Sunday, October 10, 2010

Should We Grow More Lettuce?

Maybe not that much

As we've mentioned before, Tyler Senior spent his entire working life as an engineer. And he's been very uncomfortable with the sad decline of British engineering and manufacturing over recent decades. He worries about what it means for the future of the country - or as he puts it, who's going to grow the lettuce?

Sir Anthony Bamford of JCB fame shares those same worries, and this morning he urges us to change direction before it is too late. Highlighting the way that German engineering is currently hauling their economy out of recession, Bamford says:

"I can't help wondering what might have happened if our various Governments in recent decades had put in place a long-term industrial policy and promoted engineering as a professional career for young people. Maybe Britain would be enjoying the same recovery in economic growth that Germany is going through right now...

We need to look ahead and get our policymakers to focus on the future – urge them to make manufacturing important once again, treat engineering with the respect it deserves and use it as the driver for economic growth and wealth creation in Britain."
That really could be Tyler Senior talking.

Let's look at a few facts.

Contrary to what many believe, UK manufacturing output has actually grown over the last 30 years. Yes, it was severely whacked by the early-80s recession, but it bounced back strongly through the rest of the Thatcher government. Indeed, by 1988 output exceeded the previous peak in 1973. The early 90s recession saw another dip, but much more modest this time, and by the end of the Tory government in 1997, output was again at a new high and growing steadily.

In fact, over the entire 17 year period of Tory rule, manufacturing output grew - not by a huge amount (0.7% pa), but it did grow.

Which contrasts sharply with its more recent dismal performance under Labour. During their 13 years of catastrophic misrule, manufacturing output fell by 6%:

Of course, where manufacturing never recovered was in its workforce. The numbers employed have fallen from 6.6m in the late 70s to a mere 2.5m today - a loss of 4m jobs:

And it is quite true, as Bamford points out, that manufacturing has a far more important role in Germany than it does here. At the last count (2007), German manufacturing comprised 24% of their entire economy, whereas here it was just 13%.

But what should we do about it?

Well, we've already done one thing of course. We've slashed our interest rates to zero, printed a ton of money, and allowed our currency to depreciate by around 25%. That has hugely boosted the competitiveness of British manufacturers, and that is now feeding through into output - up 6% year-on-year.

Should we do more?

Certainly there's no harm in government encouraging kids to take engineering seriously. For example, it is appalling that we have hundreds of state secondary schools now labelling themselves as "specialist performing arts colleges" or "specialist sports colleges", whereas we only have 70 labelled "specialist engineering" colleges. Just how many jobs are there going to be in sports or performing arts? We are selling a cruel fantasy to the kids going to those places.

But we are very nervous about government getting back to the days of industrial planning. It didn't work then, and it won't work now. The horrible truth is that nobody has any real idea which industrial sectors are going to be the winners of tomorrow. And whereas the Germans can still prosper with 24% of their economy in manufacturing, they are Germans - leaders in engineering excellence for over a century. Whereas we produced the Austin Allegro.

Besides, amongst the richest economies, Germany is an outlier. Most countries have smaller manufacturing sectors, more in line with our own. The US is on 13%, France on 12%, and Canada on 16%. Even Japan has dropped down to 20%. And as China and the other BRICs develop, manufacturing sectors in the West seem certain to shrink further.

As we've blogged many times, what our government can most helpfully do to stimulate economic prosperity is to cut taxes and regulation. Not to pick winners.

PS And who grows the lettuce? Why, all those Eastern European migrants of course.

PPS A couple of weeks ago we were treated to the sight of a highly discomfited Steph reporting on the BBC News that the IMF had come out in support of George's economic programme, including the cuts. She spoke through gritted teeth, and Tyler wondered if she was in pain. It must be very difficult to manage a rabid anti-Tory mindset at times like this, and today's MoS gives us some splendid detail on Steph's medical history.

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