Human Quantitative Easing

Britain has an industrial strategy, but it’s bad

A big splash from me today as I write The Critic Essay for the first time, on ‘Human Quantitative Easing’.

It’s a term I’ve used before in a piece for ConHome, but this is very much an expansion of the idea and an attempt at definition and effects. I argue that Britain, far from being behind the US and Europe on developing an industrial strategy, has had one for a long time - our immigration policy:

Human Quantitative Easing is the method by which government allows geographically rooted industries, which cannot offshore their workforce to lower wage economies, to satisfy their need for cheap labour by importing the same workforce to the UK — with government providing a subsidy, if required, in the form of services and welfare payments.

But this race to the bottom on wage via workforce importation has, I argue, hooked Britain on cheap human capital, disincentivizing long-run investments in capital, infrastructure, skills and innovation and trapping Britain in a low-wage, low-productivity model:

The cycle is brutal, but simple; low-wage en-masse immigration acts as a break on productivity because, whilst migrants themselves may be as productive as native workers, the constant influx of cheap human capital disincentives investment. This weak productivity results in flatlining wages, which cannot sustain the increasing demands on the welfare state. 

I also argue that this is a deliberate choice, but despite claims that ‘we need immigration’, there are alternative options:

There are less frequented paths; China leads the world in robot installations because its government “has aggressively promoted the production and use of industrial robots in recent years”, recognising investment in robotics and automation as a much more effective solution to combat demographic challenges; whilst maintaining a productive economy than employing HQE. Despite claims, familiar to western ears, that “China needs migrants” China’s net migration rate has remained below replacement since 1950, and UN projections expect that trend to continue. Chinese growth, it should be noted, is driven by increasing productivity rather than increasing the size of the population.

HQE is a term I’ve been using increasingly, as I think (and have been told) it’s a powerful, useful term that describes the effects of Britain’s immigration policy on our economy; I’ll be expanding on these ideas for an upcoming paper on immigration for a think tank over the next couple of months.

If you agree this is useful please share as widely as possible; the poasting-to-policy pipeline must flow.