[Closed] The Economics of Buying British

So, what's wrong with this logic?

There are only 27 products left that we actually make in this country nowadays. And 3 of those are different flavours of Pot Noodle

Economists will point you to the theory of trade and comparative advantage. The theory is not water-tight by any means, but the basic argument is that both parties/countries benefit is they specialise in and allocate resoures to making things that they have a competing advantage in and then trading with each other. As with most things in economics it comes down to opportunity cost.

Edit: ignore Binners' joke, we still manufacturer a lot and are either the 10 or 11th biggest trader in the global economy, and our biggest export remains manufactured goods.

It's not a zero sum game.

Also it won't be you personally paying for the consequences of somebody British going out of business - by buying cheaper from Taiwan you're getting all the other taxpayers to subsidise your purchase.

[url= http://kkozak.wz.cz/Porter.pdf ]The Competitive Advantage of Nations by Michael Porter[/url]

Well worth a read. Ultimately though it's your money and its up to you how you spend it.

Did anyone see the Mary Portas programme not long back? Comparing the price of Chinese and British made goods? In this case textiles?

Increased wages in emerging economies (10-15% pay rises a year against our stagnant wages), and transport costs are now reaching a tipping point. Companies are now shifting production back to the UK, as while the costs are still a little bit higher, there's not much in it any more. And quality-wise there is no comparison as the Chinese economy is still based on a largely unskilled workforce.

Actually, since I'm the one buying British whenever I can, I guess it's me subsidising everybody else's purchases 🙂

Thanks for the link on trade and comparative advantages teamhurtmore. The 2 country 2 commodity example does make sense. There still seems to be a leap of faith involved in applying it to the many country many commodity situation with intermediate goods. But I guess I could try and track down:

Yoshinori Shiozawa, A New Construction of Ricardian Trade Theory / a Many-Country, Many-Commodity Case with Intermediate Goods and Choice of Production Techniques, Evolutionary and Institutional Economics Review, Volume 3 Issue 2, pages 141-187, March 2007. Andrew J. Cassey, An Application of the Ricardian Trade Model with Trade Costs, Applied Economics Letters, 2012, 19, 1227-1230.

[b][u]geetee1972:[/b][/u] The Competitive Advantage of Nations by Michael Porter

Well worth a read. Ultimately though it's your money and its up to you how you spend it.

Thanks, that looks a little easier to digest than the Shiozawa paper 🙂

I broadly agree with this. I would add though:

Buy quality.

Although UK goods are not guarenteed to be better, many are, and many will also be economic to repair or get spares.

If we import a lot of stuff, does that not mean that we're selling a lot of GBP and buying a lot of other currencies? This would weaken the pound and lead to a more competitive home market and a stronger export market. So long term good?

I agree with point 3 as long as you are not seriously disadvantaged by doing it.

There's nothing wrong with your logic, you're right.
If you're a greengrocer & buy a bike from the shop next door, he's got the money to buy carrots from you. If the bike is made in Britain, then the manufacturer's employees can buy from you. The taxes on ransactions & profits & wages pay for the NHS, teachers, etc
If the money goes to China via Amazon, then all the wages & profits go elsewhere, & little tax is due here.

Moses, if the logic was correct, no one would engage in trade at all.

if the logic was correct, no one would engage in trade at all.

This - taken to its illogical conclusion you would only buy or sell things from yourself.

Porter is a case study in making money out of something very, very simple. (Although a recent Forbes article branded him a charlatan!!). Take the basic things that economic theory assumes are constants, make them variables, package them in a "model" and charge $100k per hour to lecture about it! Wow, what a business model.

I tend to follow the ten crack commandments.

"if you follow these rules you'll have mad bread to break up; if not 24 years on the wake up"

Thanks Moses, that's pretty much the logic I use. It's simple and it seems to make sense. But, as teamhurtmore points out, it's probably worth thinking about why we trade with each other at all. Why don't I just build my own bike? Well, clearly there isn't time for me to acquire all the skills I'd need to do everything I'd need to do in a modern world myself. Also, while I may not be the best in the world at what I do, it still makes more sense for me to do that rather than something I'm even less good at, which seems to be the "competitive advantage" argument. Still not sure it really works for international trade though, but it's food for thought.

I'm glad I'm not alone in a dim view of Michael Porter, had to consume a lot of his output in my studies, and it always seemed like a case of taking some common sense, drawing a grid around it et voila, a matrix for which businesses will pay handsomely.

What's his one that basically boils down to "if your product isn't the cheapest in the market then you need to differentiate it some other way in order to sell it"? Really? Thanks for that Michael, I'd never have figured that out if you hadn't drawn a grid around it...

Moses, if the logic was correct, no one would engage in trade at all.

The logic is fine.
However we don't make everything on our doorstep, so some trade is inevitable: not all foods grow here, most minerals originate elsewhere. But the more added value we put in here, the richer we are. By buying manufactured goods and services from abroad (like EDF electricity & German cars), most of the profits are made & taxed elsewhere so we are poorer.

A case in point: when we closed many of our uneconomic coal mines, in favour of nominally cheaper imported coal, the overall cost to the British economy was higher, because of the social support required for the ex-miners and the industries which depended upon the industry.

Buying British, in the context of a global market, means very little - even if you buy something made in the UK, where did the parts come from? there is virtually nothing within the modern world, that is made in one country that solely comes from one country - so the very idea of buying british only has limited effect, the money will find itself overseas eventually (and back again, as money comes into this country from other countries - although mainly through finance, but also tourism and universities etc.)

So, what's wrong with this logic?

You are only one person
If you were a million people then you may see some noticeable return on your investment. But instead you will see zilch so logic dictates you should buy the cheapest available product.

This is also the reason I don’t recycle – because it’s akin to turning up at an earthquake with a dust pan and brush.

Moses - I will beg to differ and even your first para partly explains why (ie your more value added point). Trade does not mean that we are poorer, otherwise we would no engage in it. Lets take a very simple example and assume that the UK and Taiwan both make road and MTB bikes and they share resources equally between producing both.

Assume output of UK is 1 MTB and 4 road bikes
Assume output of Taiwan is 2 MTB and 3 road bikes

[u]So in total 3 MTB are made and 7 road bikes are made.[/u]

From this we can see that to make 1 MTB, the UK gives up making 4 road bikes (the opportunity cost), The cost to the UK of making one road bike is 1/4 of a MTB. For Taiwan the cost of making 1 MTB is 1.5 road bikes, and the cost of making one road bike is 2/3 road bike.

So just look at road bikes - making 1 road bike in the Uk has a cost of only 1/4 of a MTB. If Taiwan makes a road bike then its cost is 2/3 of a MTB ie its a higher opportunity cost. So wouldn't it make sense for the UK to make the road bikes and Taiwan to make the MTB?

Instead of splitting their resources between the two bikes they allocate all to road (UK) and all to MTB (Taiwan). Assume the returns to scale are the same ie double resources = double output.

What happens now?

The UK produces 8 road bikes but no MTB
Taiwan produces 4 MTB but no road bikes

The result is instead of total production of 3 MTB and 7 road bikes, [u]the same resources now produce 4 MTB and 8 road bikes.[/u] The UK and Taiwan can now trade between each other and both economies are better off.

The logic behind why we trade with each other is that is allows countries to specialise in things that they have a competitive advantage in, it can give access to more output and choice (see above) and cheaper prices. Simple really.

But in that example the UK is more efficient that Tiawan at making road bikes. What happens when we're less efficient at everything?

Since we all live on the same planet we really need to grow up and realise we are all running out of recourses.

Add to that the fact you wont live very long and it takes far longer to change a society.

The only logical response is to buy quality that you can afford. Anything else is not logical.

Very good question - that is the difference between absolute and comparative advantage. Countries can have absolute advantages in the production of eg MTB if an equal amount of resources can produce more MTB than another country. But that does not necessarily mean that it has a competitive advantage. [u]The key is the concept of opportunity cost. What is the opportunity[b] given up[/b] to produce the MTB? [/u]

Countries may well be more efficient at producing one good in absolute terms, but if this involves a greater sacrifice in terms of producing other things, it remains logical to concentrate on the one with the competitive advantage and trade the other. Obviously this also works in reverse (to answer your question directly).

Roverpig - my example above is very simplified obviously and is the very basics of Trade Theory devised by a guy called Ricardo. There are much more complicated (and realistic models) but the basic logic and principle (opportunity cost) is easiest to see with Ricardian examples - I hope!!

The only logical response is to buy quality that you can afford. Anything else is not logical.

Agreed, but what you can afford is not necessarily what is cheapest in the short term. If buying all my goods from China means that loads of people here lose their jobs (leading to poverty, civil unrest etc) it's quite possible that the cost (even in my lifetime) will be higher than it would have been if I'd just paid a bit more for my bike in the first place.

I hear the council of despair. I'm just one person; I can't make a difference. But that's not a path I'm comfortable following. Do what you think is right and try to convince others to do the same seems a better philosophy to me.

However, the "comparative advantage" argument is a powerful one.

Looking around, people are more mobile these days, talk different and come from different places. Should you buy stuff from the country/town you were born in, the one you are currently in or one you'd like to live in next ? Is this about getting stuff back yourself? Or helping people that are like you? How do you decide?

But in that example the UK is more efficient that Tiawan at making road bikes. What happens when we're less efficient at everything?

The trouble is we all seem to want to live in nice houses, own 2 cars, have 3 meals a day etc etc and so labour rates are an order of magnitude higher than in Taiwan where expectations are a tad lower. We also seem to agree that everyone ought to have all these nice things even if they don’t contribute to the economy - which adds further overhead to the cost of producing anything.

In the past we overcame these issues by producing things that nobody else could; unfortunately the rest of the world has kind of caught up. Also we were quite good at getting a lot of people work for peanuts and people from other countries to work for free! Now we are all very ethical so this doesn’t happen either.

Nowadays the only way we seem to be able to make money is by shuffling other people’s money around from one risky venture to another - as recent events have shown- I don’t think there's much of a future in this.

Thanks teamhurtmore. You are right, the simple examples are indeed very helpful in getting the idea across. I see that yours is very similar to the one on the Wikipedia page on Comparative advantage, which in turn leads to Rocardo's 1817 book "On the Principles of Political Economy and Taxation" which deals quite nicely with my question as, in that case, Portugal was more efficient than the UK in making both commodities.

Now, what's the conclusion on this Porter guy? Is the objection to him simply that he is making money by dressing up the obvious as something new, or is there a flaw in his logic too. As far as I can tell he seems to be saying that the best thing I can do for the long term benefit of the country is to be as demanding and unforgiving a consumer as possible (or have I read him wrong?).

So, let's get back to a cycling analogy. Say, for the sake of argument, that I think the Single Pivot is probably not the best suspension system for a mountain bike but that it's good enough for my purposes. By my "rule 3" I'd conclude that I should buy an Orange. The design is fit for purpose and (as long as I pick the right model) it's made in the UK. By Porter's logic I shouldn't as it is neither the best nor the cheapest option on the market. So, which is the right path to follow?

You are only one person
If you were a million people then you may see some noticeable return on your investment. But instead you will see zilch so logic dictates you should buy the cheapest available product.

This is also the reason I don’t recycle – because it’s akin to turning up at an earthquake with a dust pan and brush.

But here you are assuming nobody else does it, whereas if you assume that lots of people do it you're onto a winner. in reality some do, some don't, so the effect won't be massive but could be significant.

I've no idea if that makes sense..................

Roverpig - I cannot claim any originality in my case study, I just tweaked the bike bit!! The numbers I chose are repeated in basic economics text books because they illustrate the concept very easily!! Plus I was recently drilling those numbers into my son's head pre-Econ exams!!!!

Porter is an interesting guy. The work that made him famous was his so-called 5 forces model on what determines industry competition. It remains a very powerful and easy-to-use framework for starting analysis of any industry. Porter extended this into four generic strategies and then into the concept of the value-chain. IMO these are also useful framworks for analysis. He later produced the 855 tome on the Competitive Advantage of Nations where he tries to extend the theory to explain why some countries are better tha others at producing certain goods. It's a lengthy read. I have no objection to him making the money he did, I am just surprised that people paid him $100k an hour to explain it to them. But I guess that's what makes a successful consultant!

Edit: on your final question, this was not Porter's focus. But simply, what you describe is yet another economic concept/question - are we maximisers or satisfiers? A large part of theoretical economics is based in the principle that when seeking to allocate their scarce resources (the basic question of economics), people seek to maximise things such as utliity or profits etc. What you describe is different behaviour altogether, which forms a different part of theory. Even if buying the Orange is not the optimum decision you "could make", it's still satisfies most of what your are looking for, so you make the purchase.

But here you are assuming nobody else does it, whereas if you assume that lots of people do it you're onto a winner. in reality some do, some don't, so the effect won't be massive but could be significant.

Im not assuming nobody else does it. Regardless of how many people do it.........
X + "something insignificantly small" = X

so no change.

Look I’m not say saying it’s not morally the right thing to do - that’s not my area - just don’t expect to see a return on investment thats all.

Did anyone see the Mary Portas programme not long back? Comparing the price of Chinese and British made goods? In this case textiles?

Increased wages in emerging economies (10-15% pay rises a year against our stagnant wages), and transport costs are now reaching a tipping point. Companies are now shifting production back to the UK, as while the costs are still a little bit higher, there's not much in it any more. And quality-wise there is no comparison as the Chinese economy is still based on a largely unskilled workforce.

+1

or like the machine tool industry the Taiwanese bang out some of the best in the industry bar none

they bought all the production of the UK made grinders to do this then used them to make more taiwanese precision machinery hence putting the uk grinder manufacturer out of buisness

"Look I’m not say saying it’s not morally the right thing to do - that’s not my area - just don’t expect to see a return on investment thats all."

I think return on investment is a key issue here. There was also a comment earlier about taiwanese bikes seeming like good value for money. Producing all these goods in places like China increase profit margins. I think they would also be good value for money if they were made in the UK and also sold for the same amount. Can manufactures do this, probably they can (almost certainly) its just investors etc would have a lower return on investment.

I would personally prefer to buy from a local source, knowing that I am supporting a regular bloke in having a job and a decent standard of living. This is preferable for me to paying the same price for the same item produced in china and knowing that the item has been market up 900% and that the extra is going to some fat cat. Also at the cost of the increased pollution in that region.

I have a problem with the idea the money must stay in the UK.

Developing countries are desperately poor. There's plenty of things we can do here that they can't, they don't need us to take away their business in the things they CAN do as well. Most of us are doing better than most Chinese people despite the fact that they make most of our stuff.

It's as if you are saying British people deserve your money more than foreigners do...

Also, it's interesting how people seem to tend towards the right of the political spectrum then they change track and maintain that British workers have a right to work regardless of their product or costs.

Now I'm not saying that's wrong.. I am not a Conservative or even right wing, but it's a point worth considering imo.

[b][u]molgrips:[/b][/u] It's as if you are saying British people deserve your money more than foreigners do.

No it's much more selfish than that 🙂 I'm just trying to work out what's best for me in the long run. It wasn't really a moral argument. Simply a question of whether buying the cheapest bike (for example) in the short term ends up costing you more in the long term if you buy it from abroad. I've always assumed that it does. Now I'm not so sure.

Before this thread veers further off course, as it must, I just wanted to say a quick thanks to all those who have tried to educate me on basic economics. Let's just say that rule 3 is now under review.

roverpig - Member
Now I'm not so sure.

Which is the value in debate!! But the answer is easy - buy the Giant!!

Indeed. Any day where I end up less sure about something is a day well spent. The more I learn the less I know.

I would like to just throw something in there. I have a limited and very simplistic view of economics so don't blast into me 😐

I think that Molgrips has a point. Perhaps we should consider relieving poverty of certain other countries. However, while this is good theory, does it actually work? Countries get trade, but they get trade because they are cheap, workers are paid low salaries while all the big money goes to just a few. Does this not create an incentive to keep salaries low and continue to exploit people?

Spending on local products I would expect stimulates local economy, jobs and hopefully everyones life quality increases a bit. what is the alternative? Spend to get cheaper goods, money goes to other countries, local jobs lost, unemployment then poverty, then crime, then drug problems, then social unrest and violence on the street. Once that has happened, taxes go up to pay for the unemployment, health service, policing and the money you saved by buying cheap is gone and, you end up living in a dump.

Is this too simplistic?

THM: "Trade does not mean that we are poorer, otherwise we would no engage in it. "

I never said that it did mean this, just that by importing / buying frmo abroad, we are impoverishing ourselves when compared with buying locally. Similarly, we are enriching other countries. (Even though they may be porer than we are)

Understood, but I still do not agree Moses, and hoped that my example explained why. But I cant have been clear enough. We are not enriching others - there is a win, win if resources are allocate better. In the simple example the UK MTB maker (who may look like a loser here) can join the road bike firm (ok, assumptions here) where he will do better, the consumer does better and even the environment does better as fewer resources are required to make the same amount of output.

Teamhurtmore,

Producing in low cost economies generally increases environmental impacts.

Cheers

And this is exactly why our economy is ****ed. Economists like those you quote have been telling us that it doesn't matter if we in Britain don't make stuff nor own companies. It does.

What exactly are we exporting to Taiwan to trade for goods, so that both parties benefit? Where will we be in 10 years? We know that by offshoring corporate HQ, foreigh companies avoi paying tax to you & me. Where's the benefit to us?
Yes, we have lots of financial services, but there are easy to replicate, and are being. Trade is good but it has to reciprocal, and at the moment the UK is not exporting. So by buying British we can cut the deficit and improve our lot.

Your bicycle example is a good one.
We import many MTBs, but we don't make the road bikes either. In the real world, the 5000 ex-employees of Raleigh don't make anything, and many were on the dole for many years. Please explain how this benefitted the UK. If Raleigh had continued to make bikes in the UK, by improving efficiency, we could have bought locally and the UK would be better off.

This is also the reason I don’t recycle – because it’s akin to turning up at an earthquake with a dust pan and brush.

🙄

Roverpig, do you work for Orange or Hope 😀

I do agree with buying locally where possible.

1. Never borrow money to finance anything unless it is going to increase in value faster than the interest rate.

Does any such thing exist?

This is also the reason I don’t recycle – because it’s akin to turning up at an earthquake with a dust pan and brush.

"If you can't be part of the solution, be part of the problem" ?!

Why not just recycle so a bit less of your crap is buried in the ground?

😀 Chief, I knew that comment would be misinterpreted!!!

Moses, last point and then I will just move on. No economists are saying that it does not matter if we make stuff nor if we do not own companies. Roverpig asked a simple question about logic and I explained the logical Economics argument about why trade benefits both parties. This is a long way from what you say I or any economist is saying. But as i said earlier, I must have explained it poorly. Economics is about how we allocate scarce resources. In the simplified example I used earlier, economists would not conclude that we should not make bikes. They would correctly point out that it is better for us (including the workers) in terms of using scare resources, having successful companies and giving better choice and prices to consumers to specialise in road bikes and vv for Taiwan. It's a massive and illogical step to argue that this is negative for the either economy.

But both your argument and my case study use extreme points (1) mine assumes constant returns to scale ie putting all the bike making resources into road biking instead of splitting them 50/50 will double output. Thus ignores the law of diminishing returns. Your extreme is to state that "many" of the ex-employees of Raleigh ended up on the dole.

The key is to invest in ensuring that we are able to have competitive advantage in a balanced range of economic activities and on that, at least, I hope that we will agree.

[edit - wrong thread]

Ormonroyd, am not sure if that is a real question or not? Surely that is just an interesting way of stating the basic concept behind investment?

Okay, I'll rephrase, is there anything [i]guaranteed[/i] to do so? I think half our country's economic woes are caused by the assumption that certain assets must increase in value by more than interest rates (and therefore policy frameworks should support that inflation). It's why nobody under about 35 can afford a house

No, by definition they cannot exist (guaranteed returns) because everyone would do them up until the point when the returns fell below the cost of financing them.

ormondroyd

1. Never borrow money to finance anything unless it is going to increase in value faster than the interest rate.

Does any such thing exist?

Not sure any more. Only money I've ever borrowed was the mortgage, which we took out 15 years ago. So far, yes, it looks as though it will work out OK. Not sure things are so simple for people buying now though. I've never contemplated (or understood) borrowing to finance anything other than property. But that's a whole other thread.

And no, philbert31, I don't work for Orange or Hope (or any British manufacturer) I'm afraid.

More importantly Roverpig, are you going to buy an XTC, an Anthem, a Trance or a Reign (can't remember the DH version!)?!?!?

Already got a Trance (and an old Five), so need to sell something before I think about buying anything else. Both great bikes though.

Rational economics? Soooo last century :roll:.

I buy Exposure Lights (even though I know I can get the same lumens elsewhere for less, sort of) mainly because the provide real jobs making things in a part of the sticks where the choice is be a farmhand or move. And its very near where I live so I care about it.

I cant explain that rationally, its an emotional choice that just makes me feel better.

JOAO3v16, I think your approach is very narrow minded and pessimistic, you are indeed part of the problem.

Now, mr teamhurtmore. I have had to read your posts again and in particular, the one with the bike production example. Just a question (I did say I was a dunce in terms of economic understanding).

So, the UK are making bikes and china are making bikes, and we trade bikes between each other. I see how we both can benefit.

My question is, what happens if in china no one wants to buy any of our bikes? Maybe they are too expensive, or maybe people just ride around on locally made bikes. What happens then?

The interesting thing about comparitive advantage theories and all that is that if you look at more sucessful exporters than us (or at pretty much any other major exporter), they all have big cultures of buying their local products - for example in USA, Germany, Japan etc. locally made goods have a cachet that made in the uk doesn't obviously have here.

Dunno what that means, probably just that it is as always more complicated than economists would have you believe, and yet another reason why economics is essentially ablack art.

It is worth considering the derived economic activity that occurs with imported goods?

I mean any tax revenues on imported goods, and then any associated distribution, warehousing, etc services the importer has to pay for, the manufacture of an item is the “Headline” activity, but there are always secondary, local services that generate some income in the UK, would these goods sell to anyone if they were produced more locally and priced higher as a result?

Is “Made in the UK” a sufficient USP to support more than a handful of Niche, higher value manufacturers?
Using the familiar Bicycle business as the example; Is there enough market demand to support more than one Orange or Hope, or is that the limit?
I would contend that only a relatively small number of UK consumers are now willing to pay the higher retail price for a UK manufactured item, over and above that of a Far Eastern equivalent, to support a finite number of UK manufacturing businesses in any given market segment...

Rational economics? Soooo last century :roll:.
I buy Exposure Lights (even though I know I can get the same lumens elsewhere for less, sort of) mainly because the provide real jobs making things in a part of the sticks where the choice is be a farmhand or move. And its very near where I live so I care about it.
I cant explain that rationally, its an emotional choice that just makes me feel better.

Nope it’s a perfectly rational, understandable explanation to my mind; as a consumer you find value in something other than the £’s per-Lumen ratio, you also value the contribution of the product directly to your local economy, hence Exposure have a USP that No Far Eastern company can match, and thus they stay in business...

Chief, the example I gave is highly stylised and simplistic (especially the two commodity example). In that specific case, remember Taiwan stops making road bikes completely because it is in their interests to do so. Hence it needs to trade for the road bikes (assuming that the original supply was matched by local demand). Of course, in reality, the relationships are far more complicated/multi-dimensional.

But yes, if you have high value added/expensive product you are not going to have much success trying to trade that with a less economically developed country. So it doesn't make sense for us to sell life insurance and pensions to Bangladesh but it makes more sense to sell higher yielding crop varieties etc (assuming appropriate technology levels.) A slightly sloppy example admittedly.

Already got a Trance (and an old Five), so need to sell something before I think about buying anything else. Both great bikes though.

As long as you dont buy British you can afford to keep all 3 🙂

The interesting thing about comparitive advantage theories and all that is that if you look at more sucessful exporters than us (or at pretty much any other major exporter), they all have big cultures of buying their local products - for example in USA, Germany, Japan etc. locally made goods have a cachet that made in the uk doesn't obviously have here.
Dunno what that means, probably just that it is as always more complicated than economists would have you believe, and yet another reason why economics is essentially ablack art.

I was under the impression that it was almost the opposite, that the ruling and economic elite in China actively seek out and import High value, Western manufactured goods as they are both a display of wealth, differentiate them from those who can only afford locally manufactured goods and carry perception of greater quality, Cars are a good example, the Chinese Import plenty of European vehicles, precisely because they are European. If you started making them in china for supply to the local market they would no longer be so desirable...

I'm just trying to work out what's best for me in the long run

Well, buying high tech goods from a developing country might be good in the long run. It'll ensure education and development in that country so living standards will rise, cost of living will go up and it'll become just as expensive as UK manufacturing. So in the end we'll all have something to manufacture, which I think is alluded to above.

Actually Joe, all of those countries demonstrate exactly the benefits of trade and focus. Take Japan, interestingly now running a trade deficit - it exports cars (21% of Xs), machinery of different types (21%) and consumer electronics and seminconductors (18%). It imports fuel (32%), machinery (18%), food and other manufactured goods ie, it specialises as do US and Germany.

Perhaps a better example would be to compare Germany and France - who is more open? who is more competitive? France has a natural tendency towards protectionism. Has that worked?

Look back at the "I'm backing Britain campaign" of 1968- to see where these ideas lead. Wiki gives an interesting final concluding paragraph.

geetee1972 - Member
The Competitive Advantage of Nations by Michael Porter

Well worth a read. Ultimately though it's your money and its up to you how you spend it.

Noooooo... don't give that man any more exposure than he's already got. His ideas have been widely discredited as overly simplistic. Despite that, he's sucked millions of dollars out of governments (national, regional and local) for his consultancy - including the UK government in the 1990s and early 2000s.

Teamhurtmore, I got the bit that the example was simplified 🙁

But anyway, of course! the real situation is a lot more complex, and i guess that a study of it would need to take into account an almost endless chain of events and effects. I guess in the end, its a system and all systems try and reach some kind of equilibrium in the end. We will all end up poor 😯

Why do we all end up poor?

In the end, I am merely reacting to the question posed in the OP. Is it logical to ensure that you spend as much of your money as locally as possible? And the answer is no, not always. A brief look at any of our lives explains why.

@roverpig

So, which is the right path to follow?

1 what you individually do doesn't matter, it makes no difference at all
2 there isn't a right or wrong anyway

so do what you want ... as you do

aside: I read in a book yesterday about the Japanese word "mu". It means "neither yes nor no", or better "a yes/no response is not appropriate to this question".

I think that's your answer (or lack of!) here.

My opinion on the issue: buy the product that best suits your needs. If being of British origin partly defines that for you then that's what you should do.

Teamhurtmore, I wasn't having a pop.

I was merely stating that the the whole thing can be looked at as a system and systems eventually reach some kind of equilibrium. Right now we are discussing about economics, we talked about manufacture in china and manufacturing in the UK. These situations are not stable, and there are always shifts. Years ago we manufactured in the UK, bla bla and then china was popular, standard of living increased there and so have manufacturing costs and for some clothing manufacturers,for example, this has meant a move to another lower cost economy. So the system is constantly changing. Eventually this will reach an equilibrium, not for a long long time, but eventually. This system is linked to physical resources, fuels metals, water etc. Once these have been depleted, we start again. Probably living in caves. That's what i meant by poor.

This question is interesting tho.

"Is it logical to ensure that you spend as much of your money as locally as possible? And the answer is no, not always"

Well of course it will depend. I think for some people, depending on their life style, interests and so on, it can be done. Whether or not it is logical is a different question and it will depend on whats right for the person asking the question.

Cheers Chief! I agree with your comments. China of course is a fascinating case as it is in the process of changing from an investment-led development model to a consumption one and this transition is proving very difficult as reflected by the poor performance of well-known investors who bought into the idea of China changing and are being very disappointed by the reality and inertia in its investment-driven model. 😉

You often learn stuff form these debates - found some fascinating interviews this afternoon on the demise of Raleigh. I grew up with my french teacher translating TdF commentary from the radio for Raleigh and owned two of their bikes. So interested in the real story of what went wrong!

@chief unfortunately (for us and our kids) I suspect the new equilibrium is going to be most of the wealth that's historically been in "the west" is going to end up in "the east". There was a time the west had technological, social and intellectual advantages. That time is gone. (long term we'll all be back in caves).

@thm what happened to Raleigh?

I hear the council of despair. I'm just one person; I can't make a difference.

I respectfully disagree. If everyone does one thing, that's a lot. Look at the rise organic food. For that reason I agree with the idea of buying what you believe in.

Matt, haven't finished listening yet!! But they were the dogs when I was little!!

I had a BSA, with crossed rifles headbadge. Anyway we digress.

There was a time the west had technological, social and intellectual advantages. That time is gone

I don't see this as a necessary conclusion.

Why can't we all have skills, and we excel in different areas?

I said this over in the Hope handlebar rant thread but it's all part of the same discussion:

I run a [url= http://barefacedbass.com/ ]tiny manufacturing company[/url] here in the UK and despite making some of the best products in the marketplace and selling them for fairly high prices it's still not easy to be all that profitable. However, I believe that it's the right thing to do in the long-term, as we'll be ahead of the game as overseas labour and shipping costs increase - and we'll get to employ a wide variety of people in jobs from all academic backgrounds, from PhD level R&D engineers/scientists to those leaving school with hardly any qualifications but a willingness to work (well that's the plan anyway!) So although it's an economic decision it's an ethical decision too.

The Mary Portas programmes were great and reminded me of my work experience days at my Dad's factory - yes, working in a factory is repetitive and often boring but there was that sense of belonging, that sense of value and of worth. That factory is long gone, gradually turned into a warehouse as production was moved overseas for the usual cost reasons.

I despair at the increasing academicisation of the education system - if you're not good at maths or english or computers and you're told that you've got to get good grades if you want to make it in the world, how will that make you feel? How much better would those kids feel if they knew that on leaving school there was a fair chance they'd get a job in a local factory, where their mates worked, where if you put the work in you'd get rewarded? Rose-tinted glasses yes but even the harsher reality is way better than the stupid situation we're now in, where it seems like everyone is expected to go and get a degree and then go to the job centre until a vacancy opens up in the nearest call centre...

Why can't we all have skills, and we excel in different areas?

That's not impossible, however I suspect a winner-takes-all model is more likely. And the talent pool, and hunger for improvement, in the east is truly enormous. I don't think the surface is scratched on that yet.

http://thebikeshow.net/

An interesting account by Hadland and Thurston which actually says a lot about UK manufacturing at the time and why trade can be good!!

1960s merger created a very powerful company that dominated the UK but failed to respond.

Experimented with lots of models - copied Schwinn (didn;t know that) with Chopper but launched too late into target market (US). But this was successful as "toy=bike" in the UK. Suffered with court cases from wheelie accidents etc

Mixed fortunes with spotting trends 1 - early into hybrids but late seeing BMX and MTB

Brand identity increasingly confused - top end racing team combined with choppers and even plastic toys. Very fuzzy, loss of brand identity (dare I say it not focusing on where they had competitive advantage!)

Company became too big, too may competiting parties and eventually part of TI that was too diversified. Very poor product differentiation, lost cycling values and then very poor quality and delivery times.

Mixed fortunes with spotting trends 2 - Japanese produced better quality kit and where more responsive. Critically, they (Shimano) came up with the 'group-set' concept. Attractive, graded, better value, better quality. So choice was buy one high quality set or buy in different bits from poor quality and unreliable Eu suppliers (not my words here, this is a precis!)

1980s lost money consistently but propped up by TI until 1987 when sold off to Derby &Co (?). Initial turnaround but management increasingly distant in both senses (transferred to US and not bike guys).

Mixed fortunes with spotting trends 3 - couldnt make aluminium bikes (apparently). Death knell came when it became cheaper to buy in complete bikes rather than buying the components themselves (pre-labour!). Clear then that business was unsustainable. End of manufacturing in N'ham which as stated above was a boody blow at the time. From them on everything outsourced.

Pretty sad story - almost a monopoly in 60s, then loss of brand, complacency, lack of focus, falling quality, poor responsiveness, mixed fortunes in responding to market demands, changes of ownership....not a unique story 🙁

[edit: all the above is a rushed attempt at precising others' comments. Not nec my views but precised through a biased set of personal lenses !!! 😉 ]

Thx for the summary. All the classic ingredients are there really.

Groupsets are interesting - 2 companies that basically started from nothing (Shimano, SRAM), pretty much own it. SRAM in particular won big even though they entered a market already saturated by Shimano. Raleigh could have done that.

@mattjg

"@chief unfortunately (for us and our kids) I suspect the new equilibrium is going to be most of the wealth that's historically been in "the west" is going to end up in "the east". There was a time the west had technological, social and intellectual advantages."

This will not be an equilibrium, but I agree that it is likely to happen, and coming closer by the day.