Friday, 10 January 2014

On Workers and Water Cannons

It looks like Larry Summers' IMF speech on "secular stagnation" in November will remain central to economic debate for the foreseeable future. This is as much because of the political ramifications as the economic. To recap, Summers suggests that we (in the developed West) are in an era of low growth, which started well before the 2008 crash, marked by low interest rates and stubbornly high unemployment. As Paul Krugman noted, one implication of this is that we need financial bubbles to provide any sort of oomph to the economy.

In the New Yorker, John Cassidy summarises the former US Treasury Secretary's position as a combination of supply-side causes ("slower growth in the work force and a drop in productivity growth") and demand-side solutions ("ending the disastrous trend towards ever less government spending and employment each year and taking advantage of the current period of economic slack to renew and build out our infrastructure", in Summers' own words). Cassidy characterises this as a "centrist" position, in contrast to the wilder shores of the left where you will find advocacy of "tougher labor laws to spur higher wages, more income distribution, and centrally-directed investment" (yay, the 60s!) In American political geography, as in the UK, the centre is pro-big capital and "relaxed" about finance capital (Summers was a prime mover behind financial deregulation during the Clinton administration).

Cassidy is still drawn to the idea that low productivity growth is the result of a lack of innovation: "The online revolution, after a promising start, has so far proved disappointing. The green-energy revolution hasn’t really got going" (kids today, attention span of a gnat - as the slow-burn impact of online shopping on supermarkets shows, disruption can take a decade or more). As I've previously noted, there are good reasons to believe that productivity growth has been increasingly decoupled from technological innovation since the 80s, and that our current problems are actually the result of transformative technology, not the lack of it. Rather than rehash the arguments about the awesomeness of ICT, I think it worth looking at the other chief culprit in Summers' analysis, namely the slow growth of the work force. This has a particular relevance in the UK because of the current debate about immigration, which is increasingly presented as a trade-off for growth.

Moving the discussion beyond emotion to pragmatic calculation has long been the aim of pro-immigration advocates on both the political left and right, from macroeconomists like Jonathan Portes to the CBI and the City. Not everyone has moved onto the new terrain. Says Nigel Farage: "I'd rather we weren't slightly richer and I'd rather we had communities that felt more united and I'd rather have a situation where young, unemployed British people had a realistic chance of getting a job". Of course, as Portes would point out, lower immigration means fewer jobs for natives, due to lower demand. The inevitable consequence of "less richer with the same number of jobs (now filled by natives)" is lower wages, which might satisfy the small capitalists of UKIP but is unlikely to entice the wider population.

Economic growth over the second half of the twentieth century was heavily dependent on a growing workforce. This was a combination of three things: the high birth rate during the postwar "baby boom"; the increased level of female participation in the workforce (from roughly 1/3rd to 2/3rds of working-age women over the last 60 years); and immigration. The problem faced by the UK (and most other developed nations) is that the baby boom and the move of women into the workforce were one-off events that are unlikely to be repeated. From now on, immigration is going to have to do the heavy lifting.

This might seem a daunting prospect, but in fact the "terms of trade" have never been better. As the developing economies grow, they are producing millions of skilled workers that can be attracted to the developed economies by relatively higher wages. Labour migration then is simply a matter of comparative advantage: we have the money and they have the workers. At a certain point, the wage gap will narrow and the flow of immigrant workers will shrink, however that is probably many decades away. There are plenty of countries still at the back of the development queue with high birth rates and under-employed women (the global population is not expected to top out until early next century). Even when the labour market tightens in emigrant countries, it is likely that this will be eased by further immigration there from less developed countries (similarly, the feared "flood" of Bulgarian and Romanian migrants this year will probably divert towards Greece and Spain, while more Greeks and Spaniards will in turn head for London).

The argument of Farage and others is that we can and should eschew growth in the working population, either settling for a steady-state economy (which finds some support on the eco-friendly left) or using our native intelligence to boost productivity growth instead. Unfortunately, both of these strategies assume a very different economy to the one that we've actually got. A steady-state or zero growth economy sounds nice in theory, all recycling and bucolic contentment, but the reality would probably be increasing repression as the powerful sought to preserve their privileges. The great attraction of growth for the right is that it offers the poor and powerless hope: the possibility of getting on, a larger pie that we can all have a slice of. Despite the continuing attempts of China to prove otherwise, growth and democracy tend to go hand in hand (the neoliberal con is to insist that only markets deliver reliable growth, despite the evidence to the contrary). Stagnation tends to breed authoritarian "stability", like Portugal under Salazar, or Russia under Putin.

A high-productivity economy (the "innovation nation" no less) depends on the free flow of ideas and the stimulation of new thinking, which means new people (like the Russians who developed Graphene in Manchester). There is an obvious correlation between high value-added economies and immigration - just look at London. The idea that the UK could be an exception to this rule is improbable. The bottom line is that the advanced economies need immigration to fuel growth, specifically by stimulating demand. Counter-cyclical government spending and infrastructure investment can certainly help boost aggregate demand, but by its very nature this has to be temporary. Low immigration and persistently high government debt gives you Japan, a stagnation early adopter.

At this point you might wonder why we need more workers, even highly innovative ones, when the robots are going to take over. The point is that workers (unlike robots) are also consumers, and that means they create both demand and product. A growth in the workforce tends to be relatively progressive in terms of wealth distribution as the increase in aggregate demand is widely spread through lots of individual purchasing decisions. Productivity growth is less progressive because it is selective - typically it delivers greater returns to capital. Optimal growth (in mainstream economic thinking) is a mix of the two. Many of our current problems stem from the shift of income from labour to capital, which is the result of productivity (better technology and increased automation) amplified by policy (the privileging of finance through lower CGT etc).

Both automation and the declining birth rate (i.e. the ageing of society) are serving to shrink the share of the population with a healthy disposable income (that they largely spend), at the very time that policy is further consolidating wealth among the elite (who save proportionately more). This has been routinely dressed up as a conflict between the generations in a bid to obscure its class basis. Similarly, immigration has been dressed up as an "issue" for the working class (foreigners taking our low-wage jobs and swamping our state schools), with pro-immigration advocates dismissed as a "metropolitan liberal elite". This serves to distract from the real challenge to the well-off. The choice is not between immigration and growth, because growth is the outcome, not the option. Rather the choice is between immigration and repression. The news that Boris Johnson wants to see water cannon on Tottenham High Road is an agenda-setting victory for UKIP.


  1. " The point is that workers (unlike robots) are also consumers, and that means they create both demand and product."

    Robots are also consumers, but not purchasers. A robot consumes energy for it to work just as a worker consumes food as energy to work. A robot consumes auxiliary materials such as lubricating oil. A robot consumes labour-power for its cleaning and maintenance, as well as materials for its repair etc.

    In all these ways a robot like any other machine, like a pack animal or like a slave is a consumer in the same way as a wage worker. The difference between a wage worker and a slave, pack animal, machine or robot is the wage worker is also a purchaser of all these commodities, whereas all of the former have these commodities provided to them/bought for them by someone else, i.e. the owner of the means of production.

    This indeed is why Marx says that it is only the wage worker who produces surplus value. The wage worker supplies their labour power at its value - the value of all these commodities required for its reproduction. Similarly, the wage worker has to buy all these commodities at their value, a value which includes the unpaid labour-time required for their production. But, the owner of means of production does not.

    A slave owner obtains various commodities not at the full cost in labour-time of their production, but only at the cost of the production of materials, and the cost of producing the labour-power of the slave. The capitalist does exactly the same. It may be true that each individual slave owner or capitalist pays the full value of production - this depends on the nature of the market - but the amount that each loses, each in turn (on average) regains by selling their own commodities above their actual cost of production.

    The only participants in the market who cannot so regain the difference are wage workers, precisely because they do not own the means of production. That is why as Marx says, slaves, machines, and so on, may produce a surplus product, but they do not produce surplus value.

  2. "A growth in the workforce tends to be relatively progressive in terms of wealth distribution as the increase in aggregate demand is widely spread through lots of individual purchasing decisions. Productivity growth is less progressive because it is selective - typically it delivers greater returns to capital."

    I don't think this is true. High levels of population and population growth increases the potential labour supply and thereby tends to lower wages. Lower wages discourage innovation, which reduces potential productivity, which raises unit labour costs. It may be true that this causes wages to be a larger proportion of output, but because lower productivity means lower total output, the actual amount of output going to labour - real wages - may well be, and usually is lower.

    It also usually means lower volumes and rates of profit - that bit of your argument is correct, i.e. a higher share to capital. But, as Mmarx indicates in Capital I, the higher rate and volume of profit leads to greater accumulation, which leads to a larger absolute amount of labour being employed.

    I would say the innovation and higher productivity that arose with Fordism, and which brought with it the kind of shifts described above was progressive, and also led to a strengthening of the position of workers, as well as the possibility of introducing other advantages fo workers such as an extension of welfare provision, education etc - though I believe this extension would have been even more progressive if it had taken the form of an extension of the workers Friendly Societies to provide welfare under the direct ownership and control of workers themselves.

  3. Boffy, population growth increases the labour supply, but it also increases demand, which is why wages don't tend to drop during periods of workforce expansion. I agree that lower wages discourage innovation (and this is likely to be one of the causes of current low productivity growth), but stagnant median wage growth (and thus lower real wages) can also be a consequence of innovation, as the current evidence of technology-driven job polarisation would suggest.

    My broader point is that productivity growth is not a get-out-of-jail-free card, that can be treated as an alternative to population growth (and thus immigration), because it has a distorting effect on the job market (i.e. differential rates of productivity growth, e.g. manufacturing vs care), and because the lion's share of the gains increasingly tend to accrue to capital rather than labour.

    In an era of publicly listed businesses, stock markets do not look kindly on declining profit margins (i.e. conversion ratios, rather than the quantum of profit), because of the impact on dividends and P/E ratios. This means that investment decisions tend to be geared more towards increasing short-term margins, which means a disproportionate share of productivity gains goes to capital rather than labour (in contrast to earlier eras when the benefit was more evenly split).

    This does not mean that labour gets no benefit from productivity improvements, but that these gains tend to be concentrated in fewer high-skill roles. Conversely, workforce growth spreads the gains from GDP growth more widely. It is in this sense that it is "progressive".

  4. David,

    I agree that population growth means additional demand as well as extra supply, but clearly under Capitalism is does not mean as much additional demand as it means additional supply. If that were the case - that workers are able to provide all the demand required to consume what they produce - workers could never produce a surplus product, or any surplus value, so Capitalism, which depends upon workers producing such surpluses would be impossible!

    Wages both nominal and real fell most in Britain when a huge supply of agricultural Labour flooded into the towns at the end of the 18th/start of the 19th century. It took until the middle of the 19th century before living standards started to recover previous levels, and largely that was due to the rapid rise in productivity that then occurred, as the surplus population was used up, capital was forced to introduce the Factory Acts etc. to prevent the further decimation of its most vital resource, and consequently alo had to innovate to use that resource more effectively.

    I don't agree that stagnant median wage growth is being caused by innovation. It is being caused by the fact that a lot of the higher paid jobs went to Asia and other developing economies, once those economies had the required level of infrastructure etc to be able to do the work more profitably. It is being caused by the fact that a workforce that is inadequately educated and trained, has then been left with low skill, low value jobs in various forms of service industries - most notably retailing selling commodities now produced elsewhere - whilst the encouragement of this low-wage/high debt economy by Thatcher and her heirs, has meant that lazy capitalists could make easy profits from them, boosted by state subsidies for low wages, rather than invest in high value, high wage production. That has been exacerbated by the concomitant ability to make easy capital gains in various state backed Ponzi schemes that have blown up asset price bubbles in property etc.

    If you look at the areas of innovation these are high value, high paid sectors not characterised by stagnant wages at all. What we have is what Lenin described in relation to the development of Capitalism in Russia - we are not only suffering from Capitalism, but also from not enough Capitalism!

    1. Boffy, the innovation that I'm talking about (in the context of stagnant wage growth in the West) is precisely the technological advances that have facilitated globalisation, notably containerisation and ICT.

      Silicon Roundabout et al may get the media coverage, but it's a pin-prick in economic terms, and the claims of high wages are over-stated (most startups depend on young grads willingly to work for <£20k, many of whom are migrants).

    2. But, that process of globalisation has raised income levels in those countries that have industrialised. That process of globalisation, plus the rise in productivity that innovation has brought about has increased real wages globally.

      I don't think the claims of high wages are over stated. The tens of thousands of people employed by Microsoft and other similar companies, in highly skilled jobs are very well paid.

    3. I agree that globalisation has raised income levels globally, but my post was specifically about the UK and the political ramifications of stagnant wage growth. UK capital has been a winner during the globalisation era, but UK labour has been a net loser.

      Similarly, my point about high-tech wages being partly a myth relates to the UK: Silicon Roundabout (which I know intimately) is not Silicon Valley. There are high wages to be had, but the UK high-tech sector (even including engineering, pharma and high-end manufacturing along with ICT) is a foreign country to most workers, hence the stagnation of median earnings.

    4. But, my point is that the reason its a foreign country to most workers in the UK is not because of innovation. The reason is rather that the promotion of low wages, and low skills as an economic model leads to capital investing in those areas.

      If Britain under Thatcher and her heirs had not promoted a low-wage, high debt model, but like Germany, Singapore etc. had discouraged low wage employment, encouraged the development of education and skills - rather than for example bringing in a £9,000 a year Tuition Fee - there would have been more capital attracted to those areas, and more workers employed in it, earning higher wages.

      But, in any case, Silcon Roundabout may not be Silicon Valley, but nor is it the whole of the IT industry in the UK, let alone the whole of the high value production that does exist in Britain. If you look at the stagnant wage growth it is in those areas where innovation has not had an impact.

  5. "In an era of publicly listed businesses, stock markets do not look kindly on declining profit margins (i.e. conversion ratios, rather than the quantum of profit), because of the impact on dividends and P/E ratios. This means that investment decisions tend to be geared more towards increasing short-term margins, which means a disproportionate share of productivity gains goes to capital rather than labour (in contrast to earlier eras when the benefit was more evenly split)."

    Actually, I don't think this is true either, for the reasons Marx and Engels set out in Capital III. They make the point that the industries that were characterised by being Joint Stock Companies - and therefore publicly traded - had in general much lower rates of profit than the old style private capitalist monopolies, because the former were much, much bigger and required lots of constant capital. In fact, it was because they needed such large amounts of capital that they had to become Joint Stock Companies rather than being private capitalist companies to begin with.

    But, Marx points out it is this very fact that makes the rate of profit much less important for these very big companies, because their growth is determined not by the rate but by the volume of profit. As he says a very big company can grow more than a small company even if its rate of profit is much lower, because a low rate of profit on a very big capital can be many times the amount of even a high rate of profit on a small capital.

    Moreover, for stock market investors, actually the rate of profit IS less important than the volume of profit. Microsoft only started paying a dividend a few years ago, but investors flocked to its shares, precisely because its profits kept being reinvested in the firm, so its capital value continued to expand driving up the share price. Amazon and other companies have produced no earnings from the beginning of their business, but again their share price has continued to go higher, as they continued to expand the companies market.

    Another example is Apple. I've suggested recently that we are likely to see the rate of profit slow down in coming years, because of the turn in the Long Wave, and the slow down in productivity growth. I've pointed to Apple as an example. Its profit margin has continued to drop over the last year, because of those facts. Its new products are increasingly only versions of its older products, and it is cannibalising its own sales, it is facing increasing elasticity of demand for its products, a classic example of what Marx describes of production expanding faster than the capacity of the market to absorb. But, despite a temporary fall, Apple's shares have continued to rise, along with the 30% rise in the share price of other technology stocks last year.

    If you watch CNBC etc. you will see that what drives share prices is not the rate of profit, but whether earnings have beaten expectations. In other words has the volume of profit risen.

    1. Boffy, the stock market is very different today to what it was in Marx's time. Long-term individual investors were common then, but are as rare as hen's teeth now. Mutual funds didn't get going until the 1870s, and there were no private equity funds as such, let alone hedge funds and other speculative vehicles.

      There has always been a tension between growth (i.e. share price appreciation) and income (i.e. dividends), but with shares being routinely traded (high-frequency trading means that the average duration of most share-holdings is measured in seconds), the distinctyion has become increasingly blurred. You can generate an income stream solely from non-dividend-paying shares by "flipping" them.

      Both MS and Apple started paying dividends recently because investors reckoned stellar share price growth was a thing of the past, so they wanted a better mix of growth and income. Amazon have staved off this day simply because most analysts believe they can grow more, notably into grocery deliveries (the drone delivery meme was simply part of this financial PR).

      However, my point is less about tech companies going through this evolutionary phase (which is atypical of the market as a whole) and more about bread-and-butter businesses where volume growth is less of an issue. In their case, meeting analyst expectations revolves around profitability, because this impacts both the share price (through the P/E ratio) and dividend policy.

    2. But, the dividend paid by Microsoft is relatively small even now compared to their profits. The whole point about the asset price bubbles of recent years is that they are both a concentration on growth rather than income. The increase in share prices has not been driven by higher profit margins, but by multiple expansion, in other words, p/e ratios have been blown out, and the reason for that is that speculators are less concerned about whether a companies rate of profit is rising than with the volume of profit being generated, thereby generating growth rather than income.

    3. Microsoft's dividend is relatively small because they have only just started paying it. Ditto Apple, where shareholders continue to lobby for larger payouts. What is significant is the rate of dividend growth (i.e. the yield). Both companies have increased their dividends and are likely to continue doing so. This is a trend across the tech sector generally. See:

    4. Microsoft could have chosen to pay a much larger dividend had they chosen to. The fact of them only just starting to pay one is irrelevant. They like most successful IT companies have masses of cash on their Balance Sheet from which to pay the dividend. The fact of no dividends for years, and low dividends today is rather because their shareholders are far less interested in dividends than in capital growth - both the actual capital growth of the company, and the fictititous capital growth of the share price.

      In fact, Apple demonstrates the opposite of the case you suggest. The lobbying going on from Carl Icahn and other activist shareholders is NOT for Apple make a bigger dividend payout. He is arguing for Apple to return cash to shareholders in the form of a share buyback, of bigger proportions than those already undertaken.

      The purpose of a share buyback rather than a dividend payment is manifold. Firstly, a share buyback by reducing the supply of available shares relative to demand raises the share price. That is why executives also favour them, because it uses company money to raise the value of their share options, and existing shareholding! Secondly, a share buyback can provide a much bigger benefit for the shareholder.

      The reason for that is this. I should say firstly, that your definition of yield as dividend growth is incorrect. Yield is the ratio of the dividend to the share price in the case of a share, or the ratio of the coupon (interest) to the current market price in the case of a bond. Suppose the yield on a share is at the average of around 5%, and the current price of the share is £100. That means the dividend is £5 per share. Suppose, the company raises the dividend by 10%, so that it is now £5.50. If you own 1 million shares, you pocket an additional income of £500,000.

      However, suppose instead the company uses its cash to buy back shares, and the consequence of this is to raise the share price by 10%. The share price then rises to £110. Now your 1 million shares have increased in value by £10 million, or 20 times the benefit you would have obtained from the higher dividend!

      Thirdly, dividends are income and are taxable immediately as such (to the extent you don't avoid such tax), but a rise in the value of shares is a capital gain. Capital Gains are generally taxed at much lower rate than income, where they are taxed at all. Moreover, a Capital Gain is only taxed when it is realised, i.e. when you actually sell the shares. In the meantime, and this is important for a bank or company holding shares on its balance sheet, the increased value shows up as an increased asset value, which means for example a bank can borrow and lend more on the back of it. But, the fact that it is taxed only on sale, means you can arrange that sale to meet your needs accordingly.

      Its not surprising then that over recent years the yield on shares has been declining, because share prices have been rising faster than the increase in dividends. As an investor you might want to have a core holding of shares that provide dividend income for the long haul, but the majority of investors and all speculators invest to obtain short term capital gains, which are far more spectacular.

    5. Boffy, I wasn't providing a definiton of "yield". What I was referring to was the year-on-year growth of dividends for two companies (Apple and MS) relative to share price - i.e. the improvement in the yield as dividends grow at a faster rate than the share price - though I accept (now I look at it again) that my wording was ambiguous.

      I'm aware of the merits and mechanics of share-buybacks and why capital gain has been more popular than dividend growth over the last 20 years, but - again - my point was not about a general preference for one over the other across the stock market as a whole but the observation that two specific tech companies (MS and Apple) have started paying dividends.

      Once a company starts to pay a dividend, it is difficult (though not impossible) to stop or suspend payments in the future. It is therefore highly significant that MS and Apple have started to do so, rather than ploughing cash into share buybacks alone. Equally significant is that they are pursuing a "progressive" dividend policy, which means they expect future payments to increase at least in line with earnings. In the early stages, the dividend yield will advance at a faster rate than earnings per share simply because you start from zero. Though you can hit your target yield on the first dividend payment, it is prudent to approach this gradually, hence the incremental improvement year on year.

      What we are seeing with MS and Apple is a shift to reliable dividends. This suggesst a recognition that, for these two companies, the era of rapid capital gains and growth in turnover is coming to an end (hardly a shock). Committing to a reliable dividend is a good way of reinforcing the share price, in the short term, at a time when (as you rightly note) profit margins are under pressure, even though dividends must, in the long run, track profitability.

      The problem with share buybacks for Apple specifically is that most of their cash is actually foreign profits still held offshore. To buy back shares this would have to be repatriated to the US, which would make it subject to corporate tax. The alternative (which Icahn seems to be sanguine about) is to use the balance sheet to raise debt to fund the buyback. This is unpopular with the Apple board (and many other shareholders), not least because they remember when the company almost went bust in the mid-90s due to over-gearing (MS actually bailed them out). Icahn is the quintessential "corporate raider", so I would be cautious about interpreting his policy as representative of the mass of shareholders.

  6. "My broader point is that productivity growth is not a get-out-of-jail-free card, that can be treated as an alternative to population growth (and thus immigration), because it has a distorting effect on the job market (i.e. differential rates of productivity growth, e.g. manufacturing vs care),.."

    Distorting compared to what? This suggests that there is some normal pattern of the job market under Capitalism and that innovation is some kind of exogenous factor, rather than the fact described by Marx that Innovation is central to Capitalism - in fact central to human development in toto, but Capitalism is inconceivable without it.

    Your argument here also seems oddly contrary to the correct argument you have made previously criticising the view that health and other care costs must continue to rise because of an ageing population etc. In fact, one reason that there has been a lack of innovation in these areas, and why the level of care is so poor, and has failed to improve in line with the resources put into it, is because there has been a large supply of cheap labour to be employed in these industries, so capital has not had to innovate, and introduce new more efficient methods of provision.

    In fact, these industries, particularly those in the state sector are very similar to the kind of rigid feudal state monopolies that Marx criticised in the Communist Manifest and elsewhere, and whose break up and shake up by the invasion of Capitalist competition and innovation he saw as a highly progressive function of Capitalism. Its an indication of just how far the Left has slipped from the ideas of Marx that instead of being the proponents of such advance and revolutionary change, they have become conservative defenders of an inefficient status quo.

    1. Boffy, I wasn't making a value judgement in using the word "distorting", merely pointing out that productivity growth has an inherent bias - i.e. rates of return on productivity-enhancing innovations differ between economic sectors, largely as a consequence of the pre-existing composition of labour versus capital.

      The irony is that if we committed to a policy based exclusively on productivity growth, then we'd be tempted to bias investment towards health and social care, and relatively neglect manufacturing. Though they are roughly equivalent in size (about 11% each of output on the widest definitions), this is because of the greater potential for productivity gains in the former.

      A low immigration / high productivity policy would (I suspect) lead to greater government direction of the economy (albeit covertly) to ensure that investment was directed to these low-hanging fruit. A pro-immigration policy, in contrast, would allow big capital more control over investment.

    2. But, I suspect that there will be a tendency for innovation in these areas of "low-hanging fruit", precisely for that reason. That's why all the talk about healthcare being unaffordable in future is bunk. Neo-Fordism as Aglietta argued 20 years ago will transfer all of those same kinds of innovation that occurred in manufacturing to services. That is what all the changes in healthcare systems being fought over today amount to. The same thing is going to happen with Education.

      The new innovations for wearable health monitoring devices etc. will completely shift the basis upon which the health industry works. The development of very high speed broadband will impact that and education provision in the way it is already doing elsewhere.

      My neighbour is a Maths Professor at the local University. He was at Cambridge with the current PM of Singapore, who is also a Mathematician. My neighbour lived and worked in Singapore for several years, and he was telling me recently that people there think we are nuts, because we are not progressing these things. They believe he says its because we elect politicians who themselves do not understand it, and who themselves are not the sharpest tools in the box.

      I don't agree with the latter point, because the real decisions tend to be made by civil servants who also went to Oxbridge or Ivy League Universities. But, a look at how much is being wasted on HS2, and the minimal objectives for high speed broadband does lead me to think they have a point on the first argument.

    3. I agree the claim that the NHS will become unafforable is bunk, and also for the same reason, namely that technology has the potential to dramatically transform health care (and education), which is why private capital is so keen to get in now.

      I think your neighbour is spot on, but I'd suggest the problem with our politicians is not that they are thick but that they despise practical intelligence. The "two cultures" problem still applies, but it is less about the disciplinary dichotomy of C P Snow and more about class.

      A lot of my comments above have been informed by my own experience. I spent 25 years in IT, ending up as a director of a multinational high-tech recruitment company (so I'm very familiar with the jobs market and the upper end of labour migration), and am currently doing occasional consultancy for an Old Street startup (so I really do know the going rate around Silicon Roundabout).

      During the mid-00s, we floated the business, which meant spending a lot of time with City analysts and bankers. They were invariably public schoolboys (the oiks are confined to trading) who made a fetish of their technical ignorance. It isn't that they hate or fear technology, they just see it as beneath them. They really do believe that they were born to rule.