Over the past four decades, our economy has lost much of its manufacturing capacity. Manufacturing contributes less than 10% to GDP in the UK, whereas services contribute over 80%. We are told not to worry as services are a good replacement. This is not true. It’s a monstrous lie. It’s like telling somebody, “Don’t worry, I’ve replaced the gold in your safe with rocks. All’s fine.” Yes, it’s fine for the thief who took your gold, but not for you. Losing our manufacturing base is terrible news for the majority. Good news for the wealthy elite. This article explains why. 

The rich foster a belief that it’s a natural progression for developed economies to move from being manufacturing-based to service economies. This is not true, despite it happening. It has happened not because it’s a “natural progression” but through deliberate design and deceit. 

The design has been to entrench free market policies nationally, then implement them internationally, establishing global free markets (commonly called globalisation.) This enables them to produce anywhere in the world where production costs are low and to sell everywhere at maximum profit, with no limitations or restrictions. This decimates manufacturing in established economies where wages are high. As a result of vastly expanded markets and lower production costs, their profits have soared astronomically. The vast wealth they generate allows them to invest in and rapidly expand the service sector. To a large extent, the service sector comprises rental services (such as financial services.) Its growth is harmful to the majority. The rentier economy is often referred to as the “bloodsucker economy.” It has justifiably earned this name as it extracts wealth from others through no productive output. Simply through the ownership of assets, they extract wealth. 

What I’ve described above is called the “Triad of Evil”, comprising free markets, globalisation, and the rentier economy. They are evil as their implementation is harmful to society and the environment. The loss of manufacturing helps them spread this evil. The return of manufacturing will be an important step in stopping the spread of this cancer. 

The above introduces you to the broader adverse implications of losing our manufacturing. However, you need to be aware of other equally critical specific issues, such as…

We are huge consumers. These products have to be produced somewhere. As we’ve lost our manufacturing base, most have to be imported. Because we import more than we export, we incur a deficit in our balance of payments. More money leaves the country than enters. This has to be funded. A sustained deficit leads to increased borrowings, which leads to increased costs and a lowering of the quality-of-life for the majority, as governments implement spending cuts to reduce expenditure. Higher borrowings also mean lower investor confidence in the economy, which puts the economy in a downward spiral, again, to the detriment of the majority.

This wouldn't be such a big problem if services were as easy to export as products, but they are not. According to 2021 UK data, the service sector, which makes up 80% of GDP, only exported 49% of total exports. That means manufacturing which only makes up 10% of GDP, exported 51%. That's over an 8 times better ratio. The manufacturing ratio would be much higher if you remove travel from services figures. 

The more we produce locally, the more money remains in the national economy. The more the economy grows, creating more work. Manufacturing jobs have what is called a "multiplier effect." For every manufacturing job created, it creates more jobs in other businesses. Other businesses need to supply them, and in turn, these businesses need to be supplied. This affects businesses from a broad cross-section of the economy. The more technical the job, the higher its multiplier effect. In some cases, it can be as high as 1:13. That means one technical job creates 13 jobs elsewhere in the economy. Service jobs also have a multiplier effect, but it's very small, often 1:.25. That means that four service jobs create only one additional job in the economy. Obviously, the more technical the service job, the higher this ratio, but it's seldom above 1:1. The lowest manufacturing jobs have multiplier effects higher than this. 

When manufacturing jobs are created, service jobs spring up to support them. However, manufacturing jobs do not spring up to support service jobs. This shows the fundamental relationship between manufacturing and services. Manufacturing provides the economy with its leading edge and always will. Manufacturing encourages economic activity across a broad front. Services don't. When manufacturing closes, support jobs are lost. 

Manufacturing also encourages greater innovation and knowledge development. Most R&D (Research and Development) is invested in manufacturing to gain a competitive edge. If manufacturing is done elsewhere, they take on this responsibility and benefit from the rewards. When you have a thriving manufacturing sector, greater knowledge and experience are built around these industries. This knowledge and experience can be exported (as a service) to other countries. Without this manufacturing, we lose all this knowledge and expertise. We become lazy renters, sitting on our backsides twiddling our thumbs. 

All the economic arguments to return manufacturing to our shores are compelling, but of equal or perhaps an even more compelling reason is one of security and self-reliance. When the pandemic struck the UK, we couldn't even provide the most rudimentary PPE (Personal Protective Equipment) or paracetamol. We make virtually nothing in the UK. This security vulnerability, in light of current political events, highlights just how weak and exposed we are, thanks to the greed of a few. 

Of course, there is a counterargument to globalisation. The rich say, "you never complained when you got your cheap replica from China." The thing about price is that it's always relative. If we had to pay a slightly higher price at the time, and there was nothing to compare it to, you paid the price. They created this false reality by sourcing from China or elsewhere when there was no need to do so, considering that the obvious long-term, big losers would be society and the environment. So, this argument is null and void. 

Let's take a closer look at the service sector. As mentioned earlier, it cannot fill the trade deficit left by a loss in manufacturing. In fact, service exports will decrease shortly because of increased competition from other countries and the growth in AI (Artificial Intelligence.) This will mean poorer exports, a higher balance of payment deficit and borrowings. A balance of payment deficit limits the country's ability to import technologies, enabling it to compete more effectively and leading to slower growth.  

Manufacturing lends itself to mechanisation and, therefore, productivity gains, whereas improving service productivity without losing quality is difficult. For example, a waiter may serve five tables well but ten poorly. Productivity is gained at the loss of quality. The same applies to exportable services. Markets require productivity gains with no loss in quality. This is difficult to achieve for services. Consequently, when an economy becomes dominated by the service sector, productivity growth will be low, and the whole economy will slow down. 

Remember that the service sector comprises a large rental market (the unproductive economy.) Therefore, a large portion of this sector cannot achieve productivity gains. 

When it comes to globalisation, there's a lot wrong with it, which I cover in another article) but bear one thing in mind for now. The ecological and sustainability factor of transporting goods worldwide has never been adequately factored in. If done correctly, it would be totally unviable. 

 So, to claim it's good for us and a natural progression (in developed economies) to move from a manufacturing to a service-based economy is not wrong; it's a barefaced lie. They paint the picture that manufacturing is a low-level endeavour (dirty, mucky, unsophisticated) better suited to developing countries, not modern, sophisticated countries. Nothing could be further from the truth.

You may read other articles by Adrian Dore on Medium at

https://medium.com/@adrianmarkdore/