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As the term revolution implies, this massive industrial growth was not sustained and this led to massive economic and political upheaval in Wales. Despite industrialisation around the world, various factors combined to reduce the scale of the Welsh coal industry long before its eventual collapse in the 1980s. This came about due to a variety of factors including modernisation of industries in competing nations such as Poland, service of overseas markets by closer competitors (such as Canada importing coal from the United States), and even the war reparations enforced on Germany, which lacking cash were settled in coal (Morgan 1981).

Industrial decline and the ‘fdi’ era

The massive contraction of the steel industry and the almost complete disappearance of the coal industry during the 1970s and 1980s punctuated a trend of economic decline that had set in during the post-war period (Morgan 2001). To stem this decline, major efforts were made to develop other sectors, including attracting Foreign Direct Investment (FDI). Since the 1970s this restructuring has absorbed 200,000 jobs from these declining industries into a more modern base of services and manufacturing (WAG 2001). This was also accompanied by a gender restructuring of the workforce that included the proportion of women rising from 38% in 1975 to 50% in 1994 (Cameron et al. 2002).

The GDP of Wales has broadly tracked that of the UK as a whole, though trailing somewhat behind, since records began at the beginning of 1970. This lagging performance, is an effect of the structure of the Welsh economy relying heavily on low value-add employment, compounded by higher rates of economic inactivity in Wales (and particularly the West Wales and Valleys region), along with lower productivity per employee as shown in [link] (WEFO 2004).

GDP per employee (‘000s) by sector, Wales and UK, 1996 (WEFO 2004)
Industrial Sector Wales UK
Agriculture, hunting, forestry and fishing 12.8 22.6
Mining, quarrying, including oil and gas Extraction 55.1 60.0
Manufacturing 33.9 32.8
Electricity, gas and water supply 98.2 105.7
Construction 18.9 20.9
Wholesale and Retail Trade 22.4 25.0
Transport and communication 30.6 35.1
Public administration and defence 20.4 26.1
Education, health and social work 17.6 18.2
Other services 5.3 4.7
Total 22.8 25.1

The regional development agency approach

This massive economic pressure and the rise of nationalism led to the UK government establishing development agencies in Wales and Scotland in 1976 (Cooke and Clifton 2005). In Wales this took the form of the Welsh Development Agency (WDA). Its core strategy to provide job creation was to pursue Foreign Direct Investment (FDI) from around the globe. Though much of the literature mentioned in the following section focuses upon FDI in the UK and Wales, it should be noted that this phenomenon of economic development through FDI occurred throughout the European Union (EU) and Organisation for Economic Cooperation and Development (OECD) (Barrell and Pain 1997), including the United States (Friedman et al. 1992). However, FDI interventions occurred at (proportionally) higher rates in the EU than the OECD, which were higher in the UK than the EU, and higher in Wales than the UK as a whole.

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Source:  OpenStax, A study of how a region can lever participation in a global network to accelerate the development of a sustainable technology cluster. OpenStax CNX. Apr 19, 2012 Download for free at http://cnx.org/content/col11417/1.2
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