Maggie Thatcher decimated Britain’s manufacturing industry in the early-1980s, partly driven by a crusade against union strength and perceived antiquated work practices.
Over the next two decades Britain, the ‘workshop of the world’ of the industrial revolution, became a services based-economy.
The process went in tandem with wholesale privatisation of swathes of industry, from oil and defence to telecoms, gas, electricity, airlines and airports, steel and water.
The transformation has been stark. Manufacturing contributed 25 per cent of the country’s GDP in 1989 compared with just 14 per cent or so now.
The sector employs 10 per cent of the working population now. That’s down from a much more muscular 28 per cent in blue-collar occupation in the late-1970s.
Much of the slack was taken up by financial services, which increasingly became the blue-eyed boy of the British economy.
But the trouble is the blue-eyed boy was cocksure. At the same time he developed short-sight and started lending stupidly to people unlikely to be able to pay back, and greedily to line his pocket with bonuses.
The resulting near-collapse of the sector has focused a lot of minds, including apparently Peter Mandelson, the new Business Secretary (two Cabinet comebacks and counting).
It is said Lord Mandelson believes that Britain will be healthier in future by recreating a broader-based economy to help it weather future shocks in the financial services industry.
Lord ‘Adair’ Turner, the new chairman of the Financial Services Authority, has added his voice to this argument, saying a vibrant financial services industry needs to be balanced “by fashion, by tourism, by creative industries”.
So far, so nebulous. And in some ways it is all a bit of a reworking of Mandelson’s ‘knowledge-based economy’ blueprint back in the late-1990s. Again, that always seemed vaguely more soundbite than substance.
This is not to say a balancing of the UK economy is without merit. It is clearly preferable to balance dependence on financial services with strength elsewhere.
It is our over-dependence on banks, insurers, financial markets and the like which are making reputable organisations like the Organisation for Economic Co-operation and Development say we are particularly vulnerable among western countries in the current financial gridlock and economic slump.
Economic diversity is clearly a source of strength. But it is one of these arguments that risks being dismissed as just fluffy aspiration unless accompanied by concrete proposals to effect the economy-rebalancing changes.
