Four shades of grey

In: Uncategorized

15 Jan 2013

Only a few years ago industrial policy seemed as out-dated as black and white televisions. Yet it appears to be making a comeback across the political spectrum.

Until the 1970s both of Britain’s main political parties accepted what was sometimes called “indicative planning”. The state was expected an active role in guiding the economy using measures such as subsidies, grants and tax policy.

Sometimes governments even engaged in what was later derided as “picking winners”. They would focus their efforts on companies that they assumed could or should do well. Often the results were disappointing.

This approach went out of fashion with the governments of Margaret Thatcher from 1979-1990. There was a switch to free market rhetoric about the state stepping back to free the entrepreneurial spirit of corporations.

It was symbolic then that Michael Heseltine, a former Thatcher minister, should speak at a seminar at the Trade Union Congress on industrial policy last week. Admittedly Heseltine fell out with Thatcher and the TUC is far from the force it once was. Nevertheless the event indicated a strong desire for consensus.

Heseltine was invited because he recently produced a report at the behest of the prime minister called No Stone Unturned. Although it talked more broadly about growth in general, rather than industry specifically, it covered similar ground to the other speakers.

The other panelists were Lord Adonis (an adviser to the Labour Party’s policy review on industrial strategy), Frances O’Grady (the general secretary of the TUC) and Andrew Churchill (the managing director of JJ Churchill ).

Adonis, a cabinet minister in the last government, is in charge of the Labour party’s current review of industrial policy. He covered many points including the need for elected mayors and more emphasis on skills. The Labour peer also emphasised the need for government to use its procurement power to bolster the British economy.

For instance, Adonis pointed out that although the last Labour government awarded a train contract to Bombardier, a Canadian-owned company, it insisted the work was done here. He played down the potential for such measures to contradict with the European Union’s competition law.

The TUC’s O’Grady focused on a familiar theme: the need to learn from the best of the German model including the cooperation of unions with firms. This is a theme I have covered before on Fundweb including here and here.

Finally, Andrew Churchill presented the question from the perspective of someone who runs a manufacturing firm. He emphasised the need for the government to have a clear long-term view of what a balanced economy should look like. Churchill favoured a set of key performance indicators that the government should meet.

The problem with all this was the cozy consensus. All sides favoured a more highly skilled work force, more state backing for British firms and the need to work within the European Union. But all that is essentially a twenty first century version of being for sin and against evil.

There was no conception of thrashing out difficult questions such as: How can risk aversion be tackled? How can true innovation be promoted? Are not green thinking and economic dynamism contradictory? Are there not inherent problems with the EU?

Instead of colour the current debate seems to be stuck in a few shades of grey.

This blog post first appeared yesterday on Fundweb.