Should we be making more things? Part 2

27 03 2009

Having looked at one of the wrong arguments against reindustrialisation let us now look at one which does have some substance.

A global division of labour is a good thing. It makes more sense because of the economies of scale to focus production of cars in large factories located in a few countries rather than a myriad of small ones dotted around the world.  Some countries are rich in raw materials and therefore focus on mining. Others, such as Finland, focus on niche technologies. The alternative,which would be for each country to try to make everything it needed, is a kind of autarky last tried unsuccessfully by the Soviet Union and makes no sense.

What each country brings to the world market can change and evolve. We have seen this most recently in the way that China has rapidly become a leading producer of consumer goods for export. However it is also true that a country’s speciality can be surprisingly persistent. Take Holland and the diamond trade. Holland’s leading role in diamond trading began in the 16th century and flourished when Holland was a global power. Yet despite the fact that Holland lost its global status centuries ago, it remains the centre for diamond trading. In World War Two the trade was largely destroyed by the Nazis but even so it was revived after the war was over.

The UK’s speciality over the past ten years has become financial and business services while its manufacturing base has played a relatively less important role. There is nothing wrong with this in principle, as long as we have something to exchange on the world markets.  Enterprises which make things generally speaking produce new value. Service industries generally speaking do not. They take a share of the value produced elsewhere. As long as we can exchange our services with countries that produce value then we can legitimately take a share of the value they create and consume it ourselves. An analogy would be a car maker using part of his wages to pay a hairdresser.

In the UK we have two problems. Firstly, most services are easy to move, certainly easier than large scale manufacturing. The loss of belief in UK bankers knowing what they are doing may lead to new global financial centres opening up. Or it may not. The kind of inertia which has preserved the Dutch diamond trade may apply to the financial services sector in the UK.

However we have a second problem. It seems pretty certain that financial services as a sector is not going to come back after the recession to the size and dynamism that it had before. That is why we need to look for other engines for the economy even if we do not lose our financial services expertise elsewhere.

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5 responses

27 03 2009
Rob Clowes

Isn’t there something fundamentally uninspiring about doing the car workers hair, or taking in other people’s washing, or attempting to refloat the busted flush of the financial services (to mix metaphors)? It also seems that this is the current governments bet to, restart the housing boom at any cost and whatever happens don’t screw-up the city, is a bit to close the hopeful reliance on financial and business services this article seems to be advocating. While this might be a holding strategy it seems as likely to dig us further into a hole as dig us out and moreover seems to have an air of desperation about it.

Britain is still a world leader in certain scientific disciplines, elements of the design / architectural profession and even has (had) a little highly productive and innovative manufacturing. Isn’t it time to trying to invest in this with a view to putting this to work, rather than banking all on … well … the banks?

The financial services of the city may well survive and perhaps, just perhaps, even and as world leaders (although surely at some point China will start developing its own financial services sector) but relying on this to get us out of the crisis seems more like desperation than pragmatic optimism.

As I think you’ve argued elsewhere we need inspiring, game changing ways out of the crisis and the financial services root just looks like an implausible way back.

27 03 2009
Strategist

“despite the fact that Holland lost its global status centuries ago, it remains the centre for diamond trading”

Actually it’s Antwerp, which is in Flanders, Belgium.
http://www.jeremyjosephs.com/diamonds.htm

27 03 2009
david tonge

In twenty years time, we will for economical, logistical and dare I say ecological reasons not want to be shipping TVs and Mobile phones designed in the UK and US, from China back to here. As a designer who has spent the last 20+ years on a plane first from London then from San Francisco to Asia, only to have the fruits of my labours shipped back, I can tell you there is no future in this.

As Rob suggested we need something radical. The current ways will not work in the long term but for the next 10-20 years I don’t see a change as long as manufacturers and retailers want to leverage cheap disposable products from other parts of the world, and as long as we continue to salivate over them and not want to change our comfortable lives.

We need to go back to being a nation of shop keepers, local makers and crafts people. These sounds backwards, but it IS the future for this country. Nor does it mean, with localised rapid prototyping / manufacturing techniques, wiki- community lead R&D research that we will not still be able to enjoy the latest and greatest gizmos we have all come to love and can’t live without. We can but in a radical new way.

If as a nation we are not using our hands to make things, instead of just waving them like the bunch of consultants we have become, there is no future. Real people need to be active and need to see the fruits of their labours, not only does this give them satisfaction it will in the end help us to get out of this planetary mess.

If there is anyone brave enough, it can be done.

29 03 2009
Robert Hennecke

Pharmaceucticals have aparently been overlooked in the argument against manufacturing. The perception of Manufacturing seems to be psychologically limited to beefy guys welding, riveting and hammering away at metal objects. In reality it is the production of someone`s vision of physical objects to whatever end either good or bad and preferably in serial production to employ the most people possible. It is the transformation of a vision and maybe it is a misunderstanding that prevents people from realizing the true vitality of the challenge of making something that isn`t guaranteed to work and pulling it off. Better than that is to succeed at a project beyond expectations and literally having an impact beyond the reasonable expectations of the founder and or inventors.

Take Mr. Dyson as an example, a living breathing U.K. example of what can be achieved, I doubt any of the 1200 people who work for him would question the wisdom of manufacturing in the U.K. or in general.

Research and development
Researching and developing new products and technology that work better is at the core of Dyson, all of which is carried out at the Dyson Research and Development Centre in Malmesbury, Wiltshire, UK.

1,200 people work at Dyson in Wiltshire, one third of employees are engineers and scientists who design, develop and engineer all new Dyson products & technology, as well as challenge and develop existing technologies. Dyson has almost 1000 patents and patent applications for over 150 different inventions.

The future
Dyson launched in the US in 2002, since then Dyson has gained over 20.7% by value of the US upright vacuum cleaner market in 2 years (NPD Houseworld 2004). Dyson remains committed to the development of new products that work better. In 2004, the company’s pre-tax profit came to £102m, more than double the figure for 2003. Dyson’s engineers and scientists are working on many other new technologies to solve problems in the home. Dyson’s investment into research and development in 2004 was £40m, this is set to increase to £50m in 2005.

Robert Hennecke.

29 03 2009
Robert Hennecke

I really think the Dyson example is valid and he should be made a sir/knight as just about every actor or singer is and that sends the message that making things doesn`t really matter in the overall scheme of things but become an actor or singer and you are heaped with praise but it couldn`t have been easy for him to get his act together and he is making a positive impact on the U.K. R.H.

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