Author Archives: Diane Coyle

Made in everywhere

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Building Boeing’s Dreamliner used 16,000 gigabytes-worth of information, equivalent to a library of 16 million books, according to Peter Marsh’s new book [amazon_link id=”0300117779″ target=”_blank” ]The New Industrial Revolution: Consumers, Globalization and the End of Mass Production[/amazon_link]. He quotes one historian’s comment about the original Industrial Revolution: “About 1760, a wave of gadgets swept over England.” A wave of gadgets is now sweeping over the world. The general purpose technology of the microprocessor and the other innovations it has enabled has launched us into another industrial revolution – indeed, the history of capitalism is one damn technological revolution after another.

The book sets out these successive waves, but its interest lies in the mass of examples Marsh gives to illustrate the thesis of a new revolution. He has been covering manufacturing around the world for many years as a Financial Times journalist, and has a more or less unrivalled range of experience. One of his supplementary arguments is that manufacturing is of vital importance for economic growth because it is the route for innovation to enter everyday life. His description of the specifics of how companies actually innovate is very interesting. The organisation of the manufacturing process is one key, and one chapter looks at the Toyota Production System in some detail. Not only did this famously introduce the concepts of just-in-time and constant improvement, it also enabled huge variety by the switching of standard components – Marsh calculates that out of 8.6 million units made by the company in one year, there are 1.7 million variants.

Another element is specialisation in specific gatekeeper technologies. Industrial clustering is as old as industry, and Marshall famously described the role of know-how in explaining clusters. However, many older clusters are explained by the location of resources or by transport. Knowledge clusters are the new norm. Marsh’s example is Poole in Dorset, which turns out – who knew? – to be the world centre for the manufacture of air spindles. These are small electric motors whose shaft rotates on an air bearing rather than a metal bearing. They are essential for making circuit boards. In 2010, two firms in Poole accounted for 80% of the world’s supply. One has a factory in China as well as Dorset, but the other does not, and both have their R&D in their southern English home. We tend to talk down UK manufacturing and, heaven knows, we need more of it; but this story chimes with my own experience of there being many uniquely innovative and productive specialist manufacturers in the UK. Here, as another example, is a encouraging tale about the revival of the Lancashire cotton industry – my parents and aunties and uncles worked in the old version;  Lancashire Cotton 2.0 is a remarkable story.

Between 2006 and 2010 the UK slipped from 5th to 10th in the world league table of manufacturing nations. It wasn’t alone in this slide – China, S Korea, Brazil and India have also pushed France down the rankings with us. But Italy is hanging on with a slightly larger share of world manufacturing output, and apart from the US, Japan and Germany have substantial shares. What lessons do the success stories hold? Marsh highlights scientific and technical education, R&D spending, the accumulation of specialist knowledge – including practical know-how –  in niche areas (a highly effective barrier to entry by new competitors), added-value activities such as design or customer support surrounding the manufacturing, and strategic thinking about supply chains.

The redrawing of the manufacturing map into complex global supply chains is another interesting part of his account. Indeed, one of the main messages I took away was the massive interdependence of the various countries’ manufacturing industries. You can see its visible expression in the marvellous atlas of economic complexity. Marsh does not go on to consider the implications of this interdependence, which – for all the industrial upheaval and job losses –  has been the source of huge gains in productivity and prosperity over the decades. On the other hand, it is also a vulnerability. China needs those two factories in Poole to continue improving living standards there. We need other factories sited outside Bangkok or in Shenzen just as much. There has been less of a move to protectionism than one might have feared in the aftermath of the Great Financial Crisis, but if we do now see a turning away from globalization, the implosion of living standards around the world will be absolutely catastrophic.

The book does not go in for this kind of analysis, however. It is a book of reportage, stuffed with interesting examples that illustrate the history of manufacturing and its present, globalised state. I love the kinds of facts it offers – in 2010, six out of every 10 large crawler excavators of the kind needed for big construction projects went to Chinese customers (they are made by Komatsu of Japan and Caterpillar of the US but these manufacture them in China). There’s more on every page. This book is a great companion to [amazon_link id=”0349123780″ target=”_blank” ]Made in Britain[/amazon_link] by Evan Davis. Wearing global rather than national spectacles, it offers the same policy lessons for the UK or for any country needing to ensure the long term health of manufacturing industry.

[amazon_image id=”0300117779″ link=”true” target=”_blank” size=”medium” ]The New Industrial Revolution: Consumers, Globalization and the End of Mass Production[/amazon_image]

The limits of markets

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I reviewed Michael Sandel’s new book, [amazon_link id=”184614471X” target=”_blank” ]What Money Can’t Buy: The Moral Limits of Markets[/amazon_link], for The Independent.

[amazon_image id=”184614471X” link=”true” target=”_blank” size=”medium” ]What Money Can’t Buy: The Moral Limits of Markets[/amazon_image]

His recent BBC Radio 4 lectures, The Public Philosopher, are available as podcasts. The great man is back in the UK in a couple of weeks so no doubt there will be more events.

My conclusion?

“He ends the book with a question: “Are there certain moral and civic goods that markets do not honour and money cannot buy?” This is rhetorical. Of course the answer is, yes. But how do we know what they are?”

And I don’t think he actually answers that.

Notes from beneath the duvet

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It will not have escaped the notice of British readers of this blog (about half the total) that it is still raining; and if you’ve looked at a long-range weather forecast with a sense of mild desperation, that it will continue raining for the rest of May. The only possible reaction is to curl up under a blanket or duvet with a book or several. Luckily, my ‘just read’ pile of books is outweighed by the ‘in pile’.

Just read vs still to read

There’s plenty in the weekend papers, too. The new British Library exhibition on landscape and British literature looks very enticing, and is featured in the Guardian Review. The illustration is from [amazon_link id=”0060119535″ target=”_blank” ]Remains of Elmet[/amazon_link] by Ted Hughes and photographer Faye Godwin. It’s one of my favourite landscape books, not least because I’m from more or less that part of the world, the Pennines in between Lancashire and Yorkshire, & find it so evocative of my childhood wandering around the moors. The feature also mentions a terrific book I reviewed here, [amazon_link id=”0224089021″ target=”_blank” ]Edgelands[/amazon_link], by Michael Symmons Roberts and Paul Farley.

Faye Godwin's Elmet

Meanwhile, over at the FT, there is an analysis of the e-books market and publishing, and some enticing reviews. I very much want to read E.O.Wilson’s [amazon_link id=”0871404133″ target=”_blank” ]The Social Conquest of Earth[/amazon_link], reviewed here. (It was the economist Alan Kirman who first got me very interested in ants thanks to his classic QJE article, Ants, Rationality and Recruitment.)

Ferdinand Mount’s [amazon_link id=”1847378005″ target=”_blank” ]The New Few: Or A Very British Oligarchy [/amazon_link]also looks like an excellent, angry-making book about the way a business elite has creamed off for itself so much of the productivity growth of the past couple of decades via their bonus scam. Thank goodness it seems to be the beginning of the end for that. The Telegraph has an article on the woman behind the institutional investors’ revolt, Michelle Edkins  of Black Rock.

Female talent meets male brains

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What if anything can evolutionary theory tell us about the explanation for gender disparities in the workplace? According to a fascinating new book, [amazon_link id=”B007BP3B0S” target=”_blank” ]The War of the Sexes: How Conflict and Co-operation Have Shaped Men and Women from Prehistory to the Present[/amazon_link], by Paul Seabright, a pre-historic division of labour between men and women resulted in economic inequalities that have lasted until now for two reasons.

One is that women have different preferences, having a wider set of goals in life, and choose to work fewer hours and take career breaks. “These choices have an adverse effect on women’s advancement not just in the child-rearing years but for decades afterwards.” The unfair economic penalty women pay for this difference in preferences is amplified by the fact that men are rewarded for bargaining aggressively over pay, whereas women are not. (Linda Babcock’s excellent book, [amazon_link id=”069108940X” target=”_blank” ]Women Don’t Ask[/amazon_link], also looked at this specific dilemma.)

The second is that there are small differences in the way men and women network, partly as the result of women leaving the workforce for some years, so that women less likely than equally talented men to have a connection with the powerful people in the workplace that can be exploited for advancement.

Although these disadvantages are rooted in our ancient evolutionary history and legitimised by long custom, the book is mildly optimistic (because of increased demand for skilled labour) about overcoming the ancient disadvantages of sexual selection. Not that it offers public policy recommendations. Rather, the advice is directed at individual women, with suggestions for signalling talent more clearly to even the most antediluvian employers.The bottleneck for women’s talent is the limited attention in other people’s (men’s) brains, so the key is being known and noticed. Scarce attention has been an interest of Paul Seabright’s for a while now – see his recent Princeton in Europe lecture and the earlier Toulouse School of Economics workshop (pdf) – while the linking of anthropology and evolutionary theory to economics dates back to his previous book, [amazon_link id=”0691146462″ target=”_blank” ]The Company of Strangers[/amazon_link]. Like that book, The War of the Sexes is a fascinating read. I love its interdisciplinarity. I’m just not sure that it persuades me to be even mildly optimistic about improving economic justice for women, given the record of what happens when male brains confront female talent.

[amazon_image id=”B007BP3B0S” link=”true” target=”_blank” size=”medium” ]The War of the Sexes: How Conflict and Cooperation Have Shaped Men and Women from Prehistory to the Present[/amazon_image]

The economics of city mayors

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As some English cities vote for whether or not they want to have elected mayors, and London votes in its mayoral contest, I pulled Ed Glaeser’s [amazon_link id=”0330458078″ target=”_blank” ]Triumph of the City[/amazon_link] off the shelf again. He writes:

“Much of the world suffers under awful governments, and that provides an edge for those cities that are administered well.” (p227)

His two examples of well-managed cities are Singapore and Gaborone. Can London or other English cities live up to the standard set by Botswana’s capital or the minuscule island state of Singapore? The UK as a whole has been a highly centralised economy – one of the most centralised if you look at William Nordhaus’s globe – and decentralisation would be healthy for major cities other than London and for the economy as a whole. It would for example make for an economy less dependent on financial services. Still, to have a mayor or not doesn’t seem to me to be the issue, so much as what decision-making powers are decentralised, and the quality of governance applied to decisions at the city region level.

[amazon_image id=”0230709389″ link=”true” target=”_blank” size=”medium” ]Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier[/amazon_image]