I refute Wilkinson and Pickett thusly

Margaret Thatcher made Britain a less, not more, desirable place to do business


If that were true then there would have been a flood of capital out of the country trying to do business elsewhere then.

As it is, we\’ve been running a trade deficit just about every year since Thatcher came to power. Which means, as all know, that we must have been running a capital surplus. That is, more foreigners have sent more foreign money here to do business than Brits have sent money out to in foreign.

It may well be that Wilkinson and Pickett believe that Britain is now a worse place to do business. It\’s just that all the people with the money seem to disagree.

17 thoughts on “I refute Wilkinson and Pickett thusly”

  1. Surreptitious Evil

    Sighs …

    It is an accounting identity. The books balance – if we’re paying out more than we’re being paid in – a trade deficit – then the money must come from somewhere.

    Which is foreign investment of some sort or another.

  2. Dinero, that’s only possible because the currency is so strong — otherwise it should drop and eventually you’ll start making things at home again. Why didn’t the currency drop? Because more foreigners want GBP more than UK citizens want their currency.

  3. >SE a country could have zero domestic buisiness and no foreign investment and the trade deficit would be 100% total deficit. The money comes from the domestic currency.

    agreed . exchange rates balance goods and capital flows.

  4. Surreptitious Evil

    Foreigners buying sterling is just the same as foreigners buying assets for which they pay in sterling or in a currency convertable to sterling.

  5. Exporters get paid in there own currency, the sterling doesn’t leave british banks. When exporters do take sterling deposits they are not buying assets here as the trade deficit shows. So Tim must have overlooked that. What is building up is future claims on British assets.

  6. “Margaret Thatcher made Britain a less, not more, desirable place to do business”

    Many of the comparisons between then and now overlook one significant change that the Thatcher government made immediately, that at a stroke made it much, much easier for Britain to recover its status as a big international trading economy. In 1939, the Government imposed exchange controls. Those lasted until 1979: 40 years of begging permission, on the right forms, from the Treasury to do anything internationally (including taking money abroad to look things over). Even the tiniest transaction involving currency exchange was subject to exchange control. The war had ended in 1945. Over 30 years of wretched bureaucracy limiting trade and finance.

    Hattersley (I think it was) wanted to re-impose them.

  7. what proportion of capital inflows represent actual ‘investment’ (r&d, new plant etc?) versus cheap credit to buy stuff? or am i mixing apples and oranges?

  8. The success of a country is measured in how important the trade union leaders are. Their input into the requirements of the working classes is of utmost importance.

    Given that trade union officials are less important now, she failed!

    Good! We need more failure like that!

  9. What roym said – and how much is foreigns buying shares in UK companies (or whole companies) without actually investing in underlying business? I suppose that is fine if we are creating companies as fast as we sell them?

    Or am I confused?

  10. “Or am I confused?”

    If a foreigner invests in the underlying business, it will involve spreading money around various places in exchange for goods and services.

    If someone sells a company to a foreigner, then that will involve lots of money to one person.

    What’s the difference?

  11. Roym: “what proportion of capital inflows represent actual ‘investment’ (r&d, new plant etc?) versus cheap credit to buy stuff?”

    I’m sure we all have our own ideas about what is useful and what isn’t. The point of using a market rather than a minister is that one person doesn’t get to impose those views, and what is useful is defined by what everyone actually wants.

  12. Luke,

    Whether a foreigner buys shares or invests directly matters little. In the former case the domestic former owners then have cash to spend (invest) in the latter there is no intermediate step.

    There are some arguments about the desirability of domestic ownership – HQ jobs for example, but in the greater scheme of things, it is minor and almost certainly outweighed by the desirability of free capital flows – not to mention the generally pretty poor way in which UK manufacturing management operated – the UK car industry is wonderful when not run by Brits (or more specifically by the UK government).

  13. @ #11 Luke
    Yes, there has been a lot of buying UK companies by foreigners but surely that just proves that they believe that Mrs Thatcher made Britain a more desirable place to do business?

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