Special Report - Are we better off as laggards?

The Chancellor is obsessed with the productivity gap between Britain and other leading industrial na

As a sales pitch to woo those all-important inward investors to our shores, it was not one of Gordon Brown's best efforts. More Cassandra than Del Boy, he proclaimed: "Productivity levels in the US are 40 per cent higher than in Britain, and 20 per cent higher in Germany than here".

Worse, he didn't exactly keep quiet about this claim. Instead, alongside his Calvinist zeal for the "work ethic", Brown made the need for higher productivity into a mantra late last year. In November he launched a series of "productivity roadshows" and hosted confessional seminars at the Department of Trade and Industry and the Treasury to spread the unhappy message. Rectifying Britain's laggardly performance will be a core theme of the March Budget.

But does Britain really need to pull its socks up as much as Brown says? Is there really still a huge productivity gap between us and our competitors, even after Thatcher's self-proclaimed "productivity miracle"?

Not everyone thinks so. Since Brown made this a big theme in his pre-Budget report last year - devoting 30 pages to it - a number of people have stepped forward to question his gloomy analysis. In a recent research paper, Lies, Damned Lies and Productivity Statistics, Graeme Leach, senior economist at the Institute of Directors, wrote: "Statistical deficiencies do not preclude the possibility that UK productivity levels are second only to the US. This seems unlikely, but is this caution merely the product of decades of doing Britain down in the media?"

Leach is not alone in questioning Brown's figures. The Institute for Fiscal Studies (IFS), the Trades Union Congress (TUC) and the Institute for Public Policy Research (IPPR) have all produced papers doing so. The TUC report, Productivity and Partnership, for example, points out that the most recent studies of the productivity gap with the US offer estimates of between 7 and 40 per cent.

The basic squabble is over what kind of definition should be used. This may sound an arcane topic, suitable only for economic pointy-heads. But it matters because, as Leach says, "if the gap is more of a mirage, then the opportunity for a productivity miracle is undermined".

What exactly do we mean by productivity? Statistical definitions are a bit like balloon animals. You've either got your basic, crude shape - not very sophisticated. Or, with a bit of imagination and sleight of hand, you can turn your material into a far more impressive puppy.

And so it goes with productivity figures. The standard definition of productivity is output per worker. This is the figure the government uses. What this ignores, however, is exactly how many hours the worker was beavering away to produce those widgets. If, for example, it took one worker ten hours to produce a car, and another one five hours, the output would be the same, but it is easy to see that one worker was more productive than the other. Tweak the equation by sprinkling "hours worked" into it and the gap with the US magically shrinks from 40 to 20 per cent, because the average American worker puts in longer hours.

And with a bit more clever tweaking, such as that employed by Rachel Griffith and Helen Simpson of the IFS in their paper Productivity and the Role of Government, the gap shrinks to nearly zero. This is because they also factor in both the age of Britain's physical capital and its dodgy quality. Workers, it seems, can sometimes legitimately blame their tools for their poor productivity levels.

Why then does Brown persist in putting the worst possible spin on British performance? There are good and bad reasons for his doing so. Poor productivity offers a handy scapegoat for the recession now hitting manufacturing. Ministers were particularly keen last year to blame poor productivity rather than the high pound for the problems at Rover's Longbridge factory. Far better, too, to talk, as Peter Mandelson did, about linking potential government subsidy to assist the ailing factory to "productivity improvements", rather than convey the impression that the government was engaged in old-style bailouts to prop up inefficient industries.

Making an issue of poor productivity shows Brown in a macho light for focusing on a tough long-term agenda. "To caricature Brown, you could say, 'In my first Budget I solved the unemployment problem, in my second I dealt with work incentives and now, in my third, I will lick the productivity problem'," observes Peter Robinson, senior economist at the IPPR.

Highlighting a productivity problem helps to get the issue higher up the political agenda. Indeed, the Treasury itself implicitly acknowledges that the figure it cites is inflated. "We know and you know there are a number of ways of looking at this," said John Kingman, head of the Treasury's productivity panel, at an IFS conference last year. He added that the high figure acts as "a way of focusing minds on the need for further supply-side reform which seems to us to be desirable". The seminars and the roadshows all helped to "build a public perception that this was an important priority".

And so it should be. Although it is possible to explain away why Britain has worse levels of productivity (shorter average hours, or ageing equipment and so on) this does not mean that we should ignore Britain's relative decline. Higher productivity does matter because, as Brown puts it, it is the "key to the stronger economy - to higher growth, more jobs and opportunities, and better living standards for us all".

How do we get to this economic utopia? There are lots of different routes. Margaret Thatcher thought she had found one and talked boldly of a "productivity miracle" in the 1980s. And although Peter Mandelson has claimed that "productivity relative to our main competitors did not improve during the Tory years", there is a body of evidence that contradicts him. Britain did see a marked reduction in the productivity gap, particularly in manufacturing, after a time of slow productivity growth, and even some decline, during the 1970s.

"It is hard to say Britain didn't improve," says Nicholas Crafts, professor of economics at the London School of Economics. However, some of that improvement came at a price. "The revival in manufacturing productivity growth stemmed mostly from reductions in employment; output rose at only 1.2 per cent per year during 1979-89," wrote Crafts in Britain's Relative Economic Decline 1850-1995,published by the Social Market Foundation.

Despite these improvements, Britain's relative economic decline was stalled, not reversed. Worse, official estimates of manufacturing productivity growth suggest that since 1994 even this progress has stopped, with spartan growth since then. Adair Turner, the director general of the Confederation of British Industry, argues: "The process of liberalising the economy in key ways, the productivity improvements in the privatised industries, labour market reforms and the relegitimisation of enterprise and business as key social values were all beneficial. So this government has to preserve them." But, he adds, "Thatcher's changes were probably a necessary but not sufficient condition for us to close the gap".

So what is still missing? For Turner there are two important elements. "Between 1979 and 1993 there were dramatic booms and busts. These are relevant to the productivity debate because in a more volatile macroeconomic environment it is more rational for businesses to focus on the short term."

The first way for Brown to help improve productivity, then, is to ensure that there is fiscal and monetary stability. "The more you strip out financial noise," argues Turner, "the more you can concentrate on the fundamentals." He suggests, however, that this stability may not be enough. "Does the pursuit of macroeconomic stability also require going into the euro? On balance I would say yes."

The second factor that Turner thinks significant is "the failure to grip the education system. We have a less skilled workforce compared with our major competitors. Therefore we need to focus on an education and skills agenda."

This kind of view, however, is dismissed by the McKinsey Global Institute, whose paper on British productivity helped jump-start the debate last year. It sees "low capital investment, poor skills and sub-scale operations" as merely secondary effects. Instead, McKinsey touts a neo-liberal agenda of ever more deregulation, arguing that the productivity gap is "the effect of regulations governing product markets and land use on competitive behaviour, investment and pricing".

Although this conclusion has been embraced by the Institute of Directors, there are not many others who subscribe to it. The Treasury's John Kingman says: "It [the McKinsey paper] was not something the government had commissioned and they have their own views. They are better on individual sectors than on the economy as a whole. They are more convincing at explaining the gap with the US instead of continental Europe."

The TUC has also duffed up McKinsey's findings. It points out that it is bizarre to say we are less productive than France and Germany because we are over-regulated. Those two economies, after all, are far more snarled up in red tape. The TUC argues that the real causes of poor performance are "under-investment, skill shortages and poor workplace relationships". While Britain was better at cost-cutting in the 1980s, Germany's higher labour productivity comes from a history of higher investments in human and physical capital.

The TUC is right to emphasise the need for higher levels of investment. However, its focus is still very much on improving manufacturing industry. Increasingly, experts recognise the crucial role of productivity in the service sector, which matters more than manufacturing, since the latter makes up only around a fifth of the overall economy.

Nicholas Crafts agrees that "we focus far too much on manufacturing. The lever for improving it is not necessarily the same as for services. It requires a different sort of human capital."

Mary O'Mahony, an economist at the National Institute of Economic and Social Research, is one of the few people who has attempted to quantify rigorously how Britain compares in this area. It's not all doom and gloom. Based on her data she found that, in sectors such as mining, utilities and construction, British labour is more productive than its French, German, American and Japanese counterparts. Overall, however, she concludes that "Britain does not generally enjoy a comparative labour productivity advantage in service sectors".

Figuring out ways to measure, or even boost, productivity in services is tough because what you mean by "output" is tricky. School class sizes are a good example of this. You could argue that the government's commitment to smaller classes, made in its five pre-election pledges, is a commitment to lower productivity in education because there will be more teachers ("input") to each child ("output"). But shouldn't "output" in education be measured by results? And, if so, which results: more exam passes, higher literacy levels, lower delinquency rates?

Or take retailing, in which France is far more productive than Britain. This is partly because there is more land available to build whopping big hypermarkets on the edges of towns. And they offer poorer service levels than British stores. There are no bag packers or people in unfashionable garb offering to show you where to find muesli. The French may be more productive in retailing, but are they really "better"?

A similar dilemma faces the hotel industry. Is a hotel "better" because guests have to make their own coffee and carry their own luggage? And again it is easier for a hotel to be more productive on a greenfield site than on an older one simply because you can design it so that, say, the kitchen is near to the dining room. Both France (which has the same population as Britain but twice the land) and America have a highly productive hotel sector, partly because they have the room for new edge-of-town development. One survey found that, for new hotels in Britain, the break-even occupancy rate was 80 per cent, compared with just 50 per cent in America.

Should we then rip up our planning laws as part of an effort to squeeze more productivity out of hotels? Most people would say not. But different issues are raised by efforts to forge industrial clusters, such as a mini-Silicon Valley in Cambridge. In this case, people like Adair Turner would argue that it may be worth compromising social welfare and allowing development to proceed in order to boost hi-tech productivity. What matters, Turner explains, is whether the industry is one which could have "a cumulative dynamic effect" on the rest of the economy.

The existence of these potential trade-offs suggests that the government needs to be careful about over-hyping the importance of higher productivity. A big part of the political problem is that long-run productivity performance can have nasty side-effects in the short term. There are often good reasons to prefer lower productivity. As Nicholas Crafts sees it, "productivity is a benchmark for performance, instead of an objective in itself ".

The additional danger is that, as Britain faces an economic downturn, efforts to get short-term productivity improvements are more likely to involve job losses or tougher conditions for workers - as they did at Rover's Longbridge plant - than expansionary investment to sustain economic development.

Speaking at the launch of the CBI's Fit for the Future campaign, Turner acknowledged this prognosis when he said "we need to improve more than productivity. If we simply improve productivity we will create a high unemployment economy."

This article first appeared in the 15 January 1999 issue of the New Statesman, A slight and delicate minister?

NEAL FOX FOR NEW STATESMAN
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They know where you live

Imagine your house being raided by armed police. That’s what happened to Mumsnet’s Justine Roberts after she fell victim to an internet hoaxer.

At around midnight on Tuesday 11 August 2015, a man dialled 999 to report a murder. A woman had been killed in her London home, he said, before hanging up without offering his name. A second call followed. This time, the man claimed to be the killer. He told the operator that he had now taken the woman’s children hostage at the Islington address. They were locked with him inside a room in the house, he said. The police responded with reassuring speed. Fifteen minutes later, eight officers, five of them armed with automatic weapons, accompanied by saliva-flecked dogs, arrived at the scene and took up position in neighbouring front gardens. When one officer banged on the front door of the house, the team was greeted, moments later, not by a masked murderer but by a blinking and bewildered au pair.

Justine Roberts, the woman whom the caller claimed to have killed, was in fact nearly 2,000 kilometres away – in Italy, holidaying with her husband and children. After explaining this to the police, the au pair called Roberts, who assumed that the incident was an unfortunate misunderstanding, one that could be unpicked after the vacation. It was no mistake. Roberts had been the victim of “swatting”, the term given to a false emergency call designed to bait an armed unit of police officers to storm someone’s home. It wasn’t until a few days later, as the family was preparing to return to London, that Roberts discovered that she had been the target of a planned and sustained attack, not only on her household, but also on her business.

Roberts is the founder of Mumsnet, the popular British internet discussion forum on which parents share advice and information. A few days before the swatting incident, members of 8chan, a chat room that prides itself on being an open, anonymous platform for free speech, no matter how distasteful, had registered accounts on Mums­net with the aim of trolling people there. When legitimate Mumsnet users identified and then ridiculed the trolls, some retreated to 8chan to plot more serious vengeance in a thread that the police later discovered. Roberts wasn’t involved in the online skirmish but, as the public face of the site, she was chosen as the first target.

After the initial armed response, Roberts’s perception was that the police were unconcerned about the swatting attack. “We were told that there was no victim, so there was not much that could be done,” she told me. The hoax caller, however, was not finished. In the days after the incident, there was chatter on Mumsnet and Twitter about what had happened. A Mumsnet user whom I will call Jo Scott – she requested anonymity for her own safety – exchanged heated messages with a hacker who claimed responsibility for the 999 call.

“It descended into jokes and silliness, like many things do,” Scott said. “I didn’t take it seriously when the hacker said he had big surprises in store.” She doesn’t believe that what happened next was personal. “I think I was just easy to find.”

A few days after police were called to Roberts’s home, Scott was in her bedroom while her husband was sitting downstairs playing video games. At 11pm, she heard a noise outside. “I looked out of the window and saw blue flashing lights in the street,” she recalled. “I could hear shouting but I didn’t pay it much notice.” Then she heard her husband open the front door. Police rushed into the house. An armed officer shouted upstairs, asking Scott if she was hurt. When she replied that she was fine, he told her to fetch her two young children: he needed to see them. Scott shook her sons awake, explaining, so as not to alarm them, that the police had come to show the boys their cars. As the three of them went downstairs, the officers swept up through the house, repeatedly asking if there were any weapons on the property.

“I was beyond confused by this point,” Scott said. “Everyone was carrying a gun. They had little cutaway bits so you could see the bullets. My eldest asked one of the officers if he could have a go on his gun and went to touch it.”

As Scott sat with an officer downstairs, she asked what had happened to her husband. “I later found out that the noises I’d heard were the police calling for him to come outside,” she said. “He dropped the PlayStation controller as he left the room. It was only later that we realised it’s a good job he did: in the dark, the controller might have looked like a weapon.”

Outside, Scott’s husband had been surrounded and arrested. Other police ­officers were on the lookout in the front gardens of nearby properties, having warned the couple’s neighbours to stay indoors, away from their windows. “One of the officers said it was beginning to look like a hoax,” Scott said. “Then he mentioned swatting. As soon as he said that word, I twigged that I’d seen the term that day on Twitter in relation to the Mumsnet hack.”

***

The term “swatting” has been used by the FBI since 2008. “Swat” is an acronym of “Special Weapons and Tactics”, the American police squads routinely called to intervene in hostage situations. It is, in a sense, a weaponised version of a phoney order of pizza, delivered as a prank to a friend’s home, albeit one that carries the possibility of grave injury at the hands of police. For perpetrators, the appeal is the ease with which the hoax can be set in motion and the severity of the results. With a single, possibly untraceable phone call, dialled from anywhere in the world, it is possible to send an armed unit to any address, be it the home of a high-profile actor whom you want to prank or that of someone you want to scare.

In America, where swatting originated, the practice has become so widespread – targets have included Tom Cruise, Taylor Swift, Clint Eastwood and the Californian congressman Ted Lieu – that it is now classed as an act of domestic terrorism. In the UK, where Justine Roberts’s was one of the first recorded cases, swatting is classed as harassment, though that may change if these and other forms of internet vigilante attacks, such as doxxing, become increasingly commonplace.

Doxxing involves the publication of someone’s personal details – usually their home address, phone numbers, bank details and, in some cases, email address – on the internet. It is often the prelude to swatting: after all, the perpetrator of a hoax cannot direct the police to the target’s home address until this is known. (During the week of the Mumsnet attacks, one of the perpetrators attempted to locate another target using their computer’s IP address, which can identify where a person is connected to the internet, often with alarming precision. Their calculation, however, was slightly out; police were called to a neighbour’s address.)

Though doxxing has a less dramatic outcome than swatting, the psychological effects can be just as severe. For victims – usually people who are active on the internet and who have outspoken opinions or who, in the eyes of an internet mob, have committed some kind of transgression – the mere threat of having their personal information made available on the web can cause lasting trauma. A Canadian software developer whose home address, bank details, social security number and email history were published online in 2014 told me that he now keeps an axe by his front door. “I still don’t feel safe here,” he said. “It’s terrifying.”

Christos Reid, a social media manager for a software company, was doxxed last year. Reid’s information came from a website he had registered seven years earlier. “I woke up one morning to find a tweet announcing my personal details,” he told me. When he asked the Twitter account holder to take down the address, he was told to commit suicide. Reid said he was “OK for about half an hour”; but then, after he went out, he broke down in the street. “I’ve become more paranoid,” he said. He no longer gives out business cards with personal information.

Reid lives in London, but at the time of the doxx he was attending an event in Nottingham, home to the British police’s largest cybercrime division. He was impressed with the police response, even though they told him that they had not heard of the term “doxxing” before. “I was interviewed by two separate people about my experiences who then compiled everything into a case file and transferred it to the Met. When I arrived home, an officer visited me to discuss what happened and my options.”

The policeman explained harassment law to Reid, and offered advice on how to improve security at his flat and what to do if someone hostile turned up at the address. Reid shouldered the repercussions of what had happened alone; no suspects were identified. A spokesperson for the Metropolitan Police similarly said that although detectives from Islington CID have investigated the swatting attacks made on Roberts and Scott, no suspects have been identified “at this time”, even as “inquiries continue”.

Doxxing may seem to be a mild form of harassment but it carries with it an implicit threat of impending violence; the worrying message is: “We know where you live.” Unlike swatting, which is always malicious, doxxing is sometimes viewed by its perpetrators as virtuous. In November 2014, hackers claiming to be aligned with the internet group Anonymous published personal information allegedly belonging to a Ku Klux Klan member from Missouri. The hackers said that their action was a response to the KKK’s threat to use lethal force against demonstrators in the city of Ferguson, Missouri, protesting against the killing of the unarmed black teenager Michael Brown by a white police officer. In January 2015 hackers claiming to be from Isis took over US Central Command’s Twitter account and posted information about senior military officers, including phone numbers and email addresses. In each case, those carrying out the doxxing believed, however mistakenly, in the virtue of their actions and hoped that the information could be used to bring punishment or ruin to the subject.

The term “doxxing” may be new but the practice is an old one. The Hollywood blacklist revealed the political beliefs and associations of actors and directors in the late 1940s as a way to invite shame, deny employment and dissuade others from following their example. “But it has become a lot easier to find people’s private details with the help of the internet,” Jeroen Vader told me. Vader owns Pastebin, a website that allows users to upload and distribute text documents, and where much of the personal data is anonymously uploaded and shared. “People post their private information on social networks,” he said. “A lot of people aren’t aware that their information is so easily available to others.”

In Justine Roberts’s case, the perpetrator may not even have needed to look at social networks to mine her personal information. “If you’re on the electoral roll, you’re easy to find,” she said. “There’s not much you can do to stop people getting hold of your data one way or another, whether it’s for nefarious reasons or simply to better advertise to you. We live in a world that is constantly trying to gather more information about us.”

Jeroen Vader said he has noticed an “upward trend” in the number of doxxing posts uploaded to Pastebin in recent months, but insisted that when someone uses the site’s abuse report system these offending posts are removed immediately.

Across social media companies, action is more often reactive than proactive. Victoria Taylor, a former director at Reddit, one of the largest community-driven websites in the world, said that the rule against publishing other users’ personal information has been “consistently one of the site’s most basic policies” and that “any violation of this rule is taken extremely seriously by the team and community”. Still, she was only able to recommend that victims of doxxing send a message to the site’s administrators. Similarly, when asked what a person can do to remove personal details that have been published without permission, a Twitter spokesperson said: “Use our help form.”

The spokesperson added: “There has def­initely been an overall increase in doxxing since 2006, both on Twitter and on the internet more generally.” She attributed this rise to the emergence of search engines such as Intelius and Spokeo, services designed to locate personal information.

***

The surge in the number of dox­xing and swatting attacks is in part a result of the current lack of legal protection for victims. Confusion regarding the law on doxxing is pervasive; the term is even not mentioned in either US or European law. In a tutorial posted on Facebook in 2013, the writer claims: “Doxxing isn’t illegal as all the information you have obtained is public,” and adds: “But posting of the doxx might get you in a little trouble.”

Phil Lee, a partner in the privacy, security and information department of Fieldfisher based at the law firm’s office in Silicon Valley, said that differing privacy laws around the world were part of the problem. “Various countries have laws that cover illegal or unauthorised obtaining of data. Likewise, some of the consequences of releasing that data, such as defamation or stalking, cover elements of what we now term doxxing. But there is no global law covering what is a global phenomenon.” Indeed, Roberts believes that her London address was targeted from America – the 999 call was routed through a US proxy number.

One challenge to creating a law on doxxing is that the sharing of personal information without permission has already become so widespread in the digital age. “If a law was to state something like, ‘You must not post personal information about another person online without their consent,’ it wouldn’t reflect how people use the internet,” Lee said. “People post information about what their friends and family members have been doing all the time without their consent.

“Such a law could have a potentially detrimental effect on freedom of speech.”

Lee believes that a specific law is unnecessary, because its potentially harmful effects are already covered by three discrete pieces of legislation dealing with instances where a person’s private information is obtained illegally, when that information is used to carry out illegal acts and when the publication of the information is accompanied by a threat to incite hatred. However, this does not adequately account for cases in which the information is obtained legally, and then used to harass the individual in a more legally ambiguous manner, either with prank phone calls or with uninvited orders of pizza.

Susan Basko, an independent lawyer who practises in California and who has been doxxed in the course of her frequent clashes with internet trolls, believes that the onus should be on the law, rather than the public. She points out that in the US it is a crime to publicise information about a government employee such as their home address, their home and cellphone numbers, or their social security number, even if the information is already online. “This law should apply to protect all people, not just federal employees,” she said. “And websites, website-hosting companies and other ISPs should be required to uphold this law.”

Basko said that doxxing will continue to increase while police have inadequate resources to follow up cases. For now, it is up to individuals to take preventative measures. Zoë Quinn, an American game designer and public speaker who was doxxed in 2014, has launched Crash Override, a support network and assistance group for targets of online harassment, “composed entirely of experienced survivors”.

Quinn, who spoke about the problem at a congressional hearing in Washington, DC in April last year, recently posted a guide on how to reduce the likelihood of being doxxed. “If you are worried you might some day be targeted,” she wrote, “consider taking an evening to stalk yourself online, deleting and opting out of anything you’re not comfortable with.”

Both Scott and Roberts have changed their privacy habits following the attacks. Scott is more careful about interacting with strangers online, while Roberts uses scrambler software, which ensures that she never uses the same password for more than one online site or service.

For both women’s families, the effects of their encounters with armed police have also lingered. When one day recently Roberts’s husband returned home early from work, the au pair called the police, believing it was an intruder. And Scott is haunted by what happened.

“What if my husband had made a sudden move or resisted in some way? What if my eldest had grabbed the gun instead of gently reaching for it? What if people locally believed that my husband did actually have guns in the house?” she asks. “I don’t think the people making these sorts of hoax calls realise the impact.” 

This article first appeared in the 28 April 2016 issue of the New Statesman, The new fascism