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Corbyn's Manufacturing Fetish Parallels Trump's Obsessions

July 26, 2018 in Economics

By Ryan Bourne

Ryan Bourne

This week’s George Orwell award for doublespeak goes to
Jeremy Corbyn.

The Labour leader has repeated ad nauseam that he’s
“for the many, not the few”. But this apparently does
not apply to business policy. His economic speech this week —
trailed misleadingly as about opportunities from Brexit —
focused on the small 10pc of the economy
and 8pc of employment in manufacturing.
The growing service
sector which dwarfs it was largely ignored.

Corbyn’s certainly not the first politician to hold a
manufacturing fetish. Whereas economists are usually indifferent
towards industrial structure, many MPs seem to prefer physical
“stuff”. But Corbyn’s romanticism is more deep
set.

Though he pays lip service to Britain being a hub for future
industries, his proposals prioritise propping up domestic
shipbuilding, train production, and passport producers
through tilting public procurement in favour of domestic firms.
The very title of his speech — “Build it in Britain
again,” an echo of Donald Trump’s “Make America
Great Again” slogan — is a paean to reviving
traditional manufacturing jobs.

Corbyn didn’t advocate new post-Brexit tariffs thankfully,
although he would maintain a UK-EU protectionist customs union.

But the parallels with Trump do not stop with desired reshoring
of manufacturing. Corbyn wants to water down World Trade
Organisation rules, sung the virtues of a cheaper pound, wishes to
relax restrictions on state aid and riffed off a “Buy
British” mentality. Like Trump, underpinning it all was an
assumption that malign forces were to blame for hollowing out
industry. Whereas Trump’s villains are weak former presidents
and cunning foreign governments, Corbyn blames the traditional
bogeymen of the hard Left: the Tories, in hock to dastardly
bankers.

So convinced of his ideology of economic planning, Corbyn
thinks the growing economic
share of services
was somehow designed by financiers and their
Conservative mates in Parliament.

True, policy can be important. Tax and environmental laws may
well have raised manufacturing costs and could be re-examined.

But broadly, global trends show Corbyn is badly mistaken. The
decline in manufacturing employment owes everything to changing
demands and resources flowing according to comparative
advantages.

As the economist Robert Lawrence has shown, innovation and
productivity growth has been easier in manufacturing, as machines
have replaced workers. Over time, factories therefore produced more
for lower cost. But as we get richer due to this, we tend to spend
the additional income on services and not goods, and pocket the
savings from cheaper manufactured products for other spending.
Subsequently, manufacturing falls as a
share of the overall economy.

This trend can be seen both in the UK and around the developed
world. Manufacturing output was actually …read more

Source: OP-EDS

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