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管理学院的经济学essay
引言
英国或者更正式地称呼，大不列颠及北爱尔兰联合王国，名义GDP位列当今世界第七大经济体，购买力均价位列第八。它是世界最早的工业大国之一，在整个19世纪和20世纪初一直是世界经济的关键影响力。近天它被认为是世界的金融中心之一，拥有吸引来自世界各地的大量外国投资的良好的记录。在2009-10年度就吸引了超过1500项目，创造了超过五万个就业机会。今天，它也是主要出口国之一（世界第二大商业服务出口国）。
本篇文章尝试分析多年来英国的营商环境如何演变，经济政策与相似的国家政治情况有哪些影响。
早期 - 1900-1945年
1900年，美国和其他国家在工业增长已经获得了对英国的经济优势。此时美国拥有大量发达的工业，而英国仅仅略微领先其他国家。
Indian Institute Of Management Udaipur Economics Essay
INTRODUCTION
United Kingdom or more formally, The United Kingdom of Great Britain and Northern Island is today the world＊s seventh largest economy by nominal GDP and eight largest by purchasing power parity. It was one of the world＊s first industrial nations and has been key influencers of world economy throughout the 19th century and the early 20th century. Today it is considered one of financial hubs of the world and has a proven track record for attracting copious amounts of foreign investments from the world over. In 2009-10 it attracted over fifteen hundred projects creating over fifty thousand job opportunities. Today it is also one of the leading exporters (second largest exporter of commercial services in the world).
This article attempts to look at how the business environment in the United Kingdom has evolved over the ages and what have been the influence of economic policies and the political scenario of the nation on the same.
Early years - 1900-1945
In 1900, U.S and other countries have gained economic advantage over United Kingdom in industrial growth. U.S has developed large number of industries by this time and U.K had very little advantage over the others. Prior to this U.K had undergone second industrial revolution which provided U.K edge over others. Second industrial revolution promoted small organizations to become larger organizations. The revolution helped the country increasing foreign trade and increasing export capital. The reason for the success of second industrial revolution was the availability of desired infrastructure. The railway infrastructure and free trade policy helped businesses to gain advantage to organizations in U.K. It allowed organization to use access capacity and gain market share in untapped market. During the second industrial revolution evolution of diesel engines takes place. That provided faster mode of transportation, reducing the time to reach the customer. During the period of 1900-1945 the economy of U.K have undergone many changes this helped increasing the growth of country.
1900-1920
The key reason for continuous growth in economic development till 1900 was the industrial revolution. The revolution gives many earning opportunity to the organizations to develop themselves and gain competitive advantage. After 1900 the strong business position of U.K＊s organization was declining and the reason for this was the evolution of countries like Germany and United states. Even with the decline in growth, London remains the center of business and large international payments.
World War has changed the business scenario across the world. It also defined the need and competency of a country. It made the policymakers of country realize the need of expanding. Policymakers realized their short coming and helped them build competitive advantage on the same. Many industries expanded and many industries rise as the business scenario and needs changed after World War.
The politics in U.K at this point was centralized to coal miners. The key policies were driven by Miner＊s Federation of Great Britain founded in 1888 and were becoming powerful after 1900. With the key policies in control the Miner Federation helped coal companies increase production from the beginning of 20th century. The coal production was highest in 1913 and helped economy grow by providing the needed coal in infrastructure.
In this period U.K also started the production of steel at very high levels, realizing the importance post World War. The steel production which started in 1800, during 1800-1870 U.K was the producer of half of the world＊s pig iron. During the 1910＊s U.K started production of steel at larger level, where the production level was 3 million tons in 1893 has reached 8 million tons in 1914. During this period steel industry produced many experts in the field and undergone technological advancement.
Post World War there has been loss of life and material, the total loss was estimated at ㏒7,500 million. The economy was suffering because of dependence on other countries for financing and they owed billions of dollars to United States.
1921-1939
The working population was specialized in specific work only. This restricted them to work from working in some other field. Post World War period, 1921-22, was sluggish for United Kingdom, the economy was undergoing depression. The limited skills of people raised the unemployment in the country as skilled people were left with very few options to work. This depression left 2 million people unemployed in the country in 1921. During the depression period the key social indicators which showed the effect of depression was long-term mass unemployment, poor health conditions, bad housing and economic stagnation. This was the time when U.K understood the importance of centralized decision making government. They also felt the lack of centralized decision making during the World War.
In order to manage the production capacity and workforce efficiently, the minimum labor hours was reduced to 48 hours a week. Some politicians showed uncertainty of labor productivity, but the productivity actually increased because other nation also reduced the labor hours. The high productivity was shown mainly by steel, iron and coal.
In 1926, the effect of depression was still not over and economy was struggling to come over depression. In 1929 U.K economy was hit badly by crash of Wall Street stock market, leading to higher unemployment. The unemployment reached to 2.6 million in 1931 and in 1933 it reaches to 3 million which contributed to 20% of the total working people in U.K.
GREAT DEPRESSION (1929- 1939)
With the economy was just trying to come out of the depression, in 1929 it was hit by Wall Street stock market crash. The Wall Street crash spread the global depression, popularly known as Great Depression.
Economist believed that the great depression was twenty years long starting from 1918, while for rest of the world it was from 1929 每 1932. It continued long for U.K because of the effect of First World War was still there on U.K economy. The depression was there because of the large debt on U.K and other European countries during the First World War. Due to enemy action the loss of asset caused to U.K. As U.K was already on debt so it could not finance its loss.
After the depression started, U.K adopted protectionism policy and dropped the tariff reform. The dropping of tariff reform protected free trade to happen and it lessen the effect of depression from other countries.
The effect on U.K trade was devastating and the exports of product manufacture in U.K, fell down drastically. With high unemployment and lower export, national income fell. The hardest hit was the growth of industries of the U.K economy.
With economic slowdown, U.K congress passed a bill to cut public spending and wages. The bill faced lot of opposition from public all around the country. Then the government came up with idea to get control over banking and exports to control the currency transfer. U.K government took several safety measures, like getting investor confidence in pound. Government issued a emergency budget which comes with proposal to cut public wages and public spending. These measures lead to reduction in purchasing power of consumers in U.K.
Finally in 1931 the gold standards were scraped off, this affected the exports and the currency fell by 30%. This fall of currency make way for U.K to recover from the great depression. In 1932 government put 10% duty on all the imports to encourage domestic production. After the scrapping of gold standards and decrease of currency, the interest rates also fell down to 1%. The recovery of economy starts in 1933 when the good from U.K became more competitive than most of the countries following gold standards. This helped reducing the unemployment. This increase in employment was in few parts of the country only. Where there were low interest rates the employment was higher, as the good were competitive in market.
SECOND WORLD WAR (1939-1945)
During the Second World War U.K successfully managed their resources. They very well managed workers and all the manufacturing facility to support the war. U.K prioritizes the needed equipment and then planned manufacturing capacity accordingly. Government effectively mobilized the worker from their routine task to the important task. At this time the focus was only on completing the demand of equipment for the army. Every citizen of country contributed during the war time. All the workers, women, children contributed their part. Women took care of rationing and consumer goods become a success that time.#p#分页标题#e#
Government gave priority to war related manufacturing facility and diverted all skilled workers for the manufacturing of war needs. In this time they felt importance of planned manufacturing facility. Country also learned to mobilize all the resources effectively. During the war U.K put all the other steel production on hold and all the steel manufacturing facility was directed to manufacturing aircrafts. Even all the workers from other industries were diverted to fulfill demand of aircrafts. Because of the effective planning and allocation of resources U.K army get the aircraft on time. The number of aircraft in April 1941 was 256 and with the planning efforts it increased to 461 in September 1941.
At the end of 1941 U.S provide munitions to U.K totaling to $15.5 billion. When the war ends between Germany and U.K, U.K government put the exchange controls. After exchange controls are in place no one was allowed to purchase/sales foreign currency. U.K also decided to sell its gold and foreign reserves. The selling was done to pay back the munitions and equipment given by U.S. In 1940 the exports of U.K dropped significantly and the foreign & gold reserves were also exhausting. At the end of 1941, U.K promised orders worth $10,000 but U.K did not had any money to place order. In 1941 U.S congress passed a bill ※Act to promote the defense of United States§. The bill allowed U.S government to give $31 billion to U.K, this amount was never to be repaid by U.K. The Act was popularly known as Lend-Lease. After one month the gold and foreign currency reached to its lowest level. Under the Act U.K was not allowed to export any good to any country other than U.S. U.S also sent officials to monitor the effective implementation of the rules. This rule resulted in lowering of exports to its lowest level ever.
POLITICAL SCENARIO AFTER 1945
After the Second World War ended in 1945, Labor party was elected to Downing Street. This era was characterized by increased taxes and nationalized industries. The party at power tried to create a welfare state introducing the ideals of welfare state, pension funds and social securities. The coming years saw Britain recovering from its post war trauma and expanding beyond the previous size of the economy.
However by the end of the 1960s, growth had begun to slow down and there was a gradual and creeping rise in unemployment rate. In the next decade the conditions further worsened driven by a rise in unemployment rates.
It was during this period that Ms. Margaret Thatcher rose to power as United Kingdom＊s first female prime minister. One of her foremost tasks was to reduce government control of the economy and weaken the influence that the trade unions had on the industry. It was during this period that Britain saw a rise in the service sector and a cut back on the dependence on the industry as a whole. This change has been termed as the ※Third Industrial Revolution§ although this is not a term that one hears in common parlance.
The major highlights of the post second world war period have been:
1941-45 : Austerity Drive
After the Second World War, the economy of Britain had taken a major hit. A huge amount of the country wealth had been used up in defending its borders. United States of America had been one of the firsts to anticipate the post war conundrum and had initiated liberalized trade. It had also allowed relatively free flow of capital across nations and thus was able to actively enter markets and country to which it had previously closed doors. Thus the Atlantic Charter was established in 1941.
In the post war period, United States of America had given a long term low interest loan of $US 4.33 Billion to United Kingdom. When the time came to repay the loan and the question of currency conversion came up, the pound sterling was traded against the dollar which had become the most stable currencies the world over.
The Unites States then started with their Marshall Plan grants and essentially granted another $3.3 Billion to the economy. This forced the British businessmen to forego their traditional approach and modernize their way of working.
Nationalization
In order to boost a flailing economy and the then Labor party decided to hold the reigns of the economy and started large scale nationalization of essential British Industries. Historically across the globe, nationalization of important utilities with greater state involvement had shown promise. However Britain was not able to live up to the expectation.
Even overseas the nationalized British industries were unable to make substantial gains. This can be attributed to the following two factors:
Traditionally the entire export markets of the British were the Commonwealth nations on whom Britain had ruled previously. However in the post war period, the Commonwealth countries had made trade treaties with neighboring countries and were not dependent on Britain anymore
The countries, with which Britain traded before the world war engulfed the continents across the globe, now lay in complete ruins. Most of them had to be rebuilt from scratch and it was not possible to make any profits from them.
1960-1970 : Labor Government
During this period the government tried very hard to control the spiraling inflation. However it had to achieve the same without compromising on the economic growth of the country. At the same time the country itself was struggling to grow at fast pace and its growth rate was only half of that of Germany and France at that time. However one of the salient features of this period was the low unemployment rates that the country was able to maintain.
The Labor Government during this time tried to push the economy by devaluing the Sterling Pound in 1967. However the lack of competition especially in the nationalized sectors made it perform in a sub optimal manner. There was also an increasing power in terms of trade unions that further crippled the industrial sector. With growing trade with other European countries, Britain decided to enter the European Economic Community.
The growing unrest in the economy led to massive strikes called by the trade unions which led to the collapse of the Labor Government. The situation worsened to such an extent that 9 million labor days were lost to strikes alone under Heath＊s governance. Industrial unrest, constant strikes plagued by rising inflation gave Britain the term ※sick man of Europe§.
1979 -1990: The Iron Lady
It was in 1979, that Ms. Margaret Thatcher came to the power of Downing Street. One of the prime steps taken by her was the reduction of power of the trade unions. Her era was marked by deregulation of the market, changes in taxation policy and reforming industrial relations. Protectionism was replaced by encouragement of competition by the market forces. Most of the firms that were controlled by the government were privatized. The major names include British Aerospace (in 1981) followed by British Telecom and British Leyland (in 1984). Amongst the other major names were British Steel and Rolls Royce in 1987 and 1988 respectively. One of the major effects of this was the increased share ownership of the citizens of the country. One of the key decisions taken by Margaret Thatcher during this era was the introduction of the Single Europe Act that allowed free movements of good across all countries of Europe. Some of these measures did start to bring result as after a long economic slowdown Britain was able to witness a 4% growth by the end of the 1980s. Many of the decisions taken during that period were adhered to even when the opposition party came into power later and by the early 1990s Britain was facing an economic boom.
In the following section we will in greater detail the performance of Manufacturing, one of the major contributors to the British Economy and also try to understand the Nationalization policy followed by the country.
Second World War
The Second World War saw Britain transform into a centrally managed nation deviating from the rich tradition of one of the pioneers of free market economies in the world.
Manufacturing
Historically post war Britain has been slow in catching up to its sisters across the pond as far as manufacturing is concerned. Although the growth in the sector in terms of productivity has been very high in the period between 1951 and 1973, it was still much lesser than its neighbors in Western Europe. Since 1979, much of the manufacturing productivity gap that Britain had with others has been reduced. However this cannot be attributed to the increase in productivity levels but rather to a decrease in manpower.
Table given below gives the productivity performance in each sector from 1951 to 1999
It can be seen in the above table that the total factor productivity in the manufacturing sector as a whole grew at a pace of 2.9 % between 1951 and 1973. It dipped to a negative growth in 1973-79 peaking again in the period of 1979-99 steadying at 2.2% in 1999
British manufacturing facilities faced a severe hit in 1950s and 1970s when the idea of standardized mass production was all pervasive. Craft workers severely protested against a system that took away their individual identity form the entire process and reduced them to mere resources. There was also a problem of securing proper markets. The shifting world economy made it imperative for the companies to concentrate on Continental Europe rather than the Commonwealth countries. This was aggravated by the fact that the British economy was not allowed to shape up by the competitive forces from across the world and continued till 1980. Post 1980, Britain once again was able to rise to the levels of its European partners.#p#分页标题#e#
Competitive advantage of United Kingdom
In order to compare the performance of Unite Kingdom vis a vis its competitors, the country has been pitted against two of its traditional rivals in the manufacturing field namely United States of America and Germany. The figure given below demonstrates the above comparison from 1870 onwards. In this we can see that on the long run the comparative trend are mostly stationary. However post Second World War, Germany was much faster in bridging the manufacturing capability gap with United States of America than United Kingdom,
Comparative labor productivity
Share of the world market
From an international perspective, it can be seen that till 1937, Britain enjoyed a royal position as far as having a share in the world manufacturing market was concerned and was displaced by the United Stated in 1950. Even in Europe, Germany had become the largest exporter in the manufacturing sector by 1964. The above comparison is illustrated in the following table:-
State owned industrialization
The twentieth century witnessed large scale economic experiments carried out by the then political and economic policy makers one of the largest of which included of large scale ※nationalization§ or state owner ship of companies.
Why nationalize? - Arguments in favour of nationalization
It was widely considered that ※core§ industries like public utilities if left to the private sector would fall prey to capitalist mindsets and not be able to serve the purpose. Examples of such sectors would be sectors like Telecommunications, roadways, railways, electricity, gas and water. It was widely concerned these were network intensive sectors which in the hands of the private sector would naturally lead to either sub optimal output and/or complete monopolization. It was also feared that monopolization of essential markets would naturally lead to spiraling of the prices of essential commodities and services.
However Britain extended the boundary of ※essential public utilities§ to sectors such as coal, steel, automobiles, aero planes, aero-engines and shipbuilding. However the logic behind them being deemed of national importance was often shaky if not nefarious. Nationalization of coal was carried out in order to supposedly gain economies of scale in coaling mines. It was also seen as a way to resolve the deep rooted labor problems in the particular sector.
State owner ship usually implied state control. British Petroleum was nationalized and regulated by Winston Churchill in order to secure war time fuel requirements.
The methods of public adoption of companies were as varied as their reasons. This included civil service departments with direct ministerial control, municipal ownership and National Corporation.
Performance of nationalized industries
Total productivity growth rates in nationalized industries from 1948 to 1985
The above table shows us that the total factor productivity in industries like airlines, electricity, gas and coal peaked in the period during 1958-68 then declined in the period 1978-85. Only one industry shows the clear mark of the positive effects of nationalization and that is the steel sector, with TFP increasing from 2.5 to 12.4 in two decades.
The major reason for the decline of TFP over the years has been attributed to lack of accountability of people responsible for running these organizations which had become behemoths. The managers were of the opinion that they were too accountable and often for the wrong reasons. It was felt that the target on which the performance of both the managers and the industry as such were judged on parameters that were not conducive to the growth of the sector as a whole.
Post 1979, Margaret Thatcher＊s government took the decision of privatizing most of the industries thus allowing market forces and competition to shape up the sectors and make them more efficient. As far as productivity measures is concerned, as far as the numbers go, the British Industrial sectors showed better rate of growth than they showed once they were privatized. No doubt the threat and uncertainties of privatization played a major role in the above. But the above can also be attributed to the clear financial goals and strategies set out for the organizations. The turnaround of the British Petroleum is one of the largest success stories in the history of British Economy.
Comparison of privatization with other nations
In order to understand the comparative advantage of a nation, it is imperative that we understand its position in comparison to the other countries and measure its performance. The broad comparative matrix is shown in the table below. Such comparisons throw to light some interesting insights as far as sectors like network utilities is concerned. At the time of the British nationalization program, the utilities of all the four countries were behind United States of America. This can be attributed to the stupendous performance of the American industries and in particular its services sector. In the latter years it can be seen that, labor productivity in telecommunication, transport etc in West German, United Kingdom, France and Japan lack United States by the same amount as their economies fall behind United States of America.
Over the years there have been only 2 instances when the when the utilities of the four countries have matched up to the levels of United States of America. The Japanese gas, electricity and water sector and the French railways and telecommunication sector were state owned in the relevant periods. Thus by this indicator it can be clearly seen that efficient management is clearly possible in these sectors irrespective of whether it is owned by the public sector or the private sector. The period from 1950-79 when nationalization mainly took place, is characterized by falling labor productivities in the utilities as compared to the broader British economies and also in comparison to similar industries in other countries. Although the scenario improved post 1979, with the impact of privatization, the impact of the same did not have the required effect. The growth in Britain＊s utility sector was not as rapid as the growth in the utilities sector in similar sectors in other industrial nations. The comparison drives home the fact that while state industries can indeed be effectively managed, the British ones in general were essentially not and historically private ownership has had a better effect on the economy and the sectors in the general.
Monetary policy since 1945
Since 1945 there has been ambivalence about the monetary policy and whether or not it should be assigned to some domestic or external objectives. There also has been a deep discussion about the management of national debt and in difficulty in controlling the monetary growth of the country.
The figure given below essentially shows three periods of rapid monetary growth
The post war period of monetary growth.
The 1970s where there is a rapid acceleration in the growth of all the aggregates.
The 1980s where the growth in Mo has been modest but the growth in M1 has been rapid.
The British economy typically has had low control over monetary growth in the floating period, at first the Conservative chancellor wanted to accommodate expansionary fiscal policy. In the 1970s the labor governments had to face the effect of the oil price shocks. With inflations accelerating worldwide, they struggled to keep the pound stable. The conservative government that followed took steps such as abolition of exchange control but also had to face the major recession that followed. However anti inflationary measures taken since then have been fruitful in tackling these issues effectively
21st Century
This was the period when the Labor Party's second term in office began starting from 2001. The party increased taxes and borrowings during this period citing reasons for increased spending on public services such as the National Health Service which they claimed was suffering from under-funding. The nation＊s economy saw a shift from manufacturing which had been on the decline since 1960s and banked heavily on the services as well as finance sectors to fuel its growth. UK along with USA also entered at war with first Afghanistan (2001) and then Iraq (2003) which increased spending of the government. The growth rate ranged between 1.6% and 3% during 2000 to early 2008 when the recession struck.
2008 recession
United Kingdom in quarter 2 of 2008 entered into recession following the developments in USA. This was as per the data provided by the UK Office of National Statistics (ONS). UK came out of recession on Quarter 4 of 2009. UK had suffered six consecutive quarters of negative growth. Unemployment rose from 5.3 % in May 2008 to 7.6% in May 2009. The Bank of England pumped in ㏒200 billion of new capital into the British economy through a process known as quantitative easing to help the economy recover. The major reason thought to have been responsible for the same are increased government borrowings (leading to structural deficit).#p#分页标题#e#
UK lagged behind other nations like USA, Japan Germany as well as France in returning to growth. They eventually returned to growth in the last quarter of 2009 compared to other nations who returned to growth by second quarter. The government＊s slow decision making was considered the reason for the same by many experts.
By the beginning of 2010, UK had left recession, the last major economy in the world to do so. In Quarter 2, 2010 UK＊s economy grew by 1.2% which was the fastest rate of growth in the past 9 years. In 2010, Moody＊s gave AAA credit rating to UK on account of stability driven by governmental actions.
2012 recession
In Quarter 1 of 2012, the UK economy entered a double-dip recession for the first time since 1975 posting four consecutive negative quarters of growth. The recession saw a sharp decline in the productivity of British business. The Office for National Statistics said on 24th August, 2012 that the UK economy contracted by only 0.5% in the three months to the end of June, from initial estimates of -0.7 %. The ONS reported that the decline in UK construction output was not as steep as initially feared easing concerns about the double dip recession.
CONCLUSION
The competitiveness of a nation is a concept which despite lot of studies still remains misunderstood despite widespread acknowledgement of its importance. The starting point in understanding the competitiveness of any nation is to first comprehend the sources of a nation＊s prosperity and to understand how the same as evolved so that we can predict how it would evolve in the future. The standard of living of a nation is determined by the productivity of its economy, which is measured by the value of goods as well as services produced per unit of the nation＊s human capital and natural resources within the nation.
Looking at the economy of United Kingdom, the economy has performed well on the most important economic metrics over the last two decades. Prosperity has improved in absolute terms and has also increased in relative to many other developed nations. Labor productivity growth has been good though not significantly above the level in many other advanced economies. Other intermediate measures of competitiveness like the world export market share of UK as well as FDI attraction has been stable over the years.
But despite the initial dominance of UK when we look at the current levels of productivity as well as the nation＊s prosperity we see that it still lags behind many advanced nations. With the economy falling into recession in recent times, it remains to be seen how the nation would be able to climb out the current state which it sees itself in. Though recent studies have been improvement, the government would needs to make sustained improvements in the microeconomic as well as macroeconomic business environment to improve the business scenario of United Kingdom.
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