As an example let’s examine some figures from 2010. In that year, UK furniture manufacturers saw profits of $28.4bn (excluding the sale of cars, which account for some $6bn). That accounts for 7% of the UK’s entire GDP and 1.3% of that of a single continent; it’s also 2.8% of the entire UK’s total exports.
It’s no surprise that it’s the world leading maker of furniture – it has over 7,000 employees, more than 500 of whom work in England. But the profits are actually only one type. For all the billions of pounds each year that we spend on furniture and the fact it is a billion-strong industry, we’re only able to buy about a fifth of the furniture in the world. This is partly because many countries don’t want their exports to be imported – and partly because some countries simply don’t produce enough of the things in their own countries!
The other types of furniture, from carpets, cushions, beds and so on to sofas and sofas’ legs or chests, are manufactured in much greater numbers. But even the highest paid workers are usually paid only about 40% of the prices for these other types of furniture. Even worse, as well as earning a minimum wage, we’re also likely to find that many of our manufacturers get subsidies from the government to enable them to grow – often in return for building factories in these countries.
What happens if we let this industry go?
In this environment it is likely that many countries will stop or reduce their subsidies for this sector, and others may impose import taxes on the high-quality goods that they produce. The result is likely to be a slowdown in that industry, and the consequent loss of lots and lots of high-value exports. It’s not so different to what happened in the UK, and probably would have happened anyway; as well as the big tax increases we’d already seen, there could also be higher costs in transport, energy, and so on. It probably sounds like a lot of pain if these sectors start to shrink; but they will. The consequences to the economy – more jobs, less income, lower purchasing power, higher unemployment, etc… are all real (and even more so if any of those effects are also seen in a country where consumers decide that they’ll keep spending rather than using all their money on other things).
How do we fix the problem?
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