Monday, 24 November 2008

Hoping to Buck the Trend

I'm hoping to counter the recession as I have a job interview tomorrow, for which I have spent a long time making a presentation. Its for a Study Skills Facilitator (HE).

I make a number of applications for jobs knowing that many are efforts that will blow away to nothing, but Study Skills is an interest of mine, the lack of which - like literacy - leads to educational incapability and therefore compensatory strategies by teachers at many levels to force students through exams getting students qualifications levels that overstate their actual abilities.

This is why exam rates rise, inflating league tables, with plenty of quantity of work, and yet when students have to cope with their own learning they often show inadequacy at HE level. In the past, when students learnt for A levels, teachers handed out chunky, wordy, textbooks and taught in an academic manner that meant some students failed but those who passed were ready for undergraduate Higher Education. Even some A level textbooks today follow the facing pages rule. Now HE finds that it has to do what amounts to much remedial work at its level, despite the near 100% pass at A levels, with inadequate literacy to cover the subject demands and with study skills that were never developed by students told what to put and where.

I think that students benefit from study skills sessions because they offer the organisation of learning, and that organising is a means to handle abstract concepts. A levels used to start the handling of abstract connections in subjects, but the teaching now continues the concrete pushing of material in order to get through the exam. Study skills is to get people off this dependency. It also introduces academic community rules in amongst that responsibility for learning.

It would be good to beat the recession. I'm not sure if this government will by its actions today. The drop in VAT comes across as throwing money away. It's a drop that, in the midst of sales discounts, will be unnoticed, and will even be mathematically inconvenient for staff brought up with 35p in every £2 in their bloodstream. It might help generate more cash in businesses, which is what some measures seem to do. The primary tax pumping seems to be bringing forward benefits, and one off payments, though as ever the single unemployed get sod all. But the most stupid aspect of this pump-priming (or should it be prime-pumping?) is the tax payback starting in 2011, which is likely to choke off any resultant growth, or deepen an ongoing recession, with borrowing therefore far higher than the huge amount forseen. This £118 billion borrowed in 2010 for what is a £20 billion pump into the system is a huge burden, and that's on the Treasury's optimistic presentation.

It's basic economics, or it used to be, that at this point in the economic cycle the monetary curve is somewhat flat - interest rates have little impact - and it needs spending. But it needs to be effective spending. Handing out money might just mean reducing private debt (transferred to public debt) and additions to savings (that reduces interest rates, but by little at this part of the cycle). What works is the government actually spending. And here the Chancellor has brought forward public spending on some £3 billion of items, but actually his public spending growth is given at 1.2% in the future years whereas we have been having this at 3% year after year. There is a sense that over in the United States Barack Obama will show how it is done - through massive infrastructure spending. As Vince Cable said, we should be buying up the land and physically constructing social housing. There are railways to be laid again, and some new rail and road projects. Capital and efficiency making spending - value added spending - is better than simply consumer spending, much of which goes on imports anyway. And the most stupid 'tax' rise of all will be the National Insurance rise - that is called a tax on jobs - in 2011.

Since the government got over its first nationalisation, it is now suddenly discovered a left wing blood vessel and will tax the wealthier more in the future. The economic justification for this is more effective spending - marginal consumption is higher among the poorer.

The only long term economic strategy is efficiency that brings down the 'natural' rate of unemployment. That means productive and value-adding activity, value in the end determined by a productive worker who consumes. The difficulty is the imbalance where so much productive capacity has transferred to China and its state directed capitalism that delays market developments to higher wages, and less so to India with its English language and education advantages (but it will see higher earnings start to modify its cheap productive base). Thus surpluses in China and nearby fund debts in the West so that it continues to consume what it cannot afford. Therefore the answer to the economic downturn cannot be more debt funded consumption, which is what this government proposes. It must be in productive ability, and in market segmentation (terms of trade - where shifts in productive activity leave us with comparative advantages: it might be cheaper for them to do some things, but we do them because they do the other cheaper still) and all the State can do is aid the means towards value adding.

It's like the Americans bailing out their car industry. If all that US federal money does is a kind of British Leyland scenario, then it is money down the drain. In the end we gave up on that, car plants as existed were slashed, but new ones were built by other companies (often with state subsidy) in other places on upgraded productive techniques and with different models. Our failed banks have been bailed out with little instruction to change; they need major changes in operation and a longer term outlook.

If banks will not lend to solvent businesses that can afford interest payments (and any going concern should be able to do so), then the government may have to take a nationalised bank and make it a business bank and state banking might have to allow some private banking to go to the wall. An independent panel as proposed today is rather pathetic in comparison.

I don't see this pre-budget report, really a budget, doing anything except choking off any growth in 2011. Such is after a General Election. It's called timing. By the way, doesn't Alistair Darling mumble at the despatch box!

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