Stephen Says...

Stephen Says...

This is my blog

sharing occasional thoughts about things that interest me

Post-Brexit Posturing

the state of the countryPosted by Stephen Mon, March 06, 2017 15:16:57
There have been repeated suggestions that the results of the referendum illustrate a polarised British social culture: divided according to personal preference either for or against UK membership of the EU. Misrepresentation of the evidence has been rife. The impression has been given, for example, that older people were overwhelmingly for Brexit whilst the young were overwhelmingly the other way, and hence that there is bitter division between young and old over this question. But actually the evidence shows a 3 to 2 split (for Brexit) amongst the elders and a 2 to 3 split (against Brexit) amongst the youngsters. So both opinions, for and against, were well represented amongst old and young alike. The similarity in degree of division within both groups (3 to 2 either way) makes them more alike in character than the opposite, despite the divergence in their balance of opinion. And the same argument applies to other allegedly opposed sub-groups of the franchise: Scotland was 3 to 2 for staying, Wales was 3 to 2 for getting out; the Metropolis was 3 to 2 for staying, the rest of England was 3 to 2 for getting out; the advantaged AB social group was 3 to 2 for staying, the disadvantaged C1C2DE was 3 to 2 for getting out; people with university degrees were 3 to 2 for staying, non-graduates were 3 to 2 for getting out. In all these cases the unifying similarity between the sub-groups is the division of opinion within them; they are not sub-groups divided from one another by uniformity of opinions within themselves. Promoting the notion of sectarian division between different social groups is delusional posturing, actively poisoning British cultural solidarity.

Of course if some groups are 3 to 2 in favour but the rest are 3 to 2 against, the chances are that overall the result will be 5-all! It’s because we couldn’t be sure which view was in the majority that we decided to conduct a head-count, using the relatively recent British tradition of the secret ballot (legislated for in 1872). Abiding by the result of this particular ballot is a test of our political system. And in fact it seems to me far more dangerous for society that there should be a significant preponderance (rather than a nearly 50-50 balance) because of the scope for a small minority to be subject to discrimination: picked on, bullied or victimised.

Sterling and the ONS

the state of the countryPosted by Stephen Tue, November 15, 2016 17:24:39

On October 28th 2016 the ONS published a piece concerned with the implications of changes in the exchange rate for sterling ( In this article it says: “A fall in the pound means that UK exports will be cheaper for customers in other countries to buy. This should help UK companies increase the amount of goods and services they sell to the rest of the world which would bring more money into the UK – potentially increasing employment, growth and therefore living standards.” But this is utterly flawed.

Data extracted from past issues of the ONS “UK trade in goods publication tables” unambiguously give the lie to the article’s assertion.

Here they are:

The figures indicate that devaluation of sterling in conjunction with the Great Financial Crisis was substantial: from $2.00 in 2007 to $1.55 in 2010; a fall of 22%. In consequence, the traded goods price index for imports went from 76.2 in 2007 to 92.0 in 2010; a rise of 21%. Meanwhile the traded goods price index for exports went from 75.6 in 2007 to 92.7 in 2010; also a rise of 23%. So neither in absolute nor in relative terms did UK exports become cheaper as a result of this substantial devaluation.

In fact these data are precisely in line with what ought to be expected. In reality, the prices of all tradable products are set in the global market-place and denominated in $US. Then these global prices, which apply both to UK imports and to UK exports, are translated into sterling via the exchange rate. Hence both the prices of exports (when expressed in sterling) and the prices of imports (when expressed in sterling) will rise as a consequence of sterling’s depreciation.

Before posting this, I took a look at the most recent version of the ONS balance of payments database and calculated the correlation coefficient for the series giving prices of exports (BQAJ) and imports (ELAZ): it was +0.99. And this ought to come as no surprise since, according to the 9th November issue of the ONS "UK trade in goods publication tables", you only need eight types of product to account for more than half of UK exports and you only need the same eight to account for more than half of the UK’s imports as well. The categories are: Mechanical machinery; Cars; Medicinal & pharmaceutical products; Electrical machinery; Other miscellaneous manufactures; Scientific & photographic equipment; Crude oil and Refined oil. So no wonder prices of imports and exports move together: their prices are those of the same types of products and come from the same world markets.

The price relativity which actually does change as a result of devaluation is that between traded goods, for which prices are determined in world markets, and non-traded goods (such as places in residential care homes), for which prices are determined locally (i.e. directly in sterling). Hence the major economic consequence of exchange rate change is a rebalancing of the economy between the traded and the non-traded sectors (as their relative prices are altered by alteration of the exchange rate). A fuller consideration of this analysis, incorporating detailed estimates of the relevant relative magnitudes (based on the ONS Supply & Use Tables), is available at:

European Union and the United Kingdom

the state of the countryPosted by Stephen Fri, June 03, 2016 13:58:54

In many ways it is a shame that commitment to “ever closer union” is not available to choose in the UK’s referendum on membership of the European Union. Both options actually on offer exclude this idealistic commitment which was at the heart of the project originally envisaged by the founding parents of European amalgamation (whose idea began with economic integration as a platform for associated political affiliation). In its absence, the only options available are:

either half-hearted consent to continued limited membership;

or attempted abandonment of such commitments as remain after eschewing the euro and the Schengen zone (these residual commitments being the common external tariff and regulation associated with the Single Market, plus certain common policies, such as the CAP, and financial contributions associated with funding them along with a set of EU-wide institutions such as the European Parliament).

Given this context, concentration on the economic dimensions of remaining or leaving is understandable. The free movement of resources across the unified or single market is most visibly manifest in the case of labour (i.e. workers’ economic migrancy): hence the consequences of immigration in the UK are a subject for debate. Likewise, the feasibility and financial consequences of alternative international trading arrangements are an issue requiring discussion. Unsurprisingly therefore these two topics have dominated the propaganda campaign being conducted on both ‘sides’ with a repellent lack of regard for the intelligence of the public at large.

With regard to immigration: it seems to me that the responsibility for dealing with any consequential congestion in relation to public services or infrastructure lies with the national government; and since immigrants are subject to taxation like the rest of the citizenry they can be presumed to pay their way like the rest of us (not to mention that they may be working in those public services anyway). Rejecting EU membership on the grounds of its impact on immigration is effectively a vote of no confidence in the UK national government rather than a judgement on the EU itself.

Regarding international trade arrangements: losing a protected price advantage of 5% (typical for manufactures) will eat into margins or value-added across the tradables sector of the economy whilst making such tradables cheaper for consumers. Since most businesses buy inputs as well as selling their output at such newly lower prices the impact on margins may be somewhat attenuated.

It is by no means clear that the financial consequences of abandoning the EU will be bad for the UK population in real terms. The Treasury’s analysis is completely bogus owing to the tragically flawed view of the country’s economic situation according to which the Treasury operates (see for details).

If, as a consequence of abandoning membership of the EU, sterling is devalued, then this will impact adversely upon the standard of living enjoyed by workers in the UK in the short term by raising the prices of tradable goods and services; but it will also increase margins or value-added in those same tradables-producing sectors of the domestic economy (hence also offsetting the impact of any reduced tariff protection).

The political choice that I might want is not available. Neither ‘side’ has made a case worth voting for. I would not make this choice on economic grounds. Is it worth having a vote?

Labour’s Damaging Economic Doublethink

the state of the countryPosted by Stephen Thu, January 14, 2016 10:48:53

On the on hand John McDonnell has called for “a New Economics, laying the economic foundations of a prosperous, fairer and sustainable society”. On the other hand he has promised to “demand that the Office of Budget Responsibility and the Bank of England put their resources at our disposal to test, test and test again to demonstrate our plans are workable and affordable”. But John McDonnell misses the point: it’s the Old Economics of the Treasury, the OBR and the Bank of England (what Gavyn Davies has usefully termed ‘the standard apparatus’) that is at the root of the country’s economic policy problems. Giving the OBR and the Bank responsibility for judging Labour policy involves a prior commitment to seeing things their way. And their way is completely wrong.

For as long as sterling remains a sovereign currency the exchange rate will be a significant factor affecting the country’s economic circumstances. But unfortunately both the Treasury (and hence the OBR) and the Bank (and hence the MPC) hold to the heartfelt belief that “devaluation makes our exports cheaper” (as Robert Chote puts it with technical precision, it causes “a change in the relative prices of domestic and foreign goods”). This erroneous preconception leads them to suppose that any depreciation of sterling will expand sales volumes for British goods and services (because they’re cheaper) thus boosting economic activity and employment. Such thinking is completely bogus.

Not only are the official expectations without justification in terms of economic theory, they are also directly contradicted by the evidence provided by the Office for National Statistics. The figures below amply illustrate my point.

The ONS figures indicate that the standard expectations are completely refuted. The devaluation of sterling in the aftermath of the Great Financial Crisis has been substantial: from $1.87 in the years before the crisis (2004-2007) to $1.57 in the years after it (2009-2012); from €1.47 in the years before the crisis (2004-2007) to €1.17 in the years after it (2009-2012). This devaluation raised the prices of goods imported and goods exported alike: there has been no “change in the relative prices of domestic and foreign goods”.

The traded goods price index for exports went from 74.7 in the years before the crisis (2004-2007) to 94.9 in the years after it (2009-2012); the traded goods price index for imports went from 74.4 in the years before the crisis (2004-2007) to 94.9 in the years after it (2009-2012). In technical terminology, the terms of trade remained unchanged. And this ought to come as no surprise since you only need seven types of product to account for more than half of UK exports and you only need the same seven to account for more than half of the UK’s imports as well. The categories are: Mechanical machinery; Electrical machinery; Cars; Medicinal & pharmaceutical products; Refined oil; Crude oil; and Other miscellaneous manufactures. So no wonder prices of imports and exports move together: their prices are those of the same types of products and come from the same world markets.

In fact, the ONS data is entirely consistent with the proper economic theory. In this, the crucial price-relativity affected by the exchange rate is that between tradables and non-tradables. Tradables being those things that are internationally portable (e.g. motor-vehicles; feed wheat; consultancy services etc.,). Non-tradables being those things irrevocably confined to our shores (e.g. residential property; domestic care services; the infrastructure of the public realm etc.,). The impact of sterling’s devaluation has been to raise the sterling prices of tradables across the board (i.e. both the things we buy from overseas and the things we sell abroad) because their prices are set in international markets (and not in sterling terms) and these are the prices which apply equally to ‘imports’ and ‘exports’ (translated into sterling terms by the same exchange rate), so there is no relative price change such as the official experts expect. And consider the significant difference that this makes: the flawed conventional wisdom believes devaluation is expansionary (increasing domestic output) whilst the correct theory says it isn’t (rather the opposite when you take’ income effects’ of price changes into account).

A more detailed consideration of the ONS data confirms that import and export prices within the same (tradable) product categories habitually move together (being basically the same international price of course), showing that the UK is well integrated into global market determination of producer prices for tradables. The pivotal role of the exchange rate is to alter the balance of activity in the UK economy between the tradables and the non-tradables sectors: this comes about because whilst prices in the latter (non-tradables) are inherently set in sterling, prices in the former (tradables) are translated into sterling from abroad by the exchange rate (thus changing when it changes: i.e. increasing when sterling is devalued).

Tradables and non-tradables each account for about half of national income (GDP) so the scale of this problem posed by this price change is significant. And because the government itself is responsible for a large part of the national infrastructure (non-tradable) and for purchases of (non-tradable) educational and healthcare services (on behalf of the population at large) this is an issue bearing directly on the economic responsibilities of government operation. So these observations are particularly pertinent for policy-makers of a social democratic persuasion. They provide a platform for a party with a purposive perspective on government: “a New Economics, laying the economic foundations of a prosperous, fairer and sustainable society” (John McDonnell MP speaking at UCL on 20th November 2015).

It cannot be in the best interests of the Labour Party or the people that it aspires to represent that a false picture of the country’s economic circumstances should be used as the platform for evaluation of the policies that will affect so many important aspects of commercial performance as well as standards of individual, household and community life. Sadly there is no prospect that the reviews instituted by the Shadow Chancellor will challenge the official standard apparatus: their terms of reference preclude it. The prospects for the country remain as bleak as before: see (

Talk About Taxation

the state of the countryPosted by Stephen Thu, August 13, 2015 15:26:51

I think it’s fair to say that most of us (who are not self-employed) do not pay income tax or national insurance personally. That’s because our employers transfer money to us through the PAYE system and simultaneously they transfer money to the government, as ‘income tax’ and ‘national insurance’, notionally on our behalf. But in effect what they’re doing is simply paying a levy to the government and leaving us with the amount of money that will persuade us to work for them.

I know it’s conventional to pretend that employers are making these payments on our behalf (us, the workers they employ). But it’s not the way we ourselves think about it really. In reality we all have what you might call ‘rational expectations’: we all make judgements about wages and salaries based on ‘take-home pay’; we all take decisions about offers of work after making allowance for ‘stoppages’. And certainly everybody recognises (in the light of numerous broadcast documentaries and News-items) that unemployed people evaluate offers of work in relation to post-tax earnings vis-à-vis out-of-work benefits.

This system of taxation, in which levies are paid to governments by employers notionally ‘on behalf of’ the workers they employ, operates across the economically developed world. Reviewing the way in which these levies are presented is quite interesting. The cost of making payments of income tax and social security contributions (national insurance) is expressed by the OECD as a ‘tax wedge’: the proportion of the total cost of employing workers that is accounted for by making such payments (i.e. both those that are being made notionally ‘on behalf of’ their workers - as ‘income tax’ or social insurance ‘contributions’ – and those made as explicit payments by employers qua employers).

Figures in the table below illustrate the size of this tax wedge in various comparable North-West European countries. You can see that it varies quite widely: ranging from 26.6% in Ireland to 55.8% in Belgium. The UK (31.48%) is towards the lower end of the range.

The last two columns in the table illustrate what happens if the whole amount of employment cost (‘the tax wedge’) is expressed as a transactions tax (like VAT) explicitly levied on purchases of labour. These figures show that human resources are taxed more heavily than the general run of purchased inputs (taxed by VAT) in most of the countries considered here (though it’s fair to say that some specific inputs, such as energy, attract special supplementary purchase/transaction taxes). This is appropriate because the employment of workers is the best available indicator of the level of pressure on the country’s infrastructure resulting from the operation of any particular business (i.e. the tax levied on payments to employees is a proxy for costing the use of the infrastructure as a business input; it stands in for an explicit rent, payable for the use of the infrastructure).

It should be apparent from these data that the implicit transactions tax cost of employing workers in the UK is very competitive (i.e. low) compared with that in other North-West European countries. This suggests that there could be scope for an increase in this tax-rate without the prospect of damaging the country’s competitive position internationally. In fact an increase in the UK’s implicit employment transactions tax rate (and with the increase explicitly imposed on employers rather than workers), so that overall it was raised from 45.94% to nearer the Dutch level (58.58%), might be expected largely to eliminate the budget deficit.

Corbynomics Nearly Nails It

the state of the countryPosted by Stephen Fri, July 24, 2015 15:44:01

In his crisply presented paper on economic policy (‘The Economy in 2020’) Jeremy Corbyn comes tantalisingly close to a correct analysis of the country’s situation and makes some sensible suggestions for addressing its problems.

He affirms the traditional basis for social democratic government: using the state as the agent for collective consumption. By doing so he supports the vision of the electorate as a consumers’ co-operative (the vision originally established by Beatrice Webb and supported by other foundational Labour figures like Leonard Woolf). And he confirms an explicit conception of the state as a subscription society in which it is expected that payments subscribed should reflect ability to pay.

But he could and should have gone further.

Firstly, he could have pointed out that the UK budget deficit is not due to the provision of public services as benefits in kind (health and education): these are paid for by the taxes on people’s spending which they directly pay themselves out of the money that comes into their households. A summary analysis of the system as it stands is reported in the tabulation below.

This analysis considers taxes that households pay directly when spending their take-home pay (e.g. transactions taxes such as VAT or Stamp Duty, licences for cars or televisions), compared with the value delivered through purchases made by the government on their behalf (i.e. as collective consumption or ‘benefits in kind’ - mainly education and healthcare services).

The figures show that by and large the existing system operates according to the progressive principle: to each according to their need, from each according to ability to pay. Those who spend the most contribute the most. And for the majority of households (the low-money and middle-income households), the value of collective consumption outweighs the cost of tax-payments.

Secondly, despite acknowledging that most people pay taxes linked to their employment through PAYE (so that ‘income tax and national insurance’ are removed before employees see them) Jeremy Corbyn fails to draw the logical inference that these payments are more truly to be regarded as employment transaction taxes, paid by employers as incidental to the provision of the take-home pay required to attract workers. This is unfortunate because if he did so it would create a more effective platform for the argument which he rightly makes that such taxes ought to be increased as the most effective measure to address the persistent UK budget deficit.

As can be seen from figures comparing taxes on employment in different European countries, UK taxes are lower than their equivalents elsewhere.

These figures show that the UK’s international competitiveness would not be damaged by higher UK employment transaction taxes. What’s more, by representing these charges more accurately as employment transaction taxes, and doing away from the ridiculous pretence that they are taxes on personal incomes or individual insurance payments, they would become explicitly the charges for commercial use of the infrastructure that Jeremy Corbyn rightly wants them to be seen as. Not only that, it would draw the teeth of arguments about benefit payments as transfers from virtuous workers to feckless scroungers or from the poor put-upon working young to expensively pampered pensioners.

Jeremy Corbyn has nearly nailed it: he should take the further steps that I’ve suggested and hammer home his message about reforming taxation to tackle the deficit whilst recommitting the Labour party to collective consumption and social solidarity according to existing progressive practice.

Double or Quit? Dealing with Greece

the state of the countryPosted by Stephen Tue, July 07, 2015 12:14:26

It’s frustrating that the Eurozone can’t seem to get their act together and to use their collective economic strength to deal with the difficulties currently being faced by quite a small component country of the zone (i.e. Greece). In order to check out whether my intuitive feelings were massively wide of the mark I decided to look for myself at the figures that would illustrate the dimensions of the problem and to consider the potential for political action to address it.

I think it’s pragmatic to surmise that establishing the euro as a sovereign currency reflects a nascent common sovereignty for the countries of the zone in which it operates. On this basis it’s appropriate to consider the para-statal financial circumstances of the Eurozone as a context for dealing with ‘the Greek crisis’. The compilation of statistics presented in Table 1 makes a start.

The figures in the table represent the situation across the 18 countries of the Eurozone in 2014 (Lithuania joined at the start of 2015). The first thing to notice is the dominant position that devolves upon the four largest countries: Germany, France, Italy and Spain (the Big4). Together the Big4 account for over three-quarters of population and GDP as well as state revenues and government debt across the zone as a whole. And the idea that the Big4 effectively represent a core or centre-of-gravity for the zone is reflected by the fact that their aggregate statistics for activity rate (Emp/Pop), economic significance of the state (GRev/GDP), weight of government debt (GGD/GRev) and average income (GDP/hd) are all very close to the figures for the Eurozone as a whole.

The size of the state relative to the economy as a whole varies quite widely across the Eurozone. Overall within the zone government revenues equate to 46.7% of the total GDP. But in some countries the share is less than 40% (Ireland, Latvia and Spain are the lowest) whilst in others it is more than half (Finland, France and Belgium are the highest). Luxemburg, Ireland and Austria have the highest GDP/hd; Latvia, Slovakia and Estonia have the lowest; the variation is extremely wide. Given the current focus on Greece, it is interesting to see that the activity rate (the fraction of the population in employment) is lowest there (32.2%) whilst the burden of government debt in relation to the size of government revenue is highest there (406.4%).

Since ‘the Greek crisis’ has concentrated so heavily on government debt it is worth noting that across the Eurozone as a whole such debt is equivalent to about double the annual revenue of the state sector (201.3%). Aggregate statistics for the countries with a state debt more than 250% of government revenue (Cyprus, Greece, Ireland, Italy, Portugal and Spain) indicate lower-than-average activity rates and GDP/hd, as well as a relatively smaller-scale government revenue stream. It’s notable that 2 of the Big4 countries, Italy and Spain, are members of this group.

Turning to an explicit treatment of the Eurozone as a sovereign area with component country-regions, some proportional figures are presented in Table 2.

Although all the recent fuss has focused on Greece, it’s a small part or minor region of the overall Eurozone economy. It is interesting to observe how closely the various countries’ shares in total Eurozone government debt mimic their shares in the total population of the zone. Greece, for example, is 3.3% of the Eurozone population and accounts for 3.4% of total Eurozone government debt. Germany has 24.4% of the population and 22.4% of the debt. France has 19.2% of the populace and 21.5% of the debt. Spain has 14% of the people but only 10.9% of the debt. The countries (regions) whose shares in the debt are significantly higher than their share in the population are Ireland, Belgium and Italy. The virtuous, frugal countries (regions), whose shares in the debt are significantly lower than their share in the population, are Estonia, Latvia and Slovakia.

Maybe it’s time for the Eurozone to redouble its efforts to achieve integration and to assume common responsibility for all the government debt across the countries (regions) of the zone. Because the most heavily indebted countries (CGIIPS) are dominated by two of the Big4 (Italy and Spain) it should be possible for these two to broker any such deal, from which the solution to ‘the Greek crisis’ would emerge as a relatively minor by-product. Doubtless common fiscal rules and procedures required as part of such a deal would take a long time to harmonise (with plenty of scope for transfer of good practice across member states) but since this might effectively amount to much the same in time-scale terms as debt rescheduling, and since it might much more readily be presented as (if not actually constituting) progressive development rather than palliative care, this ought not to detract from the substantial achievement that such an agreement would create. The opportunity for established governments in Italy and Spain to demonstrate constructive leadership to their own electorates at a time when they are under pressure from radical alternative challengers ought to encourage this sort of initiative. But I’m not holding my breath.

Greece on the face of it

the state of the countryPosted by Stephen Mon, June 29, 2015 01:13:23
In the end I just couldn’t help trying to make some sort of sense of the Greek economic crisis for myself because I have by now completely lost trust in the reporting of economics by news media. I’ve used published statistics from the IMF and the OECD, and I’ve adjusted the presentation and made some supplementary calculations of my own where necessary. The full tables and commentary are available here. My conclusion based on this analysis is that even though Greece was relatively poorly placed to weather the economic storm of the great global financial crisis (2007-2010) it had actually managed not too badly in the circumstances. In fact it’s been the events of the aftermath (2010-2015) that have done the damage; and in particular the absolute collapse of wage-payments (down by 20%) and the explosion of unemployment (the rate has doubled to over 25%). These twin developments, accounting for the 19% decline in Greek GDP, set Greece apart from other countries at the weaker end of the Eurozone where unemployment rates and pay have tended simply to stagnate. They do not seem to justify a punitive refusal to countenance further financial support or debt rescheduling on the part of multi-national agencies.

Although in the years before the global financial crisis Greece’s public sector or government debt was, in relation to government revenue, relatively high, it was not much different from Italy’s. And at the end of the crisis in 2010 Greece, Italy and Belgium, which had started out with the highest debt relativities, had controlled their debts better than many other countries. Then in the aftermath years up to 2015 several other countries’ debts grew proportionately as much as Greece’s did (and in the case of Spain by much more). And no other country’s debts approach the scale of Japan’s!

Regarding the budget deficit, although Greece was not particularly well positioned prior to the global financial crisis its 2005 deficit was much the same, relatively speaking, as in Portugal, the USA and Japan. And at the end of the crisis in 2010 there were several other countries in much the same situation as Greece, with deficits greater than 20%. Nor in the aftermath, in 2015, is the Greek budget deficit (7.5% of government revenue) exceptionally large; France and Ireland (both 7.1%) and Portugal (6.5%) are not dissimilar; the UK (10.2%), Spain (11.8%), the USA (11.9%) and Japan (19.7%) are all much worse cases on the face of it.

Although, in the years before the crisis, Greece’s aggregate expansion (+41% between 2000 and 2005) was not exceptional, Ireland (+57%) and Spain (+44%) exceeded it, and despite Greece maintaining expansion at the end of the crisis in 2010 to much the same extent as the other European countries considered here, in the years of the aftermath Greece has experienced a collapse in GDP (-19% to 2015) quite unlike any other country. And it is this special circumstance that justifies giving special attention to Greece’s situation.

Before the global financial crisis Greece’s unemployment rate, whilst quite high (10.8% in 2001; 10.0% in 2005) was not exceptional (Germany had a higher rate, 11.3%, in 2005). And even after the crisis in 2010 Ireland (13.9%) and Spain (19.9%) had higher rates than Greece (12.7%). But in the years of the aftermath, to 2015, the unemployment rate in Greece grew much more rapidly than anywhere else, reaching 25.2%. Certainly unemployment rates did rise in other countries, including other countries identified as economically weaker members of the Eurozone (in terms of government debts and deficits), but not so swiftly as in Greece.

In addition, Greece experienced a further exceptional development: workers’ pay fell continuously across the years of the aftermath; this caused a cumulative reduction in pay of almost 20% by 2015. In the other weaker countries of the Eurozone workers’ pay was stagnant but it did not cumulatively fall. On the face of it, this continuous fall in workers’ pay is a classic Keynesian unvirtuous spiral of economic depression: a self-reinforcing reduction in economic activity.

The resolution of 'the Greek Crisis' requires the same thing as the rest of Europe needs: an expansion of demand in the outside world or a co-ordinated programme of public sector expansion across Europe as a whole. Unfortunately neither of these desirable events is visibly on the horizon. This is tragic: a condemnation of the western political process. Singling out Greece for punitive sanctions rather than co-ordinating a programme of debt rescheduling across Europe (and maybe beyond) is a failure of imagination against which protests are entirely justifiable. Greece’s problem is just the most obviously painful instance of a situation that, in the absence of good fortune in terms of external circumstances (overseas economic expansion), will blight other weaker economies in their turn. On the face of it the crisis belongs to Greece. But in reality it’s a crisis that faces us all. Picking on Greece is a distraction.

The full tables and commentary are available here

Next »