Threat of Car Plant Closures in Oxford 2009

There is an oft repeated quote:

“A recession is when you’re neighbour loses his job. A depression is when you lose your job. “

It is one thing to write about recessions, but, when you see job lay offs near where you live and when you hear about friends who are without work, it makes the recession a living, rather than abstract, reality.

Near where I live, the Oxford Mini factory has developed a good reputation for efficiency. It has benefitted from the popularity of the new Mini Cooper, which has been a hit in the UK and around the world.

Not so long ago, the Oxford Bus companies were complaining that BMW were employing so many workers they were having to put up wages of bus drivers to retain enough drivers. (An interesting example of wage inflation as the economy nears full employment)

However since that time, the economy and, the car industry in particular, has suffered significantly. Demand has dried up and BMW laid off agency workers, without any notice. It was an example of flexible labour markets in action and raises issues of how it is easy for firms to lay off temporary workers with only a days notice and no redundancy pay.

Despite, the concern over unemployment, it is hard to justify significant government ‘subsidy’ to protect the car industry. It is a very expensive way of ‘saving’ jobs. There are better uses of the very limited government funds available for tackling unemployment.  If the problem was lack of finance, there may be a case for government providing market competitive loans. But, with a collapse in demand and oversupply in the car market it is hard to justify subsidies to the car industry in general. (Should we subsidise car industry?)

I would say Car workers are far more ‘deserving’ than bankers. But, the bailout of the banks was never done because they deserved a bailout but because the cost of not doing it would have been too high.

2 thoughts on “Threat of Car Plant Closures in Oxford 2009”

  1. There is one sentence above I don’t agree with, or at least which rings alarm bells in my brain: “ There are better uses of the very limited government funds available for tackling unemployment.” I suggest that given excess unemployment there are no limits to what government can spend to solve the problem: government can simply print money to solve the problem if it wants. This will not result in inflation unless too much money printed and demand becomes excessive, but by that time the unemployment problem is solved.

    At least the above obtains in a closed economy, or for the world economy as a whole (we don’t trade with Mars or Venus). An open economy, in contrast, has the problem that it cannot boost itself significantly more than other countries, otherwise its currency might collapse.

    There are numerous seasoned economists who have made a similar point. E.g. see Samuel Brittan’s article in the Financial Times at : . Or Tim Congdon’s suggestion that we print money, also in the F.T.:

    And for someone who approaches the problem from a very different perspective ( a “Chartist” perspective) see Warren Mosler’s views at See especially “Mosler’s Law” set out in yellow at the top of the page.

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