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.