A letter to the Daily Telegraph which was published on 12th October 1996.

One wonders what Professor Cameron Watt means when he asserts that “two generations of German leaders” have established “a democracy at least the equal of ours”, and “whose politicians seem more responsive to the anxieties of the electorate” than ours are.

How do you measure democracy in fact?  Has contemporary German democracy really been tested by the sort of harsh economic conditions which the post-1919 Germany democracy had to endure?

As a recent visitor to Germany, the one actual measurement I saw was the poll which showed that about two-thirds of the German people were opposed to giving up their currency in favour of the euro.  But Mr Kohl has decided that, come what may, they shall give it up.  Not much democracy there!

A letter to the Daily Telegraph which was published on 12th April 1994.

The dawning realisation of the inescapably federative tendency of the European Union, to which Niall Ferguson refers (article, April 8th), is very welcome.  There is indeed no middle way between Britain’s independence and our extinction as a self-governing nation.

Escape from the European Union nightmare is not only possible but also the only way to secure our future as a happy and prosperous nation.

The fourth quarter of last year saw Britain’s visible exports to the EU fall below 50 per cent of total visibles.  When invisibles are added the EU probably took less than 45 per cent, refuting once again the constant Europhile refrain about the ever-increasing importance of the EU market to Britain.

In any case, free trade in industrial products has long existed between all European countries, whether inside or outside the EU, and will continue when we eventually leave.  Britain’s trade with non-EU Switzerland – per capita the richest country in the world – is as free as it is with Germany.

The North American Free Trade Area is visible proof that free trade arrangements do not need large, EU-type bureaucracies. As important, the failure of the United States to grapple with its huge crime and public education problems, and the EU’s impotence in the face of massive structural unemployment, should discourage anyone from believing that large, multi-ethnic federated states do anything but provide employment for functionaries.

With national self-determination regained, Britain would be free to reallocate the massive resources of taxpayers’ money and civil service effort presently expended on mitigating the worst effects of EU membership.  This effort would be in part transferred to determined support of our trade and culture in the Americas and other parts of the world which have been neglected because of the European fixation.

Accompanying this would be a re-evaluation of the Commonwealth as an asset, not a burden; as a vehicle for practical idealism; and perhaps, by virtue of its containing about a quarter of humanity, as informal guarantee of our UN Security Council seat.

This is an article about the sale of Rover to BMW which was published in the Independent on 21st February 1994.

Despite the general chorus of approval in the City and financial press, the proposed sale by BAe of Rover to the German company BMW, if approved by their respective shareholders, brings into sharp focus fundamental faults in British capitalism which, if not corrected and corrected soon, will take our country to industrial oblivion.  At £4,300 million turnover, the transfer of Rover is the largest single loss of control of industrial output and market ever – about 4% of our gross manufactured product, dwarfing other recent transfers like Jaguar to Ford (about £800 million) and ICI Fibres to Dupont (about £300 million).

Contrary to the City comment at the time of the announcement of the sale, it is not chauvinistic to safeguard your most strategic industrial capacity from foreign takeover.  To every foreign engineer and manager I know, it is the merest commonsense on the grounds of the opportunity difference between having one company and having none.  I doubt if there is a single British professional engineer who does not take the same view.

In terms of GNP per head, Britain has in 30 years slid from near the top to near the bottom of 24 Western industrial countries in the OECD.  At the same time, British manufacturing operations have hauled themselves from near the bottom of the efficiency league to near the top, Rover being an outstanding example.  We who work with or for British Industry, as well as the millions outside who depend on it for a living, are entitled to ask what magic insight is it, denied the rest of us, that allows a tiny group of financial institutions and corporate managers to watch complacently as British industry is expelled from one sector after another, and yet swear it is the inevitable “restructuring” of the international economy which is working in Britain’s long-term interest?

The Rover sale exposes three of the most profound issues for national debate which must not continue to be brushed aside by the City establishment and their allies in the present government.

Much has already been written about the City’s incompetence and short-term outlook in industrial matters and there have been occasional signs that it is prepared to defend itself against these charges.  But Rover is the clinching case for those of us who believe the charges are made out a hundred times over.  Essentially Rover is a growing success which is being sold at a failure price, to enable British Aerospace to relieve the difficulty arising from its aircraft leasing arrangements.  As a rule of thumb, a well run modern manufacturing company will have capital assets valued somewhere in the region of its annual turnover.  On this basis Rover is being sold at well under half its value, even if you count the takeover of debt as part of the price: in fact LandRover on its own is worth the £800 million cash being paid.

This leads to the first fundamental point.   Why do the financial institutions place such blind faith in the abilities of a gilded circle of corporate managers, who lacking technical expertise fully to get to grips with the businesses they are entrusted with, are whisked from one chairmanship to another, in an elaborate game of musical chairs in which every participant receives a huge prize every time the music stops?  In high tech manufacturing such as cars and aerospace, it is the three-way conjunction of long-term product research, process design and marketing which ought to be the primary concern of the board, as it clearly has been in our successful chemicals and pharmaceuticals businesses.  Almost exactly two years ago Akio Morita, chairman of Sony – one of the companies that have propelled Japan to world economic leadership said it was “very curious that so many British industrial companies are headed by accountants or lawyers . . . in Japan almost every major manufacturer is headed by an engineer or technologist . . . I do not believe accountants and financial professionals should be at the helm of industry”.  Just as British manufacturing has learned enormously valuable lessons from the Japanese, why do not the financial institutions do likewise in their own interest and that of the millions whose investments they manage?  Why do they continue to reinforce failure?

The second fundamental issue is the future of Britain’s prodigious research and design expertise.  In an address on February 1 to the Parliamentary Scientific Committee, the Prime Minister complained that too much of Britain’s scientific achievement benefited our competitors rather than our own industry.  The answer is you cannot transfer science and technology to an industry which is not there or is not prepared to absorb it.  The Rover sale takes out of British hands around £4,300 million of annual turnover in high technology products.  No conceivable expansion in the birthrate of new high tech companies can begin to replace the added value this turnover represents.  With the world awash with production capacity the key strategy in high technology industry is to spread your very expensive research and design over as many products as possible, retaining only inexpensive badge engineering to create market differentiation.

It is inconceivable that BMW will retain two research and design facilities, since their consolidation into one, centred in Bavaria, is the obvious way for BMW to recoup much of the cost of the purchase.  Of course this will not be noticed for some years by the general public, or even by the production workers, since the existing models will run for several years yet.  It is for this reason that BMW is able to give a continuity of employment guarantee to production workers.

But the loss of research and design autonomy will be felt immediately.  With the centre of design decision making being removed to Munich, discussion with British component suppliers about new developments will come rapidly to a halt as designers realize that for future models BMW will have their own views about component supply.  Inevitably young British graduate engineers will realize that promotion and prospects depend on fitting in with Munich not Birmingham.  There will be an enhanced flow of our ablest young people to Germany, ultimately to serve German, not British industry.

For our research scientists and engineers to make a useful contribution to our industries, they have to know what the objectives are – what the markets are likely to be.  It is this knowledge of the linkage between R & D and the market, which domestic ownership of the market and production provides in strategic sectors of industry.  The sale of Rover represents a massive reduction of that linking and therefore a massive opportunity loss in mechanical engineering as well as in plastics, electronics and metals.

Perhaps the most fundamental point of all is the devastating blow to our national morale and self-respect.  It is not true as some aver that the battle for the British car industry was lost in the 1970s.  This is the defeatest argument which has dominated British public life since Suez.  It is never too late to build a new industry if the will is there as the Japanese, the Koreans, and now the Malaysians are demonstrating.  Thirty years ago BMW was itself an ailing company, smaller than Jaguar is now.  Since then by keeping in the business a much higher proportion of profits than is usual in British industry and by dedicated expertise at the top, it has grown to its present position.  Growing a business in this way is in fact much more typical of German industry than of British industry where corporate managements tend to prefer the takeover of existing businesses as the easier route to growth.  It was entirely symptomatic of the malaise of British corporate management that the only engineer present at the news conference announcing BMW’s takeover of Rover was Mr Pischetsrieder, chairman of BMW.

No nation can survive on a diet of everlasting retreat and evacuation.  Our country desperately needs a victory in the intense industrial war which is fought out daily around the world.  There was no immediate need to sell Rover: the partnership with Honda, committed as they were to keeping Rover a British company, had many miles to go.  In round terms, the £100 billion bonanza from North Sea oil has financed the bulk of the huge British investments in largely non-strategic sectors of overseas economies.  Just two percent of this sum is all that is needed to save the strategically vital Rover for the British economy.  Instead the City and the BAe board have handed us another Dunkirk in order to obtain short-term financial relief.  When a system continues to deliver nonsense, the thing to do is to change it – not pretend that it works.  As Churchill said in 1940, “Wars are not won by evacuations”.

Professor Bush, formerly with ICI, holds the Chair of Polymer Engineering in Manchester and is Chairman of the North of England Plastics Processors’ Consortium.  He directs his own technology company and is a Fellow of the Institutions of Mechanical Engineers and of Chemical Engineers and of the Institute of Materials.

A letter to the Daily Telegraph which was published on 1st November 1993.

It was written by Lord Stoddart of Swindon (Labour Life Peer and Chairman of the Campaign for an Independent Britain), Sir Richard Body (Conservative MP and one of the Maastricht rebels) Austin Mitchell (Labour MP and vice-chairman of the Campaign for an Independent Britain), Professor Stephen Bush (vice-chairman of the Campaign for an Independent Britain), Dr Martin Holmes, Norris McWhirter, Lord Jay, Ron Leighton (Labour MP), Sir Teddy Taylor (Conservative MP and one of the Maastricht rebels), Dr Alan Sked (first leader of UKIP), Peter Dul (Anti-Common Market League) and Charlotte Horsfield (The British Housewives’ League).

Today the Maastricht Treaty comes into force and all British citizens are, without their consent, thereby conscripted as citizens of the European Union with obligations yet to be defined.

Many British politicians, including those on the Conservative and Labour front benches, appear to believe that with Britain’s exit from the ERM last year and the ERM’s virtual collapse in August, the Maastricht Treaty is essentially a dead letter. They could not be more wrong.

Despite the well publicised misgivings in Germany and France, the European Commission is determined to extract the absolute maximum from the authority over member countries which the Maastricht Treaty gives them.

Under Article 103, the Treaty requires member countries to submit national accounts for inspection by the Commission and to co-ordinate their economic policies, striking at the heart of Britain’s freedom to sustain its fragile recovery.

We, who have been consistently opposed to the imposition of the Maastricht Treaty without the explicit approval of the British people, will continue to fight its implementation. Instead, we aim for a self-governing Britain that will regain its freedom to trade unhindered with the whole world, including the Pacific Rim countries, with many of whom we have unique ties of history and language.

A paper written on 25th March 1993, but not originally for general publication. It is included here because it shows the author’s progress of thought on this subject and the time scale.

1          Change in Establishment View about Manufacture

Alarm about the state of British manufacturing has now gripped all but the most unreconstructed City circles, but the alarm is largely inchoate.  Barely five years ago political, financial and journalistic circles maintained almost to a man that a rapid decrease in manufacturing as a proportion of the gross domestic product was in some ways “natural”, even perhaps the hallmark of an advanced economy, where Britain would once again be pointing the world towards its future.  With a trade gap of £15-20 billion in prospect for the recession year of 1993, following on an accumulated deficit of over £30 billion from the previous two years, this proposition is exposed as the ridiculous viewpoint it always was.  In three years then, in the depths of a demand-based recession, the average British family unit has accumulated a foreign debt of around £2,500 or 15% of its annual income.  Before a remedy can be proposed it is necessary to analyse briefly why the proposition about the relative unimportance of manufacture is, and always was, so absurd, as this writer and a few, but very few, others have argued over the years.

2          The importance of Manufacture for Britain

Broadly any nation can make a living in the world from four natural resources – its land, its sea, minerals under the land or sea and its brains.  For a country with nearly 60 million people, living on about 60,000 square miles of reasonably habitable and cultivatable land above 50 degrees North, having only one significant mineral resource (oil), its brains will have to provide the bulk of its income.  Even a 50-100% tariff on food form tropical and subtropical regions of the world has not discouraged the population from importing a massive percentage, possibly 30%, of its food from these regions, while living and working for 48-50 weeks of the year above latitude 50^o North and subject to 30-100 inches of rain per annum will ensure a massive deficit on tourism.

Oil and gas extraction contribute around 2.5% to national income – a proportion which is likely to decline.  Oil and gas extraction in UK waters, and mineral extraction generally, pose a particular problem in another sense however and that is that the available price is set overwhelmingly in regions of the world where extraction is fundamentally easier, so that relatively small price shifts can close a large portion of the British industry down overnight.  The coal industry poses the present example, but world price reduction of $5 per barrel would threaten half of North Sea production.  There is no salvation, nor has there ever been salvation, in North Sea oil.

2.1       Britain’s dependence on brains

A major objective of national economic policy – as for any prudently managed business – must be to reduce the vulnerability of the nation’s economy to factors beyond its control even – and this is a key point – at some sacrifice of short-term advantages.  For this and the preceding reasons Britain is dependent on its brains and always will be for the vast bulk of its income.  Many will nod agreement and add “skills” but here it is worth recalling a phrase of King Alfred, written (in English) almost exactly 1100 years ago: “That which is done unthinkingly cannot be reckoned a skill”.

2.2       The Manufacturing Multipliers

The fundamental reason for the importance of manufacture in Britain’s economy is that via its enormous replicating ability it is overwhelmingly the vehicle for brains – German brains, Japanese brains, American brains – and potentially British brains.  It is for this reason that the overwhelming majority of traded products are and will continue to be manufactures.  Using data from the chemical, computing and aerospace industries certain ratios can be established which may be termed the manufacturing multipliers:

M₁:       One unit of design effort embodied in capital plant provides about 40 units of saleable product.

M₂:       One year of designer’s effort embodied in capital plant provides about 30 man-years of semi-skilled employment.

Contrary to received wisdom the values of M₁ and M₂ indicate that manufacture, in Britain’s geographical situation, is both the main engine of wealth and directly and indirectly will continue to be its main source of wealth creating employment.

Of course for M₁ and M₂ to apply at their maximum values capital must be forthcoming to embody the designers’ efforts – in a word his brains – and the capital must be managed efficiently.

2.3       The Principal Reason for British Failure in Manufacture

While much attention has for 20 years or more been focussed on labour productivity, there is abundant evidence that it is capital inefficiency in both senses – the embodiment of brains in the initial investment and the subsequent management of that investment – which is the most important factor distinguishing British manufacturing industry disadvantageously from its chief rivals.  Because funds available for reinvestment are particularly sensitive to capital efficiency, practically the whole of the shrinkage of British manufacture relative to its principal competitors can be attributed to this feature which is today the responsibility solely of corporate management. That there are baneful influences in Anglo-Saxon capitalism bearing down on British managements is indeed true, but will singular and outstanding exceptions, British corporate managements are composed of men whose mentality is that of traders – people who are happiest when buying other companies’ technology (i.e. their brains) and markets, using money borrowed from banks and shareholders – rather than applying themselves to the hard graft of thinking, analysing and developing their own technology and products.  While there are many examples to choose from, that of BMW is one of the most instructive.  Here is a company which 30 years ago was about the size Jaguar is today, whose subsequent organic growth to about half a million vehicles per annum owes nothing to City-type expertise, but everything to the services of a dedicated and determined management, schooled in the technology of car design and manufacture.

2.4       Scale of the Failure in Manufacturing

Overall the hard fact must be faced that by and large the leadership of British industry has in the last 30 years or so, with as I have said outstanding exceptions – pharmaceuticals and chemicals among them – been a gigantic failure.  It has allowed itself to be expelled from whole areas of manufacture – machine tools, printers, copiers, plastics machinery, instrumentation, electromechanical gear of all descriptions, heavy trucks, most domestic equipment, heave construction equipment and a whole host of everyday items.

To answer those who say market losses were inevitable, it is worth reflecting that if Britain had the same share of world manufacturing as France has (about 7%) it would have a trade surplus bigger than its current deficit and unemployment well below a million.  It is a significant commentary on political attitudes that reference is always made to Britain’s share of world manufacturing trade (about 8.5%), but it is total manufacturing that counts.

Because the source of failure on the current scale is attributable to the corporate management class, heavily influenced by the financial system, and because something so entrenched will neither be changed overnight, nor even be inclined to recognise its own failings, the best that can be expected from it over the next ten years or so is to hold on to Britain’s existing world manufacturing market share (4%).  Even this objective will require a major shift in attitudes among those presently in control.  The significance of Japanese investment is that it injects just the required change of attitude, but the injection is essentially that – a projection of Japanese corporate attitudes, not a change in British ones.  However at best this will, for the reasons given above, only keep Britain in permanent trading deficit – which will have to be paid for eventually by the gradual realisation of its overseas assets (basically the 1980s’ oil revenues) or the progressive sale of domestic assets (chiefly companies and real estate as found on the West Coast of the USA and Canada) or both.  Just as serious a consequence will be the institutionalising of massive (around 10%) unemployment (the present levels is about 15% of genuine jobs).

3          Radical Change

It is the view of this paper that such a prospect for a great country is not to be contemplated, that the threat to our survival as a nation is greater than any in our long history, and that being so, every current belief, shibboleth, alliance, relationship, commitment, practice, must be subjected to the stringent test: “Does it help or hinder us in our fight for industrial survival?” and if it hinder us, it must be discarded or bypassed.  Everything, but everything, must be subordinated to winning the industrial war.

3.1       A National Objective for Manufacturing Expansion

Wars are won by setting difficult but attainable objectives.  This paper proposes that over an eight year period manufacturing industry should be expanded by 35% net.  This would bring manufacturing’s direct share of GDP to about 30%, broadly the figure which applies to Germany.

This would add £50 billion to GDP directly and via the multiplier add another £50-100 billion in total.  It would require at current manufacturing technology, additional investment of around £120 billion, or about £15 billion per annum.  This corresponds to an approximate doubling of current levels of manufacturing investment.  It represents however a mere £500 per insured adult per annum and should be compared with the nearly £2,000 per insured adult per annum which Germany is paying (or rather not paying) for bringing former East Germany up to West German levels.

At current technologies the additional employment in manufacturing industry would be about 0.8 million, which merely replaces the loss in the last six years.  Further employment of 1-1.2 million would be created in the services supplying the new manufacturing industries, making 1.8-2.0 million all told.  In essence the main part of our chronic unemployment problem would be solved.

3.2       How the objective can be achieved

3.2.1    Human Resources

At current technologies and wage levels an investment of £15 billion per annum over eight years requires about 120,000 qualified people to design, construct and subsequently run it.  This is about half of the current membership of the major engineering institutions.  However only 50% of engineering graduates enter industry.  That is about 15,000 per year who do not.  Thus contrary to received opinion there is a vast pool of inexperienced, but qualified engineering professionals in the country, and it is probable that a disproportionate number of the ablest have entered accountancy and finance which at the end of the day create nothing.  In addition there are probably 100,000 qualified and experienced engineers in the prime of life, eking out a living as consultants, advisors to government quangos, reluctant teachers and refugees in the further and higher education sectors.  In addition the country is awash with unemployed time-served experienced mechanical craftsmen of all descriptions, many of them from defence-related industries under the threat of further large-scale closures and redundancies.  In short there is no lack of human resources for the envisaged expansion.

3.2.2    Creation of new firms from scratch

Just as in another emergency Kitchener raised his New Armies in 1915-16, so we must create a New Army of firms from scratch, using the human resources defined above.  Members of the existing corporate establishment (with outstanding exceptions) must not be, repeat not be part of this venture.  (The outstanding British (Australian actually) general of the First World War, John Monash, was an engineer by profession, and even Haig recognised that officers from the non-military field performed on average better than those from the traditional military caste.)

Taking the average manufacturing firm as having the following characteristics: £20 million capital, £20 million turnover, £10 million added value, a staff of 200 of which 10 are engineers and 10 other professionals, we need to create at this scale about 1,500 firms per annum.  Of course over time many of these will grow so the need to seed will reduce.

3.2.3    Market targets for the new firms

These should be based on a detailed expansion of the list given in 2.4 of the markets from which Britain has largely or entirely been expelled.  The business schools should be called on to donate 50% of their staff time to doing a real job of work, namely to producing, industry by industry, sector by sector, a market plan for British manufacturing firms at the £10 to £50 million per annum turnover level.  Before any firm is set up this essential staff work must be completed.  Included within this will be the need to define sales networks for both recapturing the home market and capturing overseas markets.  To support the national objective of £15 billion additional manufacturing product, approximately 5,000 man years of effort will be needed, but there is bags of resource for this – to be found not only in the business schools, but among the mass of technical research degree takers which have at best only peripheral scientific, let alone commercial, relevance.

3.2.4    Paradigm for the creation of new firms

The central enabling step is the establishment of several Manufacturing Institutes with a mission defined by broad categories of industry.  The unique feature would be both the scale – each would be responsible for about £1 billion of new output per annum – and the fact that they would be a combined business and teaching establishment.  They would have responsibility for launching the new firms.  Instead of doing artificial case studies, students – who would be qualified engineers and scientists of any age – would be the managers and directors of actual new firms, starting not at the one or two man scale, but at the 50-100 employee scale.  Each Institute would also be the home of a General Staff for its industry sector, assembling and commissioning the market plans referred to in 3.2.3.  This general staff would not be made up of failed members of the present corporate establishment, but would be staffed by people having two essential qualities: an absolute dedication to reconquering lost markets and the technical knowledge of the manufacturing processes to achieve this.

The leaders of the new firms would bid for a given market segment on the basis of their personal qualities, not their access to finance, which would come through the Institutes.  They would be paid a good salary together with shares, which if the firm reached the £10 million per annum added value, would make them paper millionaires.  Restrictions on selling out would be imposed.  Mistakes would be made, but the release of youthful energy targeted by the experience and dedication of older people would rejuvenate the whole nation.

3.2.5    Where would the cash come from?

We are talking of £500 per annum per insured person, about the sum spent on foreign holidays, about two thirds of that currently spent on support of the unemployed.  If implemented, this plan would make the DTI and regional aid largely redundant, releasing about one third of the required cash.  My proposal is that the money should come initially from a combination of %0% savings on the DTI/regional aid and a savings levy in the form of industrial credits – at the rate of one penny on basic tax rates, five pence on higher rates, the restoration of a new 60% top rate, plus 50% on merchant bank profits – which could be encashed at some future date.  This would give the general public a stake in the success of the plan.  Individuals could nominate which manufacturing institute they preferred – machine tools, plastics machinery, textiles – whatever.  Because the focus would be initially at least on conquering the lost home market, credit holders would have a built-in incentive to buy British and to know precisely where to address their complaints if the quality were not good enough – but it will be; I have no doubt of that.

A letter to the Daily Telegraph which was published on 29th January 1993.

Your report that Britain is being pressed to give up its permanent seat and veto on the UN Security Council needs a more robust response than your editorial (Jan. 27th).

If the level of current financial contributions were to be the criterion for membership, then both Russia and China would have to give up their seats before Britain did; the former because it has no foreign exchange to pay its $230 million assessment, the latter because it pays less than Spain or the Netherlands.

It would, however, be sensible and prudent for Britain to increase its contribution by the relatively paltry sum of £30 million and to act more conspicuously on behalf of the Commonwealth, to which it owed a great deal at the UN during the Falklands crisis.

At the same time, President Clinton should be reminded that it is not just cash to support a bloated UN bureacracy that matters, but a record of long-term willingness and ability to act physically in support of UN objectives.  In this respect, Britain’s record, from Korea to Bosnia, is second only to that of the United States.  Germany and Japan need to work their passage before making claims.

France and China were not victors in the Second World War as you state: they were the two principal defeated Allied countries, whose liberation was due to the victories of the other three permanent members of the Security Council.  Stalin recognised this and opposed their membership of the Security Council for that very reason.

A speech to the Staffordshire Moorlands Democratic Conservative Association at Leek on 5th October 1992, “The Real Alternative to Rule by Brussels”

Themes

• Bankruptcy of Political and Economic Class
• Delusion about Europe
• Fundamental Nature of Economic Crisis
• Primacy of manufacturing as a source of gain in standards of living
• Means of achieving change

1        Introduction

1.1      The present crisis is more fundamental than just a currency and economic crisis.  It is in fact the symptom of the bankruptcy of the British political class to understand the world we live in and what to do about it.  The leaderships of Conservative, Labour and Liberal-democrat parties have been at one in upholding the Government’s strategy – if such it can be called – of maintaining Britain in the ERM and ratifying its political analogue, the Maastricht Treaty.  This strategy has been upheld also by quasi-political bodies such as the CBI and the Institute of Directors, and also by the Treasury, the Bank of England, practically all the chairmen of our major companies, and all but a handful of economists.  Despite the complete disaster which their opinions have inflicted on our country, none of them has had the grace – so far – to acknowledge they are wrong.  Instead they choose to blame other people, or things – the Germans, the Bundesbank, the workings of the ERM – thus further heaping shame and humiliation on our country and people.

As someone who has lived and worked abroad in many Western countries, I have long held the view that Britain is the worst-governed of the major Western countries – that Britain has survived in spite of (not because of) the political class and what may be termed the corporate business establishment.  The fundamental reasons for our misgovernment – both in plentiful evidence at the moment – are firstly, the all-pervading liberal philosophy which acts as if the world conformed to its illusions about other people’s good intentions, and secondly, the shear elementary incompetence of the higher Civil Service and their political masters when measured against the requirements of the job.

1.2      Thus in his memoirs Nigel Lawson is not only unrepentant about his attachment to the ERM, he apparently continues to believe that the Continental political classes would be content to leave it at that – a form of local Bretton Woods arrangement.  The fact is that Continentals have always seen the ERM as the first, most vital stage on the way to currency union which in turn is the keystone for political union, as confirmed once again by a leading member of the Bundesbank Council in London recently.  Lord Lawson’s illusion about the purpose of the ERM is but one particular example of the delusion which still, despite everything, grips government and opposition alike, to the amazement of every single foreign commentator here, on the Continent and in the USA, namely that the Continental Political Classes are not really serious about political union.  The fact is they are – the Schumann Plan, the Treaty of Rome, the Single European Act and the Maastricht Treaty are all designed to lead to that end.  Each of these steps follows a path laid out in 1943 by Jean Monnet, the father of the EC, and documented line by line in his memoirs, which have been available in English since 1978.  Thus in the preface to the Coal & Steel Community Treaty (Schumann Plan 1950), which Monnet largely wrote: “Europe must be organized on a federal basis.  A Franco-German Union is an essential element . . .”  It is deceit and wilful folly by British politicians to pretend otherwise.

1.3      That the British Civil Service is good at administering rules, writing elegant position papers about our decline and running committees is widely acknowledged abroad.  That the Westminster parliament can, on occasion, be an impressive expression of democracy is also understood.  But the key, absolutely central issue – on which everything else depends is our country’s ability to sell abroad at least as much as it imports.  It is as vital to win the industrial battle as it was to win the battle of El Alamein, whose 50th anniversary we remember this month.  Quite literally in comparison nothing, but nothing else, really matters and has mattered for at least 70 years, since the end of the First World War.  Economic failure between the wars was the root cause of our weakness in 1940 just as it is the root cause of the crisis today.  The vast majority of the higher Civil Service have nothing to contribute to repairing this failure since they have no expertise in manufacture, which is at the heart of our failure.  It is as if the chauffeurs were in charge of repairing and redesigning the car.  The ignorance level is truly amazing.  Thus a senior Treasury official, reflecting a widely held view among economists, was quoted recently as denying that manufacturing was important to Britain – giving Switzerland as an example of a service based economy.  In fact Switzerland’s manufacturing exports output per head are three times Britain’s.  On the input side, its share of Nobel Prize-winners per head of population in the last 25 years is the highest in the world.

Why is manufacturing the key?  To answer this we have to ignore macro-economic analysis which dominates media comment and look instead directly at the physical world.

2        Essential Elements of Wealth

Broadly speaking people actually want, are prepared to pay for and measure their standard of life by, five categories of product: shelter, clothing, food, transport and entertainment.  Services such as banking, insurance, government are not wanted in themselves, but as means to obtain these five.  Education and health are conspicuously not services people in this country expect to pay for – but things they put up with as a means to the five categories of tangible wealth.

The first four of these products consist essentially of tangible and therefore tradable goods (although housing materials like bricks are unlikely to be exported).  Modern entertainment (including tourism) depends increasingly on three of the other four.

Now, again broadly, it is increases in the efficiency with which tangible goods are made which provides the real increases in our standard of living and therefore real growth in the economy.  Our ability to make more for less is what growth actually boils down to.  Where does this ability come from?  On the whole, labour is much the same as it was – people work at about the same rate (indeed some elements such as bricklaying rates have gone down).  Where there have been quoted increases in labour productivity, such as in telecommunications and in the mines – it is usually due in the main to investment in improved technology.

Accepting these simplifications for the moment, we can see that industrial products with the central element of manufacture are basically the sole source of increased wealth in an economy.  Every activity not directly connected with the technology, production and marketing of industrial goods is, in business terms, an overhead.  Proof of this is easy to see: since 1980 labour costs have risen by two to three times; the cost of a technological product like steel or plastic is much what it was then (meaning the real price has more than halved); the cost of electronics goods such as computers has dropped phenomenally in real terms.  Taken over a wide range of products, real cost reductions for industrial goods average out at something like 6% per annum.  It is this real cost reduction which pays for the so-called growth in the economy as a whole.

3        Source of Britain’s Economic Problems

If a country’s real wealth is dependent on its industrial output then the proportion of the national workforce working in industry (including agriculture and fishing) will determine this overall rate of growth when it is in competition with other countries employing much the same technologies.  For Britain, the proportion is about 30% while for Germany it is about 40%.  This means that for equal efficiency improvements in their industries of say 6% mentioned above – in Britain this is spread over the remaining 70% of the population – giving about 2% overall (which we actually achieved in 1981-88) – in Germany it is spread over a smaller number of overheads – giving growth of about 2.5% per annum.

Now this is on the assumption of equal improvement rates.  Because Germany’s industry is bigger – about one and three quarter times bigger than British industry – it is very unlikely that Britain’s improvement rate can be as great as Germany’s – and the gap will increase between the real output of the two economies.  This effect is not a result of financial policies, Bundesbanks, and other economic tinkerings – it follows directly from the fact that our industry is too small for the population it is called on to support.  The attempt to maintain a fixed parity, let alone a common currency, can only result in unemployment in Britain being permanently on a trend above that of its major competitors, as nature adjusts the buying power of the British population to that which its wealth generation represents.

Not only has this unavoidable adjustment since the 1970s been concentrated on those who have lost their jobs, the job losses have been concentrated on those who actually produce the real tradable wealth in this country to such an extent that there is now one person in financial services for every three in manufacture.

4        Means of Achieving Change

The first act is to recognise that we are not, repeat not, dealing with something that can be corrected by fiscal or monetary means.  Proper policies are needed for these areas, of course, but what we need is a physical expansion of British industry by about one third to match the current proportions in Germany.

We have to grasp the nature of our problem.  Much of our industry is as efficient as any, some of it (pharmaceuticals) is world class, but we simply do not have enough divisions in our industrial army.  Left to itself, British industry will continue to contract faster than its competitors – as it has done under every government since the war.  With the noticeable exception of firms in the pharmaceuticals industry, no major British manufacturing company has managed to expand its output in real terms for many years.  Our so-called “Captains of Industry” are, at best, just that – captains, able perhaps to perform tactical manoeuvres, but seemingly incapable of mustering the generalship to lay the long-term foundations of success stretching forward in time.

We will need therefore to approach our problem with all the seriousness of a world war.  In 1940 the British army escaped from the Continent without weapons, rather as our economy has just escaped from the ERM – but as Winston Churchill reminded a nation euphoric with relief: “Wars are not won by evacuations”.

Likewise we must organise ourselves to reoccupy the industrial territory we have evacuated in the last 30 years.   This will have to be done on two fronts:

• by reducing imports and
• expanding exports and production for home consumption.

4.1     Reducing Imports

I believe imports of consumer goods will have to be restrained by quota for a period of say five years, or by the most massive campaign in which buying a foreign, especially German product, where a British product is available, is seen as a deeply unpatriotic act.

I believe that the major chain-stores, which account for most of the retail business, must be leant on to adopt the type of British ordering policy which Marks & Spencer have developed, where suppliers are helped to achieve the quality required by the store and they build up a long-term relationship which, provided quality is maintained, is difficult to displace.  Most of the other chains clearly do not do this, but scour the world for bargain basement short-term deals to give a temporary advantage over their rivals.

4.2     Expanding Production

It is total nonsense to say, as the present Government does, that nothing can be done because of the world recession.  In fact Britain, having the world’s largest manufacturing trade deficit per head, is in the perfect position to set about expanding home production, first for import replacement – then (later) for export.  Note that construction per se is a net importer and therefore not the industry to lead the country out of the slump though it may play a part later.

In order to increase our industry to Germany’s proportion, will need a massive increase in investment of about £15 billion over say 8 years to 2000.  Large though this sum appears, it is only about £250 per person per annum.  It is only about one quarter of the £120 billion say that Germany is paying for reunification.  The British people will make this small sacrifice of current satisfactions if they are offered a battle plan for success.

4.3     Where the money could come from

The present cost of EC food levies is about £10 billion (over and above what the farmers receive), the budget payment to Brussels is about £3 billion (increasing to about £5 billion under Maastricht).  So £13 billion of the £15 billion per annum needed is there for the taking by withdrawal from the EC.  The remaining £2 billion can be obtained by a levy on financial institutions.

4.4     How could the money be deployed

Entirely new institutions will be needed, but the basic idea is that this money should not be in the hands of Captains of Industry, who have generally failed woefully to justify the scandalously high salaries they have awarded themselves.  At this stage it is only necessary to remark that there are about 250,000 qualified engineers and manufacturing managers who are either wholly or partly unemployed.  There is the resource we need to tap for the second British Industrial Revolution.

5        To Sum Up

a          The current crisis is the symptom of a fundamental problem. 

b          It is not self-correcting with any of the measures the political and business establishment understand.

c          Integration with Europe will make matters worse and only withdrawal from the EC will give us the freedom and cash to implement the needed measures.

d          Because of its incompetence the political and business establishment cannot undertake the huge change required.

e          New institutions are therefore needed to superintend the major industrial expansion needed.  A new political forum is therefore needed to explain matters to the British people and gain their support.

6        Why should they listen to me?

Qualifications for talking to you on these fundamental themes:

1          Twenty-one years ago I made a small contribution to a little booklet entitled “British Business for World Markets”, where we pointed out inter alia that the EEC was not a free market but a managed market, that this would imply massive direct and indirect costs for Britain, that the EEC would imply a substantial loss of market share in engineering, that the Commission would turn Europe into a bureaucratic parade ground.

            If we were wrong it is only in the modesty of our predictions.

2          In the last decade since I returned to this country from 6 years’ work with ICI Europa in Holland and Belgium, I have consistently attacked, in the national media, the defeatism of our political establishment and its attachment to Europe as a substitute for thinking about and solving Britain’s economic problems.

3          I believe there is No Middle Way between political extinction in a European Union and sovereign independence – booklets I have published on this theme and “The Meaning of the Maastricht Treaty” spell out the reasons, which are amply supported by Continental politicians and civil servants.

A letter to the City Editor of the Sunday Telegraph which was published on 21st June 1992.

In his perceptive “Working Brief” (June 14th) on the differences between Anglo-Saxon and Japanese-German capitalism, Tom Lloyd points to the puzzle which the success of the latter poses for the supply-side economists.  This puzzle arises because of the persistent failure of most economists to attach anything like their true weight to two ingredients of an economy besides the common ones of capital and labour.  The two missing ingredients are (a) technology and (b) the competence of the boards of companies in directing the other three ingredients.

Robert Solow (Nobel Prize 1987) has analysed in careful detail the respective contributions of capital, labour and technology to real economic growth in the United States over 40 years to 1969.  He found the ratio of contributions to be about 20:20:60.

With notable exceptions major British companies are dominated by men whose mentality and expertise, if it can be called that, are largely those of traders, who are happiest when engaged in acquiring other companies’ products and markets with borrowed cash, rather than applying themselves to the hard task of thinking and analysing how their own products and processes can be improved.  No effort is spared, on the other hand, in devising reward systems whose effect is to confer scandalously high chunks of wealth on themselves.  The chairman of Nippon Telephones, which has twice the turnover of BT, receives about a third of the pay of the BT chairman.

For the most part growth in real wealth comes from the tangible products.  Banking, financial services and the like have grown from the provision of essentially a simple service into being elaborate ways of spreading the wealth around, usually to the vast benefit of those doing the spreading.  Until Solow’s conclusion is properly understood and acted on, British industry will continue to lose ground, not just to Germany and Japan, but to Korea, Taiwan and beyond, no matter how free the capital markets are.

In 30 years, BMW, whose products are so popular with City types, has grown from a company smaller than Jaguar today, without any expensive City expertise, but with instead the dedicated input of retained capital, technology and hard work from the top.  It is technological capital, not cash capital, that is the most important ingredient of capitalism – and always has been.  That is the solution to the economists’ puzzle.

A letter to the Daily Telegraph from Mrs Gillian Bush, which was published on 18th March 1992.

We have now been presented with a budget from each of the main political parties, and there has been non-stop media comment on them.

The essential point, however has been missed.  Not one of these budgets has a chance of being carried out.  Whichever party or coalition of parties forms the next government, it will have to ratify, under present pledges, the Maastricht Treaties later on this year.

This will mean that the European Union, as the Common Market now calls itself, and not our Government’s budget, will decide our economic future.

The new, higher rate contributions that M Delors intends us to pay the European Union will distort all the careful calculations.

Some sort of compromise may be workd out.  But the Germans, who are the largest contributors, have problems that will make them keen for others to carry the burden of higher rates.  It would be close to a miracle if we do not end up doing so.

In addition, the stated intention of normalising VAT across all our presently zero-rated areas of food, gas, electricity, water, sewage treatment, children’s clothes, transport, mail and books will greatly increase indirect taxation and hit the lower paid in particular – as, of course, the artificially high European food prices do already.

This election campaign should be about the future of our country either continuing as an independent sovereign state or becoming just a region of the European Union, not about tiny changes to the tax system.

Over the weekend I heard Mr Major say twice that the Conservative campaign was about giving people choice.  We have no choice at all on the one really crucial issue.  He should promise us a referendum on the Maastricht Treaties before they are ratified.

A letter to the Daily Telegraph which was published on 4th February 1992.

Charles Moore is right (article, Jan. 31st).  There is something rotten in the State of the Union, and that is the corrosive defeatism which has gripped most of the British political class since Suez.  To this defeatism must be added the automatic denigration of our country by the majority of journalists and other members of the chattering classes who gullibly reproduce any claim about the superiority of continental countries.

Dirk Bogarde’s review of two books on Germany (Weekend, Feb. 1st) is a case in point.  Beside his fantasies about the three-language abilities of ordinary Germans is the matching remark about our “impoverished, rather smug island”.

According to the OECD, the real disposable incomes per head in Britain, Germany (before unification), France and Japan are only trivially different when calculated in purchasing power parities.  Last year a German study revealed that of the best 50 companies in Europe, 27 were British, while the value of the top 500 companies quoted on the London Stock Exchange is greater than those of Frankfurt and Paris combined.  Britain’s net overseas assets (at around £130 billion) are the greatest of any country in the world (including Japan).

Yet these facts about our real strength do not prevent George Jones, for instance, referring to Britain’s “declining economic influence” (Jan. 31st) when discussing pressure brought by the Germans and Japanese on Britain to give up its UN Security Council seat.

The increased pressure for the separation of Scotland from the Union is a predictable consequence of Britain’s insane policy of surrendering her independence to the European Cmmunity – itself a direct consequence of post-Suez defeatism.

To paraphrase Ludendorff’s supposed remark about the British Army, we have become a lion of a country ruled by ninnies, and nobody wants to be part of that when there is an alternative.  Whichever party announced it was reclaiming Britain’s independence and would not ratify the Maastricht surrender would both win the next election and save the Union.