Tuesday, Feb 20, 2007
What happens when a country destroys its manufacturing base
WhatReallyHappened.com: The United States is in Deep Doodoo
This article talks about the United States - but it may as well be the UK.
Imagine for a moment that someone inherits a farm. Let's say that the farm has good topsoil, a good well, good breeding stock, good seed, and excellent farm equipment in good repair. Prior to passing into the control of the present owner the farm did a good business selling vegetables, meat, and dairy products to the local market, and it made a small profit.
But let us suppose for a moment that the present owner of the farm doesn't understand farming, or isn't even really interested in learning. The present owner has no objection to standing around looking good, so he stays at the farm, standing in front of it, looking good to passers by.
Posted by lvmreader @ 10:58 AM (157 views) Add Comment
10 Comments
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1. nearly30 said...
Bit off the wall but Interesting article nevertheless.
Good point raised about Intellectual Property (IP) and the economy.
UK is said to have many patents, copyrights and other IPs - which are leased out.
Now - if we don't make the stuff - so no jobs back home - and there is still cash to be made - who gets the wealth generated from IPs?
This can only be a situtation where R&D, enterprise and home-grown talent is positive but the benefits only go to the few that own the IP rights! So what happens to the income and wealth gap? Similar situation for drugs companies, electonics etc etc....
And what if other countries simply ignore IP rights - black market copies, re-engineering etc.. who wins in this situation?
Do we ultimately have a market where the 'Real' product is vastly more expensive than the 'Faked' - even though the 'Faked' is actually as good as the 'Real' product?
And what situation do we have when international / global companies buy out smaller firms - pinch the technology and physical machinery and ship it abroad - good olde assest stripping?
Companies seem hell-bent on doing a similar thing now with the whole 'Lease-Back' system - see Sainsburys - which give them the capital from the buildings through relinquishing the ownership to Private Equity Firms.
Are we becoming Franchise Britain?
Little Blue Plaques everywhere that read - this was the birthplace of this or that industry - we were good at it once - honest!!!
2. lvmreader said...
What do we actually "DO" anymore in this country?
Why should Chinese peeople send us goods and services just because we keep saying our houses are worth more money.
See what happened to the Japanese when they did this through the 80s. 15years later, they are still in the doldrums.
And they have been exporting manufactured goods for every single year.
We are DOOMED. We have the worst leaderhsip ever.
3. enuii said...
People who go on about how clever we are, how many patents or IP rights we have and how we will be OK without a Manufacturing Base are the ultimate short termists. Engineers and Scientists used to ply their trade side by side with manufacturing, learning from mistakes, problems and improving and developing products and technology. Remove the manufacturing and you slowly detach these people from reality, the countries where the products are manufactured rapidly pick-up the finer details of the products and improve them themselves just as Japan did in the 1960's and 70's, China is doing the same now.
Within 5 years Chinese cars and motorbikes will be on our roads at discount prices, just like virtually all other manufactured electronic and white goods.
In 10 years time we will be developing nothing, no matter how many universities you open and degrees people get it will be too late, the only future for graduate scientists and engineers will be overseas.
Just remember that a mere 40 years ago we still led the world in virtually every field from Aircraft to Motorcycles, from Ship Building to Toasters and had a health care system that was the envy of the world.
How times change when the only thing people are interested in is the value of the roof over their head, they forget that in the future a house in a clapped out economy will be worth a lot less.
Rant Over.
4. Tipping Point said...
The problem in this country is the reward system is too far focused towards finance. The fact is that the majority of talented engineers and scientist from the top 10 universities go into finance. Impoverished engineering companies cannot hope to offer the sort of earnings potential offered by the big 4 or city banks. The financial rewards are so much greater than engineering that when a graduate does take up an engineering job its with a sad regret that they weren't quite good enough for the city.
5. Northernlad said...
THE WORST LEADERSHIP EVER!!!!
6. Northernlad said...
times are a changing already!
7. Mr Plumbase said...
Well said enuii I thought I might have written that myself, not surprising though when you look at who are the "heros" these days, chefs, b -list celebs, smug city types, and other assorted w*****s, no room for hard work or genuine enterprise anymore, all about a quick buck and nothing else.
8. Jonathan said...
Yes but.....
this article descends into conspiracist gibberish.
Explain this; money is virtual goods and services. If you peg it to a gold standard so it's value is linked absolutely to an asset class what happens when the volume of goods and services expands far faster than the supply of gold? Human population and human activity may not be infinite but they're dynamically rather different than gold stocks.
The issue is rather what happens when the money supply (M$ - broad money) expands faster than economic activity. That's what's been happening lately and the result has been excess liquidity and a rise in asset values.
9. dohousescrashinthewoods said...
Hear hear, enuii and, Jonathan, I agree.
The fact that the US (and the UK) have dramatically disconnected money supply from goods supply is the real issue.
The question is, how do you peg one to the other accurately, leaving no fudge-factor? (e.g. CRI, RPI, Gordon marking his own tests..)
I was astounded at the implication: that the Fed prints tons of worthless paper and uses it to siphon off real money (interest)!
In their shoes I wouldn't care too much about inflation either, because I can lend old rope and get paid real money - instant road to riches.
The value of paper money probably isn't a big deal to them because it is literally "free money". Plus, inflation means people have to borrow more each time, increasing the interest they paf and thereby mathematically protecting my level of income.
In those shoes, I would get richer and everyone would get poorer. If I can just keep the wool over peoples' eyes, I'll be fine. But greed and power makes me push further and faster and I don't think I could constrain myself to just a bit..
Thereby the road to the state of US and UK finances? Anyone seen those exponential graphs recently?
10. lvmreader said...
@Jonathan: There is no such "conspiracist gibberish"
"Explain this; money is virtual goods and services. If you peg it to a gold standard so it's value is linked absolutely to an asset class what happens when the volume of goods and services expands far faster than the supply of gold? Human population and human activity may not be infinite but they're dynamically rather different than gold stocks."
The price of gold goes up. the price per ounce of gram will increase.
You need to read "The Power of Gold" by Peter L. Bernstein.
http://www.amazon.com/Power-Gold-History-Obsession/dp/0471003786