back to article So, was it really the Commies that caused the early 20th Century inequality collapse?

What with both the Corbynistas and Sandersistas on their various sides of the pond bringing back into the political mainstream the somewhat discredited ideas of state directed economies and socialism lite, perhaps it's time to have a look at one of the arguments used to bolster those ideas. Which is that post World War Two …

  1. Nick Kew Silver badge
    Pint

    Post-war 90/10 story

    We in technology talk of 90/10 scenarios. The first 90% of a project takes 10% of the effort, and vice versa. Post-1945 was a 90% time: there was lots of low-hanging fruit, not least because we'd bombed each other halfway back to the middle ages. A big chunk of growth from there was just a matter of replacing the (infrastructure) growth of about two preceding centuries, with the addition of electricity. Also a fertile time for individual careers, as "dead mens shoes" opportunities helped with corporate (and other institutional) career ladders.

    Does the fact you never mention that mean that we've put the Ballsian stimulus behind us? The one they put into practice in 2004/5 to ... um ... see us through an economic slowdown, and called for again when Osbourne pretended to give us austerity? I seem to recollect Balls in particular trying to suggest that more government spending could lead to growth by analogy to post-1945.

    [edit to add] Oooh, first reply to a Worstall article. This calls for a pint!

    1. J.G.Harston Silver badge

      Re: Post-war 90/10 story

      Have an upvote. All through the article I was thinking: the post-WW2 boom was because we'd all bombed ourselves halfway into the stone age and had to rebuild all the infrastructure. People forget that 70% of 1945-1965 was a under a Conservative government. Hardly hard-on socialism.

      1. DougS Silver badge

        Blowing things up

        Tim may downplay the "blowing things up" economic growth during the war - after all if we produce billions in bombs and other military infrastructure that is either destroyed during the war or has greatly reduced utility after the war, that part of GDP is simply a mirage.

        However, all the civil infrastructure that is damaged or destroyed and needs to be replaced, while having a bit of the 'broken windows fallacy' about it, still needed replacement after the war. So you had much of Europe needing to rebuild that infrastructure, and less damaged countries providing the industrial products to aid it. Thus the growth in Europe fixing/rebuilding things, and the growth in the US supplying a lot of the manufactured goods to help that effort.

        While the US didn't have the damage Europe did from the war, consumer spending had slowed greatly, to only the necessities. Factories that had produced cars, radios, and whatever had converted to producing tanks, military radios and so on. The population had been buying war bonds with their surplus income instead of spending it on that stuff. Once the factories went back to consumer products, there was a lot of pent up demand and a lot of savings to spend on it. Though this probably only accounts until the early to mid 50s in the US.

      2. WalterAlter
        Pint

        Re: Post-war 90/10 story

        You said hard-on, huh huh...huh huh...

      3. Anonymous Coward
        Anonymous Coward

        Re: Post-war 90/10 story

        Conservatives in the period 1945-1965 were pinkish tinged. And Heath's lot were outright Euro-Communists. Ask any Thatcherite stooge.

    2. Charles Manning

      Re: Post-war 90/10 story

      The idea that fixing up stuff creates wealth is known as Broken Window Fallacy. Sure a lot of spending goes on, but it does not create value and therefore does not create wealth.

      It does create wealth for some players though. USA made a mint (from both sides) selling war goods during the war. They were not bombed to hell, so when their men came back from war they were immediately able to become highly productive - supplying both local demands suppressed by the war economy as well as supplying other countries that were recovering. Since they sold a lot of stuff on tick, that gave them leverage to sell their own goods.

      This also gave USA their ability to flex their imperial muscle. They were the only nation that was not hammered and they had all this money to throw around.

      But was there really a huge boom in Europe after the war? Not so sure. I have never been to Europe myself, I've spoken to people from both sides of the conflict. The 1950s were a hard time for England, Germany, France and Italy at least. All these countries had post-war rationing. UK only stopped rationing in 1954 - 9 years after the end of the war.

      HTF can you say they're booming when there's rationing?

      1. Nick Kew Silver badge

        Re: Post-war 90/10 story

        Post-war reconstruction is not at all the broken window fallacy. Noone is suggesting that the war damage was a good thing. The point is that, being so very much more than just broken windows, it had reduced us to a shadow of where we should have been.

        If you're measuring economic growth from a starting point that's (for the sake of argument) half what it was just a few years earlier, then merely repairing the damage gives you 100% growth from that reduced startingpoint, which gives a major part of post-1945 growth. The broken window fallacy is only relevant if you measure from before the damage happened. And Balls's preposterous suggestion was that you can get something like that same growth from an undamaged startingpoint.

        1. Quip

          Re: Post-war 90/10 story

          " repairing the damage gives you 100% growth from that reduced startingpoint,"

          And, if at that starting-point things were not new but rather worn and outdated, demolition and reconstruction does give real growth even from a starting point before the damage occurred.

      2. Mark Dempster

        Re: Post-war 90/10 story

        You're forgetting that a HUGE amount of money was spent straight after the war (by a Labour government) on nationalising industries, creating the welfare state, setting up the NHS, etc. And while none of these systems is perfect, you won't find a better health & welfare system that's free at the point of access anywhere in the world.

    3. LucreLout Silver badge

      Re: Post-war 90/10 story

      Also a fertile time for individual careers, as "dead mens shoes" opportunities helped with corporate (and other institutional) career ladders.

      Quite. Willets book, The Pinch, also makes an interesting point about generational demographics and the wage pyramid. Essentially, due to the boomers being a large generation and Gen X being a small one, the wage pyramid should have inverted such that the young would have earned better pay than their parents due to competition for their time, similar to the post war dead shoe gig.

      Mass immigration and globalisation were brought about as a means to prevent that inversion, and continue to ensure that while national GDP rises ever higher, GDP per capita does not. That is either a good or bad thing depending on what you earn/own/and any emotive or philosophical preferences you may hold.

    4. Naselus Silver badge

      Re: Post-war 90/10 story

      "Post-1945 was a 90% time: there was lots of low-hanging fruit, not least because we'd bombed each other halfway back to the middle ages."

      Except that story doesn't actually match the statistical evidence. The world economy grew more between 1951 and 1970 than it did between 1800 and 1951. And again between 1971 and 1980. 'Low-hanging fruit' and 90/10 scenarios don't come close to explaining that.

      It's also worth noting that, while Tim chooses to ignore economic growth that displeases him (so let's ignore the fact that building all those bombs is what put America back to work in the '40s), that economic growth was actually very important - a classic Keynesian stimulus which took the US from a depression to a sustained, lasting boom, through big-government government tax-and-spend. Which is exactly what he would like us to forget.

      1. Peter2 Silver badge

        Re: Post-war 90/10 story

        "Tim chooses to ignore economic growth that displeases him (so let's ignore the fact that building all those bombs is what put America back to work in the '40s), that economic growth was actually very important - a classic Keynesian stimulus which took the US from a depression to a sustained, lasting boom, through big-government government tax-and-spend. "

        Except that much of the military equipment produced in the US was then sold to Britain and Russia in cash (ie gold, diamonds etc) deals, and only went to credit once said nations had completely expended all of their hard cash.

        In case your not getting my point, the taxing (and repayment) was done on different economies to the spending which somewhat invalidates it as an argument for tax + spend within the same economy?

  2. Boris the Cockroach Silver badge
    IT Angle

    The growth

    post 1945 came as a result of 2 things.

    1. the huge leap in technology due to ww2 and the return of an upskilled labour force

    2. More importantly, many middle and senior managers had been conscripted into the armed services and felt akin to the men they now employed because they had faced the same risks their employees had.

    Its very hard not to care about Joe bloggs the employee after he'd been Flt. Sgt J. Bloggs the tail gunner and had saved your life from a FW190 attack.

    Plus you had capital controls to stop vast sums of money being sent out of your economy unless the government approved it.

    1. graeme leggett Silver badge

      Re: The growth

      I'll add to that the "ability" of the war to produce managers of men and material (materiel) and the recognition of their merit.

      Their is also a supply of resources produced at the nation's expense made available at discount.

      Eg post war air travel in ex-military DC3s (technically C47s). Aircraft designs built on work began during the war. Britain's temporary lead in jets.

      1. John Brown (no body) Silver badge

        Re: The growth

        "Eg post war air travel in ex-military DC3s (technically C47s). Aircraft designs built on work began during the war. Britain's temporary lead in jets."

        That's an almost perfect example of civilian industry built out of war. I'd go further and suggest the entire civil aviation industry was built on the back of bomber development in the 14-18 war.

    2. John Brown (no body) Silver badge

      Re: The growth

      "Plus you had capital controls to stop vast sums of money being sent out of your economy unless the government approved it."

      I'd add in Tims point of "pent up" technological change still in the "lag" period from the 30's which should have made it into the economy during the 40's but was either held back due to lack of a commercial economy/materials or being used purely for the war effort.

      I'd also add in the technological leaps that were hot-housed because of the war and the enforced efficiencies and improvements made to the entire productivity of the UK brought on by the war. Prior to that period we were still very much living on past achievements using outmoded factories and labour relations.

    3. a_yank_lurker Silver badge

      Re: The growth

      I think point 2 may be overlooked. In combat, everyone depends on each other to survive. It is very difficult to understand the bond of combat veterans and understand that many owned their lives literally to actions of a private bravely doing his job.

  3. Will 28

    Destructive growth?

    A good article Tim,

    I did like the point about making things to blow things up not being economic growth. It made me think as to whether or not the arms trade is contributing to growth or not. Is the net effect of the arms trade on the global economy a positive or negative one? On one side we have the obvious advantage that we've made something (for example a bomb), on the other hand we've got the disadvantage that it will ultimately destroy something. In between we have the potential advantages/disadvantages that our "will" is being enforced, and we perhaps get global security.

    I suppose it actually comes down to a basic question of "is it ever necessary to fight a war". Still, got me thinking, which is sometimes a good thing.

    1. Nick Kew Silver badge

      Re: Destructive growth?

      The arms trade is a big part of the UK economy. And others, but the UK is (proportionally speaking) #1 amongst big/developed nations[1]. So the end of the Cold War hit our economy harder than other Western economies. That's also why the UK and US have driven so many smaller wars (arms industry trade fairs) since 1989.

      [1] The US has three times more arms exports, but I believe their total economy is more than three times ours. Noone else comes close: the next two (France and Russia) are a small fraction of ours.

    2. John 209
      Meh

      Re: Destructive growth?

      For better or worse, we measure economic health and growth with GDP, but that only takes into account current expenditures - and makes no place for existing asset evaluation, its increase or decrease. That, in turn, makes any expenditure a gain, and lack of expenditure a loss, so that a natural disaster, or artificial one such as war, that destroys assets but elicits recovery effort, is a gain or growth in the economy even though expensive assets, including infrastructure, may have been wiped out in the process. That is, the economic base may be substantially reduced, but if that elicits a recovery effort involving expenditures, the reduction goes unaccounted in GDP, and only the ongoing recovery expenditures are recorded. One might argue that a substantially reduced base would be indirectly reflected in a lower GDP, by taking away the potential for expenditure by all, but if the recovery effort is sufficiently robust, it won't count for much. There are other national accounting statistics that would reflect the asset losses, but they don't get nearly the attention or the identification with "economic health", "growth", "stagnation", or "decline", as GDP.

  4. Anonymous Coward
    Anonymous Coward

    A bit simplistic

    "the somewhat discredited ideas of state directed economies and socialism lite"

    To a degree this is done by cherrypicking. Much of Chinese industry and infrastructure is in fact owned by and run by the Communist Party, so we tell ourselves that China is "really" capitalist. Parts of India too have had successful socialist administrations. And capitalism has had its huge failures, WW1 and what followed being an example.

    1. Richard 12 Silver badge

      Re: A bit simplistic

      I'd argue that all economic theories are simplistic.

      The socialist ones are possibly the worst, as they assume (almost) everyone is happy to be a "worker bee".

      The capitalist ones are possibly the worst, as they assume (almost) everyone cares the most about accumulation of wealth.

      Reality is neither of these things.

      1. LucreLout Silver badge

        Re: A bit simplistic

        @Richard12

        The socialist ones are possibly the worst, as they assume (almost) everyone is happy to be a "worker bee".

        The capitalist ones are possibly the worst, as they assume (almost) everyone cares the most about accumulation of wealth.

        The most important differentiator in what you have said is that socialism pretty much forces everyone to be a worker bee and to accept less. The less comes from the fact that a hard working person will slack off if all he is to earn is the rate of the slacker, thus everyone produces less on average.

        Capitalism does not demand that anyone give a shit about accumulated wealth, but allows those that do to accumulate it. Everyones a winner, in that sense.

    2. Tim Worstal

      Re: A bit simplistic

      I generally argue that capitalism v socialism isn't the important part. It's markets v not markets that are. And yes, the SOEs are a large part of the Chinese economy and they are state owned enterprises. But they're also competing in what is possibly the most vicious free market on the planet currently.

      1. Anonymous Coward
        Anonymous Coward

        Re: A bit simplistic

        "I generally argue that capitalism v socialism isn't the important part. It's markets v not markets that are."

        On this I am in complete agreement.

        The controlled economies of e.g. Babylon depended on central warehouses, a scribe army, and a lot of planning. They led to cultural and economic sterility. The Greek agora led to a cultural explosion - it brought together a commercial market and access to information, since news and learning was also traded there. And the WWW is basically a world wide agora.

        I do think that WW2 gave a huge shakeup to power structures and reduced state control so that technical discoveries could be exploited far more efficiently. I also wonder if the Cold War was actually a brake on this expansion - military activity in support of anti-piracy and free movement of goods can be very valuable, but much of it in the late 20th century was mere R&D willy-waggling, and the cost of Trident could imho be much better employed in surface naval capacity to deal with localised threats.

        So with TW's clarification I suspect we are singing from the same hymn sheet.

        1. Alan Brown Silver badge

          Re: A bit simplistic

          "much of it in the late 20th century was mere R&D willy-waggling"

          and into the 21st.

          It was trying to respond to the willy waggling which sank the Soviet Union, and it's the continued willy waggling which may well result in chunks of the US economy tanking - there are large parts of the country whose entire economy is geared around the war machine (North Dakota being a classic example) to the point that they would be third world countries if not part of the USA.

          "Superior" Military tacticians and planners have always planned for the next war using what worked in the last one. The problem is the enemy may not cooperate and the increasing use of asymetric warfare means that a bunch of guys with cheap weaponry and hit-n-run tactics can keep a larger bunch of guys with extremely expensive weaponry busy for a very long time until they run out of money.

          1. This post has been deleted by its author

          2. midcapwarrior

            Re: A bit simplistic

            Agriculture is the largest industry in North Dakota, although petroleum, food processing, and technology are also major industries. https://en.wikipedia.org/wiki/North_Dakota

            I must have used the wrong citation as "war machine" didn't make the list.

      2. itzman

        Re: A bit simplistic

        The model that I find most attractive is that an economy is essentially a complex dynamic system and a very non linear one at that. Any attempt to 'control' it is useless as the only way to do that is to damp down its ability to respond to almost anything, so command and control economies are OK if nothing changes, but will be inefficient in times of rapid (technological?) growth.

        Laissez faire capitalism doesn't attempt to control, it just follows.

        And that may ultimately be the least worst of all approaches. In the absence of an external moral standard, one can only judge attempts to control economies on the moral standards of those who have imposed them. That is, for example, did the application of communism result in the sort of world those that espoused its principles wanted? I would say not.

        In the UK 15 years of Labour has resulted in a less, not more, equal society.

        And there I find myself poised on the horns of a dilemma. Those that espouse the sort of Corbynist policies are all good well meaning people for the most part: They see politics as a means of expressing ideals about the nation state, and ideals about human progress that are arguably laudable.

        Those that decry them, do so on the grounds that such an idealistic approach is not only massively implausible, but, if implemented, would lead to in many cases the reverse of the 'ideal' solution.

        We have in effect a battlefield between idealism and pragmatism in terms of the political map, and that strikes at the very heart of the matter, which is I believe expressed very simply: What, in the final analysis, is the point of government at all?

        To the Left it would seem to be a moral instrument tasked with presenting a hope filled picture of human endeavour. To the pragmatic right, it is merely a necessary evil that should impinge upon the freedom of the individual only so far as to ensure some form of social stability and cohesion.

        Pragmatists are more humble: They do not presume to know what the fate of Man should be, nor seek to dictate its terms. Merely that men do not routinely slaughter each other, steal from each other, and obey the minimal set of public codes that seem reasonable to the majority.

        To me the flaw in the Left's model is that if people do not willingly follow its tenets, they insist on enforcing them, by diktat, legislation or deep moralising. In so doing they oppress the very class they claim to represent, because they 'know better' than the people themselves 'what is good for them'.

        If we, the people , do not know what is good for us, why on earth do we have a vote at all?

        And indeed, we can see that where Leftish power structures really rule, that democratic right becomes an irrelevance and a nuisance. As the standing joke goes:

        "Democracy means one man, one vote. And I am that man" (attributed to a fictitious Robert Mugabe).

        What ultimately do we expect a government to deliver in economic terms, and what ultimately is its scope?

        The Assumptive Close of the Left has been to skip over the question of whether or not it is a valid thing for a government to engage in social and economic engineering at all, to move the agenda to the exact means by which it shall do it.

        It may be time to challenge that assumption, because in times of rapid change and deep political instability and economic fragility, it is possible that government's role must needs change to simply ensure political stability at almost any price, or risk being swept aside by forces who have no intention of preserving social order, freedom or democracy, but imply using force of arms or naked economic power to dominate for the narrow interests of a very few.

        Finally, in the context of economics, the real correlation of 20th century growth has been one single fact alone. Petroleum.

        Lightweight independent machines to replace the sweat of the working man's brow (or his horse) , running on dirt cheap fuel, allowed a complete and total transformation of production and transport (and war)..

        Electricity generation followed by cost reducing the application of that fuel. The devastating combination of fossil fuel and electrical energy means that anywhere any time you have a power source to do the 'heavy lifting' at far far less cost than human energy. Toss in computer technology and robotics, and that's another layer of white collar work that simply vanishes. Add expert systems to THAT and good bye to many skilled jobs as well - how much of e.g. general practice of doctors is matching a reported set of symptoms to an internalised database of disease knowledge and producing a diagnosis and a treatment plan? How hard is it to make a driverless train or car that is safer than a human driven one?

        No, the reality of the 20th century was nothing to do with politics, or economic theory, and everything to do with the rapid exploitation of technology, especially power technology, and post WWII the IT revolution.

        Nobody intended it to happen, no one designed it on ideological grounds: It happened because it could.

        Ex of the sort of totalitarian systems that would e.g. Ban the Wheel in a hugely Luddite system that would 'restore the dignity of human labour' and keep peasants in their place forever we are stuck with a population level that can not be sustained without the application of massive amounts of energy and highly developed technology.

        All those urban Greens who dream longingly of windmills and solar panels would be dead within a week if that was all we had to rely upon.

        And that is the irony of politics. The urge to achieve idealised solutions, and the transformation of politics into a battlefield of morally inspired ideals, is ultimately the gross decadence of the West. Before you can go chasing ideals, first of all you need a society and infrastructure that actually works well enough to keep its population alive. And defend it from those who see it as nothing more than a morally decayed occupier of a bit of real estate that would be highly welcome to them.

        Economic growth is more or less a symptom that you have such a system in place. Economic growth relies on a very few things, and none of them are ideals.

        It relies on a sufficient resource base to draw upon, and sufficiently sophisticated population to understand and maintain the system that exploits those resources and just enough political authority to ensure that the fruits of that exploitation are distributed sufficiently to avoid major political instability, or, failing that, a sufficiently cynical 'peacekeeping' force that divides the world into those that shall have, and those that shall not, on pain of death.

        Economics and economic theory is almost irrelevant in that picture. As are emotional ideals.

        And the philosophy of Marxism, that drives the left, is almost utterly irrelevant in a world in which there are no human workers, only machines.

        1. Crumble

          Re: A bit simplistic

          "And the philosophy of Marxism, that drives the left, is almost utterly irrelevant in a world in which there are no human workers, only machines."

          Ever since I was a boy reading science fiction, I have struggled to see how such a world could work. How do you get the output of the machines to the people?

          The best I can come up with is, take all the money, give it to the people, they use it to buy the output of the machines. Then you have to take all the money off the owner of the machines and give it back to the people to keep the cycle going. I don't think you can dispense with money and give the goods directly to the people, how do you know which people need stuff? At least money allows the people to choose which goods to obtain.

          If we could only work out where we're headed, the path ahead would be a lot clearer!

          In Kurt Vonnegut Jr's debut novel "Player Piano", central planning allocates goods to people, who mostly work in either the army or the "reconstruction and reclamation corps". It turns out not to be a great solution (although it's an excellent novel).

          Meanwhile the Star Trek universe survives fine without money, although sadly Mr Roddenberry didn't go into sufficient detail as to how this works.

          1. Ben Bonsall

            Re: A bit simplistic

            Meanwhile the Star Trek universe survives fine without money, although sadly Mr Roddenberry didn't go into sufficient detail as to how this works.

            He did. As much free power as you need, (only Scotty never had enough,) and a way of transporting things and making things using nothing but the free energy. Your standard post-scarcity sci-fi economy.

            1. scrubber
              Alien

              Re: A bit simplistic

              "post-scarcity sci-fi economy"

              And yet the Ferengi use Latinum.

              And the Federation use Credits.

              And the Klingons use Darsek

              Since the dawn of technology every society 100 years ahead appears to be post-scarcity from the old POV, but they never actually are.

              1. LucreLout Silver badge
                Joke

                Re: A bit simplistic

                @scrubber

                And yet the Ferengi use Latinum.

                And the Federation use Credits.

                And the Klingons use Darsek

                To paraphrase some religious text or other:

                And ForEx trading spivs will ever be with you.

          2. LucreLout Silver badge

            Re: A bit simplistic

            @Crumble

            The best I can come up with is, take all the money, give it to the people, they use it to buy the output of the machines. Then you have to take all the money off the owner of the machines and give it back to the people to keep the cycle going.

            In that scenario, who generates the wealth to invest in the machines initially, and why would they do so? If there is no economic incentive to do anything then people will do nothing - pop into any Wetherspoons about now and watch the tax payer funded welfare system at work. My local one has a sign restricting those with children to two drinks maximum, which is a very sad state of affairs.

            The transition from where we are to the "Star Trek" universe you mention, assuming it comes, will be more painful than any in human history. Until the robots and the AI are truly commoditised, someone will own their output, and that person will no longer seek to pay for your output. Worse still, they will no longer seek to pay for mine!

    3. streaky Silver badge

      Re: A bit simplistic

      The problem is they're not actually discredited per se. Communist governments work like other governments; they're magnets for corruption and incompetence - this is what is actually discredited but we've known this for a long time and it's still happening if you're capitalist, communist or anarchist.

      The directed economies generally can work as long as you assume that government is capable of actually planning ahead. In a perfect system (which I'm not suggesting can actually exist for a second) there's nothing preventing a government reacting to reality and also correctly planning ahead. China didn't come out of bouts of mass starvation because it embraced capitalism (frankly, it still hasn't; it's embraced other people's capitalism) - it happened because it's directed economy was directed towards the tech sector and making enough food to feed themselves and because they allowed people to do things like buy cars.

      Their directed economy is running round the world happily swapping natural resources for infrastructure and weaponry, then eating those resources and spitting out phones and computers to the rest of us. If the UK's economy was directed it'd be way more broad-based than it is and it'd still be worth getting a job in mechanical engineering.

    4. Anonymous Coward
      Anonymous Coward

      Re: A bit simplistic

      Yes, a lot of Chinese industry is owned by the State, and that's the huge and failing part of the Chinese economy. It's a big chunk of the heavy industry and other wealth consuming parts of their economy. The growth comes from the more entrepreneurial (and market oriented and capitalistic) part of their economy.

      India, the patterns the same. They were very "socialist" and state lead development oriented, and then the moved partially out of that straight jacket and started to grow a good deal faster.

      To see the socialist ways as a genuine growth path is self-deluding at best.

      1. Alan Brown Silver badge

        Re: A bit simplistic

        "To see the socialist ways as a genuine growth path is self-deluding at best."

        It's not socialism which is the problem.

        It's bureaucracy. Governments (of whatever stripe) and civil services in particular will keep growing unless ruthlessly culled.

        Unbridled capitalism (mercantilism) has been tried and doesn't work - it leads to inefficient monopolies operated by bloated private interests.

        Communism doesn't work either - it leads to much the same thing, only it's bloated government.

        Even if you avoid both of those paths, history shows that bureaucracy will always expand unless you periodically declare open season on the civil service.

        There's a need for a middle economic path. There's nothing wrong with embracing some socialist and some capitalist principles. The "free" market is nothing of the sort, because it takes government intervention to keep it free (of distortions and monopolies), but a market free of government intervention would cease being competitive in a short period of time - history has proven that several times over.

        The hard part is keeping within reasonable limits and finding where the distortions from corruption are buried (there is _always_ corruption - even if it's just politicians avoiding alienating their voting base) in order to ensure it can't spread.

    5. CN Hill

      Re: A bit simplistic

      " And capitalism has had its huge failures, WW1 and what followed being an example."

      WW1 was a consequence of capitalism? If you say so.

      1. Fraggle850

        Re: A bit simplistic

        Yes, I thought much the same. WW1 was a family squabble at the end of the dynastic imperial period, capitalism merely capitalised on it (or got destroyed if you happened to live in Russia).

        WW2 was just the denouement of unfinished business from WW1.

  5. David Roberts Silver badge

    Correlation?

    The slowdown in the 20s and 30s may also match the decline of the British Empire as the US and Germany became the leading world industrial nations.

    It could have taken the second world war to make the UK self reliant and invest desperately in manufacturing, instead of relying on sucking the rest of the world dry.

    Post war economic boom because everyone was so relieved to have survived, and the end of rationing made pay and conditions look good?

    Pick your isolated facts to fit your theory.

    We did get a boost to the work force in the late 60s and early 70s with the Asians being chased out of Africa.

    As far as I can tell none of these factors seem to relate to high taxation and strong unions.

    Global mobility of wealth and labour should prevent any attempt to recreate the 90% tax rates that drove some into tax exile.

    1. graeme leggett Silver badge

      Re: Correlation?

      Britain had a reasonable manufacturing industry pre-war. Just not big enough for the demands of total war. And war brought specialisation - an aero-industry turned entirely to combat aircraft with no thought to civilian/transport until the end is in sight.

      Ditto the vehicle industry (Leyland, Rover, Morris Vauxhall) turned over to armoured vehicles.

  6. Anonymous Coward
    Anonymous Coward

    Scarcity of resource

    Doesn't this all just come down to globalization and ease of resource mobility?

    Technology means you need less people, and in many industries also means you need less skilled people, which means it is easier to move around the world to places with cheaper labour costs (over time these places skill up, and get more expensive, so it moves elsewhere). Modern cargo ships effectively make transport free except for the in-country part to and from the dock (which you would have to pay anyway shipping local goods around the country), so there is little penalty to globalization unless there are border tariffs.

    The end result is a massive oversupply of blue collar workers, which is only really offset by the fact that we have enough income in the rest of economy to fund a lot of services jobs which can mop up people (restaurant staff, coffee shop baristas, next day delivery drivers for Amazon, call centers for your iThingy tech support). The major downside is that most of these services are "luxuries" and so as soon as globalization catches up and a chunk of the "middle class" white collar jobs start to move overseas then the whole pyramid collapses, because services industry based economies are reliant on someone at the top of the pyramid pushing money in to it so the guys at the bottom get paid (vs. just having something in the ground to dig out and put on your market barrow - vegetable or mineral).

    I think boom really came from three things:

    * Post-war work ethic - people wanted to put the country back together again.

    * Integration of technology - drives productivity

    * Exploitation of world resources - the industrial societies dug up a lot of resources elsewhere in the world which makes them cheap. Since China started hoovering up more and more of them, physical resource costs have gone up somewhat, making goods more expensive.

    I think the basic question here is "how does a western services-based capitalist society survive in a situation with a global oversupply of labour and improving skill sets up in Asia and Africa?" Personally I think the answer is "it can't", at least not at the current standard of living everyone expects, and at that point I think it stops being about economics and starts being about religion ^H politics - because you can't have 75% of the populus being "poor" - that is the thing that revolutions are made of.

    1. a_yank_lurker Silver badge

      Re: Scarcity of resource

      As someone who has worked importing German goods into the US manufactured goods cost money and time to move from factory to store. It is roughly a month by ship from German port to US port. Secondly duties and freight are not necessarily trivial costs either. At some point the manufacturing costs will rise to a point when it is cheaper to move manufacturing back to the consuming country.

      Also, do not underestimate the problems of managing a global workforce and contractors. Outsourcing is not a panacea nor is offshoring. Both have hidden risks from issues like difficulties in coordinating meetings, travel costs, cultural issues, and political stability in some countries.

      1. Anonymous Coward
        Anonymous Coward

        Re: Scarcity of resource

        Time is "free" provided your planning is good enough, so taking a month to deliver goods isn't usually a problem - at least not for bulk industrial stuff once you have built up a stock in country (it's just a question of pipelining delivery so there is always a "big enough" stock in country until the next boat arrives). Less true for smaller orders, of course.

        Duties sure - that why I said border tariffs - but on the whole they are reducing over time world-wide as most countries realise that on the whole trade goes up with less tariffs in place.

        > Also, do not underestimate the problems of managing a global workforce and contractors

        There are plenty of multinationals around who prove it works, and globalization doesn't mean I necessarily need my company to do all the out-of-country work. I don't need to have an overseas branch to benefit from overseas labour - I just need to buy materials or finished components from someone who does (directly, or via an importer).

    2. veti Silver badge

      Re: Scarcity of resource

      You totally can have 75% of the populace being poor. History shows us that's the norm - the golden age of the middle class in the late 19th-20th centuries is an outlier - and make no mistake, if the invisible hand is allowed to govern everything in its own way, we'll be back there in no time.

      The question is whether that's what we want. Because we have the tools, now - democracy, economic models, government infrastructure (or "bureaucracy", as Tim would probably call it) - to do things differently.

      If we want to.

    3. Alan Brown Silver badge

      Re: Scarcity of resource

      "at least not at the current standard of living everyone expects"

      Western industry and technology has largely been built on the back of cheap (carbon sourced) energy.

      You're quite right that 75% of the population being poor is revolution fodder. One of the answers is to ensure better access to cheap energy resources.

      Unfortunately.... that can't be done by burning carbon-based fuels, unless you want to poison the world's oceans (this will happen far sooner than global warming does us in, there are already indications of a spreading global anoxia event, so it may be too late) and subsequently do most of the land-based species on the planet in too.

      The answer (for better or worse) can only be nuclear power, preferably thorium based - which will keep Tim happy - and the only sustainable choice is to pretty much give it away to developing countries in order to avoid a carbon apocolypse.

      Interestingly, the solution to global human overpopulation is also contained in this energy solution: Put simply, poor people have more children and around the world the trend is very clear that as people become better off, they have fewer of them. In countries without meaningful welfare systems you need your kids to look after you in old age and if there's a chance that some won't survive (ie, you don't have access to healthcare and clean water, etc) then you'll have enough to ensure some do.

    4. itzman

      Re: how does a western services-based capitalist society survive..

      ...in a situation with a global oversupply of labour and improving skill sets up in Asia and Africa?"

      By going massively hi-tech. And having the arms to defend its wealth against those who would seek to take it from them.

      De Gaulle built the French Nuclear industry largely on the basis that he didn't want to be dictated to by OPEC.

      If you want a nation to survive and prosper when global forces are turbulent, you isolate it, and make it as self sufficient as possible.

      And throw money at real education, as opposed to political indoctrination, to assist the best and brightest to construct things that will make use of low resources and be very effective,

      In that process sadly, the not so best and not so brightest will have to accept that they sadly didn't get the best education, and there are not necessarily the top jobs available.

      However there are always the arts...and humanities, and so on.

      As the old Jewish joke goes :

      "This is my eldest son, and we are so proud, he is the finest concert pianist of the decade.

      And this is my daughter. She is a writer and her books are acclaimed everywhere.

      This is my youngest son. Sadly he is only a tailor.

      But he feeds the whole family"

      1. Anonymous Coward
        Anonymous Coward

        Re: how does a western services-based capitalist society survive..

        > By going massively hi-tech. And having the arms to defend its wealth against those who would seek to take it from them.

        This doesn't solve the economic problem though. We live in a society where we have more people than jobs, population nationally and globally is increasing, and everyone in the UK wants to get paid more. "Going high tech" just means you need even less people to do the same amount of work. It's good on paper for the companies involved, but what does the country do with the burgeoning supply of unemployed (or at least underemployed). If you just tax the companies or people in work then you take away all incentives to going high tech in the first place, as you are effectively paying for the staff you lost anyway as the state has to support them, and the only way to do that is via taxation.

        What wealth? We have no natural resources, and burgeoning national debt which is still increasing, albeit at a lesser rate. The only "resource" in Britain is a large supply of people, which as per the above argument is increasingly an economic cost not a benefit in a massively mechanised society.

  7. Anonymous Coward
    Anonymous Coward

    all very simple

    Two massive World wars in the space of a generation decreased the male work force along with explosive global industrialisation. Since the 80s the industrialised labour market has now rebalanced and inequality is a natural consequence.

    1. Fraggle850

      Re: all very simple

      Certainly in the case of the two wars a generation of male workers was significantly reduced in both cases, which presumably had an effect on supply and demand and therefore pay. It's a grim fact but large scale death is often good for workers wages when stability returns, I believe that the black death in 14th century England had a similar effect.

  8. Warm Braw Silver badge

    Money has to go somewhere

    I wonder to what extent your argument is true because "high marginal tax rates, currency controls [and] union power" were a package. Capital was a lot less mobile (because of currency controls) so if you were going to invest your money, the UK was the place you were going to put it, regardless of the tax rates or union power, you didn't really have a choice. A political argument for high marginal tax rates and union power was much easier to make, since they are more likely to result in some level of "redistribution" in a more closed economy. A much harder argument to make now when capital can disappear overseas in moments (or, more awkwardly, simply not come to the UK in the first place) and "redistribution" simply becomes an argument over having a larger slice of a smaller pie.

    Difficult to argue that politics has no impact on economic growth, though - the treasury would never have funded the GPO to roll out broadband, for example. And of course it's easy to say that external factors are entirely outside the influence of domestic politics - for example the huge crash in UK economic growth in 1973-1974 (9.8% at Q1 1973 and -4% a year later) - which you could put down entirely to the end of Bretton Woods and the oil crisis. Except the huge peak in growth that came before those events was largely a result of the Barber Boom (lowering of high marginal tax rates) and high inflation (reinforced by wage demands from powerful unions...) and the OPEC embargo was not unrelated to political decisions made by the oil-consuming nations.

    So perhaps it's a case that politics happens and growth happens but it's very difficult to determine the influence of one on the other even in hindsight...

    1. Anonymous Coward
      Anonymous Coward

      Re: Money has to go somewhere

      Broadband stuff is more complicated than that:

      http://www.techradar.com/news/world-of-tech/how-the-uk-lost-the-broadband-race-in-1990-1224784

      1. Doctor Syntax Silver badge

        Re: Money has to go somewhere

        "Broadband stuff is more complicated than that:"

        And you can see how that would have gone. High density areas would have got done. But would there have been a big incentive to connect at that time? The whole thing would have stalled when the cost of passing premises and the preparedness of potential customers to pay for a new connection meant that there wasn't payback. BT would then have had to abandon roll-out or go asking for public money to finance free connections and as Warm Braw says, the Treasury wouldn't have forked out.

        Yes, BT should have been allowed to compete with the cable TV companies but no, it wouldn't have resulted in a wider network than cable TV achieved, maybe less because competition would have lowered the return for any given network so the cherry picking would have been even more intense.

      2. Chris Miller

        Re: Money has to go somewhere

        Cochrane was on Today (BBC R4) last week plugging the same line: we must have FTTH because Hong Kong* has it and there he can get symmetric 500mbps and "cloud computing won't work without it". Which is odd, because I get 100Mbps asymmetric over good ol' FTTC and yet my cloud computing works fine, thanks. I assume he has shares in some fibre company he's boosting.

        New connections to new dwellings should be fibre, no question (it's cheaper anyway), but relaying existing connections to 30 million homes would cost many billions, for what benefit?

        * Ignoring the fact that if you lay fibre to a few hundred skyscrapers in HK, you've covered half the population. We don't live like that in the UK. And I'd love to know what happens if everyone in the same apartment block tries to exercise their gigabit speeds at the same time.

        1. Tim Worstal

          Re: Money has to go somewhere

          Gold star there. The reason that the US has lower connectivity at high speed couldn't possibly, maybe, related to population density, could it?

        2. Allan George Dyer Silver badge

          Re: Money has to go somewhere

          "And I'd love to know what happens if everyone in the same apartment block tries to exercise their gigabit speeds at the same time."

          i) No-one gets gigabit speeds because everyone uses WiFi within their flats, sharing the available bandwidth with their neighbour's wifi.

          ii) You blame the website for being slow

          iii) The ISP persuades you to upgrade to an even faster connection.

  9. Nick Leaton

    It's very simple.

    The UK state takes the working poor's surplus income. National Insurance. it's surplus because the worker generates the money. It doesn't go on their services, its redistributed.

    The result is the working poor end up where they started with no assets. They have a share of the state's debts, and 90% of those are pensions debts. They are 400K in the red.

    The state pension is worth 105K. They are still in the red.

    However if Mr Median had invested his NI in the FTSE all share with low charges free of taxation, he would have 840K in a fund. Mr Min wage, 400K. There wouldn't be any pension debts.

    So when the working poor have been ripped off and have no assets, it's the socialist welfare state that is to blame.

    1. Anonymous Coward
      Anonymous Coward

      Can you re-write that with better grammar? I'm not exactly sure what you're trying to say.

    2. Aitor 1 Silver badge

      Redistribution

      So when the rich and the big Cos don't pay taxes, and the politicians overexpend and give perks to the rich, it is the "socialist" state that is stealing from the poor.

      Thank you for your clarity.

    3. Waspy

      And who teaches Mr Median about how equities, bonds and commodities work? I'm pretty libertarian myself but this knowledge has to come from somewhere - presumably in your ultra laissez-faire utopia you don't want Mr Median paying for education if he does not want it.

      So let's look at somewhere where until recently health insurance was not mandatory - did usa workers invest their insurance money in the s&p and dow jones? Nope. Whilst there may be some truth in what you say, your idea is about as rooted in reality as communism.

      1. Matt Bryant Silver badge
        Stop

        Re: Waspy

        "And who teaches Mr Median about how equities, bonds and commodities work?...." Investopedia would be a good start (http://www.investopedia.com/dictionary/). Or CNN Money, Bloomberg, Marketwatch, or any of the hundreds of other financial sites. Even Wikipedia has some decent articles on economics. TBH, the financial field is just as complex as say the coding industry, but seems to move a lot slower development-wise. If so many here claim to be "self-taught, ordinary Joe" coders (and keeping up-to-date on new and different coding skills seems to require a lot of research even if degree-educated) it would seem well within the capabilities of many to "self-learn" finance.

        I am always amused by the insistence that finance is some kind of closed shop that only a secret handshake and an Eton education can get you into. I have met City traders with very varied backgrounds, from council-house Scousers through Nigerian princes (I kid you not) to the son of a Polish trawlerman.

        "....did usa workers invest their insurance money in the s&p and dow jones?...." Go look up 401K,

        1. Waspy

          Re: Waspy

          Not disagreeing with you at all Matt, all of this is learnable, now more than ever, but do people bother? I would perhaps argue no, seeing as most people seem to think property is the only thing safe enough to grow your wealth (you and I know this to be false, as is the often held premise that 'stock markets are a casino'). I myself am self taught but know that most people don't want to or can't be bothered to learn any more than they need to (which is often nothing at all). Same goes for NI...people on the whole just will not invest that surplus into wealth growing funds and will find themselves at the sharp end of no money and illness. Maybe you think this is their own fault...perhaps you are right, but I don't see it as simply as that.

          I also suspect you will find a direct correlation between no health insurance, no 401k and very little money, although I haven't got time to get links so feel free to correct me if I'm wrong.

          1. Matt Bryant Silver badge
            Boffin

            Re: Waspy Re: Waspy

            ".....but do people bother?...." Well, that is the crux of the matter - it's kind of hard to legislate against poor life choices, and telling kids to plan for their old age and ill-health can be tough when they assume they have years of youth and good health before they have to worry (especially when the Bank of Mummy and Daddy is paying the bills, or the State). Life is not "fair" and rarely "easy". But it is also annoying to hear those people moan about their poor choices later as though it was anybody's other than their own fault. I recently had the misfortune to run into a complete waster from my schooldays, he is still a complete slacker but now has an additional bitterness to add to his cries of "injustice and inequality". As I pointed out to him, we went to the same school, we had the same chances, he just didn't bother to take them (I can't claim to have been an angelic student either, but I did finally get it into my thick head that what you put into your life is what you get out). Apparently, all those teachers that told us both for years to knuckle down and study were speaking a language he just couldn't comprehend, but it was somehow their fault not his. Needless to say he preferred to cling to his theory of "unfairness" to the realities of the consequences of his choices. It seems a popular failing.

            "....I also suspect you will find a direct correlation between no health insurance, no 401k and very little money...." I'm sure you will, but that would be looking at the symptoms of the problem and ignoring the actual underlying causes. Some people from quite humble backgrounds make very good lives for themselves - Sir Alan Sugar is my fave example from the UK, whilst Charles Philips (ex-Oracle Prez) and Condoleezza Rice (ex-Secretary of State) are two good examples from the US. Others seem happier to wallow in their "poorness".

  10. Doctor Syntax Silver badge

    "Maybe we should deliberately lower inequality with very high tax rates and all the rest in order to get us some of that lovely growth of the 1950s and '60s?"

    And rationing. Don't forget the rationing.

    1. Anonymous Coward
      Anonymous Coward

      Well, I think Tim's misrepresenting Piketty's key point: if government does nothing the result will be increasing inequality due to cost of money. Piketty doesn't imply that very high tax rates are necessary, just that intervention is necessary if you really want to get maximum benefit from human advancement.

  11. Peter Johnston 1

    Manufacturing became less relevant

    Let me add marketing into the mix.

    WW2 drove internationalism. It winkled people out of their little countries and showed them other worlds, other experiences, other ways of doing things. This also opened up markets for the countries and corporations who were able to capitalise on them.

    The 1950s marked the beginning of the era of the international brand. Brands had existed in America since 1910, but for their domestic market. Suddenly they were everywhere.

    Manufacturing was decoupled and took a back seat - it was no longer the key to success as a company. It marked the end of the power of unions to control the price of goods, the speed of manufacture and the relationship between manufacture and market.

    This was massively helped by revolutions in communication. Suddenly the world moved into colour as colour printing became economic and colour TV started to gain traction - both leading to a massive explosion in marketing success.

    This directly led to the Japanese and later Chinese manufacturing boom as the brand became paramount and where and by whom it was manufactured no longer mattered.

    This led to a 50s boom for cheaper UK regions, then a boom for lower wage regions of Europe and eventually, as transport improved, the growth moved away to lower cost regions of the world. End of boom.

    1. Doctor Syntax Silver badge

      Re: Manufacturing became less relevant

      "This was massively helped by revolutions in communication. Suddenly the world moved into colour as colour printing became economic and colour TV started to gain traction - both leading to a massive explosion in marketing success.

      ...

      This led to a 50s boom for cheaper UK regions, then a boom for lower wage regions of Europe and eventually, as transport improved, the growth moved away to lower cost regions of the world. End of boom."

      I think you've got your chronology wrong.

  12. albaleo

    Not so much public ownership but public wealth creation

    Tim, you mention public ownership, control, and planning, and I'd probably agree with you that those alone don't cause reductions in wealth inequality. But is public spending on wealth creating projects not a different matter. From the 1920s through the 1970s, there was large investment in council housing. After 1947, there was also large investment in the health service. In addition to employment, these also brought wealth to large numbers. A decent home, parents who aren't too sick to work, etc. Taking ownership of the car industry seemed quite different from these other projects. They weren't handing out cheap cars to everyone.

    1. Tim Worstal

      Re: Not so much public ownership but public wealth creation

      " From the 1920s through the 1970s, there was large investment in council housing. After 1947, there was also large investment in the health service."

      Not so much really. The 30s housing boom was private sector driven. And the NHS was simply the nationalisation of previously extant health care facilities. The NHS didn't actually build a hospital until 1963.

      1. Doctor Syntax Silver badge

        Re: Not so much public ownership but public wealth creation

        NHS is more than hospital construction. The war brought on new treatments of all sorts. It would be interesting to see what the expenditure on pharmaceuticals was pre/post NHS.

        1. Anonymous Coward
          Anonymous Coward

          Re: Not so much public ownership but public wealth creation

          The War delivered improved surgical techniques and antibiotics/antibacterials.

          Drugs significant to general medicine less so? Eg Beta blockers appear in 60s.

          1. Doctor Syntax Silver badge

            Re: Not so much public ownership but public wealth creation

            Antibiotics not significant to general medicine? You learn something everyday.

            1. Anonymous Coward
              Anonymous Coward

              Re: Not so much public ownership but public wealth creation

              Don't think that's what I said. Certainly wasn't what I meant.

      2. albaleo

        Re: Not so much public ownership but public wealth creation

        I'm not sure that the 30s private housing boom is relevant to the council house building activity. Over 1 million council houses were built in the inter war years. That's not a small event.

        Regarding the NHS, I don't think there was anything simple about the nationalisation of existing facilities. Not sure what data would suffice. My parents said it was the biggest change in society in their lives (and they'd just lived through a war). Before they used to get treatment for free, and handed in rabbits for the doctor once or twice a year.

        I picked up on council housing and the NHS, but I think there were other publicly financed investments in the 20th century that may have had an impact on wealth. Road building, education, electrification, gas grid, ports authorities, whatever. My image of this is that it increased steadily in the early part of the 20th century, and accelerated after WW2. I can wave my hands like any economist and say this was the cause of reduced wealth inequality. I'm hoping you can do better.

      3. Richard 12 Silver badge

        Re: Not so much public ownership but public wealth creation

        The National Grid was extremely significant though.

        Built and expanded throughout the 30s to 70s, it finally brought standardised electricity to most of the population and industry - instead of the myriad of slightly different and incompatible systems scattered around the country and even individual cities that existed before.

        Massive infrastructure like that has a huge impact.

        It also has nothing to do with unions or high marginal tax rates.

        1. itzman

          Re: Not so much public ownership but public wealth creation

          One wonders how the internet - never nationalised and never in public ownership, managed to bring IP data packets to everyone?

          Its the myth that only centralised command and control can actually generate standards.

          That is, pardon me, utter codswallop. People adhere to standards because that way they make more profits. In the end local grids would have adhere to common standards because that way the same electrical appliances could be sold. We have, worldwide, without a world government, broadly two electrical standards at the domestic level - 110V 60Hz and 230V 50Hz, plus minus.

          Likewise train lines are standard world wide.

          DVDS are standard, world wide, regional codes and DRM aside. Globalisation drives standards, not world government.

    2. Stork Bronze badge

      Re: Not so much public ownership but public wealth creation

      I suggest you should try to compare UK to some of the other (Western) European economies - they all had high growth rates in the post-war period.

      But e.g. Germany, Denmark and Sweden did not have public ownership of manufacturing industries as the UK did. Even VW which is/was with large public ownership was a PLC, and my impression is that the owners kept more distance to running the outfit and at Leyland. Unions in those countries were also more pragmatic and less militant.

      On housing, DK government supported house building but kept out of running it. In Germany (and Switzerland), a large proportion of the population lives in privately owned, regulated rental housing.

      Health? Various models of general healthcare in the EU, most work quite well (and at a much lower price than the US solution).

      I do not have figures to back this up, but my impression is that compared to the rest of W.Europe, UK grew less 45-80 and not much more from 80 to now (I think I read in the Economist years back). Anyone knows where to find some numbers?

  13. Anonymous Coward
    Anonymous Coward

    I've always felt that the post war boom time was mostly to do with our new found ability to massively exploit the energy provided by fossil fuels. Obviously we were extracting oil before and during the war but after the war we went energy mad. I bet if you looked at the price of energy vs the cost it would plummet like a stone after the war. At the same time availability will have shot up, suddenly everyone had energy in abundance. With all this new found, almost free, energy it gave people time to invent things and so was born the technological revolution. Thing about revolutions is they almost always seem to cause equality. My guess is that this is because rich people are no better at jumping on the bandwagon of the next big thing than anyone else is (despite what they will tell you).

    We've continued to use more energy but my gut feel is the rate of change of our energy use has dropped. As well the newness of it has worn off and the easily exploitable benefits of lots of energy have been exploited already e.g. fridges.

    1. unitron

      I'm glad someone else brought up energy...

      ...fossil fuels, and especially oil, in particular.

      I've long felt that the relatively low price up until near the end of '73 and the removal of that advantage afterwards played a pretty big part in post WWII economics.

      1. LucreLout Silver badge

        Re: I'm glad someone else brought up energy...

        @unitron

        I've long felt that the relatively low price up until near the end of '73 and the removal of that advantage afterwards played a pretty big part in post WWII economics.

        It certainly likely to have contributed. We should have some better data in the next 10 years too, as the current oil price crash begins to feed through to the economic output.

  14. Anonymous Coward
    Anonymous Coward

    Appreciation

    Thank you The Register for your journalistic excellence. Everyday it is refreshing to explore your take on what, and what does not, ail us.

  15. captain veg

    where's the second part

    OK, so you have a theory about the period between 1929 and 1980. (Not saying it is convincing, but there is some coherence to it.)

    So how does it explain the sudden and accelerating increase in inequality since Thatcher & Sons destroyed the unions, the industries that they recruited from and notions of social cohesion and progressive taxation?

    -A.

    1. Doctor Syntax Silver badge

      Re: where's the second part

      You've just got to love the nostalgia for black phones with dials, three-day weeks, uncollected rubbish and unburied dead.

      1. Fraggle850

        Re: where's the second part

        Nothing to do with nostalgia, merely a sensible question as to what has changed since the 80's to promote increases in inequality. The extremist ideologies held by much of the left in the 70's prevented them from being an effective force for the workers and led to infighting and their eventual downfall but that doesn't mean that the idea of collective bargaining and coherent representation of the will of those at the bottom of the economic heap is discredited, it is merely held in abeyance.

  16. Greg 16

    Since the 80's

    So what's changed? The main thing seems to be house prices, which kind of links to your recent article on land values in San Francisco. In the UK, until the 1980's houses could be thrown up pretty easily and infrastructure was built in the national interest with precedence over local concerns. I wonder how much nimbyism and it's effect on house building and infrastructure building, has acted as a brake on growth/competition and what effect this has had on inequality?

    Also surely the massive increase in women entering the workforce has had an effect. In the 50's if you had two families, both with housewives, but one with an unemployed/low income male and one with an average income male, then the inequality isn't massive. In the 90's if you have two families, one with no earners and one with a male AND a female earner, then the inequality is far higher?

    1. Tim Worstal

      Re: Since the 80's

      "one with no earners and one with a male AND a female earner, then the inequality is far higher?"

      It gets worse than that: assortative mating. Lawyers marry lawyers these days, not lawyer the legal secretary who then retires to raise the kids. We therefore have much greater household income inequality simply because we get two professional income households up at the top in a manner we never used to.

      And barring some form of state control over who one may marry there ain't much anyone can do about it.

      1. Anonymous Coward
        Anonymous Coward

        Re: Since the 80's

        "Lawyers marry lawyers"

        In effect, greater equality in one area creates greater inequality in another. But that's nothing new. Among the landowning aristocracy, careful selection of mating to ensure that estates stay large has been a thing since the early Muslim expansion forced Europe off the gold standard and onto the land standard. Plenty of wars to kill off younger sons, plenty of nunneries to absorb less pretty sisters.

        1. Tim Worstal

          Re: Since the 80's

          Hugely cynical but, umm, maybe.....

      2. Robert Grant

        Re: Since the 80's

        Problem is that mortgageable (spelling?) income is now 100% of both salaries - it used to be 100% of one, and a much lower % of the other. So there was a limit on how much things such as house prices could shoot up, as the credit wasn't as accessible.

        1. Anonymous Coward
          Anonymous Coward

          Re: Since the 80's

          Indeed the increase in housing cost is a fundamental problem, and it's something Germany's quite aggressively managed to avoid. But they have plenty of manufacturing and maybe that's why they aren't so keen to create the illusion of wealth through property-based debt.

  17. Yet Another Anonymous coward Silver badge

    But without unions, taxes, controls...

    We would have had the same technologically led massive economic growth but it would have been concentrated in the hands of a few lucky owners of a few massive corporations.

    Imagine if half the country's GDP and the only growth industries were owned and controlled by a handful of people who when they can't control government can simply ignore them.

    1. Greg 16

      Re: But without unions, taxes, controls...

      Full employment is far more effective and sustainable than unions, if you want to achieve improved pay and conditions. And regarding ownership of businesses, the largest owners are pension funds and insurers - we all basically own a large part of them, but not directly.

    2. Mephistro Silver badge
      Thumb Up

      Re: But without unions, taxes, controls...

      "Imagine if half the country's GDP and the only growth industries were owned and controlled by a handful of people who when they can't control government can simply ignore them."

      Imagine? I see what you did there. :O)

    3. itzman

      Re: But without unions, taxes, controls...

      The irony is that who in the end are those massive corporations going to sell to, if there are no affluent classes to act as a market for their goods?

      Yes, its possible to concieve of techno based neo feudalism, of a really nasty sort - more perhaps like Tsarist Russia or Communist Russia, where all the production is co-opted to make a few people very comfortable, and the rest just die.

      But that's why we have a democracy.

  18. 8Ace

    Where's the balance El Reg ?

    Whilst Tim's articles are interesting they are the view of one side of the economic spectrum only, and any criticism or attempts at rebuttal are restricted to those of us on these forums. Whilst I'd hate to see the Register become too focussed on economics, isn't it time we had the views from the opposite side of the fence from the Adam Smith Institute. This is hardly balanced reporting.

    1. Tim Worstal

      Re: Where's the balance El Reg ?

      Given my income sources ("being at" the ASI is an unpaid position, I get maybe a burger, but a nice one!, and a glass or two of wine if I'm in London) I'm rather more El Reg's rep to the right wing think tank world than the other way around....

      1. Gordon 10 Silver badge

        Re: Where's the balance El Reg ?

        I think a lefty less laisse fair economic writer would be interesting but it's hardly a must have I think the Reg readership is intelligent enough not to feel in necessary to have total balance in the OpEd pieces. This isn't the BBC after all.

      2. 8Ace

        Re: Where's the balance El Reg ?

        Tim,

        Nothing whatsoever to do with rewards, remuneration or anything like that, purely a matter of balance. I've no problem with your articles, I enjoy them though they are necessarily written from a certain point of view and a perfectly valid one at that. However the argument from the other side of the fence is absent, apart from the comments, and if the Register feels that articles on topics such as this and economic principle and theory are of interest then they need to be balanced. Whatever people think economics is not a science, large aspects are open to opinion and interpretation, and yours is one of many.

        So it would be nice to hear the opinion from those with somewhat opposing views, I'm sure almost everything you've put in this article could be interpreted differently and a different conclusion reached by an economist starting from a different viewpoint.

        1. Tim Worstal

          Re: Where's the balance El Reg ?

          1) I'm not an economist.

          2) I'm just me.

          3) My opinion pieces are my opinion.

          4) If El Reg wishes to publish opinion pieces that don't agree with my opinions that's just great by me.

          Actually, with point 4), I wonder if the powers that be would like to have, say, Richard Murphy.....

        2. itzman

          Re:a different conclusion reached by an economist starting from a different viewpoint.

          Of course. Deductive logic always starts from an assumption, and thereby in the end all logic that applies to the real world is inductive.

          I aksed a socialist what he means by the term. "I think its all to do with how society treats its weakest members".

          "Oh?" I queried. "Isn't that a bit unfair? Why not its strongest members, or the ones with red hair and perfect teeth?"

  19. Quip

    agricultural land, great aristocratic fortunes,death duties etc.

    Lose the son(s) and heir(s) in the Great War and death duties may bite twice in a generation. Sell your low yielding agricultural land and invest in bonds: again wiped out by the Great War. Yes, it is the great urban estates that had the best chance of survival.

  20. John Savard Silver badge

    Why Booms After Every War?

    Actually, if one goes back in history, the World War II postwar boom was preceded not just by the Roaring Twenties, but by a historical pattern that people were noticing (the nuclear stalemate of the Cold War finally ended it).

    An economic boom is ended by excessive speculation - the bubble collapses. People are left out of work, but the government isn't going to massively intervene in the economy to end the human misery - that sort of thing just isn't done.

    And then a war starts. Well, that's national survival for you, so of course deficit financing is now permissible. And so what was impossible before becomes possible now - people are put to work.

    The war ends. Now the economy is humming, but its products can be put towards the service of real human needs. An economic boom.

    Keynes wasn't the only one to suggest getting out of this circle. Unrestrained free enterprise is not capable of producing an economy with no crashes ever and full employment always - that takes a hand at the switch ready to limit or remedy the potential damage of excessive speculation. As ordinary working men far outnumber businessmen, in a democracy it is their economic interests that should be jealously safeguarded by the government.

  21. Stretch

    Its just because so many died. There was room to grow. We need to kill a few billion people, maybe 5.

    1. Anonymous Coward
      Anonymous Coward

      "We need to kill a few billion people, maybe 5."

      If you believe some people who don't write for The Register, we're in the process of doing that (and the current chaos in Iraq and Syria may be as much resource wars as the region dries again, as the rise of Wahabism.)

      The problem is that if we did kill off 5 billion people, the consequences would most likely be the collapse of civilisation. OK the survivors might potter around in the wreckage living off tins for a while, but who would get the infrastructure going again? Lots of key workers will be dead. People with critical skills - like fixing trucks or refining fuel - will see the opportunity to demand money and power. And the remaining people who know how to use weapons will try and force them to do what they want, with unpleasant consequences.

      A gradual decline in population is the most we can hope for, and even that will result in dislocation as the population ages.

      1. midcapwarrior

        Re: "We need to kill a few billion people, maybe 5."

        "The problem is that if we did kill off 5 billion people, the consequences would most likely be the collapse of civilization"

        From a purely theoretically view the consequences would depend on the distribution of the population loss/devastation.

        Current estimate is 7+ billion world population.

        North/South America together would have enough resources to exist at a fairly advanced level.

    2. itzman
      Pint

      We need to kill a few billion people, maybe 5.

      The greens are well on the way there. But we dont need to actively do it.

      Juts sit back whilst the idealists destroy everything that works, on the basis that its unfair in some way, and then we will *all* die, equally and together.

      Hurrah!

  22. Tim Worstal

    "So how does it explain the sudden and accelerating increase in inequality"

    I'm not trying to explain inequality, I'm trying to explain growth rates. Largely on the grounds that I don't care very much about inequality but do about growth rates.

    But since you insist: standard models would suggest that if you add a few billion low productivity and low pay people to the economy then the low skill and low pay people originally in the economy are going to get the shaft. And that's what globalisation has done since 1980 or so (really, 1978 started it in China).

    So, increasing inequality within rich countries is a result of globalisation. I've even written a piece about it for this very publication:

    http://www.theregister.co.uk/2014/09/28/inequality_rising_screw_the_one_per_cent/

    For if I am to worry about inequality and or poverty then I'm not going to worry about within rich country inequality. I'm going to worry about global inequality and absolute, not relative, poverty. And since globalisation reduces global inequality and massively reduces absolute poverty then to hell with relative poverty in the UK and bugger rising inequality in already rich countries.

    1. Fraggle850

      We obviously need to globalise the unions then too

      Perhaps we need a globalised voice for the have nots? A new internationalism in the global labour movement with a focus on getting the best for all workers, one that doesn't place ideology over pragmatism nor parochial concerns over global ones?

      1. LucreLout Silver badge

        Re: We obviously need to globalise the unions then too

        @Fraggle

        the global labour movement

        There is no labour movement, global or otherwise. Unions have never really represented the working man, they don't really representt heir members interests either - they predominantly represent the unions interest, for they are businesses in competition with each other for dues, much as any other industry.

        Why else would Red Robbo have destroyed car manufacturing? Scargill the mines? The destruction of their members livelihoods was a gamble they took to exert more power and influence such that they could garner larger fees, or dues as their members know it.

        Is it really in the tube drivers interest to continue earning twice the salary required to replace them in the role with identical skills? Does that not simply speed the process of automating their jobs? The RMT will be just fine - blow up one employer and others worry they're next. Great for the union, less great for their members in the busted business.

        There never was a global labour movement, and it is unlikley to ever come about now. Professionals don't join unions, by and large, and much of the future roles to come will be professional.

        1. Fraggle850

          @LucreLout Re: We obviously need to globalise the unions then too

          I largely agree with what you say in respect of unions and their destructive, ideologically driven agendas not being in their members best interests, indeed I've commented on that more than once on el reg (think I've even referred to it later in this thread in response to some red-tinted-glasses trotskyite apologist).

          In its earliest days socialism and the labour movement did have an international vision, 'the internationale' was their anthem from the late 19th century.

          I don't doubt that there may be a tendency toward future roles being professional ones but the idea that such groups don't have collective bargaining representation is ridiculous: ever heard of the BMA? The Institute of Directors? The CBI? I myself am a member of my local chamber of commerce.

          Assuming that future roles are increasingly professional and that bulk roles for workers will disappear over time with increasing automation, where does that leave those who don't fit the new roles? Are we to have an ever expanding underclass doomed to a life on ever decreasing benefits?

          1. LucreLout Silver badge

            Re: @LucreLout We obviously need to globalise the unions then too

            @Fraggle

            ...the BMA? The Institute of Directors? The CBI?

            I'm not sure how many professionals view the BMA and their members as a proper profession anymore. Professionals don't strike, which rather diminshes the standing of much of the BMA in my eyes. I'm equally unsure that the IoD or the CBI canbe had as paragons of collective bargaining, certainly not on behalf of the staff they employ.

            Assuming that future roles are increasingly professional and that bulk roles for workers will disappear over time with increasing automation, where does that leave those who don't fit the new roles? Are we to have an ever expanding underclass doomed to a life on ever decreasing benefits?

            Ultimately, we'll have to restrict population growth to ensure that we limit how many people fall into such category. That can be done by a variety of means such as taxing the production of children rather than incentivising it with welfare. That sounds awful to say, but being realistic we can't have an unending increase in the supply of economically useless people unless the economically active can outproduce them adfinitum, which we can't.

            After that we need to revist the purpose of education and the means by which it is provided. For all the grade inflation of the past 25+ years, teenagers certainly aren't any smarter than my generation: a fact which can be evidenced by visting any high street after dark.

            Collective bargaining will make no difference to the pace and scale of automation, other than perhaps to speed it up. It is not the answer to this problem. Afterall, it cannot overcome the disincentive to effort nor mitigate the freerider problem.

            1. Fraggle850

              Re: @LucreLout We obviously need to globalise the unions then too

              Gaargh! Stop appealing to my logical side!

              'Ultimately, we'll have to restrict population growth to ensure that we limit how many people fall into such category. That can be done by a variety of means such as taxing the production of children rather than incentivising it with welfare. That sounds awful to say, but being realistic we can't have an unending increase in the supply of economically useless people'

              That makes unpalatable, logical sense and does chime in with my own thoughts, certainly 'if you can't pay for 'em, don't have 'em'. I'm trying to be empathetic and not give in to my baser 'I'm alright jack' instincts. There is a part of me that will always be working class and idealistic.

              Having previously worked in education and seen just how grim things can be I also have to agree with you on that point. I actually thought that a lot (not all) of what Gove said made sense. I also think that there are way too many useless degrees offering false hope and debt. But don't demonise the youths, you may not understand them but they aren't all bad.

              Anyway, the idealist me still likes to think that we could all share in the spoils of the new, bright future, and that such enlightenment could lead the whole of humanity to a better place (including a natural reversal of population growth). Despite my darker, more logical thinking I'll probably always come down on the side of equality and inclusion for all. Raw, naked capitalism is a harsh and greedy thing. Meritocracy? Yes, if nepotism and class isolationism are meritricious.

              Choose your future society: Robocop or Star Trek

              1. LucreLout Silver badge

                Re: @LucreLout We obviously need to globalise the unions then too

                @Fraggle

                There is a part of me that will always be working class and idealistic.

                Me too. Thankfully that part is no longer my income :)

                I also think that there are way too many useless degrees offering false hope and debt.

                Completely agree with that. I really don't see why we can't setup a proper modern apprenticeship system (that is a failing of parties of all colours). I'd also like to see each university school publish the average salary of its graduates in the first 5 years after graduation, isolating any earnings premium or none. I'm sure the history of art is a fine degree, but studying it for financial gain, as opposed to any intellectual enjoyment, my not be the wisest course of action.

                But don't demonise the youths, you may not understand them but they aren't all bad.

                I don't really believe its their fault.... society lies to them all the way through school, and media & branding sell them a vision of a lifestyle they'll never have. Just tell them the truth -> Of course you can fail. Your peers may be your friends, but they will also be your competition. Some of you will win, some will lose, most will be the middle of the curve.

                Despite my darker, more logical thinking I'll probably always come down on the side of equality and inclusion for all.

                Equality of what though? Of outcome? That is every bit as wrong as it is unattainable. Of opportunity? Well, yes, I'd go with that as an ideal, but its not something you'll ever see happen. As a parent I'll do everything I can to give my kids the best start, and advantage, in life that I can. Most parents do the same.... hard to legislate against that.

                Choose your future society: Robocop or Star Trek

                RoboCop was way cooler. All StarTrek really did was elevate mankind into competing and fighting with aliens instead of each other. They two visions aren't so different as they first seem. Unfortunately.

                1. Fraggle850

                  Re: @LucreLout We obviously need to globalise the unions then too

                  Hmm...

                  >Me too. Thankfully that part is no longer my income :)

                  Ditto

                  > each university school publish the average salary of its graduates in the first 5 years after graduation

                  Yes, by course/subject too

                  > society lies to them all the way through school, and media & branding sell them a vision of a lifestyle they'll never have

                  Couldn't agree more, and learning to cope with failure is indeed a valuable life lesson but these images are promoted to impressionable minds by capitalism and reinforced by parents and other children. You can get bullied for not having Nikes (or whatever symbol of consumer triumph is du jour) How bad do you think the targeting of minors would be if there were no legislation? Junior cigarettes anyone? Untrammelled capitalism would be a nightmare. Evidence that the markets do need some social control.

                  > Equality of what though?

                  Opportunity, obviously and a reasonable safety net for those who get mangled trying to win but fail badly. Preferably with a dignified, opt-out alt lifestyle choice for those who choose not to compete.

                  Can't fault you trying to do the best for your kids but I'd ban inherited wealth/property full stop. Use it while you're alive or lose it. If you've brought your kids up well they'll be fine without it.

                  Robocop was indeed cooler but Star Trek was idealistic. And Kirk & Co usually found the peaceful solution.

  23. Identity
    Boffin

    Well, that's one man's opinion...

    It is, of course, very convenient and simple to develop a world view if you're selective about the facts you choose. I will not posit mine here (no doubt suffering from similar flaws), but I can mention some things forgotten.

    During the earlier periods, the salaries of the heads of corporations (latterly known as CEOs) was perhaps 7x that of the lowest paid worker. Today it is many hundreds of times greater, and even more so, if you factor in cheap off-shored labor.

    Before 1974, salaries and standard of living rose on a near-yearly basis. After 1974, salaries (excluding corporate officers and factoring in inflation) remained stagnant.

    Prior to the 60's, most families were supported by a single (usually male-earned) salary. With the advent of the women's movement, women who felt they'd been getting the short end of the stick, entered the workforce in great numbers. Now, it's common — even necessary — for multiple paychecks to support a a family. It's my belief that while those 60's white male-based employers outwardly responded negatively, in secret they rejoiced at the near-doubling of the workforce, especially with cheaper labor. (Even today women fight for equal pay for equal work.) The trend for off-shoring continued the joy as corporations raced to the bottom to find the cheapest labor. (And why wouldn't they? It is the sole purpose of corporations to profit.) This played into the breaking of union power (which was not helped by some apparent corruption among unions — I'm looking at you, Teamsters.)

    American wealth was boosted by huge infrastructure projects, not least of which was the National Highway System, which fostered trade and travel with it's concomitant growth effect on the economy. This was paid for with taxes. Somewhere along the line a general tax revolt ensued, egged on by the rich who admittedly bore a large burden. Without taxes and with the addition of huge defense expenditures (military-industrial complex, anyone?), today we are faced with crumbling infrastructure, which we could rebuild, but those think government should pay for nothing but defense object and we are at a stalemate. Obama's plans for such came to very little.

    The Glass-Steagall Act was an attempt to protect the ordinary citizen from predation by monied interests. Even though Roosevelt (decried as a class traitor and blamed for just about any and every governmental or economic ill that ensued by my right-wing friends) was cool to the idea, it became the law of the land until it was repealed under Bill Clinton. (For those unaware, among other things, it prevented the combination of commercial and investment banking.) Not too long thereafter, the world suffered what we now term 'the Great Recession,' caused in no small part by those banks playing money games with the economy (there are many good histories of what happened.) We need mention only in passing Credit Default Swaps; slicing and dicing unsupportable mortgages as investments which the issuers, themselves, bet against; and interest-rate rigging — though of course there are many issues as deep. Average Americans suffered dreadfully and were further taxed with paying for a bailout. Those banks (the ones that survived) did very well, thank-you and their officers, even better.

    I'm quite sure there's more, but I've gone on long enough...

    1. Anonymous Coward
      Anonymous Coward

      Re: Well, that's one man's opinion...

      Tim is far too busy tackling the big problem of global poverty to deal with small time local issues!

    2. Robin 12
      Pint

      Re: Well, that's one man's opinion...

      You put much of what I wanted to say to words better than I could.

      I have been reading much on this and there are many comments on different forums that state what I am putting here.

      The other thing that changed in the 70's was easy credit. Credit cards for the asking, banks bending over backwards to lend you money. Sub-prime loans.

      Before the rise of easy credit, if you wanted that new car, you had to ensure you made enough money or saved enough money to get the vehicle. This forced individuals to demand wage increases to keep up with inflation and hopefully get ahead of inflation.

      Dual income families made it easier to lower wage demands of workers for a period as the wife's income helped the family get ahead, at least for a few years.

      You look at the recent crash, in the USA, to boost the economy, it has lowered interest rates and is pushing more debt onto already over indebted consumers. Every week you read more and more reports about consumers being so deep in debt and it is getting worse. A rise in the interest rates would kill the economy.

      As executives didn't have to pay their employees more money, they kept it in their pockets. The Top Down approach doesn't work for the benefit of the country, only the top 1%.

      All you have to do is look at the after inflation adjusted mean wages for the last 100 years and you will see what I am trying to say.

      I was informed of a report about Wal-Mart and how they have used social assistance to keep their wages low, which is a form of corporate welfare.

      If you want your government to be out of debt, then get your self out of debt first. It is funny how much extra money you have when you are not paying the credit companies interest charges.

      1. David Roberts Silver badge

        Re: Well, that's one man's opinion...easy credit?

        Easy credit didn't suddenly appear with credit cards.

        Hire purchase, the never never, goes back a lot further.

        Invented in the 19th century, I beleive, as an alternative to an unsecured loan.

        Yes, credit cards decoupled the loan agreements from individual purchases and made

        the whole thing swifter but then a lot of people (myself included) use credit cards to slightly defer the time of payment instead of for longer term loans. So easier credit for some, perhaps. Before that there was always the overdraft.

        1. Diogenes

          Re: Well, that's one man's opinion...easy credit?

          And there was the margin lending for stock speculation in the 20's. Didn't THAT turn out well ?

        2. itzman

          Re: Well, that's one man's opinion...easy credit?

          Credit risk is low in an expanding economy.

          Its when that expanding economy falters, that credit risk mushrooms.

  24. airbrush

    Hmmm

    Theres little evidence this is the case, capitalism works best when you have customers. Low wages and easy credit ultimately lead to most of the money and alk of the power in fewer and fewer peoples hands. Higher taxes ensure the money keeps circulating, keeping the system functioning. This is why inheritance taxes and inequality matters to everyone. You might find a few knowledgeable people on TED, even a billionaire believe it or not saying exactly that. The highest rate of tax in the USA was 80% in the 50's and they didn't turn into the Soviet union. Our wealth depends on customers too,if we run out of young people willing to pay for our houses then obviously that price will fall.

    1. Anonymous Coward
      Anonymous Coward

      Re: Hmmm

      "Theres little evidence this is the case, capitalism works best when you have customers."

      The problem is that, when you consider companies like Wal-Mart, their idea is that everybody else can pay their workers well so they can afford to shop, but Wal-Mart can underpay them and let taxes make up the shortfall. They can't comprehend that if everybody thinks like that, the system will fall apart. This is because the psychopathic mindset overestimates its own intelligence and underestimates that of everybody else, and the management of large corporations, with the combination of power and access to money, is a natural career goal for psychopaths.

      Of course there are reasonable people at the top of large corporations, but they are dealing with unreasonable people every day.

      1. Alan Brown Silver badge

        Re: Hmmm

        "the management of large corporations, with the combination of power and access to money, is a natural career goal for psychopaths."

        It's worse than that. Companies by their very legal nature and directives ("maximise value for the shareholders") are inherently psychopathic.

        It's only natural that psychopaths end up at the helm - until they decide to maximise value for themselves and screw the shareholders.

    2. Diogenes

      Re: Hmmm

      You might find a few knowledgeable people on TED, even a billionaire believe it or not saying exactly that.

      The one question to check the bona fides of these people, and the TED people are often big earners, is to ask a simple question (US only) ...

      " If you believe the tax system is unfair and you are not paying enough tax, just how big a cheque did you write to the 'Bureau of the Public Debt' last year"?" ie how big a voluntary contribution did you make ?

      I would suggest not a lot as the chart at http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm shows .

      I play the same game at work when our resident Socialist bags on about tax unfairness - except in that case the question is - "Are you claiming every single solitary deduction you can from your tax ?"

      1. codejunky Silver badge

        Re: Hmmm

        @ Diogenes

        Looks like you got there before me. Good comments.

        @ airbrush

        "Higher taxes ensure the money keeps circulating, keeping the system functioning"

        No. Look at what tax is and how it is collected. 'Give me a protection fee, whatever I deem fair else I send heavies around. This is a good deal because I may provide services to you (directly or indirectly) but I wont do bad to you, honest'. What other organisation works like that? Tax takes money off people who earn it so it can be spent in ways you wouldnt spend it. To a point that is good for social good projects. However to take money off people is to take money from the economy. It is the removal of money from the market (which can simply be to eat!). And I dont consider NHS alternative therapies, moats and duck houses, porn and such as social good, except for those spending our earnings so they dont have to.

        @ Arnaut the less

        "but Wal-Mart can underpay them and let taxes make up the shortfall"

        Then blame the socialist money spenders. When someone is giving away free money (especially what has been stolen from you in the first place) then yeah you take the money. In the UK public money must be spent (blown!) to get the same again next yr. If the gov hoses people with money then yes you get in line. They already hose you with tax's to do this.

        "management of large corporations, with the combination of power and access to money, is a natural career goal for psychopaths"

        This can be somewhat true I would argue. And what better management position than that of the countries largest monopoly which also gets to make up the rules (gov). With all the perks and trimmings.

        @ Alan Brown

        "It's only natural that psychopaths end up at the helm - until they decide to maximise value for themselves and screw the shareholders."

        An action we see from government and public institutions regularly. But the gov dont go broke until the country goes broke. And they leave behind a bill to all the people demanding more services and more welfare because it is their right and they deserve to be given it. The people were happy with labour because they felt rich. Blair walked out loaded, as did a lot of the labour clan and the people were left the bill. What did the people do? 'Noooooo, you cant cut spending we want more!'. Sounds very similar

        1. Stork Bronze badge

          Re: Hmmm

          @codejunky:

          ok, right, governments do in theory take utility (the economics term) out of the economy. But judging from any reasonable assessment, governments must do more good than harm with the money as the most miserable places on Earth (Syria, Somalia, Afghanistan,...) tend to be where there is least government.

          I think we could paraphrase Churchill on democracy here.

          1. codejunky Silver badge

            Re: Hmmm

            @ Stork

            "the most miserable places on Earth (Syria, Somalia, Afghanistan,...) tend to be where there is least government."

            Tell that to N.Korea. Or any oppressive and anti population governed country. Government by default is not good or bad, it is the people. The best countries in the world as we understand them have rule of law and a basic welfare provisioning. Beyond that things get very hairy. Government as representatives on a world stage and as regulators is about their pinnacle as long as the people vote for them (otherwise we get puritanical or multicultural views imposed for example). But when the gov become providers of services we have people with little clue about the subject running health, education, etc. The worst excess is that these people make up the rules and are part of the biggest monopoly in the country where they can only go broke by the country going broke (they spend our money).

            A punch in the face is better than a kick in the nuts but I would still prefer the strongest person in the room wasnt duffing everyone in for their lunch money. I certainly wont be happy about it.

            1. Stork Bronze badge

              Re: Hmmm

              I agree that NK is not something to aim for, perhaps everything in moderation.

              If you look at outcomes, consider:

              - education. Yes, a lot of Governments may be clueless, but I can't think of a developed country where the majority of primary and secondary education is not provided by governments. Just has not happened anywhere, or please educate me ;-)

              - health. Different surveys give different results, but inevitably the US (largely non-gov) system comes out as an expensive way of not covering the whole population. In one France came out as best value for money, but that depends a bit of how you measure.

              "worst imaginable apart from all the others that have been tried"?

              1. codejunky Silver badge

                Re: Hmmm

                @ Stork

                "I agree that NK is not something to aim for, perhaps everything in moderation."

                Absolutely that was my point. This is where as a regulator it can provide fairness but as a service provider it is corrupt. That is why health, education, etc is such a political football with poor results. Remove the vote bribing and instead regulate it and we wont have people without a clue given total control over them.

                -education. In the UK we have degrees required for base jobs and the government mandated monopoly of university degrees has caused great damage to apprenticeships and other forms of education. The standards change so often teachers have to teach exams now not subjects. While increasing in cost it provides less. This I would argue is abandoning moderation for excess.

                -health. This is a tough one. Our health system is so good the only developed country we dare mention in comparison is the US who have an awful system. It is so good nobody else in the world wants to copy us. And like everything it can be compared in many different ways, but our obsession with 'the best' means we pick stats we like and ignore the ones we really suck at. Labour tried to solve this by throwing money we didnt have at the problem and increasing costs/wages/pen pushers. Now we have a bill we cant afford and a health service which becomes less affordable.

                A good system is in moderation. No government is bad but too much is just as. Both ways can lead to sudden collapse and it is the people who suffer but are unprepared.

  25. Panicnow

    Inequality

    I'd put it down to the use of debt at consumer AND government level.

    Once a borrower cannot repay their debt, the creditors have the debtor by the short and curlies.

    Thus the creditors can choose whatever interest rate they like, using the threat that they will take all their money away from you and lend it to some other schmuk! So the Capitalist can capture all wealth creation for themselves without lifting a finger.

    Look at how they totally subverted the democratic process in Greece for an example!

    There is a way to get out of this problem, but it is for a brave government

    1. codejunky Silver badge

      Re: Inequality

      @ Panicnow

      Good comments but I would not call the EU capitalist. They used debt as a weapon to save themselves from a Greek crash and now use it as a weapon to own Greece. Taking the resources to keep the political project, the EUSSR running.

  26. Johan Bastiaansen
    IT Angle

    So no economic growth from IT?

    If the pent up technology growth from the 30's launched the world in a solid economic growth, why didn't it continue?

    When did the PC hit the market? Wordprocessors and spreadsheets? Networked PC's and the internet?

    So why didn't this growth continue?

    Paul Krugman wrote an article about it: "the big meh" http://www.nytimes.com/2015/05/25/opinion/paul-krugman-the-big-meh.html?_r=0

    Not questioning the IT angle, but IT as a whole ;-)

    1. airbrush

      Re: So no economic growth from IT?

      Nicely done. Next week, how big corp gave votes for women, universal healthcare, a safe workplace and fair pay for all.

  27. Matt Bryant Silver badge
    Go

    Go loons!

    Saunders and Corbyn winning their parties' nominations would be the best thing for Britain and the US as it would guarantee Conservative and Republican victories at the next elections. They are both far too far to the Left to appeal to the Center.

    1. LucreLout Silver badge

      Re: Go loons!

      They are both far too far to the Left to appeal to the Center.

      They are, but that is not a good thing. An effective government requires an effective opposition, and let us be honest about this, Labour are not an effective opposition now, and they will not become effective by lurching to the left.

      In order to keep the government on a well thought through course, Labour will have to retreat from the politics of the playground / student common room. It may be funny laughing at Corbynomics, but 4+ term governments rarely achieve their best, due to being hamstrung by their past.

      1. Quip

        Re: Go loons!

        "4+ term governments rarely achieve their best"

        too true. The pigs need to be dragged away from the trough after a while, even if only to be replaced by other pigs.

        Landslide victories are also a bad thing, especially two in a row. Parties tend to try out their candidates in no-hope constituencies; some will not get the opportunity to stand again. But with a big swing some very unsuitable people will get elected, and have the advantage of incumbency next time. Repeat that for more than one election and you get a government of (more than usual) loons

  28. J.Goodwin

    Of course the allies also basically nationalized all of the German businesses and IP that they could get their grubby paws on during and after the war.

    Pharmaceuticals, radio, recording, aircraft, rocketry, improvements great and small all then free for everyone to use.

    1. graeme leggett Silver badge

      Distribution of Reparations is interesting.

      As an example, the design of a small pre-war German 2-stroke motorcycle was given over to the UK, US, and USSR

      As a result we got the BSA Bantam, Harley-Davison Hummer, and Minsk M1.

      On the other hand the VW Beetle was not taken in reparation but production used to rebuild (West) German industry.

  29. Naughtyhorse

    So let me get this right....

    The post war boom was due to the introduction of tech...

    Which kinda begs the question 'what the fuck happened in the 80's?'

  30. Robert Grant
    1. Tim Worstal

      Re: Thoughts, Tim?

      Haven't read it so can't really comment

  31. Nigel Sedgwick

    Female Proportion of Labour Force

    I am wondering if the rate of female employment has any effect on inequality.

    Though difficult to find, going very far back, this link gives the proportion of employed persons who are female, for the USA from 1900 onwards.

    Over the period chosen as particularly relevant by Tim (1920 to 1980), the female proportion of the labour force goes from around 20% to just over 42%. This is a very substantial change. It also occurs to me that female wages for each year, particularly over that period, may well have varied significantly less than male wages for each year.

    Subsequently, from 1980 to 2008, the female proportion of the labour force fluctuated mildly between 42.5% and 47.0%. There was then a marked increase, to 53.6% in 2010 and to 57.0% in 2014.

    Best regards

  32. Neal Jackson

    There's a little matter of buying on tick (post WWII Hire Purchase) and the introduction of those euphemistically named debt cards the banks preferred to call "Credit Cards" (1970's ...present). Both created a large increase in consumerism and had nothing to do with left/right economic policies.

    Credit was to European workers what mirrors and pans were to savages; a cruel beguilement.

    There has never been a time of greater economic equality, ever. The closest people got to this state being achieved was after the great plagues swept through and depleted the european populations of skilled human resources.

    Efforts to establish a fairer distribution of wealth were made almost entirely by socialists and workers themselves via trades unionism. It is fair to say some monied, yet philanthropic, pre labour party libertarian socialists (usually Quakers) of means and influence did give great credence to both education and putting workers rights and humanitarian goals before profit. As influential to thinkers as their altruism was, capitalists then, as today, retained the upper hand and abundant power to burden workers shoulders in assurance those workers genuflected before the Alter of Lucre.

    Socialist economic policies are the only means to ensuring a more egalitarian civilisation. Communism certainly fuelled a more radical approach to engendering a fairer playing field as its audacity galvanised thinkers and doers within and without.

    The populations of the Soviets closest neighbours tore at each others throats with some demonising and others evangelising. Germany, who had fought off the Russians in WWI soon faced a dilemma when the Weimar Republic disintegrated into dozens of political parties. One party, DAP, were quick to see the appeal of certain aspects of communistic economic policy and soon added "socialist" to it's name; NSDAP. Despite the neutralisation of trade unions in the Reich, the NSDAP adopted many of the best socialist policies and soon had internal organisations which oversaw the interest of workers.

    If WWII had not happened the result may have been a Soviet Europe, USSER, as communism was gaining monumental strength with workers throughout Europe. The strength of influence of communism within neighbouring countries was directly proportional to their distances from its borders. Where water and wet weather kept it bay, its effects were more dilute in the UK.

    Immediately post WWII, Churchill had bankrupt Britain and picked all the threads of a well-worn Empire... India would fall first and start its own economic destiny. In the Pacific, Japan had capitulated moments before the Soviet troops marshalled along the Chinese coast embarked on their invasion of Japan. The recriminations for their cruelty to the Asian populations, especially the Chinese, was more terrifying than any atomic bomb. Both East and West the USSR had beaten the axis. In Stalin's hesitation, both regions feel into an American dictatorship.

    Radiating East and West of Moscow, spheres of influence were established. With the exception of the UK (which the American's believed was either communist or socialist - they couldn't decide as they didn't understand the differences), other european countries were engorged with American dollars and awash with Coca-Cola. Britain was given a fraction of the loan it asked America for. America also walked away with the blueprints of Britain's top secret technology.

    1. Fraggle850

      Revolutionary socialism was a treacherous monstrosity from it's inception

      Orwell was left wing yet saw the true nature of socialist revolution in Animal Farm. One only has to look at the shocking treatment of the Ukrainian anarchists by the red army during the revolution to see that the flaws in the socialist revolution were in place from the off.

      Socialist dogma prevented the unions from truly working in the best interests of the working man in the UK and ultimately led to unopposed Thatcherism and weak-ass new labour.

  33. Speltier

    Oh, the Rentiers

    In Europe and parts a bit to the west, the rentiers were severely damaged-- more so in WWII than in WWI, as WWII saw more worldwide damage.

    The rentiers are the ones who (besides living on the stored assets and the sweat of others to a large extent) also mostly want the status quo in order to maintain their positions-- any changes had to be "positive" (like a reduction in income taxes at the top end).

    The wars upended the financial and social stratification-- vast wealth and ossified economic empires burned to ashes; lots of niches opened up for people to move into from the oppressed masses below.

    Eventually all that cruft regrew, more rentiers established their financial castles, and here we are again. Unfortunately, a new world war probably will open rather more niches in society than one may want...

  34. E 2

    When did The Register become a political rag?

    Where is the technical angle or connection?

    This article is just another hack trying to bolster a new orthodoxy.

  35. Magellan

    Careful with timing

    Events and actions a decade or two before can cause outcomes only measurable much later.

    For example, I have heard someone comment prior to the collapse of the Bretton Woods System increases in consumer spending correlated to increases in wages. After the collapse of Bretton Woods there is a correlation between increases in consumer spending and increases in consumer debt.

    It is highly possible the collapse of the Bretton Woods System in the early 1970s contributed to increasing wealth and income inequality in the late 1980s.

    Similarly, the deregulation of transportation and communications in the late 1970s had certain impacts.

    The changes to the income tax system were actually fairly small until the late 1980s. It is hard to comprehend how changes in income taxation on the wealthiest have a significant impact in wealth and income inequality, since they only impact one end of the wealth and income spectrum. However, it is possible there is correlation with changes to capital gains taxation and executive compensation.

    By far the biggest economic impacts in the 1980s were those due to what John Naisbitt called "Megatrends", and other business futurists predicted. The movement of low skilled industrial labor offshore, the automation of low-skilled white collar work, the decline of skilled blue-collar work, along with the rise in the dual-professional household all had impacts.

  36. Anonymous Coward
    Anonymous Coward

    Free Trade, Globalization, Pensions and Capitalism

    The problem with any form of Government is that without sufficient safe guards the economic system proposes can be controlled by a powerful elite. We've been seeing this increasingly in the United States since the late 1970s and if you're watch the Republican nominees you can see that none of them are viable candidates for a Democracy and I wonder if Bernie Sanders isn't the only candidate in the election cycle that understands Democracy at all.

    Free Trade and Globalization have proven to be nothing less than the wealthy being able to suck the money out of the middle class of established economies. It is entirely possible that with appropriate safe guards this/these ideas may have been beneficial to many nations but because the wealthy have been able to subvert reasonable government regulations

    Perhaps the biggest challenge to changing much of this is that Pensions are now largely directly in the stock market instead backed by the companies that people worked for, of course, a decreasing number of people seem to work for any particular company for the length of their work life.

    All of the above only strengthens the hold that the Uber Wealthy have over both Governments and the Populace.

    1. Stork Bronze badge

      Re: Free Trade, Globalization, Pensions and Capitalism

      Yes, but free trade and globalisation has also lifted hundred of millions in China and the rest of Asia out of poverty. Africa is probably growing faster than it ever has.

  37. bugblatter321

    Tim, just a quick comment to say how much I appreciate your columns. This is mostly because your ideas and comments agree pretty much exactly with my thoughts, and therefore you are an intelligent, erudite (and presumably handsome) man. Please carry on the great work! I hope and pray that people who have the ability to mess up my life with their policies read them and pay attention. Would be interested to see you and Lewis Page get together and look at defense spending some day.

  38. E 2

    This item should be filed under "editorial".

  39. BobRocket

    Won't someone think of the children ?

    The economic boom was created by the boom in survivable babies and ended when baby production topped out in 1972.

  40. BobRocket

    Missing link

    Interesting piece on infant/child mortality

    https://jscholarship.library.jhu.edu/bitstream/handle/1774.2/936/WP90-07_Childhood_Mortality.pdf?sequence=1

  41. Starlite Lemming

    Tech acceleration during WW2

    While the 1930s did see many technological advances, as noted, WW2 itself did accelerate certain technologies (radar and communications, in particular) beyond where they might have reached without the war (over the same time period). Once the war was over, that technological expertise naturally sought out peace-time applications, in my example leading to a sudden explosion in radioastronomy, but also in more consumer-applicable communications fields. I would be surprised if this development in select, narrow fields did not give other, related areas a boost -- dragging them forward at an increased pace, so to speak.

  42. LucreLout Silver badge

    @Tim Worstall

    Maybe we should deliberately lower inequality with very high tax rates and all the rest in order to get us some of that lovely growth of the 1950s and '60s?

    I still don't understand the socialist obsession with other peoples money. We could more readily equalise beauty by hitting the pretty with a brick, or applied intelligence by taxing education, or health by a centrally planned diet and exercise regime, and even lifespan could be equalised by euthanisia a-la Logans Run.

    I earn my income by legal means, paying all taxes which are due under the system. That I don't spend every penny I earn is more due to budgeting than it is a high income. Just how much of what I earn do socialists feel entitled to, and why? Why do they think I would continue to make the sacrifices I do now, in return for the higher comp, if I'm to see it squandered on other peoples pipe dreams?

    Short of a global implementation, which will never happen, I don't see how this could be expected to work without emmigration controls - the best & brightest would simply leave, again. The world is a lot smaller now than it was during the brain drain of the 1970s, and those with the greatest skills and/or wealth are the most mobile.

    So, maybe there is something to this strong unions, government management of the economy

    The 70s called for a chat. They want their power cuts, lack of service, zero choice, and appaling politically motivated strikes back.

    It so happens that the turning point in the 1980s coincides with (1) acceleration of skill-biased technological progress, (2) increased globalisation and entry of Chinese workers into the global labour market, (3) pro-rich policy changes (lower taxes), (4) decline of the trade unions, and (5) end of Communism as an ideology.

    Seems to me that the 80s was around the time that education as a route from poverty really got going. Certainly by the late 80s my family had realised this may be the best route for us, and I became the first generation of our clan to graduate university.

    Despite Labours paucity of thought concerning pushing 50% of kids into uni [1], it remains true that those graduating a STEM subject will enjoy better than average earnings. It is also around the time the property market began to motor, which is one of the core drivers of wealth differential, particularly as the generation with the greatest property gains is also the generation that had the largest pensions, leaving more of that wealth to be inherited tax free [2].

    Those who educate themselves to an above average level, and who's families play the long game regarding property ownership and passing wealth down the generations, will drive "inequality" ever higher. If educating yourself, working hard, investing in your families future, and leaving something to the kids is a bad thing then someone will have to explain that to me, because I don't see it.

    [1] Yes, graduates tend to earn more than others but that doesn't mean making everyone a grad will increase everyones income any more than the rampant GCSE grade inflation that continues unabated.

    [2] There is no capital gains tax on a PPR, and since most houses fall well below the IHT threshold, there are no gains there. Each generation rolls the inheritance into an ever better PPR until they get to the IHT threshold. Thereafter grannies pad gets left to the next generation below, and so it goes. Eventually you start needing to gift assets and taking proper advice, but by that time your family will have a few million in assets.

  43. Sineira

    "I am disappoint"!

    Lots of utterly useless opinions by what must be kids with no real knowledge of history.

    And almost all missing the point of the article.

    It was about inequality, NOT about economic progress or which system is best.

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