Making things matters. This is what Britain forgot

Ha-Joon Chang in The Guardian

The neglect of manufacturing and over-development of the financial sector is the cause of the economy’s decline, not fear of leaving the EU.

 

The production line at the Rolls-Royce factory in Derby. Photograph: Bloomberg via Getty Images

It’s being blamed on the Brexit jitters. But the weakness in the UK economy that the latest figures reveal is actually a symptom of a much deeper malaise. Britain has never properly recovered from the 2008 financial crisis. At the end of 2015, inflation-adjusted income per capita in the UK was only 0.2% higher than its 2007 peak. This translates into an annual growth rate of 0.025% per year. How pathetic this performance is can be put into perspective by recalling that Japan’s per capita income during its so-called “lost two decades” between 1990 and 2010 grew at 1% a year.

At the root of this inability to stage a real recovery is the serious imbalance that has developed in the past few decades – namely, the over-development of the UK financial sector and the atrophy of manufacturing. Right after the 2008 financial crisis there was a widespread recognition that the ballooning financial sector needed to be reined in. Even George Osborne talked excitedly for a while about the “march of the makers”. That march never materialised, however, and the share of the manufacturing sector has stagnated at around 10% of GDP.

This is remarkable, given that the value of sterling has fallen by around 30% since the crisis. In any other country a currency devaluation of this magnitude would have generated an export boom in manufactured goods, leading to an expansion of the sector.

Unfortunately manufacturing had been so weakened since the 1980s that it didn’t have a hope of staging any such revival. Even with a whopping 30% devaluation, the UK’s trade balance in manufacturing goods (that is, manufacturing exports minus imports) as a proportion of GDP has hardly budged. The weakness of manufacturing is the main reason for the UK’s ever-growing deficit, which stood at 5.2% of GDP in 2015.

UK trade deficit with EU hits new record



Some play down the concerns; the UK, we hear, is still the seventh or eighth biggest manufacturing nation in the world – after the US, China, Japan, Germany, South Korea, France and Italy. But it only gets this ranking because it has a large population. In terms of per capita output, it ranks somewhere between 20th and 25th in the world. In other words, saying that we need not worry about the UK’s manufacturing sector because it is still one of the largest is like saying that a poor family with lots of its members working at low wages need not worry about money because their total income is bigger than that of another family with fewer, high-earning members.

Another argument is that we now live in a post-industrial knowledge economy, in which “making things” no longer matters. The proponents of this argument wheel out Switzerland, which has more than twice the per capita income of the UK, despite – or rather because of – its reliance on finance and tourism.

However Switzerland is actually the most industrialised country in the world, measured by manufacturing output per head. In 2013, that manufacturing output was nearly twice the US’s and nearly three times the UK’s. The discourse of post-industrial knowledge economy fundamentally misunderstands the role of manufacturing in economic prosperity.

First of all, despite the relative increase in the importance of services, the manufacturing sector is still – and will always be – the main source of productivity growth and economic prosperity. It is a sector that is most open to the use of machines and chemical processes, which raises productivity. It is also where most research and development, which generates new technologies, is done. Moreover, it is a sector that produces inputs that raise productivity in other sectors. For example, the recent rise in productivity in the service sector has happened mainly because it is using more advanced inputs produced in the manufacturing sector – computers, fibre-optic cables, routers, GPS machines, more fuel-efficient cars, mechanised warehouses and so on.

Second, many knowledge-intensive services, such as research, engineering and design, that are supposed to be new have always been there. Most of them used to be conducted by manufacturing firms themselves and have become more “visible” recently largely because they have been “spun off” or “outsourced”. We should not confuse the changes in firms’ organisation with the changes in the nature of economic activities.

All of those supposedly knowledge-intensive services sell mostly to manufacturing firms, so their success depends on manufacturing success. It is not because the Americans invented superior financial techniques that the world’s financial centre moved from London to New York in the mid-20th century. It is because the US became the leading industrial nation.

The weakness of manufacturing is at the heart of the UK’s economic problems. Reversing three and a half decades of neglect will not be easy but, unless the country provides its industrial sector with more capital, stronger public support for R&D and better-trained workers, it will not be able to build the balanced and sustainable economy that it so desperately needs.

Balochistan Independence is Responsibility of India

Tarek Fatah - The Hindu is not my Enemy - Part 1

Part - 2 Tarek Fatah on how India should deal with Pakistan and Balochistan

The leftwing case for Brexit (one day)

Paul Mason in The Guardian

There are many good reasons for the UK to leave the EU. But exiting now would allow Johnson and Gove to turn Britain into a neoliberal fantasy island.

 

Jobbik on the march … all over Europe, the EU’s economic failure is fuelling racism and the ultra right. Photograph: Janek Skarżyński/AFP/Getty Images


 The leftwing case for Brexit is strategic and clear. The EU is not – and cannot become – a democracy. Instead, it provides the most hospitable ecosystem in the developed world for rentier monopoly corporations, tax-dodging elites and organised crime. It has an executive so powerful it could crush the leftwing government of Greece; a legislature so weak that it cannot effectively determine laws or control its own civil service. A judiciary that, in the Laval and Viking judgments, subordinated workers’ right to strike to an employer’s right do business freely.

Its central bank is committed, by treaty, to favour deflation and stagnation over growth. State aid to stricken industries is prohibited. The austerity we deride in Britain as a political choice is, in fact, written into the EU treaty as a non-negotiable obligation. So are the economic principles of the Thatcher era. A Corbyn-led Labour government would have to implement its manifesto in defiance of EU law.

And the situation is getting worse. Europe’s leaders still do not know whether they will let Greece go bankrupt in June; they still have no workable plan to distribute the refugees Germany accepted last summer, and having signed amorally bankrupt deal with Turkey to return the refugees, there is now the prospect of that deal’s collapse. That means, if the reported demand by an unnamed Belgian minister to “push back or sink” migrant boats in the Aegean is activated, the hands of every citizen of the EU will be metaphorically on the tiller of the ship that does it. You may argue that Britain treats migrants just as badly. The difference is that in Britain I can replace the government, whereas in the EU, I cannot.

That’s the principled leftwing case for Brexit.

Now here’s the practical reason to ignore it. In two words: Boris Johnson. The conservative right could have conducted the leave campaign on the issues of democracy, rule of law and UK sovereignty, leaving the economics to the outcome of a subsequent election. Instead, Johnson and the Tory right are seeking a mandate via the referendum for a return to full-blown Thatcherism: less employment regulation, lower wages, fewer constraints on business. If Britain votes Brexit, then Johnson and Gove stand ready to seize control of the Tory party and turn Britain into a neoliberal fantasy island.

Dutch far-right leader Geert Wilders goes on trial for inciting hatred



They will have two years in which to shape the post-Brexit economy. Worse, the Tories will be free to use the sudden disappearance of our rights as EU citizens to reshape the UK’s de facto constitution. The man who destroyed state control of education and the man who shovelled acres of free land into the hands of London developers will get to determine the new balance of power between the citizen and the state. So even for those who support the leftwing case for Brexit, it is sensible to argue: not now. The time to confront Europe over a leftwing agenda is when you have a Labour government, and the EU is resisting it.

This is why I have refused to campaign for Brexit, and may even abstain on the day. I also want to see the final offer. As with the Scottish referendum I expect, if the polls show a lead for remain of less than 7%, there will be a politically orchestrated run on sterling; a string of CEOs paraded on to the BBC promising to quit Britain; then a a surprise “final offer” from either Jean-Claude Juncker or an influential group of heads of government. If this offer includes the suspension ofthe social chapter, or further opt-outs that favour the rich over the poor in Britain, then there would be little point in staying in for tactical reasons.

Already, thanks to David Cameron’s Brussels deal, the choice is between out and half-out. I do not think the concessions Cameron achieved in March were negligible. Though the emergency brake on in-work benefits for migrants was reactionary showmanship, the opt-out from “ever closer union” he gained was real. It means there will probably never be another 28-member treaty.

As the Eurozone consolidates, around banking union and cross-border transfers, the Lisbon treaty will be superseded by new, core-country agreements. If that happens, it is likely the UK will be able to legally retreat from some Lisbon commitments. Thus, even without a catastrophic disintegration, it is likely that the UK’s relationship with both the Eurozone and European law will remain negotiable.

All this suggests that those of us who want Brexit in order to reimpose democracy, promote social justice and subordinate companies to the rule of law should bide our time. But here’s the price we will pay. Hungary is one electoral accident away from going fascist; the French conservative elite is one false move away from handing the presidency to the Front National; in Austria the far-right FPÖ swept the first round of the presidential polls. Geert Wilders’s virulently Islamophobic PVV is leading the Dutch opinion polls.

Hungarian camera operator apologises for kicking refugees



The EU’s economic failure is fuelling racism and the ultra right. Boris Johnson’s comparison of the EU with the Third Reich was facile. The more accurate comparison is with the Weimar Republic: a flawed democracy whose failures fuelled the rise of fascism. And this swing to the far right prompts the more basic dilemma: do I even want to be part of the same electorate as millions of closet Nazis in mainland Europe?

The EU, politically, begins to look more and more like a gerrymandered state, where the politically immature electorates of eastern Europe can be used – as Louis Napoleon used the French peasantry – as a permanent obstacle to liberalism and social justice. If so – even though the political conditions for a left Brexit are absent today – I will want out soon.

How Little do Experts Know- On Ranieri and Leicester, One Media Expert Apologises

In July of last year I may have written an article suggesting that the Italian was likely to get Leicester City relegated from the Premier League

 

Leicester City manager Claudio Ranieri lifts the Premier League trophy. Photograph: Carl Recine/Reuters


Marcus Christenson in The Guardian


No one likes to be wrong. It is much nicer to be right. In life, however, it is not possible to be right all the time. We all try our best but there are times when things go horribly wrong.
I should know. In July last year I sat down to write an article about Claudio Ranieri. The 63-year-old had just been appointed the new manager of Leicester City and I decided, in the capacity of being the football editor at the Guardian, that I was the right person to write that piece.

Claudio Ranieri: the anti-Pearson … and the wrong man for Leicester City?



I made that decision based on the following: I have lived and worked as a journalist in Italy and have followed Ranieri’s career fairly closely since his early days in management. I also made sure that I spoke to several people in Greece, where Ranieri’s last job before replacing Nigel Pearson at Leicester, had ended in disaster with the team losing against the Faroe Islands and the manager getting sacked.

It was quite clear to me that this was a huge gamble by Leicester and that it was unlikely to end well. And I was hardly the only one to be sceptical. Gary Lineker, the former Leicester striker and now Match of the Day presenter, tweeted “Claudio Ranieri? Really?” and followed it up with by saying: “Claudio Ranieri is clearly experienced, but this is an uninspired choice by Leicester. It’s amazing how the same old names keep getting a go on the managerial merry-go-round.”

I started my article by explaining what had gone wrong in Greece (which was several things) before moving on to talk about the rest of his long managerial career, pointing out that he had never won a league title in any country and nor had he stayed at any club for more than two seasons since being charge at Chelsea at the beginning of the 2000s.

I threw in some light-hearted “lines”, such as the fact that he was the manager in charge of Juventus when they signed Christian Poulsen (not really a Juventus kind of player) and proclaimed that the appointment was “baffling”.

I added: “In some ways, it seems as if the Leicester owners went looking for the anti-Nigel Pearson. Ranieri is not going to call a journalist an ostrich. He is not going to throttle a player during a match. He is not going to tell a supporter to ‘fuck off and die’, no matter how bad the abuse gets.”

Claudio Ranieri instructs his players during Greece’s defeat by the Faroe Islands, the Italian’s last game in charge of the Euro 2004 winners. Photograph: Thanassis Stavrakis/AP

Rather pleased with myself – thinking that I was giving the readers a good insight to the man and the manager – I also put a headline on the piece, which read: “Claudio Ranieri: the anti-Pearson … and the wrong man for Leicester City?”

I did not think much more of the piece until a few months later when Leicester were top of the league and showing all the signs of being capable of staying there.

After a while, the tweets started to appear from people pointing out that I may not have called this one right. As the season wore on, these tweets became more and more frequent, and they have been sent to me after every Leicester win since the turn of the year.

At some point in February I decided to go back and look at the piece again. It made for uncomfortable reading. I had said that describing his spell in charge of Greece as “poor” would be an understatement. I wrote that 11 years after being given the nickname “Tinkerman” because he changed his starting XI so often when in charge of Chelsea, he was still an incorrigible “Tinkerman”.

It gets worse. “Few will back him to succeed but one thing is for sure: he will conduct himself in an honourable and humble way, as he always has done,” the articles said. “If Leicester wanted someone nice, they’ve got him. If they wanted someone to keep them in the Premier League, then they may have gone for the wrong guy.”

Ouch. Reading it back again I was faced with a couple of uncomfortable questions, the key one being “who do you think you are, writing such an snobbish piece about a dignified man and a good manager?”

The second question was a bit easier to answer. Was this as bad as the “In defence of Nicklas Bendtner” article I wrote a couple of years ago? (The answer is “no”, by the way, few things come close to an error of judgment of that scale).

I would like to point out a few things though. I did get – as a very kind colleague pointed out – 50% of that last paragraph right. He clearly is a wonderful human being and when Paolo Bandini spoke to several of his former players recently one thing stood out: the incredible affection they still feel for this gentle 64-year-old.

All in all, though, there is no point defending the indefensible: I could not have got it more wrong.


At the start of this piece I said that no one likes to be wrong. Well, I was wrong about that too. I’ve enjoyed every minute of being embarrassingly wrong this season. Leicester is the best story that could have happened to football in this country, their triumph giving hope to all of us who want to start a season dreaming that something unthinkable might happen.

So thank you Leicester and thank you Claudio, it’s been quite wonderful.