Confidence is gathering in US production with students opting for engineering instead of law
Joe Wright, 11 March 2015
The US has often served as an economic barometer for the world. Owing to its size and influence, it signals economic downturns – ‘when the US sneezes, the rest of the world catches a cold’ – and can be used to track significant trends: Offshoring, the process by which economies were deindustrialised began in the US; reshoring, encouraged by shale gas-induced falling energy prices and rising transport costs for goods, was also first recognised as a US phenomenon.
In the wake of the financial crisis, President Obama aimed to promote production. Along with bailing out the US car giant GM, he introduced incentives for companies to maintain production capacity in the US. This strategy was an important part of his 2012 re-election campaign – ‘An economy built to last begins with manufacturing’. The message has broken through with the next US generation showing far more interested in industry than their predecessors.
The number of people undertaking engineering courses has grown by 38 per cent in the states since 2005, while those opting for law fell by roughly 7 per cent. This is in part reflective of a rapid rise in tuition fees for law and comparatively affordable prices for engineering courses, but it also points to a shift in attitude. There are a wide range of factors which influence course choice, one of which is perception of future job opportunities – more than a simple response to the cost of education, a steep rise in engineering undergrads signals a vote of confidence in US production.
Such a shift in education preferences can have a profound effect on an economy, influencing the labour market and availability of skills for decades. An overspill of engineering qualifications could also lead to an increase in new businesses involved in production.
US economic strategy is closely followed by the British government. Reshoring has been referenced as an ambition of the government multiple times by the prime minister, most notably in his speech to the World Economic Forum in 2014. Introducing shale gas to the UK will also be a key element of the Conservative manifesto and likely to happen under any configuration of coalition government after 2015.
Whether the same can be replicated in skills remains to be seen. The financial crisis marked the beginning of a tough period for UK graduates. General wage depression and a rapid increase in competition for high value service jobs, like law and financial services, left almost a third without a ‘graduate-level’ job even five years after leaving university.
There has been a good deal of discussion on how to boost the up-take of STEM subjects among policy makers, including the Perkins Review to look at engineering courses especially, but to little avail. STEM up-take remains poor.
Hilarious to see the country which always describes itself as the country which leads the world in its devotion to free enterprise doing its usual and engaging in state intervention on an massive scale.
Because they have the word free in them, the terms “Free markets” and “free trade” have seduced those of all political colours to treat them uncritically as ideas. They are considered good or bad but their intellectual coherence is rarely questioned.
Neo-liberals believe in a childlike quasi-religious fashion in the workings of Adam Smith’s “invisible hand”, which, moved by enlightened self-interest, supposedly creates the best of all possible material worlds through the operation of the market. Socialists see “free markets” and “free trade” as economic “state of natures” which must be ameliorated by the state before a civilised society can be realised. Conservatives in the traditional sense no longer exist as a recognisable political force in the West, but when they did exist they opposed “free markets” and “free trade” primarily on the grounds of national security and the general disruption to society that they caused. Nationalists of the fascistic kind have traditionally opposed the ideas because they see the nation as a single organism which can only be strong if it is master of its own destiny, something which can only be achieved (they believe) through state direction of both the internal market and of external trade.
There are varying quantities of truth in all these ideological responses, but their utility is seriously tainted by the lack of any objective or even properly defined and permanent prescriptive truth in the concepts of “free markets” or “free trade”. The reality of these ideas is that they are arbitrary chosen bundles of behaviours which are excluded or included at the will of their proponents. Moreover, the bundles of behaviours are not static.
The widespread negligence in examining the coherence of these ideas is all the more remarkable because their incoherence as theories and the arbitrary and dishonest nature of their practical realisation is not only readily apparent but fundamentally undermining of the claims made for them by their champions.
There is a splendid irony in the objection of the self-defined “free marketeers’” and “free traders” to state intervention for the natural end of a truly free market is monopoly – or at least greatly reduced competition resulting in oligopoly and the rule of cartels. All so-called “free market” societies recognise this by passing anti-monopoly laws. The “free market” is in fact a market controlled by the state in the most fundamental way, that is, to prevent its natural workings. It is one of the great propaganda triumphs of history that “free markets” have been successfully sold as being what happens naturally without state intervention. Call a spade a spade and substitute the truthful “state regulated non-monopolistic market” for “free market” and the psychological shape of the idea changes dramatically. (Some casuistical “free marketeers”might argue that the “free” in free market applies to the workings of the market rather than the market as a natural phenomenon. That explanation falls because “free marketeers” invariably make the blanket claim that markets only work efficiently without government interference. Their honest position would be to state that they want state regulated markets to prevent monopoly. They will not do that because it would be an acknowledgement that state regulation of the market is legitimate and hence remove any general argument against regulation. That in turn would mean any form of state regulation would be potentially reasonable and consequently each form of regulation would have to be argued down individually on the merits of the case, rather than simply empty-headedly dismissed on the grounds of no regulation = good; regulation = bad.
The state regulated “Free Market” is not even a natural phenomenon made somewhat artificial by rules to exaggerate the natural phenomenon in the same way that we breed animals to exaggerate nature. Rather it is just about as far from being a natural phenomenon as anything can be for it goes against all Man’s inclinations, both individual and social.
Economic history is overwhelmingly a catalogue of market regulation, local and national, from guilds to governments. It would be surprising if it were not because human beings, like all other organisms, naturally behave to secure their own advantage or that of their group. Extended to the nation state, this natural behaviour has commonly resulted in domestic markets being protected against foreign competition. Whether this is a good or a bad thing is another matter – a question I shall deal with later – all I am concerned to do at this point is to nail down that the fact that protectionist behaviour is what is natural.
Historically, whether you were anything from a rich merchant to a poor day labourer it was obviously not in your personal interest to allow others free access to your markets to offer the goods or services at a lower price or to work for lower wages. The merchant might be driven to bankruptcy by competition, the labourer from his job. History also tells us that whatever their previous economic station, such people will probably not be able to find equivalent or better paid employment and often may not be able to find any employment at all where structural unemployment arises. What was historically true not only remains true today, but its effect is much magnified because the opportunities for competition are greatly increased by modern communications and the ease of travel and cargo transportation.
Of course, any individual or sectional advantage causes strains in a society and if the material privilege of any person or group becomes excessive, sooner or later there will be a successful revolt and the wealth in a society will either be shared more fairly through a change in the way the society is structured, for example, through the abolition of tolls, the ending of state monopolies or even through a removal of the rich as a class without any increase in the wealth of the majority.
But wherever wealth distribution through social change has occurred it has normally been done with the express intention of benefiting a particular group or even an individual in the case of monarchs. The odd thing about “free marketeers” is that what they ostensibly advocate is not to privilege any particular individual or group but to benefit society as a whole. Whether free markets do so is another matter, but that is their claim.
The “free marketeer” says to a population, do what I say and in time society will become richer. He does not say this person or that group will become richer or even all will become richer, but merely that the society as a whole will become richer. This is an extraordinary thing to ask people to trust in. It is also the most wonderful blank cheque ever written to a politician because not only does it absolve him or her of any need to take the responsibility for regulating the economy, it also means that he or she can never be held to account for dishonesty by any individual if that individual is personally worse off. All a “free marketeer” politician has ever claimed is that his economic way will make society richer. Provided society overall is richer, he has met his met his promise.
It is also telling for their intellectual credibility and honesty that “free marketeers” will oppose government interference in such matters as subsidies, quotas, embargoes, wage rates and working hours and grumble about tax rates and public expenditure, but are generally quite happy to see other gross distortions of the market deriving from government action. They not only tolerate patents, copyright and trademarks, but often defend them as property in themselves and as devices which actually improve economic performance because they encourage invention, investment and expansion. In addition, those who constantly bleat about Adam Smith’s “invisible hand” sorting out the business wheat from the chaff insist that limited liability is necessary. This of course is also a violent interference with the market because it means that the individual shareholder never takes full responsibility for their investment. (It is worth noting that the British industrial revolution – the one and only bootstrapped industrial revolution – took place before limited liability became legally possible (Limited Companies Act 1862) and at a time when patent rights were insecure and in practice limited to the domestic British market.)
It is true that none of these things are actually part of what the concept of a “free market” is and that they are inimical to such a market, but the fact that almost all modern “free marketeers” have tacitly incorporated them into their vision of what a “free market” is demonstrates their intellectual confusion (or dishonesty if you prefer).
Read more at
https://livinginamadhouse.wordpress.com/2012/04/20/free-markets-and-free-trade-elite-propaganda/