ManufacturingVsServices

Quora Answer : How can we make Britain great again? What policies need to be implemented to make us powerful again?

May 25, 2017

Sometime in around the 1980s, the UK seems to have made a decision that it should get out of manufacturing and focus on "high value" service industries.

The problem with this is that manufacturing offers three things that service industries don't :

ever increasing productivity through new technological innovation. The UK's productivity is notoriously low compared to its European rivals. That's because it's hard to improve productivity in personal services. (An hour of personal contact requires an hour of personal contact.) And automation in information services tends to either deskill jobs to low-paying, low-satisfaction, low self-esteem drudgery (think call-centres) or eliminate them altogether (think telephone operators). Manufacturing OTOH creates lots of new, higher skilled, higher productivity jobs in the design, operation and maintenance of new technologies.

a route for those coming from the working class to improve their wealth through study. Again, high-skilled, reasonably well-paid engineering jobs are available to anyone of reasonable intelligence willing to study. In contrast high-paid banking and media jobs largely reward people for coming from the right social background and going to the right schools. People who aren't born into the right social networks have fewer opportunities, and what opportunities they do have depend more on luck and chutzpah than diligence. Not only do service industries promote less social mobility than manufacturing industries, they offer fewer incentives for study and self-improvement because success appears to be more arbitrary.

more opportunities for exports. Some of this is due to the framework of global trade in services being less mature than the framework for global trade in products. But some is due to the impossibility of providing personal services remotely. And some is due to inevitable cultural barriers to exporting services. The UK does amazingly well at exporting its pop music and some of its TV. But people will always consume mainly their own culture. Meanwhile some parts of the service sector, eg. retail (the largest economic sector in the UK economy I believe), is almost 100% focused on serving UK consumers and promotes imports rather than exports. By definition, the better the retail sector performs (ie. the more stuff it convinces us to buy), the worse the UK balance of payments gets.

The result of de-emphasizing manufacturing in the UK is a country of low productivity, low social mobility, lower incentive to study and self-improvement, lower work satisfaction and lower exports. All this adds up to an unhappier, poorer and less motivated population.

The solution would be to make product manufacturing a strategic priority and find ways to support and rebuild it. There can obviously be many approaches to that. You probably want to try a lot of small experiments and see which produce the best results.