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Money v Making Stuff-Should Britain bid farewell to the golden egg of banking.
Jeremy Bosk
Posted: 23 June 2011 11:06:31(UTC)

Joined: 09/06/2010(UTC)
Posts: 1,316

Still on life support

Well said.

While banks are necessary, the magnitude of their excesses in foolish lending, badly judged investments and grotesquely inflated pay to the bosses is not. Even though some greed and stupidity is part of the human condition as ICD reminds us.

Banks were not the only source of finance to early engineers. Roman roads and aqueducts were built by the legions paid for by the state from taxation or gold mined by the forced labour of enslaved criminals and prisoners of war. In mediaeval times public works were done by unpaid serfs as part of their feudal duties. In early modern times rich aristocrats or retired businessmen would function as business angels and venture capitalists do nowadays. And let us not forget the legal structures of partnerships and joint stock companies which define modern capitalism. Rolls-Royce has shareholders.

Generally speaking, banks and shareholders are preferable to slavery and serfdom.
Still on life support
Posted: 23 June 2011 12:15:58(UTC)

Joined: 27/09/2010(UTC)
Posts: 52

Completely agree with your last statement Jeremy

By the way, RR has £3.9bn in share capital and £5bn in loans and bonds financing their operations. Biggest shareholders are fund managers Invesco, Blackrock etc, biggest bonddholders are Credit Suisse. Great company, funded by financial services and banks, hopefully not foolish lending and badly judged investing...




Dr Jimbo
Posted: 23 June 2011 13:41:17(UTC)

Joined: 10/06/2010(UTC)
Posts: 21

This is now a very long thread and there are many interesting observations - here are mine

Re Evan Davies recent TV programme:The UK has indeed produced some marvellous machinery but is this relevant when the economy is really about ordinary people buying ordinary products at prices they can afford. The real issue is that engineering in the UK has long since become a forgotten profession with poor status and limited prospects.

Like engineeringtony I too worked at Rolls Royce on Olympus and Avon and their long forgotten rocket engines; and before that on aero engines made by Bristol Siddeley. I also worked in the car components industry and in agricultural engineering and did research at university leading to quieter vehicles. But I ended up in the computer industry and eventually became an independent management consultant after another stint at British Aerospace. Why? What was wrong with engineering?

The problem was that engineering was a poorly-paid profession - and in the early 1960's a dangerous one too. The far east sweat shops we see on TV now, were alive and well back then in Coventry, Birmingham, Bradford, Manchester - in fact everywhere where manufacturing was a major employer. Many factories of the early 1960's suffered from chronic underinvestment. Machinery was old, a good deal of it pre-war vintage. Working conditions and poor pay sowed discontent.

The term "engineer" was used to describe someone in a soiled blue boiler suit with dirty hands. It was not a description of a highly educated and respected professional. In Germany, in contrast, a fully qualified engineer was called "Doctor Engineer" and had a respected status above many other professions and was rewarded accordingly.

This was at the nub of the gradual decline of manufacturing in the UK. It was much easier to make money as an estate agent, car salesman, insurance man etc and you didn't need a degree. If you did have a degree you went into law, politics, media, accounting, banking - the service industry. There you could make a fortune, you wore a suit and had longer holidays.

I left the aerospace industry and went into central government at a time when the motor industry was dying. A dedicated division of the DTI was set up to manage British Leyland and find ways to keep it afloat. Another division looked after Chrysler. The division I joined looked after all the others and our job was to find ways to prop up failing companies with government (ie taxpayer's) money within the Selective Financial Assistance Rules laid down by Brussels. As it happened, I was the only engineer in the administrative hierarchy of this part of the DTI, most of the rest of the senior staff had humanities degrees. Engineering was not regarded in government as an ideal background for administrative office.

Jim Callaghan was very pleased when we found a way to help Ford build their factory at Bridgend. (The welsh coal mines were closing so we could give asistance and it was his constituency). We had to be more generous than the Spanish - who later got the Valencia Plant anyway - and the Dutch amongst others. Giving taxpayer's money away was an internationally competitive business. It seems it still is!

That was then; but giving taxpayer's money away to support engineering in the UK was and remains endemic in several branches of British Industry. The Nuclear Industry relies on it under the thin veil of green energy, yet its origins lie in the nuclear power needs of the military. Until cost-plus contracting was ended in the late 1980's, the defence industry in all its guises relied on it to provide an 8-13% profit margin on all development work it carried out. High-end engineering in electronics and aerospace was supported whilst the companies involved in it went offshore and sold their wares in exchange for oil or whatever else would suit the politics of the day. But when Brussles made competitive tendering more difficult to avoid swathes of the defence industry closed down. They were structurally uncompetitive. The Export Credit Guarantee Department was another government device to provide cheap contract insurance to the defence sector.

BAE Systems meanwhile had secured The Al-Yamamah arms for oil contract which was and remains the largest such contract and remains in operation today providing 600,000 barrels oil per day.

This type of engineering may be at the pinnacle of excellence but it carries a huge price. The products are so expensive they can only be purchased by governments and some of these are unpleasant. We can exchange aerospace defence products for oil but then we are locked into a dependency we cannot easily break. Where is the civil spinoff from these activities?

Evan Davies marvelled at the Maclaren car. But this too is a niche product for the few very rich. The F1 designers are a sideshow in GDP terms however top-end their engineering may be. This type of product does not relate to the application of engineering on a broad base to meet the needs of ordinary people any more than does the Typhoon strike fighter. The UK car industry is now dominated by offshore companies who are investing in a market that mainly assembles its products using our skilled labour.

In short, we have no broadly based engineering infrastructure that encourages new entrants into it and it would take a generation to build it even if we diverted money from the Eurofighter to pay for it. Much of this has been due to the attitudes of the political elite and the stupidity of government at all levels. The something for nothing society is now reaping its just reward because the service industry is just as vulnerable to the type of change we have seen in manufacturing over the last 50 years.

My question is what happens when the Euro Crisis blows up and the service economy strangles itself to death?.




Jeremy Bosk
Posted: 23 June 2011 15:52:16(UTC)

Joined: 09/06/2010(UTC)
Posts: 1,316

Dr Jimbo

I don't think the EURO is going to make much difference whether it survives or not.

If it collapses, individual currencies will be able to set their own interest rates which will make some aspects of economic management easier. Their currencies will mainly depreciate and their citizens will revert to saving in DM or gold as was their custom. International trade will be in either dollars as it mostly is now or in the revived DM. Everything will cost a little more because of foreign exchange risk within the zone and increased transaction costs.

If it survives there will have to be large transfers of capital from richer countries to poorer or continued emigration from the poorer. Governance standards will be gradually improved in Greece and the other corrupt and incompetently managed countries as a condition of the transfers. The free trade zone will survive whether or no the curency.

The service industry will, like manufacturing and production based industries, have to learn to cope with competition from overseas. If we do not drastically improve our performance through education, training, better management and saner politics we will find ourselves forced to emigrate or live in ever increasing misery and squalor as living standards even up throughout the world.

Personally I need the NHS and decent public transport. I am too old and sick to start again in a new country and my French has barely been tested since my 1965 O-Level.
Dr Jimbo
Posted: 23 June 2011 17:10:41(UTC)

Joined: 10/06/2010(UTC)
Posts: 21

Jeremy

You may be right about the eventual effect of a Euro blow up but we do not have the luxury of responding over the long-term.

The service economy in all its forms at its current level is unaffordable. We cannot balance the country's books on this basis for much longer. Financial services may well play their part but we have become a slave to the idea that we can buy everything we need. We cannot. We cannot buy a stable social infrastructure by importing cheap labour, nor can we afford to be a world policeman. We cannot borrow from tomorrow and never pay our dues. Eventually the model fails and we have anarchy.

We need to switch service economy resources into activities that directly substitute the need for physical imports. I disagree that we should concentrate on creating high value-added outputs using local cheap materials and local skills to compete on a global basis - as Evan Davies suggests. Instead we need to start re-building a social infrastructure in the UK that recognizes practical cleverness rather then intellectual brightness. We can call it engineering but now this encompasses multiple disciplines. Medical advances using electronics, imaging, molecular design and so on are being drawn together as one. This is 21st Century engineering. The complicated is getting more complicated.

History teaches us that no country can remain at the forefront of the rest for long, whatever its initial advantage. Evan's formula is bound to fail. And the cycle is speeding up. The financial crisis in the West shows how vulnerable we really are. Its about time Government invested in some practical imaginative thinking - but that might mean involving engineers and their technology in policy making.

Would you bet on it?
Jeremy Bosk
Posted: 23 June 2011 18:39:50(UTC)

Joined: 09/06/2010(UTC)
Posts: 1,316

Dr Jimbo

I am all for praxis - the marriage of theory and practice. There is nothing wrong with intellectual cleverness and many, probably most practical engineers possess it. We should strive mightily to end what the civil servant and novelist CP Snow called the Two Cultures, arts versus science and engineering. Architects and industrial designers certainly manage the fusion. Leonardo da Vinci, the original renaissance man certainly managed it. Did you ever read or see on television Dr Jacob Bronowski's Ascent of Man? It was a brilliant exposition of cultural development throughout our time on this planet and how science, engineering and all the arts have developed alongside each other and usually in collaboration.

I know two PhD's in chemistry / pharmacology, both once active researchers, who are deeply appreciative and knowledgeable of modern literature and classical music. One is still in the industry, the other took an MRes to improve her statistical skills and moved into academic epidemiology. Another moved into another branch of statistics, worked as a counsellor for the Samaritans and has an enormous general knowledge. I know a librarian who took a part-time HNC in Computing so she could learn to rewrite and subsequently vastly improve the library database system. Another librarian with a degree in English and music plus post graduate librarianship is a dab hand with a soldering iron and has built pc's and ham radios. She now leads a band and a choir and teaches life drawing. It is quite possible to bridge the divide. In my younger days I built from scratch a pine bed, window frames, a door and kitchen furniture. Which I mention for fear you might be classifying me as intellectually clever but not practically clever.
Dr Jimbo
Posted: 23 June 2011 19:30:15(UTC)

Joined: 10/06/2010(UTC)
Posts: 21

Jeremy,

I had no intention of classsifying you in any way at all. I was just suggesting that the smart application of engineering in relation to physical outputs useful to a local population is what we need more of.
ICD
Posted: 24 June 2011 09:12:58(UTC)

Joined: 12/01/2010(UTC)
Posts: 31

I am a bit busy with matters of everyday life, but still snatching a look at this interesting thread. I totally agree with Dr Jimbo’s comments – at least the ones I understand. (That’s a criticism of me not you!) I also watched Evan Davies and disagreed with the thrust of his arguments. In passing, what a whitewash to say we brought in foreigners as ‘partners’ to help with building cars. What he should have said was that our management abilities were so abysmal that British companies failed and disappeared and were replaced by foreign management. But I don’t agree with this concept of just doing what we are good at. We need, as Dr Jimbo says a manufacturing and engineering infrastructure, and of course we need to give engineering the status it deserves.

To you, Jeremy, I would say that not everyone can be thoroughly versed in the ‘Two Cultures’. I will have the cheek to classify you as someone with considerable knowledge and skill in both ‘Cultures’, looking down from a great height at ordinary folk and not realising that most of us can’t aspire to such achievements. In fact there is quite a proportion of the population who can’t aspire to either culture! But our problem is that the Arts educated top brass who pull the levers of power, and give each other jobs have very little knowledge of or respect for the amazing achievements of science.

I see no reason not to have a practical basis for a better society, so, we should be educating more people to a high level of technical knowledge, and they should look forward to well-paid jobs and lots of respect, street-cred kudos or whatever from society. It would be good to give the student some ‘instant wisdom’ as well. So throw in a condensed bit of history to teach him how incredibly stupid and just plain wrong human beings can be; some literature so that he can appreciate and use his own language better; a foreign language that lots of other people speak (not Latin) to broaden his mind and enable him to communicate with more of the world; etc etc.
Whatisname
Posted: 24 June 2011 11:21:07(UTC)

Joined: 21/01/2010(UTC)
Posts: 15

I agree with ICD and many others before.

We have sold off a large number of our main companies to foreign owners, who are often partially owned by their respective governments. While no company can support inefficient operations one feels that priority is often given to the site on the home turf when savings have to be made. So we as a country have lost control of most of our manufacturing base just as we import most of our food while imposing the highest standards of animal care in the world on our farmers. Even all our new wind farms are made overseas the only manufacturer in the UK closing down due to lack of orders.

We as UK PLC are then run (mismanaged) by a group of people who have no experience of making anything, starting a company, or even working in a private company where cash flow is often a top priority on a daily basis. Typical of the old style of management that ruined so many of our large manufacturing companies?

We can make things and compete with the rest of the world but our politicians and senior civil servants (mainly with a classical education?) seem to want to hamstring those that want to succeed with gold plated regulations and principles that do not concern most other countries whose manufactures we are competing with. The CO2 emission control is an example where we are leading the world at increasing our cost base.

Our financial companies reap vast rewards at our expense, see another thread about whether it is worth investing in pensions.

Evan Davis and others have said we should outsource the things that can be done cheaper overseas while we use our better skills and knowledge to do the more advanced stuff. The problem is that China and others place much greater emphasis on education and skill development and some are not very worried about stealing ideas and patents to help their economies develop. It will only take a few years before they have outstripped us in terms of knowledge base and ability to do the knowledge based work we are being told is our future.

I feel it returns to a common point in this thread "Education, Education, Education" be it skill or knowledge based. Along with changing people’s perceptions so that an engineer is not the guy who fixes your car and is treated with the professional status they deserve. Unfortunately the people who need to enable this to happen are the same ones, I treat all political parties with the same contempt I am afraid, who have mainly benefited from a private education in the arts and only pay lip service to the education of the prols. (I should say I have nothing against the arts I just believe we need a balance and I wish I had some, any, talent in an artistic area)
Jeremy Bosk
Posted: 24 June 2011 14:29:27(UTC)

Joined: 09/06/2010(UTC)
Posts: 1,316

ICD and Whatisname

We agree on reforming education but how?

One way to increase the general level of understanding between arts and science / engineering / technology is to stop the ridiculously early specialisation in schools. Germans take a four year degree and typically finish at age 25. It does not seem to harm their economy. We should abolish teaching to the test and give all the specialist tuition necessary to ensure that the brightest and best are stretched rather than bored to death. We should raise the status of the teaching profession at all ages and levels. We also have to work at catching the less able early and ensuring they develop as far as they are able.

My experience as a volunteer tutor in adult literacy and numeracy taught me that almost no one is incapable of improvement given the motivation. I know a young man today who works as a driver's mate delivering beer barrels. He is struggling to pass his written driving test because he attended schools where the head teachers did not believe such a thing as dyslexia existed. I don't know if they had any scientific basis for their beliefs but suspect not. I would be willing to shoot those head teachers personally.

At my grammar school we had to choose between art or woodwork / metalwork after the first year. We had to choose history or geography and chemistry or biology in the fifth (O-Level) year. We covered the same history syllabus three years running to try and lodge it in our skulls. I sat there with my eyes open but my mind elsewhere and read real history at home with the aid of the public library. In English literature we stumbled through novels one paragraph per boy and took a year to read the novel I finished the night I was given it. The rest of the year I sat at the back of the class and read something else, usually the complete works of the author in question. The English teachers had the humanity to leave me alone, except to remind me where we were up to when it came to my turn to read out loud. I used my pocket money to buy second hand university level chemistry texts because I could not stand the slow pace of learning in my O-Level class. I made some rather spectacular rockets and bangers - difficult nowadays because of restrictions put in place to foil terrorists.

I give all this biographical detail to show where I come from and that I do have some appreciation of other people's struggles with the education system. I can talk in simple language when I look someone in the eye, register their expression and hear their tone to gauge their level of understanding. If I sometimes use complex language here it is because I think you others have the intelligence to deal with it. That might be with a dictionary, Wikipedia, or by challenging me to explain myself more clearly. Simplicity is hard to achieve without losing meaning and context which is why New Speak in Orwell's novel 1984 had a vocabulary of 2,000 words. Government wanted to limit the ability to have or to express complex ideas. Engineertony uses analogies to express complex ideas for which he lacks the specialist economist's vocabulary. That works quite well.

I learn from these discussions, not just from clarifying my own thoughts, but from doing more research prompted by your remarks and your ways of expressing yourselves. Thank you all for helping to stave off senile dementia!
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