Why must there be manufacturing?

The fact is that any country, if it wants to remain strong, must have a manufacturing base.

Why?

Yes, I know it\’s an oft stated point. I also get the point about defense. But other than that I can\’t think of any reason why this statement is true.

Anyone?

28 thoughts on “Why must there be manufacturing?”

  1. A stable source of export revenues is required.

    Tim adds: Given that manufacturing is more volatile along the economic cycle than services are this would argue against a manufacturing base, no?

  2. So Much For Subtlety

    Let me try it.

    Services often do not vary in quality from country to country. A haircut in India is much the same as a haircut in Nigeria, which is much the same as a haircut in France or in Britain (well, OK, obviously not, but work with me here).

    Haircuts in Britain are more expensive than haircuts in Nigeria because of other lines of work.

    However a farmer in Britain who feeds hundreds if not thousands is inherently more productive than a farmer in Nigeria who feeds dozens, if that. The same with the factory worker who produces hundreds of cars or thousands of i-Pads.

    Thus the cost of services like haircuts depends on the existence of people like the car workers. If we have none of them, what is to stop some bad event that would push down British wages to Nigerian levels?

    It is not quite right as an argument but there is a point in there somewhere. I am just not sure where. Has any country got wealthy on services alone? Hong Kong perhaps.

  3. Because I’m sitting in a house made of stuff, with lots of stuff in it, typing this on a computer, eating my breakfast, using electricity to do all of it. All of which requires manufactured products, either as final consumption (my toast) or as a part of the production process (coal mining equipment to get coal to generate electricity). And all that goes for every single person in the country. So if every manufactured thing had to be imported, how would we pay for it? Foreigners don’t give stuff away for free. We would need some wonderful massively in demand service to sell to the world, that no one else could provide, or some piece of fantastic knowledge that we can sell, repeatedly, without devaluing it somehow. And all 60m of us would have to be fed, watered, housed and warmed by the fruits of it. Has any large nation ever survived in such a way?

  4. All, frankly, you need to do is to own (a sufficient proportion of) the companies that do the manufacturing. That way, the revenue comes in to your economy which allows you to spend locally, on services, local specialities and the limited number of things that don’t travel very well and to import things which are made abroad.

    The defence argument is regularly made but, frankly, is bollocks. If a then British company can refuse to provide details of its products which it had sold to a country that had invaded a British dependency …

    The proposition relies on a country being in a nation-threatening war for sufficiently long to tool-up the factories (10 years it is going to take us to build these carriers? And we can’t build the aircraft ourselves anyway), where all of your allies refuse to re-supply you.

    I can see where having supplies of raw materials, energy and food can improve your national security but none of these are “manufacturing” in the “Thatcher destroyed* British manufacturing” meme.

    * She didn’t.

  5. Its complete bollocks. Australia has no serious manufacturing industry and has has one of the strongest economies. Yes it has been driven by the mining boom but it also has significant competitive advantages in agriculture and tourism (although the strong dollar has hurt them a little).

    When the mining boom ends and the dollar falls to more appropriate levels then both agriculture and tourism would be highly comptetive.

    Interesting that an economy such as Australia can have a very strong primary industry and very strong tertiary industry and very litte by way of secondary industry (manufacturing) and yet has one of the highest standards of living in the OECD.

    Of course the UK lacks abundant natural resources but has a massive competitive advantage in the service sector and also in some very key high tech manufacturing industries such as aviation and formula one.

    People who want to return to the dark satanic mills are basically idiots.

  6. To take the specific example of the linked article – Sparkfun. I have an idea and a design. Sparkfun build it for me for $10 per item, ship it for a $1 and I sell it, from the UK, for £20 + p&p.

    If my idea is good enough and my design suitable, I may be able to do well myself and support a reasonably sized manufacturing business, without doing any manufacturing.

    See, for example, Tim’s analyses on Forbes of the relative profit share of iPhones between the US non-manufacturer and the Chinese manufacturer.

  7. In the end it’s all down to the market. If the UK can have a competitive industrial sector, and there’s no reason why not, then we will have one.

  8. Isn’t the problem here the implicit assertion in the quote that manufacturing must be the dominant factor.

    Rewriting is as
    “The fact is that any country, if it wants to remain strong, must have a diverse mix of economc activity to help offset sector specific shocks.”
    Not going to get those column inches with that though.

  9. Britain does have a manufacturing base. A large one. A successful one. It just doesn’t need many unskilled workers compared with the incompetent dirty manufacturing base we “lost” in the 1970s onwards.

    Shortly before the financial crash, Britain’s manufacturing sector produced the most (by value) *stuff* in history.

    So, whoever peddles this week’s incarnation of wasn’t-it-nice-when-the-state-built-Allegros is talking shite.

  10. Blue Eyes,

    Britain does have a manufacturing base. A large one. A successful one. It just doesn’t need many unskilled workers compared with the incompetent dirty manufacturing base we “lost” in the 1970s onwards.,/i>

    Quite. You get talk of the hallowed Rolls-Royce, but they’re really closer to Morgan or Ferrari than British Leyland in terms of the level of skill and volume of production.

    There will be less manufacturing jobs in China soon, because it’s starting to look like robots are a better investment.

  11. I was really quite surprised reading a piece on Chinese manufacturing the other day of the extent to which yer iPhone is still glued together by semi-skilled (not much learning, but bloody fast and bloody accurate) workers, doing all of the easily-automatable things that would be automated in non-Asian factories.

    This will certainly change.

  12. @Tim Almond #17

    “Quite. You get talk of the hallowed Rolls-Royce, but they’re really closer to Morgan or Ferrari than British Leyland in terms of the level of skill and volume of production.”

    When talking about RR with respect to manufacturing, it is always a good idea to specify which you are talking about.

    Rolls Royce plc is a major manufacturer. They have a £62.2bn order book and an underlying profit of £1.2bn.
    – the bulk of their manufacturing is turbines. Hardly a small enterprise.

    Rolls Royce motors is a small subsidiary of BMW, akin to Ferrari.

    Just pointing out. 😉

  13. Oh come on folks, you know why every country has to have a manufacturing base of the hard labour, little brainpower variety. It’s to give employment to fik male yoof.

  14. Frances Coppola – “Oh come on folks, you know why every country has to have a manufacturing base of the hard labour, little brainpower variety. It’s to give employment to fik male yoof.”

    Isn’t that why we want small scale peasant farming? I assume we want manufacturing so that urban sophisticates mainly of the Leftist sort can wax nostalgic about their grandfather’s life and what a morally improving life it was to walk to school six miles every day.

  15. Is it a certain rule that the UK will ‘remain’ strong.
    Wont the tribal influx eventually take over the ‘bread and circuses’?
    Rome?

  16. Rolls Royce plc is a major manufacturer. They have a £62.2bn order book and an underlying profit of £1.2bn.
    – the bulk of their manufacturing is turbines. Hardly a small enterprise.

    Rolls Royce motors is a small subsidiary of BMW, akin to Ferrari.

    Just pointing out.

    And if you’d read my comment properly, you’d see I make no reference to their financial size, but their level of skill and volume of production. Unless you think Rolls-Royce are producing as many aircraft engines as Foxconn produces phones.

    Just pointing out…

  17. Frances

    Fair point -but it’s worth pointing out that Left wingers (including feminists, who have a very powerful influence on the curriculum) have controlled education for five decades, during which time the UK system has collapsed to amongst the worst in the known world. Other countries whose culture is less feminised (South Korea, PR China) manage to trounce the UK in terms of educational standards, and maintain significant manufacturing capabilities….

  18. With Ed Miliband and Richard Murphy/ Owen Jones on the way in 2015, we’ll see how effective an economy whose primary export, Financial Services, has decamped to Switzerland, is able, when all it produces are ‘services’ like ‘global warming advice’, ‘LGBT awareness training’ and ‘Diversity co-ordination’ to pay its way in the modern world.

    Might make people think again about disparaging what is a complex sector…..

  19. Isn’t even Rolls Royce plc increasingly a service company these days?

    Less about selling engines so much as engine hours.

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