Low-wage Britain?

I saw an article in the Financial Times the other day that said that "Britain's manufacturing industry has fared less badly than that in comparable countries during the downturn". This is of course what would be expected when the pound has fallen so far against the dollar and euro. Our export goods are cheaper for other countries to buy, relative to goods paid for in dollars or euros. This is good for the economy and will help us turn around more quickly.

The flip side of this is that goods ultimately paid for in dollars and euro's - even if we pay for them in pounds, like package holidays overseas - will be more expensive. This applies to Taiwanese TV's, German cars, Asian rice, French cheese, and many of the goods and raw materials our industries need in order to expand or manufacture. So our manufactured goods will also cost more because of that, and that will fuel price inflation. What is really happening is that our cost of labour, as a proportion of the cost of the item, is cheaper in pounds than euros or dollars.  If we insist on our wages matching inflation then the benefits of the lower pound are partially nullified and it will take longer to recover from the recession - so the pound will stay low and goods from elsewhere will remain expensive. Better to take the hit now.

The other side of this is that the benefit will be short term - our goods will become more expensive again and manufacturing will suffer - as the pound rises. That is, unless our manufacturing also takes the opportunity to do what the Germans and Japanese did, and become lean, efficient, higher quality and customer value-oriented. 

Which brings me to a letter sent by the CEO of a US engineering company, Gregory Knox, to a President of General Motors who requested support for a bailout. It makes wonderful reading, and explains exactly why inefficient industries saddled with bad working practices, intransigent unions, managers concerned only with earning the most for least effort and lack of customer care should be left to go to the wall. Bailouts, paid for the us the taxpayers, keep these leeches in a job they don't deserve.