公民社会研究所-通往复苏之路：新冠疫情之后的经济再平衡（英文）-2020.7-70页_1mb

CIViTAS: The Road to Recovery Summary

Core Content

This report, The Road to Recovery, by John Mills, outlines the challenges and potential pathways for the UK to recover economically from the coronavirus pandemic and restructure its economy for long-term stability and growth. It critiques the UK's current economic model, which has led to a severe imbalance and low growth rate, and argues for a shift in focus towards manufacturing and investment.

Main Points

• Economic Imbalance: The UK economy is poorly positioned for recovery due to a long-term imbalance, with a disproportionately high reliance on services and a weak manufacturing base.
• Low Investment: The proportion of GDP invested in the UK's future is far below the world average (17% vs 26%). Investment in high-return categories such as mechanisation, technology, and power has been significantly reduced.
• Deindustrialisation: The UK has deindustrialised more than any other advanced economy, with severe consequences for regional and socio-economic inequality, job quality, and productivity.
• Exchange Rate Impact: A strong pound has made UK manufacturing uncompetitive, contributing to chronic balance of payments deficits and economic decline.
• Austerity Misplaced: Austerity measures aimed at reducing government deficits are ineffective unless accompanied by a reduction in the overall balance of payments deficit.
• Future Challenges: The UK faces significant future cost pressures from climate change, healthcare, social care, pensions, and training, which will further strain the economy.
• Growth Strategy: The report advocates for a rebalancing of the economy towards manufacturing and investment to achieve higher growth rates and greater economic resilience.

Key Information

Economic Growth and Investment

• Investment's Role: Certain types of investment, such as mechanisation and technology, generate much higher returns than others.
• Growth Rates: The UK's average growth rate is 1.4% per year, far below the world average of 3.5%.
• Table 1.1: Highlights the poor performance of the UK in terms of investment and growth, showing that the UK's social rate of return on investment is significantly lower than other countries.

Deindustrialisation and Its Consequences

• Manufacturing Decline: The UK's share of world exports of manufactured goods has fallen from 25% in 1950 to less than 2% today.
• Regional Disparities: There is a stark gap in economic performance between London and other regions, with London having a surplus and other areas facing significant deficits.
• Job Quality: Services provide a mix of high and low productivity jobs, whereas manufacturing is more effective at creating stable, high-paying employment.

Exchange Rate and Competitiveness

• High Pound: The UK's high exchange rate has made manufacturing uncompetitive, contributing to the decline of the sector.
• Competitiveness Loss: The pound's value has increased over time, leading to a significant loss of competitiveness in manufacturing.
• Cost Base: About 70% of manufacturing costs are in the domestic currency, making the exchange rate a critical factor in competitiveness.

Balance of Payments and Government Borrowing

• Deficit-Driven Borrowing: The UK's balance of payments deficit has driven government borrowing, which is not primarily a result of fiscal policy.
• Sectoral Trends: The public sector has been a net borrower every year, while the rest of the world has been a net lender.
• Austerity Ineffectiveness: Austerity measures are unlikely to reduce the government deficit without addressing the underlying balance of payments issues.

New Challenges

• Climate Change: Expected to cost 3% of GDP annually, with estimates ranging from £50bn to £70bn.
• Healthcare: Has grown from 2% of GDP in 1947 to nearly 9.8% in 2019, with rising costs and demand due to an aging population and increased threats like the pandemic.
• Social Care and Pensions: These will also place increasing financial burdens on the economy.
• Training Needs: Rising costs will further strain public finances.

Recovery Prospects

• Need for Reindustrialisation: To achieve sustainable growth, the UK must increase manufacturing as a percentage of GDP from 10% to around 15%.
• Global Position: The UK is likely to lag behind countries like China and others in the Pacific Rim, which have higher investment and growth rates.
• Economic Stability: A stronger manufacturing base is essential for financial stability and improving living standards.

Conclusion

The report concludes that the UK's current economic trajectory is unsustainable and that a shift towards manufacturing and investment is necessary for long-term recovery and growth. It argues that a competitive exchange rate is crucial for this transformation and that current policies have exacerbated the country's economic weaknesses.

Key Figures

• UK GDP Investment: 17% (2005–2016), far below the world average of 26%.
• Manufacturing as % of GDP: 10% (current) vs 29% in China and Korea.
• Annual Balance of Payments Deficit: Nearly £100bn, equivalent to around 5% of GDP.
• UK Growth Rate: 1.4% per year, compared to the world average of 3.5%.
• Climate Change Cost Estimate: £70bn annually, or 3% of GDP.
• Healthcare Cost as % of GDP: 9.8% in 2019.

Policy Recommendations

• Rebalance Economy: Focus on manufacturing and investment to drive growth and productivity.
• Competitive Exchange Rate: Advocate for a more competitive pound to support manufacturing.
• Reduce Deficits: Address the balance of payments deficit to reduce reliance on foreign borrowing.
• Stimulate Domestic Investment: Prioritise investment in mechanisation, technology, and power to boost productivity.