If your initial diagnosis is wrong then so too will your cures:
As a share of our total economic output, manufacturing fell from 27 per cent in 1970, and 17.4 per cent in 1990, to less than 10 per cent today. As production shifted to Asia, manufacturing declined across all Western economies, but nowhere as severely as in Britain. In America, Germany, Italy and France manufacturing plays a bigger role in the economy than here.
The result is fewer productive and well-paid jobs, and in particular fewer such jobs in the regions outside the south-east of England.
Sure, manufacturing output is a smaller share of the economy. But not because manufacturing has shrunk, because it hasn’t. It’s only a few percent off highest output ever. Other output has grown more, that’s all.
It’s also not true that manufacturing is lots of high paid employment any more. Precisely because it is easier to increase productivity in that sector than in services. This means that for any given level of output we require fewer people doing it over time.
What is actually happening here is that manufacturing is becoming like agriculture. A few percentage points of the economy, employing a few percentage points of the labour force, but still providing all the food/manufactures we desire.
We need a truly radical change to this economic model. Without it, there can be no levelling up, no great improvements in productivity or pay, and we will not make the most of Brexit. Such change will require us to smash shibboleths. Ever freer trade with developing economies may not work as the conventional wisdom assumes. Aggregate demand matters. And Brexit – supposedly a danger to our wellbeing – may well help us. Already supply chains are reforming and European imports are down.
This is not about bringing back the industries of the past, but building the industries of the present and future.
The industries of the future aren’t manufacturing ones. But Tomthy would have us design the economy to try to capture those industries in manufacturing which don’t arise. Not going to work, is it?