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Meeting our makers: Britain’s long industrial decline

The Slow Death of British Industry: a 60-Year Suicide, 1952-2012 - review.

The Slow Death of British Industry: a 60-Year Suicide, 1952-2012
Nicholas Comfort
Biteback Publishing, 344pp, £8.99

In the early 1950s, Britain was an industrial giant. Today, it is an industrial pygmy. Manufacturing was industry’s bedrock. In 1952, it produced a third of the national output, employed 40 per cent of the workforce and made up a quarter of world manufacturing exports. Today, manufacturing in this country accounts for just 11 per cent of GDP, employs only 8 per cent of the workforce and sells 2 per cent of the world’s manufacturing exports. The iconic names of industrial Britain are history; in their place are the service economy and supermarkets selling mainly imported goods. What happened? Was it inevitable? Does it matter?

Nicholas Comfort’s book is exactly what its title promises: a roll-call of the dead and the dying. The broad outline of the story is well known. Britain emerged from the Second World War with a technological edge in aircraft, aerospace, computers and electronics that it failed to exploit. In the 1950s and early 1960s, British manufacturers dominated the home market and had about 20 per cent of world exports, with some world-beaters such as the Comet airliner, the Mini and Triumph motorbikes. Then, a decline set in with increasing import penetration and declining export sales, until the trade surplus in manufactured goods finally disappeared in 1983.

In the 1970s, many firms with household names went under. Governments, starting with Edward Heath’s, desperately tried to keep“lame ducks” such as Rolls-Royce afloat by nationalising them. Margaret Thatcher returned the lame ducks to “the chill forces of the market”, many of them drowning. Manufacturing went on shrinking under New Labour; the sector’s workforce halved from 4.5 million to 2.5 million between 1997 and 2010. “Financial and business services,” writes Comfort, “were seen [by the New Labour government] as the way forward for Britain, with manufacturing recognised as globally competitive only in aerospace and pharmaceuticals.” As immigrant workers flooded into Britain’s services and food-processing sector, manufacturing jobs flooded out, mainly to the Far East. Flagship businesses were sold to foreign firms, notably Cadbury’s, which was taken over by Kraft in 2010. No story, writes Comfort, is more poignant than the “fall of two of the giants of the 20th-century British economy – GEC and ICI.”

Every advanced economy has been affected by the shift from manufacturing to services but the sheer scale of the industrial decline in Britain demands a special effort at explanation. After all, Germany has kept a much larger manufacturing capacity and its workers work fewer hours. France, too, has maintained world-class manufacturing companies such as Dassault and Peugeot. Why did Britain fail to emulate them?

Unfortunately, we don’t get an explanation here. Like almost every writer on industry, Comfort cannot see the wood for the trees. The reader is wearied by page after page of blunders, business miscalculations and missed opportunities; failed grandiose projects such as Concorde; firms going bust, changing their owners, changing their names and either disappearing or reappearing in shrunken form with new acronyms.

Comfort spreads a thin coat of “factors” to cover every possible influence: not just “fuddy-duddy management, failure to invest, outdated working practices and headin- the-sand trade unions” but also “shorttermism in the City and the Treasury; the sterile and destructive cycle of nationalisation and privatisation; poor decision-making by government; inadequate market size at home; an obsession with size; the transfer of jobs to the developing world; takeovers driven by boardroom egos; boardroom disdain for manufacturing as such; the lure of Wall Street; sheer bad luck – and good oldfashioned incompetence”. Some old saws – comprehensive education and health and safety legislation – are duly wheeled out to complete the list. As Churchill once said of a dessert placed before him: “This pudding lacks a theme.”

A historian of British industry should be able to do better. There cannot be a single explanation of the British economic experience but we can suggest two important ones. The first was the imperial overhang. Until well into the 1960s, most British companies expected to go on earning their living from the empire – that financial, industrial and military complex making up the imperial system. Premonitions of industrial decline – “Made in Germany”, the “yellow peril” – date from late-Victorian and Edwardian times. Joseph Chamberlain’s 1903 campaign for tariff reform was deliberately designed to reduce competitive pressure from Germany and Japan. It is easy to forget that for twothirds of the last century competition was repelled not by superior British efficiency but by military force: it took some time after defeat in the Second World War for German and Japanese competition to start up again.

Imperial policy was not wholly consistent. Maintaining the sterling area – not finally wound up until the late 1970s – required high interest rates and an overvalued exchange rate that hit manufacturing. But it was part of a system of sterling loans tied to orders for British exports, a British government procurement system for imperial defence and a resource-extraction system from imperial primary producers.

The British aircraft, shipbuilding, railway and motor vehicle industries were under no pressure to modernise their plants, upskill their managers and workers or reform their archaic labour practices when they could rely on captive domestic and imperial markets. Complacency ruled; entrepreneurship was at a discount. Globalisation put a stop to all that.

After the breakdown of the imperial system, the big problem facing British industry was erratic government policy. In the 1950s, Conservative governments pursued benign neglect. Governments of the 1960s and 1970s, mainly Labour, decided that the future lay in “industrial policy”: making industries more efficient by reorganising them. Governments would “pick winners” as, allegedly, the French and Japanese did. Industrial policy started up with the National Economic Development Council and its regional counterparts, the “little Neddies”; it gathered strength with the merger boom and nationalisations of the 1960s and 1970s; it was discredited with Tony Benn’s attempt to turn collapsed industries into workers’ co-operatives; it was abandoned by Thatcher in 1979.

Running through this history is a lack of continuity: government policy towards taxation and incentives continually changed, long-term aims were repeatedly sacrificed to short-term financial exigencies, projects were taken up and abandoned when they became too costly, fashions in thinking shifted, waste was colossal. The result was neverending unsettlement and uncertainty. The theoretical debate that went on at this time between “governments” and “markets” was largely off-beam. Both business and government miscalculations were equally gross.

As the former civil servant Chris Benjamin has written (in Strutting on Thin Air), “The underlying essential for industrial success is ‘continuity’ . . . Continuity fosters consistent focus, expertise evolved over decades and pursuit of research, innovation and knowledge application to secure the feedback for ‘increasing returns’.”

In the end, does industrial decline matter if we can earn our living in other ways? Comfort is of the school that laments that “Britain has forgotten how to make things” but it is not easy to separate out the economics from the nostalgia in this statement. Economic policy should not be determined by misty-eyed reminiscences about the brand names of decades past or by a nationalism derived from the tangibility of “things”.

Comfort certainly seems to feel more at home complaining about where Terry’s Chocolate Oranges are now made (Poland) than explaining why an economy less reliant on services might be a healthier one. He deplores how, while the Queen’s coronation souvenirs were made in Britain, knickknacks for the Diamond Jubilee were mostly made in China – as if cheap souvenirs were the secret recipe for Britain’s economic future.

Yet there is more to be said. Almost the last gasp of the view that manufacturing mattered was the House of Lords select committee report on overseas trade in 1985. It asked: what would happen to our balance of trade when surpluses from North Sea oil ran out? The then chancellor, Nigel Lawson, replied succinctly: services would take up the slack. Yet this is a superficial response for a number of reasons. First, in so far as the big gainer from loss of manufacturing has been the financial services, it has greatly increased the tendency to short-termism. Michael Heseltine, as president of the Board of Trade in 1993, said in parliament:

I do not doubt for one moment that deep-seated short-term attitudes are prevalent in our affairs; or that this is one important strand in understanding why we as a nation have performed less well than many of our competitors. Such attitudes have led us to invest less than we might in technology and advanced means of production. They have encouraged growth in companies by acquisition and financial engineering rather than through organic development and building on products and markets. They have led us to place far too great an emphasis on comparisons of near-term financial results in judging our companies, instead of considering the strength of management and its underlying strategy. Those attitudes are of a piece.

Second, Britain’s reliance on financial services has increased the volatility of government revenue. The financial sector, as the experience of 2008 showed, is particularly prone to boom and bust. Financial volatility affects all incomes, including the income of the government. Because of its disproportionate reliance on the inflated taxes from the financial sector, the British government’s revenues collapsed disproportionately when the financial sector failed.

This helps explain why our government’s “structural deficit” was greater than those of countries with more balanced economies. It had become over-reliant on a particularly volatile income stream. Like individuals, governments should hold balanced portfolios. No government should remain indifferent to the distribution and performance of a nation’s assets, human or physical, because on that depends its ability to fulfil its social functions. Governments therefore need to promote a balanced economy.

Finally, services of all kinds are worse than manufacturing at securing high employment and progressive increases in median incomes. In the long run, automation is bound to reduce manufacturing employment but as long as manufactures are such a large part of international trade, they are important for maintaining employment in a trading economy, because most services cannot be exported. A country that loses its industrial base will thus experience rising structural unemployment apart from automation.

Manufacturing is also a safeguard against income deterioration because it is more productive than most services. The more people are employed in labour intensive activities – especially retail services – the lower the typical income will be. The loss of two million manufacturing jobs between 1997 and 2010 probably explains why Gordon Brown, despite his best efforts, was unable to increase average productivity growth in the period.

For these reasons, Lawson’s dismissal of the case for manufacturing as “special pleading dressed up as analysis” is not the last word on the subject. It is a shame that Comfort has missed the chance to put that case in a more persuasive form.

Robert Skidelsky is the author, with Edward Skidelsky, of “How Much Is Enough? The Love of Money and the Case for the Good Life” (Allen Lane, £20)

This article first appeared in the 21 January 2013 issue of the New Statesman, The A-Z of Israel

Flickr/Alfred Grupstra
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How will future videogame makers design a grand strategy game about the 21st century?

With the diminishing power of nation states, and the lack of conventional warfare, what would a 21st-century grand strategy game look like?

In the world of historical strategy games, it always seems clear how to win. Paint the map your colour. Raise your flag over the capitals of your rivals. Pave the streets of your cities with gold. Games based around statecraft in olden times will tend to have diverse objectives, they usually focus on the greatness of a nation in the traditional senses of the word: military might, technological advancement, religious and cultural hegemony. These same priorities hold up from the times of the Roman Republic to the Cold War.

Yet if games designers in the future were to look at the world of today, how would they interpret the actions of modern governments? Do the same goals as before apply or have we moved on? Are the objectives of contemporary societies different, and if so, just what would a player in a game of 21st-century grand strategy be trying to achieve?

One thing is for sure, the conventional measures of success in historical grand strategy games don’t stack up so easily in a modern setting.

War, for instance, has always been a staple part of historical games and it remains a preoccupation of contemporary society too. In the 15 years of the 21st century, Britain has invaded two countries, conducted armed interventions in three more and is even now lining up the procurement of new fighter jets, new aircraft carriers and new nuclear weapons at incredible expense. So we can safely say we do not live in a peaceful age.

But despite having all this firepower and the political will to bring it to bear at the drop of a dossier, war doesn’t seem to serve Her Majesty’s Government in the way it does in either the history books or the strategy games. There is no territory to be won and no rival great powers being thwarted – only air strikes, occupations and teetering puppet governments.

Indeed the only country whose military adventures bear any resemblance to the old-timey way of doing things is Russia, with Putin perhaps the last of the breed of world leaders who still thinks swapping out the flags on municipal buildings constitutes a legitimate redrawing of national boundaries. Given his famous distrust for technology it seems quite likely he didn’t get the tersely worded Tweet from Obama about how that kind of thing isn’t supposed to work anymore.

On the economic side of things the approaches opted for by governments today don’t fit with the historical mind set either. Nations are no longer trying to get rich for their own sake. Privatisation relinquishes the assets of the state in return for a temporary financial gain and long term loss of revenue. Deregulation and poor tax enforcement bleeds capital overseas. It is here we see perhaps the key difference between games where you play as The State itself and real countries, countries run by people who have bank balances of their own and competing party financiers to appease.

The idea of running a country for the purpose of making that country wealthier and then reinvesting that wealth back into the country by developing assets and infrastructure has gone out of the window. Simultaneously both the leftwing model of a state run for the benefit of its citizens and the rightwing ideal of a country mastering its economy to become a more powerful force on the world stage have been quietly phased out. Outsourcing and tax havens suggest that there is no longer room for patriotism in economic policy – unless you’re China, of course, but it wouldn’t be much of a game with only one nation playing it.

On a technological front there was the space race, and there have even been games built around it. But in the 21st century, the urgency and the sense of competition has been lost. Rovers on Mars, probes on comets and space stations tend to be viewed in a spirit of collective human achievement, partly because of the collaborative nature of modern space exploration, and also, I suspect, because lots of people in those fields are Star Trek fans.

The idea of going to Mars so you can stand on the surface of another planet and tell the Communists to stuff it no longer appeals as much as that whole "pushing back the scientific boundaries for the benefit of all life of Earth" deal. It is laudable, but not ideal for games built around competing with other countries.

In the 21st century grand strategy game, we wouldn’t be looking to conquer the world, we wouldn’t be looking to buy it and we wouldn’t be looking to leave it in our technological wake either. So what does that leave? What would 21st-century grand strategy look like?

It could be argued that we’ve moved beyond the era of nation states as the bodies driving world affairs, and such a game might reflect that. Maybe something more akin to a Crusader Kings game would be the way to go, with the player taking the role of an individual – a connected political blueblood, perhaps, like an oligarch, a CEO, an activist turned politician, a drugs baron or a terrorist leader. Or maybe we would play not as an individual, but as an organisation, for example the CIA, ExxonMobil, Isis, Amnesty International or the Solntsevskaya Bratva.

It may be that we never see the present day immortalised in a strategy game, at least outside of that passing phase in Civilization where everything is either settled down or exploding in nuclear fire. Perhaps we’re destined to nestle into a historically obscure crack between the tumult of the 20th century and something spectacular or horrible yet to come. It is nice to think, however, that the times we live in are at least interesting and that maybe we’ll get to see it all laid out in a game one day, if only to find out what winning the 21st century would look like.

Phil Hartup is a freelance journalist with an interest in video gaming and culture