By Michael Baxter
And talking about the real world, have you seen the latest forecast from the OBR?
You may recall, the OBR was set up by George Osborne as an independent economic forecasting group to act as a kind of objective judge on economic performance. And in a master stroke, George turned a poacher into a gamekeeper by recruiting the then boss at the Institute of Fiscal Studies (IFS) Robert Chote — who had been having great fun ridiculing government projections — to head the OBR.
As it happens, Mr Chote is funny. When he was top man at the IFS he made some genuinely amusing presentations, which may be why he became so popular with the press — he is a good man to quote, as well as good at livening up dull press conferences.
But the forecasts from the OBR are no laughing matter.
It originally projected growth for 2012 at 2.8 per cent.
Now it is saying minus 0.1 per cent. It is forecasting
growth next year of 1.2 per cent, but frankly it is guessing. It has no idea what next year, 2014 and then 2015 will be like. It might as well stick a pin in a piece of paper, and then carry on with the data muddle it has been working with.
The man who may be closest to the truth is Bill Gross, the world’s leading bond investor. He and his colleagues at Pimco have started talking about what they call a new normal.
“In the past decade,” said Gross recently, “machines and robotics have rather silently replaced humans, as the US and other advanced economies have sought to counter the influence of cheap Asian labour.” He went on to cite a report from MIT, which “affirmed that workers are losing the race against the machine.” And concluded: “Technology may be leading to slower, not faster economic growth despite its productive benefits.”
A few years ago, the benefit systems had become silly. The incentive to work had diminished. But be careful. Some people who are unemployed have done everything possible to get a job. It may happen to you, too. Even people who have enjoyed tremendous success in the past can find themselves armed with antiquated skills, and have to go from a senior job in business to being turned down for jobs paying the minimum wage.
In an era when technologies, such as 3D printing, make it hard to see where jobs will come from, being unemployed is becoming a sin. In his Autumn Statement George has said he is going to increase benefit payments by less than inflation. A year or so ago, the ‘Telegraph’s’ Nick Cowie argued that the unemployed should not have the vote at elections. See: A tax-based alternative to the Alternative Vote http://blogs.telegraph.co.uk/finance/ianmcowie/100010127/a-tax-based-alternative-to-the-alternative-vote/
Maybe technology is why the OBR keeps getting it wrong.
Technology has created a new normal, and economists are so busy insisting that technology is not creating growth, that they miss the real point. It is changing the world, but it is making jobs all the harder to come by. There are solutions, but until the cause is acknowledged, the solutions will not be considered. By the way, there is a new book by Nassim Taleb — author of the Black Swan and possibly the most influential writer in the world at the moment — called ‘Antifragile’ which makes a related point. For that matter ‘The Blindfolded Masochist’ by …errr… me, makes a similar point.
Michael Baxter, email@example.com