The 2020 Conservatives group used Laura Sandys MP to write a report on how we should all reuse stuff much more so that we're a much richer nation. And my question to that group is why?
Why did you have written and then release a report that shows your misunderstandings of how the economy works? Wouldn't it have been better to write one on a subject you do understand?
I managed to get hold of a copy (it's not on the 'net as far as I can see) and it's somewhat painful to read. There's the pretty much standard now view that we're all about to run out of minerals, an obvious fallacy if there ever was one. This leads to the insistence that we must all recycle more and this will make us richer:
The UK spends £1 billion a year in landfill costs just to dispose of plastics, wood, textiles and food – and in the process destroys these valuable commodities41. If a landfill ban was introduced just on these products and materials, £1 billion worth of costs would be avoided and a further “£2.5 billion [of] value” would be recovered42
Those two references, 41 and 42, are to something from the Green Alliance….where Mariana Mazzucato is a trustee which isn't all that comforting. But the obvious point here isn't tackled: if all this value is currently being dumped into holes in the ground why isn't anyone trying to make money out of it? We've been running scrap and rag and bone operations for many centuries in this country already and if there really was £3.5 billion of free money available then someone would be doing it and providing themselves with hot and cold running Bentleys.
That they're not shows that there's something wrong with this basic calculation: sure, landfill might cost £1 billion (much of that being the Landfill Tax) and OK, I'm willing to believe that the materials, when processed, could be worth £2.5 billion. But the reason it's not being done is obviously that the process of not landfilling the materials and processing them instead costs more than £3.5 billion. There's also an estimate that such recycling would lead to 300,000 new jobs. Given that the pay cannot be greater than the value being created that would imply wages of £12,000 for each of them even if we believe their number for said value created. We're really going to make the country richer by creating jobs at about half of median wage? It seems unlikely, doesn't it?
But there's a part that provides me with little hope:
For those of us who come from a business background, it is always surprising that government rarely considers the profitability of the UK economy. Currently the vast majority of political discourse and macroeconomic analysis centres on GDP, but a business would never focus on the top line and ignore the bottom line – businesses focus on profit rather than turnover for good reason. In the commercial world and across the economy ‘margin’ and ‘profitability’ are given equal consideration to ‘sales’, yet this is not reflected in public policy discourse.
As UK policymakers do not currently focus on profitability, there are few policies in place that truly support margin enhancement. This is illustrated by the fact that there is no mention of the words ‘profit’ or ‘profitability’ in BIS’ Business Plan4.
I had hoped that this was simply clumsy phrasing but the same point is made in interviews about this plan:
The modernisers also call for a rethink away from what Sandys calls the "British Leyland" mentality, which says that the strength of an economy is measured solely by Gross Domestic Product (GDP) – the size of an economy. "We are going to have to look at what we are really achieving and not what I call British Leyland metrics," Sandys said. "British Leyland produced a lot of cars. It had a lot of GDP. Nobody wanted the cars but nobody seemed to care.
Oh dear. Ms. Sandys seems to believe that GDP measures the turnover in the economy. Erm, no: it measures the value added in the economy. The clearest expression of this is when we look at it from the income approach: what everybody earns, wages, salaries and profits, equals (with a couple of minor adjustments) GDP. It simply is not true to say that GDP is composed of, nor measured by, the turnover of companies. BL's contribution to GDP was the wages it paid to its workers minus the losses that it made: something which could conceivably have meant that BL actually reduced GDP given the scale of its losses at times.
Now I'm perfectly happy for people to come up with proposals to make things work a little better. But I would hope that those doing so demonstrate that they understand how things currently do work. And equating turnover to GDP is a signal that they very much don't here.
And then there's the part that near kills all hope:
Why do we only think of labour productivity?
For the obvious reason that labour productivity is what determines what it is possible to pay labour. And our aim in this whole economy thing is to maximise the living standards of the people which is why we concentrate on raising labour productivity so that people can earn more and thus have more nice things.
Please note that this isn't an ideological or political assault here. It's a commentary on the point that the people presuming to tell us how the country should be run don't have a firm grasp on that real world they want to direct. Which isn't likely to lead to a decent outcome really.