Britain Still Makes Things – But We Need to Make Far More!
Manufacturing still plays a significant role in the economy, and should receive more encouragement from public policy, instead of being written off as irrelevant to a modern nation.
Writing in Nations Choose Prosperity, a group of industrialists, trade unionists and academics band together to call for a renewal of manufacturing. Brought together by Ruth Lea, contributors include trade unionist Brendan Barber, manufacturer Alan Reece, and Cambridge economist Professor Bob Rowthorn. They consider the consequences of the decline of manufacturing and how these could be reversed.
No one argues for protectionism: free enterprise and competitive markets are vital, and the primary cause of economic prosperity is the talent and energy of the individuals who make up a nation.
However, there needs to be a constant effort to ensure that the laws, regulations and public policies provide people with the best possible conditions for free enterprise. Certainly low taxes and the avoidance of over-regulation are crucial, but positive policies are also needed in transport, energy and monetary policy, public procurement and much more if we are not to fall behind.
DO WE NEED A NATIONAL PLAN?
The idea of a national plan was discredited by the failed plans of the 1960s and 1970s but every economically successful nation has one, America included. According to Nations Choose Prosperity, published by independent think-tank Civitas, nations are in competition with each other in much the same way that companies are in a contest with their rivals.
The badly mistaken policies pursued in the 1960s have put any kind of industrial policy beyond the pale of political debate for a generation. But there are good industrial policies and bad industrial policies and we urgently need a public debate to distinguish between the two. The national plans of successful nations do not fix production targets and set prices – instead they create the best conditions for free enterprise. To avoid association with past follies, we may not want to speak of a national plan, but we do need a national strategy for future prosperity.
Nor is it just a matter of minimising government or ‘getting out of the way’, it involves effective public spending on infrastructure – including roads, railways, ports, communications and energy – and more controversially public investment in productive enterprises for which private finance is not available. According to Ruth Lea, editor of Nations Choose Prosperity:
‘It’s worth reminding ourselves that even in the heyday of 1980s Thatcherism, Britain had an active industrial policy. In particular, inward investment projects were actively pursued and supported by the Government. As a DTI civil servant I was involved in these policies which were, by any standards, outstandingly successful.’
As David Green, Director of Civitas, writes in his foreword:
‘Creating the conditions for prosperity cannot be reduced to a simple formula like “getting the government off our backs”. Much of what makes the difference between the success or failure of a company depends on the public policies we adopt as part of our democratic process. It is not just firms that compete to discover the best ways of providing for human needs and conveniences, but also nations that contend with one another to discover and create the most fertile soil for human freedom.’
THE GOVERNMENT’S COMMITMENT TO ‘INDUSTRIAL ACTIVISM’ IS COMPLACENT
Lord Mandelson has declared the Government’s support for industrial policy but official pronouncements so far are full of complacency, and even when the ideas are good, not much happens. The Government tends to point to areas where there has been progress compared with our own poor past record, but we should not be content with mere improvement, especially when we still lag behind the most successful economies. We should aim to be the best.
The government report, New Industry, New Jobs, published in April, is typical in being marred by a stream of comforting excuses. For example, the report finds it reassuring that productivity has improved by comparison with the past, despite that fact that we remain well behind our main rivals and are unlikely to catch up. Similarly, it points out that spending on R&D has increased, when we continue to invest at far lower rates than the most successful countries. It also acknowledges that we have lacked the skilled workforce of other leading manufacturers for many years and points to improvements – at least according official figures – but even so we are still well behind the best.
THE DECAY OF A ONCE-GREAT NATION
Newcastle manufacturer Alan Reece, who has been warning of the dangers of de-industrialisation for some years, points out that ‘the actual volume of goods manufactured has fallen to 75 per cent of what it was in 1997’ (p.49) and blames ‘the decay of a once-great nation’ on ‘its unique abandonment of manufacturing and, with it, physical science’. He attributes this to ‘the concentration of political power in the City of London, where it is wielded by men who know little about anything but money, and, as we have painfully learned, little about that either!’ (p.50).
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‘Nations Choose Prosperity: Why Britain needs an industrial policy’ by Ruth Lea, Brendan Barber, Ian Brinkley, Ian Fells, David G. Green, Ian Peters, John Philpott, Alan Reece, Robert Rowthorn, Candida Whitmill is published by Civitas, at £8.50 inc. pp. ISBN: 978-1-906837-10-5. Buy from Amazon.
Notes for Editors
1. Civitas is an independent social policy think-tank. It receives no state funding either directly or indirectly and has no links to any political party.
2. Manufacturing represents nearly 13 per cent of Britain’s GDP, 75 per cent of business research and development (R&D), half of UK exports and 10 per cent of total employment. Britain is the sixth largest manufacturing nation in the world after the USA, China, Japan, Germany and Italy, larger than France. The manufacturing sector is still over one-and-a-half times larger than the financial sector. It is significantly more important than construction, mining and quarrying, utilities or agriculture. Manufacturing is, on average, more productive than services. (pp.1-2)
Nevertheless, the shift against manufacturing in Britain’s economy has been dramatic. Manufacturing accounted for over 30 per cent of Gross Value Added (GVA) in 1970, but by 2007 it accounted for less than 13 per cent; whilst services made up just over half the economy in 1970 but now represents around three-quarters of economic activity. This has had a serious impact on the balance of payments, as import growth has outstripped export growth. In 1997 the current account was almost in balance. A modest deficit in visible trade (goods) of £12.3bn was almost totally offset by healthy surpluses on services and in investment income. But by 2008 the visible trade (goods) deficit had soared to nearly £93bn. (p.6)