The UK economy is failing because Tories don’t understand manufacturing any more
Port Talbot steelworks at night. It’s a manufacturing plant so Conservatives haven’t had the faintest idea how to keep it running.
Ha-Joon Chang is mistaken. Britain hasn’t forgotten that making things matters – the Tories have.
The simple fact is that Conservatives don’t care about making anything other than money – and the quickest way to do that is on the financial markets.
So they’ve chummied up with bankers and hedge fund managers – anybody who can dream up a new wheeze to create magic money out of thin air.
Meanwhile, as stated in the article, the UK stagnates.
It’s being blamed on the Brexit jitters. But the weakness in the UK economy that the latest figures reveal is actually a symptom of a much deeper malaise. Britain has never properly recovered from the 2008 financial crisis. At the end of 2015, inflation-adjusted income per capita in the UK was only 0.2% higher than its 2007 peak. This translates into an annual growth rate of 0.025% per year. How pathetic this performance is can be put into perspective by recalling that Japan’s per capita income during its so-called “lost two decades” between 1990 and 2010 grew at 1% a year.
At the root of this inability to stage a real recovery is the serious imbalance that has developed in the past few decades – namely, the over-development of the UK financial sector and the atrophy of manufacturing. Right after the 2008 financial crisis there was a widespread recognition that the ballooning financial sector needed to be reined in. Even George Osborne talked excitedly for a while about the “march of the makers”. That march never materialised, however, and manufacturing’s share of GDP has stagnated at around 10%.
This is remarkable, given that the value of sterling has fallen by around 30% since the crisis. In any other country a currency devaluation of this magnitude would have generated an export boom in manufactured goods, leading to an expansion of the sector.
Source: Making things matters. This is what Britain forgot | Ha-Joon Chang | Opinion | The Guardian
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The expertise that made Britain great was manufacturing and the greed of the Tories threw it all away. Let us hope that there will be enough left for the Labour party to recover and regenerate soon.
Britain has never really recovered from World War 2. In the years after the war Germany rebuilt its manufacturing base which had been pretty much totally destroyed be allied carpet bombing. It was helped and supported in this by the US and UK mostly in order to avoid the mistakes after the first war where Germany was punished and the seeds sown for the rise of Nazism. So while Germany was building a strong industrial base with new machines and factories British factory owners carried on doing things in the same old way using the same old tools. And lo and behold Germany became a by word for excellent engineering and efficient production while British manufacturing continued to decline.
Coupled with the technological investment in Germany was the strong trade union movement and labour laws there which saw West German workers benefiting from good wages and thus strong spending power to reinvigorate their economy.
The lack of imagination in Britain that failed to see the way the wind was blowing was compounded by a failure of the capitalist classes to engage with the TU movement whom they saw as enemies trying to eat into their profits. The resulting industrial conflict between workers and bosses became more ideologically driven and the Tory party benefitted from the spin that British workers were work shy.
This contempt for manufacturing and the idea that the unions were ‘the enemy within’ as Thatcher described them lead the Tory party on a deliberate path in the 80’s to completely downgrade UK heavy engineering in favour of investment in service and financial sectors.
All countries need a strong manufacturing foundation to underpin its other endeavours. The production brings in international revenue and the wages paid to and spent by the working classes keeps the fiscal churn going and the economy resilient. The huge profits made by the financial sector is largely lost money in that it is taken out of circulation in savings or in spending abroad further impoverishing the UK that all economy.
The don’t like manufacturing that is the real answer, the tories never have, Thatcher proved that when she sold it all off and now they wonder why we’re in the crapper for, one of the reasons why Germany is doing well is because they didn’t flog off their manufacturing industry to the highest bidder, can’t sell off your industries and expect everything to still be okay, but that’s right wing logic for you.