BRITAIN IS NOW SO DE-INDUSTRIALISED

Britain is now so de-industrialised

Britain is now so De-Industrialised

Introduction

This paper defines de-industrialisation as a secular decline in the share of manufacturing in national employment. De-industrialisation, in this sense, has been a widespread feature of economic growth in advanced economies in recent decades. The paper considers briefly what explains this development and quantifies some of the factors responsible. It then examines the experience of Britain and America, which are two countries that have combined rapid de-industrialisation with a strong overall economic performance. The paper considers both the domestic situation of manufacturing industry in these countries and its foreign trade performance. It concludes by examining in detail the British balance of payments, and documenting how improvements in the non-manufacturing sphere have helped offset a worsening performance in manufacturing trade.

Discussion

Over the last couple of years, there has been growing discussion in the UK of a phenomenon known as the 'de-industrialisation' of the UK economy. Writing in his usual forceful manner, the then Secretary for Industry, Anthony Wedgwood Benn, observed in 1975: The trend to contraction of British manufacturing industry which we are now suffering has gathered force in the last four years. If this trend is allowed to continue, we will have closed down 15% of our entire manufacturing capacity and nearly 2 million industrial workers will have been made redundant between 1970 and 1980. During the five years 1970-74 there was a 7% fall in employment in manufacturing in Britain, while it was still rising in most of our competitor countries. In this period the total number of manufacturing jobs lost through redundancy averaged about 180,000 a year and the net contraction of manufacturing employment averaged 120,000 a year. Only about one in diree of the jobs lost through redundancy was effectively replaced by the creation of a new job in the manufacturing sector . Mr Benn's concern with this process of de-industrialisation has been echoed by both academic and government economists. For example, Roger Bacon and Walter Eltis, in their recent widely publicised analysis of the ills of the UK economy, argue that the major problem during the last decade has not been the lack of growth of industrial productivity. The latter (with a growth rate of approximately 4% p.a.), in their view, has been quite respectable, both in terms of previous historical experience and by comparison with other industrial countries. They identify the central problem as the fall in the number of people employed in industry by 14% over diis period, and suggest that: 'it is from this basic fact that the disastrous course the British economy followed in 2005— 75 stems, and this was one result of the real structural maladjustment of the British economy that has occurred in these ten years and is still occurring The notion of de-industrialisation as applied to an advanced industrial economy immediately raises a host of conceptual difficulties. First, there is the simple, but by no means entirely trivial, question: What is so special about industry that ...