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The ‘postmodern economy’ was a con

Published in Business Spectator (Melbourne), 8 April 2010

When Tony Blair became British Prime Minister in 1997, the soundtrack to his election campaign had been D:Ream’s Things can only get better. Nothing more accurately encapsulated the spirit of the time. Gone were the painful economic reforms of the Thatcher and Major years; in came ‘Cool Britannia’, the world’s first postmodern economy.

‘Cool Britannia’ was different from anything the world had ever seen. It was a country in which there was no place for assembly lines, hard work, or ingenious engineering. In Blair’s new wonderland, skills and toil were not required to get ‘filthy rich’, as cabinet minister Peter Mandelson put it. Larry Elliot and Dan Atkinson, economics editors at The Guardian and The Mail on Sunday respectively, christened this the ‘bullshit economy: with luck and attitude, you can make a tiny amount of talent go a very long way’.

At the time, a London-based think-tank identified Britain’s new ‘paradigm trades’ as “hairdressers (and other bodily improvers), management consultants, celebrities and managers”. And what was the name of the think tank that gave us this fascinating analysis? The Work Foundation. Yeah, right.

Fast-forward 13 years, and Blair’s election song still rings true, if only because today it seems things cannot get any worse. Strikes are looming, private and public debt are out of control, and the country is tumbling towards an election on May 6 that only politicians with masochist inclinations would want to win.

The country is waking up from the collective fantasy that once was ‘Cool Britannia.’ Its so-called postmodern economy now looks distinctly dated. British celebrities wear recession chic, managers mourn their stock market losses, and consultants have to make do without their huge bonus payments. Whatever happened to the hairdressers is anyone’s guess, and who knows what those other ‘bodily improvers’ were doing anyway?

Suddenly the British realise that it was perhaps a tad premature to wave goodbye to the old economy that actually produced things other than hot air. The same circles that used to feel smug vis-à-vis manufacturing reptiles like Japan and Germany are now debating how to develop a new industrial base in Britain. Given the sorry state of Britain’s secondary sector, this is much easier said than done. After an era of de-industrialisation, there is little left on which a revival of British manufacturing could be built.

The weight of Britain’s manufacturing sector has dropped dramatically over the past decades. In 1970, it accounted for almost a third of the UK economy. This has fallen to 11.3 percent in the third quarter of 2009. It was a steady decline where it hardly mattered which party governed.

Employment in manufacturing went down, too. In 1978, the sector employed 6.9 million people or 28.5 percent of all employees. The respective figures for today are just 2.6 million workers or 10 percent.

Perhaps even more worryingly, the innovative capacity of Britain is in decline if patent registrations are anything to go by. Between 2003 and 2008, the number of patents granted to UK residents fell from 3,646 to just 2,070 – a 43 percent decline in just five years. At this level, the UK is miles behind the patents output of countries like the US, Japan or China. Even North Korea granted twice the number of patents to its residents than the British, according to the World Intellectual Property Organization.

It may also come as a surprise that among the top 10 ‘resident’ patent registrants of 2008, there is only one British-owned company. Instead we can find, for example, the UK subsidiaries of oilfield giant Schlumberger (US), electronics company Toshiba (Japan) or LG Display (South Korea). The only British-owned company remaining in the top 10 is Rolls Royce, the aircraft engine maker (Rolls Royce, the quintessentially British car company, has been a division of Germany’s BMW since 2000).

Britain’s innovative capacity is limited, and the situation is not helped by the kinds of jobs that young Britons are increasingly choosing. The UK-government commissioned National Strategic Skills Audit revealed the jobs with the fastest growth rates of the past years as conservation and environmental protection officers, town planners and psychologists. These are honourable professions, for sure, but they are hardly conducive to strengthening Britain’s manufacturing base.

For too long, the British have pretended that the weakness of their manufacturing sector didn’t matter. They talked about a new ‘creative economy’ replacing more traditional industries – as if it was not creative to build elegant cars, high-tech mobile phones, and superfast processors. Did they really believe that only advertising, consulting, and the media offer room for creativity?

What the British had also overlooked was that this glitzy, postmodern and creative economy had only ever been a Greater London phenomenon. In London, it might have even worked for some time if you ignore the fact that it has made the city one of the least affordable places to live for average income earners.

Other parts of the UK could not keep up with London’s postmodern hubris. Old industries disappeared in places like Blackpool, Sunderland and Hull with nothing, least of all a postmodern economy, to replace them. Instead, the state filled the gap.

According to the London-based Centre for Economics and Business Research (CEBR), public spending already accounts for 53 percent of the economy in Yorkshire, 57 percent in England’s North West, and 62 percent in the North East. Northern Ireland and Wales fare even worse at above 67 percent. The CEBR researchers expect this trend to continue in the coming years.

It is not as if British governments of the past have not tried to stop or even reverse the process of de-industrialisation. They simply have not succeeded despite their numerous attempts. As a result, Britain has experienced what economic geographers call ‘spatial polarisation’: prosperous areas like London and Oxford are becoming wealthier while poorer areas are falling further behind. This process will go on for as long as there are no new industries to generate economic activity and provide jobs outside the prosperous South East. Such industries are nowhere in sight.

The global financial crisis has shaken the foundation of Britain’s business model, namely the financial services sector. However, there is no other industry that could possibly compensate for the troubles surrounding the City of London.

It’s certain that the era of ‘Cool Britannia’ with its ‘bullshit economy’ is over – at no great loss to mankind. But it’s far less clear what, if anything, could take its place.

Things can only get better? They wish.

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