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The Political Economy of Industrial Strategy in the UK: From Productivity Problems to Development Dilemmas

The Political Economy of Industrial Strategy in the UK: From Productivity Problems to Development Dilemmas

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The Political Economy of Industrial Strategy in the UK: From Productivity Problems to Development Dilemmas

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649 pagine
7 ore
Pubblicato:
Mar 25, 2021
ISBN:
9781788213424
Formato:
Libro

Descrizione

Industrial policy was phased out with the Thatcher governments, but in recent years it has returned to the political agenda. This collection of essays by leading academics and professionals examines the effectiveness of recent industrial policies in addressing the UK’s economic malaise and considers what a successful industrial strategy might look like in practice.
Pubblicato:
Mar 25, 2021
ISBN:
9781788213424
Formato:
Libro

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The Political Economy of Industrial Strategy in the UK - Agenda Publishing

The Political Economy of Industrial Strategy in the UK

Building Progressive Alternatives

Series Editors: David Coates†, Ben Rosamond and Matthew Watson

Bringing together economists, political economists and other social scientists, this series offers pathways to a coherent, credible and progressive economic growth strategy which, when accompanied by an associated set of wider public policies, can inspire and underpin the revival of a successful centre-left politics in advanced capitalist societies.

Published

Flawed Capitalism: The Anglo-American Condition and its Resolution

David Coates

The Political Economy of Industrial Strategy in the UK: From Productivity Problems to Development Dilemmas

Edited by Craig Berry, Julie Froud and Tom Barker

Race and the Undeserving Poor: From Abolition to Brexit

Robbie Shilliam

Reflections on the Future of the Left

Edited by David Coates

The Political Economy of Industrial Strategy in the UK

From Productivity Problems to Development Dilemmas

Edited by

Craig Berry, Julie Froud and Tom Barker

© Editorial matter and selection 2021 Craig Berry, Julie Froud and Tom Barker.

Individual contributions, the contributors.

This book is copyright under the Berne Convention.

No reproduction without permission.

All rights reserved.

First published in 2021 by Agenda Publishing

Agenda Publishing Limited

The Core

Bath Lane

Newcastle Helix

Newcastle upon Tyne

NE4 5TF

www.agendapub.com

ISBN 978-1-78821-339-4 (hardcover)

ISBN 978-1-78821-340-0 (paperback)

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

Typeset by Newgen Publishing UK

Printed and bound in the UK by TJ Books

Contents

Contributors

Tables and figures

Introduction:The political economy of UK industrial policy

Craig Berry, Julie Froud and Tom Barker

Part I The historical context

1.Prisoner of the past: British industrial policy from empire to Brexit

James Silverwood and Richard Woodward

2.Industrial policy, then and now: historicizing the 2017 White Paper

Victoria Chick

3.The developmental state in England: the role of the Treasury in industrial policy

Simon Lee

Part II Rethinking economic foundations

4.The foundational economy and industrial strategy

Julie Froud, Sukhdev Johal and Karel Williams

5.The false promise of productivity

Paul Lewis

6.A return to normal times? Industrial strategy and reproductive labour

Isaac Stanley

Part III The end of laissez-faire?

7.Business-centric governance in UK industrial policy: neoliberal wine in interventionist bottles?

Craig Berry and Tom Barker

8.Reconciling a post-Brexit trade and industrial strategy

Matthew Louis Bishop

9.Financing industrial strategy: the role of state investment banks

Laurie Macfarlane

Part IV Manufacturing and innovation

10.Risk management and reduction in global supply chains and production networks: reshoring and rightshoring versus offshoring

John R. Bryson, Vida Vanchan and Shihao T. Zhou

11.Making work: the knowledge economy, automation and industrial strategy

Nick O’Donovan

12.Industrial strategy and science and innovation policy

Richard Jones

Part V Firms and workers

13.Broadening the ambit of industrial strategy to include latent demand and corporate governance

Ciaran Driver

14.Expanding skills and workplace capacity: a relational approach to industrial strategy

Alison Fuller and Lorna Unwin

15.Why an industrial strategy needs trade unions

Kate Bell

Part VI Mainstreaming inequality and low pay

16.Where should low-wage sectors feature in an industrial strategy?

John Forth and Ana Rincon-Aznar

17.Care as investment in social infrastructure

Susan Himmelweit

18.Reducing inequality as industrial policy: finding productivity gains in the overlooked economy

Ed Pemberton

Part VII The local dimension

19.The policy challenges of levelling up

Ron Martin, Peter Sunley and Ben Gardiner

20.Local industrial policy and left behind places

John Tomaney and Andy Pike

21.Looking north: the multi-level governance of economic policy

Arianna Giovannini and Luke Raikes

Part VIII Towards a greener future?

22.Sustainability dilemmas and Britain’s national industrial ambitions: Brexit, electric cars, and a petrol and diesel engine ban

Dan Coffey and Carole Thornley

23.Industrial policy in the context of climate emergency: the urgent need for a Green New Deal

Daniel Bailey

24.Clean and lean: an industrial strategy for an era of globalization and climate change

Dustin Benton

Conclusion:building a progressive industrial strategy amid and after Covid-19

Craig Berry

References

Index

Contributors

Daniel Bailey is Senior Lecturer in Political Economy at Manchester Metropolitan University. He has recently published Rethinking the fiscal and monetary political economy of the green state in New Political Economy, and the book Diverging Capitalisms: Britain, the City of London and Europe.

Tom Barker has worked as a teaching associate and/or research assistant at University of Sheffield, Sheffield Hallam University and Manchester Metropolitan University. He received his PhD from University of Cambridge, and is a commissioning editor of Renewal.

Kate Bell is Head of the Rights, International, Social and Economics Department at the Trades Union Congress, and a member of the Low Pay Commission.

Dustin Benton is Policy Director of the Green Alliance (on secondment until February 2021 at the Department for the Environment, Food and Rural Affairs).

Craig Berry is Reader in Political Economy at Manchester Metropolitan University. His books include Pensions Imperilled: The Political Economy of Private Pensions Provision in the UK and Developing England’s North: The Political Economy of the Northern Powerhouse. In 2017 he served on the Industrial Strategy Commission, and his previous employers include HM Treasury, the Trades Union Congress and the Sheffield Political Economy Research Institute.

Matthew Louis Bishop is Senior Lecturer in International Politics at the University of Sheffield. His books include The Political Economy of Caribbean Development and Post-Colonial Trajectories in the Caribbean: The Three Guianas.

John R. Bryson is Professor of Enterprise and Economic Geography at the University of Birmingham. His recent books include Handbook of Manufacturing Industries in the World Economy, Handbook of Service Business and Design Economies and the Changing World Economy: Innovation, Production and Competitiveness.

Victoria Chick is Emeritus Professor of Economics at University College London. Her major works include The Theory of Monetary Policy and Macroeconomics After Keynes.

Dan Coffey is Senior Lecturer in Macroeconomics at University of Leeds. His books include Globalization and the Varieties of Capitalism Debate: New Labour, Economic Policy and the Abject State and Crisis or Recovery in Japan: State and Industrial Economy.

Ciaran Driver is Professor of Economics at SOAS, University of London. His books include The Unbalanced Economy: A Policy Appraisal and Investment, Expectations and Uncertainty.

John Forth is Senior Lecturer in Human Resource Management, CASS Business School, City University of London. His recent books include Comparative Workplace Employment Relations: An Analysis of Practice in Britain and France and he has published extensively on industrial relations.

Julie Froud is Professor of Financial Innovation at the University of Manchester. Her recent books include Foundational Economy: The Infrastructure of Everyday Life, After the Great Complacence: Financial Crisis and the Politics of Reform and Financialization and Strategy: Narrative and Numbers. She was a founding member of the Centre for Research on Socio-Cultural Change, and recently established the Foundational Economy Collective.

Alison Fuller is Professor of Vocational Education and Work and Pro-Director for Research and Development at the UCL Institute of Education. Her books include Rethinking Widening Participation in Higher Education: The Role of Social Networks and Improving Working as Learning.

Ben Gardiner is Director of Cambridge Econometrics and a Research Associate at University of Cambridge. He has published extensively on regional economic performance.

Arianna Giovannini is Associate Professor in Local Politics and Public Policy at De Montfort University. She recently published Developing England’s North: The Political Economy of the Northern Powerhouse, and from July 2019 to February 2020 served as interim director of IPPR North.

Susan Himmelweit is Emeritus Professor of Economics at Open University and a Women’s Budget Group management committee member. Her recent books include Economics and Austerity in Europe: Gendered Impacts and Sustainable Alternatives and Rethinking Britain: Policy Ideas for the Many.

Sukhdev Johal is Professor of Accounting and Strategy at Queen Mary, University of London. His recent books include Foundational Economy: The Infrastructure of Everyday Life, The End of the Experiment? From Competition to the Foundational Economy and After the Great Complacence: Financial Crisis and the Politics of Reform.

Richard Jones is Professor of Materials Physics and Innovation Policy at the University of Manchester. His books include Soft Condensed Matter and Soft Machines: Nanotechnology and Life. In 2017 he served on the Industrial Strategy Commission.

Simon Lee is Senior Lecturer in Political Economy at the University of Hull. His books include The Cameron-Clegg Government: Coalition Politics in an Age of Austerity.

Paul Lewis is Senior Lecturer in Political Economy at the University of Birmingham. He has published extensively on capitalism, productivity and industrial relations.

Laurie Macfarlane is Economics Editor at openDemocracy and a Research Fellow at the Institute for Innovation and Public Purpose, University College London. His books include Rethinking the Economics of Land and Housing.

Ron Martin is Professor of Economic Geography at the University of Cambridge. His recent books include Handbook on the Geographies of Money and Finance, Regional Competitiveness and Handbook of Regional Innovation and Growth.

Nick O’Donovan is Senior Lecturer in the Department of Economics, Policy and International Business at Manchester Metropolitan University. He has published widely on tax and innovation, including several reports for the European Commission, and between 2014 and 2015 he was a policy analyst for the UK’s shadow Chancellor of the Exchequer.

Ed Pemberton is a doctoral student based at the Sheffield Political Economy Research Institute, University of Sheffield. He was a founding trustee of the campaign group Rethinking Economics.

Andy Pike is Sir Henry Daysh Chair of Regional Development Studies and Director of the Centre for Urban and Regional Development Studies at University of Newcastle. His books include Financialising City Statecraft and Infrastructure, Origination: The Geographies of Brands and Branding and Local and Regional Development.

Luke Raikes is Research Director of the Fabian Society, and formerly Senior Research Fellow at IPPR North. He has published widely on local economic development.

Ana Rincon-Aznar is Principal Economist at the National Institute for Economic and Social Research. She has published extensively on employment, skills and productivity.

James Silverwood is Lecturer in Emerging Markets at Coventry University. He has published papers on industrial policy, Brexit and climate change.

Isaac Stanley is Senior Researcher at the Centre for Local Economic Strategies, and formerly a researcher at NESTA.

Peter Sunley is Professor of Economic Geography at the University of Southampton. His books include The Sage Handbook of Economic Geography, Economic Geography: Critical Concepts in the Social Sciences and Putting Workfare in Place: Local Labour Markets and the New Deal.

Carole Thornley is Emeritus Professor in Employment and Public Policy at Keele University. Her books include Global Economic Crisis and Local Economic Development: International Cases and Policy Responses and Globalization and Varieties of Capitalism: New Labour, Economic Policy and the Abject State.

John Tomaney is Professor of Regional and Urban Planning at University College London. His recent books include Financialising City Statecraft and Infrastructure and Local and Regional Development.

Lorna Unwin is Professor Emerita (Vocational Education) at the UCL Institute of Education. Her books include Improving Working as Learning and Communities of Practice: Critical Perspectives.

Vida Vanchan is Associate Professor in the Department of Geography and Planning, State University of New York, Buffalo State. She has published extensively on the geographies of manufacturing and competitiveness, and her books include Handbook of Manufacturing Industries in the World Economy.

Karel Williams is Professor of Accounting and Political Economy at the University of Manchester. His recent books include Foundational Economy: The Infrastructure of Everyday Life, After the Great Complacence: Financial Crisis and the Politics of Reform and Financialization and Strategy: Narrative and Numbers.

Richard Woodward is Senior Lecturer in Emerging Markets at Coventry University. He has published widely on industrial policy, tax avoidance and international organizations.

Shihao T. Zhou is a doctoral student in the Department of Strategy and International Business at the University of Birmingham.

Tables and figures

TABLES

14.1A developmental model for co-producing more expansive skill formation, improvement and utilization

16.1The UK’s low-wage sectors (ordered by UK share of gross value added), 2015

16.2Contribution of the low-wage sectors to the aggregate labour productivity growth gap (2012–15 vs 1999–2007)

19.1Spearman rank order correlations between different aspects of local economic performance (differential cumulative growth, 1981–2017)

19.2Labour productivity trajectories by type of settlement/area (constituent Local Authority Districts)

FIGURES

4.1The significance of foundational economy activities by numbers of employees, 2016–17

5.1Mapping economic activities to productivity

6.1The significance of different segments of the UK economy by numbers of employees, 2016–17

16.1Relative labour productivity in 2015 (UK=100), by broad sector

16.2Sectoral contributions to UK productivity gap with selected major economies (2015)

16.3Annual growth in labour productivity (GVA per hour) 2011–15, by low-paid sector, in selected major economies

16.4Contribution of capital intensity, labour quality and TFP to the UK’s productivity gap with the international sector leader

18.1Manufacturing productivity versus household income in UK regions, 2017

18.2Retail productivity versus household income in UK regions, 2017

19.1The great growth divergence between southern and northern Britain

19.2Growing apart: the economic divergence of localities across Britain, 1981–2017

19.3The relationship between cumulative percentage point differential growth in employment and output across Local Authority Districts, 1981–2017

19.4Local geographies of divergent growth: cumulative percentage point differential growth in gross value added (2016 prices), by Local Authority Districts, 1981–2017

19.5Local geographies of divergent growth: cumulative percentage point differential growth in employment, by Local Authority Districts, 1981–2017

19.6Divergent growth of employment and productivity by type of place

19.7The four geographies of differential local labour productivity growth, 1981–2017

Introduction: The political economy of UK industrial policy

Craig Berry, Julie Froud and Tom Barker

Does the UK still have an industrial strategy? The Johnson government’s focus remains unclear, but it has yet to formally reject the May government’s 2017 White Paper Building a Britain Fit for the Future (see HM Government 2017a). Indeed, many of the mechanisms introduced by the White Paper, such as Sector Deals and the Industrial Strategy Challenge Fund, have taken root, at least to some extent, in the UK’s economic policy architecture. The Whitehall department established by Theresa May (for Business, Energy and Industrial Strategy) remains in operation. Furthermore, in many ways, the Johnson government offers a more stridently interventionist economic policy programme than the May government (Berry & Barker 2019), although the May-era terminology has arguably been sidelined. We need not accept that the stimulus measures developed in the wake of the Covid-19 pandemic amount to a major, permanent shift in economic stateraft – or indeed that they are comparable to the size of stimulus programmes undertaken in other European economies – to recognize that an anti-interventionist instinct among UK policy elites has been challenged, to some extent. Of course, this does not mean the governing coalition around Boris Johnson is united in this regard, or that the government is likely to offer a highly coherent and meaningful industrial policy agenda in the foreseeable future.

Developments in the UK reflect at least partly an international consensus on industrial policy evident since the 2008 financial crisis. Overriding the rather tired framework which posits a bifurcation between vertical and horizontal interventions, an influential World Bank paper by Dani Rodrik (2009: 1) states that industrial policy denote[s]‌ policies that stimulate economic activities and promote structural change, and argues that such interventions should be normalised. (Vertical interventions target particular firms and industries, whereas horizontal interventions support the general business environment.) This departs somewhat from neoliberalism (ideologically) and neoclassical economics (analytically). The reference to structural change suggests that industrial policy should be concerned with more than any old growth. It must be the right kind of growth; or, more precisely, industrial policy should ensure that the economy is able to keep growing over the very long term by guiding industry towards new opportunities for capital accumulation (in this way, for example, the notion that green growth is essential is becoming part of economic policy common sense).

Yet it is a restrained radicalism, in that structural change is understood rather narrowly as a process of industrial upgrading. This understanding is inherently limited: the distributional consequences – both within the domestic economy, and between different countries – of industrial change are neglected; an overarching framework of macroeconomic stability is both assumed and legitimized; and the possibility that finance sector practices may serve to sustain the industrial status quo is marginalized. Clearly, any technocratic account of industrial policy also overlooks the role of politics and power dynamics in shaping and constraining the scope of state intervention. Interventions mediated by political processes are not designed neutrally, but in alignment with certain political-economic interests, or with imperatives associated with the wider accumulation regime. This helps to explain, for instance, the perennial focus of UK science and innovation policy on industries and universities concentrated in the golden triangle of Oxford, Cambridge and London (Flanagan & Wilsdon 2018). Similarly, we can observe that the (re-)emergence of a positive discourse around industrial policy in countries such as the UK is connected to a populist turn in national politics. Theresa May (2016a, 2016b), for instance, understood industrial strategy as a core response to the disaffection crystallized in the vote in favour of EU withdrawal in 2016. Similarly, Boris Johnson’s levelling up agenda attempts to marry laissez-faire rhetoric on trade policy to an anti-establishment sentiment in less affluent parts of England.

This is not to suggest that industrial policy has not, in some ways, been a long-standing part of British economic statecraft. May’s 2017 strategy built upon the earlier work of the Cameron–Clegg Coalition government (especially the Liberal Democrat Business Secretary, Vince Cable). The Coalition’s approach was essentially a continuation of the framework established by Gordon Brown’s Labour government after 2008 (under Peter Mandelson as Business Secretary). Tony Blair’s Labour government had ostensibly eschewed industrial policy, yet its regional policy – epitomized by its establishment of Regional Development Agencies (RDAs) – introduced many conventional industrial policies under a different guise. Boris Johnson has seemingly revived a local or regional orientation. Yet this was actually a key part of the Coalition’s approach too, as Chancellor of the Exchequer, George Osborne, organized various local growth, Northern Powerhouse and devolution initiatives via the Treasury (see Berry & Giovannini 2017). Contestation between the Treasury and the various business/industry/innovation department incarnations is a recurrent feature of the institutional politics of industrial policy in the UK, with the former traditionally resistant to interventions to support particular industries in fear of policy failure. Osborne’s localism was not a case of picking geographical winners, but rather transposing a neoliberal approach to the sub-national level under the influence of market-based agglomeration theory, utilizing a series of deals between central government and local/combined authorities and city-based Local Enterprise Partnerships (which loosely replaced RDAs) (Berry 2016a; Martin et al. 2016a). May’s place-based approach promised a more interventionist regional industrial policy yet, despite dismissing Osborne as chancellor, she was unable to dislodge Treasury orthodoxy (Berry 2020).

Calling something an industrial strategy obviously implies a more coherent, deliberate and programmatic approach to the various forms of industrial policy intervention, essentially signalling the pursuit of objectives related to structural change (in Rodrik’s terminology) rather simply keeping the growth show on the road. However, as many of the authors of this volume point out, economic statecraft in the UK has often been highly strategic, even if the strategy in question does not substantively encompass conventional industrial policies to a significant extent. On the one hand, the Coalition government’s plan for growth (see HM Treasury and Department for Business, Innovation and Skills 2011), and the Cameron majority government’s productivity plan (HM Treasury 2015; the plan remained in place alongside the May strategy) were, in their own way, strategic blueprints for a (modified) neoliberal approach to post-2008 economic recovery. (The former was modified in the sense that it encompassed new initiatives to support some high-tech industries in service of economic rebalancing, such as catapult centres for incubating R&D, and the latter was modified in the sense that it, as noted above, endorsed a city-based localist agenda, albeit one in which local strategies were framed by national priorities.) On the other hand, we can conceive of British economic statecraft in historical terms as organized around a particular developmental strategy. In recent decades, this has focused on supporting the finance sector and housing market, to support a consumption-led growth model based on both asset value appreciation and the proliferation of personal debt (Crouch 2009; Hay 2013a; Hofman & Aalbers 2019; Montgomerie & Büdenbender 2015; Watson 2010). Yet it has long encompassed support for particular manufacturing industries, such as pharmaceuticals and aerospace, by means which can be understood as conventional industrial policy, alongside public procurement. In this way, post-2008 policy innovation has been rather conservative (see Silverwood & Woodward 2018).

Understanding where the UK’s current industrial policy agenda sits within this account of historical political-economic development is, in part, the rationale for this book. We contend that recent debates around industrial policy in the UK, which have been largely technocratic in nature, mask more profound uncertainties about the UK’s developmental trajectory. More specifically, the book discusses a large number of the policy areas included within or affected by recent moves towards (and then, perhaps, away from) an industrial strategy. As well as situating recent developments in a broader political and economic context, many of the chapters discuss proposals for improving or transforming UK industrial policy. Even a highly cynical observer of recent industrial policy developments in the UK would have to acknowledge that the articulation of an industrial policy or industrial strategy framework by policy elites since the 2008 crisis speaks to chronic failures within neoliberal economic statecraft, especially in the context of a series of (self-inflicted) economic shocks. There is at least some scope for alternative frameworks to emerge.

Productivity puzzled

Despite the populist allusion to a more socially or geographically inclusive economy, thinking about industrial policy at the elite level in the UK has been framed by the esoteric issue of productivity, defined principally but not exclusively in terms of output per hour of labour. Productivity growth has been sluggish for a very long time, and since the 2008 financial crisis productivity growth has consistently under-performed expectations, creating a significant drag on long-term output growth and, more pertinently, workers’ pay. Andy Haldane, the Bank of England’s chief economist, has been particularly vocal about the productivity puzzle, consistently referring to the long tail of small, unproductive firms which distinguishes the UK from similar economies (see Haldane 2017, 2018), despite the Bank’s own analysis demonstrating that the slowdown in productivity growth has been concentrated among the largest and most productive firms (see Schneider 2018). (After the 2017 White Paper was published, Haldane was appointed as chair of the new Industrial Strategy Council, alongside his day job at the Bank.)

The Treasury continues to favour productivity over industrial strategy as a conceptual frame for industrial policy and associated interventions (under the Johnson government, the industrial strategy has been presented as primarily focused on boosting productivity [Department for Business, Energy and Industrial Strategy 2020]); as noted below, the ultimate goal of the May strategy had been rather unclear). The Treasury’s 2015 productivity plan incorporated some of the measures to boost manufacturing R&D and physical infrastructure which survived the end of the Coalition, while explicitly identifying deregulation of business and cuts to welfare benefits as key to improving labour performance. This is not necessarily the Haldane agenda – puzzlement belies a prescriptive approach – but it is where economic statecraft inevitably ends up when productivity becomes its central concern. Productivity is a very specific analytical concept which, when applied to real-world policy-making, seemingly justifies any (non-)intervention which might help firms to squeeze more work out of their employees, on the basis that higher productivity automatically leads to higher wages.

It may of course be legitimate, even if only marginally useful, to consider an economy’s productivity performance at the aggregate level. The problem arises when we come to believe that improving aggregate productivity performance requires us to improve productivity performance at the firm, workplace or individual level. The sums simply do not add up. The UK’s poor productivity performance is a product of many things, some of which are partially addressed by recent industrial policies, and many of which are not. These include the financialization of corporate governance (Froud et al. 2006), supply chain vulnerabilities (Bentham et al. 2013b), servitization of the economy (Wren 2013), rentierization (Christophers 2019) and the robustness of foundational industries (discussed below). The productivity problem’s causes are highly complex, but not mysterious. Policy thinking also tends to overlook the distinction between real and nominal productivity growth, especially in relation to target-setting for industrial policy interventions. Real productivity growth entails producing a greater volume of output with lower worker (or capital) input. However, this may have the impact of reducing nominal productivity, if it leads to lower prices, given that output is measured in terms of price. Clearly, while it may be correct to say that real productivity enables higher living standards over the long term at the aggregate level (either through wage rises or price reductions), it is nominal productivity growth which enables better outcomes for particular groups of workers, or particular localities (that is, a more inclusive economy). Moreover, it may be that the sectors currently best able to produce nominal productivity growth are those able to exploit opportunities for rent-seeking rather than contribute in any meaningful sense to increased productive capacity (see Lewis & Bell 2019; Lewis et al. 2018).

Displacing productivity from its animating role in industrial policy design, however, leaves a gap regarding what the goal of interventions should be. We have to accept that this is a normative issue, and therefore not one with a correct answer. One of the most widely discussed academic contributions to recent UK policy debates has been Marianna Mazzucato’s (2013) outline of mission-based industrial policy. Mazzucato points to the role of long-term policy challenges, such as national defence, in empowering state actors to drive the innovations from which new and better solutions to these challenges can be devised. The 2017 Industrial Strategy offered a version of this approach, by positing four Grand Challenges as the core purpose of the industrial strategy (the challenges are: artificial intelligence and data; ageing society; clean growth; the future of mobility). The question remains, however, what the ultimate purpose of industrial policy is. Do we need to address these challenges because they are a threat to growth over the very long term? Are they a threat to productivity, jobs, well-being, the UK’s international clout, or the hospitability of the planet to human life? All of the above? There is a danger, also, of missions focused narrowly on developing or disseminating technologies which have little relevance to large parts of the economy, or of an industrial policy agenda which again treats distributional issues (that is, how to distribute gains from technological development) as secondary concerns (see Payne 2017; Pradella 2016). Confusingly, the Grand Challenges are sometimes presented instead as opportunities to pursue more and better growth, jobs, prosperity, etc. The choice of metrics, in so far as it influences the design of intervention, will of course have distributional consequences; this is especially important to note given that greater equality (with the partial exception of geography) is rarely seen by policy elites as a legitimate, direct aim of industrial policy. Various chapters in this volume consider what the appropriate measure of success for industrial policy should be, but it is equally important to note, in terms of understanding the nature of current policy frameworks, that the shortcomings and conflicts within existing metrics reflect the shortcomings and conflicts within the industrial strategy itself.

Reimagining and repurposing industrial policy

More radical models of industrial policy emerge from lower income countries, in part because an imperative to catch-up with the industrial development of higher income countries, on a highly uneven playing field, is associated with stronger forms of state intervention (Bishop et al. 2018). This developmental state approach has long been a feature of catch-up economic modernization, and its legacy remains in highly affluent countries such as Germany and Japan (and the United States, to some extent) where industrial policy is more entrenched than in the UK (Coates 2015). Matthew Bishop and Anthony Payne (2019) suggest that the UK needs to discover its own developmental state tradition, arguing that the pathologies which characterized its early developer status may now have accumulated to the point whereby they undermine the country’s ability to continue developing or maintain its highly developed status. In such accounts, development means more than simply, say, generating a higher growth rate, moving up the industrial value chain or improving the current account balance. Instead, development is conceived in broader terms as the ability of society to improve living standards for all, sustain the policy tools necessary to withstand and adapt to adverse conditions, and generally control its own economic destiny. The danger of developmentalism arises, however, when a narrower or more orthodox understanding of development priorities prevails, marginalizing social outcomes and distributional consequences, and indeed planetary issues such as climate change, in favour of output or productivity growth (albeit as proxies for average living standards).

As such, any endorsement of the developmental state requires a priori an account, first, of the nature of the economy which the state may act upon, and second, of the value – in relation to particular policy objectives – of the economic processes we may choose to support through intervention. This book has been inspired in part by the notion of the foundational economy, as a lens through which to both understand economic life, and critique conventional industrial policies. The foundational economy denotes collective consumption through networks and branches which are the infrastructure of civilized everyday life. The foundational sphere includes the material infrastructure, such as pipes and cables, which connect households, plus providential services, such as health and care, which citizens rely on. The foundational economy enables all economic functions, and is a major source of employment, but it is also the realm in which meaningful living standard improvements are realized. Given that the foundational economy is about the regulation and provision of universal basic services, it is therefore about politics as much as economics. From a foundational viewpoint, the distinctive role of public policy is not to boost private consumption by delivering economic growth, but to ensure the quantity and quality of foundational services. The mismanagement of food manufacturing in the UK – characterized by super profits, supply chain vulnerability and inadequate regulation – is a useful example of where foundational activities have been valued, and acted upon, purely in terms of their direct contribution to output growth (for further discussion, see Bentham et al. 2013a; Foundational Economy Collective 2020).

Too often, the core question around industrial policy is assumed to be one of the appropriate boundary between state and market. This is a crude distinction which, first, misrepresents the (neoliberal) state’s role in producing market-based economic processes, and second, overlooks the fact that many of the new interventionist mechanisms established recently in the UK are populated or overseen by private economic actors (in other words, the intervenors are also the intervenees). A more open and flexible understanding of what constitutes the public sphere – encompassing much of that which is superficially deemed private economic activity – requires us to start instead from the question of what political-economic order(s) we would like to bring about, and only then consider the shape and powers of public authorities (nationally and locally) necessary to achieve this. Of course, that something is deemed necessary does not automatically render it realizable. We must also consider therefore the political coalition required to build and sustain a more progressive approach to industrial policy (and economic statecraft more generally), not least because the nature of this coalition will determine in part the (formal and informal) institutional forms available to enact it.

A concurrence of crises

As suggested above, the 2008 financial crisis was an important trigger for the (re-)emergence of industrial strategy as an elite policy agenda in the UK. The 2016 Brexit vote – precipitating a further crisis, not yet fully realized – led to an intensification of this agenda. While there has been institutional innovation in some regards (at national and local levels), substantive policy ideas have been in short supply. The May government initiated a further, but still fairly limited, uptick in expenditure upon R&D subsidies. Physical infrastructure has been an apparent priority of all recent administrations, but this agenda has yet to amount to much more than proceeding with HS2 (from London upwards) alongside more minor road and rail upgrades. Boris Johnson’s first chancellor, Sajid Javid, was notoriously sceptical of industrial policy (despite serving as business secretary in the brief Cameron majority government), and his replacement, Rishi Sunak, has so far added only freeports (geographical areas where tariffs are not applied to imported components, encouraging the reshoring of assembly plants) to the levelling up agenda (see Sunak 2016). The idea has been widely derided, not least because freeports have failed in the past to do anything other than marginally reduce global producers’ tax burden, with little impact on local growth or employment rates (Swinney 2019). The coalition government inherited five freeport areas from the Labour government in 2010, and allowed each to expire two years later.

The UK policy elite, especially under Conservative-led governments, remains wedded to the understanding that recent economic crises have resulted from exogenous shocks, and so require, at most, minor modifications to economic policy practice (notwithstanding immediate stabilization measures). The perspective, broadly adhered to throughout this volume, that recent crises (and the Brexit-related and climate crises now upon us) are endogenous to a neoliberalized accumulation regime – which legitimates inequality, treats the public realm as external to (or even a drag upon) the economy, valorizes profit as the source of social utility, and relies on unsustainable extractivist practices – is rarely rehearsed. The diagnosis of crisis is invariably one of not enough neoliberalism, leading to industrial policy prescriptions such as increasing corporate welfare at the expense of social welfare, enabling greater business involvement in policy design, and subjecting local economic institutions to the disciplining of competition. Covid-19 has necessitated an array of interventionist measures – most notably the furlough scheme covering salary costs of employees unable to work – but these do not represent a strategic attempt to transform the economy in response to the problems exposed by the pandemic. That many of the new jobs created since 2008 have been in low-paid retail, hospitality and personal services industries – doubly hit by physical distancing rules and a collapse in consumer demand, and affecting youth employment in particular – explains the design of these interventions, and also the government’s haste in seeking to end the lockdown (Berry et al. 2020a, 2020b; Blyth & Lonergan 2020). Recent industrial policy discourses have, at best, paid only lip service to the reliance of (pre-pandemic) job creation on low-wage sectors. The book’s concluding chapter reflects in greater depth about the implications of Covid-19 for the political economy of industrial strategy in the UK.

Furthermore, the shock of Brexit has barely begun. Supply chains will be severely disrupted by EU withdrawal; coupled with the loss of the UK’s main export markets, the negative economic impact will be seismic (UK in a Changing Europe 2019). Indeed, some of the early impacts of a likely no deal Brexit, are already being misattributed to Covid-19. And while the Johnson government promises a new generation of trade deals to replicate or advance upon the benefits of the single market, it cannot even conjure a way of replacing the public investment funds (to support disadvantaged regions) by which the EU invested in the UK (Menon 2020). EU membership was of course an integral part of the UK’s neoliberal economic model, but it was not the cause of its failure.

The simple notion that industrial policy can be a central part of how the UK finds a way through this concurrence of crises is essentially correct – even if we doubt the extent to which current policy elites actually believe it. We must build a purposeful, capable and democratic public sector, reversing the outsourcing reflex and hollowing-out of local government, as well as reorienting the key economic policy functions of central government (Bentham et al. 2013a; Berry et al. 2018; Industrial Strategy Commission 2017). There is significant scope for green industrial strategy, and for rebuilding domestic supply chains, especially in industries such as food production. Clearly, however, the ecological challenge – of both climate change and biodiversity loss – is not one that will be met by simply investing in seemingly greener technologies and associated R&D: it requires major changes to everyday life, encompassing but extending far beyond conventional industrial policies, and reinforcing the need to rethink how we determine what is a valuable outcome of economic development. The condition of the care sector is a stain on economic governance – but also an opportunity to marry the development of a jobs-rich growth industry to tangible improvements in many people’s daily lives (and as Cohen & MacGregor (2020) argue, "care jobs are green jobs"). Investment in local infrastructure – housing, and energy systems, as well as transport – can have a similar effect (Foundational Economy Collective 2020). Industrial policy must also have at its heart efforts to address barriers to employment and progression for women, young people and people from black and ethnic minority backgrounds, as well as the deindustrialized working class in disadvantaged regions (these groups of course overlap). This would have significant economic benefits, but also help to sustain the political coalition necessary to facilitate a substantive industrial policy agenda.

This book

Overall, this volume helps us to understand the underlying problems that industrial policy in the UK could and should be focused on, by reframing the purpose of industrial policy in terms of how it can improve daily lives, public health, communities, the environment, and the quality as well as quantity of work. Many of the chapters focus, however, on assessing recent and current industrial policy practices, exploring the role of political and economic power in shaping policy priorities, and how power relationships and ideological commitments are embedded in formal and informal institutions. Of course, this wide-ranging account of why we are where we are is a platform for thinking through how we can get to a better place, that is, of how we can repurpose industrial policy beyond the present volatility, as part of reforming the accumulation regime more generally.

The book begins by setting the discussion of contemporary UK industrial strategy in historical context. In Chapter 1, James Silverwood and Richard Woodward discuss how British industrial policy has, for over three hundred years, prioritized financial services over civilian manufacturing; a characteristic they do not believe has been exorcised in its most recent incarnation. In Chapter 2, Victoria Chick compares the 2017 Industrial Strategy White Paper to the report of the Liberal Industrial Inquiry published in 1928. While the earlier document had a clear conception of public purpose at its heart, by comparison the White Paper reads more like a shopping list, in which the quality of life is subordinated to industrial success. Three elements the government sees as key to this success – competition, open financial markets and the profit motive – are considered and critiqued, with Chick showing how the application of the first two principles in financial markets has been particularly harmful. In Chapter

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