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

[Tony Makara]

Jennifer Wells, thank you. Its always good to cause a reaction because that gets people thinking. As you say its a great pity that some people cannot put forward a proper debate and resort to personal abuse, but that tells me they are ruffled by the argument. One that questions the orthodox views they have been clinging to for so many years. It is difficult for some people to think outside of the box, and I find it interesting who people try to twist the debate which is essentially an argument to buy British and support our own nation. Still, internationalists are thin on loyalty and it matters not to them whether they buy a British made product or a foreign one, just so long as they get it cheaper. Having such a mentality to the fore in British politics it is little wonder that our country is in a mess. These people are fundamentally anti-British.

[Tony Makara]

Bishop Brennan, so you want to force the unemployed to work. Actually I agree with you so long as the work is fully waged. The problem is how are you going to fit 1.6 million JSA claimants, plus 200,000 expected to move of Incapacity into 660,000 vacancies? I hope that Chris Grayling is successful in filling the 660,000 vacancies, and for this reason I support job-matching and expecting people to take work that is offered, but what about all those other people who are out of work? That is the real problem. Now if we had an industrial base we could start employing those people?

[Tony Makara]

Mike, you seem to have forgotten the forex markets. China likes to brag in its domestic press that their store of foreign currency reserves is their 'economic nuclear option'.

[North East Tory]

Just finished reading all of the thread. Is it just me or does it appear that Makara is in fact just desperate to create a public image for himself? I lost count of the number of times he demanded a public debate at Conference. If his argument was so strong that he could win a debate at conference with the oh so important audience there, then he should be able to win the debate when he's online.

But he can't. He has lost the online debate. So why would it be any different in person?

I think you need to take up golf and stop trying to solve the whole world's problems from your spare room.

[Richard ROBINSON]

Adam Smith cited the following theoretical example: it would be possible to build and heat greenhouses in Scotland to grow grapes to produce wine. It would, however, be madness, he says, to ban the import of wine from Bordeaux so that we can produce our claret in Scotland.

[Tony Makara]

North East Tory, so what are your ideas for the future direction of our country? I don't see you making any sort of contribution to debate? I don't agree with every article on Conservative Home but I have respect for those that take the trouble to write and contribute articles. These are people who care about the future of our country. We all may differ, sometimes vastly, in perspective but we are all trying to make a difference one way or another. What are you doing?

[Tony Makara]

Richard Robinson, I've never talked about banning imports only that British producers supplying the home market should be allowed an advantage. This is protects our own, which is a natural, and dare I say a patriotic thing to do. If people want to import a certain foreign good that was being produced in Britain they should still be allowed to do so, but they would find the selfsame British product less expensive if our economy was geared towards supporting British business rather than supporting foreigners as is the case today.

[Alex Singleton]

Mr Makara's proposal would damage living standards and lead to lower-paid jobs in the UK. He is wrong to claim that unemployment in the UK is caused by free trade - after all, there are more jobs in the UK today than in the past, and they tend are on average much better paid than in the past.

Low-end and labour intensive manufacturing simply cannot generate the incomes that people Britain today demand. Yet, despite not making mobiles phones, around three quarters of the world's mobiles use microprocessors designed in the UK. That has created new, higher quality jobs in our economy.

We have climbed up the economic ladder. Mr Makara's economically illiterate proposal would makes us to fall off it.

Or to put it more simply, countries that are open to imports have faster economic growth than that that are closed.

[Yet Another Anon]

This will help to create some jobs, but nowhere near the million plus jobs that we need to end welfare dependency.Dependency of one form or another won't be fully ended, whether it's dependency of someone on the state or people continuing to depend on parents, equally poverty will never be ended either and nor can the NHS be perfect, this is the way of the world. There were unemployed between the wars - not just in the 1930s but for much of the 1920s unemployment was quite a lot higher than it is now, in the late 1940s there were jumps in unemployment, Queen Elizabeth had to consider what to do with people without renumerative employment - schemes that end it are sheer fantasy. Not only this but zero unemployment would have bad economic effects, there has to be some slack in order to keep wage demands down and inevitably there are people who don't fit well into employment and who have little to offer and maybe will only get jobs through the error or charity of employers.

As for price of goods, you restrict supply and the price will go up - a government taking a protectionist stance could quite quickly bring the country back to inflation levels of over 20% and destabilise the economy and trigger a recession.

The problem is how are you going to fit 1.6 million JSA claimants, plus 200,000 expected to move of Incapacity into 660,000 vacancies?
There you go again quoting the ILO figure for unemployment as the JSA figure - the ILO figure is based on an international set of standards, it uses the same methodology in different countries - it is not based on national statistics for people claiming particular benefits - the claimant count is now less than half the ILO figure, someone can be on benefits for the incapacitated and be counted as unemployed under the ILO figure, indeed some on the ILO figure are not claiming any benefits at all and other definitions of unemployment are higher at up to 2.25 million.

There is no point misquoting figures.

[Yet Another Anon]

Queen Elizabeth had to consider what to do with people without renumerative employment
The 16th century one I should add - Queen Elizabeth I of England.

[Alex Singleton]

"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. "

The one problem with this line of reasoning is that the Bank of England explicitly does not pursue a strong pound policy - we have a free floating exchange rate.

[Andy Cooke]

Bringing back a modernised version of the Corn Laws?
Yeah. That helped the Tories before, didn't it?

Mercantilism is dead. Discredited centuries ago. The idea of free trade is comparative advantage - we are all richer through it.

[Alex Singleton]

"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."

Is Mr Makara really saying that companies that specifically want to produce goods for the domestic market, as opposed to ones that want to sell globally, should be given a special ride? If so, why?

[Alex Singleton]

The real issue here is this.

How good a deal do we want when we try and spend the foreign currency given to us in exchange for our exports? The cheaper and better the imports we can buy, the further our exports go. Essentially, the work British workers perform is worth more.

If we try to make imports more expensive, our exports buy us less, and we will become poorer.

[Rory Meakn]

This has to rate as one of the most utterly stupid articles I've read in a long time. It seems pointless to pick out a quote to criticise as pretty much every single sentence is retarded.

Seriously - making life worse and more expensive in order to 'create' work and chores? That's what one expects to hear from some trade union leader!

[Tony Makara]

It must be obvious to anyone reading that the level of personal abuse aimed at my article is because the free-traders know they have been exposed as being anti-British. In fact many of those who resort to such abuse probably are making money out of the decline of Britain, perhaps through aritrage, the outsourcing of jobs, investment in coolie labour and the like. However these internationalist free-traders are living on borrowed time. They have been exposed as anti-British and as people without any sort of loyalty to their nation.

[Richard Calhoun]

Tony you state:

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

However what you fail to understand is that it is not good enough to ameliorate the current burden of the Welfare state by politically "creating" another million jobs.

The only way is to dismantle huge parts of the Welfare State, eliminate tax for those earning under £15000 p.a. and reduce the overall tax burden from around 42% to around 25%.

This can not be achieved over night, it will take 10 to 15 years, but it is the only way to bring back manufacturing to our country, that is by putting ourselves on the same playing field as our competitors and current suppliers

[Tim Worstall]

"It must be obvious to anyone reading that the level of personal abuse aimed at my article is because the free-traders know they have been exposed as being anti-British."

No Tony, I'm afraid not. We free traders are concerned with the living standards of the average British person. We want it to be as high as is possible given the resource constraints and level of technology we have.

That means that said British workers should be doing whatever it is that they are least bad at, and the same should be done by French, German, Chinese and Russian workers. We then swap those outputs.

The first part of that is what we term comparative advantage, something that Ricardo pointed out in 1817. It's been called the only non-trivial, non-obvious result in all of economics (by a Nobel Laureate actually) and it would pay you well to try and understand it. The swapping part is trade, something which we're pretty sure is actually older than Homo Sapiens as a species.

One of your errors is to think about trade on the basis of a nation. Now, nations are indeed important as cultural, legal institutions: but not as trade ones. The logic you're deploying to say that a nation should be self-sufficient, as far as possible, applies just as much to any other economic unit. The household, town, county, region, continent.

When we apply your logic to a household, that it should be as far as possible self-sufficient, we can see how in error it is. It is possible to grow much of your own food, possible to weave your own cloth, possible to use the wood from the garden trees as your fuel. But we also have a name for the sort of lifestyle that results: medieval poverty.

Now, I don't know anything about other than what you've written above, but if you really did believe in self sufficiency then you would be running your household on such self sufficient lines.

And given that you would be, every trip that you make to the supermarket, every trip you make to the clothes shop, every time you use energy not produced by yourself: every time you breach the self sufficiency of your household, you are rejecting the very arguments you post above.

Being in favour of trade, whether between Britons or between Britons and Jonny Foreigner, is to be pro-British: for it is this very exchange which makes us all so, in historical terms, so stinking rich.

Please come back to us after you've read and understood this:

http://en.wikipedia.org/wiki/Comparative_advantage

Tell us what the error is in that argument. It'll be worth your time, if you can disprove it then you'll undoubtedly be awarded the Nobel in Economics.

[Alex Singleton]

Mr Makara writes: "these internationalist free-traders are living on borrowed time. They have been exposed as anti-British and as people without any sort of loyalty to their nation."

Mr Makara would do well to read an economic textbook. Is he really really delusional enough to believe that his economically-illiterate article on ConservativeHome has "exposed" free-traders as anti-British?

Mr Makara has failed to respond to the points made by myself or Mr Worstall. He accuses many of his critics of "making money out of the decline of Britain", rather than addressing any of the points that have been made.

The fact remains that countries that are open to trade grow faster than those that put up tariff barriers. Protectionism is unpatriotic.

[Tony Makara]

Richard Calhoun, I agree that certain parts of the welfare state should be wound down and I particularly agree with your call for a far greater level of tax relief, particularly for business. I think it is so wrong to punish initiative. For this reason I advocate that all new business be taken out of the tax regime altogether and allowed to grown before paying tax. All to often business cannot develop the infrastructure needed to create jobs because tax and regulation kills them in their infancy.

Tim Worstall, quoting Ricardo from 1817 is just as bad as the communists quoting marx from 1867. The entire world and human relations have changed completely since those days. We need to deal with the modern world and leave Ricardo and Marx to enjoy their well earned place in history. I fail to see how people can object to the idea of Britain producing more of its wares for itself? I do not advocate a North Korean style autarky, nor a command economy, just that we produce more of our own goods to provide jobs for our people and to protect us from the very real, and underestimated dangers of a decline in our currency. My great fear is that when the Pound plummets significantly as many forex commentators are now predicting, that we will be importing levels of inflation that we will not be able to eradicate without severely high interest rates.

[Richard Calhoun]

Tony
The only way we will be able to 'produce' more is to re-structure our economy. This will not be possible under your proposals

I believe the most urgent tax reduction is to target low earners so that at the same time we can start to reduce the benefits system.
There are no 'easy' answers or solutions to our over taxed economy, but surely you cannot fail to see that to have a 'protected' economy would be going back to the 1970,s when we had huge state monopolies, cars, steel, utilities etc that were employing hundreds of thousands of people who were unproductive.
Maggie dismantled it, the current lot have done huge damage but not as much as could be caused as your call for a 'protected' economy

[Alex Singleton]

Mr Makara writes:

"Tim Worstall, quoting Ricardo from 1817 is just as bad as the communists quoting marx from 1867. The entire world and human relations have changed completely since those days."

The difference is that people have disproved Marx's theories, whereas with Ricardo's theory of economic advantage, they haven't. Instead, it is a building block for modern economics.

[Tim Worstall]

"Tim Worstall, quoting Ricardo from 1817 is just as bad as the communists quoting marx from 1867."

Or as relevant as quoting Newton from the 17th century, or even Jesus Christ from the 0th.

The important point isn't the age of an idea, it's the truth of it.

[Josh]

Tony, did you vote Wilson in '74, Callaghan in '79 and Foot in '83? Your nationalist, socialist (I don't mean that as a Godwinian reference) view of trade is entirely in tune with the Labour party of that era.

[Tony Makara]

Richard Calhoun, I advocate support for British entrepreneurs who wish to supply the domestic market. This is a call to back British business and bears no relation whatsoever to the failed nationalizations of the 1970s. I have never advocated nationalization of industry and never will. I believe in private enterprise and want to support British producers.

Alex Singleton, on the subject of economic advantage, there can be no advantage if it is impossible for the consumer to switch from foreign to British made goods. Try to imagine a scenario in which Sterling collapses in value and we are highly dependent of EU foodstuffs because we have allowed our agricultural base to wither. We can't stop eating and we can't buy the British foodstuffs so we will literally be forced to pay the inflated price for EU foods. This will create pressure on wages as people try to catch up and we will be trapped in an inflationary loop. The fact that we don't produce our own food is probably the greatest danger related to import dependency.

[Richard Calhoun]

Tony

Protecting our own producers will be little different than the State owning industries, the result will be the same.

The only support should be the same for anyone producing in this country, foreign or British.

The only contribution that politicians can make is to create the conditions for an energetic enterprise economy and by keeping out of it themselves.

[Steve]

PERSONAL ATTACK OVERWRITTEN.

[Alex Singleton]

Mr Makara writes: "Alex Singleton, on the subject of economic advantage, there can be no advantage if it is impossible for the consumer to switch from foreign to British made goods."

The subject was "comparative advantage".

Insisting that we should not import things we can make here in this country would cause the labour force to move from things they are earn a lot of money producing to things that they earn less money producing. The result would damage living standards - by far more than as a result of a lowering of Sterling's exchange rate.

[Tony Makara]

Alex Singleton, are you prepared to allow Britain to become little more than a distributor of foreign goods? A nation that produces nothing for itself and only exists by way of living off the labour of other nations? In effect becoming a parasite nation? You have to understand the long-term consequences of such a policy in terms of unemployment and making us vunerable to currency differentials. I find it interesting that the free-traders have to resort to the economic theories of 200 years ago and personal attacks to defend their corner. Still, as I said yesterday such personal attacks show that these internationalists are vexed because their anti-British mantra has been exposed. If we no longer produce our own wares it means a lot of people can no longer work and we become dependent on other nations to survive. If there is a need for a product in our country it is far better that such wares are produced by our own people, rather than giving the work to a Chinaman or a European.

[Editor]

I'm closing this thread now. Enough has been said by all sides and we're having to delete/ overwrite some personally nasty comments.