06 November 2013

As others see us

Bloomberg has been reviewing the UK political scene, not unfairly, I think:
... the U.K.'s ideologically driven politics of class warfare are back after a brief respite during the booming Tony Blair years. In the space of a few weeks, Miliband has proposed a price freeze for energy companies and a cap on the interest rates that lenders can charge, as well as steps to increase the minimum wage, reduce the number of low-skilled immigrants coming to the U.K., and set up state-backed regional banks like in Germany.
I suspect that unless living standards start to rise substantially in the next year (the current increase in economic growth rates won't cut it), Miliband's back-to-the-future case for change will be hard to defeat at the next election in 2015.
The honest answer to most of Miliband's proposals is that they address only the symptoms of a wider problem: productivity in the U.K. is falling, business investment is anemic, and the high value industry in which the U.K. excels -- finance -- is still tangled in the debt crisis it helped to create. The answer to these problems is to invest more, raise productivity, fix the banks and diversify the economy. Yet these things are hard to do and don't make a good election manifesto.
The bottom line is that real wages are falling and a growing number of people can't afford basic utilities that are taken for granted in a developed economy. Prime Minister David Cameron and his government haven't done enough to speed the recovery, and Miliband has some of the right answers, such as his focus on vocational training. Yet many of his proposals, such as making it harder for companies to fire employees, betray old interventionist reflexes that will turn a cost-of-living crisis into a jobless one.

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