Monday, April 18, 2005

Longbridge 2

So it's all over, the employees get the statutory minimum redundancy, the directors retire as rich men (see Tim Worstall for details of how to make profits from a company that's losing money hand over fist) and the Rover pension fund will be bailed out by the brilliant new Pension Fund scheme.

Scott at Blithering Bunny responded to my Longbridge post.

Britain is regulating itself out of a lot of business, just not as fast as Germany and France are doing. And a combination of a poor state education system and a new generation of useless civil servants means that we aren’t as good as we should be at competing on the “international stage” (and things are likely to get worse the longer watered-down socialism remains in favour). But these problems are all caused by the state having too much power. So the last thing we want is to pay any attention to calls for the state to step in and help Rover survive.

Nothing to disagree with there. I just see our failure to compete internationally as meaning that Britain's relative decline will continue despite (or is it because of ?) free trade. Free trade is very good for those countries with high levels of education, technical skills, infrastructure etc. All these things being relative of course. You also need an government that doesn't hinder, entrepreneurial ethic among some and a work ethic among many. Britain in Victorian times had all of these and so was naturally keen on free trade.

Now we don't have the education system (with the implication for future technical skills), the government or the work ethic. Having a free market won't solve at least two out of three of those. After all, if it was possible to simply move into new areas easily, they'd have been able to make cars that people wanted to buy. Cars are as hi-tech an item as any these days, so if we can't make those what's suddenly going to make us turn out memory sticks or holographic videos ?

Conversely, with the right culture, technology and education, you can be successful with some pretty unfree markets. Japan 1960-1985 was protectionist and institutionally corrupt, but raised its game over that period from cheap plastic toys to the best cars, cameras and electronics in the world.

There's a quote from Adam Smith which I'll dig out tonight, of which the gist is : "Without the appropriate cultural setting, free markets are useless".

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