Aurelia Butler

MONTREAL/CHICAGO (Reuters) – Canada’s Mitchell Aerospace has a booming business – and a shop-floor shortfall that is reverberating from Boeing (NYSE:BA) to Airbus. The Montreal-based supplier of aircraft parts has an order backlog from clients such as Raytheon Technologies (NYSE:RTX), as aircraft makers push to ramp up output after a two-year slump. Like other companies that supply precision cast parts for everything from landing gear to engine components, Mitchell Aerospace is facing a labor shortage expected to hobble plane production through 2023.”It’s just a hurricane in the plant,” said company President Guillermo Alonso. “There’s just no time. It’s just produce, produce, produce and find ways to improve your productivity.”A slowing global economy has started to unwind some supply chain shortages that hit manufacturers and contributed to inflation. Demand for shipping and airfreight have softened, chip sales are slowing and used car prices in the United States are falling.But aircraft parts makers are still reeling from deep job cuts undertaken when planes were grounded during the pandemic, a sign of how uneven the supply chain crisis remains.In the United States, aerospace employment is 8.4% below its pre-pandemic level. In the province of Quebec, where Mitchell is located, the industry needs to fill 38,000 jobs in the next decade, according to industry trade group Aero Montreal. Major casting makers like Berkshire Hathaway (NYSE:BRKa) Inc’s Precision Castparts Corp and Pittsburgh-based Howmet Aerospace, which supply Boeing, Airbus and General Electric (NYSE:GE), are hiring after slashing staffing in 2020. But it takes time to train new hires. Boeing Chief Executive David Calhoun warned that labor will remain a bottleneck for the industry for years. “I don’t see this getting resolved any time soon,” Calhoun told a U.S. Chamber of Commerce conference this month. The problem is most acute in the highly labor intensive, hard to automate castings industry. In a recent Jefferies survey, nearly three-fourths of aerospace equipment makers cited castings as the largest source of shortages. Privately-held Mitchell Aerospace is encouraging staff to take overtime, raising wages by 4.75%, and offering workers referral bonuses. It is also trying to hire more women, immigrants and refugees from Ukraine. Some casting suppliers are taking as much as 72 weeks to fill in orders, said David Wireman, a managing director at AlixPartners. Rising interest rates and mounting economic uncertainty are making companies wary about ramping up capacity, given concerns that demand could collapse, he said. “It is going to be a rocky time for quite a while.” ‘IT’S ALL LABOR’ Meanwhile, the struggle to find workers is rippling through the supply chain, delaying jet engine and aircraft production at a time when much of the air travel market is booming. Leesta Industries, a Mitchell customer, is also wrestling with delays and quality problems from a different castings producer. When that producer delivers a month late, Montreal-based Leesta, which makes engine and landing gear components, must adjust to meet its own deadlines, said President Ernie Staub. “Your actual lead time of your product has been hurt by a month. You have to be ahead on the rest of your work,” he said. Raytheon (NYSE:RTN) recently said tight supplies of castings has left it operating “hand-to-mouth,” warning that delivery of some Pratt & Whitney large commercial engines might slip into the first quarter of 2023. The company did not specify the previous timeline for the deliveries. Rival GE said supply shortages have made it harder to deliver engines on time. Their customers are feeling the pinch. Airbus’ production target has declined, while Boeing warned supply chain pressures have capped its ability to ramp up output. Mitchell’s Montreal factory starts humming before sunrise with workers in protective gear filling mold sections with a mix of fine sand and a bonding agent. The whirring and grinding stops by mid-afternoon with no workers for a second shift.”It’s all labor,” said Alonso, who is looking for shop workers and metallurgists. “We have the demand.”Mitchell can only pass on about half of its higher costs to customers. Automating a part of Mitchell’s sand casting production by next year could address some labor issues, higher costs and allow for growth, Alonso said.     He sees robots replacing a job in which a worker must remove debris from castings. The work is repetitive and the part is at risk of damage in the process.”We haven’t pulled the trigger on the investment yet,” Alonso said, “but it’s a necessity.” More

Radical tax-cutting measures in the mini-budget have caused a maxi reaction in markets, with the pound falling to an all-time low against the dollar this week. New chancellor Kwasi Kwarteng and prime minister Liz Truss are gambling that borrowing tens of billions to fund large tax cuts and cap soaring energy bills will boost economic growth, but there are already fears that inflation and interest rates could be pushed up even further. Presenter Claer Barrett discusses what the new era of “Trussonomics” could mean for our personal finances with George Parker, the FT’s political editor, and Mary McDougall, the FT’s acting tax correspondent.To listen, click on the player link above, or search for Money Clinic wherever you get your podcasts. Money Clinic is keen to hear from listeners and readers. If you would like to get in touch, please email us at [email protected] or DM Claer on social media. She is @ClaerB on Twitter, Instagram and TikTok.

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In 1900 the world’s population numbered 1.65bn. A century later that figure had quadrupled to more than 6bn. At the same time, despite this unprecedented crowding of humanity, gross domestic product per capita rose in real terms by more than four times. That huge increase in productive potential redefined the lives of billions of people. It also enabled more destructive wars than ever before and, beyond wars, something even more terrifying: the real possibility of the total annihilation of human life on the planet. This duality of production and destruction gives the 20th century a claim to be the most radical in the history of our species.With Slouching Towards Utopia, J Bradford DeLong, Berkeley economics professor, former Clinton-era Treasury official and pioneering economics blogger, tries his hand at a grand narrative of the last century. With disarming frankness, he starts with the basic question of any such enterprise: which model, which narrative frame to pick?In The Age of Extremes, Eric Hobsbawm, the great Marxist historian, organised his account of the “short” 20th century around the rise and fall of the Soviet project — 1917-1991. The economist Branko Milanovic in his pioneering work on global inequality has sketched a narrative dominated by globalisation, deglobalisation and reglobalisation from the 1970s onwards. DeLong’s version of the 20th century is more parochial than either of those. It is centred on the political battles that raged around the growth regime of modern American capitalism and continue to shape policy debate in governments and central banks today. This is, you might say, the in-house, post-Clintonian history of the 20th century.The story opens in sweeping style in the late 19th century, when the second industrial revolution shifted global growth into a new gear. By that point the first British-centred industrial revolution was a century old. It had changed the face of a small part of northern Europe, but by modern standards it proceeded at a snail’s pace. The American-led growth phase that began towards the end of the 19th century was different. For the first time an important fraction of humanity experienced truly rapid economic growth and that growth was sustained and accelerated into the 20th century. The drivers of this development, according to DeLong, were three forces: the laboratory, the corporation and globalisation. Migration enabled tens of millions to raise their standard of living. Global investment put them to work. From the laboratory poured forth the magic of modern technology. Surprisingly, DeLong makes no mention of the immense mobilisation of raw materials all this enabled. As the economies of Europe and Japan developed their own growth models, as they collectively bound in large parts of the rest of the world through trade, migration and capital flows, the ensemble acquired such momentum that it promised to give history a deterministic logic dominated by economic growth.As the 20th century began, it seemed that economic development would realise utopia in the sense of freedom from want. But, as DeLong recognises, the liberal development engine was fragile. Indeed, it was smashed by the cataclysm of the first world war. On the question of whether that war was itself the result of combined and uneven economic development, or nationalist passion and happenstance, DeLong prevaricates. In any case, the war ended the first wave of globalisation, not only slowing growth but opening the door to contingency and politics. Rather than marching on the high road towards material abundance, humanity slouched towards utopia.As DeLong sees it, Friedrich von Hayek and his followers were right when they preached that the market would deliver dynamism and innovation, but they ignored the problems of inequality and capitalist instability. As the economist Karl Polanyi diagnosed, increasingly enfranchised populations were not passive victims of history. They pushed back against market forces, demanding protectionism and welfare. The result was a dysfunctional muddle, which John Maynard Keynes tried to sort out. Around the triptych of Hayek, Polanyi and Keynes, DeLong spans the familiar stations of north Atlantic political economy from 1914 down to the 2010s.

This is a surprisingly political economic history. Of course, individual policymakers, ideologies and institutions do matter. But in the process of narrating the twists and turns of economic policy, the corporations and research labs that DeLong celebrated in the opening chapters disappear almost entirely from view, until they roar back abruptly in his triumphalist account of microelectronics. The author likes European history and writes knowledgeably about the second world war, but the US is clearly the centre of his world. The Great Depression, postwar social democracy, the race question, the history of technology, are all addressed from an American point of view.An American-centric world history has an obvious beginning — the years following the US civil war. The more tricky question is how such a history should end. For DeLong the long era of American dominance was concluded in the decade after 2008, a period characterised by secular stagnation and the ascent of Donald Trump. One can see why this combination was traumatic for veterans of the 1990s-era Clinton administration. But, as a world historic caesura, it is something of an anticlimax. Does the shock of Hillary Clinton’s 2016 defeat really rank alongside the fall of the Soviet Union or the rise of China? Or is the relative banality of that moment, the confirmation of the bigger point, that for all its monumental self-obsession the American narrative is losing its ability to organise our understanding of the world?Furthermore, are we convinced that this is how the American century ends — with a whimper, not a bang? The last few years hardly suggest as much. For better and for worse, the US Federal Reserve remains the hub of the global financial system. American military power and technology span the globe and are girding themselves for a clash with China. The US is a major energy producer and the supplier of last resort for liquefied natural gas. Which brings us to what is surely the most puzzling aspect of DeLong’s book: his failure to address the vast mobilisation of non-renewable resources that from its beginning defined and powered the American-led growth model.

If the escape from Malthusian constraint defined what was radical about the 20th century, that century also brought us, from the 1970s onwards, a dawning certainty that environmental limits will indeed constrain our future. Not by accident, modern environmentalism was born in the 1960s and 1970s above all in the US. In the 1990s, under Clinton and his vice-president Al Gore, the US was the pivot of world climate policy. But America’s political class abandoned that leadership role and the climate problem has since become the most unambiguous indicator by which to gauge the end of the era of US economic preponderance. In the early 2000s, in the wake of massive industrialisation and urbanisation, China overtook the US as the largest emitter of greenhouse gases. Today China emits more CO₂ than the entire OECD club of rich nations put together. In environmental terms, the American-led west no longer controls its own destiny.Of all of this there is no mention in DeLong’s history. The title itself is telling. Slouching towards utopia? If utopia were on the cards, would slouching really be our problem? The big worry right now is the fear that the 20th century has set us hurtling towards collective disaster. Believers in technology insist that such pessimism is overdone. But nowadays they do at least feel the need to make the case, to demonstrate that to avoid disaster DeLong’s 20th-century formula — labs, corporations, markets and wise government — will suffice. Serenely untroubled by such concerns, Slouching Towards Utopia reads less like a history than a richly decked out time capsule, a nostalgic throwback to the 20th century as we imagined it before the great anxiety began.Slouching Towards Utopia: An Economic History of the Twentieth Century by J Bradford DeLong, Basic Books £30/$35, 624 pagesAdam Tooze teaches history at Columbia University. He is the author of ‘Shutdown: How Covid Shook the World’s Economy’ (2021)Join our online book group on Facebook at FT Books Café More

“We must get Britain working again,” the UK’s new chancellor Kwasi Kwarteng said last week. He is right. It would help the country’s inflation problem and its growth problem if more people joined the labour market. Yet inactivity — the term economists give to people who are neither working nor looking for work — is on the rise. It’s worth dwelling for a moment on how new this is for Britain’s labour market. In the decade after the financial crisis of 2009, the UK became a more industrious place. The proportion of 16 to 64-year-olds who were inactive fell from about 23 per cent in 2009 to 20 per cent by 2019, the lowest since records began in 1971. Older people retired later and more women joined the workforce. The employment rate for mothers in couples rose over 5 percentage points between 2008 and 2019. It also became more common for single parents to work when their children were young, partly because of changes to welfare rules. This growth in the size of the labour force was partly about benefit rules and changing social norms. But it was also about money. The UK was going through a lost decade for real wage growth that left people poorer than they had expected to be. As the Resolution Foundation think-tank put it in a report on these trends in 2019: “feel poor, work more.”Now inactivity has climbed back up to 21.7 per cent. Of the 640,000 or so working-age people who have become inactive since the start of the pandemic, 55 per cent of them say they are long-term sick (the other big group are students, which is less of a worry). But having identified the right problem, Kwarteng announced two policies last week that do not even attempt to tackle it. The first is to require people who receive universal credit while working up to 15 hours a week on minimum wage to “take active steps” to increase their earnings or face having their benefits cut. This is an expansion from the current threshold of 12 hours and will affect an extra 120,000 workers.The idea that you can chivvy people into switching jobs or asking their employers for more hours or more money isn’t completely without evidence, but it’s a lot of effort for not much impact. The government’s trials of the policy found that people subject to this intervention earned about £5 more per week after a year than those people who were given minimal support.More fundamentally, you don’t address a problem with worklessness by telling 0.4 per cent of the people who are working to work slightly longer hours. The share of workers who are part-time is lower than it was pre-pandemic already, while the share who are full-time is higher.Kwarteng’s other policy was to give more job-hunting support to people on unemployment benefit who are over 50. Again, this is strangely off-target. The unemployment rate for 50 to 64-year-olds is just 2.6 per cent, the lowest on record. The inactivity rate for this age group is 27.7 per cent — and it’s the people in this latter group we need to worry about. They aren’t looking for jobs and many of them are not claiming any benefits at all. The government is applying its policy lever to a group that is small and shrinking, rather than to the group that is large and growing.So what would work? The underlying problem, it seems to me, is that Britain is worn out after a tough decade. Public infrastructure is worn out; social infrastructure is worn out; people are worn out. Compared with the over-60s, those leaving the labour market in their 50s since the pandemic were less likely to leave work for retirement reasons and more likely to cite stress or mental health, according to the Office for National Statistics.

Properly funding the NHS and social care would lift barriers to growth, by allowing people to get the care they need so they can work. The same goes for addressing the UK’s expensive and inflexible childcare provision. People in their 50s and 60s, as well as increasingly suffering from ill health themselves, are often now called upon to help care for grandchildren and ageing parents as well. Britain would also benefit from a modern public employment service which is open to people who aren’t on benefits, something which is common in other countries in Europe.Kwarteng is right to focus on the labour market if he wants to boost growth. But last week’s policies were small solutions to problems that don’t exist, rather than big solutions to the problems that do. [email protected] More

Caps on electricity bills, fuel rebates, and cheap public transport tickets are just some of the ways European governments are trying to cushion the impact of surging energy prices. While these policies will lower prices in the short-term, the region’s central bankers worry they risk boosting demand and forcing interest rates to go even higher in the longer term.Tensions between governments and central banks are flaring up. There is, as Dario Perkins, an economist at research group TS Lombard, put it, “a tug of war between fiscal and monetary policy.” “Central banks want to squeeze demand, but governments want to support incomes,” he said. Since Russia’s invasion of Ukraine, energy prices in the region have soared. The European Central Bank has raised interest rates at an unprecedented pace in response, aiming to suppress demand to bring eurozone inflation down from its all-time highs of more than quadruple its 2 per cent target, even if it means exacerbating a potential recession this winter.At the same time, euro area governments are promising extra fiscal support — which Allianz economists estimate has already cost taxpayers almost €500bn. If these fiscal measures are too generous or broad-based, they will boost consumers’ spending power and undo the cooling effect on demand from higher rates — keeping inflation higher for longer in the medium term.The EU’s plan to raise €140bn from a levy on excess profits in the energy sector to spend on measures cushioning the blow of high prices is likely to further accentuate this trend.“The continuous fiscal efforts will make the ECB’s job much more tricky, as they will keep inflation stronger for longer, hence not getting inflation down as soon as anticipated,” said Piet Haines Christiansen, chief strategist at Danske Bank. In the UK, tensions have reached boiling point. Chancellor Kwasi Kwarteng’s new economic strategy, which includes a £150bn energy price cap and £45bn of tax cuts funded by extra borrowing, caused a sell-off in bond markets after investors judged it would lead to more inflation and require bigger rate rises by the Bank of England.The BoE said on Monday it would assess the plan’s impact on demand, while reminding everyone of its aim “to ensure that demand does not get ahead of supply in a way that leads to more inflation over the medium term”.Economists have also said US president Joe Biden’s $700bn climate, health and tax bill is as likely to add to price pressure as reduce it, despite being called the Inflation Reduction Act, while his decision to forgive billions of dollars of student loans is expected to fuel more inflation.The ECB, where fiscal policy is handled by 19 different governments, has an extra worry. Higher government debt levels may raise the spectre of a debt crisis and deter it from raising rates as high as needed to tackle inflation.ECB president Christine Lagarde encapsulated these concerns on Monday, saying any government support should be “temporary and targeted”, which “limits the risk of fuelling inflationary pressure . . . [while] contributing to preserving debt sustainability”.This is a new situation for Lagarde, who repeatedly praised the “strong and co-ordinated” approach of fiscal and monetary policy during the Covid-19 pandemic when both sides worked together to counter the sharp economic downturn. Some economists doubt governments will boost demand enough to avert a sharp economic downturn, which will ease inflation. Silvia Ardagna, chief European economist at Barclays, said: “The extent of the current fiscal easing does not spare the euro area a recession and a cut in gas demand.”The question is whether fiscal support is spread too wide and therefore boosts the spending power of people who do not really need it. “It is all about distribution,” said Jens Eisenschmidt, chief European economist at Morgan Stanley, who used to work at the ECB. “If you are a taxi driver you probably don’t have much extra savings, but someone like me does,” said Eisenschmidt. “Yet some of these fiscal policies like fuel duty cuts help everyone and that means they can stimulate demand too much.” More