From the TUC

Time to bin this tired argument about ‘picking winners’ in industry

27 Feb 2012, by in Economics

As a panellist at this morning’s IPPR/NEF/Resolution Foundation conference, ‘Developing an industrial strategy for the UK’, I was a man on a mission. I drafted my contribution in a two hour window last week and I planned to talk about the TUC’s ‘German Lessons’ report, which I’ve blogged on before. I could only make three points in my five minute slot and I thought my most controversial one would be that Germany seeks excellence in its areas of strength, but it doesn’t seek to be strong everywhere. Instead, Germany seeks success in key industrial sectors and recognises that the choice of those sectors is partly a political choice.

Understanding the horror – that’s probably not too strong a word – that is generally felt at the idea of UK politicians making such choices, my typewritten remarks contained a fair degree of crossings out and scribbles in the margin, as I wrestled with how to say this delicately. In fact, Vince Cable, the Business Secretary and the keynote opening speaker, helped me out. Vince has been grappling with the issue of industrial strategy in recent months (and as Unite’s Tony Burke and I blogged last week, I think progress is being made). In his remarks, Vince said:

“Government’s have been scared off by fear of being accused of ‘picking winners’. That is a legitimate concern. But the Government also makes choices every single day that affect individual sectors. And there is a case for being more explicit about the choices we are making and linking them to a clearly articulated economic strategy.”

Emboldened by Vince’s candour, I said what I really felt: that arguments about “picking winners” are actually a fig leaf for the desire, in our neo-liberal culture, to dismiss any possibility of a realistic industrial policy. Politicians do, indeed, make decisions every day, economic, social and industrial decisions, and one of the reasons that we elect them is for them to make such decisions.

But with no disrespect to Vince, or to Labour’s industry spokesman Iain Wright, who also made an excellent speech today, the best contributor of the conference, for my money, was Ha-Joon Chang, from Cambridge University. Ha-Joon debunked the arguments against industrial strategy wonderfully. Speaking of his home country, Ha-Joon said that in the 1960s, the annual per-capita income of South Korea was less than half that of Ghana at the time. South Korea took political decisions about the direction of its industrial development and had it simply followed the argument of focusing on its areas of comparative advantage, it would still be selling fish and seaweed.

Ha-Joon reminded us that Nokia of Finland made a loss for 17 years before it became a successful brand, that’s the time needed to develop a company so successful in its area of technology, yet UK banks would never support a company to do that for so long. Finally, Ha-Joon said we shouldn’t be put off by the fear of failure. Everything we do fails sometimes, but if we simply let that fear stop us, then we would never take a risk and nothing would ever change.

As Vince Cable ponders the shape of a future industrial policy, and as he wrestles with the Treasury for the funds that he will inevitably need, I hope he deploys some of these arguments. I’m beginning to think that whatever the costs of an industrial strategy, the costs of not having one will be much, much higher. In the short term, at least let’s bin this silly argument about “picking winners”. We’ve got so many better things to talk about.