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Stephen Archer is a speaker with great charisma. By using illustrations and personal experiences and not being afraid to share his own point of view of the current situation and who is to blame for it, he engages the whole audience, at the same time helping us all to understand the credit crunch a little better.

— Warwick Business School

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Export or Die! The focus on Growth vs. Balance of Payments

The UK Coalition Government has suddenly woken up to the need to export our way out of the recession. That’s what happens when you let kids run the country. The Obama administration has a similar attention to exports which thankfully for the US are on the up. It shames the UK government that the export focus has come 10 months after being elected. How could they be so dozy?

At some time in the 1980s the media shifted its focus on economic reporting from balance of payments news to growth. I well remember the 1970s and before, when the news would be about ‘last month’s balance of payments….’ rather than growth. The fact of the matter is that the UK maintained a proud legacy of the lost Empire with its regard for making and exporting goods around the world.  The UK balance of payments was invariably positive in the 1950s and 1960s though this started to slip back in the 1970s, largely because other nations such as Japan were starting to beat us at our own game. In the case of cars and motorcycles the Japanese virtually wiped out our industries.

In the 1970s we should have paid far more attention to this trend and in the 1980s when we were wealthy we should have really invested in an export infrastructure.

What actually happened is that financial de-regulation meant that the UK economy enjoyed growth on the back of the growth of the City whilst our industrial and export base continued to lag behind.

Most crucially the media got excited about growth and all but stopped reporting balance of payments. This did not matter so much in the 1980s but by the 2000s this did start to matter, the legacy of neglect was in place.

Further, between 1997 and 2010 under New Labour our manufacturing as a part of GDP fell from 25% to 12%. This has savaged our ability to export. Services have not grown enough to replace them.

This is one of the greatest tragedies of the last government – that it’s did so little to foster growth in the manufacturing sector.

And with this as a background we are squabbling over whether or not Prince Andrew is a respectable foreign trade envoy!  Errr..moving the deck chairs on the Titanic comes to mind. The UK has become paradoxically insular in its business affairs and the government damagingly so.

So I look forward to the news reporting the balance of payments (rarely good news) so that the state is shamed into helping the country export and take its place in the world as the creative people that we are.

Just remember, GDP growth does not equate exactly to balance of payments surpluses.


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