Too bloody late, I’d say. I can just about remember when Made In Britain on a product was a sign of quality but we flushed that away in the 80s with the deadly combination of Thatcherism, poor design and incompetent management. Germany now has the market sewn up for good quality products at reasonable prices on just about everything – watches, boots, cars, furniture, vaccuum cleaners, fridges, cookers, power tools, even houses.

The 200 billion euros spent on improving the East’s infrastructure has probably helped a bit too

@1: “Too bloody late, I’d say. I can just about remember when Made In Britain on a product was a sign of quality but we flushed that away in the 80s with the deadly combination of Thatcherism, poor design and incompetent management.”

Sadly, the malaise in Britain goes back much longer and deeper than the Thatcher governments of the 1980s.

Productivity in several leading industrial sectors in the 1970s – coal, steel, the motor industry – declined on trend.

By the mid 1970s, half of Britain’s adult population had no educational qualifications. Unlike West Germany, we had a poor national infrastructure for vocational training to create the technical skills needed by industry

To my personal knowledge, management studies going back at least to the 1970s showed that management in Britain was seriously under-educated compared with their peers in most of western Europe. The poor quality of management in many indigenous British companies prompted the take-over booms and mergers of the late 1950s through to the 1980s.

Industrial relations in Britain were famously adversarial.

For an independent perspective, try: Britain’s Economic Prospects (Brookings Institution, Studies, 1969):
http://www.amazon.co.uk/Britains-Economic-Prospects-Brookings-Institution/dp/0043301274/ref=sr_1_5?ie=UTF8&qid=1301060048&sr=8-5

For an insider’s view, try Alec Cairncross: The British Economy since 1945 (1995)

nice post Duncan.

I wonder if “lower wages” provides an accurate picture of the extent to which workers have (or haven’t) benefited? Are there compensating benefits, to workers. For example, has running a trade surplus increased expected future pension payouts, higher levels of public goods, lowered future taxes etc.? I don’t know, those ideas might not even make sense, but it would be interesting to know, from the left-wing perspective of looking at things in terms of benefits to workers, how things come out on net.

@3 Luis,

A good point, worth looking into.

Another one of those occasional excellent, not really partisan but thought-provoking posts that crop up around here sometimes.

Would it be an accurate summary to say then that politicians (and perhaps more accurately journalists and bloggers) invoking Germany as a model are actually invoking idealised visions of a Germany that never really existed?

I started work in a factory in 1968 as an apprentice. I worked there until the early 70s when there was a prolonged strike. The factory closed down and everyone lost their job. There were rights and wrongs on both sides. The management and the union were incompetent. I got another job and I’ve done okay but only since I started my own company 20 years ago. Sometimes I bump into people who worked with me back then. Many never got a good job ever again.

The UK wasted its potential all those decades ago. Since 1978 we have lost 4 million manufacturing jobs and gained 4 million financial jobs and 2.5 million public sector jobs.

Tim Worstall would say that this is a good thing. We do nice jobs now and some low-paid oink in China does the dirty, boring factory job for one-tenth of the price. We are, therefore, better off because we do high added-value work like financial services, design (Dysons, anyone), and even teach the Chinese how to speak English. Our money goes further on ‘stuff’ because the oink does the crap work.

Tim is right, of course. I would say that there was lot we could have done in the way of engineering and factory stuff, which the Germans prove beyond a doubt. But it is now probably far too late. Such activities require highly qualified people and enormous investment. Whether we produce the engineers etc these days, I don’t know. Perhaps we do. If we do then we need massive amounts of investment to build towards the German model. Can we find the investment? I don’t know. I do know the UK is a very tough place to be in mucky commerce because the upper class derision about ‘trade’ has now been replaced with a chattering classes snobbery about trade.

Just one thing to add – Duncan, excellent post!

Don’t know the answer to this, just wondering:

Is the stagnation of real wages due in part to the reunification? Wages in the East rise, but not in the West?

There was also an interesting article in the FT this week claiming the era of cheap Chinese goods might be coming to an end.

@8,

In the first few years – yes. But not really since about 96/97.

Good article on German/European wages here:

http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=40881

9
Cheers, interesting.

It might not be quite the scale of East/West Germany circa 1992, but there is undoubtedly a north/south divide in the UK. Might there be a nascent policy for dealing with said divide lurking in the German experience?

astateofdenmark,

Unless you are planning on having the north run by an evil one-party state for thirty-odd years (no jokes about Labour strongholds please…) difficult to see how that would work on face value.

The north-south divide more reflects the fact that the south overall have a better tradition of educated and skilled workers than the north, which historically focussed on producing and processing raw materials in bulk (there were plenty of skilled jobs in this, but they tended not to be over transferable or that plentiful). This may reflect the fact that the south was generally shorter on raw materials (or not on the shortest trade routes for bulk goods which came to the west coast – the north-south divide being really north-east-south-west). I think the divide can be overcome mind…

The fascinating thing when the subject of Germany and the UK come up is the things people commonly believe are just not true. UK high-technology exports % of manufactured exports greatly exceeds the German share. The notion that the UK only does financial services is a myth. Goods and services exports as a share of GDP in Germany only started to exceed the UK around the millennium. More why that happened later. Google have a good tool where you can use World Bank data to compare different countries.
http://www.google.com/publicdata/overview?ds=d5bncppjof8f9_

Technological achievement:

7th UK
10th Germany
http://www.nationmaster.com/graph/eco_tec_ach-economy-technological-achievement#definition

UK productivity has been higher and growing faster than German for getting on for twenty years. The UK worker is more productive than his German counterpart on a per worker or hour worked basis. That is why the UK worker earns more than German workers.
http://www.statistics.gov.uk/elmr/08_07/downloads/ELMR08_07Dey-Chowdhury.pdf

The non consuming German saver is a myth. They had a private consumption boom that ground to a halt around 2000. See here the growth and then almost flat since 2000 on this Bloomberg chart.
http://2.bp.blogspot.com/_ngczZkrw340/THwZVSaKjII/AAAAAAAARXA/KvWHKD1xSGk/s1600/Private+consumption.png

The same thing for bank lending for mortgages.
http://2.bp.blogspot.com/_ngczZkrw340/THwY30h4tDI/AAAAAAAARWo/XucLblFAluY/s1600/German+Total+Mortgage+Lending+Y-o-Y.png

Total private sector bank lending.
http://1.bp.blogspot.com/_ngczZkrw340/THwXwr88bKI/AAAAAAAARVo/nrv6IHEnHl0/s1600/German+Total+Private+Sector+Lending.png

Germany ran current account deficits until just after the millennium and the commencement of the euro project,
http://1.bp.blogspot.com/_ngczZkrw340/THwLewt3R7I/AAAAAAAARVQ/gDCm9Ipi2m4/s1600/Germany+Current+account.png

What happened around the year 2000 to alter the previous pattern? They hiked indirect taxes, and the German government, employers and unions colluded to suppress the wages of German workers. This was in effect a beggar-thy-neighbour policy against their euro partners.

At the same time the German median age started to rise. Demographics is a big driver of the current account and a rising median age usually sees less income being spent on imports and the savings rate rising.
http://3.bp.blogspot.com/_ngczZkrw340/THwZqVV3cfI/AAAAAAAARXQ/gCM3CjY76Yc/s1600/German+median+age.png

Germany probably has a better balanced economy compared to the UK. They have retained a bigger manufacturing share of the economy than the UK. However, even in Germany the manufacturing base has shrunk considerably and just like the UK services has grown as a share of GDP. However, people pay too much attention to this as the manufacturing share will automatically fall if services has faster growth. Moreover, Germany produces a lot of capital goods that can only be classified as manufacturing. Whereas, the UK does things that could be classified as manufacturing but are counted as services. For example, software could easily be classified as manufacturing rather than services. Workers do not care how statisticians classify their job, they only care how much they are being paid and UK workers are earning more than German workers.

Germany really is a contradiction for left and right and it is rather funny reading some of the drivel written about Germany. Considering what happened to Ireland after Mr Osborne praised them I would short Germany if he has turned his attention to our Teutonic friends.

Everyone one speaks about re-balancing the economy but apart from warm words I don’t see many concrete proposals to actually achieve re-balancing. The one sure way to boost net exports on the current account is if people spend less on imports and save more. The savings rate actually went negative just before the financial crisis and it is still too low. The government really ought to offer more incentives for savings as we have become too fond of consumption. Means testing is actually a disincentive for savings but I do not know how we can avoid means testing. I would support something like Singapore’s forced saving. Maybe not 35% but possibly 10% from every wage.

On the deep root causes of Britain’s economic malaise, try: Nicholas Woodward: Britain’s post-war Economic Decline
http://www.users.globalnet.co.uk/~semp/bdecline.htm

“I’m reasonably convinced that the left wouldn’t support a two decade wage freeze”

How about a five year wage ‘freeze’ with inflation running at 5%+ ?

I must admit I’m impressed with this Osborne vision of a Calvinist nation of savers and makers, investors in industry rather than property. I’d always assumed his vision was of a nation with sufficient inherited wealth to sit in a comfy chair with one’s arm round a prostitute, and a fat line of coke on the table. Just goes to show.

For those sufficiently interested, some accessible academic papers on Britain’s relative economic decline:

Charles Bean and Nicholas Crafts: British economic growth since 1945 – relative economic decline . . and renaissance?
http://books.google.co.uk/books?hl=en&lr=&id=wiTtnUn5qGsC&oi=fnd&pg=PA131&dq=britain+economic+decline&ots=s96LdNmYi5&sig=pHRSwIZyfWvyArYLi3G-pmdn89w#v=onepage&q=britain%20economic%20decline&f=false

David Kern: UK Economic Decline
http://www.rozenbergps.com/books/britain/kern.pdf

Nicholas Crafts: Supply-Side Policy and British Relative Economic Decline
http://colinthain.com/images/pub_uploads/Tbd.pdf

14
Good sources, although I’ve only managed a quick read, one thing that always appears to be part of the analysis of economic decline between the 50s and 70s is the poor industrial relations in the UK particularly when discussing American investment.
But Harold Wilson attempted to go some way to address this when, in Labours’ 1974 manifesto, he promised new legislation to allow union members to sit on the board of large corporations, consequently either side could negotiate the different interests at pre-policy level rather than via damaging industrial action at a later date.
After winning the second 1974 election, Wilson had a visit from Henry Ford jnr advising him that if he carried-out this proposal, he (Ford) would effectively remove all of Ford’s revenue from UK built cars and transfer it to their European branch. As Ford cars were then the biggest selling car, Wilson, backed-down.
I have no reason to believe that Ford didn’t represent the opinions of most American corporate owners in that period.

“Tim Worstall would say that this is a good thing. We do nice jobs now and some low-paid oink in China does the dirty, boring factory job for one-tenth of the price.”

Tim Worstall would go further: That Chinese oink may be low paid, but he’s paid four times more than he was just a decade ago (yes, Chinese manufacturing wages have been growing post inflation by 14% a year for more than a decade. Compounding is just great stuff.).

Which is a truly marvellous thing, the formerly destitute are getting richer, climbing into that global middle class.

Ain’t it great?

Duncan: excellent of you to make the point about German wages. We can go further though: it’s not happenstance. It’s been a deliberate policy decision, to actively reduce labour costs over recent years so as to increase competitiveness.

16
Yes ain’t it great, and nothing to do with free-market economics.

@15: “But Harold Wilson attempted to go some way to address this when, in Labours’ 1974 manifesto, he promised new legislation to allow union members to sit on the board of large corporations, consequently either side could negotiate the different interests at pre-policy level rather than via damaging industrial action at a later date.”

That’s an especially valuable point to make in this context – which I’d forgotten about. Wilson was proposing to import the important “Mitbestimmung” institution of the German Bundesrepublik (West Germany). Try this:

“In some countries, like the USA, the workers have virtually no role in management of companies, and in some, like Germany, their role is more important.”

Mitbestimmung – or Co-determination
http://en.wikipedia.org/wiki/Co-determination

Ford have a long historic record of hostility towards labour unions – but then Henry Ford deserves credit for introducing high “efficiency wages” in the company’s American plants in 1914 with the “five-dollar day” to buy employee loyalty, according to some interpretations, or to reduce the management and productivity problems associated with company’s high employee turnover, according to other interpretations:
http://en.wikipedia.org/wiki/Efficiency_wages

For various reasons in the late 1980s, I visited the Nissan plant in Sunderland and the Ford plant at Dagenham, which was still making cars in those times and I had lunch at both places. At the Nissan plant everyone, including the British MD who was routinely dressed in regular company overalls, ate in the same staff canteen. At the Ford plant, the management had dining facilities while the workers ate in their canteen.

In the early 1980s I had visited several manufacturing plants in Japan – it was regular practice there for senior management to wear company overalls at work every day and to work regular stints on the shop floor for the experience.

IMO part of the explanation for the difference was (? is) the greater gap in the education of management and shop floor workers in Britain compared with Japan and Germany. Another was the practice in Japan of virtually guaranteed “life-time” employment for employees in Japans’s big companies – a practice which has been substantially curtailed since the bursting of Japan’s asset-price bubble in 1992 and the stagnation of Japan’s economy which followed.

Japan and Germany have hugely successful motor manufacturing companies while no indigenous mass-volume motor manufacturing companies have survived in Britain. We need to reflect on why that is.

Britain has no mass volume car production because it designed hideous cars and built them badly. Some things only achieve significance when viewed in hindsight, many years ago I saw a Mini Metro and a VW Golf side by side on a garage forecourt, the five-o’clock-on-a-Friday construction of the Metro may have been down to the workers but the appalling ugliness and poor ergonomics of the car were all down to management that approved this monstrosity at every stage. The Golf was simple, cleanly designed and went where you pointed it with no mysterious noises. The VW Golf is now in its sixth generation, where’s the Metro?

Can you think of five good British cars from the 80’s? German ones are easy – Audi Quattro, Porsche 959, BMW 3 series, pretty much any Mercedes, VW Scirocco

Bristol recently went into administration and if you’ve ever driven one you’ll know why Britain still can’t make decent cars. Very, very thirsty, a bizarre mix of fittings ranging from luxurious wood to the very cheapest switches, gaps in the body work visible from outer space and handling described either as challenging or terrifying. All at a premium price, imagine a Rolls Royce designed and built by British Leyland

That concludes this short broadcast from planet Clarkson

@19

I can agree with much of that but it doesn’t answer questions about why managers in British car companies opted for badly designed cars to make and why these were so unreliable in use.

In periodic surveys of car reliability – such as those for the Which? magazine – cars made by Japanese car companies regular top league tables. Why is that?

Btw cars made by Japanese car companies have made huge inroads into the American market. General Motors used to be the world’s largest motor manufacturing company by sales volume, now it’s Toyota.

16 & 17

well, it supports neither purist free-marketeers nor socialists etc, really. A free marketeer has to admit that a government and union negotiated policy of wage restraint has been successful, and a socialists or whatever has to admit that lower wages led to higher investment, lower prices and consequently higher global market demand for German goods, very much a market mechanism at work (so steveb, not really “nothing to do” with free market economics).

@19 Schmidt: “The VW Golf is now in its sixth generation, where’s the Metro?”

The Metro was a rework of the Mini, a 1959 design. The Metro was a cheap and cheerful car. The Golf was designed on a clean sheet of paper c. 1974 and has never been cheap. Those are the design differences and there are other differences in build quality.

Just as our roads are absent of 1980 Metros, they lack Fiestas, Polos and Cherrys. Cheap cars dissolve. 1980 Golfs survive because they were more expensive (better built).

—

Britain does some things very well and our economy is not founded only on hairdressers and bankers. Britain makes great tech products — aerospace, racing cars, pharmaceuticals, bioscience. Britain is good at industrial design. Britain is good at small volume manufacture and crafts. When those Germans at Audi decided to build replicas of their 1930s Auto Union racers, they commissioned the work here. The skills did not exist in the powerhouse.

Sadly, Britain is bad at mass manufacturing in many sectors. Not all sectors.

Duncan identifies a few elements that represent the German approach to industry. But that does not mean that the UK lacks an approach. We used to have the British Disease — poor industrial relations — and we retain contempt for manufacturing and, to a degree, trade. Government targets for higher education, a “knowledge economy”, mean that the UK can’t make things. At best, UK designers will make things that are made elsewhere.

@16 Tim Worstall: “Which is a truly marvellous thing, the formerly destitute are getting richer, climbing into that global middle class.”

BMW aim to make 300,000 cars per annum in China by 2014. Currently all local manufacture is sold within China, but the intention is that the Chinese plants will become exporters. Bavarian and Chinese workers will become direct competitors.

@22: “Sadly, Britain is bad at mass manufacturing in many sectors. Not all sectors.”

But why is that so? Britain’s pioneering industrial revolution, starting in the late 18th century, was driven by high volume production of textiles, a large percentage of which were exported, and then, later, steam engines, railways and ships.

By the end of the 19th century, Britain as an industrial power was overtaken by America and Germany.

My guess is that our failings post-WW2 in mass manufacture relate to Britain’s relatively poor infrastructure for training for technical vocational skills and the relatively low regard for engineering compared with the esteem in which “pure” sciences and the creative arts are held. The bonuses apart, one of the attractions of working in high finance has been avoiding the hoi polloi.

I think it is wrong to think about these things in terms of which system is best. Germany does a lot of things right and there are lessons that we could learn. However, just as a matter of national account identities without the world exporting to Martians, everyone can’t be Germany.

German culture and the evolution of historical experience produced a unique path quite different to the course of development that the UK and France followed. That unique path has some things to recommend it but also produced Nazism in between. Their Sonderweg means they are more natural interventionists compared to the UK, who have an appalling record of the government trying to pick winners.
http://en.wikipedia.org/wiki/Sonderweg

In the post-WW2 period German industrial policy was heavily influenced by the Ordoliberals (Ordered Liberalism) of the the Freiburg School Of Economics and echos of this still influence German political thinking in relation to the economy. The modern ranting that one hears against any intervention or interference really has no pedigree other than a few eccentrics. The ordo-liberals believed strongly that it was all about outcomes and the government have a role in shaping good outcomes. However, the framework must be right and apply to all. The consumer is sovereign and there should be no bias in showing favouritism towards one producer against another producer.

http://36chambers.wordpress.com/2008/07/02/the-freiburg-school-of-economics/

https://www.econstor.eu/dspace/bitstream/10419/4343/1/04_11bw.pdf

Britain followed Keynesian demand management in the post-WW2 period with, umm, mixed results. Industrial relations were terrible and this was by no means all down to workers and unions. Lots of management were useless and were only there through the school they had attended. An amazing amount of UK companies in the 1950/60 period were being managed and had boards full of descendants of the original founders of the firms. However, they no longer owned the company because shares had been sold over the generations. They were only in the position because of the family connection and as a consequence the companies were badly run. Therefore, because they were badly run and under-performing, their assets were often worth more in break up terms than the capitalisation of the firm. Smarter capitalists moved in and put them out of their misery. Easy to blame the smarter capitalists but it was really Britain’s entrenched conservatism and class system to blame. Nobody now believes in Keynesian demand management. The end.

@24 Bob B: “My guess is that our failings post-WW2 in mass manufacture relate to Britain’s relatively poor infrastructure for training for technical vocational skills and the relatively low regard for engineering compared with the esteem in which “pure” sciences and the creative arts are held.”

I consider it all as a social problem. Dirty fingernails have never been welcome at posh dining tables. Nor the company of those who work with owners of dirty fingernails.

What is the old crack that Joe Ashton used? That a worker washed hands before taking a whizz and a manager performed the operation afterwards?

Btw cars made by Japanese car companies have made huge inroads into the American market. General Motors used to be the world’s largest motor manufacturing company by sales volume, now it’s Toyota.

Japanese car companies out-competed the Americans. The American firms kept building big, unreliable, expensive gas guzzlers as fuel prices increased and people became more concerned about their wallets. Not to mention differences in labour costs – employees at ‘transplant’ firms were cheaper and were not paid to sit around doing nothing, see ‘jobs bank’ – and stupid management practices.

Ben Hamper’s Rivethead: Tales from the Assembly Line provides good insights into the American car industry through the eyes of a ‘shoprat’ (from a family of ‘shoprats’ who lived in a town of ‘shoprats’ – Flint, Michigan).

the management at the Truck Plant decided what the Quality concept really needed was a mascot. Conceived in a moment of sheer visionary enlightenment, the paln was to dress up the mascot as a large cat. Fittingly, this rat-in-cat’s clothing was to be called the Quality Cat. Somewhere along the line, an even more brilliant mind upstairs decided that quality cat was sort of a dull title. Therefore, a contest was organized in an attempt to give the Quality Cat a more vital name. Hundreds of crafty welders, screw jockeys and assorted shoprats immediately began clunking their heads in an effort to christen the hallowed cat. Management announce that they would reward the most creative of these entries with a week’s use of a company truck. Hot damn! The eventual winner of the contest was a worker who stumbled upon the inspired moniker Howie Makem. Sadly, my intriguing entry, Wanda Kwit, finished way the hell down the list somewhere right between Roger’s Pussy* and Tuna Meowt.

Howie Makem was to become the messianic embodiment of the Company’s new Quality drive. A livin’, breathin’ propaganda vessel assigned to spur on the troops. Go ahead and laugh, I know I did. Just for a moment, imagine the probing skull session that took place in some high-level think tank the day Howie was first brought to mention.

* Roger Smith, then head of General Motors

@20 Bob B

I can agree with much of that but it doesn’t answer questions about why managers in British car companies opted for badly designed cars to make and why these were so unreliable in use.

If managers I’ve worked with in various sectors are any indication, I can answer those questions with one single word. Hubris.

@25: “Britain followed Keynesian demand management in the post-WW2 period with, umm, mixed results.”

JCR Dow (a Treasury insider) in his book: The Management of the British Economy 1945-1960 (Cambridge UP for NIESR), famously concluded that on average the commitment of successive governments to Keynesian demand management had positively destabilised the British economy.

It makes good sense IMO to regularly look abroad to see what we can learn from the successes and failings of policies and institutions elsewhere but importing foreign institutions is seldom straight forward as there is often a complex arrangement of supporting institutions.

However, I think most now agree that importing the notion of an indendent central bank was a good idea – the independent Bundesbank had been conspicuously successful in controlling inflation in West Germany than our experience of the Bank of England under political control from 1946 until 1997. Inflation targeting, introduced to Britain by Norman Lamont with the advice of Alan Budd, was also an imported policy prescription.

@19, 20, 22

Funnily enough, the original designs for some of the late, unlamented British cars were actually quite classy (including, believe it or not, Harris Mann’s initial concept for what became the Austin Allegro). It was generally management committees made up of businessmen (some astute, others less so) who knew very little of engineering that screwed them up on the way to production. The thread running through a lot of those stories includes something else that seems to be peculiarly British – innovative designs that weren’t quite ready for prime-time. Triumph pretty much pioneered fuel injection on mass-produced cars, but the early units were finicky and unreliable. The Hydragas and Hydrolastic suspension on BMC cars offered a ride close to that of a Citroen DS, but with a far more elegant design at a fraction of the cost – however it was poorly implemented on some models (notably the miniMetro). The Saab 900 became a classic of design, but hidden under the bonnet was essentially half a Triumph Stag engine.

German engineering on production cars of the same era tended to stick to tried-and-true methods at the expense of being a bit bland to drive. Ironically the Golf was in fact the last roll of the dice by Volkswagen, who had noted with alarm that no matter how much they refined the Type 1 (better known as the Beetle), the fundamental design was looking creaky even by ’60s standards. Sales were dropping accordingly, and their attempts to design something more modern in the Type 3 and Type 4 were commercial failures. The Golf was actually viewed with suspicion by a lot of the more seasoned VW engineers, and indeed VW only seemed to clasp the car to its bosom after the phenomenal success it became.

Japanese automotive engineering is another thing entirely, tending to thoroughly overhaul their designs every 4 to 5 years. One manufacturer in particular spent the ’80s working with a British car manufacturer to crack the European market. Honda and Austin-Rover’s relationship started out with the latter assembling re-badged and re-upholstered Honda designs in the Triumph Acclaim and the original Rover 200 series. What happened next was that Austin-Rover started applying Japanese-style quality control and mass-production techniques to their output, and Honda learned from working with British engineers how cars in Europe tended to differ in driving characteristcs from those in Japan. These informed the next generation from both manufacturers, which worked well in some cases (the second-generation Rover 200/400 series and Honda Concerto) and less well in others (Rover 800 and Honda Legend). This relationship ended with the sale of Rover to BMW in 1993, which is a story in and of itself – but if you look around, you’ll see a lot more of those second-generation Rover 200s still around than Fords and Vauxhalls of a similar vintage.

Ford UK and Vauxhall are a different kettle of fish as far as I’m concerned, because they’ve essentially been building German designs in UK factories since the ’70s.

@27

You’ll note that the bad decisions on the part of the US auto industry came from management – *not* engineers or workers.

I can agree with much of that but it doesn’t answer questions about why managers in British car companies opted for badly designed cars to make and why these were so unreliable in use.

Same reason the Americans did, they thought they had an inbuilt market that would buy any old shit as long as it was ‘British’ – the Americans have still got the same nationalist problem to an extent.

@30:

From insider knowledge, Rover management hated working with Honda and were delighted at being acquired by BMW, which sold off Longbridge not long after for a nominal sum.

You – and others here – make no mention of the (arguably crucial) differences between the component supply-chains of the British motor industry (short-term supply contracts awarded on competitive tenders, multiple suppliers for components to safeguard against strikes) and those of Japanese car manufacturers in Japan (negotiated, long-term supply contracts with cross-shareholdings between suppliers and assemblers, less vertical integration in Japan, suppliers supplying assembled sub-units), the greater use of robots on assembly lines, quality control groups with team working to maintain awareness of quality issues and – importantly – to feedback information about issues to management, just-in-time (JIT) delivery of components pioneered by Toyota.

It was often fairly typical on British assembly lines to have pits for line workers to work underneath cars – on Japanese lines, the cars were typically raised and tilted so assembly workers could work standing up and to facilitate access, car doors were not put on until nearly the end of assembly lines.

Japanese manufacturers put in much greater attention to production engineering and quality control concerns than British manufacturers. Deming, the American guru on quality contol was hugely respected in Japan and largely ignoored elsewhere:
http://www.businessballs.com/dtiresources/quality_management_gurus_theories.pdf

As mentioned, in Japanese companies, senior management were expected to work stints on assembly lines for the experience.

No mention has been made of a theory (of Baumol) that Japanese companies were not out to maximise profits but rather to maximise company sales revenues subject to a minimum profits constraint.

@33

That’s because I was talking from an engineering rather than a business perspective. There were negative rumblings coming from Rover in the early ’90s, largely due to the fact that they thought that Honda weren’t playing fair with the HH-R project (which was the second-generation Rover 400). Ironically, what started out as a return to re-skinning and re-upholstering ended up becoming MG Rover’s tightest product when tweaked and reworked into the MG ZS. Frankly, given their track record I don’t think Rover’s management can have that much to kvetch about. Every decision that hurt the company rested solely with them. A lot of the good ideas that kept Rover afloat in the ’80s and early ’90s came directly from working with Honda – the era of “parts bin” engineering was definitely consigned to the past, and as I said, what Honda got out of it was a way to make their own products more competitive in Europe. The Concerto was manufactured alongside it’s Rover sister at Longbridge, so they can’t have been too unhappy with the work done there.

BMW were interested in one thing only, and that was having a look at the Land Rover technology in order to take some design cues and break into the 4×4/SUV market (which ended up being the god-awful X5). From a business perspective it was a nightmare for Rover too – Rover’s 600 and 800 were designed to go toe-to-toe with the BMW 3 and 5 Series and BMW couldn’t allow that, so they placed restrictions on the 75’s design and made it sit uncomfortably inbetween the two – neither fish nor fowl. They then had a management re-shuffle and the self-professed anglophile Bernd Pischetsrieder was out, leading to the sell-off of the Rover assets. The Honda partnership would never have given the partner company the ability to do that unilaterally, whereas the BMW buyout did. In that respect, the buyout was a windfall for the executives and shareholders but presaged doom for the company and it’s workforce.

bluepillnation,

You’ll note that the bad decisions on the part of the US auto industry came from management – *not* engineers or workers.

ISTM the bulk of the fault is with management but the unions did (in hindsight) some counterproductive things.

@35

Bob B @33 goes into some of the reasons why that was the case. As well as management from executives on down being required to spend some time working on the assembly line to get a feel for the business, and things like long-term contracts negotiated with suppliers, there’s the implied social contract between management and workers in Japanese businesses – aimed at getting a fair return for the shareholders while planning the business side of things with long-term stability in mind. This idea fell out of fashion in the West in the ’70s, and discarded completely by the end of the ’80s with shareholder profits becoming the be-all and end-all in terms of perceived “success” and planning only for the short-term in order to maximise this. I’m not saying unions are perfect, but when you have a management and executive class that can and will actively harm the livelihoods of the workers to up the share value by a few cents, they become a necessary thing.

The stink with the BMW/Rover deal was that within BMW it was essentially championed by a single executive, and upon his ousting Rover was essentially asset-stripped and sold off piecemeal. The executives made a fortune on both sides, but the company was mortally wounded.

@34: “A lot of the good ideas that kept Rover afloat in the ’80s and early ’90s came directly from working with Honda – the era of ‘parts bin’ engineering was definitely consigned to the past, and as I said, what Honda got out of it was a way to make their own products more competitive in Europe. The Concerto was manufactured alongside it’s Rover sister at Longbridge, so they can’t have been too unhappy with the work done there. . . ”

I go along with your analysis although we need to look also at supply chain issues too with the marked contrast between the traditional adversarial relationships in the British motor industry compared with the cooperative relationships in Japan between component suppliers and the assemblers. In that connection, you didn’t mention the rapid departure of Musgrave c. 1986 in the transition from British Leyland to the Rover Group.

The traditional British practice of multiple suppliers for each component – partly as an insurance against “industrial action” – meant that an unsatisfactory performance on the part of a supplier would result in the quick termination of a contract.

In contrast, Japanese companies aimed for single suppliers of sub-assembled units rather than indiviual parts, not least to gain scale economies and to create incentives for suppliers to invest in R&D for innovation. Assemblers would work cooperatively to remedy failings in supply performance and suppliers were not readily sacked as that threat would substantially reduce the incentive for suppliers to invest in R&D for innovation over the long-term.

The supply chain philosophies were very different. GM in America was one of the most vertically integrated of the leading motor manufacturers while the leading Japanese assemblers were at the other end of the integration spectrum.

I’ve heard it argued that motor manufacturers strive for pre-eminence in one of three business advantages to gain competitive edge – as well as to avoid head-to-head competitive rivalry in the market place:

– Production (as with Ford and Toyota)
– Marketing (as with GM and Nissan)
– Engineering excellence (as with Chrysler, the Rover Group and Honda)

IMO this informed government encouragement of the link between the (state-owned) Rover Group and Honda in the 1980s but it’s not easy to readily fit the leading German motor manufacturers into this same classification.

BMW has presented itself very successfully as an engineering company. Excepting the hitch over the Rover acquisiton, BMW has been commercially very successful but a late friend, who was sufficiently affluent to buy expensive cars, rated BMW’s as the most “over-priced” cars in the business, which rather suggests the real competitive strength of BMW was in successful marketing. OTOH Audi – a subsidiary of VW – directly presents itself as an engineering company with its ad slogan of: Vorsprung durch Technik.

Whatever else, the identification of a company’s competitive edge is an illuminating analytical tool.

I’m not saying unions are perfect, but when you have a management and executive class that can and will actively harm the livelihoods of the workers to up the share value by a few cents, they become a necessary thing.

Much inclined to agree. As I said, ISTM the bulk of the blame lies with the management.

“As I said, ISTM the bulk of the blame lies with the management.”

To my knowledge, there were many academic and government commissioned studies of the management of British companies going back at least to the 1970s.

One of the distinction factors to emerge in these studies was that British managers tended to be significantly under-educated as compared with with their peers in America and other western European countries – hence the (belated) creation of business schools in Britain, starting with London and Manchester.

But I suspect social class divisions were also important. By the mid 1970s, half Britain’s adult education had no education qualifications at all – and recall that up to the point Thatcher won the election of May 1979, government of Britain post-WW2 was split almost evenly between Conservative and Labour governments.

@37

I thought Musgrove went as Chairman of ARG, with BL being effectively dissolved in the early ’80s. Your date of 1986 for his departure is correct though – he was one who had come up from the shop floor though, and successfully persuaded none other than Norman Tebbit to lobby Thatcher to allow ARG to continue development of their own engines rather than simply buying them in from Honda. The result was the K-Series – which despite it’s reputation being sullied in later years, largely due to modifications made by people who didn’t fully understand the original design, was an engineering marvel 10 years ahead of it’s time, being a single-piece ally block with 16 valves and an impressive lean-burn consumption which still stands up today.

BMW’s schtick is and always has been well-appointed refinement of a very old-fashioned front-engined rear-wheel-drive layout. They’re certainly solid machines, but nothing revolutionary and not as special as their marketing would have you believe (something I believe also true of Mercedes-Benz).

@39

The difference between the UK and Germany regarding recent political history is that there was a much wider gulf between the policies of the two main parties in the UK regarding business and education than there was in Germany until very recently. In Germany both main parties were essentially agreed that the social market underpinned by social democracy was the way forward. The CDU under Kohl in the ’80s and ’90s would be considered well to the left of Labour under Blair in terms of those policies, and yet in Germany they were considered the more conservative option. The Thatcher years pushed the economic argument so far to the right that the centre seems almost irreversibly shifted. Under Merkel the CDU has embraced monetarism to some extent, but to nowhere near the degree it is embraced in mainstream UK political circles.

As such, when a Labour government instituted the comprehensive system (which was a sound idea as originally conceived, with streaming based on merit and the ability for a pupil to move between streams), the following Conservative government did it’s best to hobble it in the name of their ideology – and Thatcher herself was in charge of that particular project.

@40:

I disagree with chunks of that. In particular:

The Economist dubbed the demand management policies of HM Treasury during the 1950s “Butskellism” to convey an impression of the prevailing consensus between RAB Butler, the Conservative chancellor, and Hugh Gaitskell, Labour leader who had been an academic economist at UCL prior to WW2 – but see the reference @30 above to JCR Dow’s book on The Management of the British Economy 1945-60.

I agree about the divergence between the two main parties during the 1980s, especially with Thatcher painted as breaking with the previously prevailing post-war consensus and Labour’s 1983 manifesto with its calls for withdrawing from the European Common Market and taking the commanding heights of the economy into public ownership – see Blair’s 22-page letter in 1982 to Michael Foot:
http://news.bbc.co.uk/1/hi/5081798.stm

Recall that Harold Macmillan (PM 1957-63), in a public speech in the 1980s, likened Mrs Thatcher’s policy of privatising the nationalised industries to “selling the family silver”.

The concept of comprehensive schools was actively pioneered and championed by Leicestershire County Council which, as a high Tory council, approved that policy in 1957. The first comprehensive Community College in Leicestershire, Oadby Beauchamp, opened in 1958. There were thoroughly pragmatic reasons for this policy – the county’s population was growing and was projected to grow relatively fast and 11+ selection for the limited number of available grammar school places would have been hugely unpopular. OTOH the mostly Labour controlled Leicester City Council kept its selective grammar schools through to the reform of local government in 1974, when responsibility for education passed to the county council.

As for the national picture, in 1974, Professor Brian Simon (Leicester University) and Caroline Benn published a book: Half Way There, commending the progress in comprehensive schooling. Mrs Thatcher, the education minister in Heath’s government of 1970s-74, is widely credited with having approved more conversions of grammar schools to comprehensives than any other education minister before or since.

IMO we should have been more concerned to establish a national infrastructure providing opportunities for education in vocational technical studies. Contrast the very different structure of schooling in Germany:
http://en.wikipedia.org/wiki/Education_in_Germany

See also this commentary on vocational apprenticeships in Germany:
http://www.guardian.co.uk/education/2008/apr/08/furthereducation.uk1

The routes for an academic education in Britain have long been well defined but the routes to apprenticeships post-WW2 became increasingly murky until, perhaps, recently.

@41

Mrs Thatcher, the education minister in Heath’s government of 1970s-74, is widely credited with having approved more conversions of grammar schools to comprehensives than any other education minister before or since.

She’s also known to have hated doing it.

I understand that house prices in Germany have remained low and stable for a long time. This must be a factor in their stability?

42
I don’t feel inclined to enter into the grammar v comprehensive debate, I’ve been there too often but education in the UK has always fallen short of Germany.
Germany introduced funded technical education in the latter 19th century for older students compared to the UK’s meagre utilitarian schooling for children between five and thirteen. Certainly the French revolution made its’ mark when it became clear that it’s success depended greatly on pamphlets distributed to a literate population, education was seen as dangerous but, at the same time, industrialism required a certain degree of literacy and numeracy. The population of the UK in the 18th century was more literate than that of the 19th century.
I am a firm believer that the UK’s attitude towards educating the working-class is still determined by its’ beginnings, imagine what might happen if all of those young working-class kids who have now been written-off were educated to a reasonable standard.

@43: “I understand that house prices in Germany have remained low and stable for a long time. This must be a factor in their stability?”

The “low and stable” house prices reflect Germany’s relatively low inflation rate on trend, as compared with the UK, France and Italy, and a good supply and variety of housing to rent. The Guardian has done two recent, researched pieces on Germany’s housing market::

Home sweet home is a rented property for many Germans
http://www.guardian.co.uk/world/2011/mar/16/new-europe-germany-property

Brits buy homes, the Germans rent – which of us has got it right?
http://www.guardian.co.uk/world/series/new-europe

Corrected link:

Brits buy homes, the Germans rent – which of us has got it right?
http://www.guardian.co.uk/money/2011/mar/19/brits-buy-germans-rent

Sorry.

@44: “I am a firm believer that the UK’s attitude towards educating the working-class is still determined by its’ beginnings, imagine what might happen if all of those young working-class kids who have now been written-off were educated to a reasonable standard.”

Compare George Orwell writing in 1936 for what was to become a study into poverty in the north of England published by the Left Book Club: The Road to Wigan Pier (1937), chp.7:

“The time was when I used to lament over quite imaginary pictures of lads of fourteen dragged protesting from their lessons and set to work at dismal jobs. It seemed to me dreadful that the doom of a ‘job’ should descend upon anyone at fourteen. Of course I know now that there is not one working-class boy in a thousand who does not pine for the day when he will leave school. He wants to be doing real work, not wasting his time on ridiculous rubbish like history and geography. To the working class, the notion of staying at school till you are nearly grown-up seems merely contemptible and unmanly.”
http://www.george-orwell.org/The_Road_to_Wigan_Pier/6.html

In places, I’m not sure values have changed much since Orwell wrote that.

@48

I know anecdote is not the singular of data, but I come from a family of very poor origin (my maternal grandfather was born in one of the last workhouses in London), and as far back as my maternal grandmother we’ve always accepted that education was the only way to improve our lot. Modern western culture does tend to denigrate education, especially for young men – but that’s not a function of how wealthy or not an individual or family is. Wealthy individuals know they can parachute into a well-remunerated executive role straight out of education regardless of how well they did – just look at George W. Bush – on the boards of several companies since his 20s despite gaining a “Gentleman’s C” at Yale and well-known to be wilfully ignorant (or, less charitably, thick as pigshit).

I agree that vocational qualifications do have an undeserved “second-string” reputation in the UK – but that’s a cultural rather than political factor in my opinion.

In case anyone is still with us, I thought to mention this P/B book which I’ve only recently come across:

Nicholas Woodward: The Management of the British Economy 1945-2001 (Manchester UP, 2004). The author is a historian, not an economist, which says something about the way he attempts a synoptic coverage of the multitude of books and rearch papers covering the post-war period to 2001. The emphasis, admitted by the author, is on demand management rather than growth and supply-side issues but even so there is a wealth of data tables and graphs showing what happened, some comparing Britain with peer group countries.

I wouldn’t endorse every i and t but the book is a useful, concise reference to the course of events. I’ve already learned some new things from it and have occasionally been surprised. There is much to be said for demythologising our notions of what happened IMO.