4 thoughts on “Manufacturing a recovery from coronavirus

  1. Can the flimsy remnants of the manufacturing base be rebuilt by devaluation? The pound has weakened an awful lot since the Brexit vote, but the north of England hasn’t seen much of a revival in the years before the latest biological and economic crisis.

    Any critic of this gentleman would point out that restricting immigration any further will have a negative impact on supporting the ageing population. Meanwhile, the rights of everyone who lives in the UK has been affected by the pandemic, but it is arguably communities of migrants who have been hit the hardest. The bonus for Brexiteers is that their economic perfidy shall be concealed by the trauma associated with COVID-19. I am ambivalent about the EU but the prospects of the UK are poor, and an extension of the transition period would be prudent.

    • Yes I think the case can be made for a more ambitious and comprehensive industrial strategy than simply devaluation. He does argue for state-backed loans which prioritise the development of industry, but I agree with you that devaluation may well not be enough, given the historical record. It may be part of the strategy however.

  2. Problem is…. be be competitive with low income countries the sector would have to have a very high degree of automation. while the production of goods for domestic consumption as well as exports would help the government accounts, wouldn’t the vast majority of the profits accrue to capital rather than labour and so potentially worsen inequality?

    • As long as output grows faster than productivity for the economy as a whole, then employment will fall. Of course, not all the jobs created will be in the expanding manufacturing sector, many will be in services (though some of this will be a spillover from the growing manufacturing output as many services firms serve manufacturing firms), but that is not the point. If exports grow faster than imports so that the current account deficit falls towards balance, then this adds to aggregate demand and boosts output growth with less accumulation of debt.

      Finally, if profits are reinvested in new productive capacity then this will help job creation and rising productivity, allowing wage increases as the economy grows, something which has barely been happening since the 2008 crisis. This need not increase inequality at all if wages rise in line with productivity, or faster for a while. Maybe it’s hard to predict this, but a better performing economy and rising wages also allows scope for increasing spending on public goods and services, spreading the benefits of higher incomes more widely.

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