The west struggles to earn its living

 

                  Yesterday the UK fell into seventh place behind Brazil in the list of the world’s largest economies. We used to be fourth behind the USA, Japan and Germany. China has already risen  to second place and now Brazil is on the climb.

                   In a way its good news. There are many more people in China, Brazil and India. As they become richer, so we should expect them to overtake medium sized western countries. The world has been an unfair place for many years. It is good if some of  the world’s lower income countries prosper. As they get richer so their citizens have better lifestyles. They expand the world market for more sophisticated goods and services. We should be able to serve those new consumers. We should be pleased for them.

                   There is, however, a darker side to this story for the west. As the emerging market economies get better at competing, their energy, hunger and hard work can take business away from western factories and offices. They can take jobs from us, or they can help force down wages in the west as their super competitive prices attract world demand.

                     The US has experienced a long period of no real wage growth in factories and general  services as the rest of the world has challenged and started to catch up. Now the Europeans are discovering that they too have been paying themselves at levels which are difficult to sustain against the competitive onslaught.

                      The problems for western politicians is acute. The very global market which is doing so much to advance living standards in the emerging world may start to lower the living standards of many in the western world. That same world market will create many more high end consumers, which in turn enables the brightest, best and most commercial in the west to earn far larger sums out of the much enlarged market. What is good for a top football team or a recording star may be bad for a car plant operative or a telephone service employee.

                      The cuts in living standards result from the increased competition from many  areas. They also come from unwinding the excessive debts and deficits individuals and some companies had built up as well as western governments. Living standards were sustained well beyond our joint earning capability up to 2007, and are now adjusting sharply in some cases.

                     In the extreme case of Greece they have decided on a 20% cut in their Minimum Wage to try and price their country back into European, let alone world markets. The UK and US has cut living standards in recent years by devaluation. US and UK citizens can now afford fewer imports for the same income. Spanish, Portuguese and Irish living standards are being adjusted sharply downwards by the cruel logic of the Euro, and by the ending of plentiful credit which had helped sustain demand, income and asset values.

               The global market is great for the Manchester Uniteds. They can expand their fan base mightily and charge good prices for their videos and merchandise. It is good for the high end bankers, fine wine merchants, smart lawyers, business advisers, estate agents selling London properties and the rest who know how to charm money out of the world’s new rich. It is proving tougher for some of the more traditional businesses who wake up to find the emerging countries do it faster, cheaper and on a huge scale. The UK lost much of its textile business to the East some years ago. It needs to watch out for other industries, as the emerging countries add cheaper energy, cheaper labour and control of some of the raw materials to their mix.

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185 Comments

  1. lifelogic
    Posted March 7, 2012 at 6:51 am | Permalink

    Indeed the UK needs to ensure it can compete in at least some areas, rather difficult to see how it can with such expensive energy, such a bloated and inefficient state sector, over regulation of everything and expensive “green” energy.

    I never expected to agree with Vince Cable but as he says “there is still something important missing: a compelling vision”. Indeed there is a lack of a vision. A vision of a smaller more efficient state with fewer regulations and burdens on industry and cheaper energy.

    I am not sure Cable’s suggestion is the best way to attack lack of bank lending but with RBS group and other banks perhaps lending 75% of property value one minute then on renewal wanting to reduce it due to new rules to perhaps just 40% it is a big and hugely damaging problem. It leaves businesses to find the rest by starving their businesses of working capital. The Basel regulations are making bank lending far too tight and far too expensive, something certainly needs to be done to sort lending.

    If the government cannot even get the bank it owns to lend sensibly to business (in the UK at least) then what can they do?

    • lifelogic
      Posted March 7, 2012 at 7:17 am | Permalink

      I see reported today that the “sacred cow NHS” (free at the point of rationing) is carrying out amputations, on diabetes patients, when perhaps 80% could and should have been avoided by better treatment. Yet another of those excellent “public services” that we have to pay through the foot for.

      Yet all the pre budget talk is of yet more destructive taxes, wealth/mansion taxes, child benefit removals, loss of pension relief. What will give a recovery best leaving some funds with real wealth creators or wasting it all on the bloated, inefficient over paid/pensioned and incompetent state sector?

      • Disaffected
        Posted March 7, 2012 at 9:49 am | Permalink

        The rumours are all about tax increases, nothing about spending cuts as it should be. Still no sign of courage to stand up to the Lib Dems to cut spending.

        • Disaffected
          Posted March 7, 2012 at 10:34 am | Permalink

          Messrs Cameron and Osborne agonise over the budget and the tax rises. Welfare lifers get 5.2% pay increase next month while pensioners have their savings robbed by QE and the Lib Dems want to take more from those who who tried to be responsible to look after themselves. When will the PPE Oxbridge courses teach students that you need to spend less than you earn? It is not a hard concept to grasp.

          Petrol has increased 30 pence a litre since the socialist Coalition took office two years ago. Diesel is the fifth cheapest out of 27 European countries and is the most expensive after tax is added. The socialist Coalition spins that the economy is the number priority. How does the over taxed fuel help business or the economy??? How many small businesses,who cannot get overdrafts from banks at a decent rate, afford these costs without passing it to the customer? Cash in hand? Not a good idea. Have the courage to start spending cuts it will force people to work and act on their own and within their own means.

          • Bob
            Posted March 7, 2012 at 6:46 pm | Permalink

            In a scheme that is sure to anger many private homeowners who struggle to find time for their own repairs, council tenants stand to pocket up to £500 a year for carrying out simple repairs like decorating, fixing leaky taps, and fitting doors instead of calling maintenance staff, they could stand to pocket up to £500 a year.

            Read more: http://www.dailymail.co.uk/news/article-2110862/Council-tenants-told-DIY—paid-500-year-it.html#ixzz1oSSu5k00

            Otherwise known as beer money!

          • lifelogic
            Posted March 7, 2012 at 8:12 pm | Permalink

            One can imagine the tenants hunting round the house for things that need “repairing” every month or two. I cannot see why social housing tenants should not all pay the going market rate for the rent, after all they get help if they need it.

            Anything else is unfair competition and clearly very unfair to others who have far less disposable income – as they do have to pay the going rent.

          • uanime5
            Posted March 7, 2012 at 8:54 pm | Permalink

            “When will the PPE Oxbridge courses teach students that you need to spend less than you earn? It is not a hard concept to grasp.”

            This doesn’t apply to the Government as they can obtain more money by increasing taxes, printing it, or borrowing it. We can’t have the Government provide the services this country needs and pay as little in taxes as possible.

          • lifelogic
            Posted March 8, 2012 at 9:16 am | Permalink

            uanime5 you ask.

            “When will the PPE Oxbridge courses teach students that you need to spend less than you earn?”

            I think perhaps most PPE Oxford students do not “earn” anyway they get money from Daddy, a trust fund or by killing time in the state sector or the EU. I do not think Cambridge does PPE hopefully not.

    • lifelogic
      Posted March 7, 2012 at 9:22 am | Permalink

      Also it is reported today that Steven Hester at RBS wants to concentrate on “rebuilding customer relations”. I assume he means just with depositors (who are happy with negative real interest rates).

      He is hardly likely to do this by calling back so many of their, perfectly good, loans or by halving the lending limits – as is being done, all over the place and at such great damage to any growth potential there still remains in the economy.

      “Helpful banking”? Helpful to bankers perhaps.

      • Disaffected
        Posted March 7, 2012 at 9:50 am | Permalink

        Bring back Gordon Brown, Cameron makes him look good.

        • A Different Simon
          Posted March 7, 2012 at 12:23 pm | Permalink

          Yes , he does .

          It’s very easy for a ditherer like Cameron to criticise Gordon Brown who at least acted and changed things , albeit many of them in unhelpful ways .

          • lifelogic
            Posted March 7, 2012 at 1:37 pm | Permalink

            If we had Brown we might also have had the prospect of a real Tory government in three years time or less rather than a Labour one as we now have to replace this socialist lot.

          • Bob
            Posted March 7, 2012 at 7:05 pm | Permalink

            If only the BBC would allow Nigel Farage to join the leaders debate at election time. That would put the cat among the chickens.

          • A Different Simon
            Posted March 7, 2012 at 11:18 pm | Permalink

            Bob ,

            Farage would comprehensively dick on them .

            No chance the Beeb would allow it .

      • sm
        Posted March 7, 2012 at 12:09 pm | Permalink

        A loss making fractional reserve bank has no choice, it must reduce lending to maintain regulatory capital ratios. In a competitive market with proper regulation of the money supply and asset inflation… where the right people take the hit for bad calls. Dreaming again.

        • lifelogic
          Posted March 7, 2012 at 2:55 pm | Permalink

          “regulatory capital ratios” are now too tight for current conditions they are making matters even worse.

          • sm
            Posted March 7, 2012 at 7:43 pm | Permalink

            The incumbent fractional reserve banking system and banks are the problem. In a full reserve bank there would be no reason to call your loan in if profitable.

            Why else would a bank reduce profitable lending? Surely less profitable work or non performing assets would be called in first? What would that do to prices? Are bank assets really worth what they say on the tin?

            I agree SME need help, i would say elimination of NI and deferral of CT, would help more than a loan from a dsyfunctional banking system.

            We need new clean banks.

    • Posted March 7, 2012 at 11:53 am | Permalink

      Lifelogic, Whence the assumption that banks should lend more? The size of the bank industry relative to GDP has expanded about fourfold over the last thirty years. The bank industry is heavily subsidised and far from being too small, I suggest it is too large. Do you approve of subsidies for what are supposed to commercial organisations?

      If government just boosted demand in the normal way, firms’ order books would expand. And nothing impresses bank managers like a full order book. Plus firms would have more money to fund their own expansion. Plus there’d be more money for equity finance.

      • lifelogic
        Posted March 7, 2012 at 1:52 pm | Permalink

        Bank lending was four years ago too free. But now, due to new Basel regulations and other pressures it is far far too tight. One minute the bank will lend you £1M on certain security. Then at renewal you are lucky to get half and at twice the price. It forces fire sales of assets and huge inefficiencies, change of plans due to a lack of working capital. This all to correct internal banking problems which were nothing to do with the otherwise sound business. At a time when confidence is so low, jobs hard to find and growth non existent it is complete madness to be sucking working capital back from good businesses and forcing them to scale back.

        These are not risky loans they are refusing – they should be profitable and safe for the banks given sensible regulation.

        • Mark
          Posted March 7, 2012 at 9:36 pm | Permalink

          The problem is that banks have been required to carry on subsidising mortgages. We have had the first moves to reduce those subsidies this past week, with increased rates from a number of banks. But it has taken until now to even make that start on reducing – let alone eliminating – those subsidies.

          The consequence has been all the burden of reducing bank gearing has fallen on a combination of business and unsecured credit lending.

  2. Single Acts
    Posted March 7, 2012 at 6:58 am | Permalink

    All the more reason to abolish business taxes which would, in a stroke abolish involuntary unemployment.

    Not a difficult concept and yet all you hear from Cable is ‘Mansion tax’ where as Mr Ed’s big policy contribution yesterday was two and a half pence off petrol* meanwhile Mr Cameron is busy with gay marriage or racism in football summits.

    Westminster Politics is dead and the smell of the rotting corpse is stinking up the country.

    (*from a Radio 5 phone in)

    • outsider
      Posted March 7, 2012 at 8:13 pm | Permalink

      If you read Mr Cable’s letter on industrial policy ( as opposed to the BBC headlines), you will find a great deal of common sense about how all government departments should so their best to help British business sectors that have great potential. This should be part of every minister’s brief. The letter does not say much about deregulation and less harmful business taxes but if you put the two approaches together you can see a really successful long-term policy. As you suggest, however, party strategists are only interested in the American idea of gathering together votes by throwing bones to as many minority interest groups as possible.

    • Mark
      Posted March 7, 2012 at 9:39 pm | Permalink

      I think the 2.5p off fuel is one of Mr Halfon’s half thought out campaigns rather than belonging to any Ed. If he though it through coherently, he might be able to make a more cogent case, but he seems to specialise in populist stuff.

  3. Mike Stallard
    Posted March 7, 2012 at 7:35 am | Permalink

    OK so yesterday I was in Peterborough looking at the various different races living and scraping a living in my home town.
    Two weeks ago I was in Singapore looking etc etc etc.

    What is the difference?

    The days (many Labour people haven’t quite got there yet) of the white working class have long departed. What we now have is a multi racial society which is the same the world over.

    By pretending that the white working class deserves better than everyone else is not just silly – it is seventy years out of date.

    Wake up!

    “Singapore does not implement any unemployment benefits system dedicated to helping the unemployed. It is because the government considers the best way to assist individuals who are retrenched or unemployed is to help them seek re- employment instead of handing out financial support such as unemployment benefits.”
    http://www.legco.gov.hk/yr99-00/english/sec/library/e17.pdf 

    • Barry
      Posted March 7, 2012 at 11:17 am | Permalink

      “What we now have is a multi racial society which is the same the world over.”

      Like Japan?

      • Mike Stallard
        Posted March 7, 2012 at 4:29 pm | Permalink

        Actually Japan is, as far as I can tell, overtly (pro Japanese-ed) and exclusive. That is why the population is falling and why it is on the rocks economically. It provides the perfect foil for countries like our own which simply open the doors to everyone who can get here.

        • Caterpillar
          Posted March 7, 2012 at 9:30 pm | Permalink

          Yep Japan has been traditionally “pro-Japanese” and the on the rocks criticism and a demographic element may have some reasonableness to it.

          Nevertheless I am not totally convinced. During the two so called lost decades Japan still grew (at a a muddling through rate) and this with the working poulation drop. The move towards more women being treated as equals in the workforce, is a (belated) response Japan can (is) make (making) to its demographic position (this can of course go both ways). Decreasing of the labour supply also seems reasonably consisitent with more capital/knowlege intensive industries.

          The largest obvious low in Japan is the growth of homelessness. E.g. walk around Ueno station and there are many homeless males and a few females. What is remakable of course is that they generally have a strong community between them, have acces to cleaning facilities, store their belongings on well organised trolleys, stick to a working day timetable, read etc. If the Japanese economy were desperate for labour these people have stunning pride, integrity and organisation.

          The other criticism of Japan is the harmful decades of deflation. Assuming no total collapse many people within Japan have been glad to benefit from what has been an advance of affordability (and the grade of a 100yen shop seems somewhat higher than a pond shop). A couple of decades back, even for locals/nationals, getting a taxi was a competition, hotels were unaffordable to many, eating out was out of reach, time was missing etc. Now many locals/nationals can and do appreciate much of what Japan has, this accessability has been brought about by slow&low deflation.

          How things will be going forward are obviously unclear, the debt and the change in youth. With an appreciation of time over service some Japanese young are again moving internationally in search of a good life (less than an 80 hour week), whether this will lead to a significant cultural shift and its consequences, I think remain to be seen.

          [I should say that I haven’t visited for 2 years so recent events might have changed things]

        • JT
          Posted March 8, 2012 at 7:56 pm | Permalink

          Japanese GDP per capita contined to rise through the last decade.
          Given the economy is export driven the main cause for slowing economic growth and shifting relative global position is the globalisation of trade, outsourcing, assembly manufacturing, capital moving into investment markets as opposed to plant / machinery.
          ie … the same as the UK is experiencing.
          The falling population (static) is beneficial as it maintains GDP per capita.

      • Disaffected
        Posted March 7, 2012 at 4:30 pm | Permalink

        Maude is about to give speech on modernising the Tory party. A conflicting point is that he wants the party to appeal more to ethnic minorities and also wants to sell gay marriage in a church. The two conflict. Most Asians, Muslims and Africans are against gay relationships (Janet Daley’s article is an accurate reflection of the position).

        Well done to Mark Pritchard for his views on Europe and resigning from his job. His article in the DT yesterday was spot on. Back benchers, wake up Cameron and Osborne will resign you to opposition for a very long time. Lib Dems know they are history, their only chance is to hang on the shirt tails of Labour- for the few who will be left.

    • Winston Smith
      Posted March 7, 2012 at 3:19 pm | Permalink

      Guest workers in Singapore have very limited access to services and no access to welafre benefits or rights of residence.

      This is how they do it in a higly successful nation:

      ” Singapore will seek to stabilize the number of foreign workers amid growing discontent about rising housing costs, crowded public transport and stagnant wages for low-income workers, a top minister said on Friday.

      The government will lower the percentage of foreign workers that manufacturing and service companies can employ and continue a four-year scheme to increase immigrant worker levies, Finance Minister Tharman Shanmugaratnam said in a budget speech.

      “We have to reduce our dependence on foreign labor,” Tharman told parliament. “It’s not sustainable. It will test the limits of our space and infrastructure.”

      “A continued rapid infusion of foreign workers will also inevitably affect the Singaporean character of our society,” he said.

      The jump in foreign workers during the last decade has become a contentious political issue in the wealthy island of 5 million people, as workers from China, India and other Asian countries have swarmed into Singapore’s growing economy looking for jobs. The ruling People’s Action Party recorded its lowest percentage of the vote since independence in 1965 in parliament elections in May.

      Singapore doesn’t have a minimum wage, and opposition parties argue foreign workers help keep salaries low, especially at the expense of poorer Singaporeans. The number of foreign workers has risen 7.5 percent each year for the last two years and they now account for a third of the city-state’s work force, Tharman said.

      The government has argued foreign workers do jobs Singaporeans won’t and have been necessary to boost economic growth as the local population ages and birth rates decline. However, companies are now expected to boost productivity through investment in technology and worker training rather than relying on foreign workers, Tharman said.

      The government is lowering the percentage of foreign workers that manufacturing companies can employ to 60 percent from 65 percent and services companies to 45 percent from 50 percent, Tharman said.

      “The easy availability of foreign labor reduces the incentives for companies to upgrade, design better jobs and raise productivity. Companies must adapt to the permanent reality of a tight labor market,” Tharman said.

      The government forecasts the economy to grow between 1 percent and 3 percent this year after expanding 4.9 percent last year and 14.8 percent in 2010.

      The government expects a budget surplus this year of 1.3 billion Singapore dollars ($1 billion), or 0.4 percent of gross domestic product. Higher-than-expected corporate and property tax revenue boosted Singapore’s 2011 budget surplus to 2.3 billion Singapore dollars, or 0.7 percent of GDP. “

    • uanime5
      Posted March 7, 2012 at 8:59 pm | Permalink

      Having no unemployment benefits works in Singapore because they have enough jobs for the whole population. In the UK removing benefits wouldn’t suddenly create enough jobs for the 2.67 million unemployed people, nor would it help those who work for a low wage and legally claim benefits.

      • Disaffected
        Posted March 8, 2012 at 10:07 am | Permalink

        The country and its people need to live within tis means. Free loading must stop. Even socialists like yourself should be able to grasp this. The Government must reduce tax to a bare minimum to provide efficient services. The government machinery mindset must change. The socialist civil service and local government always want more and it normally means more non-jobs and free loaders. TEA- Taxed Enough Already springs to mind.

      • libertarian
        Posted March 8, 2012 at 8:21 pm | Permalink

        There are already more than enough jobs available for the UK unemployed.

        They only don’t fill them because they lack the right attitude, ability or in some cases because of location. So uanime5 what are you doing personally to create jobs?

  4. James Reade
    Posted March 7, 2012 at 7:35 am | Permalink

    Wait a minute – yesterday, you cited yourself in Parliament, and there the fall in living standards was caused by inflation, which you seemed to be blaming on the last administration, incongruously given the Bank of England has responsibility for keeping inflation in check. But today it’s because of intense competition from the BRICS?

    And today you advocate protectionism for much of our industrial base too?

    This global competition is good for all UK producers that produce good quality, reliable products, not just those that produce high end goods. If the UK is able to produce goods of a quality that is unmatched by Japanese and German products, then our goods will compete on global markets and be sold – regardless of competition.

    So the more fundamental question, rather than again getting on your debt high horse (I assume you’re aware that post-WWII debt was nearer 250% of GDP yet we then had some of the best growth rates we’ve ever had?), is why aren’t our industries doing that more generally? Is it because our politicians always talk about protecting them, so they feel they can be protected if they hold out producing sub-standard produce long enough?

    The thing we don’t need, in response to Brazil and other countries reaching arbitrary income levels measured and compared using methods that contain a lot of untestable assumptions, is to start protecting failed industries any more than we already do. Neither do we need to be “picking winners”, since we’re not very good at it. We need to create an environment where start-ups can thrive, free from red tape (and picking winners creates red tape).

    Reply: I have not advocated picking winners or subsidising poor performers.

    • James Reade
      Posted March 7, 2012 at 7:36 am | Permalink

      I should add, global competition is also good for those that don’t produce the goods of sufficient quality – they go out of business and the people employed in those businesses can get on doing something they are better suited to. Why inhibit this creative destruction?

      • Caterpillar
        Posted March 7, 2012 at 11:01 am | Permalink

        I agree with James Reade in general on global competition being “good” – where “good” implies productivity enhancing rather than some value judgement. I worry at the moment that;

        (i) Emergency interest rates have propped up businesses that were marginal inboom times, and have in general limited the shakeout including the more efficient businesses taking over the less. Does this slow the recovery?
        (ii) I am also concerned that the ZIRP driven devaluation has focussed export competition based on price – a company doesn’t need to improve as its terms of trade have just changed, strong currencies tend to require competence development / innovation (sorry James, I know you will want confirmatory and refuting references, but I haven’t checked.)
        (iii) It takes time for people and businesses to adjust to something for which they are better suited. I think this is one area that Govt’s should look for constraint easing. It won’t just be education and training, it will be mobility (stamp duty and overpriced houses, two workers/seekers in one household), endemic ageism of employers, complexities of necessity/opportunity entrepreneurship etc. I think IDS’s work will eventually help here, but it is eventually and only eventually.
        (iv) Also, James, not specifically in reply to your “arbitrary income” point, but as an economist do you think purely flow comparisons (e.g GDP) are sufficient or do you think a cumulative wealth measure is needed (e.g. I found it odd to scrap cars inorder to tweak GDP which captured pointless destruction and construction)?

        • James Reade
          Posted March 7, 2012 at 9:25 pm | Permalink

          Hi Caterpillar – glad to have some constructive engagement with my comments instead of the usual stuff – exemplified by Winston Smith below.

          On (i), undoubtedly. And related, there is a bizarre contradiction at the heart of project merlin and the talk about banks not lending. We have just emerged from a financial crisis made out of huge amounts of borrowing – yet here we are telling banks to get on with creating loads more credit! And who exactly are we to know better than banks what would be profitable projects to support with credit?

          On (ii) I’m not totally sure what you’re getting at, but since you’re just making an observation and raising a question, I’m not going to hound you for evidence to back it up – I hound John for that because he makes strong and bold assertions for which there usually just isn’t any evidence to support. I imagine a strong currency does force firms to be much more resourceful, rather than relying on a weak currency to make their goods cheap. I’ve seen convincing evidence that the firms in China that don’t get easy credit from the cronies in power are actually much more efficient firms.

          (iii) Undoubtedly structural adjustment takes time. Depressed areas of the midlands and the north make this abundantly clear – the question is why they are still in a depressed state. No end of various govt schemes over the years don’t appear to have changed anything. Why haven’t relative prices adjusted, why haven’t firms set up in these areas? Is it really just due to red tape?

          On (iv), the more I think about it, the more I think the numbers we use to “rate” how we’re doing are essentially a pointless distraction. Why does it matter if another country has its income growing a bit faster than us? If we’re doing things competently, selling goods people want to buy, why does it matter if we have a little bit more or a bit less than some folk in some other country? In terms of wealth that would be just another number to use. As for the impact of the scrappage scheme, well that was simply a bit of shifting consumption through time – people bought cars earlier than they otherwise would have done.

          • Caterpillar
            Posted March 8, 2012 at 10:20 pm | Permalink

            Thanks for the thoughtful comments James – so much to learn!

            Whilst I don’t look favourably on many politicians I do on JR, this diary alone interacts at a national level not just with his constituents. I agree many comments are made without reference to evidence or full elucidation of argument. Nonetheless I think this is reasonable given available time and existing experience, and that this leads to an outpouring of comments (many of which I find interesting) on here, and of course JR reads these, it is all experience.

            Sadly I think the endogenous behaviour of (some) politicians is just where we are, and I have no idea how to change it [inappropriate choices in voting referendum, a messed up Lords, elevation of training over education (teacher training but driver education – hilarious), the Y-generation …]. I don’t know whether Churchill really said it but,

            “The best argument against democracy is a five-minute conversation with the average voter”,

            may well capture the pressures that lead people to be / not be politicians, and to how they perform.

            Reply: MY comments are based on evidence where I think that matters – all the monetary/economic/budget analysis for example is based on government figures and sources quoted.

      • Winston Smith
        Posted March 7, 2012 at 11:21 am | Permalink

        Oh to be living public sector fairyland! SME’s are really struggling with an avalanche of unecessary regulation, an interferring and bloated State, a poor supply of educated employees, artificially high fuel and energy costs and high taxes, not least 14% employer’s NI. Now we are told employees can claim more time off for being sick whilst on holidays. You academics need to get out of your cosy, parasitical, taxpayer funded existence and join the real World.

        • Winston Smith
          Posted March 7, 2012 at 3:26 pm | Permalink

          Just had a 6% business rates increase today. We have to generate £150k in extra sales to pay for that.

          • uanime5
            Posted March 7, 2012 at 9:01 pm | Permalink

            Well as long as it motivates you to sell more.

          • James Reade
            Posted March 7, 2012 at 9:08 pm | Permalink

            Thanks Winston, I can always rely on some slight from you!

            Just because I’m employed by a university, doesn’t mean I’m in the “public sector fairyland” you speak of.

            It’s funny you know, I spend more time each day researching and trying to understand data from this “real world” you inhabit and claim to understand, than you’ll probably ever see in your entire lifetime.

            Sure, if you do want us all to just stop thinking about how the economy works, trying to understand it better so that we can better understand the impacts of government policy and other events that befall our economy, let’s just go right ahead.

            But do you really think somehow that’s going to lead to a better system without stupid govt regulations getting in the way of private sector folk trying to do their jobs

            Get off your high horse and actually start engaging with the things I write instead of just insulting me.

        • lifelogic
          Posted March 7, 2012 at 8:18 pm | Permalink

          Indeed why bother must be what most owners are thinking. This government clearly sees business as just a cash cow and the enemy.

    • forthurst
      Posted March 7, 2012 at 12:55 pm | Permalink

      “I assume you’re aware that post-WWII debt was nearer 250% of GDP yet we then had some of the best growth rates we’ve ever had?”

      Did you know we had a large industrial base capable of supplying the world’s needs then? – and rationbooks?

      • Robert Christopher
        Posted March 7, 2012 at 7:02 pm | Permalink

        … and at least there was a reason for the debt!

        • lifelogic
          Posted March 7, 2012 at 8:19 pm | Permalink

          There is a reason now “bad government” it is just not a very good reason.

        • James Reade
          Posted March 7, 2012 at 9:05 pm | Permalink

          There’s a reason for the debt now too! Just you seem to like it a bit less than a war.

          The point, clearly lost on you both, is that despite debt, the economy was still able to grow.

          And it had a large industrial base? The economy had to be turned from a wartime economy to a peacetime economy – that kind of transition doesn’t happen overnight.

          • forthurst
            Posted March 8, 2012 at 10:31 am | Permalink

            “The economy had to be turned from a wartime economy to a peacetime economy – that kind of transition doesn’t happen overnight.”

            I would have thought the transition from wartime to peacetime would be rather more rapid than the other way round – after all the plant and knowhow pre-existed. As I also mentioned, domestic demand was constrained by rationing. Furthermore, the welfare state was nascent rather than senescent.

          • James Reade
            Posted March 9, 2012 at 8:02 am | Permalink

            forthurst – actually, the welfare state was just more disorganised back then. The various post-war acts just rationalised it more. It had been growing since the Liberal governments of the early part of the 20th century.

            Going either way is going to take some time and effort undoubtedly, but if there is a single entity organising the new direction, as there was with wartime (govt), then even if the result isn’t very efficient, it will be achieved quickly. The return to private activity, while welcome, will take time because all decisions aren’t necessarily co-ordinated as they (theoretically) would be if done by one body (govt).

          • forthurst
            Posted March 9, 2012 at 4:57 pm | Permalink

            Spoken like a true Marxist. How’s the USSR doing by the way? We know the EUSSR is a bit poorly – will it survive?

      • JT
        Posted March 8, 2012 at 8:06 pm | Permalink

        We were still at the heart of a rather favourable trading system at the end of the war … meanwhile gdp / debt comparisons at the end of a major war are rather pointless … even setting aside how that debt was funded

    • James Reade
      Posted March 7, 2012 at 9:29 pm | Permalink

      My apologies. I merely inferred from this statement that you advocated some kind of industrial policy:

      “The UK lost much of its textile business to the East some years ago. It needs to watch out for other industries, as the emerging countries add cheaper energy, cheaper labour and control of some of the raw materials to their mix.”

      It’s a fair characterisation of all government policy postwar though that they have tried, one way or another, to pick winners (e.g. financial services) whilst often subsidising losers way beyond what is wise to do (e.g. farming).

  5. ian wragg
    Posted March 7, 2012 at 7:40 am | Permalink

    This should serve as a wake up call for the West, particularly Britain.
    The days of dominance and welfare are drawing to a close.
    Regulation upon egulation continues to be piled on business and rights granted for all and sundry without any benefit to the country.
    Cameroon waxes lyrically about gay marriage and Clogg about Lords reform. Neither having an original thought in the body about how to compete in this larger cut throat world.
    We are indeed ruled by donkeys.

    • Alan Wheatley
      Posted March 7, 2012 at 8:50 am | Permalink

      Agreed. Why Cameron think gay marriage is of pressing concern is beyond me.

      I thought the Conservatives were pro-family and the last thing they would want to do would be to undermine marriage. The Chancellor, too, is happy to see the traditional family disadvantaged by his proposals for the withdrawal of child benefit from (some) single-earner families.

      • stred
        Posted March 7, 2012 at 10:14 am | Permalink

        Even the Association of British Lesbians has said they don’t need marriage. They only, rightly, wanted civil partnership rights to be the same as for married couples. Cameron must read the Guardian in the toilet these days.

      • lifelogic
        Posted March 7, 2012 at 5:50 pm | Permalink

        “Why Cameron think gay marriage is of pressing concern is beyond me.”

        Perhaps because he is a PR man and any distraction from the real economic problems that he is failing to address is welcome to him.

        • Mark
          Posted March 7, 2012 at 9:47 pm | Permalink

          I think he was afraid that having stood up to the EU was making him too popular in the polls: that undermines the need for a coalition with the Lib Dems, which I think he prefers to having to deal with the broad church of the Conservatives. The best way to get back in his coalition comfort zone is to promote these ideas: he did exactly the same thing during the General Election.

      • Bazman
        Posted March 7, 2012 at 6:40 pm | Permalink

        Difficult to see how promoting homosexual rights undermines marriage. It’s not as if you really have much of a choice to be gay or straight? You could just call it family rights. My theory is that the ones that protest are the one that want it? (etc)

    • Disaffected
      Posted March 7, 2012 at 9:43 am | Permalink

      Linked to yesterdays blog; the socialist Coalition is giving away our intellectual property and the ability to stay ahead of the game in some industries by providing free university education to our competitors and cheaply to the likes of China who is sending its pupils around the world to the top universities with an emphasis to study engineering, medicine, science and technology.

      The socialist Coalition is helping our competitors while placing our own students in massive debts all their life and forcing them to turn away from higher education. Only the rich and poor will be able to afford it. In contrast China is an industrial power house and has a plan to remain at the top, the UK has no plan full stop. Yesterday a leaked letter from Mr Cable demonstrated he was asking the PM and the DPM what the plan was when he should be central in creating it- you would think it is obvious in his job title. What has he done? Welcome Prof. Ebdon to help the BSI dumb down the UK higher education system by social engineering to get poorer people to top universities irrespective of merit or ability. Wake up Tory back benchers for goodness sake, get rid of Cameron before it too late.

      • Kevin Dabson
        Posted March 7, 2012 at 8:11 pm | Permalink

        There is also a problem with the science budget. At the time it was around £6Bn. It basically allowed foreign companies to use universities in the UK for research purposes to develop products/technologies and as someone pointed out to a researcher, there was no return payment for the research!

        It’s stuff like this that is crazy.

      • uanime5
        Posted March 7, 2012 at 9:05 pm | Permalink

        So if we dumb down our education the Chinese students who come here for higher education will receive a poor education, which will make China less able to compete in the global economy. Sounds like a very sneaky way to bring down China.

  6. Antisthenes
    Posted March 7, 2012 at 7:42 am | Permalink

    Against this backdrop socialist, vested interests and the EU are demanding ever more regulations, spending and social engineering and green projects that make us even more uncompetitive. Unless something is done to arrest this madness then the West will sink to the depths that the fast developing nations were in before they embraced free market capitalism.

    • Chris
      Posted March 7, 2012 at 2:55 pm | Permalink

      Agreed. The EU is stifling our recovery and growth. I see that Mark Pritchard has made a real stand with regard to David Cameron and his approach to the EU (excellent article in D Tel online today covering his reasons why he gave up the deputy chairmanship of the Conservative International Office). Mr Redwood, would you be willing to comment on this very significant step by a senior Conservative with regard to an issue that is so critical to the prosperity, or lack of it, in the UK?

      • uanime5
        Posted March 7, 2012 at 9:06 pm | Permalink

        The problems with growth are more to do with our own politicians than EU politicians.

    • Mike Stallard
      Posted March 7, 2012 at 4:32 pm | Permalink

      I so agree!

    • Kevin Dabson
      Posted March 7, 2012 at 8:03 pm | Permalink

      Please do not confuse america with socialist western europe. The Yanks are quite capable of turning there situation around. They are noticeable more right wing in there political leanings also.

      The US military technologies, semiconductors, software, medical research etc etc and universities are absolutely top notch.

      I remember at the University of Virginia (not even a top ivy league one) when I was working nearby, they had about a $1Bn of yearly funding in 2004! . They can issue their own bonds like other US universities. Cambridge tried to issue a bond under labour a few years back, but I am not sure what happened with this.

      The GATT agreement(s) had some mistakes, in that it allowed free trade without mandating some degree of equivalence in trade, with truely fair open markets and never dealt with issues like IP.

      The US & EU should just impose import sanctions on china unless the Yuan appreciates noticeably.

      .

  7. Posted March 7, 2012 at 7:47 am | Permalink

    I assume that your Party Leader together with the Deputy Prime Minister consider our position against Brazil as an irrelevance, as we are now all part of a much larger EU, which for the moment dwarfs the Brazilian economy.

    Yet if sound thinkers, such as yourself, continue to sustain them in power the EU will continue to decline into corporate socialism and one day soon other developing countries will overtake the EU itself.

    • Disaffected
      Posted March 7, 2012 at 9:48 am | Permalink

      The main mistake many people often make is conflating politics with economics. The mad EU plan has little to do with economics, economics is used a tool to spin benefits to sell the EU dream. The main aim is creating a pan European state. The other systems and process will be developed to suit Germany who is the strongest partner and dominates what happens.

  8. Posted March 7, 2012 at 7:47 am | Permalink

    Wouldn’t it seem sensible to invest and plan towards a circular economy?

    Ellen MacArthur’s website on this topic is excellent:
    http://www.ellenmacarthurfoundation.org/

  9. Phoenix One UK
    Posted March 7, 2012 at 7:48 am | Permalink

    Hi John,

    What do you and other politicians expect? What has any British government really done to keep the UK competitive with the rest of the world? Fact is, what the hell are we doing shackled to the EU? The EU comprises of 27 member states, and there are over 200 countries on the planet with even 54 countries – twice the membership of EU – in Commonwealth,.Note the Commonwealth itself also has four times the EU population.

    When I studied electronics in Australia, and at a time when the first PCs hit the market with TRS-80, I recall tutors told me about how the New York stock exchanged was being computerised, and they hired British software engineers because they were the best in the world. What happened? Where is all the British industry? What the hell have past and present governments done to my country? If I did not know better, I would suspect our own government had sabotaged British industry and business to make the EU look more attractive to British people.

    Give us our referendum.

    • uanime5
      Posted March 7, 2012 at 9:09 pm | Permalink

      One thing the Commonwealth doesn’t have is the wealth of the EU. There’s a reason the UK exports 53% of it’s products to the EU and so little to the Commonwealth.

      • libertarian
        Posted March 8, 2012 at 8:23 pm | Permalink

        Another made up “fact”

  10. alan jutson
    Posted March 7, 2012 at 7:52 am | Permalink

    John

    This is the very reason that the mass volume manufacturing of basic goods (which in the past employed millions) will never come back into the UK.

    The only manufacturing that is likely to grow is cutting edge technology, specialist short run items, or one off bespoke manufactured items.

    This is why the governments drive to increase manufacturing is short sighted, do they also not realise that the world has changed.
    Will not be too long before all of these countries also realise that trading money is a route to riches as well, and whilst we may well be number one or two in the World at the moment, this will eventually decline.

    I got out of engineering 30 years ago, the writing was on the wall then. Many of my friends who were also in manufacturing have also changed careers.
    All of us were either skilled tradesmen, managers or ran our own businesses.

    The future for the developed western world economies and workers is rather bleak.

    At some stage Western governments will have to realise that the tax take will not be sufficient, and that our social services and welfare schemes will have to be reduced, or in some cases curtailed, due to the simple mathematics of cost against income (tax revenue).

    • Robert K
      Posted March 7, 2012 at 9:00 am | Permalink

      I agree with you about manufacturing policy. If we want to have high-end incomes in a global context we can’t try to compete with Korean ship builders or Chinese mass manufacturers, for example.
      Out of interest, what was it that persuaded you to leave engineering? It seems you were frustrated by tax and regulation, but I wouldn’t want to put words in your mouth.

      • Sebastian Weetabix
        Posted March 7, 2012 at 10:14 am | Permalink

        And why do the Chinese mass manufacturers dominate the consumer goods market, and the Koreans dominate shipbuilding? It isn’t just because they are cheap or the quality is fit-for-purpose. Collectively they have an over-arching strategic vision and a national industrial policy to achieve their goals. By contrast we have a history of governments over the last 30-40+ years who have no industrial policy – rather an attitude of laissez faire. Except for the banks of course.

        • uanime5
          Posted March 7, 2012 at 9:13 pm | Permalink

          China engages in mass manufacture because it has a large number of people who are paid very little by Western standards, so they can cheaply engage in labour intensive activities.

          Korea dominates shipbuilding because the Government heavily invested in it. Giving large amounts of money to any company that is willing to build ships eventually results in a several talented shipbuilding companies.

      • alan jutson
        Posted March 7, 2012 at 10:42 am | Permalink

        Robert.

        I left engineering because I could get greater rewards doing other things. First as a self employed commision only salesman, then eventually starting up my own design and build construction company which I ran for 30 years, until I recently retired.

        Sad fact of life, but after a 5 year fully indentured apprenticeship, 8 years at polytechnics, leading to an HND, working in the research and development team at a large motor parts manufacting unit, then moving on and becoming the purchasing and production manager of an engineering company producing 1,000,000 parts per week, I found Icould earn more money as a self employed salesman.

        I recently retired and wound down my own company, because I could no longer, or indeed wanted, to compete with eastern European labour, who were prepared to work for £35.00 per day, and the competitor companies who employed them.

        I much prefered to use known skilled qualified labour/contractors, who were registered with the Inland Revenue, had all of the neccessary insurance and certification required for their trades, who were reliable and who could give a meaningful guarantee on their work.

        Margins were being squeezed at both ends, with lowering prices and rising costs, so I decided at 63 years of age, enough was enough.

        The Company is still on the books, still has money in the bank, but I do not seek to trade, as the risk was no longer worth the reward.

        • Mike Stallard
          Posted March 7, 2012 at 4:37 pm | Permalink

          The Bangla Deshis, the Chinese, the Eastern Europeans are over here now, and they are bursting to work very hard so they can get the rewards of their labour without the corruption which wrecks their lives.

          Unfortunately the mass of out of date regulations, the wicked waste of the Welfare State and the blind TU people prevent their full participation.

          I mix with the immigrants a lot and it breaks my heart to see them drift off home angry and sneering or even worse staying here picking up all the unearned benefits and becoming British (in their approach-ed)

    • Alan Wheatley
      Posted March 7, 2012 at 9:20 am | Permalink

      Re “The only manufacturing that is likely to grow is cutting edge technology, specialist short run items, or one off bespoke manufactured items”, I agree.

      I have head lots of tales of UK companies going to China to manufacture engineering goods because, on the face of it, the price was much less than manufacture in the UK, only to find that the goods received are sub-standard. The latest tale was of a product form China supplied with certificates of conformity as to the quality of the steel used only for the UK customer to discover when having the steel analysed that the steel used was rubbish. Small companies in such circumstances are stuffed.

      There is a future for specialist, lower volume UK manufacture.

      • Sebastian Weetabix
        Posted March 7, 2012 at 10:17 am | Permalink

        In defence of Chinese manufacturers I have to say they won’t screw up in the same way twice. I go there a lot to deal with suppliers and customers and I am impressed by their energy and adaptability. Their achilles heel is a willingness to say what you want to hear and conceal the truth.

        I’m quite happy to buy socks or a DVD player from China but I wouldn’t buy any drugs, medical devices or anything aeronautical in nature!

      • Mick Anderson
        Posted March 7, 2012 at 12:00 pm | Permalink

        My line is Electronics R&D, and I supply specialist knowledge and services to a range of small engineering companies.

        Only a few have bought finished product from China, and it’s always ended badly. The only firms I’ve heard of suceeding with cheap foreign manufacturing are those who are large enough to put company place-men into the manufacturs to supervise the entire process. By definition, a small company can’t afford to do that for the smaller production runs they require.

        There certainly should be a future for UK based low volume manufacure, unless it is regulated out of existance. If Mr Cameron had any track record of keeping his pre-election promises, I’d be less pessimistic.

    • Mactheknife
      Posted March 7, 2012 at 1:25 pm | Permalink

      One of the most basic issues in manufacturing is the UK’s high energy costs based on the “greenwash” sucked up by Huhne, Beddington, McKay, Barker etc at DECC from their friends in Greenpeace and WWF.

      China is getting rich on providing cheap energy to its manufacturers and Brazil is quickly becoming rich due to its abundant energy reserves.

      Manufacturing jobs are returning to the US from overseas mainly driven by Shale Gas developments driving down the cost of gas.

      As a country we can not rely on the services sector alone and financial services in particular (look where thats got us !) If the government has a policy to increase manufacturing, then it is clearly not going about it in the right way. Sucking up to the eco-fascists will not allow any growth.

      I refer you here : http://www.thegwpf.org/uk-news/5151-the-p120-billion-blunder-wind-energy-ten-times-dearer-than-gas-power-stations-.htm

      • A Different Simon
        Posted March 7, 2012 at 2:52 pm | Permalink

        There are no particualar reasons which we should not have our very own shale-gas revolution here in the UK .

        The areas where the best deposits occur in the UK are no more densely populated than say the Fort Worth metropolitan area in the US .

        Gazprom have admired how (open -ed) the energy delivery market is in the UK and are looking to buy a gap at the trough by acquiring Centrica .

        At least Poland has the sense to pioneer shale development outside the US to replace their dependency on Moscow . How long before Powerhouse Poland has a bigger economy than the UK ?

        No matter how hard Westminster and Whitehall might try , shale is not going away .

  11. Mick Anderson
    Posted March 7, 2012 at 7:56 am | Permalink

    And yet the Cabinet still think that the cure to all the problems is working out how to grab more tax, rather than how to make the Country more efficient.

    Deck chairs; Titanic.

    • lifelogic
      Posted March 7, 2012 at 8:27 am | Permalink

      Exactly “tax, borrow, waste & over regulate to death”. The governments only “compelling vision” seems to be to murder, suffocate or deter the wealth producing sector wherever it can.

      Yet more private pension muggings to come, I understand, too – is there anything much left to mug after G Brown.

      • norman
        Posted March 7, 2012 at 11:49 am | Permalink

        Has Brown gone? Osborne has proven completely inept, moreso than even I had imagined and that’s starting from a low base.

        I can’t see any difference bewteen what Labour did for 13 years and what’s happening now.

        If anything the fiscal policy under this Conservative led government is even worse, they’ve doubled down on everything that’s proven to be a failure.

      • Robert Christopher
        Posted March 7, 2012 at 7:12 pm | Permalink

        Cameron?

  12. Alan Wheatley
    Posted March 7, 2012 at 8:24 am | Permalink

    A way to charm money out of the rich is to offer them what they want. Those living in the mansions will need goods and services, and will pay for quality goods and the best service.

    For instance, shopping for a new suite a dining room furniture rather than buy mass produced an individualistic, craftsman-made piece will be more appealing. It will cost more, but of greater significance it will have taken more man-hours to produce and there by be a better generator of employment.

    It has always been obvious that as other countries have been catching up with us in the “west” there was no prospect of competing on the the same terms, so what was needed was to change the nature of our business. High technology and craftsmanship are two obvious areas where this can work. However, both need people with the skills and training, and in that respect we have not being doing as well as we should.

    • Electro-Kevin
      Posted March 7, 2012 at 12:38 pm | Permalink

      There is almost overt racialism in what people class as true ‘craftsmanship’.

      Fender guitars, for example, are produced in various countries. A USA Stratocaster will command a significantly higher price than a Mexican one. The buyer of a USA Strat visualises a Jack Danniel wizened luthier, his skills honed over decades – above all he is caucasian.

      There is no reason why China can’t offer top quality craftsmanship at cheap prices on any article you wish to name.

      Reinvigorating British craftsmanship and selling it at a premium will require telling everyone that a British worker is worth more than a Chinese one.

      As the American guitar market shows, this can be done highly successfuly. But it’s a matter of pushing Britishness to a degree that many in this country would find unpalatable.

      • outsider
        Posted March 7, 2012 at 7:52 pm | Permalink

        As a small child in the 1950s, I understood that there were three qualities of goods: British made (top), Empire (middle) and foreign. At the time there was some truth in it (except for those who could afford American) but that ceased to be the general case, most symbolically thanks to the Sony white television and German cars. Today, I would prefer a Toyota car made in Japan to one made in France but would prefer to fly in a plane with British jet engines. We are not best at making everything but should shout louder when we are.

  13. Alan Wheatley
    Posted March 7, 2012 at 8:43 am | Permalink

    “As they get richer so their citizens have better lifestyles”

    Another significant thing to learn for this truism is in relation to the impact of human activity on the planet. It was always going to be the case that the third world would aspire to the lifestyles of the first, and it would never be the other way round. We have been told many, many times of the impact of the American lifestyle compared with that of the third world, and so predictions of the human impact of the forecast 9 billion people should be based on 9 billion American lifestyles. I do not think any forecast does this.

    There are, of course, differing views of just what impact human activity does have on the planet. When you look at what humans get up to it is difficult not to be believe there must be some impact.

    What seems to me as indisputable is there there is absolutely no point what so ever for first world populations to impose upon themselves that which undermines their own quality of life and prospects in pursuit of an idealistic goal that in some way they are saving the planet. Such actions are at best irrelevant and more likely counter-productive as the third world catches up.

    What the first world can do is to change the game with the practical application of fusion power and the like.

  14. AJAX
    Posted March 7, 2012 at 8:54 am | Permalink

    The Anglosphere needs to re-discover the benefits of Mercantilism, I hear the distant warning cry of Joseph Chamberlain drifting in on the history’s wind again

    • uanime5
      Posted March 7, 2012 at 9:20 pm | Permalink

      Mercantilism is little more than protectionism and colonialism. It’s simple won’t work in the modern world.

      • Sebastian Weetabix
        Posted March 8, 2012 at 2:23 pm | Permalink

        It works extremely well for China at the moment.

  15. Robert K
    Posted March 7, 2012 at 8:56 am | Permalink

    The odd thing is the passivity with which western governments look at the emerging economies. It’s almost as if the west looks at China, India and Brazil and says “well, yes, they are emerging countries so it’s inevtiable that their growth rates are much higher than ours. When they mature, as we have matured, their growth rates will slow”.
    I simply don’t buy that argument. There is no reason why our economy couldn’t grow at seven or eight per cent a year, if only the government would get out of the way with its pettyfoggging regulations, taxation and planning.

    • lifelogic
      Posted March 7, 2012 at 3:02 pm | Permalink

      As you say “There is no reason why our economy couldn’t grow at seven or eight per cent a year, if only the government would get out of the way with its pettyfoggging regulations, taxation and planning”.

      No reason at all other than bad, over large, misdirected, government.

      • Bazman
        Posted March 7, 2012 at 6:45 pm | Permalink

        Probably quite easy to make the economy grow at large percentages if you create massive equalities. Which will in some way have to be paid for. Making Britain into a police state would be to expensive in financial and human terms.

        • lifelogic
          Posted March 7, 2012 at 8:29 pm | Permalink

          A police state would not be needed nor beneficial just a smaller state sector is all that is needed.

          • Bazman
            Posted March 8, 2012 at 7:26 pm | Permalink

            They have very much failed to fill the gap so far and this is not because of your constant chant of to much regulation and taxes.

      • Robert Christopher
        Posted March 7, 2012 at 7:14 pm | Permalink

        ” … if only the government would get out of the way …”

        The EU will NEVER get out of the way.

        The only solution is to leave.

    • uanime5
      Posted March 7, 2012 at 9:22 pm | Permalink

      “There is no reason why our economy couldn’t grow at seven or eight per cent a year, if only the government would get out of the way with its pettyfoggging regulations, taxation and planning.”

      Care to explain why no other developed nation has been able to have growth at 7-8%? Just because you don’t like it doesn’t mean a mature economy can grow as fast as a developing one.

      • JT
        Posted March 8, 2012 at 8:14 pm | Permalink

        It’s maths …

  16. Nick
    Posted March 7, 2012 at 9:24 am | Permalink

    The problems for western politicians is acute.

    =============

    yes, and its not competition. That means more jobs.

    The problem is you as a politician and what you have done to the economy along with all the other incumbants in Westminster.

    7,000 bn of government debt. The government can’t afford that because we can’t afford it.

    The result is that you are impoverishing people left right and center.

    Government in the UK is the problem, not the solution.

    Still no published figures for the state pension debts. In spite of the pre election promise from you.

    • APL
      Posted March 7, 2012 at 8:01 pm | Permalink

      Nick: “Still no published figures for the state pension debts. In spite of the pre election promise from you.”

      Mr Redwood claims he has provided the figures. What is it about the information he has provided that does not satisfy you?

  17. Alison
    Posted March 7, 2012 at 9:25 am | Permalink

    The problem is not for western politicians. The problem is politicians rigging markets, interest rates and regulations. They interfere constantly with free markets to the point that we no longer live in a capitalist economy, it’s a command economy with the illusion of democracy. The solution is to do as Hong Kong, Singapore and other successful states do. Less government.

    • oldtimer
      Posted March 7, 2012 at 9:42 am | Permalink

      You need to add taxes to your list of things that politicians rig – think energy taxes.

    • Brian A
      Posted March 7, 2012 at 10:20 am | Permalink

      Spot on. We should never underestimate the ability of politicians to destroy the economies of their countries. At the extreme end we have the Mugabes and Castros, but here in Europe we have a political class that seems wedded to policies likely to create long-term impoverishment. They are sacrificing our competitiveness by avoiding the electorally painful readjustments that address, for example, unsustainable welfare, excessive regulation, and vested interests at all levels. In the near term it is unlikely that any political party will risk oblivian by meaningful action on these areas, so I guess that we will carry on our present trajectory of relative economic decline until an overwhelming crisis forces change.

      • Brian A
        Posted March 7, 2012 at 12:33 pm | Permalink

        Oops, make that ‘oblivion’.

    • Sebastian Weetabix
      Posted March 7, 2012 at 10:29 am | Permalink

      You’re kidding yourself if you think Singapore has less government. Their government sticks its nose into every nook and cranny – historically they have been very keen on economic intervention. But what they do have is an efficient government which does not mollycoddle the bone idle, punishes criminals rather than tries to “understand” them, and makes every effort to be business friendly, from regulation through to planning permits. When I lived there I was impressed with how easy they were to deal with compared with the average British local government functionary who seems to delight in being a jobsworth.

      Lee-Kwan Yew’s PAP had very left wing origins and was established along Leninist lines but clearly they were never Gramscian Marxists.

      • Mark
        Posted March 7, 2012 at 10:20 pm | Permalink

        They also maintained high standards of probity – and rather better than the UK’s, which in places have been eroding sharply.

        • Bazman
          Posted March 10, 2012 at 10:15 am | Permalink

          Just don’t put forward any dissent or criticism of the ruling family. Not that you would if you were an ex-pat living there temporarily. They do not want you in the long term as your ideas could pollute. Are you proposing we should give up political freedoms for a few quid and clean streets? Ram it.

    • lifelogic
      Posted March 7, 2012 at 11:57 am | Permalink

      Indeed “it’s a command economy with the illusion of democracy” as you rightly say. All achieved by market distortions and huge pointless over regulation.

      • Bazman
        Posted March 8, 2012 at 7:34 pm | Permalink

        Many regulations you want abolished will never effect you or your lifespan. We are not going to compete with China and India in race to the bottom or a a previous era of hardship for millions. Which is your fundamental belief.
        Mo minimum wage, no housing rights, no healthcare and everything else left to the market that pays no taxes, except when it effects the market, Then regulations should be regulated. You are either very rich or very stupid or both.

  18. Iain
    Posted March 7, 2012 at 9:44 am | Permalink

    “The US has experienced a long period of no real wage growth”

    I don’t know if you have realised it but neither have we, some wages at the bottom have been going down. Of course the sectors the Conservative Party are obsessing about, the 50p tax rate bracket, their salaries have been doing very well, and in Directorship classes, something you might have some experience of, doing obscenely well, 50% last year, bonuses up 180% in a decade, pension pots overflowing with cash, a 4000% increase over 25 years.

    So if there is need to price ourselves back into the market, we know where it needs to start. May be if there was a little less fat and a bit more lean in the board rooms our companies would be a little more hungry to win the contracts.

    • alan jutson
      Posted March 7, 2012 at 10:48 am | Permalink

      Iain

      Ref :Wages here are going down.

      You are correct, my youngest daughter is now earning 20% less than she was 5 years ago.

      Construction workers (what is left of them) earning in some cases 40% less than they were 5 years ago.

      The public sector are now having a wage freeze.

      • A Different Simon
        Posted March 7, 2012 at 3:03 pm | Permalink

        I’m only making 8% less than I was 4 years ago so I guess I’m doing quite well but it’s still going down .

        Adjust it for the cost of living and the amount I can save for old age has halved .

      • Bazman
        Posted March 7, 2012 at 6:49 pm | Permalink

        It’s called inequality and ironically the people who are most opposed to the idea of ‘inequality’ are the ones who have had the shovel wrapped around their heads the hardest. Serves the mean middle classes right, but for the rest of us we told you so…

    • uanime5
      Posted March 7, 2012 at 9:25 pm | Permalink

      Too true. Industries cannot grow while their management is sucking so much capital out of them. Especially when the management raise their salaries irrespective of whether they’ve made a profit or loss.

  19. oldtimer
    Posted March 7, 2012 at 9:50 am | Permalink

    How true. Yet many in the political class that rule in Whitehall, Brussels and other European capitals appear incapable of understanding the consequences of what you describe still less of doing anything about it. They seem to have brainwashed themselves as much as they have brainwashed their electorates. This is evident in the welfare and tax systems they have erected. It is only a matter of time before the day of reckoning arrives here, as it already has in Iceland, Greece and Ireland. Printing yet more money might buy some time but it does not answer the problem of spending £4 when earning only £3.

  20. stred
    Posted March 7, 2012 at 10:28 am | Permalink

    An amusing comment on R4 news yesterday when lauding the good news about the new Nissan model. Another aluminium smelter has just closed, losing a large number of jobs and creating more imports. ‘There is nothing that politicians can do about this’ was claimed as he signed off. The plants have closed because they use very large amounts of electricity, which is green priced here and much cheaper in emerging countries.

  21. StrongholdBarricades
    Posted March 7, 2012 at 10:32 am | Permalink

    How can the UK compete when we strive for a minimum wage only in this country, then offshore our manufacturing to countries that do not have one, and get it delivered in ships that are also not covered by the same legislation. Why should only the workers in this country be protected by such Acts of Parliament?

    Evidence yesterday the Alcan plant blaming the cost of energy as the main reason for closure. The country will still need Aluminium, but it looks likely that it will be sourced from outside the UK.

  22. backofanenvelope
    Posted March 7, 2012 at 10:54 am | Permalink

    Correct me if I am mistaken, but I thought that 75% of our business activity is internal and about 75% is conducted by enterprises with less than 20 employees. Let us therefore, relieve these businesses of all employment regulation other than health and safety measures.

    • RDM
      Posted March 7, 2012 at 12:50 pm | Permalink

      Nice thought!

    • uanime5
      Posted March 7, 2012 at 9:29 pm | Permalink

      Why would anyone want to work in a company where they have no protection against discrimination and no minimum wage? You can’t fix the economy by making it better for businesses but worse for employees.

      • Sebastian Weetabix
        Posted March 8, 2012 at 2:26 pm | Permalink

        By making it cheaper to employ people, more people will be employed. They in turn will not be on benefits and will be paying tax… the tax take goes up, benefits spending goes down. What’s not to like?

  23. waramess
    Posted March 7, 2012 at 10:57 am | Permalink

    Very interesting to know where you think the growth might be coming from.

    Low salaries in Brazil and China are far from being the answer to our lack of competitiveness. Germany gives itself a trading advantage which will lead to increased incomes for the German people to compensate for the increassed cost of imports. The reverse happens in much of the rest of Europe and so, as the Germans get richer their trading partners get poorer.

    The only answer they have is to print more money to support ailing banks. Simplistic but you can see where all of this leads and it simply gives added momentum to those economies where the sins of the government are far less than those of the EU and the UK who are slowly suffocating the private sector from where they receive their income.

    Keep growing the public sector and leaving the Collector of Taxes to liquidate all those who are unable to pay and the circle towards poverty is well and truly set in stone.

    Every move that the government makes unless it involves a reduction in government spending will ensure that growth will not be forthcoming and every tax increase, whether transparent or by stealth will be another nail in the coffin.

    The Germans will escape because they have learnt well the art of picking pockets and the USA will also escape because their economy is sufficiently robust to accommodate even the worst kind of government for a good long period but that is about all we can expect.

    Without growth the UK will sink deeper into the swanp and nothing, but nothing the government can do will stimulate meaningful growth short of dramatically cutting itself down to size.

    • uanime5
      Posted March 7, 2012 at 9:32 pm | Permalink

      Germany is succeeding because they build high quality products, as opposed to China which makes everything as cheaply as possible. Germany also has a strong focus on engineering and competent management in its companies.

      The only way for the Government to fix the problems in the UK is to ensure that the wage disparity between employees and employers is no more than 10 fold and to prevent the wealthy from monopolising the best education.

  24. MajorFrustration
    Posted March 7, 2012 at 11:19 am | Permalink

    JR – whilst I strongly support your right wing views some of the very import threads mentioned here do need to be addressed by you – rather than the “there there” replies you so often provide. Instead of a new article a day why not a weekly detailed response to the main issues highlighted by your followers. Its almost as if there is a disconnect – possibly summed up by that old banking expression “words and figures differ”
    The only thing the Tory party has going for it is that those of us who care and get exasperated with the current shower of front bench idiots is that we are too old to take to the streets. Still there is always UKIP

    Reply: I do aim to deal with the main lines of criticism and enquiry through my daily articles.

    • Caterpillar
      Posted March 7, 2012 at 9:52 pm | Permalink

      JR – as long as you have time keep up the daily articles. I find it interesting to read people’s comments that you initiate. (Though I do wonder whether any frontbenchers of either side have read your diary and the responses).

    • Max Dunbar
      Posted March 8, 2012 at 1:57 am | Permalink

      Forget UKIP. You will be horribly disappointed. Take to the streets. Why not? Can you still walk and talk? My friends and I will be “taking to the streets” at the Scottish council elections in May. We are in our fifties and sixties and enjoy doing something other than just rotting in Glasgow pubs moaning about socialists. Its not for everyone it must be admitted, but Saturdays in Glasgow city centre provide plenty of game for the avid right-wing sportsman.

  25. Posted March 7, 2012 at 11:35 am | Permalink

    I do not believe that the growth of the HOUSE countries (Humanity outwith the US & Europe) is in any way the cause of our lack of growth.

    “Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another. ”
    Milton Friedman

    Historically it has, since fast ghrowth began 2 centuries ago) been easier for the wealthy countries to grow faster than the poor ones. Our lack of growthnis purely because of the Luddism of our political classes who actively prevent the use of new technologies (nuclear power, space industrialisation, GM foods, modern building techniques) . Had that not been the case we would have achieved at least the growth rater of China.

    Indeed not only arer the previously undeveloped countries catching up with us on the older low tech industries but are also building more new buildings, growing more GM crops, building more reactors and even doing aas much in space.

    If the HOUSE co7ntries weren’t growing our economies would be doing even worse. The only people to blame for our failure is our Luddite political class. We coyuld get out of recession and into fast growth within days if they would allow it.

    • uanime5
      Posted March 7, 2012 at 9:37 pm | Permalink

      “Our lack of growthnis purely because of the Luddism of our political classes who actively prevent the use of new technologies (nuclear power, space industrialisation, GM foods, modern building techniques) . Had that not been the case we would have achieved at least the growth rater of China.”

      Why isn’t any other developed country growing at the same rate of China? Does every developed country somehow have Luddite politicians?

      “but are also building more new buildings, growing more GM crops, building more reactors and even doing aas much in space. ”

      They’re building more buildings because they lack modern buildings, China is building coal power stations because they’re cheaper than nuclear ones, and I can’t recall any developing county doing anything profitable in space. Has China or India even sent an astronaut to the moon?

      • Posted March 8, 2012 at 12:30 pm | Permalink

        “Why isn’t any other developed country growing at the same rate of China?”

        Since you ask Singapore grew 14%.

        The AVERAGE growth rate of the HOUSE countries is 7% which is considerably better than us. It is inherent in averages that not everybody will be above them & I suggest that China is a better run country than most & Singapore better run than us. However if Nigeria can manage 7% it seems undeniable that our own government is somewhat less succesful.

        Unimeg writes here in the Luddite cause regularly but when challenged NEVER produces evidence. Thjis is an example of how the entire movement normally behaves.

        I hereby challenge him to produce evidence that Singapore lacks modern buildings or to withdraw his ridiculous claim.

        China is currently building nuclear creactors whose total output will be ahead of the entire British grid, so once again uni is talking through an inappropriate orifice.

        His ignorance of space is typical. Many countries across the world are making money from space (space industrywill be worth over £200 billion worldide this year and is growing fast).

        ” Has China or India even sent an astronaut to the moon?”

        I love the use of the word “even” there. Has the entire “environmental” movement across the world taken together ever done anything “even” 1 millionth as useful to the human race as the Indian probe that proved there is water on the Moon? I await his evidence.

        • uanime5
          Posted March 8, 2012 at 4:38 pm | Permalink

          Singapore, China, and Nigeria are developing countries so it’s no surprise that they have high growth. The USA, Canada, Australia, New Zealand, Switzerland and every country in the EU are developed countries; care to explain why they all have low growth.

          I noticed you Neil Craig couldn’t provide any evidence to back up your argument that Luddite policies are causing low growth in the UK. Can you explain in which years did these Luddite policies become mainstream or what were the 3 most Luddite policies of every decade after WW2? If you can’t answer these simple questions it’s clear you have no evidence to back up your Luddite claims?

          Having modern building has nothing to do with whether a nation is developed or not. There are far more important criteria such as infant mortality, literacy rates, life expectancy, average disposable income, and membership of the OECD.

          China currently generates 1% of its energy through nuclear power while in 2009 the UK generated 16% of its energy through nuclear power. One again Neil Craig has failed to do basic research and has been shown to be completely wrong.

          How exactly is the space industry making £200 billion per year? Are there a large number of billionaires who want to go to space? Are moon rockets in high demand? I suspect that most of this £200 billion is spent by governments to train and equip astronauts, and is likely to be cut when these countries rebalance their budgets.

          I meant ever, not even. Also how exactly is proving their is water on the moon useful to anyone?

          Regarding the environmental movement their greatest achievement is the Three Gorges Dam in China, which provides clean energy and changed the axis of the planet so days are longer by 1 microsecond.

          • Posted March 9, 2012 at 11:37 am | Permalink

            Unimeg once again shows whjat an ignoramus he is. Or perhaps he will be able to explain how Singapore, a country considerably wealthier per capita that us, is merely a “developing” country.

            None of the allegedly slow growing countries he mentions as “developed”, though all but Switzerland poorer than “undeveloped” Singapore have growth rates that fail to exceed our own or the EU average.

            Since he gives a specific (& wrong) definition of “developed” which, according to all other observers, Singapore, the world’s fastest growing cou7ntry, has long achieved perhaps he could enlighten us as the the facts behind his unique grasp of reality.

            On China’s reactors Unipretends I said someting different from what I did and then accuses me of lying . While I recognise this as representing the [pinnacle of honesty to which he and the ecofascist movement generally ever asapire it is a total and deliberate lie. I said that “China is currently building nuclear creactors whose total output will be ahead of the entire British grid” not that they were long completed. What I said was and is true and I ask Uni to publicly apologise for the highest standard of honesty to which he aspires.

            Regarding space development and the extent to which Lthe Luddism of the British political class has hurt us – quite obviously proving all this in depth would require many thousands of words and would be inappropriate here. He can find it all on my blog via http://neilsindex.blogspot.com/ should he be in the slightest degree interested in the facts he claims to be interested in.

            Lastly I am astonished at his assertion that the Three Gorges dam is the greatest achievement of the ecofascist movement. It is certainly a far greater positive achievement than all acts of the ecofascists put together but since they loudly opposed it it seems to be merely their average level of honesty to try to take credit for it.

          • uanime5
            Posted March 9, 2012 at 8:14 pm | Permalink

            Yet again Neil Craig shows he doesn’t know what he’s talking about. GDP per capita is a bad indicator of whether a country is developed or developing because a few high earners in a country with a low population will dramatically raise the wealth per person. I noticed that you ignored all the standards criteria used to determine whether a country is developed or not, most likely because they would prove you’re wrong.

            No what you said about China’s nuclear power was a complete lie. China generates the vast majority of its energy through coal and other fossil fuels, not nuclear power. By contrast the UK generates 16 times more energy through nuclear power than China. China will need to build 16 times as many nuclear plants as it currently has to match the UK’s percentage of nuclear power.

            Just checked out your blog; it’s full of rants but no scientific evidence. The level of smugness are also at dangerous levels, such as this quote on every page:

            “Excellent letter from Mr Craig. He is like a lone wolf howling in despair in the intellectual wilderness of our politics.”

            Pretty pathetic really.

            Finally I don’t know why you’d think environmental groups were opposed to a hydroelectric dam. But given the your level of research I’m not surprised you got it wrong.

          • Posted March 10, 2012 at 11:41 am | Permalink

            So wealth is not an indicator of whyether a country is underdeveloped or not.

            It is a lie to say China is buildi8ng more nuclear capacity than the entire British grid because, although it is true, because Unimeg wants to say something else.

            Facts on my blog don’t count as facts when ecofascists don’t like them.

            “Environemntalists” never opposed the Gorges Dam even though they certainly did – and are therefore the sole builders of it.

            While I accept Unomg as representing the very highest standard of honesty to which the ecofascist movement aspires it is obvious that not only is he wholly, completely and totally dishonest on every point he managed the inique feat of being 180 degrees dishonest on them all.

  26. Electro-Kevin
    Posted March 7, 2012 at 12:20 pm | Permalink

    The UK is relatively resource poor. Most of it we controlled through Empire.

    We don’t elect politicians to think about what is fair for other countries.

    We elect them to look after our interests through strength and resilience in a harsh world. Sadly many ‘intelligent’ British people don’t get the message yet and are in for a massive shock.

    We are far too soppy for our own good.

    • Sebastian Weetabix
      Posted March 8, 2012 at 2:29 pm | Permalink

      Resource poor? This island is built on coal we do not dig up and shale gas we refuse to exploit. We are surrounded by water which has plenty of fish & oil in it. We have some of the highest rainfall figures in the world, yet we contrive to have a “drought”.

      Lack of resource isn’t our problem. Incompetent governance is our biggest problem.

  27. Damien
    Posted March 7, 2012 at 12:35 pm | Permalink

    The growing economies that you mention have distinct advantages over the UK when it comes to public spending. Out of £691.2 billion of public spending in 2011 we have spent £122.1 bn on pensions, welfare £11.3 bn , defence £45.6 bn and interest £43.7 bn.

    These are spending items that are actually increasing despite much talk of austerity. China has raised its latest budget for defence £70.6 billion. How can China with a population of over 1 billion citizens protect their interests at home and abroad for this sum when we with a much smaller population spend so much more?

    The reality is that politicians in the west are unable to control public spending as it is easier to raise taxes and mortgage future generations rather than implement unpopular spending cuts. Welfare tourism in the EU is problematic for those with the most generous welfare benefits.

    • Damien
      Posted March 7, 2012 at 12:38 pm | Permalink

      TYPO

      The Welfare spending figure should off course be £110.3 billion

      Note to John; In any future upgrade you plan for your excellent blog can you add an edit function

      • Bazman
        Posted March 7, 2012 at 6:56 pm | Permalink

        John’s the editor. This is what makes the blog interesting. Save you a job.

      • Sebastian Weetabix
        Posted March 8, 2012 at 2:30 pm | Permalink

        It’s his blog. If you don’t like it you can always write your own!

      • Electro-Kevin
        Posted March 8, 2012 at 8:13 pm | Permalink

        Damien – there could be a ‘cooling off’ button too. To retract any statements made in haste.

  28. RDM
    Posted March 7, 2012 at 12:46 pm | Permalink

    On balance, I think it’s a good thing. It should bring more demand for our products?

    But, within my own field; India (statistically or not) is taking over us at a rate of knots! Investment in Technology is growing very fast!

    They have a central development Bank, lots of smaller development banks, lots of Micro banks, and lots of investment opportunities for private sector banks and private individuals.

    They are heavily investing in People, Technology, and Infrastructure.

    And not just India, most developing countries have learnt this lesson.

    This means, for us, that unless we start investing in high value added sectors, we will become a very uncompetitive and poor place to live!

    We are still structured from the Top-down, and growth can only come from the bottom-up. The best thing for us, would be for the Establishment (backward looking half wits!) to get out of the way!! We have been reliant on Trickle Down economics for to long! It has created an imbalanced, overly concentrated market economy.

    We need to remember; The Market can NOT solve all our problems, we also need to develop Products and new Technology!

    PS: Relying on People that think that the 50p tax rate, alone, will motivate entrepreneurs have got it wrong! It could very well help when thing are going better, but entrepreneurship is a way of life! But, if reducing it rises the tax take, then it should be lowered. And we don’t need any costly gimmicks to replace it either! Get the government to cutting spending, we have! Some of us are living of £57 per week!

    The British need access to the British Banking System!

    Regards,

    RDM.

  29. Martin
    Posted March 7, 2012 at 12:57 pm | Permalink

    1) Your analysis forgets the West has an age profile problem – millions of OAPs to look after. In the UK NI is the tax vehicle for this, maybe it needs to be replaced with more taxes on consumption rather than NI which taxes production.

    2) Does mainland China permit offshore tax dodges? I somehow suspect not…

    3) Re “cruel logic of the Euro” – Far from being cruel isn’t the system more honest than Gordon Brown’s devaluation of Sterling against the Euro? This devaluation was managed (hidden) by a floating (sinking) currency. Minimum wage earners and savers saw their money buy less in the shops. The cost of petrol and other raw materials rose.

  30. sm
    Posted March 7, 2012 at 1:12 pm | Permalink

    Capital has searched for the high rewards and lower labour/material cost and found them.

    It seems to be driving labour costs down (except in niches & protected areas) a race to the bottom. The Western markets are collapsing under these competitive pressures and the palliative of debt and inflationary demand shocks following.

    We should start to consider the labour conditions of the exporting countries before we allow unfettered access to our markets.

    Where has all this margin or profit gone, to Capital. Where is the capital? Where is all the cash, the money gone? Someone is sitting on it somewhere?

    http://www.telegraph.co.uk/finance/commodities/9124824/Glencore-chief-Ivan-Glasenberg-defends-getting-109m-dividend.html

    The money masters have control of the world economy whilst we accept 2.7million unemployed and net immigration of 250k… madness.

    We are too accepting of 2.7 million unemployed, low wages and unaffordable housing, this unused resource needs to be used, we need to address it properly via a citizens income and major banking reform,(nationalize them all if needed but please minus the Sirs and liabilities).

    Mr Osborne says no unfunded promises! £325 billion of QE later who is he kidding?
    Ties in with the radical blog the other day.

    • A Different Simon
      Posted March 7, 2012 at 3:14 pm | Permalink

      SM “Capital has searched for the high rewards and lower labour/material cost and found them.”

      What you left out is that this in itself would not have been enough .

      When Western Capital offshored , it had to handicap homegrown manufacturing and industrial competitors to ensure it’s offshore investments were safe .

      The best way of doing this is big government .

  31. colliemum
    Posted March 7, 2012 at 1:27 pm | Permalink

    Of course China, India, Brazil are doing better than we do.
    Are their businesses strangled by red tape as are ours?
    Do they have to jump through all the environmental hoops imposed here by the EU? Something which other european countries pay lip service to, but which our civil servants and both this and the last government seem to regard as a competition they have to win, never mind factories closing, taking our tax money, and going elsewhere – like, back to India.

    And if we are now supposedly a post-manufacturing economy, and thus into high-tech and innovative businesses – why is it that young people are not properly schooled, properly trained, properly taught at college? Is it because in our culture learning, and putting in some effort, is now totally denigrated as being uncool?

    This country will be sliding even more down the ladder of world economies, even faster, if these core problems are not addressed.
    Not even the ‘world finance centre’ London will last very much longer when the natives are incapable of doing even simple arithmetic, never mind writing proper English.
    We even have to ‘import’ people from Europe and further afield because our youngsters are too cool to stack shelves or care for the elderly, never mind learning a trade.

    Naked reality will shred all the phrases which come out of government, parliament, quangos and the MSM.
    This country is lost unless you all start dealing with facts as they are, rather than the cloudy, worthy-sounding proposals being dished out, especially by certain Tories like Mr Maude today.

  32. David John Wilson
    Posted March 7, 2012 at 1:31 pm | Permalink

    It is inevitable that the earnings of countries like China per head of the population will converge with ours. Wages and standards of living will similarly converge. What we must ensure is that the playing field is level and that their working conditions etc. are brought up to the level that we enjoy. If we don’t then the convergence will be down to their level not up to ours.
    This means initially that we insist that any imported goods are not produced using child labour or long low paid working hours. This not only needs to apply to the low cost goods sold in our shops but also to capital goods purchased by government departments etc.

    • Winston Smith
      Posted March 7, 2012 at 2:58 pm | Permalink

      Is that “long low paid working hours” relatively to UK, EU or Public Sector standards or relative to the host culture and traditions. Who are you to dictate how many hours a Chinese worker puts in?

      • Sebastian Weetabix
        Posted March 8, 2012 at 2:33 pm | Permalink

        Have you been in a Chinese factory? I have. One hundred hours a week with one day off per month is typical. They do it because they have to – there is no welfare state in China.

        OTOH they do get 2 “golden week” holidays per year, mandated by the government, so they can return to their villages and meet their families.

  33. Richard1
    Posted March 7, 2012 at 1:53 pm | Permalink

    The most cocooned of all are the public sector services. In the coming years we will see the potential for much cheaper and probably better healthcare from abroad – people flying off to other countries for medical care. The unions trying to preserve the NHS in socialist aspic are not doing their members any favours at all in the long term (let alone us taxpayers and patients).

  34. Englishman
    Posted March 7, 2012 at 2:21 pm | Permalink

    interesting that Mr Redwood mentioned textiles towards the end of his piece. Years ago I used to shop for clothes fairly regularly at Marks and Spencers, but i’m afraid the quality of their menswear has declined so noticeably over the past decade or two that I only buy food from M and S now. The cheaper goods from places like Indonesia, the Phillipines and China are simply lacking the quality that I was used to, and they could at times be plain shoody. Now I save up and buy from upmarket independant outfitters, who generally provide goods made in this country. I wonder if the same problem exists in other fields.

    • Andy
      Posted March 7, 2012 at 10:41 pm | Permalink

      I was in the textile industry, as was my father before me. He would never turn over the whole Mill to producing for M&S (even though they wanted to place more orders) because they were so ruthless should anything go wrong. Eventually something did go wrong, but at another firm who blamed my father for the error, quite wrongly. Although he went to Baker St. to meet M&S they withdrew their business and did not place another order in my father’s lifetime (he died a matter of months after this and was already dying when he went to see M&S). After his death M&S realized they were wrong and the business returned. I say all this because that was why M&S had such high quality – they were fussy and ruthless. The ‘spec’ for even the most simple product ran to pages. The ‘spec’ to make a raincoat or such like garment would run to the length of a decent novel !

      The textile industry has all but disappeared in this country. There is a role for bespoke manufacturers in say digital printing and digital weaving which make small runs of less than a piece (a piece is 60 meters) entirely possible. If we could radically reduce the burden of taxation on small firms that usually do this type of work we could begin a revival in manufacturing. Alas our political elite can only ever think of more taxation, more spending and more borrowing.

      • A Different Simon
        Posted March 8, 2012 at 12:24 pm | Permalink

        My sister lives in Shepshed in Leicestershire which was mentioned in the Domesday book as a centre for woolen goods and textile production .

        Less than 10 years ago one of the factories there used to produce shirts for M&S .

        When M&S offshored production 400 people lost their jobs overnight .

        One of the teachers at my nephews school has lived in the town all his life and can remember when there were 7 factories making socks .

        I try to go out of my way to buy British goods but there are so few of them and they are so hard to find .

        If people were prepared to pay extra for quality we would have a lot more industry in the UK . Companies love buying rubbish too when it comes to information systems and getting cheap labour in from overseas on ICT visas .

  35. REPay
    Posted March 7, 2012 at 3:01 pm | Permalink

    This is an important post. In the past the west had a near monopoly of ideas and energy. We had jobs for low skilled people in factories. Today those jobs have gone or going as pointed out. What hasn’t changed is the political class’s idea that “normal” is a steadily growing economy and an ever faster growing state which competes very effectively with the private sector across swathes of out country…We certainly can’t tax our way to prosperity.

  36. forthurst
    Posted March 7, 2012 at 3:23 pm | Permalink

    It would be preferable if politicians focused on GDP per head rather than GDP per country. Of course the progress of Brazil relative to GB in overall terms is instructive but the focus should still nevertheless be on ‘per capita’.

    Politicians need to ask themselves how to increase GDP per capita; the answer is to encourage those activites that add value and discourage those that do not. This should be relatively easy because most of the activities which politicians currently encourage are designed to destroy added value so all they have to do is to stop doing them.

    Importing people to do jobs that British people could do destroys per capita wealth. Importing people who are a drain on taxpayers, social services, healthcare and the administration of the law destroys wealth. Paying stupid people to breed whilst discouraging others through taxation destroys future wealth creation. Making idleness more remunerative than industry destoys wealth. Forcing people and businesses to pay more for power than technically necessary destroys wealth. Forcing businesses to employ people in order to achieve arbitrary quotas of ‘minorities’ destroys wealth. Paying large numbers of people to interfere in the wealth creating sector with unnecessary red tape destroys wealth. Allowing banksters to predate on businesses and individuals’ life savings destroys wealth. Wasting young people’s youth teaching them worthless Humanities courses whilst their foreign counterparts are mopping up the value adding science and technology courses destroys our wealth in absolute and relative terms.

    This government does have a vision: it is Cultural Marxism; gay marriage etc. None of this adds value, but sows discord as it was designed to do.

  37. David John Wilson
    Posted March 7, 2012 at 3:58 pm | Permalink

    The thing that we should be worrying about is helping companies to increase their cash flow. This means looking at and reducing those charges that hit companies before they receive income for the products that they produce. There are many of these but for example.
    1) Employers NI contributions. These should be got rid of as soonas possible.
    2) Various licences that are needed for a person or company to operate. A lot of these cost more to administer than they collect in revenue. The actual reasons for their existence are lost in the sands of time.

    We can then move onto other problems that hit cash flow.
    3) Late payment of invoices by large companies. There should be a law that requires payment of all invoices within 28 days of the invoice date with automatic high interest charged for late payment.

  38. Derek Emery
    Posted March 7, 2012 at 4:06 pm | Permalink

    A 20% in cut wages or salaries is nothing. EU wages are around 4 times higher than in China and other places for the exactly the same skill levels even including professional level skills.
    New Labours mass immigration policy is now having large effects on wages in the Midlands for unskilled and even some skill jobs. A guy who left Peugeot on its closure trained to repair mobile phones. Originally he was on around £20/hr but now his pay has dropped to around a third because there are plenty of Poles with these skills here today prepared to work for little more than state minimum. Many other jobs have been affected so the chances for ordinary youngsters ever buying their own homes is zero. Many live with parents because they cannot even afford to rent either.
    I know of a Midlands company that is increasing moving work to the rest of the world leaving the UK just as a final assembly area. Now management are training a set of apprentices who have been told their role will be to run production in the rest of the world once they have been trained in all areas. You don’t need to be a genius to see what will happen to production in the UK then.

    When is the state sector going to cut back by 50% to match falling incomes?

    EU wages are not sustainable in the long term and there is no EU barrier high enough that will resist the competitive forces of globalization.

    Only in fairy tales is believable that a set of unelected EU elite politicians and bureaucrats who have never had a job at the sharp end of private enterprise between them could ever put in place measures that will make the EU entrepreneurial enough to compete with the rest of the world for jobs.

    • Bazman
      Posted March 7, 2012 at 7:05 pm | Permalink

      Scarily enough we are in a post manufacturing country, but the idea that our citizens can compete or should on income with Non European countries is not real. The wealth generated by this country should be justly distributed by some means. That does not mean shared with the rest of the world.
      The fairy tale that this distribution of wealth does not matter and equality is a lie will turn into a nightmare. It is communist ideology for the rich.

    • uanime5
      Posted March 7, 2012 at 9:54 pm | Permalink

      The minimum wage in China ranges from $70-200 per month, the minimum wage in Greece is €751.39 or $987.82 per month. So the difference between the minimum wage in China and Greece is to 5-14 fold, not 4 fold. The difference in wages between professionals is far greater.

      Why are you complaining about EU wages being too high when Poles are prepared to work for minimum wage in the UK? If wages in Poland were high the Poles wouldn’t work in the UK for a little as possible.

      Anyway the way to fix the problems caused by non-UK employees undercutting UK employees is to raise minimum wage to a living wage so more people in the UK can afford to work.

      • A Different Simon
        Posted March 8, 2012 at 12:41 pm | Permalink

        “Anyway the way to fix the problems caused by non-UK employees undercutting UK employees is to raise minimum wage to a living wage so more people in the UK can afford to work.”

        I don’t believe you thought about that before you wrote it .

        To support that you would have to have extremely protectionism and be able to replace all imports with locally produced alternative .

        We would in fact have to live in a closed system . With a population of around 70 million on a tiny strip of land I doubt we could even do the food . Certainly one bad harvest and there would be famine .

        The answer is not increasing wages , it’s decreasing the cost of living .

        Now if you can find a way to decrease accomodation costs to a third of what they are today things might start to fall into place .

        • uanime5
          Posted March 8, 2012 at 4:03 pm | Permalink

          No idea why your talking about imports. Give that 75% of the UK’s economy is the services industry and this industry is very difficult to outsource you could easily raise the wages of the lowest paid employees without causing problems. It’s not like Tesco or McDonalds can outsource all their stores to India.

  39. Barbara Stevens
    Posted March 7, 2012 at 5:15 pm | Permalink

    We are not ready for the impact of the likes of Brazil and China, we have less trained people for electrics, plumbers, carpenters, than ever before, through no apprentiships being offered through the byegone years, we are now reaping what they sowed. As for cutting the minimum wage it’s a poverty level as it is and living on it is very difficult. The fact is we have the millstone round this countries neck, called the EU, and until that is off loaded trade will suffer. I’m all for limiting welfare, but we must see and increase in jobs and training made available for people to take up to meet the challenges this country will face. However, to talk about pensions, jobs, welfare and put it all together and then look at the waste of money this country allows. Foreign aid is one. We should not spend money we haven’t got on others, and NO government should do that while their own citizens are found wanting. It is our money after all, but MPs fail to see this when deciding where to spend it. Many have said this time and time again, stop foreign aid altogether until we have our own house in order. We contribute to funds within the EU, and they have given Iceland money from certain loans, yet, they owe us £2 billion from the loss of banks which they have refused to pay back. This is a disgrace when we are cutting money from our own who are on the poverty line themselves. There appears to me a lot of things wrong with the way money, our money, is distributed to the EU and round the world. We are not a poor country at all, its how the money is spent that makes us poor, and all MPs should reflect who spends this money and where? Until we stop fighting wars, which we don’t approve of; keep our money for this country, which we should do; we will always have problems with affording anything for the home front. It is the people of these islands who are made to suffer for the fools we elect time and time again, and their foolish policies. Getting trade will help yes, bring growth, but if MPs keep spending on the things they do, what’s the point?

    • Mark
      Posted March 7, 2012 at 10:38 pm | Permalink

      I don’t think the minimum wage should be about providing sufficient income to make a living. We have the situation that anyone whose work is worth less than the minimum wage is left with no alternative but to claim state benefits to cover the entire cost of their existence. At least if they were permitted to be paid for the value of the work they can do that benefit bill would be less, and in the process they might acquire sufficient skill to justify a higher rate of pay. The minimum wage prices people out of jobs and gaining experience that would enable them to earn rather more.

      Reducing the numbers wholly reliant on benefits allows more generous treatment for those who really need to be cared for by the state, and also makes it easier to reduce the high marginal tax rates that apply currently as benefits are withdrawn.

      • sm
        Posted March 8, 2012 at 10:13 am | Permalink

        Whats your thought on a non means tested citizens income (to replace all benefits & all tax allowances) and tax changes to address the marginal work/effort/incentive issue. I can think of large savings in bureaucracy.

  40. Iain Gill
    Posted March 7, 2012 at 8:07 pm | Permalink

    you have got to guard your intellectual property like gold, you do not import vast migrant workforces and let them learn the secrets and ship them back to their home countries…

  41. lojolondon
    Posted March 7, 2012 at 8:17 pm | Permalink

    It is all down to the EU. Socialist policies on ‘uman rights, worker’s hours and rights and outrageously short-sighted laws make the European economies hopelessly uncompetitive on the world market. As Dan Hannan will tell you, Europe’s share of world GDP has fallen from 25% to 15% in just 15 years, and there is no sign of any turnaround, if anything it will fall faster from now on. And so will the UK’s decline continue, all the way until we leave.

  42. uanime5
    Posted March 7, 2012 at 8:50 pm | Permalink

    Developing countries can only take business away from developed countries because they have lower wage costs. This advantage is short term and once the standard of living in developing countries increase they will lose this advantage. Then they either become change into developed countries or stagnate.

    Interesting how the wealthy in the US and the UK can continue to pay themselves higher and higher wages while the wages of most normal people have no wage growth.

    More high end demand isn’t bad for those who produce brand name good, such as Porche or Chanel, as there are more people who can afford these products. They also cannot be outsourced to low cost manufactures, such as China, without damaging their brand image.

    Finally as these developing countries make the majority of their revenues selling products to developed countries, rather than their own population, it these developed countries can no longer purchase their products the economies of the developing countries will come crashing down.

  43. BobE
    Posted March 7, 2012 at 9:24 pm | Permalink

    Younger women drivers will see the cost of their car insurance rise by hundreds of pounds when new European rules are introduced at the end of this year. This latest ruling stipulates that insurers cannot discriminate on the basis of gender when setting insurance premiums.

    If this government does not veto this there will be one hell of a backlash; This government will lose every female drivers vote at the next election, (3 years away) .

    • uanime5
      Posted March 8, 2012 at 3:51 pm | Permalink

      Given that women have more accidents than men per mile men are the ones who have been getting a raw deal for decades (though men have more accidents overall because they drive more). It’s about time that there was a level playing field between men and women.

  44. Vanessa
    Posted March 7, 2012 at 11:55 pm | Permalink

    The European Union is holding Britain back with over-regulation of everything, government which is too big and which spends our money as if it were confetti. According to the IMF the EU countries will go on shrinking into and, probably, after 2016, contributing no more than 8% down from 12% !!! It is an economic disaster, a political disaster and a democratic disaster. When will you politicians wake up and stop wasting OUR money in your idiotic dreams of world power.

    • uanime5
      Posted March 8, 2012 at 3:52 pm | Permalink

      The EU’s contribution to the world economy is shrinking because other economies are growing so fast, for example the BRICS. The EU is till growing, just much more slowly.

      • lojolondon
        Posted March 8, 2012 at 5:05 pm | Permalink

        OK, all together : OH, NO IT ISN’T!!

        The EU is devaluing, printing money, borrowing and lending, most of the ‘growth’ in the last few years has been based on increased house prices and government spending – that is NOT growth!!

        Brazil has been making more, farming more, mining more, trading more and expanding like crazy. They do not have a socialist system holding them back like we do.

        Leave the EU and watch Britain’s trade deficit fade as we grow in double figures!!

        • uanime5
          Posted March 9, 2012 at 7:52 pm | Permalink

          Neither the EU nor Euro has engaged in devaluing or printing money, which is why Greece is in severe financial difficulties. Perhaps you’re thinking about the UK which has engaged in large scale Qualitative Easing.

          Brazil has a huge number of shanty towns because they have no welfare system and the average family wouldn’t be able to spare £3 to buy a pair of sandals. High GDP does not mean that everyone in the country is wealthy.

          Growth in double figures is a fantasy. Canada, the USA, Japan, Australia, and New Zealand are all outside the EU but they have very little growth. Should the UK leave the EU it will also suffer from low levels of growth.

  45. Lindsay McDougall
    Posted March 8, 2012 at 2:17 am | Permalink

    With the budget coming up, may I change the subject slightly. The government could rid itself of one problem by making child benefit subject to income tax. The benefit would be paid out gross to the woman as at present and the income tax on it would be paid by the higher earner of the couple, usually the man. It would need one extra box and a few supplemenary notes on the income tax form.

    • Vanessa
      Posted March 9, 2012 at 6:03 pm | Permalink

      This is madness. We earn a salary which is ours ! The government takes a HUGE slice in taxes. It then gives some people some of it back in benefits and you are now proposing that from that money, we now have to pay them some of it back again in taxes. God help us if this is not the most complicated and convoluted way of taxing people. Can a government dream up a more difficult and expensive way of managing money??

  46. Steve Cox
    Posted March 8, 2012 at 7:14 am | Permalink

    I was catching up on my Economist magazines recently and came across this interesting article:

    http://www.economist.com/node/21543530

    I was staggered to read this bit:

    Two problems stand out. One is the scale of European public spending. If America is a defence superpower, spending almost as much on defence as the rest of the world combined, Europe is a “lifestyle superpower”, spending more than the rest of the world put together on social protection…

    Well I’d say that sums up the problem nicely. Until we get full control of our social protection costs and are able to start getting better value for money, as well as cutting back the scale and level of benefits and protection in many areas, we will be unable to compete with the emerging economies that have little in the way of social protection. As somebody once put it when discussing whether or not China would bail out the Eurozone, “Why should China, a relatively poor country with no benefits system, bail out Europe, a collection of rich countries that have been bankrupted by their benefits systems?”

    • peter davies
      Posted March 8, 2012 at 10:21 am | Permalink

      Hi Steve

      This comment caught the eye, and as you say sums it up well.

      Europe needs to wake up which is not likely to happen to the UK needs to retain the free trade area and break away from all the other EU imposed shackles.

      The EU may be the biggest trading block now but moving forward that is going to sharply decline and we need to be able to trade and compete freely with the rest of the world.

      Sort out these idiots that hang out in town centres swigging cheap lager whilst most are working and get them doing something useful rather than languishing on benefits!

    • Lindsay McDougall
      Posted March 8, 2012 at 11:55 am | Permalink

      Yes, indeed. Isn’t it obvious?

    • uanime5
      Posted March 8, 2012 at 3:58 pm | Permalink

      Odd that you left out this quote

      “Big governments tend to slow growth, says the World Bank, unless they are as effective as Sweden’s.”

      It seems you can have big government and growth.

      Also why do you want use to compete with emerging economies when our main exports are radically different to the exports produced by emerging economies?

  47. Andrew Duffin
    Posted March 8, 2012 at 9:21 am | Permalink

    Oh, we can earn our living alright.

    What we struggle to do, is earn our living AND pay the outrageous overheads imposed by the Welfare State, rampant bureacracy, vanity projects such as the EU, the Elf n’Safety culture, and so on. Plus keep the bankers in the style they’ve become accustomed to. And of course, the costs of assorted Greenery, global “warming”, etc etc.

    If only we could dump all that baggage, earning our living would be no problem.

  48. Lindsay McDougall
    Posted March 8, 2012 at 12:12 pm | Permalink

    Sorry, but why is this still awaiting moderation? It may be strong meat, it may be off message but it is neither libellous nor illegal. Can it possibly be the a comment legally made in 1968 has suddenly become illegal?

  49. Stephen O
    Posted March 9, 2012 at 10:23 am | Permalink

    It would be a thoroughly good thing if this did spur us to get our own house in order and improve the country’s competitiveness. I suspect instead it will be met with complacency and the feeling it is simply inevitable that the UK will keep being overtaken by other economies.

    Actually, there is much the west and the UK especially can do. Strengths such as lower levels of corruption, strong legal systems, political stability, lower pollution levels, fewer natural disasters, high quality universities have a tendency to be overlooked and underrated. These can be further improved. Weaknesses such as excessive government spending, regulation and debt can be remedied.

    On the other side China, Brazil and India also have their own weaknesses: Stifling bureaucracy in India; Overdependence on the production of raw materials and hence volatile commodity prices in Brazil; and dependence on cheap labour as a competitive advantage, while suffer very high levels of wage inflation in China. Let’s not forget that those countries with economies larger than ours include Japan and Germany with their declining populations and in Japan’s case high debt and an economy which has seen little growth for decades.

    If the UK could bring its debt, regulatory burden, government spending levels and taxes down, while improving schools, universities and infrastructure, it could improve its place in this list over the years to come. Not easy, but not hopelessly impossible either. A great start would be to have a ‘management team’ who it actually were trying to get this done in a hurry.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

    Promoted by David Edmonds on behalf of John Redwood both of 30 Rose Street Wokingham RG40 1XU

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