Letters to the Editor. Fading industries

Press, 9 January 1981, Page 12

Letters to the Editor.

Fading industries

From the “Economist,” London.

“Cheap imports are killing my business; The prices are so low it’s absurd. What can I do about them?” A Lancashire mill-owner any time since 1880? A Pennsylvania steelman of the 19605? A Swedish shipbuilder of the 19705? Wrong every time. It was Mr Y. K. Low, a Hong Kong shirtmaker in 1980, after seeing his exports decline as other South-East Asian countries started <to out-Hong Kong Hong Kong. In his eyes, textiles has become a “declining” industry. It has been called that for decades in ■Western Europe and < forth

America. Yet the name — and the idea behind it — is based on a myth. Since decline, like beauty, is in the eye of the beholder, it is not surprising that the myth has taken strongest roots in Britain — birthplace of industry and therefore its first geriatric home as well. The Jarrow shipyard workers and the Rhondda miner o were early victims of Britain’s dependence on a few basic exporting industries — textiles, coal, ship-building, iron and steel. All of these were bound to lose ground in world markets as the rest of

the world industrialised. Before long, other industrialising countries had not merely caught up with Britain but had passed it. Germany and America introduced ring-spinning in textiles before 1914, while British mill owners were still building new factories using old mule-spinners. And turn-df-the-century Britain built new steelworks that were replicas of their predecessors, while America and Germany were using every new technique in sight. Now even the strongest industrial countries are showing symptoms of the British disease. Take steel — a classic example of a declining industry, according to European and American steelmen. Wrong. Worldwide, the steel industry is expanding. It ended the 1970 s with production and consumption of steel about a quarter higher than at the start of the decade (though growth had halved to about 3.per cent a year). The traditional steelmaking countries did not benefit because new producers, with lower labour costs and more modem plants, greatly increased their share of global production. Technically there was nothing to stop them — a point that any steelman should have foreseen. Yet between 1960 and 1978 the Europeans spent about $5O billion increasing their capacity from HIM tonnes a year to 253 M tonnes, thinking they could go on exporting about 10 per cent of their output to America and the developing world. But America was bent on protecting its own ageing inc’ :stry, while the least developed countries were piling into modern steelmaking plants of their own. The effect on jobs of pro-ductivity-boosting technology interacts with geographical shifts in production. An expanding industry can absorb the kind ot technical change that leads to fewer jobs per unit of output without shedding workers. But if its market is squeezed by the arrival of new producers, technology erodes employment. The wrong reaction to that equation is Luddite. It was precisely because nine-teenth-century Britain failed to keep up with technology that its twentieth-century arthritis has been so painful. The right (job-creating) reaction is to. speed the pace of technological change, concentrate on those parts of “declining” industries where you can still be competitive, and move into tomorrow’s growth industries. Easier said than done? Yes. but that, is what successful economies have always done — and what Japan Inc. is busy doing today.