Sir Roger Carr is right to highlight the symbiotic relationship between government and the market economy. But developing an industrial policy to boost the UK’s competitive edge is difficult. What seems like the wave of the future can quickly become a damp squib. We also need to be clear on the ground rules, so that ministers can be held accountable for public money. Otherwise what’s to stop the business secretary backing firms for political gain? Instead, the most obvious place for an industrial policy to start is to build a world class infrastructure platform on which UK companies find it cheap and easy to do business. Boosting investment in transport, telecommunications and energy projects must therefore be the government’s priority. This agenda wasn’t helped by successive governments slashing capital spending to close the deficit. For the immediate and long-term health of the economy, it’s time those decisions were reversed.
Ian Mulheirn is director of the Social Market Foundation.
Advocates of industrial policy are intellectually lazy. They must believe that the civil servants who design industrial policy are super-smart, super-humanly selfless and have access to dispersed information they cannot possibly have. They must believe that civil servants are able not just to beat the market, but beat the market by a margin sufficiently large to offset the costs of using taxpayer rather than voluntary funds. They must believe that the same civil servants can be counted on to withstand self-interested pressures brought to bear by the politicians they report to, and by the industrial interests who have captured the politicians. And they must be able to explain why we should try this course of action again, when we have never got it to work before. If the government wants to help business, it should stop meddling with it and acknowledge that corporatism doesn’t work.
Kevin Dowd is an economist and a partner at Cobden Partners.