Hosted on Acast. See acast.com/privacy for more information.
[00:00:00] and in doing more, build a new economy where we put life's essentials back under stronger public control to make them affordable to you again. Reindustrialising Britain using public procurement to back British industry. This is the Debunking Economics podcast with Steve Keen and Phil Dobbie.
[00:00:27] Well, that's the plan from the new UK Prime Minister. Rather than the government buying what they need to on the cheap from overseas, they will prioritise buying British to try and rebuild the industries that have fallen away because of international competition. Convincing trading partners of that approach might be problematic, especially Donald Trump, of course, but maybe he'll understand because he's doing exactly the same thing with his own industries.
[00:00:51] But will it work? It's not really working for him. That's the key question though, isn't it? Will we see Britain reindustrialise as the UK government steps up to buy British? So Andy Burnham, the new British Prime Minister, is saying he wants more people to buy British, Steve. And the way he thinks that he can do that is by saying, well, the government is going to buy British.
[00:01:21] So if we say we are going to buy British companies, then that is going to encourage more people to invest in setting up businesses in the UK and that is going to help domestic production. Is he right on that? Is that the way to go? Well, certainly it's an improvement over Starmer and what was the name? Reeves. Basically trying to attract foreign investment in and saying we want foreign investors to come in.
[00:01:48] And this is what I love about conventional economics. Every country on the world is going to get more investment from the rest of the world than they give to the rest of the world. So we can all have a foreign investment led recovery. And this reminds me, we must actually talk about Count Binface here, of course, because I think that's probably one of the major UK exports at the moment. Yeah, yeah.
[00:02:12] The UK exports is the satire from Count Binface. But the policy that all these bloody governments come up with is let's encourage foreign investment. And it reminds me of Count Binface's election pledge that he's going to reduce your taxes and increase the taxes on everybody else. Yeah. It's just as logical. And it's just an accounting thing, isn't it? Because when people say, yes, let's get foreign direct investment, they see money coming into the country. They don't count the profits that go out afterwards if the investment is indeed successful.
[00:02:42] And this has been Australia's disaster over time. It's encouraged foreign investment. And that means it's become a country of workers with not no capitalists. You've got to keep people like Regina Reinhart and Twiggy and so on. But fundamentally, when you say you want to have the foreigners do the investing, you say you want the foreigners to be the capitalists, then the locals are going to be the workers, as if that's going to give you prosperity over time.
[00:03:05] Instead, you get hollowed out. So, at least in that sense, Burnham, by saying he wants to promote local businesses and buy British, then at least there's something about something resembling an industrial development policy. And that's what Britain desperately knows after the last 50 years of Thatcherism. So, he says we spend between 300 and 400 billion dollars a year on procurement, the UK government. I don't know whether that's just central government or whether it's local government as well. But anyway, it's a chunk of money.
[00:03:32] So, if they were to buy exclusively British, I don't know if he's going to go that far, then that is a good thing. But it's also a costly thing. So, you can see he'll get some pushback because people will go, hang on a second. We always bought the cheapest. Now you're saying you're going to buy British even if it's not the cheapest. That means we are going to spend more on doing the same thing. Is that actually a win for us?
[00:03:56] It is if the money is created by the government spending, which is back to the perennial bloody MMT argument about the government doesn't have to borrow, et cetera, et cetera. So, the government, it's a question of whether the government directs its money-creating capability at something which leads to domestic investment or whether it doesn't do that. And clearly in that case, I'm in favour of them doing it.
[00:04:15] But the problem is that this thing gets caught up in all the WTA rules over whether your country is illicitly trying to undercut the controls on trade barriers and so on by its industrial development focus.
[00:05:30] It's on the second basis right now. So, with its tariffs and, you know, Donald Trump taking a position in Intel and yada, yada, yada. Yeah. So, I think the days of worrying about what international rules are is pretty much over. Well, that's interesting. Let's look at both of those. So, actually, the government putting money into companies. But before that, yes, the idea of tariffs. Is this better than tariffs? Or is tariffs... I mean... Yeah.
[00:05:55] And one big thing to get across to everybody is that all the arguments in favour of free trade are bollocks. They're neoclassical nonsense about reallocating existing resources as if you can convert a wine press into a spinning jenny and vice versa. So, that nonsense has been at the heart of the argument for comparative advantage throughout its existence. So, the arguments that free trade is necessarily better is wrong.
[00:06:21] When you look at the empirical data, and that's what people like Danny Roddick has done at Harvard, a conventional economist at Harvard is actually open to considering unconventional data. And he said every country that's managed to develop, to go from being unindustrialized to an industrialized country has done it through industrial policy and by protecting its industries, but putting them under pressure to meet foreign competition standards within a very short period of time.
[00:06:46] So, in any country which went for the free trade, option has been beaten by countries that have decided to protect and then develop and build up their capacities. And then later they bring in free trade when they already know they're competitive. Yeah. So, the idea of comparative advantage, which was it sort of worked both ways, doesn't work, does it? Because we will buy, I mean, it will be cheaper to buy some stuff from China than it will be to do it in the UK itself. Exactly. There's nothing in the UK can offer China in return.
[00:07:14] No, this is one of the problems. We haven't had a situation where countries are so much out of whack in terms of their capacity to produce goods and services as we have right now. So, like people, anybody our generation or older would remember the rise of China and the idea that by 1990, everybody thought Japan was... The rise of Japan, pardon me. Mm-hmm.
[00:07:42] ...people would think that Japan is going to take over the world because everything advanced in America was Japanese technology. That was the basis of the movie, The Rising Sun. Now, that movie coincided with the bursting of Japan's financial bubble in 1990 and its plunge into... ...we're going from a country which is innovates to a country which is stultified by its overlay, not of government debt, but corporate debt.
[00:08:09] That meant corporations couldn't afford to invest anymore. They were too busy servicing their debt. And so, that innovation period ended. So, that's the last time we had like a rise of a new manufacturing power. But this time with China, I think China's been very careful to learn the lessons of other countries that have failed in that same process. I hope they continue down the track they're on. But they are so far ahead. Like, for example, in car and manufacturing, we'll forget the idea of a British car to compete with Chinese cars.
[00:08:40] Equally, solar panel systems. Forget it. China's too far ahead. There's so many robotics. Again, the same areas you can't find a sweet spot, but there is one sweet spot that I would like to see Burnham focus upon, and that's food. Because, to me, the major problem we're going to face in the very near future is food shortages because of both global warming. Well, facing it already.
[00:09:06] Because of global warming in Europe, the stocks have been devastated. Yeah, 90%. You can't get artichokes, Steve. I don't know how people are getting by. There are no artichokes in Europe. They're having to substitute celery or what else can you do? I'm not sure why. I've never used an artichoke in my life. Asparagus, I think. Asparagus, probably. Yeah. Yeah, there we are. They call it the night... What was it?
[00:09:31] It was a nightmare for the people that had to take out the pots and pans in the 19th century before centralized sewage. Yeah, but this is happening on the... The artichoke-free cookbook. If you can publish one of those right now, you'll make a mozza. And the asparagus. Anyway. Sorry. That got me. We're already there in terms of the need for food security because we're already seeing it devastated by what's going on in Europe this year. Yeah, but this is no joke.
[00:10:01] I mean, the suddenness of the drought that's hit the UK right now, I don't know whether... Apparently, I saw it rained a couple of days ago, but they've gone for about one and a half months with virtually no rain across the entire country. Yeah, yeah. And what you've got, I mean, it's turning... It's no longer the green... What was the land? I forgot. Our green and fertile land or something like that. Green and pleasant land. Yeah, yeah. Green and... So, I'm not particularly pleasant land. And that may...
[00:10:26] It's people who are looking at Hyde Park and Green Park, which is now a yellow park, and reacting to the aesthetics of it. But the real thing is that the farmers are not getting the rainfall that they always have been able to rely upon. And it's been sudden. Yeah. Like just one or two years and suddenly the water supplies aren't there. But how does Andy Bannon fix that? That is not a case of saying, well, buy British because the product is just not there. No, but it's a case of saying you've got to boost the...
[00:10:52] And I think that I'd be sending delegations to where I live right now, Amsterdam, not so much for the weed here, but for the grass, well, for the grass, not the weed. Why not? Why not? Yeah. Why not? And the argument is that the world's second largest food exporter is the Netherlands. Yeah. The way they've done it is by industrialising food production, greenhouses all over the country. And even though a lot of that relies upon fossil fuel and energy that goes into...
[00:11:18] They do deliberately carbon pump these greenhouses because that does work when you can control the overall environment. But the Netherlands is not going to have a food shortage, but the UK quite well could be. Well, his policy is not going to fix that, is he? Because... That's what I'd recommend. The government doesn't buy food. So this whole idea of... No, but the government could fund companies to start establishing Dutch style industrial
[00:11:45] agriculture and then make the focus reducing the trade deficit in food. Right. So you talked about how in the United States they bought into Intel. There's no reason, for example, why the UK government could therefore say, well, let's take a stake. Let's take an equity position in a company that could do that. Yeah. Or give equity-based loans. That thing I've been arguing for decades for the banking sector. The government could ape the same idea, entrepreneurial equity loans.
[00:12:11] So you sponsor a number of different entrepreneurs to have a chance that one of them succeeds. But the fundamental point that if you want to industrialize Britain, then the barrier you face in terms of the broad range of industries in competing with China is just ludicrous. You don't really have a chance. So you'd need to devalue the pound by 50% to make it competitive with Chinese goods. Well, maybe that's part of the answer. What would be the problem with doing that?
[00:12:41] Well, a bit of important... I mean, Spain would love it because no one would be able to afford to go there on holiday. So... The Spanish would really enjoy less British tourists, definitely. But yes... And they just get the wealthy ones who could afford it. Well, just the wealthy ones. I think there's a bloke called... What's his name? He lives up in Clacton, I think, or he's supposed to be in Clacton. Nigel, I think Nigel might be willing to go to Spain occasionally for a bit of spend a bit. I think he's got a five million quid somewhere. He's still got some of that left. Yeah, yeah. Maybe two and a half million quid after we devalue it. But yeah. After he's...
[00:13:12] Yes. To me, what Burnham is trying to do is correct. But the situation in which he's doing it is the most challenging in human history. Because of... Yeah, exactly. Because, I mean, let's take... You mentioned China and cars. So say they said, right, all government cars are going to be British made. As opposed to buying Chinese cars. I'm not sure they are buying Chinese cars right now. But I mean, that could double the expense of running a government fleet, couldn't it? If it's all bought within Britain. Well, that again is where government money creation comes in.
[00:13:41] This is the sort of thing the South Korean government did, the Japanese government did, the German government did when they did their industrialization after World War II. So it's done in very surreptitious ways most of the time because you're trying to evade regulations to go against it. But those policies worked because they put those firms under... They gave both... They gave those firms a cash flow and put them under pressure to try to catch up with you with foreign competition as fast as they could do. Yeah. So you need something like that in Britain.
[00:14:09] But, you know, I think it's the only sweet spot left where you could actually get away with it is food production. Yeah. Because, well, it's got to be more than that, hasn't it? Because otherwise you just say, well, we've got... Well, you can start there. I mean, what's his name? Dyson. Dyson has started to develop an industrialized way of producing strawberries. So he's implying what he knows from his engineering for, you know, vacuum cleaners and everything,
[00:14:36] anything else, and putting that into technology for industrializing and standardizing strawberry quality, et cetera. It's quite a challenge in terms of the industrial agriculture sector. I know people in the area and they tell me many of these ventures fail. But in terms of what Britain desperately needs right now, it's a reliable food supply and they haven't got it. And this is the year when it could really bite. So if I was going to choose an industrial sector to choose what Burnham is talking about
[00:15:05] doing, I would make that second agriculture. Right. But I mean, you know, there's loads of sectors that, I mean, I'm sure he's not thinking, because he's talking about an industrial policy where the government is focusing on buying everything or everything they possibly can in the UK. So there's a lot more than food. That is a whole load of services and, you know, stuff that is made overseas. And you talk about, you mentioned catching up. I mean, there's a hell of a lot of catching up because the UK has been hollowed out so much.
[00:15:35] So if he says this, you know, okay, well, we are going to give preference to UK companies, even if that is enough, because it is quite a lot of money we're talking about. Obviously, the government spends a lot. If that is enough for companies to say, okay, well, we really should take this opportunity and start to build something that they can buy. And it does sort of engender these new businesses. It's still going to take time. And as you say, lots of catching up.
[00:16:03] And it's going to take a lot of money with a lot of risk. Is the offer from the government to buy going to be enough to actually get the investment to try and make these things come from perhaps nothing at all? Yeah. Well, this is the... Trying to locate a potential British growth industry is rather a problem. I mean, one of the classics at the moment is that Britain developed the chips that are now powering Apple computers.
[00:16:29] And much as I frankly hate the Apple operating system, the Apple hardware is absolutely brilliant. And the reason is it's using British technology, which is the risk, you know, reduced instruction set chip, the risk chips that ARM, the British firm called ARM, developed over time. Apple took a putt on it. Intel stuck with what they call the six chips, complex instruction set chips. Apple's finally... That technology is now wiping the floor with PCs.
[00:16:58] So, what I can tell, the Apple is two or three times faster. If that chip company was still British owned, then Britain would be getting the benefit out of that. But in fact, the company... I've forgotten who they sold ARM to, but ARM is now a foreign owned company. So, when you look around and say, what is a potential domestic source of innovation? It's difficult to actually find companies that are suitable. I mean, there are some areas in rocketry apparently.
[00:17:26] But in general, you try to locate a sector which there's at least something... It's like some sort of seed that you can actually water to make it grow. I simply can't see it. And that's why I come back to saying if you want to choose a broad industrial sector to work in, then I'd tackle the one where Britain has the most... the worst dependency on the rest of the world, the most fragile dependency, and that's food production. But I mean, Britain used to make a lot, obviously. And a lot of it was bought by companies from overseas.
[00:17:56] Very few British brands now are British owned. And that was allowed to happen. They basically came in, swooped in, took over the companies, repatriated their profits. And I guess, you know, because that's the free market, Steve, isn't it? That's the way the world is supposed to operate. But I mean, should governments be saying, well, actually, do you know what? We're not going to allow that to happen. But is that fair on the shareholders and the owners of those companies? Well, look, there's the point...
[00:18:20] The reason we get completely flummoxed over all this stuff is that the conventional focus of economics is on allocating existing resources more efficiently. And then when anything you say that's going to be less efficient than the market would do, that's a bad idea. What really matters for economies and industries over time is investment, reinvestment, making profits out of an indexing product and then using it to improve the product
[00:18:46] so you remain ahead in evolutionary competition in a complex manufacturing system. So that's why I like the fact that Burnham is talking about the investment side of things rather than the allocation of resources side of things. That's an improvement over what was happening with Sarma and Reeves. Right. So if somebody invests a great deal into a UK company, so he says, okay, there's an opportunity. We need... I don't know.
[00:19:15] We need more of these. Not a British invention, but we need more sticky notes. Who did invent these, actually? Where did Post-it notes come from? It was the trip... The case in 3M. That's an American company. In fact, I think it was an accidental invention in that particular case. Yeah. They were just, what, cut-offs from paper or something, was it? And they... No, it was something about trying to make the glue for some other reason than finding if that could be reattached, made it usable of a Post-it note. So, you know. Okay. But yeah.
[00:19:44] So say this hadn't been invented. A UK company comes up with it. And the government says, oh yes, we want to buy a million of those. And they go, my God, we better scale up. They're going to go and try and get money from wherever. And if that money's going to come from overseas, Andy Bannon would therefore say, well, no, so we're not going to buy from you because you're using foreign money? Is that what's in his mind? Quite possibly. And that would be better than what Starmer and Reeves are pushing forward, because you do want to make low domestic profits and you want them reinvested in domestic industry.
[00:20:11] So the whole idea you can do by foreign investment just ignores the fact that foreign investors are making a mistake unless they take more money out of the country than they put in. So that's when you have foreign investment, it means that the profits get repatriated. So you get the initial investment out of it, but then the revenue for that investment goes overseas as the product develops. What you're talking about with domestic development is saying make the profit domestically and then reinvest domestically and increase the country's capabilities that way. Yeah. All right. Okay. We'll take a break.
[00:20:40] We'll come back in just a second on more of Andy Bannon's plans and other ways that you can try and drive domestic growth in an economy like the UK. But I mean, everyone's suffering from the same problem. But I mean, you know, the idea, I mean, the world has been, I mean, supply chains have obviously shortened so much now and we've seen the risk of having global supply chains. So maybe this is an idea for our times, which is why Donald Trump has been doing so much of it as well. Back in just a second.
[00:21:08] This is the Debunking Economics Podcast with Steve Keen and Phil Dobby. So Steve, I bought a car from Volvo that was made in China. It went into Sweden who I think somebody in Sweden might be known in China. I'm not sure.
[00:21:34] So I think it's a little, it's a Swedish car. It's a Swedish car. It's a Swedish car. It's a Swedish car. It's a Swedish car. And then it was exported to the UK where I bought it. So that was a Swedish car. And I get that that's the thing Andy Burnham is going to face, isn't it? What's buying British? What is British? Because you can't have every single element of any product today made in your own domestic economy. There's going to be a supply chain involved in making that.
[00:22:04] So how much of it, how much of the product that he finishes up buying has to be made in the country? And how do you sort of pull that out? You know, that's a complex puzzle to try and unweave. It is. And that's like in terms of getting a guide for that, but still the best way to work out what you should try to focus upon is the Atlas of Economic Complexity database at Harvard University, which has built a mathematical model of the effective distance between one industry and another.
[00:22:33] And then industries which are adjacent can combine in such a way as to produce a new industry. And that's what they see as the basis, one of the main basis of industrial development over time. But you'd need to say, well, what industries does the UK currently have in existence, which elsewhere are combined into another industry? And my favorite example of one industry combining with another to produce a new product is combining surfboards with sails to make, you know. Wind surfing. Wind surfing, yeah.
[00:23:02] So, but you need to have both of those domestically and you need to find a way to get the firms that make the sale boards and the firms that make the sales to interact with each other and make this new combined product. So, that's the pattern of industrial development that that Atlas of Economic Complexity indication should look at. And you really have to, there's such a, you know, it isn't just that there's a long supply chain. There's also the ludicrous variety of goods and services that are produced and consumed these days.
[00:23:30] So, to work out which ones you actually have some degree of domestic potential in. Like for example, in bicycles, this is a obscure example, but the British... Do make good bikes. The Brompton bicycle, the folding bicycle. Yeah. Now, Brompton is still running. Apparently another company was trying to compete with them, couldn't get enough market share and has folded. But the idea of bicycles which are portable... No, no, no, no, no.
[00:24:11] Yeah. So, that is a potential... The sort of thing you'd need to do if you're going to try to make an industrial policy where you choose some sectors that you hope have got some potential to replace foreign imports with domestic production. But it's not an easy task. And of course, doing it now, as I've said, there are so many instances where you look at the... How... Just how much of a barrier you'd need to be able to make, you know, competitive with the Chinese. And it's just...
[00:24:40] The game is just too huge. Yeah. Pharmaceuticals is very big in the UK as well, obviously. And, you know, when we saw that during COVID, you know, they played an important part of all... I mean, I don't know how you merge pharmaceuticals with other industries. You could have... With public transport, maybe, you know, they could come up with a tablet that you could take where the whole experience of going through public transport, which is quite grotesque in the UK. You just... You take a tablet and, you know, it feels like a pleasant experience.
[00:25:06] You hop on the ship and you see animals dancing outside my back door. Fantastic. Rather than all the people who are currently on the train. Yeah. Yeah, exactly. That sounds like a really fun idea. Turn it into a pleasant experience. People would come... People would pay money to come to Britain to do that. Yeah. It's... Amsterdam would lose out, actually, if we... If Britain... There'd be more... You see more freaks in the UK. Yeah, that's fair enough. Yeah. So, if the government says, right, we're going to buy stuff even if it's going to cost more... I mean, the...
[00:25:35] I'm going to ask a conventional economics question, Steve. I have to be the devil's advocate. If it's going to cost us more, where's that money going to come from, Steve? I appreciate that. It's going to create jobs. And so, that means that there will be more people employed. It might create better paid jobs. And that might help with the growth of the economy. So, perhaps you'll get... You'll pay for some of it because there'll be more growth. There'll be more people paying taxes. So, you sort of fit within that conventional framework.
[00:26:03] There's sort of an argument that it might get halfway to being viable. But it's not, is it? There has to be a reframing of how you look at government spending in all of this. Yeah. And this is the problem. The framing that says that government spending is a problem is why there's so many... This is the reason Britain's unwound for the last 50 years. I mean, again, I want people just to reconsider their attitudes on this front by saying, well,
[00:26:30] how successful has been the focus on forget about manufacturing services of the future? That's, again, Maggie Thatcher stuff. And cut back government spending. Otherwise, we're going to have, you know, future generations will be indebted because of our spending now. How has the UK functioned over the last 50 years? That's gone totally backwards. Maybe your policies were wrong, okay? This is the... You'd need to say, you know, basically the old sign you see on freeways, go back, you are going the wrong way.
[00:27:00] The thought was services are going to replace manufacturing and government money should not be... Government shouldn't be borrowing money. Well, these foci mean you've got less government money creation because that's what the government actually does. And you have less innovation in the society as well because there's less money to enable you to reinvest and so on. And the country's been, you know, it's on the way to third world status in that sense.
[00:27:29] So, you have to say we have to reverse direction and that maybe means in considering industrial policy, which again is why I like what Burnham is talking about. But then when it comes to how do you fund it, they're still caught up in believing the government borrows money when it spends more than it takes back in taxation. In fact, it creates money. And that's what we did. So, the government money creation should be directed at improving the capability of British industry, which...
[00:27:55] But he's halfway there, but he's likely still to be caught up on the whole idea that government shouldn't run a deficit. And then in that situation, you're not going to get the money creation in the first instance. So, you're crippling your industrial development program right from the outset. The problem is, of course, that he's focusing on the one area of government that can't create money because he's basically saying that local government, local mayors, for example, should be able to drive procurement for their local area, perhaps using local suppliers.
[00:28:25] I mean, and they can't create money. They can ask for more money from central government, of course, but that's the only way that would work. Yeah, because one of the major ways that Australia was imposed in the UK was by cutting back spending for local government. So, they don't have the cash flow that would enable them to do that more expensive procurement in the first instance. So, the only way that part of the strategy is going to work is if the central government gives the local governments more money.
[00:28:50] And in that sense, this is in some ways Burnham's ideas are aping what has happened with China because a lot of the investment is done by local governments. Of course, local governments that are twice the size of the whole UK in the case of China quite frequently. Countries like Sichuan have got – provinces like Sichuan have got about twice the population of the entire UK. So, the local governments on the scale of twice your national government. But nonetheless, that's what they're doing.
[00:29:18] So, they get money to – the central government created money to invest in local businesses. And one thing with Burnham's experience of having been the mayor of Manchester, which of course is one of the world's great manufacturing – original manufacturing centers a century ago, he's realized that local people do get more knowledge of who's likely to be a successful entrepreneur and who isn't. So, it does make sense to go through local governments that way for it to happen. The central government has to give them the funds. Yeah. Okay.
[00:29:48] And he's also putting stipulations on these companies as well. So, to be able to supply, you need to demonstrate that you're paying the real living wage. You've got to sign up to a good employment charter. So, in other words, they're picking and choosing companies that are able to demonstrate that they are looking after their workers and they also are building a credible carbon neutral plan as well is all part of the requirement.
[00:30:13] That obviously pushes up costs for those companies, but it also shows a big difference between – because this is the problem with just taking carbon credits, for example, or showing that you've got a carbon plan. I mean, that's the way at the moment countries are managing to reduce their carbon commitment is by just shifting all that work off overseas to somebody who doesn't follow the same standards. So, I mean, that's good, but it's all obviously extra cost.
[00:30:42] It will add to the differential between buying locally and buying internationally. Yeah. But again, some of these standards often lead to some of the improvements you see over time as well. So, controls on companies over pharmaceuticals lead to better quality pharmaceuticals. People – this attitude of the free market ignores the fact that the free market without regulation means that people put talcum powder into milk to look a little more like it's full-bodied.
[00:31:11] I mean, that's the sort of stuff that used to happen before regulations came into control and then measure whether what you said you're actually supplying is what you're supplying. So, you get better quality innovation out of that because you then innovate what you're supposed to do rather than trying to con the consumer into believing that white stuff they're drinking is actually milk.
[00:31:33] But it's still – it's a – you know, again, it's a hell of a – you're starting way, way, way behind the eight ball in terms of your capacity to pull results. Well, yeah, and that's it, isn't it? So, saying this money is available doesn't magically create all of these businesses. There's a time lag in all of that. So, I mean, possibly a generational time lag. I mean, you know, you're not going to get all of this happening, however much he commits. It's not going to happen in a term of government, for example.
[00:32:02] So, you know the way politics works. It'll take too long. It won't – it'll be seen as a failure because it hasn't – it hasn't actually delivered in the first couple of years and it'll be out. And Nigel Farage will be there buying everything from overseas. Quite probably, yeah. I'll remember being bought himself from overseas in the first instance. Yeah. I mean, it's – that's why I come back to saying the only area that I can see that the UK has some potential to be able to supply – It's food, yeah.
[00:32:30] But what about – the other issue they've got is energy costs are so high in the UK. Yeah, that's a huge problem, yeah. And so, that obviously filters through to absolutely everything. Everything is more expensive in the UK because energy is so much expensive. That, again, comes down – partly comes down to the pricing system is used because they're pricing. The electricity authorities imposed conventional economic theory about how one sets price. They think price should be equal to marginal cost. They define marginal cost as the most expensive producer at the time.
[00:32:58] Most of the time, that ends up being the gas industry. So, you get enormous prices charged for energy in general coming out of the pricing mechanism. So, again, I think this is another thing I'd roll back and go back to the days where energy provision was a public utility rather than being privatized as it has been in the UK. But, again, that's a huge thing that the UK has to reverse. It has the most – probably the most expensive energy prices on the planet.
[00:33:24] Not necessarily absolute, but right up the top there in terms of cost. And that means any company is starting behind the eight ball in the UK. So, you have to reduce energy costs. But that could be done by changing the pricing formula. Right. Just that or more energy generally available, I guess? Or more energy as well because, again, one reason that China has been so successful is the availability of electric power is not a problem in China. They've overbuilt.
[00:33:50] But deliberately, knowing without the energy capacity, then that's the constraint on you being able to move forward. So, China has enormous energy capability. And that's one reason they're able to – you know, they're reducing their carbon footprint at the moment even though they've established more coal-fired power stations. It's got almost the cheapest energy on the planet. They're rolling out nuclear power stations at one-fifth the cost that applies to any attempt at doing the same in the UK or America. For whatever reason that is.
[00:34:20] Yeah. For whatever reason that is. How can they do it for one-fifth of the cost? I mean, that's – because we keep on hearing – Because they're actually – they've turned it into – rather than being a craft industry, which is what current nuclear power station construction is, they've turned it into a production line. Yeah, yeah. Yeah. And then, you know, so long as you can create a standardized product, then you can reduce your cost by a factor of five. And that's what the Chinese are doing. So, yeah, nuclear power and more electricity generated, green electricity then.
[00:34:50] So, this idea of – because I think he's going to sign up to allow these two unexplored gas fields in the North Sea to progress. And some people argue, you know, short-term, maybe gas is, you know, is the lesser evil. And actually, by getting it from the North Sea, we're actually getting the same gas that Norway's getting. We just need to suck a bit harder at our end so we get more of it. So, it doesn't have to go to Norway for Norway to then export it to us.
[00:35:21] But I guess if you've got local energy production, it really doesn't matter because it's still internationally priced, isn't it? So, it's not necessarily a benefit for the country that's doing the exploration. Well, it's a revenue source. The revenue goes to you rather than paying for exports. But the trouble is, of course, this is in the context of, you know, on a brink of catastrophic climate change. And what is the UK contributing? More potential to create carbon dioxide.
[00:35:47] So, again, this is why I say this is an idea you could have put forward 50 years ago and it would have been a reasonable punt. Now, as well as having China outdoing in the manufacturing sector, we're on the brink of catastrophic climate change. I'm really doing being catastrophic and the UK. It's a bad idea. It's a bad idea. It takes time. People say this stuff as though you can build an oil field in a week, you know.
[00:36:12] I mean, the level of investment, the time it takes to do the prospecting, to build the oil rigs that can then drill down as far as is needed into the right part of a geological structure you're trying to. It is hugely complicated. Yeah. So, he's okay. Aside from that, then, we won't do any more exploration of the exploration of gas. So, his idea, you think, is a good one.
[00:36:39] The idea of tariffs is not necessarily a good one because, of course, you could apply tariffs and then the government still buys the cheapest of what's available. And certainly, we can have a look at what Donald Trump has done. He, I mean, they've still got this massive $900 billion. Getting close to a trillion dollars was their trade deficit last year for the United States. Tariffs haven't changed that at all. Employment's not really gone anywhere.
[00:37:05] There's no reassuring boom happening, which is what he promised. All he's done is got a bit of revenue from tariffs, government revenue from tariffs. In effect, it's a tax on importers, isn't it, really? That's the upshot. On importers, yeah. And so, they wouldn't have had any manufacturing growth or employment growth if it wasn't for AI coming along and sort of muddying the figures. So, it's not worked for him. So, tariffs seems like a bad idea.
[00:37:31] If you're going to drive this, the protectionism by saying that the government is going to drive investment by guaranteeing that we will purchase locally is a better way, then, than tariffs? It certainly gets around the hassles of tariffs in that sense. And saying, and you can make the national security argument when a nation does that rather than putting up tariffs in general.
[00:37:59] That, you know, you're doing it with national security. And that, again, I come back again, the major security issue is food. You direct and get to the stage where you at least have food self-sufficiency, which I think is going to be absolutely critical to be able to survive as a civilization, as a country in the next 10 years. Hmm. And the idea of the flow of capital, direct investment, because, of course, I mean, two things here. First of all, you know, we really don't want to see that foreign direct investment necessarily.
[00:38:29] But, I mean, the argument that, you know, Milton Friedman and people like that have made, and I think it's also what, you know, AMOTers are saying as well, is what's wrong with people wanting to buy our stuff? If we export stuff, like in the United States, if we export stuff, then they buy it with, you know, if we buy from them, sorry, yeah, they're getting our U.S. dollars. And that money just comes back to us because they use those U.S. dollars to buy treasuries, for example.
[00:38:59] So we win. I think the MMT argument of trade is a load of stupid nonsense, which I intend attacking very vigorously once I finish writing the current book on climate change. Well, maybe we'll do that. Yeah. Maybe we'll do that in another time. But that's annoying the MMT crowd because, I mean, to me, the stuff on government money creation is spot on. The stuff on trade is nonsense, and I intend attacking that vigorously in future months. Right. Okay. Well, let's run for another day then.
[00:39:28] But, I mean, the upside out of all of this, though, and I'm just curious about this, because the U.K. does have a problem, doesn't it, in that it does have a negative trade balance. Very negative, yeah. And it seems to be getting worse. So if they got rid of a negative trade balance, a country like that, obviously nothing applies in the United States because they're the reserve currency. But if everybody else sees their negative trade balance reduced or improved, what's the effect?
[00:39:54] Other than, obviously, it's created jobs, so people are employed, so people feel happier about that. What are the other impacts on the economy? What does it do for the pound, for example? What does it do for bonds? How does it influence, you know, Britain's standing in the world? I think that's an issue for another, several podcasts. Another one as well. Yeah, yeah. I think so. Let's leave it for another day. Okay. Asking too many questions. You want to go? I can tell. I do, yeah. He's had enough. So have I. Let's leave it there. All right. We'll talk again soon, Steve. Cheers.
[00:40:24] The Debunking Economics Podcast. If you've enjoyed listening to Debunking Economics, even if you haven't, you might also enjoy The Y Curve. Each week, Roger Hearing and I talk to a guest about a topic that is very much in the news that week. It's lively. It's fun. It's informative. What more could you want? So search The Y Curve in your favourite podcast app or go to ycurve.com to listen. Let's leave it for a moment.