Rebalancing the economy/ Rediscovering manufacturing
Workaround: In current version of Panels 3.8, it seems this body field needs to be populated in order for title above to appear. This note is hidden by custom CSS style. Jack Latimer.
The project described: An interdisciplinary project which relates two elements: first, the discourse of British political elites, including Peter Mandelson and David Cameron, about the need to rebalance the economy away from reliance on finance in London and away from reliance on state funded job creation in regions like the North East and the West Midlands; second , the available statistical evidence on British manufacturing, comparisons with Germany and new concepts of national business model
Why this project now? The project of rebalancing is proposed by the well meaning and accepted by the good natured. But our metropolitan political elites understandably have only a very blurred understanding of what manufacturing can now do to deliver jobs, output and trade surplus; they are also short of relevant policies for defending key sectors and reviving manufacturing as a whole. In our view, the discourse of rebalancing is part of larger problems in mainstream British about an elite politics of detachment.
So what’s the problem about manufacturing? The British have let manufacturing go, or more exactly let European manufacturing go to Germany. In terms of manufacturing employment, German manufacturing employs 7.2 million workers (or nearly three times the 2.4 million employed in the UK) and the German manufacturing share of GDP or national output is twice as large. In terms of trade the UK manufacturing sector is in deficit in nearly all sectors except for a now modest £1.55bill surplus in the chemicals whereas Germany enjoys a 291bill euro manufacturing trade surplus
What’s left of British manufacturing: Three quarters of British manufacturing employment is in workshops employing ten or less. There are few indigenous firms with the ambition and capability to construct domestic supply chains? If we look at domestically owned firms, we can start by excluding British Aerospace which is protected as our national defence contractor; and that leaves only one large world class high technology contender in Rolls Royce in aero engines, plus a handful of worthy niche players like JCB or Weir who typically employ less than 5,000.
Weren’t foreign owned firms going to save us? One third of UK manufacturing employment is in foreign owned plants which are generally larger and higher productivity than their British counterparts. This is the consequence of Mrs Thatcher’s strategy of inviting in the Japanese and others plus the shareholder value regime of everything for sale. But the result is foreign owned branch assembly plants whose ambition is generally limited by their fixed role in a global division of labour. Hence, all the Japanese manufacturers in the UK employ no more than 50,000.
What‘s distinctive about CRESC’s analysis? The emphasis on the problem of broken supply chains in UK manufacturing where around 50% of intermediate purchases are imported; as distinct from 25-30 % in Germany. Put simply, it is no longer possible to produce a heavy engineering product with a high British content and the JCB digger which was 97% British in 1979 is now no more than 36% British by value. And more generally the benefits of any Increase in British final output will leak abroad.
So how should government policy change? Recognise that free trade is not so much an opportunity for the British as an inescapable problem when half our manufactured exports go to Europe. So it would be sensible to stop hoping for competitive success and develop sheltered activities in repair, maintenance and upgrading of housing and economic infrastructure as part of a green new deal. The benefits of such policies for stimulating demand and output will however only be captured if they are backed with policies to build corporate actors and sustain supply chains.
The team of authors is led by Sukh Johal and Karel Williams who have between them some 30 years experience of innovative work on manufacturing, including classic books like Why are the British Bad at Manufacturing (1983) and Cars (1994). With colleagues like Julie Froud and Adam Leaver from MBS they are working with John Law (CRESC and OU Sociology) and international collaborators including Gary Dimski (University of California Riverside, economics) and John Buchanan (University of Sydney, workplace research)
The first major output? A working paper, Rebalancing the Economy (or Buyer's Remorse) was published in February 2011 and may be downloaded as a .pdf.