Why globalisation isn’t working – Part 2

You can read yesterday’s Part 1 of this article here.

THIS abject failure of the socio-economic structure explains ‘populism’, as the Establishment chooses to describe the people whom it has failed. The people for whom the economy isn’t working are an increasing proportion of the population and almost certainly a majority.

In the UK the elite witter about economic realities to explain this. They don’t understand that while economics is a theory, Reality is being strapped for cash every day. Reality is no chance of finding a GP appointment inside a fortnight. Reality is roads full of potholes so large that they verge on canyons. Reality is the whiff of marijuana on every street with drug dealers on every street corner. Reality is police forces and courts failing to prevent real crimes like robbery and burglary while being preoccupied with non-crime hate incidents. Reality is uncontrolled migration destroying the fabric of this nation and successive governments achieving nothing.

President Trump gets that – he understands the fury of the US Rust Belt. He got elected and he’s going to do something about it. While economists may, with good reason in some cases, argue that tariffs damage the world’s economy, Trump rightly doesn’t care: he knows he represents the interests of the United States. If Chinese steel is made with cheap labour, poor environmental protections, dirty power and rotten health and safety and quality why should it be allowed to compete on price with US steel? Hence the tariffs.

While it’s true that EU steel is made at least as well as in the US, the decades of globalisation have ignored the unquantifiable costs of industrial decline to the United States; welfare dependency, drug use and despair. The United States is large enough to source most of its needs internally and rich enough to pay over the odds for what it must import. Tariffs make sense to support the rebirth of their industrial base.

In the UK we have nine million economically inactive people, of whom one million 16-to-25-year-olds are not in employment, education or training (the NEETs) and some three million are long-term sick. (Economically inactive are under 65, not working and not seeking work. They are not state pensioners, of whom the UK has about 13million).

This untapped labour pool could make a lot of stuff were it so inclined. That would both cut the benefits bill and do wonders for the balance of payments. We import much of our food and indeed of everything else we consume.

Descending the value chain

In the past month I have regularly hauled loads of imported steel and imported clay roof tiles. The challenges of steel-making in the UK are well known. The UK also used to make bricks and tiles – all you need is clay, which is abundant in much of the south-east, and heat. There used to be a plethora of brickworks (I ran one for a bit). They duly got merged or bought out by European manufacturers. Several acres of Purfleet Docks are devoted to imported European bricks and tiles. They’re cheaper because the European brickworks are bigger and the energy costs lower. Whatever else it has achieved, the UK housebuilding industry has driven brick and tile manufacture offshore, and with it the profit on perhaps 5 per cent of every new built house.

Add in the wealth gone from legal migrants, from imported services and entertainment (Amazon, Microsoft, Google, Netflix etc) and from overseas investors in UK projects (notably wind turbines) and it’s clear that the UK is haemorrhaging wealth, not cashing royalty cheques from clever designs. The 1980s deindustrialisation logic is no longer valid. We can no longer survive at the top of the value chain, so we need to come back down it.

How to do that? How to pay for it?

Firstly one would need to create some demand. The much trumpeted and long overdue rearmament might achieve that. For example, the Royal Navy needs more frigates and to replace the ones it has as well. That means the UK needs an increased shipbuilding capacity. While opening a shipyard from scratch is no easy task (Neville Shute fans know this from his brilliant novel Ruined City) it’s not impossible. Start today. Ships need steel. Steel needs coke, which needs coal. Ditch net zero and get digging. The ships need weaponry, much of which we do make. Increase production and open more factories if necessary. Stipulate that henceforth for reasons of national security the defence supply chain must be under UK control, with a few items from trusted allies. All of a sudden there’s an entire supply chain, largely funded from existing planned defence spending – which is part of the answer to how to fund it.

Building six warships a year would require some 50,000 tons of steel for the MoD. That’s not much, even if you add in a few thousand more tons for tanks and armoured vehicles. Port Talbot used to supply about 3.5million tons per year and UK steel demand is about 7million tons per year, of which 60 per cent is imported from places with lower electricity costs (pretty much everywhere).

Ditching net zero would help drive the electricity cost down. In the interim the Prime Minster could simply decide that UK steel production is a core part of national security, rebuilding it will take time and during that period imports will pay a tariff. (That tariff of course, boosts government coffers to cover part of the steel costs of the enlarged fleet). The UK is a net importer, so tariffs would work for us.

Don’t fear the commentariat

Establishment economists would, of course, freak out. In 1981 364 eminent economists wrote to the Times stating categorically that Mrs Thatcher’s polices were wrong. She ignored them and the 1980s boom ensued. More important is how the bond markets would react. It’s not inconceivable that they might appreciate a policy designed to generate growth in the UK without increasing government borrowing. If there’s money to be made, private sector investors will step forward. Again, the government could reasonably argue that steel is a strategic UK industry. Investors domiciled in friendly countries very welcome, those in competitors and tax havens not so welcome.

Some (or more) economists and politicians will shriek that the risk of a government taking greater control of its national infrastructure (which it holds on behalf of its people) could expand into economic insularity, protectionism and autarky. These in turn lead inexorably to decline, poverty and war, or perhaps all three, not necessarily in that order.

I’m not persuaded. The EU is a protectionist block as much as it is an internal market. As yet it is not at war with anyone. So is the United States and NAFTA. In the theoretical world of Davos man, one in which the World Trade Organization has actually delivered global free trade and wise governments have ensured transparency on pricing and production methods, the concerns may be true. In the real one outside their models, their concerns are less compelling. The World Economic Forum was established in 1971, the heyday of centralised government. Its message hasn’t changed much over the past five decades, despite the huge changes outlined above. That it holds so much sway is more a testament to embedded groupthink than enduring wisdom. Globalism has not worked for most of the population of the West. It might have once, but it doesn’t now. As John Maynard Keynes said: ‘When the facts change, I change my mind.’

Reform UK should be developing an economic policy that tackles the abject failure of Davos, rather than bickering in public. If they, the representatives of the economically and culturally abandoned, don’t do this, who will?

This article appeared in Views From My Cab on March 14, 2025, and is republished by kind permission.