growth potential and reducing poverty. There is a neat line in here about the importance of value added - from moving away from dependence on exporting crude oil to selling derivatives of oil that carry a higher value in world markets. Yet another country looks poised to establish a sovereign wealth fund to manage some of the assets that come from selling black gold to the rest of the world.
Business with a social face
Business with a Social Purpose - Andrew Mawson on Social Entrepreneurship
It is all about the people not the structures. This seemed to me to be the core message from a tremendous talk by Andrew Mawson, the renowned social entrepreneur and cross-bench peer in the House of Lords who is renowned for his pioneering work since the mid 1980s at the Bromley by Bow Centre in East London, which became the UK’s first integrated nursery and Healthy Living Centre. And which is now fast becoming a beacon in providing the way ahead when it comes to building a legacy for the east end of London post 2012.
read more...»Telling it like it is
This 27 year old from Essex hits the nail on the head when discussing the problems facing first time buyers in the housing market - a lucid and spot on description of the impact that the housing bubble has had on housing affordability, and effective demand for people willing to save for a sizeable deposit.
The government has been reverting to type this week by floating a series of possible palliative interventions for the housing market - centred around reductions in or holidays on paying stamp duty. Why cannot they just realise that house prices need to fall? The market had become dangerously over-priced and creation a money-for-nothing illusion of wealth that contibuted heavily to the credit crunch. Let prices fall, let the market adjust - stop pretending that poorly thought-out and rushed government intervention can make a difference.
Unjust rewards?
Polly Toynbee and David Walker from the Guardian have a new book out this week - available on Amazon - which looks at the depth of inequality in modern Britain.
“The top 10% of income earners get 27.3% of the cake, while the bottom 10% get just 2.6%. Twenty years ago the average chief executive of a FTSE 100 company earned 17 times the average employee’s pay; now it is more than 75 times. Since Labour came to power in 1997 the proportion of personal wealth held by the top 10% has swelled from 47% to 54%.”
A gross income of just under £40,000 is sufficient to get you into the top decile of the income distribution (making an adjustment for household size). The book will be a timely reminder that - eleven years into a Labour government committed to a mild form of redistribution through policies such as New Deal, tax credits and the minimum wage, there are incredibly powerful forces that drive inequality higher in modern economies. One way of measuring income inequality is to use the gini coefficient - the latest figures for the UK are available here..
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