Economics

Before too long, news that Uber will offer 70,000 drivers holiday pay and the national living wage will be viewed less as an unmitigated triumph than a Pyrrhic victory. In the UK you can be an 'employee' with an ever-growing raft of employment rights, a 'worker' with rather fewer rights, or 'self-employed'. These statuses have different implications for tax purposes. Last month, the UK Supreme Court, ending a six-year case brought by two Uber drivers, ruling that the ride-hailing firm must classify drivers as workers rather than self-employed.

The big state is back. The Budget puts Britain on a path to having the highest tax levels since the 1950s, and a state that controls as much of our GDP as it did in the days when it still owned carmakers, phone lines and travel agents. Despite Rishi Sunak’s best efforts to contain spending, the figures are likely to go higher still, as the bills for the NHS, social care, and disrupted education continue to rise. But it’s not just about the numbers. Even before the pandemic, the political winds were blowing towards larger government, with Boris Johnson embracing a more muscular, state-led industrial strategy. But the pandemic has put that on steroids.

Well, that’s alright, then — we’re not going to have another recession. True, the Bank of England’s monetary policy committee expects the economy to shrink by 4 per cent in the first quarter of this year — following a fall of 9.9 per cent fall last year, itself the deepest plunge in economic growth in modern times. By the spring, we may have several million unemployed as the furlough scheme comes to an end. Many thousands of businesses could go bust as they run out of money and government help is withdrawn. But at least we won’t be in recession: because that ended last June and now we’re back in an era of economic growth. No, it doesn’t make a lot of sense to me, either.

Today is supposedly Blue Monday. Sixteen years ago, a travel agency published a press release claiming that the third Monday in January is the most depressing day of the year. The idea is superficially plausible. It’s mid-January. It’s cold. You’re skint after Christmas. You’re back at work after the weekend. There are worse candidates for the most miserable day of the year. But as a scientific claim, it was swiftly debunked and the academic responsible for it has since disowned it. It lives on as a way of filling space in newspapers and is probably most famous for being untrue.

All governments are going to have to come up with vast stimulus packages over the next few weeks or face mass bankruptcies and job losses as the economy is paralysed by measures to combat the coronavirus. But was it really wise for President Macron to announce on Monday evening that no business will go bankrupt as a result of the coronavirus crisis? True, there are a great number of businesses all across the world that risk going to pot through no fault of their own. You might run the best pizza parlour in the world but still you face going under if your government orders you to close down for weeks and months, depriving you of income with which to pay your continuing overheads.

How should fiscal conservatism be defined? George Osborne inherited a fiscal deficit that was clearly unsustainable. During the panic over the possibility of a global depression and concerned for his electoral prospects, Gordon Brown had massively inflated government spending. Only Alistair Darling prevented more excess. As Chancellor Osborne said, there was no choice but to retrench: his expression was ‘there is no Plan B’. But in fact, there was a viable choice. In an article published at the time, I somewhat cheekily christened the fiscally conservative alternative ‘Plan A+’. My argument was that we indeed needed to retrench on spending.

‘Suppose you bought a case of claret a few years ago for £20 a bottle. It now sells at auction for about £75. You have decided to drink a bottle. Which of the following best captures your feeling of the cost to you of drinking the bottle?   1. £0. I already paid for it. 2. £20 — what I paid for it. 3. £20 plus interest. 4. £75, what I could get if I sold the bottle. 5. -£55. I get to drink a bottle that is worth £75 that I only paid £20 for, so I save money by drinking it.’   This question (with prices in dollars) was given to readers of Liquid Assets, an annual newsletter on wine auction pricing. It was posed by Richard Thaler, later to win the Nobel Prize in Economics.

It has become commonplace for news reports to refer to almost any civic unrest, or even unusual patterns of voting, as evidence of ‘resurgent nationalism’ — implicitly suggesting a visceral hatred of foreigners and a desire to set the clock back to the glory days of racial homogeneity and casual homophobia. We should be wary of accepting this media trope: for one thing it may arouse far more fear than is warranted. But apart from the needless fear it generates, it is also slightly dubious to suggest that it is the gilets jaunes or the Five Star Movement or the supporters of Brexit or even Donald Trump who are acting intemperately.

Most people were scandalised by John McDonnell’s proposal to promote a four-day working week. But before we get incensed about giving people more leisure during their working life, we need to ask another question. If it really is so vital to the economy that people spend more time at work, then why does the government spend £41 billion every year (a third of the cost of the NHS) providing tax relief on pension contributions? This merely encourages older and more experienced employees to leave the workforce several years earlier than necessary. Remember, five years needlessly spent in retirement is 20 years that could have been spent enjoying a working life of three-day weekends.

History records many well conceived and apparently logical grand plans for the betterment of mankind. Sadly such ideas almost always fail. Why is this? One possibility is that they fail precisely because they are logical. The dictates of logic require the existence of universally applicable laws. But humans, unlike atoms, are not consistent enough in their affinities for such laws to hold very broadly. For example we are not remotely logical in whom we choose to help. Will wealthy Germans help poorer Germans? Yup. Greeks, however? No chance. Utilitarianism makes perfect sense — right up to the point you try to apply it. As Orwell said, ‘To an ordinary human being, love means nothing if it does not mean loving some people more than others.