Nothing could stem the tide of changes in technology and in tastes for new lighter - foreign beers, and attempts by government through higher excise duties to reduce the consumption of beer. A willingness to adapt and embrace, rather than resist, change is the key to greater prosperity. That road may at times be hard going - as I know many of you will have experienced in your own businesses but it leads ultimately to a more prosperous destination. To follow the right road we need signposts. In a market economy those signposts are movements in prices. If a particular product becomes more abundant or less in demand, its price will fall relative to the prices of other products. That relative price change is the signal which encourages consumers to buy more or producers to supply less. Over recent years, three new signposts have appeared. They mark a process that has transformed demand and supply conditions across the globe: the integration of China, India and other emerging market economies into the world trading system. The first signpost shows that prices of labour-intensive manufactured goods have fallen. China, India and the former Soviet Union between them have massively increased the supply of labour available to industry around the world. As labour-intensive goods have become more abundant, they have also become cheaper. The signpost points us in a familiar direction: the need to change what we produce.
Were we still producing the same labour-intensive goods as before, with output concentrated in industries like agriculture (including hops), textiles, coal-mining and ship-building, we too would have seen the price of our own output fall, just as it did for hop growers a century ago. Instead we allowed output and employment to expand in those industries where we could exploit a comparative advantage. In Kent, the expanding sectors include financial services, transport (with 18 million tons of freight passing through the Channel Tunnel each year) the exploitation of life sciences, and higher education (with five universities in the county). As consumers, we have benefited from falling prices of goods made in China and elsewhere in Asia. Between 1995 and 2005, the prices of imported manufactured goods fell by a sixth and, relative to the price of domestically produced output, by no less than a third. So over the past decade we have been able to increase consumption by more than the increase in production. Openness to the world economy has resulted in a higher standard of living. The second signpost marks the rise in oil and other commodity prices. Rapid growth of production in China, India and other newly integrated economies has led to a substantial rise in the demand for oil and other raw materials. Between 1995 and 2004, net imports of oil to China rose by a factor of seven.