The UK needs a strategy for industry and it must be better than what has gone before. All too often, our industrial policy has been reactive and incoherent. It has responded to lobbying and failed to offer consistent and equal support to sectors of industry. Good industrial policy must provide the tools that we need to thrive – skills, finance or technology – with strong interaction between government and industry. Government can make a big difference by using the right regulatory incentives, promoting competition and encouraging entrepreneurship across the economy. It can also provide direct help through bodies like the Manufacturing Advisory Service and Technology Strategy Board. A new industrial policy, with a proper partnership between the state and private sector, is long overdue.
Vicky Pryce is former joint head of the Government Economic Service and author of Britain Needs A Fourth Generation Industrial Policy for CentreForum.
We’ve tried industrial policy before and it doesn’t work. Successful investment is based on incentives and markets: entrepreneurs research the market, invest their own money and that of investors to whom they are accountable, and take the hit if they are wrong. Industrial policy lacks incentive and attempts to usurp market discipline. If you believe in industrial policy then you must believe that some unaccountable civil servant with (typically) no business experience is smart enough to out-guess real businesspeople at their own game. And you’ll also believe that this super-smart civil servant can do so while taking orders from politicians, captured by interest groups with their snouts in the public trough, who use money forcibly extracted from the taxpayer. If you are gullible enough to believe that civil servants can make better decisions than businesspeople, you may as well believe in the tooth fairy too.
Kevin Dowd is an economist and a partner at Cobden Partners.