Anthony Makara: Britain imports too much

Over the last weeks I've read much about the subject of welfare reform. The arguments about incapacity benefit and workfare. However all these strategies for welfare reform fail to answer one fundamental question. How are we going to get people into work? I believe all the proposed plans for welfare reform will fail because they do not tell us how we are to create the one million plus jobs needed to end welfare dependency. This is because the British economy no longer produces the jobs that the unemployed need. Lets face it, a person is either in work or they are on benefit, it really is that simple, the answer to unemployment is to create jobs.

You may well ask, why are there not enough jobs?

Well, for a start we are not making the goods to supply our domestic market anymore, we are importing those goods. So a radio that could have been made in Britain is being made in China instead and a Chinaman has work while the Briton that could have made that radio remains unemployed. We are also importing food and fuel that we could be producing ourselves too. This means that yet more of our people are unemployed and languishing on benefit.

So why are we not producing these goods ourselves?

The answer given by politicians is because it's cheaper to buy them from abroad. So we get cheaper goods, but we pay for that in other ways, with unemployment, and we pay for that with higher interest rates too. When we have an economy that is reliant on imports it means that we have to pursue a strong pound policy to ensure that the foreign goods stay cheap. To have a strong currency we have to have higher interest rates. This means not only a burden on those that borrow to invest in business or those that want to buy a home but it also means our central bank cannot cut interest rates at times when we need to because that will push the cost of all those imports up. This in turn will lead to inflation, which in turn will lead to higher wage-demands. Which in turn leads us back to the high interest rates that quell that inflation.

Sound familiar? Sound like the same old rot that you have to put up with from every government no matter what party is in power?

So: What have our wonderful imports brought us? Permanent mass unemployment and high interest rates or inflation. Rather a high price to pay for cheap goods don't you think?

What is the alternative?

Well, for a start we in Britain should stop importing goods that we can produce for ourselves. Why are we importing microwave ovens from Russia, radios from China? We can make such items here, the production of such items would create jobs, that would mean the people rotting away on benefit would no longer be on benefit, they would be working and actually contributing to the nation through tax rather than taking from the nation by being on benefit. They would also be earning money which they would spend to buy other British made goods and the wealth generated would stay in Britain rather than flowing out of the country to benefit another nation.

Already we can see that producing for our domestic market, that is having a home-market economic policy, has many advantages. The cheap Chinese radio may no longer be available but in its place we have people working, people no longer on benefit, people spending money that stays in Britain, money that British producers can use to re-invest.

Once the British economy begins to supply itself we will have no need to pursue a strong pound policy, that means interest rates can stay low, and without the trauma of currency differentials a home-market economy would have stable levels of pricing as demand and supply fall into sync, this would also lead to stable wages and house prices.

However, we are not allowed to supply our own needs, to create jobs, to have low interest rates, because politicians of all parties believe in something called 'The Global Economy' they believe in 'Free-trade' they cling to these concepts blindly. This free-trade ideology stops these politicians from thinking freely, their thought processes become conditioned. So they continue with the same economic failures time and time again.

Each new parliament, each new government brings the same old failures, unemployment, high interest-rates and inflation, around-and-around they go, unable to see cause and effect because they are blinded by the concept of completely free-trade. I've nothing against trade when it is in the national interest, there will always be things we will need to import, items like coffee, bananas, and so on. However most of what we need we can produce for ourselves and we should produce for ourselves. The reality of all this is that if we don't change the way our economy is structured the problems we have will not go away, the huge welfare burden will not go away. We will be forced to live with the trade off between inflation and high interest rates, these problems will not go away. All these problems are caused by import dependency. To end this, we need to start producing for ourselves.

Comments

[Paul Wakeford]

The mantra that it is cheaper to make the products abroad is completely disingenuous.

Please don't move on to the next letter, I am not a leftie spoiler; stay with me for a bit.

We hear that the cost of labour is less in the far east But what they don't tell you is that the labour content of a product made in Britain in most cases is less than 10% of the sales value . So any saving on labour cost is relatively small and likely to be beaten by a determined look at workplace productivity in the UK. This I know to be true; workplace productivity is my business.

Consider then that we source our raw materials and components from the same places in the world whether the the product were made in Shanghai or Somerset - no serious cost differences there then. And then it has to be shipped all the way round the world to its market - oops, shipping cost not to mention carbon cost.

What has happened is that businesses have found that making things is really just too complicated, messy and frankly, rather a bore. Better to have a nice clean marketing operation where all we have to rely on are sales people and a simple distribution operation. No awkward industrial relations difficulties - just a nice warehouse and retail operation on nice business parks.

I started my working life employed by a well known shoe manufacturer employing thousands whose headquarters town now has no manufacturing of any significance. Lots of shops (a retail outlet park instead of factories) and masses of brand new homes - where do these people work now??!!

Products are are made overseas but with design and quality determined in the UK and and a mobile force of technicians jetting backwards and forwards to support the overseas operation - oops, more carbon.

Hey - wake up, we cannot all work in the supermarkets and media businesses. There is evolving a class of low paid service workers - if they are "lucky" enough to have such jobs; we cannot all design web sites or become marketing or financial consultants.

Don't get me wrong, I do not subscribe to the galbraithian economic model - it doesn't work. But we should also remember there is no historical model for what we are indulging in now - consuming all and making little.

[Gege]

I see that after condemning obama as being an unsuitable candidate, you have chosen to adopt his policies.

What you are advocating is protectionism which Mrs T and other conservatives oppose.

Please be aware that Britain does not have a monopoly on 'producing goods in our country'. Her export partners could choose to do the same to her.

[David]

"The answer given by politicians is because it's cheaper to buy them from abroad"

Politicians no longer, thankfully, running industry, the answer is actually given by business. They seek to reduce costs, so the idea that they are somehow playing a political trick in doing so is total rubbish.

The article is quite economically illiterate, for example totally ignoring the part of the economic equation whereby inflation is kept lower than it otherwise would be by the supply of cheaper goods, which in turn reduces pressure on having to raise interest rates.

Historically, it appears to hark back to a golden age that never was; the UK has always as an economic power relied on a robust import market particularly due to the Empire. The view is worryingly reminiscent of the Labour party in the 80s, particularly the rather disproved view that a service economy can't possibly supply jobs for more than a small proportion of people.

[Tony Makara]

Paul Wakeford, thank you for your interesting comments. The change we require in the British economy cannot come overnight and may well take a generation to come to fruition. Government must play its part in offering support for entrepreneurs who wish to produce for the domestic market. Such entrepreneurs should be awarded a special trading status that affords them a range of benefits including large-scale tax relief. It is only by making home production profitable that we can begin to counter the lure of cheap foreign goods.

The shift to a service-sector economy has turned us into a second-rate nation, reduced to selling on the goods that other nations produce. This being, and with large-scale production factored out of the economy, we are left with the legacy of millions on benefit as the service-sector cannot produce enough jobs for a population of our size. A service-sector economy is also heavily reliant on credit to fuel consumer spending as wage-income cannot be increased through productivity. This in turn creates further problems and continual cycles of debt for the individual.

This is the fundamental economic problem of the age, one that politicians are afraid to accept, let alone address. Serious thinking needs to be given over to this issue. Are we to be a nation that produces, that creates, that supplies its own wares? Or are we to be a nation that is forever dependent on other nations, on other words second-ranking?

[Tony Makara]

"The article is quite economically illiterate, for example totally ignoring the part of the economic equation whereby inflation is kept lower than it otherwise would be by the supply of cheaper goods, which in turn reduces pressure on having to raise interest rates."

David, a nation that is heavily reliant on imports, as we are, is forced to adopt higher interest rates, otherwise the strength of Sterling weakens and pushes up the cost of all those imports. This leads to inflation being imported which in turn puts pressure on wages, especially dangerous with a large public sector. The problem is that people have lost the nexus of cause and effect.

[David]

"are we to be a nation that is forever dependent on other nations, on other words second-ranking?"

Almost all nations are dependent on others. It's the nature of economics and capitalism in a globalised context (comparative advantage is quite a basic tenet of economics).

Heavens, this idea of economic protectionism and isolation is completely outmoded, and not to mention dangerous if one takes account of the potential for tariff wars.

"David, a nation that is heavily reliant on imports, as we are, is forced to adopt higher interest rates, otherwise the strength of Sterling weakens and pushes up the cost of all those import"

Oh dear. Look, you can't take the inconvenient bits out of the equation. The use of imports to provide cheaper goods and services is a deflationary pressure in opposition to that. It's interlinked. And the UK does not have a strong currency policy; interest rates are set with an eye on inflation only,hence until recently the presence of low interest rates in respect of historical context.

Inflation increases have started to emerge due to high demand worldwide for certain goods which has raised costs in raw materials, and the crunch, which has raised the costs of expansion. The idea that this would somehow not occur if we arranged things so that we faced higher costs to start with is just nuts, as this would put even more pressure on wages, which you say you are concerned about.

[Tony Makara]

"the UK does not have a strong currency policy; interest rates are set with an eye on inflation only,hence until recently the presence of low interest rates in respect of historical context."

David, this is a classic example of effect chasing cause, the dog chasing its tail and never catching it. Financial commentators across the board agree that Sterling has been overvalued for some time now and is set to 'do a dollar' and plummet in value, sending the cost of imported goods soaring. This will happen, its only a question of when. Look at the situation between the MPC and the ECB, we all know we need lower interest rates to help our economy but we are effectively forced to shadow the ECB because the BOE knows that it cannot allow the Pound to weaken against the Euro because the cost of all our EU imports will rocket, meaning voter-visible inflation in the high street. So the hands of the MPC are tied by what happens at the ECB, all because we are too dependent on EU imports, goods that we could be producing for ourselves.

Those who cling to the 'laissez-faire' ideology are in fact creating a 'laissez-pourriture' as our economy literally withers on the vine. Millions trapped rotting away on benefit, they exist but they don't have a life. There has to be change and the British economy has to be re-structured to supply itself where possible. Look around you, in your home, in the supermarket, in the hardware store, how many goods were made in Britain? How many were imported? How many could have been made here at home, producing jobs for our own people and creating wealth for our nation?

[Josh]

Take it to your dominatrix! What fetishistic morons what to put an economic embargo on THEMSELVES? That's what protectionism is, a self-imposed embargo.

Free trade is the way.

What we could use is an end to the high regulatory and tax burden so maybe domestic industry can compete. But protectionism is never the answer.

[Alex]

The problem with Tony's article is that much of it is opinion dressed up as economic analysis. He is, of course, entitled to his opinion, but it is misleading to disguise it as fact.

First, the fundamental fact that Tony fails to grasp with is that our primary trade partners are the EU, the US, and the Commonwealth (and not China/Russia). So it's easy to demonise cheap goods (many of which are subject to EU quotas/tariffs in any event) but their impact in terms of job creation in marginal. The idea that if we blocked out imports then factories would be flooding into the UK is naive at best.

David has dealt with the inflation point (and given that we have had historically low inflation, I fail to see Tony's point at all), but here are some other curious assertions:

"The shift to a service-sector economy has turned us into a second-rate nation, reduced to selling on the goods that other nations produce"

Why is a service-based economy "second-rate"? The UK is a stronger economy by any sensible yardstick than, say, Vietnam, notwitstanding the fact that the latter is a net exporter of goods. Services can (and are) exported. Indeed, the UK (and London in particular) can be properly said to be one of the leading exporter of professional and financial services.

"A service-sector economy is also heavily reliant on credit to fuel consumer spending as wage-income cannot be increased through productivity"

Why can't the service sector improve productivity? Productivity is not just about installing better plant and machinery.

"we are left with the legacy of millions on benefit as the service-sector cannot produce enough jobs for a population of our size"

The Keynesian rally cry of full employment through manufacturing may have been relevant for the Great Depression, but surely any Conservative will know that this scheme unravelled fairly dramatically in the 1970s?

Far better to retrain and reskill our workforce for the 21st century. Lady T recognised that thirty years ago but the significance of her reforms appear to have sadly passed Tony by.

[David]

"Financial commentators across the board agree that Sterling has been overvalued for some time now"

Despite the presence of historically low interest rate levels, not, as you would have it, high ones.

"Look at the situation between the MPC and the ECB, we all know we need lower interest rates to help our economy but we are effectively forced to shadow the ECB because the BOE knows that it cannot allow the Pound to weaken against the Euro because the cost of all our EU imports will rocket, meaning voter-visible inflation in the high street. So the hands of the MPC are tied by what happens at the ECB, all because we are too dependent on EU imports, goods that we could be producing for ourselves."

That is utter rubbish. The MPC is not forced to shadow the ECB at all; at the simplest this can be seen by the fact that decisions on levels have not been made in step. But more than that, the MPC is bound to a CPI inflation target, and that is all (although it has paid informal heed to housing costs). If there are upward pressures on inflation, it will decrease interest rates, which is what, in fact, it has been doing recently. If what you said holds true, the bank would be steadily raising interest rates to try to counter the recent reduction in the value of sterling. Which, as noted, it hasn't.

A fall in sterling may be useful at this stage in our economic cycle; while imports are more expensive, it cheapens our exports and therefore acts as a stimulus for home grown suppliers of goods and services. The balance of payments at this time is such that this is most likely desirable despite the downsides in the short term for consumers.

"Those who cling to the 'laissez-faire' ideology are in fact creating a 'laissez-pourriture' as our economy literally withers on the vine. Millions trapped rotting away on benefit, they exist but they don't have a life. There has to be change and the British economy has to be re-structured to supply itself where possible. Look around you, in your home, in the supermarket, in the hardware store, how many goods were made in Britain? How many were imported? How many could have been made here at home, producing jobs for our own people and creating wealth for our nation?"

Firstly, you would increase costs, increasing inflationary pressures and pressures on wages which you yourself have said you are concerned about.

Secondly, the only way to guarantee any sort of domestic market is to prevent imports, so that consumers can't have the option of purchasing cheaper equivalents. This in turn has a number of effects. Domestically, it protects home suppliers from competition pressures, resulting in the sort of sclerotic economy seen in the 70s. Further, protectionism by the UK is unlikely to be simply accepted by the rest of the global economy. Kicked out of the WTO, the UK is likely to be subjected to reciprocal tariff measures, compounding the competitive disadvantage already faced by goods based industries due to higher costs, and creating a competitive disadvantage for those service based industries that would otherwise have been competitive and therefore exportable, a double whammy.

It's seriously misguided.

[David]

"If what you said holds true, the bank would be steadily raising interest rates to try to counter the recent reduction in the value of sterling. Which, as noted, it hasn't."

Apologies for quoting myself, but this is worth repeating. If Tony's theory that the MPC is pursuing a strong currency policy, which is rather key to his whole thesis, is in any way accurate, then it would be raising interest rates to try and counteract the recent fall in the value of sterling. The last three decisions have been two holds and a drop.

[Dontmakemelaugh]

It would appear Tony that you are advocating
a programme of nationalisation, otherwise how are you going to get business to invest and spend vast amounts of money on building the required factories? As soon as it is considered to be economical to produce the goods you mention in Britain so business will do it. I agree we should produce much more of our food, but will Brussels, our real government allow it?
Do not forget that all imports into Britain also attract VAT which is paid into the government coffers.
Nationalisation leads to a stagnant economy.
With all due respect Tony.......

[BorisforPM]

Terrifying.

Simply announcing that the service sector cannot provide enough jobs is a bold assertion with absolutely no evidence - since our economy has turned increasingly to service provision, we have in fact all become wealthier and growth more stable. Interest rates, in the round, have been getting lower. The experiment of an all-service economy has never been done - but there is absolutely no evidence to support your assertion that moving towards one must be bad for us all.

Pronouncing the UK a second-rate nation because it is "dependent" on other nations is absurd, based on some outdated notion of British autarky. It is precisely because our country has for so long managed its imports and exports well that we inhabit the fourth-largest economy on the planet. We gain by allowing products to be made where it is most convenient to us for them to be made - Paul Wakeford is exactly right that this needn't just mean the cheapest place, but the most convenient - and then in buying them from there we derive advantage for us and for our trade partner. Adam Smith was right all along...!

The first Chapter in Milton and Rose Friedman's book, Free to Choose, is the essence of why I am a Conservative; he challenges any man to go away and make for him, without reference to anyone else, the pencil that he is writing his book with. Nobody can source [and indeed extract] all of those materials and all of that know-how by himself. We have to co-operate, and so doing helps us all. That we might acquire "specialisms" within a globalised economy is an entirely natural and desirable outcome.

Politicians are "blindly attached" to the notion of free trade just like they are "blindly attached" to the ideas of free speech and justice: it is plainly the morally right course. And I'm afraid that your poorly abbreviated account of interest rate control does nothing to counter the quantitative work of the last three centuries which show that it is economically right, too.

We are Conservatives because we believe in freedom of thought, of expression, and of trade. A narrow paleo-socialist view that the economy can only be sustained if people are given jobs to make particular items, even when they can be more profitably sourced elsewhere, has long since gone out of fashion even in the Labour party.

[Tony Makara]

Why is it wrong that Britain should look to be more delf-sufficent? That can only be a good thing. Those of you free-traders who love the cheap foreign goods are going to have your faith severely tested when our currency goes into decline and you cannot shift your purchasing power over to buying British goods because the British goods are not being made anymore. The Pound is set for a big fall, then once the impact of that is felt, it will be interesting to see your response as every foreign good that you buy becomes evermore expensive.

On the matter of the MPC and the ECB, do you seriously believe the MPC isn't worried about the growing differential between Sterling and the Euro? On the political front I'll bet Gordon Brown is terrified of a scenario in which EU foodstuffs in the supermarkets suddenly becomes mouch more expensive. So far inflation in the UK has largely been voter-invisible because of the overvalued status of the Pound, but all that is about to change.

Those who advocate completely free unfettered trade ought to think very carefully about the role Britain plays in the free-trade system. It is a passive buying role. A role that makes Britain little more than a supporter of other nations, they produce the goods, we sell the goods for them and maybe make a little bit of a profit in the process. Is that all we are as a nation? A source of distribution and sale for the product of other nations? Anvil not hammer?

[torydeb]

This is easily the worst Platform article I've ever read on ConHome.

Between them, Gege, David, BorisforPM, Alex and Don'tMakeMeLaugh have pointed out everything that is wrong with it, so no need for me to repeat them.

Tony, I stopped reading your comments after once having been unfortunate enough to read your antediluvian views on a woman's place in the home. I am not surprised that your views on economics are similarly misinformed.
Bryan Caplan would be amused to read the above, as it contains all 4 of the classic voter biases. Read here for a summary

Your understanding of economics is astonishingly poor. Please get a copy of Basic Economics by Thomas Sowell". It is of the utmost urgency that you get up to speed with the way the world works today.

It is amazing how in one article you've rubbished every single economic tenet that Mrs. Thatcher stood for. Your views are beyond the pale.

[Paul Wakeford]

BorisforPM – it is all very well espousing the free market as the central plank of your philosophical being but be realistic and don’t let it be a cop out – I agree that Smith, Friedman and Thatcher framed the debate and the answers generated were right but they never said, OK – “ship building, Mmm, let that go, OK steel making? Let that go, Oh cars! Let that go too - oh, let it all go, what the hell it doesn’t matter – it’s the market – let ‘em all go”.

Smith never said if someone can make it cheaper than you, let it go. The narrative is, if there is no way you can compete, then, let it go – I contend that that in almost all fields, we can and must compete. Then the market can decide where to buy its fridges or shoes from us or from a Kowloon homegrown business.

But what we are doing is indulging in a form of trade where we give all our expertise, capitalisations and markets to someone who will gradually start to learn the ropes themselves. That is madness – no, it is stupidity. Yes, compete equally but for goodness sake don’t hand over everything to your potential competitor.

If we carry on along those lines then we are all completely stuffed. My point is that our productivity can always be raised to the point that there is no point in exporting jobs. Far too many companies find it too easy to “third party” their responsibilities and cover your backsides by giving the board a smart PowerPoint presentation about the wonderful manufacturing possibilities in the Far East – a damn sight easier than admitting to that same board that you have been managing a low productivity organisation.

If you see a decision that loses the job of the fathers and mothers (and by extension the future livelihoods sons and daughters) you should not just say – “shame, but that is the market” you may be condemning the next generation to flipping burgers at drive throughs and then eventually, who pay for those burgers? Surely the market allows you to fight back and retain at least some of those livelihoods? I don’t ever advocate subsidy – financial state intervention is always pointless. Measured supply side intervention in the tax incentives and the like yes, but no more.

Free market economics is NOT about letting the business disappear to fund the Red Army It is about getting your businesses survive and fighting back – we can be as productive if not more so than anywhere in the world.

[Milton]

Tony, you seem to have a very nationalistic economic protectionist set of beliefs. Free trade helps secure peace in the world, if goods arn't crossing borders soliders soon will. What's wrong with international peace?

The idea that Britian is somehow being used by other nations is just wrong. They use us and we use them, just like you do everyday when you go to the shops and buy something. If they get rich in the process this is a good thing - it means they can buy our goods and services and it encrouages British businesses to innovate and go and fulfil new market demands.

[Tony Makara]

Torydeb, have you got any ideas of your own or do you just enjoy taking an immature swipe at those of us who are trying to come up with solutions to Britains problems. As for my knowledge of economics, well, perhaps you would like to face me in a public debate sometime on economic matters and we will see who has a better grasp of the subject matter? On the subject of working mothers, I believe when women have a child they should give ten years of their life to raising that child instead of paying a childminder to do it. The torydeb world view clearly puts mammon ahead of motherhood.

Milton, you are right in saying that I do espouse a nationalistic economic strategy. That is I support what is in the best interests of our country. The free-traders are internationalists, they do not see nations, peoples, they just see the free movement of capital and the economics of egocentricity. Free-traders do not care about the consequences of their 'I'm alright Jack' credo. Whether they like it or not we are a nation and the best interests of the nation always override the interests of the individual. Currently British entrepreneurs are discouraged from producing for the home market because politicians of all parties allow the home market to be overrrun by cheap imports. This has decimated our industrial and agricultural base and left us with millions on benefit. The cheap imports will not remain cheap forever and we won't be able to buy British as an alternative because British isn't available anymore. China is currently growing at an astonishing rate precisely because it is supplying its own market and supplying ours too! We need senior politicians to think about this issue. We need to supply our home market and create jobs and wealth in our country. We need a national economic strategy. Following the lead of the free-trade internationalists is the route to economic suicide.

[David]

Tony, seriously, I suggest you sit down with a good economics primer.

[Tony Makara]

David, I've been reading economics for over thirty years now and I'm fully aware of all the economic genres. I support the radical field of economics and reject the orthodox economists academically driven abstract view of the world. When we stop looking at theory and start dealing with reality we can begin to address the problems we face.

[David]

"When we stop looking at theory and start dealing with reality "

What, you mean like stating the MPC secretly follow the ECB, and keep interest rates high to prop up the value of sterling, despite the fact that they've either dropped or kept rates the same since the pound began to fall? That reality? Come off it.

[Tony Makara]

David, when Sterling starts to tumble, as it is sure to being an overvalued currency, do you think you will continue to see these token rate-cuts? Or do you think the MPC might be more concerned with shoring up our currency to prevent an ever greater differential between Sterling and the Euro. Given a choice between the two I bet the BOE will be more interested in price stability than increasing liquidity. A falling pound means a lot of inflation being carried into the country on the back of imports. While a nation is dependent on imports it can never escape the trade-off between inflation or higher interest-rates.

[David]

"when Sterling starts to tumble"

Starts? It already has.

Here's the last three months,

http://finance.yahoo.com/currency/convert?from=GBP&to=EUR&amt=1&t=3m

I've already detailed the MPC's response.

"A falling pound means a lot of inflation being carried into the country on the back of imports."

Of course, since it means higher prices. Which reduces demand, which leads to downward pressure on prices, which also needs to be factored in with regards to the 'net' result for inflation. Plus, of course, when imports become more expensive, domestic goods appear more attractive, which again needs to be considered.

"While a nation is dependent on imports it can never escape the trade-off between inflation or higher interest-rates"

Er, no country can escape the trade off between inflation and interest rates, hence it's the prime tool used by central banks to try and control it. High interest rates reduce the money supply, which lowers inflationary pressures; low interest rates increase the money supply which increases inflationary pressures. For someone who studied economics for 30 years, you appear a bit rusty on the basics.....

[Tony Makara]

David, do you fancy having a public debate with me on this subject during the next conference season? It would be good to see how you can respond to my arguments before a live audience, seeing as you think I know nothing about this subject you ought to be confident enough to go head-to-head with me? Same goes for Torydeb and any other free-trader who wants to argue the merits of importing wares that we are capable of producing ourselves.

As for Sterling, time alone will determine how long it is to remain overvalued, but like all overvalued currencies it will eventually plummet. You will find then that EU foodcosts will increase in price and demand will not fall off and bring the price down. We can, it is true, make do without certain manufactured wares, but a nation cannot get away with not eating and the demand for EU foodstuffs will be just as great as ever, especially seeing as there is little British produced food available as an alternative.

[Tim Worstall]

Tony,
A response elsewhere.
http://www.globalisation.eu/blog/trade/confusion-on-the-benefits-of-trade-200803231317/
Politely put, I don't think you've quite grasped the point of trade nor the implications of your suggestions.

[torydeb]

David you are wasting your time.
Tony is not going to let facts and evidence get in the way of his opinions.

He is clearly a world-class debater and his knowledge of economics is unparalleled!

That is why no one is taking up his offer to debate at conference. No doubt delegates would be beating down the door to listen to us argue whether Russia's failed economic policies of the 60s, 70s and 80s (which Tony is advocating although he might not realise it) are better than those of Britain during the Thatcher years.

[David]

"David, do you fancy having a public debate with me on this subject during the next conference season?"

No.

"it will eventually plummet"

It has already started to, as I've said, twice. And even provided a graph.

[Tony Makara]

Tim Worstall, you know perfectly well that the economic conditions of the 1930s were a unique phenomena and bear no relation to today. Furthermore the economic strategy I advocate would benefit all nations. Self-sufficency is a good thing and leads to greater economic security. You have to understand that the era of globalization is about to end. Many in the United States are now openly questioning the globalist ideology and this sentiment can only grow.

Torydeb, your trite remarks are a source of great amusement to me. To claim that I advocate a Soviet style command economy shows the poverty of your debate. Still, I suppose if I argue with an airhead I should expect to get a vacuous response. Can't you debate properly like others have done?

[a-tracy]

TM "Lets face it, a person is either in work or they are on benefit, it really is that simple"

Well it can get a little more complicated than that when we introduced a third way, in work and on benefits. Which is a fantastic way of hiding increasing unemployment, two jobs in place of one topped up with tax payer funded benefits for low earners.

The catch - you have to work 16 hours per week. Not even too difficult that Tony for a mother once your children have gone to school, just look at any supermarket now - they staff the stores in term time with part-time parents and in the school holidays with students and hey presto the 70's three day week model is live and working.

Don't you know anyone on full benefit from choice? OK some use the excuse that they can't find work that they trained for but we're told 400,000 Eastern Europeans have come into this Country because there is work, those jobs could have been taken by the unemployed with the phenominal top up benefits that exist. We have removed the ambition and necessity for people to work (look at the poor lady in India whose daughter was murdered - then we discover she was living in India on the back of the British benefits system, if she was forced on a workfare programme then at least the benefits agency would have known where she was).

If you believe that people will buy goods at a higher price just because they are produced in Britain then go and speak to Doulton and Wedgewood and ask why they had to move production out of the UK in the past decade.

Ask yourself - why don't the UK Unions raise the money to set up companies in the UK manufacturing products that their members make?

[Yet Another Anon]

This is because the British economy no longer produces the jobs that the unemployed need. Lets face it, a person is either in work or they are on benefit, it really is that simple, the answer to unemployment is to create jobs.
The British economy creates the jobs that public and private sector employers have decided are needed to do the work that they feel needs doing, there is seperation between different employers who take different decisions on what needs doing depending on their own situation, to boost British business the answer is restructuring welfare to gradually phase out income assessments while holding down or cutting benefit rates and strengthening residency requirements and switching variable rate benefit payments for low interest loans. In addition holding down spending on personal healthcare and other social spending, abolishing labour market regulations and affordable tax cuts especially on income taxes will help british business flourish in a free market.

Planning by quotas is the sort of thing command economies do, and even there it doesn't work - the government cannot micro-manage industry and the economy - this is why Communism fails and it is why protectionism fails, because both are based on the premise that government can decide allocation of resource issues - which they simply can't.

As for benefits in work there have been in some form or other continuosly since WWII and on and off back into the 18th century in much of the UK.

[Tony Makara]

A-tracy, our entrepreneurs are openly discouraged from supplying our domestic market by politicians who work overtime to give competitor nations the edge. The last ten years have seen a Labour government that has gone out of its way to ensure that consumer demand is supplied by imports. The BOE, which is not fully independent as Gordon Brown's open letter to the governor, of May 1997 indicated, has kept the Pound artifically overvalued, so as to make imports appear cheaper, thus masking any inflation. This has been deliberate policy, but as Gordon Brown will find out, is a sleight-of-hand that cannot be sustained indefinitely. The Pound is ready for a big fall and I don't mean being marked down slightly, but a monumental fall, one that will even eclipse the recent collapse of the dollar. This is going to lead to serious inflation and higher interest rates as the BOE tries to regain some sort of control. The economic shock of such inflation may serve to knock some sense into those that believe we can rely on imports to supply all our needs.

[Richard Calhoun]

Stench of a controlled economy here????

There are many jobs available in this country, however the obstruction to creating new products and enterprises is the ridiculous Employment protection legislation and the Welfare state.

Create a true enterprise economy and remove the political obstructions to it and this country will compete with the best.

[Richard Calhoun]

Tony you have the way forward but fail to understand it, when your forecast below comes about it will be once again an opportunity for us to produce products that it is not economic to do now ------

""Why is it wrong that Britain should look to be more delf-sufficent? That can only be a Those of you free-traders who love the cheap foreign goods are going to have your faith severely tested when our currency goes into decline and you cannot shift your purchasing power over to buying British goods because the British goods are not being made anymore. The Pound is set for a big fall, then once the impact of that is felt, it will be interesting to see your response as every foreign good that you buy becomes evermore expensive.""

[Sam Tarran]

There is actually a very interesting post by Laban Tall (ukcommentators.blogspot.com) related to this issue, where he quotes a Guardian article that points out that the seemingly inevitable decline and fall of British manufacture isn't as straightforward as it seems:

""The sad truth is that nobody in Britain has built a major manufacturing company from scratch since the time of the Attlee Labour government in 1945. All our major manufacturers pre-date the second world war. And yet countries that didn't exist, were only partially literate or were engaged in endless conflict 20, 35 or 45 years ago have managed to build major manufacturing businesses from scratch."

This is not just about competition from low-cost rivals. If globalisation was really to blame for Britain's industrial decline, the same effects would be seen in Finland and Sweden, where costs are even higher. Medium-high technology manufacturing comprises only 3.6% of the UK economy, compared with 9.6% in Germany and 6.5% in Sweden.

How have these countries managed to succeed where Britain has not? My guess is that they are more hard-nosed about it. They probably don't think the development of "soft skills" is a substitute for knowledge; they don't think "emotional intelligence" is a substitute for real intelligence and they don't think whizzy schemes for tax avoidance are on a par with dominance of the global mobile telephone business."

[Richard Calhoun]

Sam Tarran

Maybe the Scandinavians have ensured they have a better educated population??

[Tony Makara]

The question of population size is worth bearing in mind. The population of Britain needs a large industrial and agricultural base to support it. Smaller populations can get away with service-sector economies but the service-sector cannot produce enough jobs for a population of our size.

Richard Calhoun, I certainly agree that we should do away with unnecessary restrictions like working hours, the minimum wage, and other barriers to employers. This will help to create some jobs, but nowhere near the million plus jobs that we need to end welfare dependency.

I hope a debate like this will set senior politicians into thinking about the ill-effects that can come from being too dependent on imports. In politics we all need to be thinking one generation ahead, thinking of the consequences far beyond the morrow. In fifty years or so most people reading this will be long gone, but the decisions that we take today will effect Britons fifty years from now. That is why we have to ensure future generations inherit a nation that can stand on its own feet and proudly claim its place in the world as a leading nation.

[Richard Calhoun]

Tony
Chicken before the egg syndrome here ----

We have to reduce the size of the welfare state and reduce the tax take of Government if we are to create a true enterprise economy.

The road to disaster would be to hide behind a protectionist economy!

[Tony Makara]

Richard Calhoun, my call is for our country to become less dependent on imports, that is goods and foodstuffs we can produce ourselves. We shall always need to import certain goods, the problem as I see it is that we are importing too much, this in turn means we do not utilize the productive capacity of our labour force, leading to millions on benefit.

We can only reduce the numbers on benefit by moving people into jobs, full-time jobs that take them out of the need to claim rebates and tax-credits. For every product that we import, that we could have produced ourselves, we contribute to the welfare mountain. We deny an opportunity for our own people to work and give work to a Chinaman or a European.

Our population is too big to be sustained by services alone, we need an industrial and agricultural capacity to employ all our people. Otherwise they become surplus to requirement and have to live a miserable life on forty quid a week, one generation passing on the legacy of unemployment to the next.

The Conservative government must set job-creation at the top of its political agenda. Create the consitions that lead to jobs and the welfare burden will be reduced, do nothing and nothing will change.

[Tim Worstall]

"Self-sufficency is a good thing and leads to greater economic security."

Umm, right, so you really don't understand the subject at all then, do you?

I've tried to be polite, as previously mentioned at:
http://www.globalisation.eu/blog/trade/confusion-on-the-benefits-of-trade-200803231317/

Now it is necessary for me to be impolite.

If "self-sufficiency" is a good thing, in and of itself, then it would necessarily be true that each household being self sufficient would be a good thing. We would all grow our own food at home, weave our own cloth, spin our own wool and, well, be self-sufficient.

Now not even the Tory Party thinks that this is a good idea. The Greens do, but they are, umm, crazed.

If you want to put forward this entirely lunatic economic nationalism, might I suggest that you join another political party?

The Greens and the BNP share such idiocy: perhaps you might be happier with either of them?

And now I shall be rude. Your thoughts (if they can be described as such) show that you have no idea whatsoever about what trade is or why we do it.

Debate with you, on stage? Bring it on, sucker.

Yes, that is a challenge.

[Matt Wright]

Tony's article sounds like a command economy. Politicians don't create jobs, businesses do. The role of Govt is to create the conditions in which enterprise can thrive. Even then a larger manufacturing sector would move towards high value, high tech and largely automated manufacturing. Remembering that China not only has cheap labour but leading technology so to compete we have to be ultra-innovative. An innovative and enterprising culture does not arise from a command economy something we have learnt the hard way before.

[Nick]

This article is such nonsense that it would be shocking to see it on a Labour site, let alone a place where I expect to read something vaguely sensible. As Worstall points out, it bares more resemblance to Green policy than anything else.

Leaving aside the economics, look at the facts on the ground. We don't have a lack of jobs in this country. Look around London especially and you will see loads of people who actually take two jobs with the sort of hours that would usually be considered full-time. Many of them are studying simultaneously. Of course, they are immigrants, taking jobs that were always available but were not taken up by the British unemployed.

To get people into work, we just need to offer a few more incentives to get them into work (rather than the huge marginal tax rates at the moment) and give them a few extra pokes to make being permanently unemployed a less comfortable lifestyle choice (time limited job seekers allowance for example).

[Surreptitious Evil]

Wow. This is obscenely cretinous. If you actually wish to impose a reduction on the average wage of the British worker to that of a straight-out-of-the-rice-paddy Chinese, please go and try to run another country (into the ground), not this one. Please note that as you are talking about imposing customs tariffs (the only way you are going to make British made goods cost effective compared to Far East imports), it will have to be a country outside the EEA.

Tim has said it, Sam (who is still at school) gets it - you don't.

The welfare burden you are so concerned about will only rise as the value of the pound drops to stygian levels and the money-makers migrate to somewhere less economically illiterate. Like France.

Remember that most of our raw materials are priced by the global economy - not the British one. Hence the rises in wheat and other grain prices, fuel etc over the last couple of years - not because we are producing (much) less or using (much) more - but because of international growth. The UK has been reliant on imports for over a century now (except for coal - that has been in the last 20 years). We used to import raw materials from the empire - cotton to Lancashire, jute to Dundee, oil from Iraq - and export finished goods. We have merely moved up the value chain.

I hope you feel that your thirty years reading economics has been well spent - I would personally suggest you go back to the Ladybird version and start again because you appear to have learned nothing.

[Tony Makara]

The level of hostility that my article has generated from the free-trade internationalists tells me that I've hit a sore point with them. For too long these people have held political high council and have been allowed to propagate their views unchallenged. The fact is that they cannot tolerate anyone questioning their free-trade ideology. As I stated earlier in one of the posts I challenge any free-trader to a public debate on this issue at the next conference season. I wonder of these free-trade internationalists have the courage of their convictions or whether they just like to hide behind their pseudonyms and infantile blogs. Are they prepared to debate me before an audience at conference with media invited? Looks like I touched a raw nerve today, I questioned the orthodoxy of free-trade and they have largely responded with abuse and personal attacks. This tells me that they know they are on unsure ground. Again I challenge any free-trader to a public debate during the next conference season and let's see how this debate plays out before a real audience?

[torydeb]

Whichever of the editors (Tim? Sam?) vetted this platform article should be ashamed of himself. It is unfair to let someone so ill-informed expose him or herself like this.

Tony has refused to deal with the facts and figures presented before him and instead wants people to accept he is right based on his passion alone.

It's mildly amusing to see someone hold fast, theories that have been proved wrong over and over and over again by every economically successful nation. However, I do not like seeing Tony Makara publicly humiliated or even worse leaving the content up to misinform others.

My only hope is that people read the comments as well so they know how wrong it is, otherwise it's a candidate for deletion.

[Tony Makara]

Torydeb, I am pleased to have annoyed so many free-traders today. These people have had it cushy for too long and need to be challenged. They, like the Marxists, are internationalists and subscribe to an orthodoxy based on economic theories that are centuries old. They do not see nations or people, rather they wallow in abstract theories and are slaves to materialism. Life has to be about something greater than personal gain, more than the wishes of the individual. I will not stand by and let these free-trade ideologues send my country to the dogs. I want to see our people put back to work and our economic security built by our own people rather than dependent on other nations. It is only a matter of time before import dependency reaches tipping point, then we will see a popular reaction against these people who want to sell out our country.

[Alex]

Whilst there is a certain chauvinistic but ultimately flawed logic in protecting British manufacturing interests, Tony's desire that *all* countries become self-sufficient or as close to self-sufficient as possible beggars belief. To do so would require ruinous levels of tariffs and/or subsidies, and even with them there would be serious shortfalls in output, simply because the UK could not be economically self-sufficient.

As to the tariffs are good for countries line: Smoot Hawley. Discuss.

Sam makes a good point about Nokia and the Swedish model of mobile phone production. However, this overlooks two points. First, why are the export of professional and financial services inherently worth "less" than those of mobile phones. Secondly, Nokia did not grow because of any system of co-ordinated state subsidy or external tariffs, but by delivering goods that the market wanted at prices they were prepared to pay...the solution is highly skilled workforce and a pro-business regulatory environment, not some appeal to protectionism.

[North East Tory]

The usual ill-informed rubbish that Tony Makara posts on this website.

[Mike]

"Why are we importing microwave ovens from Russia, radios from China?"

A little thing Ricardo liked to call comparative advantage. As anybody who has taken so much as an A-Level in economics would be able to tell you, of course we could produce microwaves, but only at the expense of producing something else. If that 'something else' is of a greater value than microwaves (which it apparently is) then it is most definitely not in the 'national self-interest' (whatever that is supposed to be) to produce microwaves. Producers in this country can make themselves wealthier by allowing Chinese peasants toil away in factories while educated British workers can produce something of greater value. By extension, everybody else in Britain is wealthier as a result, as they now have both microwaves, and that 'something else'. Does that not satisfy your 'national self-interest'?

"They would also be earning money which they would spend to buy other British made goods and the wealth generated would stay in Britain rather than flowing out of the country to benefit another nation."

You seem to be unaware of a very fundamental aspect of international trade. If we are sending our Pounds over to China to buy Chinese goods, the only things that the Chinese fellows in receipt of these Pounds can buy with them are goods, services, and assets that are denominated in Pounds; in other words, British goods, services and assets. If the Chinamen spend their Pounds on goods and services, then we would see our trade (current account) deficit reduced. If they buy assets with their Pounds, then this is just another way of saying 'they are investing in Britain', which is why we call it the capital account.

The implications of this are quite obvious,. If we are importing too much, as you claim we are, it doesn't matter, because current account deficit will be EXACTLY cancelled out by a capital account surplus:

Current Account + Capital Account = 0

This barmy protectionist idea you have will do nothing less than kill foreign investment in Britain. I wouldn't bet on the dole queues being any shorter if that were to happen.

[Jennifer Wells]

Why do people have to be so disagreeable in the way that they disagree?

I'm not with you Tony but you always bring heart to a topic and I respect you for that,

Jennifer

[Bishop Brennan]

I have never read a more ignorant article on the web - and that's really saying something.

Perhaps Mr Makara would like to look at his policies in action - North Korea would be a suitable example.

BTW, whilst trade economics is a couple of centuries old, Mr Makara's views go back even further. Modern trade theory dates back all the way to the 1980s!!!!!!! Try reading some Paul Krugman...

And the problem with unemployment is our welfare system - there are plenty of jobs in London, but the lazy so-and-sos can't be bothered. Force them to work; and educate / train our workforce (rather than reducing exam standards and making up useless non-qualifications), and we'll soon have fewer unemployed - and immigrants (though I'd happily swap the Poles for our useless underclass).