Monetary policy sounds bland but it kills vegan shoe factories

Why there aren't more UK shoe factories


From 1979 until about 2008, all UK political parties supported a thing with an innocuous, technical-sounding name which was Monetary Policy, as a tool to avoid inflation. When it came-in in 1979 it was raw, extreme, and experimental, run by ministers rather than the Bank of England, A fifth of manufacturing closed within five years. A quarter of the workforce was un incapacity benefit, income support, or one of the vast schemes like Youth Opportunities or the Community Programme. Others did pointless college courses on student grants, just to stay off the dole. I did economics, which should have been a good course for finding explanations and diagrams but no: diagrams like this only emerged much later. This one is from the Bank of England's report to MPs on a select committee, about the time that the policy went out of fashion.

Official Rate sounds techncial, but the important point is how much government pays to borrow the national debt, which was rising fast at the time. Governments would usually pay the minimum they can, but if one pays a fraction more, it will attract investers from all over the world looking for somewhere to lend money. They convert their money into pounds, causing the bottom left arrow. It's also very expensive to taxpayers, but the point of it is to cause the bottom left arrow so that's what's on the diagram.

Exchange Rate is what you'd expect. The pound gets more expensive if so many people convert their own currencies to pounds. This takes us round the bottom row of arrows to import prices. If you work in a factory that does a lot of exports, that stops even more suddenly. MG cars had to close very soon after 1979, while cars made in the UK to sell in the UK stayed in production a few years longer. The same went for Tredair, Solovair, Hawkins boots and the like, although some of them were sold in the UK and a bit of production continued, mainly for the best known brand. 

Meanwhile there is a recession at home. So many factory workers loose their jobs; confidence in the future is low, money is expensive to borrow. 

You might think that this is a kind of saboutage that no sane government would get elected to do, but the economists and the pundits don't have miuch to do with factories; they work in services where the effects are not so important. If they live in a service area like London, they find loads of people move-in to get the remaining jobs, house prices rise, and it feels as though the recession is over. What these people are interested in is the next box.

Inflation was a problem in the 70s because of an oil crisis caused by Saudi Arabia pushing-up the cost of petrol. It was widely blamed on under-invested factories and strike-prone unions, and the theory was that a knock to the system would stop the habit of inflationary wage rises, maybe close the odd lame-duck factory, and allow the economy to christalise again according to the rules in economic theory books which would create loads of new jobls. Some of this, slowly, eventually, happened. Some of bad bits would have happened anyway because North Sea oil pushed the exchange rate up without providing jobs, while the new containerised docks like Felixtowe would have allowed more cheap imports in anyway. The difference is that they happened far worse and far quicker than they needed to.

Why this is written on a shoe shop web site...
Is because it was on an obscure page and people looked for it, so now it goes on its own page. There are some more things to say.

Society doesn't innoculate iteself well against any barmy economic idea that the tabloids like. News editors, opposition parties, and economics teachers don't come-up with a clear way of saying what's wrong, or even know what's wrong, and then society falls into the next elephant trap like the banking crisis or whatever ideas the government has about free trade with China.

History effects our taste in shoes, wholesale or retail. Some styles of boot and shoe were popular in the 1980s because they brought people together; they were among the things that policeman and cole miners, musicians and audience, one political party or another had in common. Whether this is relevant a few decades on, I don't know, but it's part f the history of what people liked to wear.

A similar fashion worked the other way in the 1930s recession.  A government was convinced that the Stirling Area - mainly the UK - should stay on the Gold Standard rather than float at the going rate. So the currency was too high, while another government department failed to introduce national insurance or a welfare state in the colonies, causing a lot of unfair imports and rapid closures of the textile industry. Bangladesh finally got a workers compensation scheme for workplace accidents in 1939, 32 years after the UK, and never got national insurance even after independence.

In the UK, there was so much unemployment that the new national insurance system couldn't cope and workhouses remained open. On going to these council institutions as an unemployed person, you were often issued with a pair of clogs. People often wore clogs for the Jarrow march on London, arranged to try to explain to policitians how important factories and benefits are. This might have brought clogs into fashion, but it had the opposite effect, and now they're very seldom seen outside of clog-dancing clubs.

I don't know what to conclude, but people search for this stuff on the web site and it's good to write it.