Growing up in the West of Scotland in a town which was hugely dependent on shipbuilding, I became interested in economics in high school when I saw the effects of Mrs Thatcher’s way of transforming the UK economy very close up.
The Goliath crane in the Glen Yard was almost like a gateway to where I lived. I passed it every day on my way to school. It’s no longer there - blown up after the shipyards closed.
Like many industrial towns, the scars of that time are still obvious in the built environment. But there are hidden scars too - ultimately, the lives which were cut short by loss of purpose and hope. Beyond that, there was the dispersal of skills, knowledge and capabilities.
This reminds me of Ben Bernanke’s argument that the collapse of the US banking industry in the Great Depression deepened and prolonged it. As banks failed, there were fewer bankers capable of managing the allocation of capital. So deposits sat uselessly on bank balance sheets, rather than financing investment. The problem was less a lack of demand for funding a more the loss of the ability to supply them.
Much of that capital doesn’t sit anywhere on a balance sheet. So it is very easy for us to overlook it.
And that brings me to what’s happening today in the United States. There is a risk of a sudden loss of public sector capacity built up over decades, much of it designed to improve the lives of those who are just about managing. Done not with reference to any coherent theory of the economy or government but with a simple belief that everything in the public sector is inefficient.
These decisions are not being made hopefully but with arrogant presumption. It may take years to unwind their effects.