Rebooting Britain: industrial strategy for the 21st century

Saturday 28 October, 10:0011:30, Frobisher 1-3Battle for the Economy

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In January 2017, the Conservative government launched its ‘modern’ industrial strategy to make Britain fit for the twenty-first century. It pledged the government would be ‘stepping up to a new, active role’ to raise productivity across every sector and in every part of the country. This particular focus is well justified and long overdue since Britain’s productivity remains at pretty much the same level it had reached a decade ago. There is much to be done.

But many are still to be convinced that the government can and will deliver actions commensurate with the stated objectives. During the previous coalition government, the former chancellor, George Osborne, had made similar promising noises about rebalancing the economy and a ‘march of the makers’, but little changed in practice. Can we expect better from Theresa May’s government? Much of what has been suggested so far is not new, mostly repeating the familiar cocktail of a bit more research and development, skills training and infrastructure building.

Maybe this more explicit revival of industrial strategy can offer a more effective escape from low growth. Thirty years ago, industrial policy was universally rejected as the hubris of governments thinking they could plan for a better economy. The failure then of ‘picking winners’ is a lesson everyone says they have learnt from. Can the outcome be different this time? Is there an appropriate mix between state and market for reviving the economy? The objective, most supporters say, is no longer to identify ‘national champions’ but to create better conditions for business. What constitutes these ‘better conditions’? Would a period of creative destruction help, replacing zombie businesses with more productive ones and opening up some dynamic new sectors? 

Or is the rehabilitation of industrial policy simply making a virtue out of existing state support for the economy? All major industries are now deeply involved with and dependent on government activities. Does the new enthusiasm for industrial policy risk propping up of weak existing businesses? Is it possible to distinguish between government economic intervention saving old industries and firms and that encouraging innovative investment in new or expanding ones?