As the FT reported last night:
Lotus has reversed its plans to end car production in the UK after the government signalled it was willing to offer support to the struggling British sports car brand.
In a statement on Saturday, Lotus, which is controlled by Chinese carmaker Geely, said it was “actively exploring strategic options” to improve the efficiency of its operations and global competitiveness.
The concept of 'free market' economics is based on the idea that, firstly, government should not intervene in markets, secondly, that failing companies should not be bailed out, and thirdly, that suboptimal allocations of resources will follow if these conditions are not met.
I am not saying I accept the conditions; the assumptions of both neoclassical and neoliberal economics make no sense at all. But you can't say that markets must decide and run the government as if it exists solely to serve free markets and then not respect the rule of free markets. Doing so just shows you are hypocrites dedicated to enhancing the interests of those who control capital, come what may, and without any theoretical justification for doing so. That is precisely what our government is doing. A little honesty on their part would help a lot.
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Perhaps expected. Not least due to very expensive energy.
The Lotus example illutsatrates rather well one of the very best articles that I have read in Politico. June 12 issue page 15: Britain at a Crossroads: Finance, Industry and The Global Adjustment by a guy called Micheal pettis (ex-investment banker).
https://www.politico.eu/article/britain-crossroads-finance-industry-global-adjustment-trade-deficit-capital/
I strongly recommend a read.
Hypothesis: UK decided to be a clearing house for capital it then defines an industrial policy which means a shrinking industrial base. Capital inflows do not lead to investment of the sort that employs people. Conclusion: UK if it sticks on the current course becomes ever more reliant on speculative capital. LINO is functionally incapable of understanding this, both Starmer and Reeves are too thick and too wedded to the status quo.
Sounds right
Excellent and concise article that you referenced Mike (Parr).
Certainly the evidence that is portrayed via the new Industrial Strategy, seems deliberately or inadvertently to miss the point that John Maynard Keynes made…and has been proven to be prophetic.
The evidence I see is an increasing number of US Private Equity entities looking to invest in the UK…as we remain (wrongly) committed to to financial engineering and capital inflows (and jobs outflows).
Thank you and well said, Mike.
Even the City at large is not benefitting.
Redundancies at big firms are not being reported. Smaller firms are wondering if it’s worth continuing in London.
From week to week, firms and clients are changing plans.
The winners are largely US vultures.
Pettis doesn’t push his arguments to a logical conclusion. A lot of the foreign money pushing up the value of the pound will be going into UK treasury bonds because we are perceived as a stable democracy. Given base rate was pushed down and fiscal policy used more to deal with inflation it becomes possible to use the UK bond receipts to revive British industry through taxation reduction grant subsidy. Indeed Richard’s Green Investment Bonds a joint private/investment initiative could use this strategy to expand the UK’s potential to become a big sustainable low cost energy zone for manufuring.
Thanks
And of course this is where MMT breaks down: Bill Mitchell will insist that moving Lotus to the US would give us an advantage because we could then trade “worthless” cash for nice cars…
Bill Mitchell gets most things wrong, and that has nothing to do with MMT, and all to do with his lack of political sense.
Socialism for car manufacturers.
Capitalism for the masses.
To echo Mike, ‘investment’ in this country has always been a nothing more than down payment in order to profit by extracting other people’s wealth. This is why we need real long term investment and a long term investor.
This goes right over the heads of people like Stymied and the Reevescividist.
All I see markets as, is mechanisms of daylight robbery.
I’ve cancelled my order for a Lotus. I’ll have to get a Porsche now.
If you want a high quality American made car, buy a Toyota! LOL! LOL!
🙂
I wonder if you have a lodge/caravan on the same site as us in Bwlchtocyn? I spotted 2 Porches there last year… No Lotuses though.
🙂
And yesterday I saw a brand new Porsche being loaded onto a breakdown truck
I should not share your amusement.
But I do.
BBC happy to go along with ‘our’ car industry, steel industry etc etc when its all Chinese or Indian – owned etc
While the rescue may preserve a few hundred skilled jobs and prevent the loss of some recent UK investment, it’s hard to argue that this is the most productive use of public money that the Government claims is so limited.
There are many other opportunities – better aligned with the UK’s long-term economic and environmental needs – that would offer broader benefits:
Green retrofit SMEs could create thousands of local jobs while slashing energy bills and emissions across the country. Yet they remain undercapitalised and politically neglected.
University spinouts in deep tech (like green materials, semiconductors, or biotech) struggle for scale-up funding. Public investment here could anchor IP, R&D, and skilled jobs in the UK.
Support for health and care tech innovators would not only stimulate employment but ease pressure on an overstretched NHS.
Decarbonising core industries like steel and cement – critical for both jobs and net-zero goals – is far more urgent than propping up a premium EV maker owned by a Chinese conglomerate.
Even within the automotive space, investment in EV charging, battery recycling or lightweight components would generate wider industrial spillovers than a niche luxury marque like Lotus.
While Lotus may have heritage value and symbolic appeal, the environmental gains are modest (most of its EVs are made in China using coal-heavy electricity, with very large batteries), and the macroeconomic impact is minimal. This seems more like a political trophy than a coherent industrial strategy.
Wouldn’t a serious government focus its investment on sectors that deliver higher returns in terms of jobs, carbon reduction, and UK resilience?
Much to agree with
Lotus has for many years been more about design and consultancy than their actual own-brand cars. (Maybe 80:20?)
That’s what Geely wanted (and got).
But they need at least prototype manufacturing and testing in Norfolk.
All economists know the free market exists only in textbooks at school/college/uni.
Tariffs, import duties, right down to the level of governments building new roads to service new industrial estates – all examples of intervention in the market!
Free my **** !