Shifting stances on migration, investment and economic change in Britain

Afternoon all,

I’m a long way from neutral on Alistair Darling – he gave me my first big job and his wonderful wife Maggie somehow single handedly catered our wedding, a feat if I’m honest I still don’t understand. But even recognising my bias, I think Alistair deserves every one of the kind words that have been spoken and written since his painfully early passing.

He was a truly decent man who understood what senior jobs in politics are fundamentally about: the public service of taking decisions and resolving differences, of dealing with the questions (or crises) the country faces when you are lucky enough to hold office, not the preoccupations that got you excited as a teenager.

He wasn’t in any way apolitical, but he got that politics isn’t just about you – that in the UK it is a team sport. He saw himself as part of a team driving government forward (while it has to be said being an absolutely terrible backseat driver in an actual car).

The man who loved the distinctly wet Hebrides, also had a humour as dry as the Sahara. At a pretty grim party conference down in Brighton, I’d persuaded a very reluctant then-Chancellor that getting some fresh air might improve all of our frayed nerves. We headed down the steps to the pebble beach, only to be confronted by a hundred or so naked pensioners posing for a photo to protest at something or other the government had done. On seeing Alistair’s distinctive outline they came running wobbling up the beach towards us. As we beat a hasty retreat, Alistair turned to me and remarked through a wry smile: ‘I told you a walk was a terrible idea’.

I’ll be remembering him this weekend, and always.

Torsten

Chief Executive
Resolution Foundation

Weighing workers. Comparing countries’ economic performance via headline GDP is always dangerous, because it’s GDP per capita we ultimately care about living standards wise. A new paper reminds us of something else obvious, but too often missed: the share of your population that is of working age is really important to how much you actually produce. Take Japan, and the supposed puzzle of its slow growth (averaging just 0.93 per cent between 1990 and 2019). Well maybe Japan isn’t so puzzling after all. While GDP per capita growth has been lacklustre in this fast ageing country, GDP per working-age adult has grown at annual rate of 1.44 per cent over the last 30 years, similar to the 1.56 per cent rate in the US. The authors show that on this basis, performance differences across advanced economies are far smaller than headlines suggest. Of course there’s always one country that bucks the trend: Italy is such a disaster that it’s the Italian job puzzle we should really focus on.

Close collaborators. In economics, like other social sciences, we tell ourselves that it’s the best papers that get published, because of the process of author blind peer-review. Unfortunately, the evidence indicates this isn’t quite what happens in practice. New research examines papers which include experiments and appeared in top economics journals. It finds clear evidence that papers published by those with ties (e.g. as co-authors) to editors are able to get published despite being lower quality (as measured by citations after publication). Fricking favouritism.

More migration. Migration is on the up – with net migration to the UK hitting 745,000 last year. My view is its part in British politics will also be on the up – despite lots of academics and liberal campaigners rightly saying public attitudes have shifted towards being more pro-migration. If there’s a change of government, a Conservative opposition will focus on the issue: Conservative MPs are already writing substacks on the topic (Neil O’Brien’s latest discusses the challenge of deporting those denied asylum). And migration’s opponents will always have issues to work with because there are trade-offs. Take our moral obligation to accept refugees. Those, like me, who take that very seriously, need to also wrestle with challenges large refugee flows can bring. A new paper examining the 2015 and 2016 influx of refugees into Germany finds, while it did not raise crime rates during the year of refugee arrival, there was a small increase in property and violent crimes one year later. I’d prep for more migration in our politics.

Impact investing is all the rage, with funds promising both financial and social returns. But the evidence is thin on the ground about what impact they make (research tends to focus on whether they make any money or not) so research trying to fill this gap caught my eye. We can start with the good news: impact investors are more likely to invest in disadvantaged communities and emerging industries, while also exhibiting greater risk tolerance and patience. But, and it’s quite a big one, there is little evidence impact investors are expanding which firms are actually getting finance – investing in companies that broadly would have got funded anyway. This question, of making sure social investments are genuinely ‘additional’, is something that is front and centre in our growing social investment work, through Resolution Ventures. Keenies can watch our recent WorkerTech conference for more.

Mechanisation marvels. The dominant view of the industrial revolution is that it made us all far richer in the long run – but the long run took quite a while to arrive, with workers not getting their share of the gains for several decades in the 19^th Century. But a perkier take comes from a study of the spread of steam power – one of the largest waves of mechanisation ever – in France. Its headline finding is areas that adopted steam-power quicker in the mid-1800s got more jobs (122 percent more), higher wages (20 per cent higher), and didn’t see a fall in labour’s share of revenue. Basically this paper is arguing more tech was good all round. I hope it’s right about our future, whether or not it is about our past.

Chart of the week

This week’s chart is taken from Ending Stagnation: A new economic strategy for Britain – the final report of The Economy 2030 Inquiry. Figure 76 to be precise, but you’ll have to wait until Monday for the other 75…. The book argues that it is time for a new approach, given the absolute disaster that 15 years of low growth and four decades of high inequality have been for low- and middle-income Britain’s living standards. And it’s not just us saying that. This sense of economic drift is reflected in our politics – its why both the opposition and government talk about the need for economic change. And it’s also reflected in public opinion, as COTW shows – 62 per cent of people think the country is heading in the wrong direction, compared to just 16 per cent who think we’re on the right track. This yearning for change should stop any fatalist talk that change is politically impossible – there is now a clear constituency for it. Please do read the whole book, and join the conference launching it on Monday, for lots of detail of what that change can, and should, be.