Every silver lining has a cloud

In economics, there's nothing fully good.

From the department of counterintuitive findings come two findings showing the downsides of good news.

First up, the Washington Post reports on a new explanation for why it is that people start to die when the economy gets better. For every percentage point decrease in the unemployment rate, there is a 0.004 per cent increase in the number of deaths (a low, but statistically significant amount), which corresponds to about 6,700 dead people.

Suzy Khimm writes:

In a new paper, researchers argue that economic boom times create a scarcity of caregivers in nursing homes, raising the mortality rate through a disproportionately high numbers of deaths among the elderly.

The Center for Retirement Research explains that a strong job market creates “greater scarcity in front-line caregivers in nursing homes, which may cause more deaths among the elderly.” When the overall unemployment rate goes down, for instance, employment declines are particularly noticeable among certified aides and nurses in these facilities.

Meanwhile, in Investors Chronicle, Chris Dillow addresses the upside of a downside (so to speak).

Since 2007, labour productivity has fallen in the UK, meaning that the one hour of work now produces less output than it did five years ago – 3.4 per cent less, to be specific. This is pretty bad news. Historically, a lot of growth has come from population growth. A more populous country can make more stuff than a smaller one, after all. But now that much of the west appears to have a stable population, we need productivity to grow if we are to have any growth at all. If we can't have more people making stuff, we need to have each person making more stuff.

But this prductivity slump isn't entirely bad news:

If the relationship between GDP and employment in the last four years had been the same as it was in the previous 20, there would now (mathematically speaking) be 3.1 million fewer people in work. If all these had registered as unemployed, there'd be 5.8 million out of work - an unemployment rate of 18.2 per cent. Imagine the political effects of that.

On his personal blog, Dillow elaborates:

You might think that the very fact that workers are more productive in this alternative universe would cause firms to hire more of them. But things aren’t so simple. Firms only hire if they anticipate sufficient demand for the additional output. And where would this demand come from? The tendency for higher unemploymentwould depress consumer spending. On the other hand, it’s likely that business investment would be higher - not least because a world of growing productivity is a world in which there are more investment opportunities and easier access to finance.  But as business investment is only 8.3% of GDP, it’s unlikely that it would be so much higher as to create three million jobs.

Sometimes, good news can be bad news, and bad news can be good.

We may not be getting more productive, but there's an upside to that. (Getty)

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.