In the topsy-turvy world of capitalist economics there have up to now been one or two unshakeable dogmas. One of these has been that devaluation leads to an increase in exports as our lower prices lead to higher orders abroad. In our post-Thatcher, post-Blair, post-Brown, post-industrial strategy Britain, that doesn’t seem to be happening any more.
According to figures released by the Office for National Statistics in March, industrial production dipped 1.2 per cent between December and January. Yet the pound has been falling. In November the rates were $1.60 to the pound and 1.25 euro to the pound. Now the rates are nearer $1.50 and 1.15 euros.
Have our productive industries suddenly become unable to sell their goods? Or, as many suspect, is the real answer that our productive industries simply lack the capacity to produce more?
That should hardly be a surprise, given the failure to invest in manufacturing industry. A report from the Institute of Mechanical Engineers last year stated what should be obvious: “It is generally well understood that manufacturing is a capital-intensive process. This process requires long-term investment across the sector in its production assets to enable competitiveness, especially in high-labour-cost countries.”
And what has actually happened? Cue the Institute again: “But manufacturing investment has however more than halved over the last 10–15 years, with evidence showing that UK manufacturing spends less per employee or per pound of Gross Value Added (GVA) than its competitors, with the UK capital per worker being 40% to 60% lower than Germany or France.”
The wilful destruction and weakening of our manufacturing base is the result of an economy dominated by its most unproductive sector – finance capital. So we will get all the disadvantages of a low currency in high prices, but none of the supposed advantages such as jobs in expanding industries. A lose–lose, as they say.
Cambridge economist Ha-Joon Chang commented in the Guardian in March that “Britain has been finding it difficult to recover from the financial crisis not just because of its austerity policy but also because of its eroding ability to engage in high-productivity activities. This problem is most tellingly manifested in the country's inability to generate a trade surplus despite the huge devaluation of sterling since 2008.”
The decline absolute of an economic system cannot be disguised forever. The fact that two-thirds of all Formula One cars are built in Britain cannot blind us to the killing fact that our deficit in manufactured goods runs at billions of pounds a year, and is growing.
Yes there is manufacture in Britain, and yes it is crucial to a British economic recovery and to our national independence, but it is weak, underinvested, unbalanced and uncontrolled (and too few of its workers are union members). Worse, those outside manufacturing still fail to realise that their survival is intimately bound up with that section of the economy, wherever they work. We produce, or we die. ■