productivity

UK austerity

In the current debate about UK austerity, what’s missing from the choice (not the fake choice between austerity and no austerity, but the hard choice between Social and Economic austerity) are two important other options (Productivity improvements and Philanthropy).

To elaborate, the current debate about austerity should be about the mix of four things:

(1) Social austerity – realisable tax rises for some or all current UK tax payers). Of course, history shows us that raising taxes encourages tax avoidance and discourages incentive to work harder.

(2) Economic austerity – alleviating current austerity through borrowing to burden future citizens with greater austerity.

(3) Productivity improvements – workers choosing (through a combination of after-hours study and after-hours volunteering?) to up-skill, to raise their productivity to ultimately alleviate austerity. When we change our expectations, build on small successes to boost our confidence and reframe current problems in a different way using personal flexibility, then there is every chance to better ourselves. If the future is about portfolio careers, and in the age of smart machines, ‘keeping our skin in the game’ through clever design, then up-skilling starts today. After all, process automation and machine learning won’t wait for us, but proceeds at its own pace. A final question about labour productivity at the national level. Which is better – fewer people employed but them generating higher average labour productivity (the French model, relative to the UK model) or, more people employed but with lower average labour productivity (the UK model, relative to the French model).

(4) Philanthropy – particularly high-net-worth individuals forming consortiums, to alleviate UK social deprivation through charitable foundation activity.

The best solution will probably come from a better combination of all four things.

One great opportunity with philanthropy is developing ‘hospital charities’ to build city hospitals that are entirely charity-funded and can take some ongoing pressure off the NHS, care homes and private hospitals. Such hospitals could offer a more selective range of treatments (target elective-surgeries with long waiting lists?), than the NHS.

Food for thought?

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STEAM Power (that’s STEM and A)

Science, Technology, Engineering and Math skills are undergoing a period of increased emphasis in our schools. Some might argue it’s at the expense of Art subjects. Does it have to be a zero-sum game?

Science hypothesises, experiments and interprets. Art creates directly, with no underlying rules or logic to adhere to. Science is structured simulation. Art is role play and improvisation. To reach human markets (voters or buyers) needs emotion, not just product features. Art and Science should therefore be seen as a partnership.

Secondly, at school, can we engage more students in STEM subjects, by emphasising it as a means to an Art end? Invite students to come on the STEM journey to empower Art.

Thirdly, great science discoveries utilise Psychology and thought experiments. Or sudden leaps of insight (realisations). Great thinking is arguably as much an art as utilising the science.

It’s productivity Jim. But not as we know it.

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London productivity arguably rests on a four legged stool of superfast broadband, decent public transport, affordable housing and clean air to breathe. Why can’t politicians get their brain in the game on this?

Meanwhile, according to the OECD, after making adjustments for purchasing power parity between countries, the growth in output per head in the five years ending 2015 was 19% for Germany, 18% for USA, 17% for Japan and the entire Eurozone, 10%. In the same study, the UK managed a mere 9%!

People can argue about the data, the method or the way output is valued. In any case, there’s no point blaming the capital versus income taxation regimes for poor national productivity, if both taxes are being widely flouted by big corporates, in favour of tax havens, while lobbying to offset capital investment or job creation with special tax breaks. Physical and intellectual capital investment reduces corporate performance in the short term which then reduces bonuses, isn’t so relevant (as a reason) either, if much of the capital investment (both types) happens in university labs. Or is commercialised off the back of them.

Management decisions that shed labour cost, rather than investing to make the same labour more productive, might explain the relative OECD productivity measures in Germany versus the UK in the above figures. However, since productivity for the EU as a whole (with consistent labour laws) is very similar to the UK, it probably isn’t the main explanation.

There’s also the output valuation issue – how to best measure productive output, if the resulting output value doesn’t necessarily accrue to the invention developer. Perhaps nations wanting to boost productivity, need to publicly reward inventors by waiving their income tax payable? Productivity may continue to be elusive on every level. The race is on, not just to improve national productivity, but even to understand it.