UK cars & housing kaput
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”
James. 1 November 2010