A conference held by Prospect and Cityforum asked how government might help industryby Jay Elwes / March 19, 2012 / Leave a comment
Alison Wolf argued controversially that the economic benefits of education are limited
It is suddenly fashionable again to talk about industrial policy. For years, ministers have shied away from the notion that they should try to promote or rescue businesses, scarred by the history of failures of “picking winners” or saving national champions. But since 2008, the need to rescue banks with billions of pounds of taxpayers’ money, and calls to “rebalance” the economy away from finance towards manufacturing, have prompted them to think again; so has the rise in unemployment, the struggles of apparently viable businesses to secure financing, and the fierce battle with the rising economies of Asia. Ministers have openly asked whether they should try to stop companies from failing, and work harder to promote those which might give competitive advantage in taking on Asia.
Prospect’s all-day conference on regenerating the British economy, held with Cityforum, the conference group, captured the new energy in those questions—of whether there should be an industrial policy at all, and if so, what. The day concentrated on practical recommendations. Signs of recovery in the United States injected an upbeat tone into the fierce discussion.
Richard Lambert, former director general of the Confederation of British Industry, member of the Monetary Policy Committee, and now chancellor of the University of Warwick, opened with a provocative, detailed pitch that Britain should indeed have a clear policy. He allowed that some might disagree, gesturing at “my former boss at the Financial Times,” Geoffrey Owen, his predecessor as editor, in the audience in front of him. Owen, speaking later, argued that the main function of capitalism was to encourage experimentation. “And that’s not a job for government. It is also not the job of government to turn uncompetitive businesses into competitive [ones].” That way lies the biggest trap of all, he said: “Industrial policy must not become a cloak for protectionism.”
For years, many have agreed with Owen’s view, and not just in Britain, arguing that governments should not meddle with market economies. World Bank economists have advised ministers across the globe to deregulate markets. But the World Bank has begun to hold that some developing nations could benefit from more planning (see “The Role of the State in the Dynamics of Structural Change,” (2010) by Justin Yifu Lin, chief economist at the World Bank). And Lambert’s argument for an explicit British policy, covering government support,…