The Economics of Christmas Past
Dr Kwok Tong Soo, senior lecturer in Economics reflects on how Christmas has changed in the 58 years since the Management School opened.
The Christmas holidays are a good time to pause and reflect on the year that is about to end. If we consider the past 58 years of LUMS, we can also reflect on the changes that have taken place in a much longer time period. There have been many technological advances since 1963, but there have also been many economic changes.
For instance, whereas in 2019 (pre-pandemic) nominal per capita GDP in the UK was £33,000, in 1963 it was less than £600. Of course, this does not mean we are over 50 times richer today than in 1963! Prices have also increased, but by a smaller proportion: 2019 consumer prices were about 17 times higher than in 1963. Therefore, in real (purchasing power) terms, the average person in the UK in 2019 is over three times richer than the average person in 1963.
Of course, broad generalisations can hide many subtleties. For instance, real per capita GDP is only slightly higher in 2019 than in 2008, marking a “lost decade” of growth. Similarly, the North-South divide persists (and continues to grow): whereas in 1997 (the earliest available data) gross disposable household income in London was 34 percent higher than in the Northwest of England, by 2019 it was 62 percent higher. Rising inequality is a key feature of many economies, as documented by Piketty, Saez and their collaborators. This may in part be due to de-industrialisation, another key feature of the UK economy since the 1960s. Whereas the percentage of workers in manufacturing was 36 percent in the 1961 Population Census, it was down to 9 percent in the 2011 Census, with a corresponding increase in the percentage of workers in services from 49 percent to 81 percent.
The Christmas holidays are also a good time to look forward to the new year. Yet caution may be warranted; as the Danish proverb (sometimes attributed to Niels Bohr) goes, it is difficult to make predictions, especially about the future. In 1930 Keynes famously predicted a 15-hour work week in 2030. Keynes’s essay, written in the midst of the Great Depression, is remarkably optimistic, so may be a good Christmas read at a time when many have been feeling the strain of the pandemic over the past two years – a “Christmas Carol” for our times.