You know you’re onto something when both the director general of the CBI and the general secretary of the TUC, senior industrialists from the likes of Rolls Royce and JCB as well as Ed Miliband and Michael Heseltine are calling for the same thing.
For the last 30 years, there was a broad consensus that governments really needed to get out of the way of the markets. Free, unfettered competition would be the way to power productivity, efficiency and growth.
Actually, in the modern world, successful economies don’t work like that. If you look at the successful economies over the last 30 or 40 years, the likes of Germany, South Korea, or China, you see that active government industrialism has created jobs, growth and allowed these nations to enhance their competitive advantage.
The three most competitive economies on earth, according to the World Economic Forum, are Switzerland, Singapore and Sweden. They share the similar characteristics in terms of high levels of business investment on research & development, a relentless focus on innovation, help and support from government in respect of their supply chains and the strongest possible collaboration between industry, academia and government. These are not economies leaving future competitive advantage to chance, but focusing on what they as nations do best and making sure they continue to do so in the future.
Even the United States, characterised as the most open and free market in the world, has quietly and under the radar operated a large and very successful industrial policy. DARPA [the Defense Advanced Research Projects Agency] in the States is charged with ensuring that US defence capability is the most advanced anywhere in the world; it provides funding and support to contractors and gives them the freedom and confidence to innovate. This emphasis on US government support for innovation has helped companies like Google, Apple and Intel to prosper.
By not adopting a similar approach here in the UK we face being an unproductive and second-rate outlier in the global economy that will cost us competitiveness, jobs and growth.
As Michael Heseltine put it in a speech in November last year, Germany for most of the post-war era has had an industrial strategy as well as an economic strategy that has been applied with “huge consistency of purpose” which has helped German industry plan for the future. In contrast, we in the UK have “serious deficiencies.”
Industry understand this. That is why Sir John Rose, the former chief executive of Rolls Royce, has said that: “We need a framework, or a business route map, to create context, drive focus and help prioritise public and private sector investment”. That is why John Cridland, the director general of the CBI, is urging Britain’s economic future to be one that mixes traditional strengths in manufacturing with innovation, R&D and advances in high-tech and low carbon. John concludes by saying that: “What’s needed is a new form of industrial policy, one that signals ambition, helps develop future capabilities and secures sustainable growth.”
We understand it too. That is why Ed Miliband and Chuka Umunna are leading the most far-reaching review of Labour’s business policy for 20 years. Ed and Chuka rightly are urging a partnership of intelligent and active government, working together with productive business, to put in place a long-term strategy as to what British industry is good at and what we need to do in regulatory, procurement and fiscal terms to support the leading and growing sectors of the future.
It is in that context that Ed Miliband this week made the case for patriotism in UK business policy. Ed is not advocating a lurch to protectionism or support for lame duck industries, but he is emphasising the need to support British firms that compete with the best in the world. An economy based on long-term productive wealth, centred on high value manufacturing, engineering and other leading sectors, will stand Britain in much better stead than a focus on short-term profit speculation.
The world won’t wait for us in this arms race of global economic competition. If we don’t capture the opportunities we have in ground-breaking technologies and sectors, there is little chance of regaining them again in the future. That is why we need the government to adopt a long-term active industrial strategy with business now.
Iain Wright is the Labour MP for Hartlepool and shadow minister for competitiveness and enterprise