The decline of British industry

Fight racism! Fight Imperialism! 112 – April/May 1993

industry decline
Longbridge MG Rover plant, 1979

In 1992 output of all production industries – including manufacture, energy and water – fell for the third year running, the first time this has happened since the early 1930s. As if some belated dawn of recognition had struck the government’s brain, John Major declared that ‘... services aren’t enough because services in a recession are the first thing you cut, so we need the manufacturing base both as import substitution and as part of the continuing export drive’. TREVOR RAYNE examines the decline of British manufacture.

Manufacture is now presented as the key to solving the British economy’s problems of persistent trade deficits, soaring public sector debt and unemployment. To reverse the decline of British manufacture would require halting the decay of British capitalism. This is impossible without an unprecedented assault on living conditions for millions of people in Britain and around the world, combined with a shift in the balance of forces between competing capitalist blocs.

It was fashionable among Tory ideologues and their economic theorists during the 1970s to claim that the distinction between income derived from manufacture and income derived from services was irrelevant; what mattered was that goods and services be sold on the market. A dwindling manufacture was viewed as acceptable for as long as services expanded and were profitable and North Sea oil was there to top up the balance. An expansion of banking, insurance and financial services during the Thatcher years was accompanied by intonements to a ‘leaner and fitter’ industry.

Between 1979-92 over 2.5 million manufacturing jobs have been cut out of the British economy. At the end of 1992 manufacturing employment stood at 4.59 million or 18% of the workforce in employment. In 1978 7.3 million of the workforce were employed in manufacture, 32% of the total. At the end of 1992, Britain’s manufacturing output was about 1% higher than it was in 1973. Over the period 1970-90 Britain’s manufacturing capacity has grown by 19%, that of Germany, France and Italy by 43%, the USA’s by 86% and Japan’s by 129%. At the end of the Second World War, Britain sold 25% of the world’s manufactured exports; today the figure is less than 9%.

This relative decline in manufacturing performance has produced an intractable balance of payments problem. The trade in physical goods, the visible trade, has been in deficit since 1983. The current account, which combines the visible balance with the invisible balance in services, has been in deficit since 1987. The situation is deteriorating. With a presumed ‘crisis of confidence’ in the population supposedly depressing demand, Britain recorded record levels of imports for December and January of £5.44bn and £5.31bn respectively. Britain’s visible balance for 1992 was in deficit by £13.77bn. The trade in services was in surplus by £3.73bn, but the final quarter of 1992 produced the lowest surplus in this sector for 11 years, of £594m. With Britain's physical output of oil falling by 28% since 1986, earnings from services combined with those from investments overseas, which yielded a £3.2bn surplus for 1992, are insufficient to cover the huge deficit in traded goods.

Imports are rising in almost every sector of visible trade: iron and steel up 50% since 1985; electrical goods up 100% over the same period; clothing and footwear like-wise doubled; plastics up 5% since 1990; scientific instruments up 8% since 1990. As one merchant banker remarked on the feeble hopes that sterling’s devaluation might revive British capital’s competitiveness: if Britain ‘does not produce motor cycles, vacuum cleaners and fridges in the first place, simply chopping 15 per cent off the exchange rate is not going to solve the problem’.

Seldom have a British government or indeed capitalism’s theoreticians been so bereft of ideas or inkling. In so far as the government has a strategy towards the EC and Maastricht, it is to attempt to draw overseas investment into Britain by cheap labour and thereby facilitate custom free exports into the single market. Since 1987 about one-fifth of the £220bn invested in British industry has come from abroad. In his budget speech Lamont boasted: ‘We have attracted no less than a third of all foreign investment into the EC over the last few years.’ British capital hopes to revive itself by sharing its labour with particularly Japanese and US capital.

Reviving profitability

Capitalists do not invest to revive manufacture, to solve trade imbalances or to reduce unemployment; they invest to make a profit. Currently, the average rate of return on investment in Britain is about 7.3% and has been thereabouts since early 1991. This is approximately half the return on investment in Germany and the USA and a quarter of what can be squeezed out of the Third World. 7.3% is insufficient to revive much interest in British manufacture.

British capital, using the British state, must resort to the customary ways of raising the rate of profit through the extraction of more surplus value from labour. Each of the following can be seen in more extensive use in Britain today, and they will be reinforced with a vengeance. The length of the working day can be extended; the work rate can be speeded up; the amount of time necessary to make a product can be reduced, resulting in a greater number of goods made during the working day. New machinery and changes in the organisation of the workforce are integral to these processes which drive down the costs of labour. At the same time the demand for labour falls as the pursuit of surplus value intensifies and a huge reserve army of unemployed is disgorged by capital, available to be deployed to discipline and further reduce the cost of the workforce. Currently, the 24 countries of the Organisation of Economic Cooperation and Development, developed capitalist economies, are estimated to have 34 million unemployed and double that amount classified as ‘economically inactive’, that is, no jobs, but given up searching.

Together with the above methods of raising the rate of profit, capital concentrates into huge monopolies which are able to manipulate prices and control cheap resources and markets around the globe. This they do in competition with each other for ‘spheres of influence’. These are the real solutions that capital seeks to use for its problems of accumulation, not the innocently labelled ‘investment in training’, ‘tax allowances on capital’, ‘work-fare’. If Major and Lamont do not have a clue, capital will attempt to survive on its instinct and attack labour.

Monopolies

‘Britain is an island dominated by big corporations, growing bigger: with a small circle of corporate chiefs at the top.' (Anthony Sampson, The Essential Anatomy of Britain.)

Of the Financial Times’ ‘European 500’ top companies ranked by market capitalisation value (that is, assets and share value), of the ten biggest, three are British and two are Anglo-Dutch. Twenty five of the top 50 are British and Anglo-Dutch companies. While the British economy lags behind, the transnational monopolies concentrate through mergers and takeovers at home and overseas and take leading global positions. The top 13 British companies in the FT list shed approximately 70,000 jobs in 1992. None of those 13 are primarily manufacturing firms, if pharmaceuticals are excluded. Britain’s biggest manufacturer and exporter of manufactured goods, British Aerospace, came 464th on the list.

In February, British Aerospace announced the largest ever loss by a British company of £1.2bn. Its workforce of 134,000 in 1991 was cut to 123,000 in 1992 and a further 10,000 jobs are to go this year. The only profitable sector of British Aerospace’s operations apart from ‘construction and other’ is weapons sales. Britain has a trading deficit in goods with every region of the world except for the oil exporting countries, to whom British capital sells weapons.

Intensification

The motor industry is traditionally seen as the barometer of Britain’s manufacturing performance. Foreign trade in cars went into the red in 1982 and the deficit rose to a record £6.6bn in 1989, 28% of the visible trade deficit. In 1991 Britain received 38.2% of Japanese investment into Europe, $3.6bn. So far £2.1bn has been invested by Nissan, Toyota and Honda in car manufacture in Britain. The chairperson of Peugeot described Britain as ‘a Japanese aircraft carrier’, leading the assault on European car makers. By the end of the 1990s, the ‘British’ car industry is expected to be a third Japanese, a third US and a third European.

However, looking to Japan to haul British manufacture back to its feet is a delusion. When a Japanese car is sold out of Britain up to 70-80% of the components were imported, diminishing the value added here in Britain. Further, since 1991 Japanese overseas investment has fallen by 39% as it moves into Asian markets and the Japanese domestic economy slides towards a stock market and banking crisis with corporate profits down nearly 40% in the last quarter of 1992.

Significantly Japanese working practices show something of what is in store for workers in Britain. In 1982, 315,000 car workers made 1.16 million vehicles. In 1991 216,000 workers made 1.45 million vehicles. Throughout the car industry there are speed-ups of production lines, cuts in break times, and the increased use of temporary and part-time contracts. Japanese car factories organise the workforce into teams which break down job demarcation lines. The concept of the ‘flexible’ worker is a worker whose job description encompasses what were two or three people’s jobs. Teams are competitive units that both accelerate the rate of production and serve as a management surveillance device over the workforce. It is noteworthy that the percentage of days lost through absenteeism each year in a Japanese factory in Britain is 2.35% while that for domestically owned firms is on average 3.9%. The Japanese company workforce in Britain is a largely deunionised force.

In the context of massive and growing unemployment, employers will turn increasingly to deunionised labour. Toyota has a management philosophy of the ‘total production system’ where employees ‘share responsibilities’. Twenty thousand applications were processed for 400 jobs on production ‘teams’ at the Derbyshire plant. Applicants had to pass a series of tests for ‘commitment’. The 400 successful applicants were rewarded with £13,000 a year for a 39-hour week. With the scale of com-petition for jobs among unemployed workers combined with the weakness of existing trade union organisations, even the skilled in the most productive factories in Europe will be forced to take pay cuts!

Wherever you look the same problems arise. Britain now has the fourth largest electronics industry in the world. Of the 16 members of the trade association for consumer electronic firms just one is British-owned. The rest are primarily Japanese and US, importing components. Britain has two of the top six pharmaceutical companies. In 1992 Glaxo invested £72m in Britain and £124m abroad. For four successive years Glaxo has invested more overseas than in Britain. ‘It just does not make sense manufacturing bulk chemicals in the UK anymore,’ according to ICI’s Chief Operating Officer. From 1981 to 1991 ICI’s investment in Britain was £3.5bn, overseas it was £7.6bn. Having significantly weakened the trade unions in the 1980s by legislation and unemployment, the government does not now intend to grant workers in Britain the rights and conditions proposed in the Social Chapter of the Maastricht Treaty. It intends to provide multinational capital with a cheap, malleable and unprotected workforce to draw investment back into Britain.

The Labour Party says that investment in manufacture is a way to create jobs and reduce unemployment. This is nonsense. Capital requires prospects of a sufficient profit before it invests. In the context of the international competition among capitals this requires that the productivity of labour in Britain be raised and raised again in order to restore the rate of profit. The result would be an overall loss of jobs, not a gain. Mass unemployment, low wages and an intensified work regime are what a declining British capitalism has in store for workers in Britain.

 

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