What are the key elements for rebalancing the economy of this country? A great deal has been said about one essential element namely the restructuring and rebalancing of the manufacturing base of the country. Although this is a crucial element there are other equally and challenging aspects after the disastrous situation following the financial crisis of 2008. The obsession and addiction with the financial and banking service which created the crisis continues unabated in spite of statements by the government and other political parties for major reforms. The politicians still seem wedded to an economy that is dominated and disproportionally skewed towards consumerism and property and founded and driven by a culture of permissive debt accumulation. Currently little has been done to carry out any fundamental reforms or to bring to account the financial terrorists, market manipulators and banksters who created the crisis coupled with the attitude by government that banks and financial institutions are too big to fail and must be bailed out! It is as if the country is in a coma where economic policy is involved. with politicians unable or unwilling to rethink new and more radical solutions. At present it seems that we are coming to the end of this particular industrial age along with the financial operations that underpinned it – a new paradigm is urgently required. The current financial architecture is fundamentally flawed and requires a radical review and reform.
One major element in rebalancing the economy is to establish a totally different paradigm of running the economy moving way from one based on debt and loans to one based on savings and a set of sound fiscal policies. It seems the politicians have learnt nothing about the causes of the financial crisis and the activities of banks and financial institutions which has become more like a gambling casino industry. Many commentators have argued that this culture has prevailed with little regulation, high risk taking, and market manipulation, an obsession with derivatives driven by over complex, abstract and suspect algorithms. In addition the use of high-speed/frequency trading further highlights the criminality of the stock exchange. It seems as the pure mathematicians rule the roost in the City and Wall Street! These coupled with a blind trust in a largely unregulated market and the disproportionate influence of multinational organisations. In a sense bank vaults have become casinos full of roulette wheels and other gambling games managed by accountants and pure mathematicians! Require banks and other financial organisations to establish methods of financial support to employers that are more conducive and appreciative of their problems during a period of recession. That financial support must be less bureaucratic and intrusive and encourages companies to grow and contribute to a revitalised export recovery. SMEs particularly should be preferentially treated in terms of interest rates and periods of repayments.
Again artificial bubbles are being created around housing and stocks and shares and inevitably both will collapse – note that the current household debt is £1.43 trillion! compare this with the GDP of the country which is approximately £2.40 trillion. But note there are other debts e.g. pensions, corporate etc. which when totalled far exceed the GDP. Also the policy of privatisation is flawed and should be reversed asap!
In order to restructure the country’s’ economy a new fiscal policy must be established with tight regulation of the financial and banking services and closer monitoring of multinational corporations with practices of the past consigned to the dustbin of history. At present there is a real danger of repeating the mistake of the past by perpetuating the debt culture and a zombie economy through quantitative easing; printing money and allowing companies to trade while hiding irrecoverable debt and maintaining the false belief that the stock exchange represents the real economy is no way forward. Many of the activities of the financial world are on a spectrum much of which is invisible so that people have no or little idea what is going on. Couple this with weak regulation arising from the fact that a number of the regulators/inspection agencies are working both sides of the equation being in league with the banks, financial organisations and the multi-nationals. The current problem was caused by debt and surely the solution is not further debt creation. London and the city have a reputation of being the international centre for financial terrorism and operating the most lax and permissive financial control in the world attracting tax dodgers and speculators from around the world – nothing to be proud of!
The continuing imbalance in the economy is very unfair in a number of ways banks, financial institutions and international corporations are protected at the expense of the individual. It is a culture that takes money from the have not’s and gives it to the have yacht’s! The 1% are ok whilst the 99% are not.
In order to rebalance the economy and address the current fundamental problems a series of long term consistent reforms are needed. Only an economy that produces products and services that are high up the value chain that the rest of the world wants will succeed in the long term in the global economy. It must also have a productive, flexible and adaptable work force with an adequately resourced and supported education and training system (see other articles on this website). This country destroyed its manufacturing base and replaced it with a service based economy largely dependent on financial and banking services with the City, London and the South East as the epicentres. This has now been shown as a false and unsustainable philosophy. There needs to be a redistribution and devolution of resources and powers to the other regions of England as well as a continuing policy of devolution for the home countries. With a more equitable distribution of powers and increased local and regional governance each part of the country can play its part in contributing to its own economic health as well as the rest of the country.
If the EU vote happens let’s hope the result is to stay in – if the country votes to leave the results will be dire for manufacturing, productivity, competitiveness and global activity.
To rebalance the economy the following actions have surely to be considered and implemented:
- Re-establish a viable, innovative manufacturing base producing high quality products and services with a well trained and versatile workforce. Promote apprenticeship programmes by treating them preferentially in terms of funding and apprentice and employer support (see article on apprenticeships on this website). Create a real economy based on sustainable skilled jobs and living wages i.e. real jobs and real wages instead of the free lance/ (rip-off) economy that now exists.
- Create an export led recovery coupled with long term investment in infra-structure.
- In the country we only produce 25% of the engineers we need, ( whilst other commentators say the figure is near 50%), and as a result the country has to import skilled workers from abroad.
- Raise the profile of engineering as it is sadly as a low level occupation requiring few skills e.g. just repairing cars and domestic appliances etc.
- Improve productivity levels which continue to be very low in comparison with other countries.
- Improve the essential skills and quality of managers across all sizes of companies.
- Support new business flotation and SMEs through tax incentives and low interest loans.
- Adequately support colleges and other training providers to produce sufficient qualified people for the newer industries and technologies with a particular emphasis on technical and vocational disciplines. (A recent survey be the Royal Academy of Engineers highlighted the need to produce 830,000 professional scientists, engineers and technologists between 2012 and 2020 – that is even before a reinvigorated manufacturing base is created – if that ever happens!?) The country needs engineering technicians, incorporated and chartered engineers who comprise the engineering teams (see article on this website) that are fundamental to successful manufacturing organisations.
- Introduce an effective system of Information, Advice and Guidance (IAG) on learning, jobs and the economy for young and older people. A recent survey showed that 78% of students said they did not receive enough information about careers in engineering.
- Make a fundamental shift away from an economy that is based on finance and banking particularly bearing in mind that this country has been massively discredited as a trustworthy leader in finance at home and abroad so it will be difficult for it to re-establish its global influence in this area. This essential transition will hopefully create a more sensible and balanced economy with a wide range of strong industries producing high quality products and services for domestic and overseas markets.
- Create a more balanced manufacturing base with a significantly reduced dependency on the armaments and defence industries with their highly questionable export activities to nations with poor human rights records which have been sadly supported by successive governments.
- Reduce the influence and powers at present centred on London and the South East by devolving powers to the regions and the larger cities of England that would allow them greater freedoms to innovate and build of their undoubted strengths.
- Introduce independent regulatory and inspection bodies that will monitor financial institutions and multinational companies and call them to account promptly.
- Emphasis national creation and growth that is based on carefully considered, consistent and long term investment in industries that are productive and responsive to world markets.
- Move away from the linear economy that operates at present to a circular economy namely to one that recycles products and reduces waste. A linear economy justifies its existence by making products that have a limited life of possess built in redundancy with little intention to recycle or renew existing products.
However rebalancing the economy will not be easy as long as the government remain committed to the ideological belief of the financial-politico complex/axis.
Footnote (added July 2014).
A few of the factors that will contribute to this country failing to re-establishing and rebalancing its economy and manufacturing base include:
- Continuing low productivity levels – yet again international surveys highlight that the country has the lowest levels in the G7 nations and one of the lowest in the EU being approximately at 20% lower when compared with other EU countries.
- The continuing decline in levels of numeracy and literary. A recent OECD skills survey highlighted that England is the only country in the developed world where adults (55-65) are more literate and numerate than the younger adults. Even so and more concerning is that 24.1% of adults have mathematical skills equivalent of 10 years of age. So approximately 8.5 million adults possess very low mathematical and literary skills being at the foundation levels.
- The continuing decline in educational standards across all sectors of education and training. Just read the international tables when they appear.
- The reluctance to learn other foreign languages at schools/colleges and universities e.g. since the year 2000 44 Universities have closed foreign language programmes.
- The continuing inability of creating a nation-wide high speed, efficient and secure broad band network according to a recent FSB survey (July 2014) is having a negative impact on more than 47,000 SMEs who have to use phone connections. The future shape of the British economy will critically depend on the creation of more successful SMEs and micro companies. In regard to broadband provision at present providers Sky/BT/Virgin/Talk Talk et.al. find it more profitable to install their delivery systems e.g. fibre optic into domestic properties. The packages that are so profitable include elements that commercial companies do not require e.g. downloading films and music but these are the aspects that make money SMES and micro companies urgently require tax incentives and a far more sympathetic and supportive banking and financial services. Also empty and vacuous headline grabbing statements from politicians about the importance of SMEs that lead to no positive long lasting action are not wanted.
- An educational and training system that recognises and addresses the issues of skills shortages and gaps and what skill sets are required in the future. Providers must be supported by government and employers to create a long term policy on skills without misguided policies.
- The creation of a very high set of quality apprenticeships frameworks with the major players being employers and professional bodies.
Increasingly employers are employing people who ‘can do things and not necessarily those that know things’ and the increasingly academic curriculum being created in the country does not recognise this reality and continues to ignore the consequences of this approach. This example of continual academic drift further significantly weakens the so-called commitment by the government to introducing vocational elements into the national curriculum. It casts aside the development of manipulative skills that are so important in providing a sound foundation to many vocational and technical disciplines and reinforces the low regard for such programmes.
Note: Many of the associated themes raised in this article appear in the viewpoints, the histories and other articles on this website.