Industrial strategy - the wider view

This is the second post in a series I am planning to write about my role as a member of the Government’s Industrial Strategy Council. I won’t be revealing the conversations we are having in the Council, nor am I seeking to force my views on other Council members. But as I learn and think more about industrial strategy it is helpful to bounce my ideas off other people. 

It was instructive on Monday to attend an event, hosted by the Institute for Policy Research at Bath University and Future Economies at Manchester Metropolitan University, entitled ‘An industrial strategy for the UK: What now?’. There were thought-provoking presentations from Michael Jacobs, formerly Downing Street and IPPR, now University of Sheffield, Andy Pike from CURDS at Newcastle, Rachel Laurence from NEF and Ozlem Onaran from the Political Economy Research centre at Greenwich. Unsurprisingly recurrent themes emerged:

• There is now a broad consensus behind the need for a UK industrial strategy. The days when economic activism by the state was deprecated by New Labour and scorned by Conservatives and business organisations are long gone.
• Industrial strategy ranges from subsiding selected high tech, export-oriented manufacturing sectors (which make up a small part of the economy and an even smaller part of the workforce) to full scale planning with the goal of restructuring the whole economy (and the power relations and values underpinning it). The current UK Industrial Strategy is very much at the former end of the spectrum.
• Whilst it is important to grow high tech industries, partly because of their spill-over effects, it is unlikely that a strategy focussed on these sectors will do a great deal to address our deeper economic weaknesses; namely, underinvestment (public and private), poor productivity, stagnant living standards, too much low-quality work, deep social and geographical inequalities and over-reliance of the financial sector. Although we have some strengths too including our language, our best universities and our pretty good employment rate.
• An effective industrial strategy almost certainly requires a stronger regional and sub-regional element but, despite some progress, we are nowhere near having the level of devolution or the institutional capacity necessary.
• However, to address these failings would take an approach that was radical and far reaching on the one hand and long term and resilient on the other. Even then, success could not be guaranteed given the political, cultural and institutional path dependencies in our economic model (see this excellent piece by Nick Pearce and Gavin Kelly).

The final point presents not only a huge substantive problem but also a personal one. Like the rest of the RSA, I am motivated by the possibility of change, so it can be dispiriting to be reminded of how hard it would be to turn the dial on the core economy. But we should not make the best the enemy of the good. Ultimately, incremental advances can add up to significant change. Or as we say at the RSA we should ‘think like system but act like an entrepreneur’. Indeed, Pearce and Kelly themselves urge hope against the odds;

‘The British state has shown itself capable of strategic purpose and organisational ingenuity in the last century. And—however unfashionable it may be to point this out in the current moment—there remains a residual resilience in the democratic politics of the UK’.

From the session earlier this week and from other reading (for example this excellent collection from Manchester Metropolitan University) a case emerges for a fourfold approach.

First, the existing Government strategy should be supported but it is important that the funding and policy levers it comprises deliver the outcomes it aspires to (indeed, this is the core work of the Council).

Second the Government should be encouraged to back up with action some of the things it has already said around industrial strategy engaging more fully with the ‘foundational’ or ‘everyday’ economy. This is where our problems of low pay, poor work and stagnant productivity are concentrated and where a large proportion of the workforce is employed.

Third, the case must be made for greater devolution by showing concretely how sub-national policy could have an impact. The RSA is currently working alongside the UK2070 Commission and One Powerhouse consortium to develop regional economic blueprints for four English mega-regions.

Fourth, and this is the most politically difficult and the furthest away from the Council’s remit, those with profile and influence on industrial strategy need to encourage a greater emphasis on economic dynamism in other policy domains. This isn’t just the obvious case of education and skills policy. To take two examples; how can public procurement be a stronger driver of innovation, and how can public spending decisions better weigh in the balance that some forms of spending (investing in child care for example) are good for the economy while others (say, boosting middle class retirement incomes) are less so.

To those in the field this may all seem rather basic and not a little naïve, but perhaps now – before I imagine myself an expert too – is the best time to try to engage a wider audience.