Why doesn't Britain make things any more? - Aditya Chakrabortty via The Guardian

Aditya Chakrabortty analyzes the post-industrial economy of Britain, and finds that it looks like… Greece.

Aditya Chakrabortty via The Guardian

What’s driven the de-industrial revolution? In significant part, it’s a tale about where Britain is going, one that’s been told by Conservative and Labour alike over the past 30 years. It’s a simple message that comes in three parts. One, the old days of heavy industry are gone for good. The future lies in working with our brains, not our hands. Two, the job of government in economic policy is simply to get out of the way. Oh, and finally, we need to fling open our markets to trade with other countries because, despite the evidence of countless Wimbledons and World Cups, the Westminster elite believe that the British can always take on the competition and win.

Yet there’s ample evidence that the promised rewards of this post-industrial future haven’t materialised. What was sold as economic modernisation has led to industrial decay, with too often nothing to replace it.

[…]

Meanwhile Britain has been undergoing one of the biggest industrial declines seen in postwar western Europe. When Thatcher came to power, manufacturing accounted for almost 30% of Britain’s national income and employed 6.8 million people. By the time Brown left Downing Street last May, it was down to just over 11% of the economy, with a workforce of 2.5 million. (Two caveats need to be made. First, manufacturing is partly a productivity game: you get more machines in, so you employ fewer staff on a particular task. Second, other countries have stepped back a bit from manufacturing – all those new Labour-isms about the competitive threat from China and India were not just babble.)

Even so, by any standards these numbers represent a collapse. As the government itself admits, no other major economy has been through our scale of de-industrialisation. The Germans and French have kept their big domestic brand names – the Mercedes and Mieles, the Renaults and Peugeots – and with them their supply chains of smaller suppliers and partners. In Britain there’s been no such industrial husbandry, with the result that we have few big manufacturers left – but a profusion of bit-part makers. Is that a bad thing? Plenty of evidence suggests so. Bad economically, and terrible socially and culturally.

You can sum up the economic problem in a word: Greece. Not my comparison, but the one I repeatedly heard in Newcastle. To me, it still sounds too extreme but I saw their point: the loss of manufacturing means Britain no longer pays its way in the world. Last year, we British bought £97bn more in goods from other countries than we sold to them – the biggest shortfall since 1980.

The de-industrialists in Whitehall have long argued that this doesn’t matter: that Britain can simply borrow more and sell its assets to foreigners. But there are problems with relying on foreigners for hard cash; they can simply refuse to extend it to you – just ask George Papandreou.

In the north-east, manufacturing jobs have nearly halved since 1997 alone – one of the biggest drops anywhere in the country. So what’s come along in its place? The simple answer is: not a lot. A few minute’s walk from Newcastle train station is the old Scottish & Newcastle brewery, which is now called Science City. It was meant to be home to hi-tech new businesses, but all you can see there is some fancy student accommodation and acres of barren ground.

Even the good-news stories of de-industrialisation turn out to be pretty grim. In 2005, MG Rover shut its plant at Longbridge in the Midlands. Around 6,300 staff lost their jobs but, the argument ran, if anyone was going to bounce back it would be these skilled staff at a prestige name.

Three academics tracked what happened to 300 MG workers, interviewing them regularly for three years. Sure enough, about 90% got another job. A lot retrained and some went into the service sector. In other words, they did everything the government told them to. Only now they were earning an average of £5,640 less every year than they had at MG Rover. And a quarter of those interviewed admitted to living off their savings or being in financial difficulties.

It’s a similar story at regional level. Look for private-sector growth in the north-east and you get the odd high-skilled niche such as computer games in Middlesbrough – but they’re never going to provide volume employment.

At the other end of the labour market the north-east is now in with a shot at becoming call-centre capital of Britain. There’s Northern Rock, of course, which was a great success story until it collapsed. Finally, you get the public sector, covering up for the weakness of private industry.

The Centre for Research on Socio-Cultural Change at Manchester University calculates that, between 1998 and 2007, the bulk of the new jobs in the Midlands, the north, Wales and Scotland came from the state. And, of course, there’s welfare: more than one in six of all people living in the north-east claim some form of out-of-work benefit.

I think his digs at Richard Florida are a bit superfluous, but otherwise a really good piece.