It may not be playing with words to point out that not having an industrial strategy would itself be an industrial strategy. To seek not to “pick winners”, and refuse to subsidise firms, on ideological or other grounds, is no more or less a policy that trying to pick them – and providing those subsidies, for whatever reason.
If that claim isn’t convincing, try this one: no government will be neutral about growth and productivity. Any will seek both, which means seeking to marry jobs and housing, ensuring that there is transport to move people between the one and the other, and helping to raise the education and skills of the workforce – beside the business of striving to get a country’s governance, law, tax and regulation right.
To this way of thinking, whether or not to have city mayors is no less industrial strategy than whether or not to have capital allowances – at least here in Britain, where housing, work and transport growth all are concentrated in the Greater South-East, that great cluster of satelitte towns and cities which feels the gravitational pull of our capital city.
So it is that we have recently had an economic model based on London, services, high immigration and an arguably over-valued currency. The Brexit referendum decision was a vote not only for self-government, but also for the provinces, manufacturing, and less migration. In other words, for what the Government calls levelling-up.
But there is continuity in its policy as well as change. Seeking to link up northern cities through better transport, thus building an economic counterweight to London, was part of the Coalition’s Northern Powerhouse project. So was upskilling the workforce. So was new elected mayors with new powers.
What is new as the world wrestles with a pandemic – or at least more highly charged – is the debate about national resilience. Britain’s relative vaccine success was bound to be a major theme of the mini-series about industrial strategy on ConservativeHome this week. We may not always be able to get what we want from abroad.
However, the vaccine achievement, please note, wasn’t brought about by government providing subsidies to selected companies over many years. It is an emergency programme that has combined good Ministerial decisions, an excellent taskforce chair, a good team, comandeering property wartime-style, the armed forces, and private sector distribution.
In other words, it wouldn’t have worked without the right personnel (and a big slice of luck). Ministers won’t always be operating in such circumstances. Which takes us to the list of industries that some of our contributors have picked out as good investment bets: life sciences, artificial intelligence, quantum, agritech, space, hydrogen.
As we’ve seen, government help doesn’t necessarily mean direct subsidies – though some for these enterprises, and others, will doubtless be forthcoming. But not all Ministerial decisions will pay off in the way that the vaccine ones are doing. For example, one impeccably green friend of ConHome concedes that some of the green technologies are in a better place than others.
“I do think there is now very strong evidence that electric cars (on a lifetime basis), wind and solar energy, and insulation will save consumers and businesses money, but there are less mature clean technologies (heat pumps, clean hydrogen, carbon capture, bioenergy, etc.) which are currently more expensive,” he told us.
He believes that the costs of the latter will eventually come down, but that meanwhile there will be “a cost in deploying them, particularly in the early phase of their development (in the form of taxes, subsidies, or regulation”). But for how long will those costs last? And what happens if Whitehall bets on the wrong horses – especially if new ones come galloping on to the racetrack between now and 2050?
But the best way of thinking about industrial strategy is to not to fix one’s gaze on subsidies, but to look wider. “As a nation we have done more to generate wealth in Silicon Valley with our ideas than we have in our own regions. We have been terrific at pure research, and useless at translational research,” David Davis wrote on this site recently.
He was lining up in print alongside a man who hasn’t always been kind about him, and to whom he was infinitely kinder in his article: Dominic Cummings. The Prime Minister’s former special adviser “understood this – and started a series of mechanisms with the aim of improving the environment for wealth creation distributed throughout the country”.
Davis cited the Advanced Manufacturing Research Centre in West Yorkshire; developing it as a “Massachusetts Institute of Technology of the North”, and spinning off from it “a completely new style of university…teaching 48 weeks a year, rather than the 30 plus taught by conventional universities, and like MIT it could focus solely on science and technology”.
Cummings’ DARPA programme is still alive in government, though whether it is also well is another matter: Kwasi Kwarteng is to keep it going. He will need Boris Johnson’s unwavering backing to make a success of it, and Downing Street will need to think laterally in any event.
ConHome picks out just one example, which shows how industrial strategy can meld into security policy, raising again the matter of resilience. “We should also create a critical minerals reserve stockpile with our Five Eyes intelligence partners. This would end our collective supply vulnerability in relation to minerals such as lithium, cobalt and tungsten,” Alan Mak wrote as part of our series this week.
If the Government and our alllies are to pursue a more aggressive policy towards China – the question at the heart of the continuing tale of the Trade Bill, the genocide amendment and backbench revolt – what would happen the latter turned off its lithium taps? The substance powers our smartphones, laptops and tablets.
Our contributor is thinking ahead, and the sharing of resources among allies should be part of Joe Biden’s D10 idea, in the event of the new President seeing it through and getting it off the ground. The moral of the story is that industrial strategy isn’t about whether to intervene; it’s about how to.
Government will always cast that die: under Margaret Thatcher, the Education Department had a Microelectronics Education Programme with a three-year strategy, and a Department of Industry scheme called “Micros in Schools”: “cash will be made available to local education authorities…to buy either the 380Z Research Machine or the Acorn, both British microcomputers,” she declared in 1981.
Research Machines is still there, though its business was hit by the cut in the rate of education spending under the Coalition, and it has got out of computers. Acorn was broken up during the 1990s, though ARM Holdings is a former subsidiary. Businesses come and go, and some gambles in any industrial strategy won’t pay off.
The question is whether it will give the taxpayer value for money – viewed in the round. Which will never be clear at the time. President Eisenhower could not have known when he gave the go-ahead for DARPA that its spin-offs would include SIRI, GPS and the net, which you are using as you read now. Industrial strategy is a matter of time.