With the continuing decline in manufacturing, Roger Eglin considers the effect of the Thatcherite "revolution" on British industry.
"A brief period of golden years rather than a new era" is the verdict of Steven Bell, a senior economist with Morgan Grenfell, summing up the outcome of the Thatcherite revolution on British industry. With the familiar ills of rising unemployment, declining output and poor investment forecasts making the headlines once more, it is easy to see why Bell is less than convinced about the transformation supposedly wrought on Britain's industrial performance.
Many doubt that there was ever "a Thatcher effect" other than in the imagination of a small group of supporters. Their conviction that the industrial base of the economy suffered irreparable damage during her 11 to 12 years as Prime Minister cannot be lightly brushed aside. With the exception of chemicals, which managed to remain in surplus, every major industry sector experienced a worsening trade deficit during the 1980s. Can it be right to talk about a revolution when by the late 1980s manufacturing, far from moving into a new decade of expansion, had continued its decline to the point where Britain's imports of manufactures exceeded manufactured exports?
Not surprisingly, an increasing number of voices are springing forward with their assessment of the Thatcher legacy. In a recent study Peter Spencer and Helen Dunn, economists with Shearson Lehman, stress the need to distinguish the typical end-cycle effects such as inflation and poor trade figures from the long-run trends in the economy. They claim: "Before she became Prime Minister, each successive economic cycle saw a higher rate of inflation and a more anaemic growth rate. But the latest cycle, measured from 1979 to the 1988 peak, shows these trends reversing."
Between 1973 and 1979 Britain had the worst growth rate in the Group of Seven industrialised nations, but in the subsequent decade Britain had climbed to fourth place - ahead of Germany and France. There was some improvement in our inflation record but still nothing to get excited about.
There is some room for hope on the trade front. After Britain's share of world trade manufactures dipped below 8% for the first time in 1983, the latest figures suggest that it climbed back above 8% in 1987 and 1988. A study from the French bank Banque Nationale de Paris (BNP) provides a little more encouragement: the historical dependence on exporting to the markets of the old colonial empire is being replaced by a better performance in the markets of the European Community and North America.
This trade shift to markets where design and quality are probably more competitive than price suggests that our exports are achieving that extra degree of added value which has so often been lacking. The Land Rover, for example, has long been an export staple to Third World countries. The latest derivative, the Discovery, shows every sign of becoming a top export seller, underlining the importance of investment in product innovation and design.
To the better dispatches coming from the trade front can be added the undisputed and remarkable turnaround in British productivity. With the onset of recession, productivity gains are slowing, but the achievements are still heartening. From being bottom of the industrial productivity growth league through the 1960s and 1970s, Britain is now at the top. The Shearson study quotes one telling fact: in the UK now, two people produce what it took three people to produce in 1979. In another study, published in 3i's Quarterly Enterprise Digest, Graham Bannock agrees that the productivity gains have been remarkable. But he cautions that there is room for complacency: the United States, for example, is still about 48% more productive per worker.
How do we build on this? Here are some suggestions for John Major.
First, create a more caring society, but avoid any retreat into corporatism. It was the switch away from corporatism and trade union domination which did so much to improve the industrial climate of the 1980s.
Second, the Shearson economists noted that the productivity gains had come from managing people more effectively rather than any great increase in the use of investment capital. But the latter certainly needs to be encouraged.
Third, bring interest rates down, as these are crippling industry.
And finally, encourage innovation by ensuring that jobs as manufacturers, engineers and industrial leaders are as highly regarded here as they are in Germany, the US and Japan.
Mrs Thatcher's mistake was to inflict too much damage on manufacturing with an over-harsh recession at the start of the decade. Though not in themselves a new era, the 1980s offered the promise of one. It would be tragic to see it thrown away.
(Roger Eglin is managing editor of the business section of The Sunday Times.)