Chillaxing across Latin America and Leicestershire

Afternoon all,

Feeling pretty perky today. There’s the exiting the recession thing, which is good. But better, the weather recovery is at last underway, as we exit 2024’s never ending winter. This week has been genuinely pleasant, so the voters weather gods better not take us back to square one. Especially as I’ve missed most of the fun over the past two days, being locked into a recording studio small box to record the audiobook version of Great Britain? But I did learn an important life lesson – you can, it turns out, hear too much of your own voice. Who knew.

On the Q1 growth figures this morning, they’re strong at 0.6 per cent (strongest in the G7 so far, with Japan’s data still to come) but as ever we need to not put too much weight on one quarter of growth. The big picture is what matters – it’s good that GDP per capita grew for the first time in two years in Q1 2024, but it’s still lower now than it was two years back. Our Research Director James Smith has a terrifying stat to put our stagnation into context: GDP per capita has grown by just 4.3 per cent over the past 16 years – down from 46 per cent during the preceding 16 years running up to the 2008 financial crisis… Anyway, did I mention the sun is out?

Have a good weekend.

Torsten

Tick-tock. I always try to share time-use data with you – not least because, unlike with GDP etc, hopefully everyone gets it is about our real lives. If you haven’t before, marvel at how much French parents don’t give a damn about ramping up the hours spent on childcare, something we see in every other advanced economy. This week the ONS had an update on how us Brits are spending our time. It confirms what we’ve all lived (if we’re honest) – that the pandemic induced exercise boom has turned to bust (in a shock move once we had some alternative options we also cut down on the gardening/DIY). And to finish on some London bashing – those in the capital spend the least amount of time on ‘free time’ (i.e. fun) activities. You East Midlanders do the most chillaxing – over an hour more than the stressed-out Londoners a day.

Warm workers.The weather, not just which region you’re in, can change how we spend our time. At least for some of us. New research gives us the Colombian view of how periods of high temperature (lots more of those coming for the globe people) impact how time gets spent. In particular, it examines how the volume of childcare was affected (between 2008 and 2019), or who was left holding the baby when the mercury soared. The answer might be a surprise… When it gets hot, men worked a bit less and spent more time on unpaid childcare (an extra 24 minutes for kids under 5, and 17 minutes for 6 to 11 year olds). Women saw no increase. Is this a gender equality silver lining to the climate crisis? The author is gloomy enough to take that away from us, arguing this gender pattern just reflects that the extra childcare for men is leisure – with the fact there’s no matching decline in childcare for women indicating they remain maxed out on routine childcare.

Banning bank-holidays. Tim Leunig wants to abolish bank holidays, and give you the days off back as a higher statutory leave (ie scrap five days’ worth of Easter/May/August holidays, and raise minimum paid leave from four to five weeks). Why? Because he’s a massive liberal that thinks people should be able to choose when they don’t work (we’re allowed to keep “culturally entrenched” Christmas and New Year days off). Fair point. Tim goes so far as to say “I literally can’t think of a good answer to” why we have bank holidays. But if we sprinkle a bit of collective pondering onto this liberal vision you get a partial answer – lots of people off at the same time helps solve a coordination challenge ie other people are free for us to hang out with. This fact is what killed a less liberal attempt to change time use patterns: the Soviet abolition of fixed weekends in favour of different people having different 5 days on, 2 days off pattern. You can also tell Tim is not imminently running for office… because he also suggests redressing the imbalance of those in Scotland/Northern Ireland currently having more bank holidays by either taking those days off them or cutting their pay. Bold.

Supreme steam. Lovely bit of economic history here, which delves into how a new technology displaces old ways of working. Thankfully this new paper isn’t about AI (for once), but instead the uneven transition of 19^th Century American manufacturing from water to (superior) steam power – examining the pace of change between 1850 and 1880 among lumber and flour mills. The key finding is that it benefitted places without ready access to water most/fastest. Partly that’s for an obvious reason (they suddenly had an easier route to operating a mill). But what’s interesting is that this was also because areas with water were slow to make the move to steam. Many firms, including new entrants, in these areas continued to adopt water power because the fixed (ie upfront) costs of starting up in that way were low vs steam. These firms then became ‘locked-in’ to the old tech (by the costs of switching) which made it harder to scale up production easily. Turns out firms, like people, are path dependent.

Secret subsidies. Ed Conway wants you to look at “the most important chart in the world”. The chart in question is the OECD’s attempt at estimating the degree of state aid different countries provide to their industries – and in particular a chart of the fact that China does shed loads of this (nine times the OECD average). That help doesn’t come largely in the forms of state aid we discuss in the context of the US/EU (ie tax breaks or subsidies) but largely through cheap credit (which state control of lots of the finance sector makes possible). Ed’s take is that while this chart looks imbalanced, free trade is a lot less of a win-win, although he doesn’t tell us whether the answer is less trade or more subsidies here at home. PS If you haven’t already read it, Ed’s book, Material World, is great and very different to anything else you’ll read (you can watch our event on it).

Chart of the week

Thought we should keep the out of recession/good news theme going with a COTW on the number of months spent in recession in the UK and US over the past century and a half. It’s good news because basically recessions were happening left, right and centre in the 19^th Century and have got a lot less common – thanks in part to us working out that regulating banks can reduce banking crises, that the gold standard had some pretty big downsides, and that fiscal/monetary policy can make a real difference in a downturn. We’ve included the US to spell out that this isn’t a UK specific phenomenon (American banks in particular used to go bust every five minutes). Unfortunately, this feel good tale doesn’t have the happiest of endings… with three recessions in the last 16 years, we’re currently seeing them twice as often as we did during the second half of the 20^th century. Time to kick the recession habit guys.