So how are we going to get out of this recession thing, then? If we just cut interest rates to zero and crank up the printing presses, will everything return to being fine and dandy? Well, possibly, although I have to say that I personally severely doubt it. Such alarmingly simplistic Keynesian policies might help us along the …
Buy this book!
That is all.
Alternative Energy production
Imagine a perpetual motion machine entirely operated by merchant bankers: a turbine wheel with spokes radiating out from a central point, the spokes at belly height. The bankers are placed behind the spokes, their (ample) bellies both powering the motion of the turbine and providing the chemical energy for the continuous movement. They are blinkered so cannot see behind them. Their motivation: each spoke has a vertical wire attached which wafts high denomination bank notes enticingly just in front of their blinkered face: they reach for the notes, and these are snatched away by the motion, thus they continue to turn the wheel.
It could be marketed as a free gym for those with the biggest credit crunch hangover. As their bellies decrease in girth, the amount of money increases - the motivation could thus be improved via an element of competition - they could boast to the others in their post-energy-generation "health club" about the size of the wad they are chasing.
If businesses weren't trying to reduce wages, why did they all complain so bitterly against the minimum wage? In times of nearly full employment, surely we should have seen Tesco, ASDA, Woolies etc. offering higher and higher wages to their work force. We didn't. Whenever I went in to a packed store with only one till open, I was told that "We can't get the staff." Try paying more than £5.73ph and watch more staff roll up.
One of the reasons that the classical capitalist economy is collapsing is because of the reduction in scarcity. Food and housing are the only things which seem limited in this world. Anything manufactured can be made for pennies in sweatshops in the Far-East, everything else is digital. It doesn't fit in to the capitalist mindset that CTRL-C CTRL+V is the new distribution channel.
This may well be nonsense - I haven't woken up yet...
"This was going to happen because the capitalists would gang up on the poor and deliberately reduce wages so that capital could exploit them more: lower wages and higher profits were the aim. Looking around our world we can see that this obviously didn’t happen, the British working classes might not be all that joyful but they’re not immiserated."
Scuse me but you're looking in the wrong place. The British working classes are pretty high on the global ladder and aren't 'the poor'. No, not by a long way.
If you want proof that capitalists DID gang up on the poor and are continuing to do so then look no further than sweat-shops. Of course, strip-mining 3rd world countries for massive profits while paying them a pittance falls into this category too. As do certain oil deals - I'm sure you know which ones.
The real reason that the economy collapsed is entirely down to economists. They tell us that it's their job to manage the economy. They take massive bonuses when they get it right and then try to pass the blame when they don't. You can't have it both ways.
ps. Terence Eden - you're absolutely right too.
RE: Terence Eden
Your example applies only to unskilled labour, of which there is still an excess, especially as supermarkets can tap into part-time workers such as housewifes who traditionally do not expect high wages. In other areas where education is required (such as computing), wages have risen as competing capitalist companies have had to compete for a finite resource - educated (skilled) workers. Had you looked further into your example and considered the next level on the ladder - supermarket management - you would have found their wages have risen as supermarkets have had to offer more to attract the grade of employee they require to tell you they haven't got enough till girls.
My solution for unemployed merchant self-abusers would be to send them all to the US to fly our RAF Predator drones. These guys are used to staring at screens for hours and then pressing a button when they judge the moment to be right, it shouldn't be beyond their abilities to teach them to remotely fly a Predator, and we can pay them in lapdances (quite cheap in Vegas, or so I'm told). Then, if we can make a STOVL Predator, we can get rid of the need for any Fleet Air Arm and just fly Preds off the new carriers with the bonus of seriously p*ssing off Lewis Page!
Stack them along the coast
...as sea defences - at least that way they'll be protecting everyone elses' financial interests for a change !
"When the resources currently not being used are indeed being used then we won’t have unused resources"
Is it really that easy to get jobs with The Business and The Adam Smith Institute?
...and if that is the definition of a recession then explain this: why are most of earth's resources not being used? What I mean is that they've never been used. Ever.
Also, what is it that is driving us to use some resources to the point that they're about to run out and not to use others at all?
People can and will blether on about economics for days but there are no rules, laws or hypotheses which provide a way to make accurate, repeatable tests and predictions.
All this seems to me to leave it in exactly the same position as tarot, homeopathy or palmistry...
@Terence Eden - yes, it is nonsense. The 2.5 million immigrants that arrived since 1997 acted as a wage depressor and kept wages low. There was never full employment, the government simply shoved a million people off unemployment and on to incapacity benefit to make it look like there was.
There are many countries in the world who have, as yet, no banking sector to speak of. Perhaps they could be the next stage of the rebuilding of countries like Iraq and Afghanistan, a "banker surge" to get the finances flowing. Perhaps by introducing working financial markets they could start to altogether recreate failed states such as Somalia and Liberia.
Of course some, perhaps many, of these brave souls we conscript and send against their will into the most dangerous places on earth are likely to be shot, or blown up or become casualties of the failed infrastructure that leaves little food, water and medicine in these stricken locations. We must be strong in the face of such cruelty, accept their martyrdom for the noble sacrifice to free market principles that it is and keep sending more bankers into the line of fire in the certain knowledge that eventually the Capitalism will prevail and the world will be saved.
Allotmentize the golfcourses
And see if the merchants of death can learn to be subsistence farmers and enjoy it.
i like the gym idea
but what do you do when there are thin i think we should just shoot them (middle/upper management bankers that is this way we employ ore to make bullets and reduce rescources cause these less bankers in the world (good thing)
(ok i'm a little bitter the house market tanked while i was appling for a mortgage and be the time the valueation came around the valued the house 30 grand less then it had been worth 3 months before when it had been valued by the current owners so the bank declined to lend me the money )
grrrrrr f%^k it lets line up advertising execs up with the bankers and then shoot them both.
Hmmm, too many to employ now
Not only do we have a load of bankers to employ but a few thousand retail staff as well now (no doubt that will rise as well as more high street stores go to the wall).
I reckon our rule of thumb should be if you haven't found work within a year your instantly signed up and shipped off to the armed forces, let's face it, to be a decent human being nowdays you really do need to contribute something to society, this solves that problem, plus I'd be a lot happier that my taxes were paying benefits to useful people instead of lazy scum.
1 - Money is not an absolute, it is a notional thing usually revolting around printed paper or pressed metals. (accepting dosh as an abstract reality undermines its premise as a notional object)
2 - bankers and hence financial sector is a much over valued sector and equivalently overpaid to boot. It is only notional and as recent events show "values can go down as well as up or even disappear altogether"
3 - should the finance sector wish to relocate where will it go? China? (most senior managers would have been lined up against a bullet riddled wall by now). Africa? (yeah! Manifestation of notional objects require rule of law (provided it benefits the finance sector that is) and rule of law in Africa is not quite deemed through the courts of law?)
Middle East? Far East? South America?
Uh-huh. Love em or hate em - senior managers in the finance sector are stuck in north America and Europe and they should be doing far, far more than undermining the 'democracy' (another notional object?) that they seem so ready and willing to do.
Either by farming Kudza or similiar on land unsuitable for food crops, or by other, more direct methods.
How many miles can you get per hedge fund manager?
Hmmm, now consider this
The new style £20 (20 GBP) note in my hand bears a signature of one Andrew Bailey (well, it looks like that) Chief Cashier of the Bank of England.
It also bears a circular reference in the form of a promise signed by above named person and on behalf of the Governor and Company of the aforementioned bank to pay the bearer on demand 20 pound.
It appears that all a £20 note is a note to get other notes or coins to the value of £20 whatever a £ may be.
Might want to start off correctly...
Interesting enough a read but you might want to start off your article using the correct terminology.
'cut interest rates to zero and crank up the printing presses' is NOT 'alarmingly simplistic Keynesian policies'.
You get it right later: Keynesian policies would indeed encompass 'engineering a fiscal boost'. Just rather dampening to see such a glaring error in the opening line.
All those maths Ph.D.s....
Let's remember who all those bankers are: they're people who did their Ph.D. in maths or theoretical physics or something like that, and then noticed that they could earn ten times as much in the City than they could anywhere else. So that's where they ended up. There's a very good chance that their skills will easily transfer back to jobs in science & engineering.
Pull vs Push
Real growth is a pull model, people take risks, invent new things, new markets open, money supply grows as the economy grows.
Fake growth is a push model, governments shove money in, that flows into inflating some asset or other, that assets (tulip bulbs, property, credit derivatives, famous paintings etc.) simply become overpriced and collapse back since all that sustains them is faith in their future value. US has had endless 'fiscal stimulus' packages and they're the cause of these ever increasing bubbles, all fake growth.
I don't think Browns fiscal stimulus package will work, but I don't think it's supposed to. I think it's simply to create a little bubble to float him till the next election around Jun/July (troops will be coming home then, and leave it any later and you risk the inflation hitting). I think it's more about holding onto power at all costs.
Also look at what the Fed is doing to the US. It will soon guarantee car dealer loans (the loans car dealers take out to place the cars on their lot). Those cars aren't selling and the dealers are going out of business, the Fed will simply pump in loans, the dealers know the cars can't sell and the loans cannot be repaid, they'll extract the money in wages & fees and leave the Fed with the bankrupt asset and a lot of unsold cars.
Then the Fed will dump those cars on the market at knockdown prices, because those loans back up the US$ it has no choice but to extract whatever it can to protect the $. They will dump the cars on the market at any price, put any profitable dealers out of business with these discount cars and discount car dealerships and do more damage than good.
You cannot make tulip bulbs cost a million dollars once people lose faith in their value, no matter how much money you pump into tulip bulb dealerships.
re: Hmmm, now consider this
well, historically, you would have been able to go to the Bank of England, hand them your score, and they'd exchange it for the correct amount of gold and the current rate.
however, these days, all they will do is probably laugh at you, but assuming you could convince them to exchange it for something, you'd probably just get an ayrton and a couple of deep sea divers.
partly this is problem with finance these days. money (i.e. notes) were only ever meant to represent wealth, they were bearer bonds or promisary notes that were backed by physical valuables and you had a right to realise them into their underlying value. but these days, the notes themselves are the wealth, which is why it's so easy to have so much debt. if you equated your monthly paycheck to a small handful of gold, you'd appreciate it more, and particularly appreciate how insignificant it is to the huge mountain of gold that represents the 5x mortgage that you need to repay, or the house-sized slab of gold that your credit card bills equate to
returning to the question posed by the article - what to do with finance middle-management?
i don't think there is an answer. these are not a resource - a resource is something that can be used in a useful and productive way. in my experience, middle-management does little but complain that you haven't done enough work, while refusing to believe that the reason why is because all your time was taking up generating weekly reports and timesheets and progress reports and milestone-target reports etc etc
the best use for them would be to turn them all into a fossil fuel replacement to keep our cars going until honda's hydrogen fuel cell reaches mass production
Wages, unions and all that.
At the time of the industrial revolution, there was no shortage of workers. They weren't being enticed into the new industrial towns and cities from an impoverished countryside by competitive wages, they were displaced from the countryside by the Enclosures Act and later the mechanisation of agriculture. The factory owners might have been in competition with each other, but they were all agreed that they wanted to pay as little as possible for everything (including labour) and since there were rarely more vacancies than there were unemployed workers, the employers could set wages as they wished. True, there were highly skilled posts, but these were less of a concern of factory owners. Industrialisation was all about finding the jobs that could be deskilled and mechanised, making a machine to do the job and then sacking the artisan and hiring an unskilled worker to work the machine. There were a few employers who did pay higher wages to unskilled workers, but they tended to be benevolent idealists. The only thing that has consistently made wages rise is the ability of a workforce to organise, withdraw their labour, and prevent the factory owner from acquiring a new workforce. Say what you like about the labour unions (they are far from faultless), but it was the factory owners who struck the first blows by paying low wages, trying to control their workers' lives, sacking them when they complained, and trying to criminalize them when they organised. Both sides of this were able to band together to fight what they perceived as a common enemy.
On the oft-cited subject of competition, while there are sectors where real competition exists between companies, this is a lot less widespread than capitalist pundits would have you believe. In most established markets, the producers' market shares are fairly stable, and all the producers plan (depend, even) on this remaining so. An example that has appeared in The Register on many an occasion is LCD screens. While the boys in the backrooms are researching like crazy to improve everything about them, and the marketing boys are busily plugging away trying to improve their market share, they still can't produce more units than their existing fabs can, or sell more units than the market is prepared to buy, or afford to store much dead stock or let their sales channels run too dry. When supply faltered, there were no competitors leaping out of the woodwork to fill the gap - instead, prices rose and LCD monitors became harder to obtain. Simply put, financial and market realities prevent unfettered competition or rapid changes in market share, no matter how the products perform.
If anyone followed Peter Drucker, he analyzed things quite logically 20 years ago, and came to the conclusion that the "financial industry" was ludicrously oversupplied, and not possibly a growth business. The bankers fooled us a while with developing a variety of scams, making planners in places like NY, and London think that the "financial sector" was a growth business after all. I figure let those bankers do some not for profit work, and get an idea what the word "service" means, financial or otherwise. Once they figure that out, they might get a handle on how to add value, instead of rip off the system, and from added value, they might develop some useful functions for their talents.
The problem is that we have so few compared with those on the trading floor. All we've done is shuffle money around since the 80's so that nobody knows the real value of what we own. Our governments know deep down that our economics system is built on lies but they won't say anything because they know our pack of cards is going to come crashing down.
Inflating your way out of debt.
Everyone with debt in this country is better off if the govt. fire up the printing presses. It has a two-fold impact on the govt. as the national debt is less in terms of goods and services and all the mortgages it now owns will be less likely to default as inflation will also keep house prices steady. The pensioners and importers would suffer enormously though.
Or the west could simply say to China "we're not paying you any of the trillions of dollars we owe you so there!". And then try to win the war.
Germany had a similar problem in the 1930's and they went on a massive public spending spree building infrastructure (Glasgow to London in 2.5 hours by train would be nice) unfortunately they also had an idea what to do with unused resources...
And why not?
Send them to the salt mines in Derbyshire, that's what I say.
The fact of the matter is that economics is not a science. Economies are mathematically chaotic systems like the weather. Politicians and economists are either delusional or con-artists when they claim to predict or influence the economic future.
Wait for the announcement "This morning a woman rang in to say she had heard that there was a recession coming. Don't worry, there isn't."
A new World economy
With the move to international carbon trading schemes surely there is a massive opportunity to create complicated markets based on this new economy?
Who better to sieze this than the hoardes of out-of-work bankers.
What derivitives, options and futures could be spun out of countries and companies having to trade their carbon emissions to stay profitable?
How long before an "un-employed merchant banker" becomes a "former merchant banker"? I heard timeframes of a year bandied about - what is the general opinion on timeframes at which "unemployed" becomes "unemployable?" And at which point does the need to retrain kick in?
And if these guys were halfway competent, they would be higher up on the totem pole and not first for the chop when the recession came, so can we really put them to use elsewhere? Don't forget, even finance workers can be "drones" while the senior manager "queens" cock it up and sail on through regardless.
Perhaps bin a few hundred govt computers and make a few thousand of them do long-division? Stick them in the tax department, or in our schools? Give them each 10K and tell them their knowledge of the money markets should allow them to trade their way out? Apprentice them to a struggling business and pay them in share dividends? Send them to Poland (now it is paying better wages)?
The Problem with Bankers...
The *problem* is that there is no use for bankers in finance any longer, and bankers are far less valuable in their next-best uses, which would be (in descending order) math teachers, biodiesel feedstock, or second-rate physicists. Entrepeneurs may find something useful for young math wonks (just entering university) to do, but middle-aged quants will resist paying the cost of retraining, and then taking a starting wage for their new career. Sucks for them.
Entrepeneurial inspiration occurs at about a constant rate. It won't get us out of the recession unless we get a great influx of new entrepeneurs. And no, the risk-averse (talking about personal bet-your-house-and-retirement risk here) math geeks who gravitated to the easy money of finance cannot be retreaded into entrepeneurs.
Credit was unsustainably easy to get. The last 5-7 (or 20) years of economic growth was built on this shaky foundation of too-easy credit. Now that we all have to live within our means again, we're having to take back all that false growth. Real growth won't begin again until the economy has been marked to the market, which process may take several years. Inflation is one way to do this. A credit freeze, deflation, and high unemployment is another. Pick your poison.
Waiting for my layoff notice...
Support the Arts
I suggest drafting them into Muppaphone orchestras:
There isn't a recession coming, that implies that it hasn't already arrived...
Luxury vacation testers
1. Luxury vacation testers (aka travel writers).
2. Chauffeurs specializing in 2-seat sports cars.
3. Rent-a-birthday-boy, for people who want to hold birthday parties but don't have a friend whose birthday it is to receive the presents.
4. Deity. People could give them vast sums of money in return for imagined benefits (similar to their previous careers).
5. Heir/heiress/royal. The could be employed receiving great sums of money for the arduous work of having been born.
6. Cattle feed.
Put them to work as backing for currency
A £20 note should be redeemable for £20 of merchant bank executive.
The answer is bleedin' obvious ...
Will they blend?
@ AC 13:41 et al
Even real growth is synthesized growth? (It's all notional m8 - no matter what anyone tells you). The only difference between perceived push-pull models is who is doing the pushing and who is doing the pulling. Ultimately the difference is that "market forces" are less/more publicly acceptable according to public perception of the time (more or less dictated by media anyway?)
Push-pull are vector based models and as with vectors it really depends upon the initial frame of reference based upon a simplifying assumption that one direction is positive and the opposite is negative.
Like someone said: it is all relative and totally notional. The value of money or currency cannot be tied in to a universal constant such as the speed of light?
Paris may be a wonderful model but does she model Paris, France, Paris the person or an intrinsic perception of one's own imagination. (Some may be far sadder than others :) )
@ AC 16:53
My own view is that there is a common misconception that deregulation means irresponsibility is acceptable. In fact the constitutional papers of most organizations (including those in finance sector) clearly define what it should do. I further posit that the personal assets of governors and directors (as well as organizational assets, chattels and belongings) of suspected organizations should be seized, frozen and impounded pending investigations.
Principle: deregulation does not equal acceptance and justification of irresponsibilities.
I sometimes wonder if a single nation state might be behind all these troubles and further wonder what that nation state may be and where it is located.
101 uses for a former merchant banker
#1: Soylent Green
You know it makes sense!
Stack them in battery cages, find a cheap way to maintain their belly-fat, then use regular liposuction to reclaim the grease for conversion to auto-fuel or gasify it for cooking and heating.
A New Sport: Merchant Banker Hunting
I haven't quite fine tuned the rules yet, but basically:
1. Get your Merchant Banker, Wealth Fund Managers and anyone from the Rothschilds on down...
2. Get an angry mob of people that have had their homes repossessed, investments destroyed, jobs lossed.
3. A nice arena that any gladiator would be happy to participate in.
4. Punters pay £20/hr to watch, £40/hr to participate in the mob
5. In the event that the local supply of Merchant Bankers dries up, we can start importing foreigners - but that will raise entry prices.
6. Special events (i.e. Mr Madoff, Alan Greespan et.al) will cost £40/hr to watch and £80/hr to participate. It is assumed the bigger the bastard, the longer the entertainment will be drawn out - so an event like this will last for many hours, maybe days...
7. As with any Boom-Bust economy, as the Merchant Bankers and Wealth Fund Managers become scarcer, the costs of entry will become higher until, finally, no other Merchants will remain... Then we can start on the Politicians...
Please use the correct collective noun...
...for bankers, i.e. "wunch" as in:-
A wunch of bankers.
What to do with them, cement them into the footpath (sidewalk to 'merkins) so that people have somewhere to park their bicycles.
Oh, for those of you wondering what you can get for £20 note, about €25 in a week or two.
Hmmm, which icon to use...
Finally, it seems that I've found somebody that agrees with me!
Nice one, Tim! OK, the point I've been making about entrepreneurs vs. beancounters has been isolated to certain media, for example television, but the whole point is still valid.
Our whole society is being run by beancounters, people who are supposed to check the accounts, not decide on which route to take next. As a result, nobody takes risks anymore. In the television example, it means that we now have mountains of imports, repeats and poorly made dross, all of which costs far less than making new product for ourselves, never mind the fact that the risk, if it pays off, produces far more wealth, creatively speaking, than just treading water with the same old tired schedule.
The same can be said for the economy. Just plugging along with the same tired old policies, with the beancounters at the helm unable to take risks (because they are unwilling or unable to) plunges us into stagnation. Keep the wages low, keep the spending high and we'll be alright? Then what? That's what we have, and the economy is falling apart because of it. Farming our technology, our skills and whatever other assets we had out to other countries doesn't cut it because it just leaves people here in even worse state. In this respect, Maggie and her monetarists were just plain naive with all this "level playing field" nonsense; since when do other countries play fair? And there's old Brown Trousers, making all the same mistakes again, but that isn't to be wondered at. After all, he *is* a beancounter!
Presumably, in a recession, the cost of assets falls and therefore the barriers to entry for entrepreneurs are reduced. In recent years, the horrendous bubbles in asset prices have meant it required huge amounts of capital to start a business: in the near future it might be easier, once the credit flows ease a little.
Shortage of care home workers
Why not make them do something useful, they can server the people who's pensions they plundered to pay for the Porsche. Maybe they can wipe the stuff off peoples bums not drop us in it.
Sad thing is how similar the latest screw up is like the insurance situation in the eighties, they parcelled up bad risk disguised as good and resold it, then the great storm & Asbestosis claims started coming in and it was totally unexpected. How did we get out of that? Oh yes the premiums went up.
Prosecute a few senior finance people to 'encourage the others' I believe one in ten is the most effective number.
Paris because even she can see when a Wunch of Bankers are coming.
To answer the question posed in the first post, "Does anything eat bankers?", the answer is "Yes! I will!"
I just love the move that one of the large Swiss Investment Banks made in paying this year's bonus to their "Bankers". The bonus is paid in the worthless financial instruments that these kiddies were selling. If they can turn round the market they get their money.
Personally I've used Gordon Brown's advice to guide my investments. When he was selling our gold I was buying some ... et al.
No real question...
Q: "What do you call 1000 investment bankers heading to the floor of the Atlantic in concrete boots ?"
Yeah, you all know this one...mine's the one with the Ready-Mix receipt in the pocket!
@AC - 18:04
>Presumably, in a recession, the cost of assets falls and therefore the barriers to entry for entrepreneurs are reduced.
I think that's generally correct, but, unfortunately, in the UK, we have a government that is intent on taxing us into the ground (mostly to pay for stuff we don't want like overwhelming bureaucracy, id cards, surveillance databases etc).
They're struggling to screw much more out of the poor, without being too obvious (they seemed quite surprised when they got caught increasing income tax by abolishing the 10% rate), so they're now going after anyone else they can find, including the entrepreneurs. Ask any small business on the fixed VAT scheme about the reduction in VAT for example.
Overall a nice little article. Modern economics has hinged around applying theoretical models to real situations, and then ignoring the problems caused when the policies fail to work - the guys from the IMF are a perfect example.
I must just take issue with one of Tim's points (and yes, unforunately it is to do with Marxism...).
So, according to Tim modern apaitalism does not "immiserate" the workers, indeed it's moderns capitalism/capitalists that ensure we have a '1.8-2 per cent increase in the average per capita income each year'. But whn I left the UK I thought that the retail prices index was measuring effective infation at around 5%. Which surely means that each year your actual buying power reduces by around 3%. Innit?
Maybe I've failed to grasp something here. And as my comments aimed at a criticism of Marxist theory I'm damn sure that I'll be set to rights very, very quickly.
I'm not a defender of Marx, much...
Paris...should I turn out to be grasping be shitty end of the stick.
My economic theory (well, everyone has one it seems)
The banking business is very cyclical. Stay in it for many years and, statistically speaking, you won't make a penny. Get in and out at the right time and you make a killing. I'm sure all bankers know this and try to do just that (the ones who've lost money recently just timed it wrong).
So the money to finance the killing has to come from somewhere and right now we're in the process of sorting out who's going to pay for the last party. Guess what? It'll be taxpayers and savers.
So the problem's already solved, really. We just have to let a bit of time pass while money flows out of everyone's bank accounts at a slow enough rate for them not to notice too much, but for a long enough time to fill in the big hole the bankers have dug.
Look on it as like bank charges, but deferred ;-)
The time it takes to recover is determined by how fast they can drain our money without us complaining too much. Expect lots of positive thoughts from the government over the next year; it helps you not notice how poor you've become.
The penguin. Because they make an excellent currency and aren't taxed (yet). You just need to find someone who'll accept them in payment.
line them up in hight order and use the short ones as comedy drinks holders
An Adam Smith contributor?
You might as well have got Mantanmoreland to write an objective piece. Stick to what you know - IT
You won't get any rebuttal from me - its well documented that real wage increases (ie wage increases minus inflation) have been much lower over the last 10 years than the previous 30, so Tim is being disingenuous with his figure of 1.8-2%. This has been to a variety of factors - migration, changes in labour laws, women working amongst others (mentioned by previous posters). According to the Office for National Statistics real wages actually fell into negative territory in 2007/8 thanks to the increase in inflation to 4-5%.
This is important because as Bill Bonner and Dr Kurt Richebacher have pointed out the low levels of real wage increases in the US and UK couldn't sustain the level of consumption taking place. In order to carry on consuming (once most households already had 2 or more earners) personal debt ballooned to the levels we have now - which is as it turns out unsustainable.
This leaves the more interesting (quasi-Marxist) question, than what to do with merchant bankers (who will probably carry on being merchant bankers in reality). How does the UK grow its consumer-based economy at the long-term trend of 2-2.5% when wages are growing at 1.5% or less, and there's no more credit?
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