Industrial Policy: So where are we?
I enjoyed Duncan’s blog on economic fatalism last week. Interestingly, this came up again, twice, this morning at the Resolution Foundation’s event on ‘2015 – The Living Standards Election’.
First, Stewart Wood of Ed Miliband’s office made similar points to those made by Duncan. Stewart argued that realism is good, but when it drifts into pessimism, it becomes more difficult. If it drifts further, into fatalism, it challenges the notion that politics can make any difference to people’s lives. Challenging fatalism will be a key election issue in 2015, he said.
Later in the morning, Danny Finkelstein (who was excellent, by the way) didn’t quite go into fatalism, but he came close when talking about industrial policy.
Successive British Governments, for 100 years, have been trying to tackle the decline of manufacturing, Danny said. The Conservatives’ industrial policy after 1979 had focused on the City of London, which has now been exposed as having not been enough. In response, everybody is, once again, talking about industrial policy. Danny hoped we’d make a better job of it this time that we did before, but he accepted that industrial policy is “obviously the right thing to be focusing on”.
I disagree a bit with Danny’s timescale. In the 1960s and 1970s manufacturing was very strong in the UK. We were the cradle of the industrial revolution, so that’s hardly surprising, and whilst Danny is correct to say that, historically, the writing was on the wall for manufacturing even in the 1960s, there was no reason for it to fall off a cliff in quite the dramatic fashion that it did after 1979.
Anyway, that’s ancient history. Danny’s fundamental point, that we did industrial policy badly before, and we need to do it better now, is probably true. So how do we get it right this time?
Trying to achieve a political consensus for industrial policy would be a start. In Germany, politicians from across the spectrum, as well as employers and unions, agree on the fundamental principles of industrial policy. Sure, there’s a tweak here and another tweak there, but as the TUC reported in ‘German Lessons’, there’s a common ground that everyone signs up to. Moreover, Michael Heseltine tried to do that in the UK. As he was preparing his report, ‘No Stone Unturned’, he was careful to consult with Labour to see if some principles could be ironed out across the political divide. Officially, the Coalition Government accepted most of his recommendations. I’m holding my fire on whether or not that is true. Heseltine is such an interventionist, and many Tories are such neo-liberals, that I find it hard to believe that that’s the way things will turn out.
I’m more hopeful for Vince Cable, the Business Secretary. Indeed, the TUC will be testing how much consensus we have in the UK, and how much further we still have to go, at our After Austerity Seminar, ‘Industrial Strength Britain’, on 21st June. Alongside Vince, our speakers will be his Labour Shadow, Chuka Umunna, a senior industrialist from Siemens, Juergen Maier, and the TUC’s Frances O’Grady. They will be debating the common ground, and the differences between politicians and both sides of industry, when it comes to industrial policy.
We will also hear from the successes of other countries. The Emilia Romagna region of Italy, which enjoys a higher income that most other parts of the country, has long had a specific tradition of industrial policy. Patrizio Bianchi, Professor of Economics at the University of Ferrara, will present his work looking at the value of industrial policy and lessons that can be learned after the crisis. I’ve heard him speak before and I know he is excellent, so I’m looking forward to his presentation. We will be naming other speakers for the seminar in due course.
I hope to see you on the day. Attendance is free and registration can be accessed here: http://www.afterausterity.org.uk/