Why the fuss about the manufacturing industry?

Variations on this idea (a "Tobin tax") include higher rates, which would be rebated for genuine trades. Those who operate in the financial markets may not like such regulation, but we need to remember that the purpose of the finance sector is to serve the real economy. The events of the last two years should be enough to remind us of the consequences when the finance sector develops a life of its own, displacing its role as a service to the real economy.

Similarly, we need to think through our tax systems, to consider whether they adequately support long-term investment of the sort that is required in manufacturing. Do our depreciation rates adequately reflect the rapid changes in industry technologies, for example? The 1999 changes in capital gains tax, which abolished indexation but halved the rate, were highly favourable to short-term speculators, but because they tax nominal rather than real capital gains, they are relatively discouraging of long-term investment.

Such measures, if implemented, will not halt industry change. Structural change is a feature of a dynamic economy, and there is every indication that the pressures for structural change will persist.

What we now know as "developing countries" will become sources of increasingly sophisticated products, exploiting scale economies for huge domestic markets. Depletion of certain fossil fuels and over-exploitation of water resources will change factor input prices, and however the world eventually adjusts to carbon-induced climate change – taxes, tradeable permits or regulation – there will be challenges and opportunities for manufacturing industries. There will always be rich pickings for firms that can anticipate these challenges and develop new products and processes, where we can compete on the basis of responsiveness and innovation.