The Political Economy of Competitiveness: Corporate Performance and Public Policy (Contemporary Political Economy Series) - Softcover

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Kitson, Michael; Michie, Jonathan

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From the Foreword by Ajit Singh, Queens' College, Cambridge Once a 'workshop of the world' the UK economy today hardly accounts for 5 per cent of the OECD's manufacturing production. It has suffered massive deindustrialisation in the last two decades in the sense that the number of people working in industry has literally been halved. Between 1970 and 1993, the UK's manufacturing labour force fell from 7.5 million workers to 4.3 million, a drop of 45 per cent. Other industrial countries also suffered declines in their manufacturing labour force during this period but none of anything like the same magnitude. The average loss of manufacturing employment for the G7 countries in the period was 15 per cent. There is however an apparent bright side to this story which cannot be ignored. Notwithstanding this poor comparative record of UK manufacturing in terms of production and employment during the last quarter century, its productivity growth relative to other European countries has greatly improved.

Kitson and Michie provide a stimulating and incisive analysis of these paradoxes of the UK economy. They adopt a political economy perspective which takes full account of the historical and institutional specificities of the UK situation. Combining economic analysis with this historical and institutional approach, this book examines important developments in a clear and realistic fashion. The authors' analysis of the performance of and prospects for the UK economy confirms the key role played in industrialised economies by the manufacturing sector, however much the differential productivity growth between the manufacturing and service sectors may lead to a declining share for industrial employment. The phenomenon of deindustrialisation is a complex one, which I raised myself back in the 1970s, with many of the issues having already been realised by Lord Kaldor in the 1960s. Kitson and Michie's discussion of globalisation is also significant, demonstrating as it does the importance of creating new institutional arrangements at the global as well as regional and national levels, if we are to introduce a degree of stability and equity into international financial and economic relations.

Routledge are to be congratulated on launching this contemporary political economy series analysing the key issues in the modern world economy. Kitson and Michie's book is in the best traditions of political economy and will be an important contribution to the series. However the authors' work is distinguished not only by its political economy perspective but also by the fact that its conceptual framework is rooted in the work of Cambridge economists - John Maynard Keynes, Pierro Sraffa, Joan Robinson, Richard Kahn and above all Lord Kaldor. It also draws on the work of more mainstream Cambridge economists such as Alfred Marshall and Austin Robinson. The difference between the Cambridge and the mainstream approaches is epitomised in Joan Robinson's assessment of Alfred Marshall as the greatest of all neo-classical economists and that of Paul Samuelson who regarded Marshall as the worst of all neo-classical greats. Based on an impressive understanding of the actual workings of firms and industries, Marshall's writings on industrial districts continues to inform applied economic research into such clustering effects - an issue Kitson and Michie discuss in their analysis of the complex interaction of competition and cooperation between firms.

This collection will be of interest to anyone wanting to understand current economic issues. Real world economies are extremely complex and continually changing. To understand such developments requires a proper appreciation of the role of history and of institutions. Abstract models, general equilibrium analysis, and equilibrium economics provide only limited insights into these issues. Less formal analysis, when it is skillfully integrated with historical and institutional approaches, as in this book, is often a great deal more illuminating.