Still on life support,
Thanks for the research, I'm in my workshop slogging away on hobby projects and I love it, so I only see the nameplates, like Siemens, Sick, Schunk, Endress & Hauser, Sprecher & Schuh, and they don't ring the same as Brook Crompton, British Thomson Houston & English Electric. I still have problems understanding how they come and manufacture & manage in the UK and it counts towards our GDP, something must be going towards the German GDP.

Dr Jimbo,
I think your first paragraph says it all, it's the imbalance between services and manufacturing.

Still finding my wild west analogy helpful...the big farmers have now taken over the less efficient ones and are employing the same farmers to work for less & less while they accumulate more and more, taking over more and more farms. I find it a bit cheeky to go to a successful farmer and say OK you've made lots of cash, let me keep it for you and I'll give you more back than you give me. I'll be sitting in this comfortable office while you slog away in the fields, and...I'll make more than you at the end of the day.

Thanks Doc

I agreed with your whole post until the penultimate paragraph which starts to suggest moving away from globalisation to protectionism. Your piece on inflation very neatly illustrates the effect on prices of spare capacity in terms of efficiency gains leading to failing prices, something where we have all benefitted from over the recent past as the cost of FMCG has fallen dramatically as China became much more efficient. As you also point out, when that capacity gain slows, coupled with increasing demand, the natural outcome is rising prices.
Unfortunately your conclusion smacks of sour grapes, it is deeply unfair for us to have raped and pillaged the developing world of labour and resources to fuel our own industrial revolution, only to then blame corporates for taking advantage of lower costs etc when that revolution spreads to the rest of the world. In our position as one of the worlds leading economies, we have a responsibility not to revert to protectionism but to support the development of a global economy that provides opportunities for as wider population as possible. That said, it is in our self interest to try to grow our economy and benefit from the developing world, and our opportunity lies in playing to our strengths, be it in areas like precision engineering (like RR winning aircraft engine orders), deep water drilling (BP still the best despite recent challenges), professional services (PWC, E&Y etc going global) or finance (HSBC playing major role in financing in Asia, Barclays likewise in Africa). The success of these global businesses benefits us all as they tend to be represented in our pension funds etc, and they employ tens of thousands of British citizens.
I cannot agree with your suggestion that globalisation and the growth of multi-nationals is damaging our economic infrastructure and social cohesion, if anything we are benefiting. Our economic situation was most damaged by the previous government spending far in excess of their income on areas that generate poor return on investment, and our social cohesion is most damaged by the Daily Mail.

engineertony

When a company manufactures in the UK, it pays wages to UK citizens, it rents UK factory space, its buys UK supplied power, it pays UK NI and Income tax contributions, its employees eat lunch, drive to work etc etc. Agreed that profit and a proportion of revenue goes overseas but some also remains in the UK and that is how it adds to our GDP.

When it comes to the farming analogy, you suggested that the successful ones had taken over the less efficent and were employing them to work for less, so already your successful farmer was now a manager, probably spending more time at his desk than in his fields, similar in fact the head of pretty much any significant business, manufacturing, farming or otherwise. The CEO of BP is a clerical worker, not a manual worker. Secondly, the service of looking after the successful farmers money, and giving him more back than when he started is a vocation in itself. It may also involve much sitting down, and perhaps less time with tractors and cows, but is probably best not described as cheeky. By the way, the best paid CEOs in the UK work for Reckitt Benckiser, Tullow Oil and BHP Billiton, none of them service related as far as I can tell.

Still on life support, Jeremy Bosk, engineertony and Whatisname

Just a quickie to respond to your observations.

I really have no sour grapes about global corporations - some of them are British after all. Nor do I want to revert to protectionism after raping the old third world! But we cannot live in the past or try to offset the damage done by our forefathers.

Control of Global corporations will not be achieved through any form of supra-national government, whether in Europe or elsewhere. Some have larger turnovers than entire nation states. But we do need to get a grip on the downstream effects of globalisation which are not always beneficial - a certain media empire springs to mind. We also have to find ways to ensure more local benefits are secured.

Global corporations use their economic power to influence local situations for their own benefit. Ford effectively blackmailed the UK Government in the late 1970's when the motor industry was in chaos. They had paid almost no tax in the UK for many years as they could repatriate international profits through "internal management charges" but negotiated a huge grant to build Bridgend. This was in effect an open auction with Germany, the city of Amsterdam and Valencia. The local economy benefitted but the UK Government paid a huge price only to see the plant in Valencia spring up within a short period. Ford worked the system.

This was not the only global corporation to secure funding to build plants in areas where indutrial ouput had declined - The Potteries, South Wales, the Midlands etc. In many cases the plants were unviable but political gains through employment protection or provision outweighed any longer-term view. The whole of Europe was involved in these games. Unfortunately we now have a different sort of game being played - the massive debt balancing act.

We do need to find an effective mechanism to ensure global corporations provide us with longer term infrastructure benefits. Stronger balance sheets may help the pension funds (and their hangers on) but this is no substitute for strong local economies, supporting local people in a variety of activities that are not all service based.

Prof

Says the pot calling the kettle black!

I think the underlying assumption of all civilised debate is that we should stay within the rule of law.



Dr Jimbo


I agree with your last post. But how?