Open up the factories and get Britain moving again
Neil Clark: As the recession goes on, it's time we stopped banking on financial services
It's certainly not the sort of news that Gordon Brown wanted to hear just before Christmas. Official figures released yesterday show that despite the Brown government‘s efforts to boost the economy, Britain has remained in recession for a record-breaking sixth quarter.
As The First Post's business correspondent Edward Helmore reports today, the economy shrank by 0.2 per cent between July and September - meaning that Britain is now the only G20 nation still mired in recession.
Why have we got it so bad while our European neighbours are already enjoying a return to economic growth? The opposition have of course been quick to pin the blame on Gordon Brown and Chancellor of the Exchequer Alistair Darling. But the problem runs deeper than two individuals. The reason why Britain is still in recession, while France and Germany are not, is because of the type of economy we run.
Britain, since the election of Margaret Thatcher in 1979, has been a country where manufacturing industry - and a diverse, mixed economy, has been sacrificed at the altar of free market dogma. We have allowed important industries to close, or be sold overseas - mistakenly pinning our hopes on a burgeoning financial services sector fuelling long-term economic growth.
Our continental rivals have pursued a more balanced, less-ideological approach. Unlike Britain, France, Germany and Italy have maintained a strong industrial base. Six of the top 14 automobile manufacturers in the world are from those three countries. Europe‘s largest engineering company - Siemens - is German; the largest energy company - EDF - is French and 85 per cent owned by the French government.
It's instructive to compare the economic policies of Nicolas Sarkozy, France's right-wing President, with those of his Conservative counterparts in Britain. Sarkozy has attacked the "speculative capitalism" of hedge funds and other financial predators and railed against market fundamentalism. He has called for greater state intervention in the economy and has done all he can to protect French manufacturing during the economic downturn.
In Britain meanwhile, the Conservative Party remains wedded to free-market, laissez-faire ideology, defending the role of hedge funds and private equity companies, opposing state intervention to help industry and remaining blase about famous British manufacturing companies, such as Cadbury, being taken over by foreign-owned rivals. When Lord Mandelson was involved in a public argument with Sarkozy over issues of free trade and protectionism last year, British conservative commentators revealingly sided with Labour's EU Commissioner and not with the French President.
The great tragedy for the British economy was that instead of breaking with free market dogmatism when they came to power in 1997, New Labour continued on the path laid down by Margaret Thatcher. In fact, under Labour, manufacturing declined at a faster rate than even under the Conservatives. Labour in government presided over a reckless credit boom and did nothing to stop the rise of the worst kind of financial spivvery in the City of London.
But despite the change in rhetoric since the slump kicked in, the government continues to champion the disgraced financial services sector. Shamefully Labour - together with London mayor Boris Johnson and the Conservative party - is fighting attempts to introduce tougher EU-wide regulation of hedge funds.
It doesn't have to be like this. In the 1960s the Labour government's pro-manufacturing policies, aided by the devaluation of 1967, led to a 20th century record balance of payments surplus of £550m in 1970, the year they left office.
An ‘I'm Backing Britain' campaign, to encourage economic patriotism, was endorsed by Prime Minister Harold Wilson, while an innovative Selective Employment Tax was levied on service industries, the revenue going to subsidise export industries.
What is needed for Britain to achieve long-term sustainable growth is for the Labour Party to once again put industry first and end its disastrous 12-year love-in with the City. And for the Conservatives to jettison Thatcherism - a most unconservative ideology - and follow the more dirigiste Gaullist policies followed by Sarkozy in France. Or, failing that, a third party to come to power which will make a clean break with the deeply flawed economic policies of the past 30 years.
Britain was once known as ‘The Workshop of the World'. If we are to return to prosperity, we urgently need to get the factory gates open again. ·
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