Well Bob, Larry\’s not quite right

Bob Piper picks up on this:

The Treasury has always been at its most comfortable counting the candle ends: by rescinding this loan ministers have shown that the blinkered, short-termist, anti-industry mind set of the 1980s is back with a vengeance.

That 1980s anti-industry mindset is usefully illustrated by this chart of industrial output.

Manufacturing output at the end of the 80s was some 20% higher than it was at the beginning of the 80s.

Using 2005 as 100 (it is an index, after all) manufacturing output was 77.2 in 1980 and 93.3 in 1990.

Note that this is manufacturing and does not include either oil or mining.

Some \”anti-industry\” action definitely going on there then.

5 thoughts on “Well Bob, Larry\’s not quite right”

  1. Simple rule of thumb for Bob:

    If the government has to loan something money that means the banks won’t. If the banks won’t lend something money then there is a very good chance it’s a bad business proposition.

    Now, having resolved that problem all one has to ask oneself is: Should a custodian of public money be lending it out to bad business propositions?

  2. The only reason that i know of for goverments to loan money to businesses (out of a recession), is if they are key industries.

    By that i mean it’s a good idea to be able to produce our own metal for our own tanks.

  3. @The Remittance Man
    “If the banks won’t lend something money then there is a very good chance it’s a bad business proposition.”
    Or they only have limited funds and prefer to lend money for mortgages backed by inflated asset prices.
    In the 10 years up to 2007, 75% of bank lending was on mortgages and real estate. Only 3% went on loans to manufacturing industry. (Source: Dispatches C4 14 June 2010).

  4. “Manufacturing output at the end of the 80s was some 20% higher than it was at the beginning of the 80s.”

    But what was manufacturing output as a proportion of GDP? That is the more relevant statistic.

    Tim adds: err, no, it’s not. If you want to look at whether manufacturing has grown or shrunk then you should look at the actual figures for manufacturing. Have they risen or fallen?

    To look at is as a portion of GDP is an error: for example, has agricultural output risen since 1900? Has it risen or fallen as a portion of GDP? See what a difference that makes? For of course both agricultureal and manufacturing output can continue to rise while still shrinking as a portion of GDP….all that is required is that the not agriculture and not manufacturing parts of GDP grow faster. As they have done.

    To say that manufacturing must stay steady as a percentage of GDP would be to make the same error as saying that agriculture should. Why, when they have been falling as a portion of the economy absolutely everywhere? Indeed, agriculture falling as a percentage of GDP is what makes civilisation itself possible.

  5. Timmy: “all that is required is that the not agriculture and not manufacturing parts of GDP grow faster”

    ERR NO!!!!
    If you take that line then you will end up arguing that economic growth can continue with an ever decreasing productive sector (agriculture, mining, manufacturing etc.) until none is left and only service industries remain. I thought that line of zombie economic thinking had been debunked for good in the 1980s. Or is David Cameron not alone in dreaming of Audi Quattros?

    Agriculture and manufacturing (including mining) are the productive parts of the economy. They provide the wealth that the service sector, both private and public (i.e. Govt), then recycle. It’s all part of the multiplier effect, but at its heart you need something to multiply that is non-zero otherwise all you get is zero.

    The critical dividing line in the economy is, therefore, not between the public sector and the private sector as some of your friends at the ASI appear to believe. It is between the service sector (public and private) and the productive sector (public and private). That productive sector includes agriculture, manufacturing, commodities and anything that brings in foreign currency.

    As recent events clearly indicate that we cannot base our entire economy on financial services, and as mining and agriculture are in terminal decline in this country, it is left to manufacturing to take up the strain. Otherwise we will end up living on credit. That is unsustainable. So we will only rebalance our economy and achieve a current account surplus when we manufacture and export more AS A PROPORTION OF GDP!

    tim adds: Sorry, not getting this division of “productive” and not productive activities. You’ll have to explain further. From where I sit it looks like gibberish so far.

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