Industrial strategy: back from the 1970s
Hardly anyone in the UK seems to have clocked the “sheer enormity” of President Joe Biden’s Inflation Reduction Act, said Iain Martin on Reaction. It provides $370bn in subsidies and tax breaks to US businesses making “the stuff of the future” – especially green technology – and will suck in trillions more in global investment. It is an astonishingly aggressive use of state power to mould the economic future. The British Government, meanwhile, remains so fearful of state intervention that the very phrase “industrial strategy” has just been dropped from the Business Department’s name, said John Thornhill in the FT. Since the Department for Science, Innovation and Technology (as it is now) was created seven years ago, there have been seven secretaries of state – a “dizzying churn” that has left business struggling to detect any coherent agenda, let alone a strategy to drive growth. On a recent visit to a promising tech start-up, I was told that British officials – unlike, say, their counterparts in Singapore – were doing nothing to court and support such businesses.
There’s a reason state-directed industrial policy has fallen out of fashion, said David Frost in The Daily Telegraph. However clever our leaders may be, only businesses create wealth. No one knows what skills Britain will need in 20 years’ time, or what the big strategic sectors will be.
Hence no politician knows “the right things to subsidise, tax or protect”. Only the market can tell that – “and if we fight the market, we will carry on having low productivity and low growth”. On the contrary, said Nick Dearden in The Guardian. Industrial strategy isn’t about fighting the market, it’s about helping it work in the national interest. State intervention and planning, derided over decades of neoliberalism, are “necessary tools of government today”.
British policymakers remain haunted by the “ghosts of the 1970s”, when “vast caches of decaying, uncompetitive” industries were kept alive by government subsidy, said Juliet Samuel in The Daily Telegraph. But that was 50 years ago, and industrial policy in advanced economies has moved on. Silicon Valley in California, Taiwan’s semiconductor industry and Japan’s robotics are all examples of cutting-edge, booming sectors shaped by lavish state support. “It should not be beyond the wit of the British state to follow these examples” – and build on existing strengths such as artificial intelligence, chip design, life sciences and green tech.
The coming years will see further “floods of industrial subsidies” from the US, China, the EU and others. Without a competing strategy, Britain “will be squeezed mercilessly out of the industries foundational to future prosperity”.