Some people are arguing (usually from across the Commons benches) that Britain has become too heavily reliant on its financial services sector. As we headed, blissfully unaware, into this maelstrom, the City of London and associated banks and fund management corporations counted for just less than 20 per cent of Britain’s GDP. That’s probably too much.
Manufacturing. That’s what we need. That’s what the unions reckon. We need to make stuff that other countries need. Our only marketable export currently is actors. So this clearly needs to be addressed.
The argument that our country would be better placed to withstand the global financial slowdown if we manufactured and exported more goods is a strong one. But manufacturing is not a panacea. And it wouldn’t have saved us from this recession.
Japan, a country that knows a lot about recessions, has just announced a year on year drop in exports of 46 per cent.
Japan is particularly vulnerable to this downturn because trade is so central to the economy.
The car industry in Japan is in dire straights, loosing money as it is for the first time in 70 years. Exports to the US shrank by over half since Jan 2008. It shows that manufacturing is no guarantee of economic prosperity.
Japan has a few attributes that may have exacerbated such a slump in exports. Firstly, its currency is very strong compared with other world notes. This makes importing goods from Japan less attractive – any country would get less for their money.
Japan also seems to export rather luxury items – cars, cameras, electronics. These are things that sell like hot cakes during a boom, but people think twice before buying disposable goods in the current economic climate.
Fortunately, thanks to Mr Brown’s public debt and proposals to print money, our currency is not strong. Not at all.
Now could well be the opportune moment to invest in British manufacturing.It might not save us from subsequent boom and bust, but it would go some way to readdressing our unhealthy skew towards financial wizzardry.
