Bank of England joins the "forward guidance" party

The Bank of England's Monetary Policy Committee has announced that they will adopt "forward guidance" - a move which could prove psychologically self-defeating, or worse financially ruinous.

A few weeks ago I wrote in this blog that I felt the adoption of "forward guidance" by the Bank of England’s Monetary Policy Committee would be a mistake. Well, as expected, they did so, in an announcement timed to coincide with the publication of the Bank’s August Inflation Report -the quarterly document which lays out the Bank’s perception of the current state of the economy and forecasts for its performance over the next few years.

In that previous blog I highlighted the danger that forward guidance could inflict self-defeating psychological damage upon people and businesses by telling them, effectively, to ignore the good economic headlines that are increasingly appearing in the newspapers - i.e. the Bank of England doesn’t believe a word of it, and therefore won’t be raising interest rates for years to come.

The other side of the coin is potentially as dangerous. The form of guidance adopted was an assurance that the Bank wouldn’t raise rates until unemployment hit 7.0 per cent, (it is currently 7.8 per cent, and the Bank’s Report expects it to fall to 7.0 per cent only in mid-2016). In a vain attempt to preserve what’s left of the MPC’s credibility as an inflation fighter, caveats, or "knock-outs", were added to this promise. There were three of these: they wouldn’t wait that long to tighten policy if they thought a) inflation was going to be above 2.5 per cent in eighteen months to two years' time, b) inflation expectations became "unanchored", or c) "the stance of monetary policy pose[d] a significant threat to financial stability".

The nightmare scenario for the Bank, and for us all, is that policy has to be tightened because one of the "knock-outs" has been triggered before unemployment has fallen meaningfully. Imagine a world, 12 or 18 months hence, where either "knock-out" a) or b) is triggered, but unemployment is stuck stubbornly at 7.2 per cent. Given what's happening in the housing market, the prospects for acceleration thereof following this guidance, and the UK economy’s propensity to exhibit high inflation, I see a real danger that knock-out b) is the problem.

On the other hand, given the "productivity puzzle", (in this recession, productivity has dropped, and unemployment has risen less than one might normally expect), the stage seems set for productivity to rise, at the expense of employment, especially as employers become more confident and commit to long-delayed capital investment in new, more efficient plants and machinery.

If either inflation "knock-out" is triggered within the 12 to 18 months time horizon I mentioned above, that is a lot sooner than the date at which the Bank of England’s own forecasts expect unemployment to hit 7 per cent, i.e. mid-2016, (and Carney assures us 7 per cent is only a "way station" anyway, not a "trigger" for higher rates), and the danger here is that individuals and businesses are now fooled into taking on more and more debt, comforted by the Bank’s prediction that rates will stay where they are for almost another 3 years at a minimum, and the UK can already hardly be characterised as a country with low private debt. If rates do have to rise much sooner than this, then loan delinquency could sky rocket.

Outside the Bank of England. Photograph: Getty Images.

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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Gender pay gap: women do not choose to be paid less than men

Care work isn’t going anywhere – and it’s about time we recognised which half of the population is doing it, unpaid.

Is it just me, or does Mansplain The Pay Gap Day get earlier every year? It’s not even November and already men up and down the land are hard at work responding to the latest so-called “research” suggesting that women suffer discrimination when it comes to promotions and pay. 

Poor men. It must be a thankless task, having to do this year in, year out, while women continue to feel hard done to on the basis of entirely misleading statistics. Yes, women may earn an average of 18 per cent less than men. Yes, male managers may be 40 per cent more likely than female managers to be promoted. Yes, the difference in earnings between men and women may balloon once children are born. But let’s be honest, this isn’t about discrimination. It’s all about choice.

Listen, for instance, to Mark Littlewood, director general of the Institute of Economic Affairs:

“When people make the decision to go part time, either for familial reasons or to gain a better work-life balance, this can impact further career opportunities but it is a choice made by the individual - men and women alike.”

Women can hardly expect to be earning the same as men if we’re not putting in the same number of hours, can we? As Tory MP Philip Davies has said: “feminist zealots really do want women to have their cake and eat it.” Since we’re far more likely than men to work part-time and/or to take time off to care for others, it makes perfect sense for us to be earning less.

After all, it’s not as though the decisions we make are influenced by anything other than innate individual preferences, arising from deep within our pink, fluffy brains. And it’s not as though the tasks we are doing outside of the traditional workplace have any broader social, cultural or economic value whatsoever.

To listen to the likes of Littlewood and Davies, you’d think that the feminist argument regarding equal pay started and ended with “horrible men are paying us less to do the same jobs because they’re mean”. I mean, I think it’s clear that many of them are doing exactly that, but as others have been saying, repeatedly, it’s a bit more complicated than that. The thing our poor mansplainers tend to miss is that there is a problem in how we are defining work that is economically valuable in the first place. Women will never gain equal pay as long as value is ascribed in accordance with a view of the world which sees men as the default humans.

As Katrine Marçal puts it in Who Cooked Adam Smith’s Dinner?, “in the same way that there is a ‘second sex’, there is a ‘second economy’”:

“The work that is traditionally carried out by men is what counts. It defines the economic world view. Women’s work is ‘the other’. Everything that he doesn’t do but that he is dependent on so he can do what he does.”

By which Marçal means cooking, cleaning, nursing, caring – the domestic tasks which used to be referred to as “housework” before we decided that was sexist. Terms such as “housework” belong to an era when women were forced to do all the domestic tasks by evil men who told them it was their principal role in life. It’s not like that now, at least not as far as our mansplaining economists are concerned. Nowadays when women do all the domestic tasks it’s because they’ve chosen “to gain a better work-life balance.” Honestly. We can’t get enough of those unpaid hours spent in immaculate homes with smiling, clean, obedient children and healthy, Werther’s Original-style elderly relatives. It’s not as though we’re up to our elbows in the same old shit as before. Thanks to the great gods Empowerment and Choice, those turds have been polished out of existence. And it’s not as though reproductive coercion, male violence, class, geographic location, social conditioning or cultural pressures continue to influence our empowered choices in any way whatsoever. We make all our decisions in a vacuum (a Dyson, naturally).

Sadly, I think this is what many men genuinely believe. It’s what they must tell themselves, after all, in order to avoid feeling horribly ashamed at the way in which half the world’s population continues to exploit the bodies and labour of the other half. The gender pay gap is seen as something which has evolved naturally because – as Marçal writes – “the job market is still largely defined by the idea that humans are bodiless, sexless, profit-seeking individuals without family or context”. If women “choose” to behave as though this is not the case, well, that’s their look-out (that the economy as a whole benefits from such behaviour since it means workers/consumers continue to be born and kept alive is just a happy coincidence).

I am not for one moment suggesting that women should therefore be “liberated” to make the same choices as men do. Rather, men should face the same restrictions and be expected to meet the same obligations as women. Care work isn’t going anywhere. There will always be people who are too young, too old or too sick to take care of themselves. Rebranding  this work the “life” side of the great “work-life balance” isn’t fooling anyone.

So I’m sorry, men. Your valiant efforts in mansplaining the gender pay gap have been noted. What a tough job it must be. But next time, why not change a few nappies, wash a few dishes and mop up a few pools of vomit instead? Go on, live a little. You’ve earned it. 

Glosswitch is a feminist mother of three who works in publishing.