Macroeconomics: UK economy, IB Economics

Larry Elliott on the state of the macroeconomy: crumbs of comfort, perhaps, but little else. 

If you are of the view that the poor are lazy, you can stop reading here. But if, like most humane and intelligent people you find poverty disturbing, then this article is for you.

In it, Richard Partington looks at the Joseph Rowntree Foundation's 2024 UK Poverty Report, which highlights the rather grim fact that it is now far harder to escape poverty than it was 2 decades ago. 

6 million people live in deep poverty, and higher energy bills, food prices and reduced access to public services are all making the lives of the poor harder. And that's before we start contemplating things well beyond their reach such as buying a house. 

Phillip Inman draws on Resolution Foundation Research to highlight the effects of the cost of living crisis: the standard of living of the average family is going to decline and, once again, better-off pensioners will gain, something that's been going on for pretty much most of my lifetime. Another example of how the distributional effects of economic events are always unequal, in this case perpetuating intergenerational inequality.

Guardian research reveals the extent of rail disruption in the course of 2022, suggesting that the system has reached, and probably gone beyond breaking point. 

This has adverse implications for productivity, for standards of living and thus almost all aspects of economic life.  

It pains me to say it but Owen Jones makes a valid point: poverty costs lives. But even if you don't go to that extreme, it alters life prospects for the worse, and even if you go for the availability heuristic and say 'Look at X, hauled himself up by his bootstraps from his single-parent family on a council estate' - what I call David Davis syndrome, it doesn't mean that everyone is going to be able to do this...

I didn't immediately spot this, however, it makes an important contribution to well-being and inequality, in as much as it posits that austerity has had an adverse effect upon the well-being on the poorest in society, such that life expectancy among this group has stalled or it even falling in some instance. 

It also highlights the fact that when measuring well-being we need to look at more than GDP, something that regularly features although quite why that's the case, when even it's founders were aware of its shortcomings in this regard. 

Nice summary of the state of paly from Faisal Islam. Growth has been stronger than expected, but for many people, the response is probably "So what?"

Another rather depressing story for a Monday with the Centre for Cities highlighting the extent to which the UK's cities have 'lost out' since 2010. Their analysis compares current levels of incomes with what might have been expected had growth remained at pre-2010 levels, with the average Briton losing out on £10,200. That's quite an opportunity cost - shaped by the pandemic and Brexit, no doubt - and suggests that we're producing well inside our PPF. PPC. Call it what you will. 

Another angle on the cost of living crisis, with the Guardian editorial looking at the ability of charities to mitigate the cost of living crisis. The editorial highlights the fact that as more people require charitable assistance, the charities themselves are less able to provide it because they also face higher bills. 

This is of particular concern at a time when the third sector is increasingly responsible for what was previously seen as the the state's responsibility. And if they are unable to meet these needs, then increasingly it seems that no-one will be able to.

Mohamed El-Erian is unlikely to have an optimistic view of Kwasi Kwarteng's Plan for economic growth, but even I didn't expect it to be quite so bleak. He sees it as likely to promote stagflation and make the lives of the poorest in society harder. 

We will have to wait and see...

Really interesting Phillip Inman piece about the implications of the buy now, pay later economy and the notion that renting is coming back into fashion. 

All of which hints at the fact that inter-generational equity remains one of the biggest issues that we have yet to address. It's an old favourite of mine, but, as I remind my students, their parents won't have paid for their university education, will have generous state pensions and a free-at-point-of-service NHS. They, on the other hand are, in my mind, unlikely to live to enjoy all of these things. (Of course, you could also factor in the benefits of EU membership, a rapid increase in wealth as a result of changed attitudes to home-ownership in the 1980s and so on)

However, the biggest concern for Inman is that at some point interest rates are likely to rise, increasing the cost of debt repayments and making those people who've taken out loans, or who live on credit, far worse off than had they lived within their means. And before you sneer, it isn't always that easy for the poorest in society to avoid this...

The IFS looks at the rising cost of the links between health and economic outcomes and reveals some interesting facts about healthcare provision.

Did you know, for example, that there healthcare spending has increased by nearly 20% in the last decade, or that healthcare spending is eight times that on unemployment benefits. Neither of these things is sustainable, I suspect.