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UK cars & housing kaput

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  • james armstrong
    Sometimes a productive activity which once was founded for the most rational purposes, and for a time highly successful, grows into a white elephant. This
    Message 1 of 1 , Nov 1, 2010
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       Sometimes  a productive activity which once was founded for the  most  rational purposes, and for a time highly successful, grows into a white elephant.  This can happen when an institution has national recognition  and iconic status.

      Once Britain manufactured shoddy cars in huge numbers. Now our chief manufacture is ‘financial assets’ based on a perverted housing market.

      Both failed catastrophically.  

       

      “Such in the 60’s was the  British Motor Corporation.  (BMC) a conglomerate of various formerly independent  car manufacturers like Morris and  Austin , and itself it later merged with Leyland to produce  British Leyland (BL)  which as late as1980 was selling its products as emblematically ‘British’.

       Like the German manufacturers,  British carmakers laid the emphasis on selling abroad, but there the similarities  ended. 

      After the war successive British governments urged BMC to sell every car they could overseas.- as part of the desperate search for foreign currency to  offset the  country’s huge war debts..  The company duly and deliberately neglected quality control in favour of rapid output. The resulting shoddy quality of British goods mattered little at first. as  British firms had a captive market : demand at home and abroad exceeded available supply. In 1949  the UK produced more passenger cars than the rest of Europe combined.  The reputation for poor quality proved impossible to shake off.  European buyers abandoned British cars.

      When they did  decide to  update their fleets and modernize production  lines,  British  car manufacturers had no affiliated banks to turn to  for investment cash and loans in the German manner.  Under heavy political pressure  they built plants and distribution centres  in uneconomic parts of the country- to conform to regional policies  and to appease local politicians and  unions.  After this economically  irrational strategy was abandoned  some consolidation  was undertaken ,  British automobile firms still remained  hopelessly atomized. ; in 1968  British Leyland  consisted  of sixty different plants.

       Government  actively encouraged the inefficiency of British  producers.  After the war the authorities distributed  scarce supplies of steel  to manufacturers on the basis of  their prewar market sales.  Thus freezing this  major  sector of the economy  in the mould of the past  and decisively penalizing the new.

      The oil crisis in the 1970’s, entry into EEC and the  end of UK’s protected markets  in the dominions finally destroyed the independent  British car industry.

         The decline and disappearance of an autonomous British automobile industry may stand for British economic experience at large.

      The UK’s endemic balance of payments crisis  was largely due to the  six year war against Germany. and Japan and  the  cost of the enormous post war  defence establishment.  8.2 % of British   national income against a German  outlay of half that figure.

      One of Britain’s problems was the workforce, traditionally organized into  hundreds of long established trade unions – 248 of them  in British Leyland in 1968.”   *

      But also the management was chaotic.   When Michael Edwards was parachuted into the failing BMC as CEO he startled the nation by announcing his discovery that no-one in the company had any idea of the  production cost of the  iconic model, the Mini.

      Back in 1930 Clement Atlee had identified the British Economic malaise as  a problem of underinvestment,  lack of innovation, labour immobility and  managerial  mediocrity.

       

      The provision of housing in UK is like the UK car industry in 1960, no longer fit for purpose. 

      In its way house provision on a national scale is as complicated a structure as automobile manufacture. ..

      Exclusive minority land ownership and therefore control of use, already   extremely high and continually upgraded  building standards, restrictive and  rigorously and universally enforced town and country planning laws,  prioritizing the role of houses as property over that  for home making  by occupiers and  manipulating house prices to out of reach levels by government as part of a macro-economic policy to treat houses as assets against which mortgages can be borrowed, thereby encouraging increased borrowings (and the consequent rise in house prices) as a way of stimulating credit and , in turn, boosting consumer spending-

      all these have contributed to making the supply and the price of houses an inescapable  matrix  which excludes  a large and growing  section of the population from access to housing at prices they can afford.

      In addition the unlawful monopolizing of scarce building sites with planning permission or with potential for planning permission ensures that new house supply is severely restricted even in times of economic growth. Restricting the supply , in the absence ofaccess to ‘other ‘sites,  pushes up prices

      That millions are on waiting lists for social housing and that the numbers of those in housing need , both in the private  and social sectors  at a time when  the supply of new houses is at a record low – these  show that  the housing industry does not meet the needs of  consumers an has not done so for twenty years.  

      That the house manufacturers do not fail, as did the car manufacturers is due to their second role as land speculators.   The increase in the value of land contributes more to their profits than the does the deliberately restricted number of new houses they build.

      Monopolising scarce land , against the background of  the severe restricted availability of land with planning permission for house building, allows them to benefit from windfall gains on both the houses  they produce (in restricted numbers) and on the land they retain in their landbanks and advertise in their balance sheets.

             Governments ignore the unlawful monopoly behaviour and government regulatory authorities (OFT) fail to act  because high house prices further government and Bank of England  economic strategy of stimulating growth through increasing credit based on high and ever rising house prices – that’s all we can manufacture-not houses but the   financial products based on their high price.. We once manufactured motor cars for the world - and failed.

      In both instances,. cars in the 1960’s and houses in the present, the institutions , both public and private are no longer rational, considered from the  viewpoint of the public good.  Ultimately it was the lack of trust that ditched BM and will ditch HMG.

       

      House provision in UK is more than a white elephant, it is a raging tiger consuming   people s lives and  blighting the prospects of  the future generation.

       * Tony Judt…. “Postwar”

       

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      James.   1 November  2010

       

       

       

       

       

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