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Pigs flying at the expense of others

To paraphrase the words of a wiser politician than any we have today, no-one would remember the Good Samaritan, for all his kind intent, if he had had no money. Economically our society must be, to use a fine old word in danger of losing its meaning, sustainable. It's worrying, therefore, to reflect upon two pieces about economics I read today. First NickM writes about the EU's economic crisis over at his excellent blog, Counting Cats in Zanzibar. He makes several good points, but none better than this:

The basis of any economy is making and selling things or providing services. It is not and can never be about borrowing huge amounts of money against domestic dwellings which are on a mortgage anyway because at some point reality has to set in. And the simple truth is houses are for living in.

We in the real estate business understand that. While providing accommodation to others is business, our own homes are just to keep the rain off. That millions have mistaken their shelters for piggy banks should not be anyone's problem but theirs. Only the bitch goddess democracy could make it otherwise, as a majority of losers force the minority who should have been winners to disgorge their savings, via taxation or inflation.

Meanwhile, over at the Losers' Gazette, official publication of those who regard it as high morals to make others pay for their mistakes, another point of view is proclaimed;

Public sector workers are in the firing line. Find out how much they contribute to your economy

The article goes on to tell us that;

In South Buckinghamshire, only a mere 6.7% of the work force rely on the public sector for employment. But in Newcastle-upon- Tyne over 53,000 people work in the public sector – 30.5% of the workforce. In Copeland, Cumbria that number is 14,200, or a significant 50.4% of the workforce.

Where to begin? Firstly, let's answer the question about economic contribution. Public sector workers contribute, give or take a few basis points of GDP, nothing. That, at the risk of causing offence to decent people, some working hard, is the kindest possible interpretation. It's not to say that all of them contribute nothing of any kind of value, but economically they quite simply create no wealth. It is wealth creation, not good intentions or diligent attendance at an office, that ultimately pays for everything, including public services.

The Guardian may see jobs as an economic benefit, but they are more like a by-product. In economic terms, they are a cost. That anywhere is so forsaken by all gods as to be 50.4% dependent upon the state (more so if you add those on the dole, the sick or otherwise "economically inactive") is a matter to be mourned, not celebrated. Such places are economic zombie-towns. At that level, it's very likely that most "private sector" jobs are merely providing services to public authorities or their workers.

That its fleas are plump, glossy and breeding freely does not, as the Guardian seems to think, speak well for the health of a dog. The wealth-creating portion of the population is now such an oppressed minority that it may be time for Trevor Philips to add them to his little list. Certainly the way they are treated smacks of "hate crime".

Higher house prices or a bail-out from the Germans are just not going to cut it now. The one economic question no-one seems to be asking at present is this:

What can we make or what services can we provide that the rest of the world will buy?

Sadly, as NickM points out, that's the only question that matters.


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Suboptimal Planet

For those unable to view it, Ben Lodge has written an excellent summary for The Cobden Centre.


Fiscal value in the sense that the public would have to buy the services privately and doing so would negatively affect their ability to pay taxes, ergo fiscal policy would be affected.

I would like to know what proportion of government spending goes on the salaries of doctors, nurses, teachers and policemen. I've looked but I cannot find them separately itemised. I suspect the total would be surprisingly small and should have been ringfenced so as to more easily target the total wasters. As it is the unions and the Labour party will raise merry hell.

As to your questions.
(a) 10-20%
(b) 50-75%
(c) <15%

However I recently had my preconceptions somewhat shaken by the fact that the US federal government spends more per capita on healthcare than the NHS. Granted most people in the US receive much better healthcare, but they have to buy insurance as well.

My surgical friends tell me the reason they do little private work is because it's such an inefficient use of their time. Too much chat, chat, chat not enough cut, cut, cut.


Sadly, as we have both demonstrated, it lends itself very well to generalisation!

Labour only ever talks about doctors, nurses, policemen and teachers, all of whom (except arguably the policemen) would work better and cheaper if privatised. Those on the right only talk about "gender coordinators" etc. Both sides generalise.

Personally, I think a generalisation is acceptable as shorthand in public discourse if a substantial majority of the relevant group is caught by it.

What proportion of public sector workers do you think (a) properly belong in public service, (b) perform a useful function and (c) do so with efficiency that would be acceptable, medium term, in the private sector? I am prepared fully to exempt from my generalisation all who qualify on all three counts and partially to exempt (as you tried to do) those who only fail (c).

Except you said fiscal value, not economic. The NHS surgeon's taxes (except those on his private work) are paid from other people's taxes. No doubt he has economic value, because his work would have to be done (better, cheaper and at a higher salary for him) in the private sector. But his taxes are a pretence.


I used that example because when I made the point you are making, it was to a pair of surgeons and a hospital manager. They raised no objection at the time but it grated with me that I implied to the surgeons that their work was of no fiscal value when clearly it is.

Incidentally the hospital manager was the best paid person out of the four of us and we spent most of the evening discussing her out of control personal debt.

There are, I agree, a huge numbers of public sector workers that no one would ever reach into their pocket to pay for, but I maintain a distinction should be made for those we would. Sadly the line between the two is blurred and wide and doesn't lend itself to generalisation.


Surgical teams would exist and be paid for, yes. But that's an interesting selection - and not very typical. A private surgeon would not have so many bureaucrats behind him or her, at hospital, health authority and ministry level. For every privatized surgeon, how many such drones would become workers?


"Public sector workers contribute, give or take a few basis points of GDP, nothing."

I have made this point in the company of friends who work in the public sector. It is a useful rhetorical point but hardly tells the whole story.

There will always be teachers and surgeons and policemen, and they will always be payed for, directly or indirectly by the public. To simply exclude them from the balance sheet is sleight of hand which ignores the costs which the public would willingly pay to avail themselves of these people's services.

The current GDP estimate is as artificial as the tax these people 'pay' as it does not include the hidden costs not incurred on these services. As an example, if the UK where to privatise surgical teams, and made them like legal practices, would there be a significant boost to real GDP and wealth creation, I doubt it.

Suboptimal Planet

I think the message is slowly getting across.

Do your web proxies allow you to view Martin Durkin's documentary, Britain's Trillion Pound Horror Story on 4oD?

It has its detractors, as does Durkin, but to me it was a landmark. I never thought I'd see such a programme on British television.

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