Search for Economic Growth
February 23rd, 1983
A letter to the Editor of the Daily Telegraph which was published in February 1983.
Your leading article and the commentary on the City Page (Feb. 21st), like many others, follow the oft-repeated view, also built into most if not all models of the British economy, that there is little if anything to be done to revive the British economy without the long-awaited upturn in the United States economy and revival in world trade generally.
But does this view not lay too great a stress on foreign trade as virtually the only source of inflation-free growth?
With anything from 40 per cent to 90 per cent import penetration in the major categories of the manufacturing sector (valued at about £55 billion annually), it is clear that a determined across-the-board attack by British manufacturers on the British market, aided by a Government employing the same measures to restrict imports as our trading partners do, would be the single biggest contributor to reducing domestic unemployment.
A 10 per cent reduction in manufacturing penetration would correspond to about 300,000 direct jobs alone, even allowing for present under-used capacity.
It is usually objected at this point (as implicitly in your City Comment) that the resultant strong pound would make imports cheaper and exports dearer again, thus largely offsetting the quoted employment gains.
But this objection ignores the fact that the United Kingdom, alone among the major industrialised economies, can, if it wants to, control the trading balance outside the manufacturing sector, without using fiscal means, by varying the extraction rate of oil.
Oil at the present rate of extraction is the great exporter of British manufacturing jobs. One day’s production of North Sea oil shipped to West Germany keeps 1,000 West Germans in jobs for a year just on converting a fraction of that oil to chemical and plastics products, a large proportion of which are then shipped straight back to Britain to contribute to the import penetration quoted above.
In fact, the oil extraction rate should be seen as a control lever in the economy which we have never had before.
With central government revenues now under control, the opportunity exists to use this control to engineer an import substitution-led revival of the British economy, to a considerable extent independently of the decisions and difficulties in the economies of our principal trading rivals, the United States, Japan, West Germany and France.