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December 18, 2003

Comments

Matthew

Oliver,

That was very interesting. The only comment I would make is do you not think at some level it's a bit worrying that UK manufacturing output is basically the same as it was in 1980 (IIRC), wherea in the US, despite having a similar fall in manufacturing employment, output is vastly higher?

I guess the argument is that as long as GDP is increasing, who cares where it come from? However given the extent to which service sector jobs will come under international competition perhaps it would be better if our economy was as 'balanced' as the US one? On the other hand I don't know what proportion of our GDP comes from high technology manufacturing.

Ben Keen

Pardon if this is too basic a question, but where does R&D and software design activity count, economically? By which I mean does a company entirely engaged in building software count as manufacturing jobs or as something else?

Tom Robinson

Ben's question is pertinent because it blurs the distinction between services and manufacturing. Why is nobody still worrying about the decline in the number of farm workers which began over 300 years ago?

Manufacturing is going to become more and more software controlled, so the number of assembly-line workers and machine tool operators will likely continue to fall. This trend will eventually become a global one.

We can get in on the act (i.e. the next industrial revolution) here in Britain if, amongst other things, we:

(1) reduce taxation and public spending
(2) decrease the burden of regulation on business, particularly in the areas of planning and the environment
(3) drop the "50% must go to university" target (which is arbitrary and will not benefit our economy or the diversity of our culture)

One immediate way to help (1) and (2) along is to slam the brakes on with respect to European political integration. With Euro-MPs having just awarded themselves a 30% pay rise, the task has become more urgent.

Simon

I ownder is every Tory and Labour MP is au fait with every sophisticated economic idea...then again perhaps they are not all economists. As you mentioned, Dr Vince Cable MP is the Shadow Chancellor, David Laws MP is chief secretary and they both have excellent credentials. I am sure that they could discuss the work of Keynes, Smith, Lucas, Feldstein and others at great length if you care to e-mail them...

Andrew Ian Dodge

Tom, agree with you sentiments in full. That is exactly what I would have written.

Mike Wood

Simon, perhaps if Mr Holmes is not able to grasp basic economic concepts then he shouldn't highlight the fact by coming out with this level of drivel. It just highlights the folly of the Lib Dems' decision to appoint a full team of shadow ministers instead of a more limited number of party spokesmen. Obviously this was intended to make the public associate the Lib Dems with being the opposition. However, I don't think that many people actually do think that Holmes is a potential future Employment Secretary of Campbell a future Foreign Secretary unless one of the two main parties is so desperate for support from the minor parties that they have to resort to a coalition. The Lib Dems simply are not the opposition party.

Having said that, I think Oliver may be being slightly too dismissive of the statement. As someone who is a firm believer in the basic principles behind Adam Smith's writing, I agree with him that in the medium-term, if allowed to, the market will adjust to offset decline in some sectors with growth in others.
However, if we are to argue that belief, then we must be prepared to acknowledge the disproportionate effect that the decline in manufacturing has on some commmunities, in the shorter-term - just as the decline in the ship-building and coal-mining industries had a particularly severe effect on some parts of the country. Whilst many of those areas have since attracted investment from other sectors of the economy - notably electronics and car manufacturing - the process of moving from reliance on one industry to another caused significant hardship to those communities effected.
Finally, were he to be writing today, I am sure that Adam Smith would say that government policy (as has been the case - albeit to different degrees - with previous governments) makes the transition from declining sectors to growth industries more erratic than might have been the case in a genuine free market.

Simon

Mike,
I quite agree with your more substantial points re Adam Smith and the decimation of some communities. WHile agreeing with the fact that 'non-profitable' industries should not be subsidised, retraining, investment and the rest are high priorities for those affected by the decline in manufacturing. Can an economy operate on services alone, however?

Also, my point is not necessarily that Paul Holmes is talking rubbish, merely that so do a LOT of politicians from ALL parties. To point out merely Holmes without saying that this is a general problem is disingenuous. When Oliver says 'Those Labour Party economic principles' and thrashes a Patricia Hewitt speech or Byers from the backbenches, then I will call his commentary balanced.
Also, I think that you do some of the Lib Dem frontbench a disservice:
Rt Hon Ming Campbell QC MP is widely regarded as a first-rate commons performer and is rightly coveted by the other parties- journalists and opposition MPs will admit as much if asked- Dr Vince Cable is rightly praised as the man with possibly the most knowledge of economics of anyone in the Commons, Professor Steve Webb MP is one of the foremost thinkers either inside the House or within on pensions, David Laws MP, shadow chief secretary to the treasury, is an assured and engaged treasury spokesman. Simon Hughes knows the criminal justice system. Per capita there is a LOT of talent on those benches. Which appraisal do you disagree with?Also, watch out for Susan Kramer, Nick Clegg and Chris Huhne who will all be MPs after the next election.

Daniel Rees

Excellent analysis - I've added you to my blogroll at http:///www.point-of-information.co.uk.

At the moment I am a Lib Dem party member, but I think what you have described above is symptomatic of an underlying feature of the Lib Dems; they simply lack both talent and unity within the party. Policies are often inconsistent with other policies, and more importantly the party never seems to resolve the tension between the classical-liberal right of the party, and the left of the party who are members because the Labour party is too right wing. That is, there are some Lib Dems who are further to the right than the Labour party, and some who are further to the left. The Labour party is ideologically in the centre of the Lib Dems, and it is difficult to see why the Lib Dems should exist. Once the Tories recover their strength, the Lib Dems will weaken, at least at the Westminster level.

The only issue upon which I can see a fundamental difference between the Lib Dems and Labour is centralisation vs. decentralisation. I think the Labour party is moving increasingly towards the latter - one only has to look at their record on devolution and the NHS to see this.

I for one shall not be renewing my membership, and am considering joining the Labour party. Lib Dems would be better served working within the Labour party rather than trying to change its policies from a weaker position outside.

Jonathan Hoffman

Oliver
Vince Cable is sound on macro but when it comes to micro he still hankers after the days before free capital movements when governments could control the quantity of bank lending. See eg his recent pamphlet for the Cenre for Reform (Lib Dem think tank) where he proposes bank lending ceilings. These just wouldn't work, the banks would disintermediate and find a way around them.
Regards Jonathan

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