From his Independent column today:
I can understand why the Prime Minister should tell an audience of Yorkshire industrialists that they are the unjustly neglected sector of British industry – it won him a grand ovation. But there is a danger that in so doing, he is perpetuating a form of conventional wisdom that borders on myth. As that formidable economist* Tim Worstall points out, the official Index of Production shows that, in real terms, the value of our industrial output is more than twice what it was in the 1950s, when, as he puts it, \”absolutely everyone, to hear the stories told, was gainfully employed making whippet flanges\”.
It is true that the manufacturing industry has been steadily declining – more rapidly under New Labour than Margaret Thatcher, as it happens – relative to other sectors of the economy, but that is a function of the great success of our service and financial industries over a sustained period, rather than any absolute decline in manufacturing output. It is also true that employment in manufacturing has shrunk, even as its output has increased, but as Worstall observes: \”This is another way of saying that we\’ve got rising productivity, and as Paul Krugman, the Nobel Prize-winning lefty economist is known to point out, productivity isn\’t everything, but in the long run it\’s almost everything.\”
The original is here.
And it wouldn\’t be Timmy without some pendantry:
Yet all nations, as Adam Smith observed, do best by concentrating on industries in which they have a competitive advantage.
While Smith does mention it (grapes, wine, Scotland and Bourdeaux is his example) the complete working out of the idea we usually attribute to Ricardo.
* Yes, I have emailed pointing out that I\’m not an economist, only an interested amateur.