Did politics kill British Leyland?

January 2018 marks fifty years since the formation of British Leyland Motor Corporation, a company (latterly a publicly owned one) synonymous with failed industrial policy. Whilst the disastrous history of what had been hoped would be Britain’s ‘national champion’ is hard to dispute, the question remains: did politics kill British Leyland?

The decision to form BL in the first place via the government’s Industrial Reorganisation Committee was an inherently political one. Harold Wilson’s Labour government was deeply interventionist by today’s standards. It all fitted in with the Wilson administration’s ‘white heat of technology’ rhetoric: Britain’s car industry would be a dynamic part of high-tech, forward-looking nation of the future.  In the deal brokered by politicians, Britain’s two biggest motor manufacturers, BMC (who made Austin and Morris cars) and Leyland (Triumph and Rover cars, plus trucks and buses) would merge to create the fifth-largest vehicle maker in the world.

The Industrial Reorganisation Committee was a tool of a government that believed intervention in the economy was not only necessary, but desirable. This is the first way in which government policy has been accused of killing BL – by enforcing an unworkable merger. The desire to form such a huge company was not an ideological socialist one; the aim was not to take the car industry into public ownership. The theory was that if the two manufacturers joined forces, they could benefit from economies of scale, on costs like research and development, and sharing components. In doing so, they’d be more focussed on fighting foreign competition, rather than each other, and assisting Britain’s balance of payments.

None of this was an inherently bad idea. The decades since 1968 have seen a consolidation of the car industry globally. BL was the right size, had some strong products, and should have been well positioned to benefit from combining the abilities and capacity of both companies – this is, after all, what VW has done in recent decades to great success. In retrospect, it is easy to say the merger shouldn’t have happened, that Leyland (the structurally stronger of the two) would have been better off alone. It was equally reasonable to assume that the newly merged company would get its act together.

The merger was far from a myopic, ideologically-driven scheme, ploughed ahead with by a bluntly technocratic government, as it is sometimes portrayed. It was a pragmatic plan, and it was met with huge optimism at the time. Yet, by the end of the ‘70s, BL was in a state of near-constant crisis and had ceased to be a serious global player.

Even so, one political failure did massively affect the fortunes of Britain’s car industry - France’s veto on Britain’s EEC membership application in 1963. This mattered because steep import duties were charged on cars from outside the Community, whilst a free market existed within it. Fiat, VW, Renault and the rest benefited from this, whilst Britain – the only significant Western European car manufacturing nation outside of the EEC – lost out.

It would have been the optimal time to join, too. At the time, BMC made a range of cars that appealed to European drivers – especially the Mini, and its larger brother, the 1100 series. Both were smart, well-designed cars, and already big sellers in the UK. They were sold at a significant premium over comparable European cars within the Community.

BMC, instead, concentrated their export efforts on the old Commonwealth countries, but cars designed for Britain’s well-maintained roads were never going to be ideal for South Africa or Australia, and it was these markets that the emerging Japanese car industry first conclusively conquered a few years later. All this meant BMC was in a weak position by the time of the ’68 merger.

Of course, Britain did eventually join the EEC in 1973. BL strongly supported the campaign. But by then – perhaps due to lack of understanding of the European market – it wasn’t in as strong a position to compete. Yes, the Mini’s sales increased – but what was really needed was a mid-size model that would be as strong a contender on the continent as BMC’s 1100 could have been in the ‘60s. But instead, they produced this.

The Austin Allegro was not the car Europe wanted. It was hardly even the car that Britain wanted. It never met the sales precedent set by the model it replaced, the 1100. There’s so much to say about what was wrong with the Allegro. It was not the VW Golf, a car launched the following year, and exactly the car Europe wanted.  

The Allegro is symptomatic of how capable BL was of sabotaging itself, regardless of the political context. All that capacity for market research, development and innovation somehow resulted in a car slower, heavier, uglier and with much less export appeal than the 10 year old design it replaced.

What about the other kind of politics – the kind that no conversation about BL is complete without? Industrial relations at the company were increasingly terrible as the ‘70s wore on. BL was hardly unique; the root cause being, to a great extent, that wages were not keeping up with inflation by the late ‘70s.

To me, that makes the grievances of those striking in the run up to the ‘Winter of Discontent’ far more sympathetic, despite the Thatcherite narrative through which the period is often recounted. Greater prominence has always been given to the – admittedly damaging – strikes over getting an extra five minutes on tea breaks and the like. Besides, even accepting the destructive behaviour of some shop stewards, poor industrial relations ought to be seen as a symptom of a structurally unsound company rather than the cause.

BL became a political football in 1975, when its precipitous decline reached the point where the government had to save it through nationalisation. The formation of BL in 1968 had been part of a political strategy, its nationalisation was reactive. Letting BL go to the wall, as some members of the Thatcher administration would later argue should happen, would have meant mass unemployment in the Midlands.

From then on, politics did kill BL, essentially. The Wilson, Callaghan and – interestingly – Thatcher administrations gave it sufficient bailouts to keep it going, but never enough to undo the strategic mistakes of 1968 – 1975. Thatcher’s solution was to break it up and sell it off in the late 1980s. That was, undisputedly, an ideological decision. The slimmed down group was beginning to turn itself around by then – and one of its privatised successors, the Rover Group, went on to have an (admittedly temporary) renaissance in the ‘90s, making re-badged Honda models. Dismantling BL was not the only option. In France, Renault went through a period of state ownership and emerged intact into the private sector.

Today’s economic and political climate has changed vastly since 1968. No longer is Britain a primarily industrial country, a land of trade union policy and Industrial Reorganisation Committees. No-one seriously suggests the kind of intervention that led to the creation of BL nowadays. However, the car industry is as hot a political potato as ever.

Car makers are footloose transnational corporations; the Japanese owned car factories in the UK are here because of Britain’s openness to trade, especially within the EU. What’s the government’s strategy for keeping them here after Brexit? Meanwhile, intervention is once again being seriously discussed to cajole the industry. Only when legislation began to be implemented by national and local governments to restrict fossil-fuel powered cars did the manufactures start to take electric vehicle development seriously. Last year’s VW emissions-test scandal suggests that, without insufficient oversight, corporations often don’t act in society’s best interests. The cars, and the people making them have changed, but political intervention in the car industry is here to stay.

Austin Allegro image created by Thomas Pics and used under creative commons.

The decline of the steel industry raises real questions for the left?

“If L S Lowry was painting today he’d be painting [in Notting Hill], not Manchester. Because this area is the dormitory for the biggest factory in this country: the factory of finance.” These are the words of Henry Mayhew, a City employee and Notting Hill residence interviewed in the BBC documentary The Secret History of our Streets. Manchester was once been the driving force behind the industrial revolution, but today most of the economic activity of the country is generated in one square mile.

Whatever you think of the bankers of the City of London, they are the economic engine of the UK and generate most of the wealth in the UK. This wealth does not make it far out of the South East or through many social classes, but the fact remains that we have traded factories for financial models.

This is mainly because our economy has been pivoted toward the City, through decades of privatization and financial deregulation. The 2008 financial crash and the subsequent recession has only increased our relevance on the City to generate economic activity. Neo-liberal economists would argue that this is because we have a competitive advantage - literally an advantage that makes you better than the competition - in banking and financial services. In Lowry's day, our competitive advantage was in steelmaking or coal mining. Things have changed. Time marches on. However, we cannot all be bankers and move to London, so we should probably think about the jobs everyone else is going to do.

A thousand people currently employed in an industry where the UK does not have a competitive advantage are about to lose their jobs as the Teesside Steelworks in Redcar closes down. With the closure of Tata Steel as well, it is clear that the UK steel industry cannot compete in the global steel market - especially against cheap steel being produced in China. Only the coldest neoliberal economist would dismiss the problems of these thousand people, their families and communities. Clearly something has to be done for them but retraining unemployed workers in their 40s and over is not something we have been historically good at in the UK and no one is talking about how we can change this.

Faced with the mass closure of steel plants, the conventional free-market wisdom is to rebalance the economy towards an area where we have a competitive advantage. The idea is that the government invests in science, engineering and computing education, to train young people in work in the high tech industries of the future. This is writing off the steel workers losing their jobs, but offering them the chance that their children can work in new industries.

Put this in the wider context of decreasing social mobility and we see how empty this promise is. People from poor backgrounds with unemployed parents have not historically done well in a liberalised labour market. Even if we created thousands of high tech jobs in former steel towns then these jobs would not go to the children of steel workers, because by taking their parents jobs away we are giving these children a competitive disadvantage in the labour market. Given the current state of social mobility and the labour market, what is left for these people or their children? The only jobs being created in these areas are working in a distribution centre - in other words low paid and insecure. In the current labour market the future does not look good for the people of Redcar.

The closure of Teesside Steelworks and the Tory's recent agreement with China to build a new nuclear power plant are often mentioned in the same breath. Opening up our domestic markets to global completion has destroyed the steel industry. There is no shortage of demand for steel in the UK, however it is much cheaper to import it than to buy it from Tata Steel, the company which owns the Teesside Steelworks. The fact that the Tories need to make a deal with China to build a new nuclear power plant is because the twin snakes of deindustrialisation and globalisation has got rid of all the British firms that could have built the new power stations. Any jobs created by opening our construction industry up to China will be offset by the job losses caused by opening our steel industry up to China.

The aforementioned neo-liberal economist's solution to this issue would be to move the entire county up the supply chain. Rather than competing in making huge amounts of raw materials at a low price, focus on making more complex products that China does not produce. The only problem with this is that China also wants to move up the supply chain and in the future we will be competing against cheaper Chinese software or financial products. Even if China does change, none of this will help the newly unemployed steel workers or their children, for the reasons mentioned above.

Cameron and Osborne clearly have not thought this through. As they open the country up to increasing competition from globalisation more and more businesses will be forced to close. Cameron and Osborne, like the neo-liberal economist, insist that job losses are a temporary and are a necessary pain to pass through as we move to more prosperous future economy, much the same way that they justify their spending cuts. The problem with this approach to globalisation, like austerity, is that it is never Cameron or Osborne or anyone they know or anyone in their constituencies who loses their jobs or tax credits. Their set are always the one to benefit from globalisation but never the ones to pay for it.

Ignoring the problems of globalisation is not a trend which began with Cameron and Osborne. Since the 1980s the UK has moved away from manufacturing and towards financial services and job losses have been dismissed as the cost of structural readjustment. This dismissal of the problems of globalisation has led to under investment in our manufacturing, which has meant closures and job losses. The proof of all this is in the China power plant deal. No firm in Britain can build it, because we have no invested in these skills in the race towards our competitive advantage in finance.

Globalisation, deindustrialisation and the problems it has cerated for communities has been met with a shoulder shrug from society as a whole. In Britain we are more than willing to throw thousands of steelworkers under the bus to have cheaper smartphones and holidays abroad. When we choose to think about the poor people who lose out we shake our heads and say there is nothing to be done.

No one on the left has a solution to this problem. Corbyn is critical of the free market which created the problem but he does not have a solution. He talks about investing in infrastructure but you cannot talk about infrastructure without talking about industrial infrastructure. There is a difference between what we can produce and the economic capacity of the country, i.e. having roads and railways are pointless without factories or services to generate economic activity. Using state spending to give these declining industries a competitive advantage will not work either, the government already spent £1 billion on the Teesside Steelworks and could not make it produce steel at a competitive price.

So, we come back to the same problem. What are these communities supposed to do as their jobs disappear? Move to London? Clearly not an option for everyone. Invest in a Northern Powerhouse to create new employment outside London? Good idea and something I support, but there are four problems:

1. There is a lot of talk about this but nothing is actually happening.

2. It does not help the people who are losing their jobs today.

3. Making Manchester or Liverpool a bit more like London will not help Blackpool or Whitehaven or Workington. The brain drain will just have less far to travel

4. By the time all these new industries are established in the Northern Powerhouse they will have to close because China will have moved into these industries in a big way and the North will have gone from being unable to produce steel a competitive price to being unable to produce software or microcircuits at a competitive price.

Maybe the solution is an L S Lowry type figure taking pictures, or making films about these towns and their people, so that it becomes harder to dismiss them. We need to have more understanding and sympathy for the people who are losing their jobs. That is the best idea I have and calls of compassion have a poor track record at tackling economic problems.

We need to do something about the loss of these jobs, we cannot just leave these people and communities to slide into absolute poverty because it is what our neo-liberal, free market ideology demands. The left does not have an answers to this questions, these industries their workers and unions used to be the backbone of the labour movement, why is there not a left wing clamer to do something about these job losses? Corbyn's retro approach to politics will not work in this situation. We need new thinking.

The middle class should pay attention to what is happening in Redcar, as the twin snakes of globalisation and automation are coming for their jobs too. We can try and move up the supply chain to protect the jobs we still have but China is also doing so and competing against China in a liberalised global market has not gone well so far.

Putting up trade barriers is not the solution, that is the same as pretending the world economy has not become globalised. Retraining workers who lose their jobs under the current system is not a solution, not unless we redesign our education system and spend a lot more money on it. Shrugging your shoulders and saying there is nothing that can be done for these people is not a solution either. We need radical new thinking to tackle this problem. We need thinking that questions the established orthodoxies of the free market but also accept some of the aspects of globalisation that cannot be changed.

The lesson from what is happening at the Teesside Steelworks is that during the time of Lowry the work which sustained our economy was done by many people in unionised and relatively well paid and more secure jobs. Now the work is done by a few people and everyone has less secure jobs. We have gone from factory workers to bankers and cleaners. We need to tackle this issue of deindustrialisation, economic change and globalisation before we become a country with only a few highly specialised City jobs, which still make money in the one specific competitive nieche China has not priced us out of, while the rest of us work in low skilled, insecure and low paid jobs.

HS2: On the Right Track?

Fifty years ago, the infamous Beeching Report was published by the government, aimed at dealing with the spiralling losses incurred by British Railways. On Dr. Beeching’s recommendations, over 2,000 stations and around 5,000 miles of line would close down, leaving many towns and regions without any public transport at all. And even after all that, BR still ran at a loss. At the time, coinciding with a huge motorway building programme, it seemed to represent an epochal shift from public to private transport; from rail to road – as inevitable, it appeared, as the shift from canals and stagecoaches to railways one hundred years earlier.

Fast forward five decades, though, and investment in railways is once again on the political and economic agenda. Passenger numbers have increased hugely since the 1990s, and are now at their highest level since the 1920s. Any closures suggested nowadays would be political suicide, for any government. And there is even broad consensus on building a new high speed line, HS2, to connect London and the North. A lot has changed since the Beeching era. Or has it?

To begin with, I was a strong supporter of HS2. In a context of ever deeper cuts and austerity, the HS2 project looked like one decision the government had got right. Aside from improving public transport, it’s an example of using infrastructure investment to prime the pump of the economy – the sort of thing which the Tories are, elsewhere, ideologically opposed to. There is a wide range of opposition to the scheme – not just from the usual nimby brigade, but more concerningly from groups such as Greenpeace and the Campaign for Better Transport. In these quarters, it’s not so much a question of whether rail investment is a good idea or not, but whether the £30bn about to be spent on HS2 could be used better elsewhere on the network. This is the source of my own doubts about the scheme.

For a start, I would argue that ticket prices, not the speed of the trains, is the main change ripped-off passengers would like to see in intercity travel. At its best, public transport can be a great equaliser – whereas HS2 will be of the greatest benefit to a minority of business travellers who can afford to pay for high speed. At 125mph on many parts of the west coast main line, train speeds into the capital are already pretty good. Capacity on existing lines into London could be improved to some extent by laying more passing loops to prevent slower freight trains delaying expresses, and by improving signalling to get more trains onto the line at a time. As far as London goes, the rail scheme Londoners really need isn’t another main line terminus – it’s Crossrail. And then there’s the small matter of the rest of the country. Away from the glitz of the main lines, local services in many areas are still appalling (not to mention overpriced). A Northern Rail train I was on recently reminded me of the BR of my childhood – draughty, grimy, late, and for all the private sector branding everywhere, giving the sincere impression that the operator just didn’t give a damn.

So what could we invest in instead? The association of train operating companies (ATOC) has proposed 14 lines, closed by Beeching, that should be re-opened as a priority. I’d add a few more to the list too. The former line connecting Penrith on the west coast main line with Keswick and Cockermouth in the traffic-clogged Lake District looks like an obvious candidate, as does the Carlisle to Edinburgh Waverley Route, the closure of which left much of the Scottish Borders isolated from the rail network. But reopening these lines doesn’t just benefit the localities in question, it also strengthens the network as a whole with increased versatility. Similarly, several main lines (such as the Western and Midland main lines) are still diesel operated. Electrification does more than improve train speeds and reduce carbon emissions – it also ‘cascades’ down newer diesel trains to replace clapped out rolling stock in non-electrified areas (the hateful, cheap-ass 1980s ‘Pacer’ units favoured by Northern Rail in my part of the country being particularly prime candidates for scrapping). And that’s even before we get to more general improvements such as better station facilities, longer trains on busy routes and more services extending into the evening.

Of course, HS2 won’t be without its benefits – I’d rather have that than nothing – but the money could be used to give a much more evenly spread beneficial impact on the network as a whole. The much vaunted reduction in flights probably wouldn’t happen either – it would have to extend to Scotland, not just Manchester, to achieve that.

As always, the elephant in the room is still the obscenely powerful road lobby (look how much fuss petrol duty causes, for example). It has more than anyone to lose from rail investment. But unlike road building, which only benefits those who can afford to use them, improving public transport benefits everyone, both by reducing carbon emissions from transport and increasing quality of life. Back in the Beeching era, the common complaint was that government shouldn’t subsidise BR, and that it must run at a profit – even though motorway building effectively subsidised haulage firms and car manufacturers.  But it isn’t the idea of HS2 that frightens the road lobby. Trains are already the quickest and most convenient way for most people to travel into London. What actually terrifies them is the idea of a net improvement in public transport across the UK – an efficient, accessible, systematically invested in railway system.

British Rail image created by Steve Jones and used under creative commons.

Internships and Wealth Inequality

Internships have long been blamed as a means by which wealth remains concentrated amongst the upper classes. Most of the positions available at some of the UK’s largest and most prestigious firms to young people starting out on their careers are unpaid or come with a bare minimum of transport fees reimbursed. For young people looking to gain the vital experience necessary to secure a job, an additional source of income is needed to pay their cost of living during an internship which could last for several months. Firms expect an intern to be present during normal office hours which rules out most forms of employment and the long hours and demanding timetables frequently placed on interns also makes evening employment difficult. Generally interns rely on what has become known as ‘the bank of mum and dad’ meaning that only the children who have parents wealthy enough to pay their way can afford to take up an internship.

To a firm, having an internship is not only a desirable characteristic in a prospective new recruit but is increasingly become essential. In a government survey, one third of British firms said they would only hire a new recruit who already worked for them. The most obvious illustration of class perpetuation through internships is an annual Conservative Party fund raiser to which Mayfair based capital and equity firms donate internships which are then bid for by part donors, the proceeds going to the party. At this event, those who can afford to spend several thousand pounds to secure their child an internship at a top finical firm (as well as paying their children’s living cost during the internship itself) spend their money to guarantee one of their children will have a well-paid career.

The incentive for parents who can afford this for their children is clear. Not only is it a good way to give your child an advantage over the competition in beginning their corporate career but by ensuring your child has a well-paid position, parents are preparing for the retirement by providing their children with financial success. The net effect of the recruiters relying on internships to vet candidates at the beginning of their careers is the concentration of wealth amongst the privileged class. Only the wealthy can afford to furnish their children with the internships that are necessary to secure well-paid jobs.

Recently Nick Clegg and the coalition government have announced plans for major companies to offer more starting positions to people from less well-off backgrounds and to offer payment or living expenses to interns while they are working. Although this is noble in intent it fails tackle the root of the social inequity caused by the internship system. It is impressive that Nick Clegg has managed to convince so many large companies to agree to a scheme which offers firms little more than a PR boost, but by making the proposals opt-in rather than legally binding there is no incentive for most firms to alter their behaviour at all. An outright ban on internships would force firms to at least offer minimum wage to those gaining work experience which would go some way towards leveling the cost barriers to most young people taking up internships.

The plans are welcome news to those with an eye on becoming a senior corporate executive but hint at a fundamental flaw in the collation government’s approach the issue of wealth inequality; in that they expect private business to tackle the issue with government only very gently prodding the companies in the directing of socially conscious capitalism. Making internships more accessible to those who dream of vast corporate wealth is one thing but the issue at the heart of capitalism is the fact that regardless of how level you make the playing field, the majority of people will end up owning a small percentage of the wealth mean while a few people will own the majority. The question is what can be done about this and the answer the government suggests is ‘nothing’.

Reforming the internship mechanism may make it easier for those from poor backgrounds to get internships but will do almost nothing to tackle wealth inequity. It will also have a negligible effect on social mobility as there will remain a finite number of internships and even smaller number of people who reach the higher echelons of the corporate hierarchy. The people at the top of pyramid may vary slightly but this does nothing to comfort those at the base or those who question the virtues of a pyramid structure.

Hinting to large companies that they should be more socially aware will not solve the problems of a widening gap between the rich and the poor. Most of the coalition government’s austerity program is cutting the services that the poorest members of society depend upon. The government needs to do more to tackle wealth inequality rather than smoothing off the edges or implying that large firms should be readdressing the wealth balance themselves.