MG Rover, industry and employment

By Tim Worstall | 19 April 2005

The inevitable collapse of Britain's MG Rover has brought the usual crew of economic illiterates out of the woodwork. Mark Seddon, writing in The Guardian says:

If France can have large-volume car manufacturers, then so can we - but it will need a publicly owned stake in the industry, investment from the public purse, a new management interested in building high-quality modern cars and a proper search for private-sector partners.

What he quite fails to note is that the UK does have large-volume car manufacturers, production rising from 770,000 cars in 1980 to 1.38 million in 2003. What we do not have is a British-owned large-volume car manufacturer and that is a rather different issue, if an issue it is at all.

The actual fact is that for all the talk of globalization moving production from British industry simply is not true. Manufacturing output is within a couple of percentage points of its all time high. What is true is that manufacturing employment is falling, as it has been for decades, from 7.1 million in 1978 to 3.5 million today. As Mark Steyn points out, that is also true of Chinese industry:

Between 1995 and 2002, China had a net loss of 15 million manufacturing jobs, but it made no difference to the booming economy because of the rapidly expanding high-value service sector.

If we cast our net back to 1850 we would see that the two major employers in the UK were agriculture and domestic service. Neither of these two really trouble the employment statisticians any more. Manufacturing will, I predict, over the next century go the same way. Just as agricultural output is vastly greater than it was then, so will manufacturing output, while employing some vanishingly small percentage of the workforce.

When we talk of the decline of manufacturing we should be careful to make it clear that we are actually talking about the decline of manufacturing employment, and that it is also a good thing as it is simply a symptom of manufacturing labour becoming more productive.