The consequences of economic ignorance

Type: Think Pieces Written by Graham Cunningham | Friday 16 November 2007

Graham Cunningham looks at the economic history of Britain and explores the movement away from the manufacturing industry. He explains why he believes this shift is not a good thing and how the 'entertainment culture' in Britain has left the country with a lack of understanding of significant economic concepts.

Seventeen years on from the political assassination of Margaret Thatcher, her legacy seems to be an enduring transformation of our national economic fortunes. Her political courage was the sledgehammer that was needed to knock Britain out of its pathetic performance as a manufacturing nation. Seventeen years of media establishment vendetta however have sought to deny her any of the credit. This travesty of the truth has been made possible because there is in Britain a widespread ignorance of our economic history.

Self-delusion and decline

The hard fact is that our relative decline in manufacturing began right back in the second half of the 19th Century, as soon in other words, as better adapted societies like Germany and the USA began to compete with us. It had continued relentlessly ever since. No economic policies of either political party had ever made a jot of long-term fundamental difference.

Mrs Thatcher set out to make a real difference, and in a way she did, although probably not quite the one that she and many of us had hoped for. It may be difficult for us to learn to love it, but in spite of its frothy insubstantiality, our new financial, leisure and entertainment economy has the merit at least of being relatively successful. This ironically lends it a kind of dignity compared to the industrial sick joke that was Britain in 1979. Decades of sentimentality about our manufacturing base was a major reason why it had failed to match or even copy the wellspring of design and manufacturing innovations of our competitors. The real cost of flattering badly educated home-grown middle managers and propping them up with taxpayers’ money was that they were still in post next year doing just as badly. The real cost of ‘saving jobs’ was a long slow economic decline.

The 1980s freed the British to focus on what has always been their greatest strength, which is trading. London is now more comfortable than ever in its role as the great global bazaar. But if Mrs Thatcher had dreamed of revitalising our technological prowess she will have been disappointed. Dispiritingly, in 2007 as in 1977 you kind of know that if a consumer appliance is well designed and thoughtfully innovative, then it almost certainly was not designed in Britain.

The cost of prosperity

It was no small achievement to steer us onto our current economic path given the drag effect of our sentimental mythology about ourselves. But perhaps the real cost of having a prosperity like ours is Celebrity Big Brother and a sad underclass culture in which people pay ludicrous prices for football merchandising tat even though they cannot themselves play football and even though their hero is far less marketable for his skill with a ball than for his brandability. Does this matter? Is there more inherent quality of life in a German-style industrial design and manufacturing culture than a British entertainment, leisure and financial services ‘products’ culture?

Quite possibly, for the whole of Europe, the heyday of manufacturing is in the past and we are just ahead of the game. On the other hand, as Robert Pirsig demonstrated in Zen and the Art of Motorcycle Maintenance the mental discipline of engineering can nurture spiritual qualities as well. In this case the Germans may in the long run, fare better than us in the new Western, post-industrial zeitgeist.

Still no economic understanding

One reason for Britain’s long manufacturing decline has been the low status of engineering compared to other professions. Allied to this is the poor quality of technological and - I would argue - economics education. Our education system has always been relatively biased against technology and decades of politically correct educational theorising have resulted in the virtual abandonment of the intellectual and the conceptual as a goal of education - except for an elite. Apart from its one great lesson in economic realism, Thatcherism failed to rescue our education system. The Blair era has done no better. And so it is that our more streetwise economy has not been accompanied by any greater understanding of fundamental economic concepts. We may be better at shopping than we used to be but the British are an economically ignorant people.

Does this matter? Yes. Britain’s initial manufacturing advantage has been let down ever since by our educational culture. Absence of economics education has had a part in this because the cost / benefit principle is so fundamental to good design. But the consequences of that educational failure go much further even than this.

We have in this country a huge media current affairs output. And yet in our political discourse, even amongst the educated middle class (and most notably amongst journalists) fundamental economic concepts are rarely applied or even comprehended. It has long been fashionable to sneer at economics and many chattering class people wear their ignorance as a badge of honour. Presumably they imagine that this makes them seem less calculating and more warm-hearted. On the contrary, an understanding of the fundamentals of economics underpins an understanding of almost everything else in life because it deals so directly with human desires. The oft repeated: All they care about is money is a profoundly ignorant observation. There can scarcely have been a single human being in the whole of history that only cared about money. But how many British people would apprehend economics as being (as in Robbins’s classic definition) a study of human behaviour - the interaction of scarcity and desire?

Does this matter? Only in so far as how much more effective would our public spending be if every time the clamorous phrase more resources were uttered the economic phrase real or opportunity cost were to pop up in the consciousness. And how much less would have been squandered on completely ineffectual ‘health and safety’ measures if a cost/ benefit habit of thought had been instilled during schooling. We might even have been spared Live 8 if only it had occurred to our Make Poverty History warriors to apply a cost / benefit analysis to the history of Third World Aid. If only our huge BBC current affairs army had shown an interest in the story of South East Asia and just how irrelevant foreign aid has been to the economic vitality of that region. And how much more coherent might the philosophical system of your average weekend anti-capitalist be if they understood how ‘foreign sweat shops taking our jobs’ might actually be a good thing all round.

If your education spokesperson understood the interaction of scarcity and desire, how much less likely that they would make the fatuous claim that GCEs have not been devalued by the fact of everyone now getting lots of them. And how much less media abuse there would be of the word genius.

Feelings supplant facts

Take another example: ‘Europe’. All through the 1990s a seemingly interminable debate raged on and on in the media about ‘Europe’. The BBC current affairs coverage must have run to many thousands of hours of talk-talk asking the question Is membership of the European Union good for the British economy? That discussion could have been so much better informed if the endless coverage had featured just some of the relevant macroeconomic statistics (easily available from the OECD etc). If such a thing ever happened in those ten years and more, well I never saw any of it and I certainly was looking. How much are we exporting to the French for example and how much are we importing from them? Or a nice graphically presented matrix table showing, in detail, payments to and receipts from Brussels.

I have no doubt that this would have held the viewer’s attention just as well as following some man-on-the-Clapham-omnibus around on his rather unremarkable daily routine. Instead we got what BBC journalists and producers love, which is pointing a microphone at someone and asking What do YOU think? Do you think Britain is doing better in Europe? The theory is that this anecdotal approach brings the economics to life. The truth is that the journalist making the programme is not remotely interested in the economics in the first place – only in the drama.

Or another example: ‘Global Warming’. How much better focussed might be the debate about reducing ‘greenhouse gas’ emissions if the BBC gave wide coverage to quantitative data instead of just fretful emoting. A simple table showing how our targeted reductions over the next few years will be utterly dwarfed by China and India’s projected increases in the same period – that would be interesting.

So for the British, an understanding of economic concepts is not normally a part of their education; and thanks to the media, they are also left blissfully ignorant of macroeconomic data on how our economy and quality of life compares with other nations.

Does any of this matter? Certainly it is right to question, for example, to what extent GDP per capita is really a measure of quality of life. But to critique the standard tools of measurement of economic development you first need to understand them and what they do and do not signify. In media driven, post-Enlightenment Britain this is apparently unnecessary. All you need to know is how you feel.