China, the UK and Economic Rebalancing: What about the jobs?
The ever-thoughtful Linda Yueh has published a great article on the BBC website about industrial rebalancing, to coincide with the visits to China of the Chancellor, George Osborne, and the Mayor of London, Boris Johnson.
Linda argues that both the UK and China are seeking to rebalance. But whereas the UK wants more manufacturing, in response to the economic downturn of 2008 and our excessive reliance on services in general, and financial services in particular, China is seeking a larger services sector, as it spends too much on investment and not enough on consumption.
The problem, as Linda sees it, is that the UK is particularly good at services – not just financial services, but also legal, accountancy, architecture, design, management consultancy, software and advertising. Trade in services tends to be relatively high value added. It faces difficulties in that international trade in services has not opened up in the way that trade in manufacturing has, but where international co-operation exists – as in higher education – the UK has done well.
This is all good stuff, but I have a question regarding Linda’s argument, which is this: would expanding the sectors that she describes create quality jobs paying decent wages?
In my view, this is the hole in the UK’s economic approach. We identify sectors of the economy that provide healthy (sometimes very healthy) returns to owners and shareholders, but we forget that there are swathes of young people out there who need quality jobs to go to. In a separate blog today, Linda talks about the squeeze in wages in the UK. There is no one reason why relative wages have fallen in recent times – the decline of collective bargaining has certainly played a part – but this can be accounted for, at least to a degree, by the fact that we don’t produce enough jobs for what sociologists used to call the skilled working class. Our economy is not just out of kilter industrially, it is also unbalanced from an employment and pay perspective.
As I blogged from Beijing a couple of weeks ago, China seeks to develop modern services that are also employment-intensive. Indeed, job creation is central to China’s economic approach. There is no assumption that the market will deliver good jobs without policy instruments to ensure that such things happen. I think we should take a leaf out of China’s book here. For 30 years, the neo-liberal experiment has assumed that “the market” will solve all our ills, creating quality jobs and paying good wages. It’s time to think afresh.