28 September 2015

Something Will Turn Up: Britain’s Economy, Past, Present and Future

David Smith
2015, Profile Books, 288 pages, £6.99
ISBN 9781781253229

Reviewer: Andrew Sentance, Senior Economic Adviser, PwC

Something Will Turn Up is a very readable, semi-autobiographical account of the UK’s economic fortunes since the mid-1950s, as seen through the eyes of David Smith, Economics Editor of The Sunday Times.

David starts his narrative with a description of the Black Country economy around Walsall in the West Midlands, where he was born and brought up. The local economy was dominated by manufacturing industry, which prospered in Britain in the 1950s and 1960s. As our industrial competitors in continental Europe and Japan rebuilt their economies after the ravages of the Second World War, Britain supplied a wide range of manufactured goods to customers at home and abroad. ‘Made in Britain’ was a hallmark of quality and a source of national pride.

One key theme of David’s book is the story of how a country dominated by manufacturing industry has evolved to become the post-industrial British economy we now inhabit. The peak year for UK manufacturing jobs was 1966, when British industry employed over 9 million people. Around 50 years later, the figure is down to around 2.5 million, a decline of over 70 per cent. UK manufacturing industry was partly undermined by its own weaknesses – poor management and bad industrial relations. But it was also the victim of tougher global competition, big financial shocks and mismanagement of the national economy.

Another major theme of the book is periodic economic crises. After the shock of the 1967 devaluation, the UK economy appeared particularly accident prone in the 1970s, 1980s and early 1990s, which included three major recessions, the 1976 IMF crisis, and exit from the ERM in 1992. The UK economy seemed to follow a steadier economic path from the mid-1990s until the mid-2000s, but the illusion of stability was shattered by the Global Financial Crisis.

Despite this tale of industrial decline and economic misfortune, the big picture portrayed by this book is positive. The UK economy has generally performed well relative to its counterparts in the western world since the early 1980s. How did the fortunes of the UK economy in fact improve over David Smith’s journalistic career, despite so many economic mishaps?

The narrative identifies three key ingredients. First, more disciplined macroeconomic policies – which were implemented from 1976 onwards, after the IMF crisis, under both Labour and Conservative governments. There were setbacks and policy failures along the way, and no government has an unblemished record. But by 1997 the incoming Labour government had taken the bold step of giving independent control of monetary policy to the Bank of England MPC. This arrangement has proved remarkably durable given the many economic policy switchbacks the UK has experienced since the late 1960s.

The second ingredient was microeconomic reform – reducing union power, increasing employment flexibility, tax reform, financial liberalisation, privatisation, encouraging inward investment, promoting competition and deregulating business. The Thatcher government in the 1980s was the key innovator in this sphere, but subsequent governments generally built on, rather than rowed back on, its changes.

The third key element in the turnaround of the UK economy was the adaptability and flexibility of the private sector. Despite the decline in manufacturing jobs, new industries and sectors have created alternative employment and growth opportunities.  Financial services was one of these key growth areas, but even when they faltered after the crisis, other sectors have picked up the baton and created nearly 2.5 million extra private sector jobs since 2009. Manufacturing itself has been transformed, though our industrial base is now narrower and more specialised than in the 1950s and 1960s. A new generation of high-tech, highly productive and export-oriented firms dependent on technical knowledge and skills now forms the core of British manufacturing.

David Smith does not gloss over the downsides – the high unemployment and industrial wastelands created in the 1980s, particularly in his West Midlands homeland. But he tells the story of British economic decline and recovery in an engaging and personal way, drawing on his own experiences and the relationships he built up along the way with key policy-makers including Chancellors of the Exchequer, Prime Ministers and Governors of the Bank of England.

Like David, I was born in the 1950s and this book brings back my own memories and experiences of the key events he relates. For a younger generation of readers, this is a highly accessible guide to a world they cannot recall personally. And the roller-coaster ride that the British economy has endured over the past fifty years reminds us that it is remarkably resilient.  The UK has economic ‘bouncebackability’. Something will turn up – and normally does.