Dead Men Left

Friday, April 15, 2005

Beaten Black and Brown ha ha

Larry Elliot, making amends:

...the old blue-collar workforce has suffered under New Labour over the past eight years. Never mentioned in the litany of success trotted out by Tony Blair and Gordon Brown is that the number of jobs in manufacturing has fallen by a million since 1997, and that industrial output is lower going into this election than it was on polling day in 2001. Nor can the problems of UK manufacturing be explained away by globalisation or the rise of China, since both were factors in the mid-90s, when manufacturing employment rose for five years in a row.

Jobs in industry have fluctuated with the level of the pound. After Black Wednesday in 1992, sterling's value fell by 15%, and with exports cheaper and imports dearer manufacturing employment rose by 200,000 in the final four years of John Major's premiership. Sterling started to rise in late 1996. It continued going up for the next five years, by which time it had appreciated by 20%. A stronger pound made chardonnay and shiraz for the chattering classes a lot cheaper, but also meant that as many jobs in manufacturing have been lost under Blair as in the boom-bust recession of the early 90s. The 6,000 jobs at risk at MG Rover have attracted much attention, but are merely the tip of an iceberg.

It's a good article. What it doesn't mention is that Black Wednesday, though disastrous for the Tories, crippling them for the next decade or more, provided the shot in the arm needed to carry the British economy into a boom under a new Chancellor, Gordon Brown. British manufacturing became more competitive overnight, even as consumers felt the pinch, and later Britain was effectively insulated from a prolonged recession in Europe.

Brown had the good fortune to preside over a period of extended relative prosperity, but this had fundamentally little to do with his economic wizadry. Quite the opposite: Brown strongly supported the pound's over-valued entry into the ERM as, amongst other things, a necessary anchor for economic policy. With Brown in government, critical economic weaknesses, like the "productivity gap"and sluggardly investment, have remained unscathed, covered up to a great extent by the benign and unanticipated effects of a catastrophic policy failure. The question, however, is for how long can Brown coast?