Apparently Dominic Lawson reads The Register

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.

3 thoughts on “Apparently Dominic Lawson reads The Register”

  1. Certainly financial & sevices are doing better than average for the british economy & that this brings up the average which industry is underperforming. However if industry was doing better it would bring uop the averahe closer to the world average of 5% growth. Perhaps we could even aspire to being better than average.

    Manufacturing is held back more by energy prices & elfin safety regulations & others than office work which is why manufacturing is underperforming. Electricity prices & regulation are, of course, entirely controlled & massively increased by government fiat which is why manufacturing is doing co,[paratively poorly.

    We could achieve world class economic growth any time we ended this government parasitism.

  2. Neil Craig:

    You’re right. Quite a few of the things that combine to give one place a “comparative advantage” over another are environmental features such as climate, soil fertility, access to transportation and markets, etc. But nothing is really more important than the social and moral environment: it can almost make up for the lack of other, merely physical features and, conversely,
    negate entirely almost any advantage which might have been conferred physically.

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