Made in Britain: How the Nation Earns Its Living

Made in Britain: How the Nation Earns Its Living
Evan Davis
Little, Brown, 274pp, £18.99

In recent times, the belief that the last Labour government left Britain "bankrupt" has become alarmingly widespread, so it comes as a relief that Evan Davis begins his disquisition on the nation's economy with a blast of sanity. "Britain," he writes, "is not a basket case." He concedes, with classic English understatement, that things went "somewhat awry" in 2007-2008, but refuses to accept that the UK must settle for managed decline.

Davis's optimism is premised on the belief that Britain still has a manufacturing sector to be proud of. Manufacturing may account for just 12 per cent of the UK's output - down from a third in the 1970s - but, he contends, we should not confuse a smaller sector with less dyna­mism. He singles out the McLaren sports car company, the fold-up bicycle-maker Brompton and the defence behemoth BAE Systems as examples of the high-end, niche areas in which Britain now specialises. Elsewhere, he makes the astute point that greater efficiency creates a misleading impression of decline. As companies become more productive, they inevitably require fewer people to produce the same volume of goods. Conversely, "It takes the same number of people to play a quintet as it did in Mozart's day."

He identifies Britain's historical openness to trade as one of the factors that has guaranteed its prosperity since the Industrial Revolution, and sketches an excellent description of the 19th-century free-trade movement and the repeal of the Corn Laws. An instinctive economic liberal, Davis rightly warns that the coalition's short-sighted cap on immigration will have deleterious consequences for many sectors, not least our universities, which will lose significant numbers of foreign students, worth £8.5bn a year to the British economy.

Davis, who presents both the Today programme on Radio 4 and Dragon's Den, has a gift for explaining abstract ideas in clear language. At a time when economic literacy remains woefully low (I have heard several MPs confuse the national debt with the deficit), Made in Britain deserves a wide readership. But even though the book has analytical appeal, it is of little prescriptive value. He echoes the new consensus that the economy needs to rebalance away from its dependence on financial services, but fails to indicate how this should be achieved. Is the state "crowding out" private investment, as George Osborne suggests? Or is active government a precondition for a successful industrial policy? Davis avoids raising, let alone responding to, such matters.

He also dodges the question of whether the City - large parts of which were aptly branded "socially useless" by Adair Turner, chairman of the Financial Services Authority - has grown too big, arguing that the authorities should refrain from making judgements about its size and focus instead on making sure that "it works properly". A well-regulated banking sector, he concludes, will "inevitably shrink somewhat". He is silent about the issue of whether investment ("casino") banking should be separated from retail operations to ensure that we no longer run institutions "too big to fail". Similarly, though he argues passionately that a healthy university sector is important to the economy, he fails to say whether the state, or the students, should foot the bill for it.

Such omissions make Davis's account simultaneously rousing and deflating. He assumes what he has to prove, namely that Britain will recover from the near collapse of its financial system. The spectre of Japan, which suffered a similar meltdown in the 1990s, is a permanent reminder that some nations never do. The author's abiding belief is that ultimately Britain will thrive. But, in the long run, as Keynes quipped, "we are all dead". l

George Eaton is a staff writer for the New Statesman

George Eaton is political editor of the New Statesman.

This article first appeared in the 27 June 2011 issue of the New Statesman, The food issue