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Yuckonomics

What does "yuck" have to do with economics? A lot, according to Jeremy Hazlehurst.

On the face of it, Aston Martin cars and Pot Noodle don’t have a lot in common. The motor driven by James Bond in his suaver moments can rarely have been mentioned in the same sentence as the famously nasty noodle snack slurped by students and builders.

What links them is that both have recently been “re-shored” by their owners. Pot Noodle, which have, amazingly, been made in China in recent years, will come back to Leeds in the UK. When Aston brought production of one of its models home, British business secretary Vince Cable said that having them built outside the UK was “like having a Swiss watch built in Swaziland”.
Onshoring is quite the buzzword at the moment.

According to EEF, a British manufacturers body, 40% of British manufacturers have re-shored some activities. In the US, General Electric is bringing back the manufacturing of household appliances from China to Kentucky. Google is making a new product in San Jose. (Although those firms are leaving some manufacturing in China.)

Of course, some of the through-the-looking-glass nature of globalisation continues. HP Sauce, whose name stands for Houses of Parliament and has a picture of Big Ben on the label, is now made in the Netherlands. Another British staple, Branston Pickle is made in Bury-St-Edmunds, but owned by a Japanese vinegar-maker. Then there’s the news that the Qataris are looking at buying a big chunk of M&S, an iconic British brand. It all feels like part of a joke – when is a British firm not a British firm?

It all makes many people uneasy. But should it? Philosophers talk about the “yuck” reaction we have to things we find instinctively repellent. This is often seen as a “pre-rational” or naive response. But often the gut reaction is a proxy for a rational one. Offshoring might not prompt a yuck, but we often have a very definite “hmm”, accompanied by a premonition of things ending in tears.

When you hear the meat in supermarket meals came from Romania, via France, the Netherlands and Ireland, a hmm is most people’s reaction. Nobody was all that surprised when such meat turned out to be from horses. Hmm also often accompanies the outsourcing of manufacturing to China. Lo and behold, it turns out that often when you offshore, quality control is a problem, shipping ends up costing more than you thought and labour costs tend to spiral. It’s a gamble because you lose some control. Could your business survive a Foxconn?

In the years before 2008 it sometimes felt the British economy was turning into one giant structured investment vehicle. Now the government is keen to encourage manufacturers here. Many people instinctively feel that’s a good thing. And it’s working. Embedded carmaking expertise in the old industrial regions have tempted Honda, Jaguar Land Rover and Nissan to bring so much production here that UK carmaking will double between 2011 and 2015. Some researchers say that every manufacturing job creates eight more.

The idea of keeping production local, or sticking to the old ways, might give you a fuzzy romantic glow that you’ve been taught to mistrust. But sometimes it’s right to heed the yucks, hmms and glows.

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