Brexit, Globalisation and De-Industrialisation

by Jim Tomlinson (Glasgow University)

brexit downloadIn seeking to understand the economic basis of the Brexit vote, we should concentrate not on globalisation but on the long-term impact of de-industrialisation.

The evidence is certainly strong that economic disadvantage played a significant part in the patterns of voting in the referendum (though age and educational qualifications seem to have played a large, independent role). But this disadvantage seems best linked to de-industrialisation, which has left a legacy of a much more polarised service sector labour market, with large numbers of people condemned to poorly paid and insecure jobs.

Globalisation has contributed to de-industrialisation, but it is only one contributor, and historically not the most important. De-industrialisation began in Britain in the 1950s. It was driven by shifts in patterns of demand and technological change, most strikingly in increasing the growth of productivity (and lowering the relative price) of manufactured goods. (Total industrial output has not fallen, but grown slowly on trend.)

These broad trends have affected all industrial countries, so that industrial employment has fallen substantially even in successful industrial countries with a manufacturing trade surplus, such as Germany. Industrial employment as a share of the total has more than halved in that country since its peak in 1970.

The long-run nature of these trends is illustrated by the fact that many more coal-mining jobs were lost in Britain under Harold Wilson’s government of the 1960s than under Margaret Thatcher’s government of the 1980s.

Similarly, the big collapse of industrial jobs in Lancashire began in the 1950s and accelerated in the 1960s; across the country, textiles and clothing lost 123,000 jobs between 1964 and 1969.

Proportion of workers in industrial employment in the UK

1957               48%

1979               38%

1998               27%

2016               15%

Serious errors of policy have undoubtedly accelerated this process, and compressed it into short time periods (most obviously, the extraordinary appreciation of the pound in 1979-81 as a result of the Thatcher government’s policies). But overall the process has not mainly been policy-driven.

In responding to the economic problems that underpinned the Brexit vote, it is important to be clear that globalisation is only one part of the story. To put it crudely, if globalisation were somehow reversed, it would not return Britain to having anything like the number of industrial jobs that existed in the 1950s.

While there are certainly powerful arguments for seeking to offset the impact that globalisation has had on particular groups of workers, the biggest challenge is how to make a service-dominated economy deliver much better outcomes for those who currently occupy the lousy jobs in the service sector.

THE INEFFECTIVENESS OF GOVERNMENT EFFORTS TO PROMOTE PRODUCTS MADE AT HOME: Evidence from the ‘Buy British’ campaigns of the 1960s and 1980s

David Clayton (University of York) and David Higgins (Newcastle University)

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Campaigns to promote the purchase of domestic manufactures feature prominently during national economic crises. The key triggers of such schemes include growing import penetration and concern that consumers have been misled into purchasing foreign products instead of domestic ones. Early examples of such initiatives occurred in the United States in 1890 and 1930, with the introduction of the McKinley tariff and the ‘Buy American’ Act, respectively.

In Britain, similar schemes were launched during the interwar years and in the post-1945 period. For the latter, Britain’s share of world trade in manufactures declined from 25% to 10%, and between 1955 and 1980, import penetration in the manufacturing sector increased from 8% to 30%.

Simultaneously, there were numerous government public policy interventions designed to improve productivity, for example, the National Economic Development Council and the Industrial Relations Commission. Both Labour and Conservative governments were much more interventionist than today.

Currently, the rise of protectionist sentiment in the United States and across Europe may well generate new campaigns to persuade consumers to boycott foreign products and give their preference to those made at home. Indeed, President Trump has vowed to ‘Make America Great Again’: to preserve US jobs he has threatened to tax US companies that import components from abroad.

Using a case study of the ‘Buy British’ campaigns of the 1960s and 1980s, our research, to be presented at the Economic History Society’s 2017 annual conference in London, considers what general lessons can be learned from such initiatives and why, in Britain, they failed.

Our central arguments can be summarised as follows. In the 1960s, before Britain acceded to the European Economic Community, there was considerable scope for a government initiative to promote ‘British’ products. But a variety of political and economic obstacles blocked a ‘Buy British’ campaign. During the 1980s, there was less freedom of manoeuvre to enact an official policy of ‘Buy British’ because by then Britain had to abide by the terms of the Treaty of Rome.

In the 1960s, efforts to promote ‘Buy British’ were hindered by the reluctance of British governments to lead on this initiative because of Treasury constraints on national advertising campaigns and a general belief that such a campaign would be ineffective.

For example, the nationalised industries, which were a large proportion of the economy at this time, could not be used to spearhead any campaign because they relied on industrial and intermediate inputs, not consumer durables; and in any case, the ability of these industries to direct more of their purchases to domestic sources was severely constrained: total purchases by all nationalised industries in the early 1970s were around £2,000 million, of which over 90% went to domestic suppliers.

Efforts to nudge private organisations into running these campaigns were also ineffective. The CBI refused to take the lead on a point of principle, arguing that ‘A general campaign would… conflict with [our] view that commercial freedom should be as complete as possible. British goods must sell on their merits and their price in relation to those of our competitors, not because they happen to be British’.

During the 1980s, government intervention to promote ‘Buy British’ would have contravened Britain’s new international treaty obligations. The Treaty of Rome (1957) required the liberalisation of trade between members, the reduction and eventual abolition of tariffs and the elimination of measures, such as promotion of ‘British’ products, ‘having equivalent effect’. Attempts by the French and Irish governments to persuade their consumers to give preference to domestic goods were declared illegal.

The only way to overcome this legislative restriction was if domestic companies chose to mark their products as ‘British’ voluntarily. This was not a rational strategy for individual firms to follow. Consumers generally prefer domestic to foreign products.

But when price, quality and product-country images are taken into account, rather than origin per se, the country of origin effect is weakened considerably. From the perspective of individual firms promoting their products, using a ‘British’ mark risked devaluing their pre-existing brands by associating then with inferior products.

Our conclusions are that in both periods, firms acting individual or collectively (via industry-wide bodies) did not want to promote their products using ‘British’ marks. Action required top-down pressure from government to persuade consumers to ‘Buy British’. In the 1960s, there was no consensus within government in favour of this position, and, by the 1980s, government intervention was illegal due to international treaty obligation.

In a post-Brexit Britain, with a much weakened manufacturing capacity compared even with the 1960s and 1980s, the case for the government to nudge consumers to ‘Buy British’ is weak.

From VOX – Short poppies: the height of WWI servicemen

From Timothy Hatton, Professor of Economics, Australian National University and University of Essex. Originally published on 9 May 2014

The height of today’s populations cannot explain which factors matter for long-run trends in health and height. This column highlights the correlates of height in the past using a sample of British army soldiers from World War I. While the socioeconomic status of the household mattered, the local disease environment mattered even more. Better education and modest medical advances led to an improvement in average health, despite the war and depression.

hattongraph
Distribution of heights in a sample of army recruits. From Bailey et al. (2014)

The last century has seen unprecedented increases in the heights of adults (Bleakley et al., 2013). Among young men in western Europe, that increase amounts to about four inches. On average, sons have been taller than their fathers for the last five generations. These gains in height are linked to improvements in health and longevity.

Increases in human stature have been associated with a wide range of improvements in living conditions, including better nutrition, a lower disease burden, and some modest improvement in medicine. But looking at the heights of today’s populations provides limited evidence on the socioeconomic determinants that can account for long-run trends in health and height. For that, we need to understand the correlates of height in the past. Instead of asking why people are so tall now, we should be asking why they were so short a century ago.

In a recent study Roy Bailey, Kris Inwood and I ( Bailey et al. 2014) took a sample of soldiers joining the British army around the time of World War I. These are randomly selected from a vast archive of two million service records that have been made available by the National Archives, mainly for the benefit of genealogists searching for their ancestors.

For this study, we draw a sample of servicemen who were born in the 1890s and who would therefore be in their late teens or early twenties when they enlisted. About two thirds of this cohort enlisted in the armed services and so the sample suffers much less from selection bias than would be likely during peacetime, when only a small fraction joined the forces. But we do not include officers who were taller than those they commanded. And at the other end of the distribution, we also miss some of the least fit, who were likely to be shorter than average.

FULL TEXT HERE

From The Conversation: No, the Black Death did not create more jobs for women

by Jane Humphries, Professor of Economic History, University of Oxford
Published on 8 April 2014

The plague known as the Black Death which tore through 14th century Europe is traditionally held to have had at least one upside. Women, the theory runs, were able to exploit the labour shortages of post-plague England to find themselves in a richer and more stable position than before. However the idea that women of the era were forerunners of the post World War I generation doesn’t stand up to much scrutiny, as new research shows.

Medievalists have long debated the extent to which women shared in the “golden age” of the English peasantry that followed the demographic catastrophe of the Black Death. The plague killed between 30% and 45% of the population in its first wave 1348-59. Recurrences meant that by the 1370s England’s population had been halved.

The silver lining, for the peasantry at least, was the dramatic increase in workers’ remuneration as landowners struggled to recruit and retain labourers. The results are apparent in a rapid increase in male casual (nominal and real) wages from about 1349.

hngts2cm-1396890152

Some historians have argued that women’s gains were even more marked as they could find employment in hitherto male-dominated jobs, or migrate to towns to work in the growing textile industries and commercial services and so enjoy “economic independence”.

Others however have suggested that whatever the implications of the Black Death for male workers, the sexual division of labour prevented women from seizing the opportunities created by the labour shortage. As one account puts it: “Women tended to work in low-skilled, low-paid jobs … This was true in 1300 and it remained true in 1700”.

The debate has significant implications as optimists have gone further in arguing that women’s improved wages changed demographic behaviour by delaying marriage, promoting celibacy and reducing fertility, with the resulting so-called north-west European Marriage Pattern raising incomes and promoting further growth.

READ FULL ARTICLE HERE

 

Credit, Currency & Commerce: New Perspectives in Financial and Monetary History

Conference Report: University of Cambridge, 13-14 September 2016
by Sabine Schneider, University of Cambridge

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‘Dividend Day at the Bank of England’ by George Elgar Hicks (1824-1914), Bank of England Museum. Copyright: The Governor and Company of the Bank of England

 

Retracing the path to the Great Recession, Barry Eichengreen has observed how ‘The historical past is a rich repository of analogies that shape perceptions and guide public policy decisions.’[1] Certainly, recent years have shown that analogies drawn from historical experience are most in demand ‘when there is no time for reflection.’[2] Beyond the study of banking crises and financial regulation, the past decade of economic turmoil has generated renewed scholarly interest in the evolution and politics of financial capitalism. While the legacy of the Great Recession has profoundly shaken established tenets of mainstream economics, it has also stressed the need for new historical narratives that understand the world economy within the specific cultural contexts, economic ideas and political debates of the past. On 13 and 14 September, the Centre for Financial History at Darwin College, Cambridge, hosted an early career conference to foster an interdisciplinary dialogue about histories of finance, global trade and monetary policy. Over the two conference days, twenty early career scholars and doctoral researchers presented papers that ranged, in period and geography, from medieval Catalonia and eighteenth-century Scotland to pre-war China and post-war Britain. This review will reflect on three major themes of the conference: the art and science of central banking, studies in political economy, and cultural approaches to the history of finance.

Central banking and the formation of monetary policy have resurfaced as key concerns for economic historians since the 2007/8 financial crisis. The debate over the Bank of England’s evolving role as Lender of Last Resort, for instance, was re-examined by Dr Paul Kosmetatos (Edinburgh). His paper analysed Adam Smith’s and Henry Thornton’s differing recommendations for crisis containment as a starting-point for evaluating the Bank’s conduct in 1763 and 1772. Kosmetatos concluded that the Bank’s timely injection of liquidity via the banknote channel during the latter crisis showed that ‘the attitude and means of intervention described by Thornton were already practically in place.’ Pamfili Antipa (Banque de France/Paris School of Economics) presented new Bank of England balance sheet data that adds considerably to our knowledge of how the British government financed the Napoleonic and Revolutionary Wars. Her joint research with Professor Christophe Chamley (Boston) revealed that the Bank strategically operated in the secondary market for Exchequer bills in order to re-direct funds to the Treasury. For the post-war period, Oliver Bush’s paper (Bank of England/LSE) investigated Britain’s approach to monetary and macroprudential policies in the years after the UK Radcliffe Report (1959). Based on collaborative research with Dr David Aikman (Bank of England) and Professor Alan M. Taylor (California), Bush presented new findings on the ‘causal impacts of interest rates and credit controls’ on inflation and economic activity.[3]

The evolution and management of modern central banks in mainland Europe and Great Britain formed the focus of three further papers. Starting with the foundation of Germany’s Reichsbank in 1876, Ousmène Mandeng (LSE) explored the role of competition and monetary stability as integral elements of the operation of Germany’s central bank prior to 1890. Mandeng argued that the Reichsbank’s flexible reserve requirements, as well as its rivalry with regional note issuing banks in the market for bills, created an effective, incentives-based system of central banking. Enrique Jorge-Sotelo (LSE) took a micro-historical approach to the Spanish banking crisis of 1931, assessing the criteria the Banco de España employed for the provision and conditions of its emergency loans. In her closing keynote, Dr Anne Murphy (Hertfordshire) examined the origins of modern management practices at the Bank of England.[4] Shedding light on the Bank’s working processes, recruitment, and staff training during the 1780s, Dr Murphy demonstrated that the Bank took important steps towards fostering and monitoring good managerial practice, which over the long run may have aided ‘the development of trust in the British public finances.’[5]

The politics of currency, taxation, and trade shaped a second major strand of the conference. Professor Martin Daunton (Cambridge) delivered a wide-ranging keynote on ‘Bretton Woods Revisited: Currency, Commerce and Contestation’. Shifting the focus away from the predominant narrative of US-UK rivalry at Bretton Woods, Daunton re-evaluated the specific domestic concerns of several Western European and Commonwealth countries, which affected their negotiating positions at the 1944 summit and at subsequent international trade conferences. The League of Nations’ work in the field of trade finance in the years leading up to the Great Depression was re-examined by Jamieson Gordon Myles (Geneva). His paper investigated the League’s failed internationalist efforts, and traced how economic nationalism and beggar-thy-neighbour policies could take hold in the inter-war period. New research on France, China, and Germany prompted further reflections on the impact of global integration in capital markets, and its effect on nations’ public finances. Jerome Greenfield (Cambridge), for example, investigated the political economy of France’s fiscal constitution between 1789 and 1852. Greenfield’s paper elucidated the central government’s rationale for re-introducing and extending indirect taxes after they had been abolished during the French Revolution. Ghassan Moazzin (Cambridge) discussed the Chinese state’s practice of raising capital for public expenses through foreign bond markets in the early twentieth century. His paper demonstrated that the interventions of Western bankers to uphold China’s credit had a critical influence on the political outcome of the Republican Revolution of 1911. Considering the nexus between finance and diplomacy, Sabine Schneider (Cambridge) appraised the role of cosmopolitan financial elites in Germany’s conversion to a gold standard. Her paper examined the semi-official position of Gerson von Bleichröder, private banker and economic advisor to Bismarck, and his interventions in the monetary reforms Germany pursued after unification.

Several papers pointed to the underexplored potential of cultural and social history to broaden our understanding of how economic cultures, ideologies and policies are themselves socially constructed. Owen Brittan’s paper (Cambridge) drew on autobiographical evidence to assess men’s anxiety over bankruptcy and debt in later Stuart England, and revealed how such fears were mediated through ideals of masculinity, honour and economic independence. Henry Sless (Reading) discussed the news reporting of financial events in the Victorian era, while Damian Clavel (Geneva) revisited the speculative bubble in Latin American bonds that gripped investors in the 1820s, focusing, in particular, on how underwriters constructed the notorious story of the ‘fictitious country of Poyais’.[6] Exploring changing cultural attitudes to speculation, Kieran Heinemann (Cambridge) traced the practices of brokers and investors in Britain’s grey market for stocks and shares during the half-century leading up to the Prevention of Fraud Act of 1939. Heinemann recovered a largely forgotten ‘discursive struggle over the boundaries between investment, speculation and gambling’, which still resonates with the concerns of investors and regulators today.

Credit, Currency & Commerce brought together thirty-six junior researchers and senior academics from across history, economics, development economics, business management, and philosophy. Their contributions from a variety of disciplinary angles and methodologies produced lively exchanges on the trajectory of financial and monetary history, and the opportunities it holds for mastering a deeper understanding of the world economy.

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The full conference report and programme are available at https://camfinancialhistory2016.wordpress.com/

The conference was generously funded by the Economic History Society, the Centre for Financial History and the Faculty of History at the University of Cambridge. For more information on grants and conference funds: www.ehs.org.uk

 

[1] Barry Eichengreen, Hall of Mirrors: The Great Depression, the Great Recession and the Uses and Misuses of History (New York: Oxford University Press, 2015), 377.

[2] Eichengreen, Hall of Mirrors, 377.

[3] David Aikman, Oliver Bush, and Alan M. Taylor, ‘Monetary Versus Macroprudential Policies: Causal Impacts of Interest Rates and Credit Controls in the Era of the UK Radcliffe Report’, NBER Working Paper No. 22380 (June 2016).

[4] Anne Murphy, ‘The Bank of England and the Genesis of Modern Management’, eabh Working Paper, No. 16-02 (August 2016); see also, Anne Murphy, ‘“Writes a fair hand and appears to be well qualified”: the recruitment of Bank of England clerks, 1800-1815’, Financial History Review, 22 (2015), 19-44.

[5] Murphy, ‘The Bank of England and the Genesis of Modern Management’, 29.

[6] Carmen M. Reinhardt and Kenneth S. Rogoff, This Time is Different: Eight Centuries of Financial Folly (Princeton: Princeton University Press, 2009), 93.

Repost – Gentlemen and capitalism: some questions

by Dave Postles, University of Hertfordshire

Consequent upon Wiener’s and Rubinstein’s research respectively into culture and industrial capital and ‘men of wealth’, Cain et al. embarked upon the elucidation of ‘gentlemanly capitalism’, which has become a paradigm of English entrepreneurship, status and the performance of the economy.(1) Perhaps, however, we can illustrate a dichotomy by reference to contemporary literature and ethnographic writing. Ostensibly, Henry Wilcox represents this ethos of gentlemanly capitalism, although his company is a commercial enterprise rather than industrial. We should recollect, however, that, although he purchased the Onibury estate (Clun, Shropshire), he really was not enamoured of the countryside, visited the estate rarely, and abandoned it when an unpleasant incident occurred there. Nor was he especially attracted to his wife’s Howards End. His countenance of both arose from expectations of status and family rather than a desire to enjoy the lifestyle of the country elite. His natural environment was the City.(2) In contrast, Jack London excoriated the 400,000 gentlemen in the 1881 census, ‘of no occupation’ and ‘unprofitable’.(3) Such a number could not have been composed of either retired industrialists or ‘men of wealth’.

Read the full article here: http://davelinux.info/wordpress/?p=32b1bb2b9a79a7a81b8033e6a9e8a9fd33

 

From Positive Check – Danger to the Old Lady of Threadneedle Street?

by Patrick O’Brien (Professor Emeritus,
London School of Economics)  and Nuno Palma (Assistant Professor,
University of Groningen)
– Friday 21 October 2016

NEW EHES Working paper

The Bank Restriction Act of 1797 suspended the convertibility of the Bank of
England’s notes into gold. The current historical consensus is that the suspension was a result of the state’s need to finance the war, France’s remonetization, a loss of confidence in the English country banks, and a run on the Bank of England’s reserves following a landing of French troops in Wales.

Read the full post here: http://positivecheck.blogspot.it/2016/10/danger-to-old-lady-of-threadneedle.html

The working paper can be downloaded here: http://www.ehes.org/EHES_100.pdf

 

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