The idea is back that a wise thing to do is bring back state-sponsored ‘industrial policy’. See eg Lord Mandelson:
"We need to focus on areas of policy like technology, skills, regulation and investment and export markets – and how we set the relevant conditions for business success in these areas," he said in a speech to the Chatham House thinktank …
… Public policy, including a more active industrial policy, has, I believe, a role in ensuring that the market functions effectively as a means of maximising our economic potential in the long term – which it does not always do on its own."
My high-pitched scream of despair has cracked a window-pane.
What’s the real-life problem with this? Let me count the ways.
I can imagine a group of fairly smart people sitting in the faded elegance of Chatham House and being beguiled by the smoothly-spoken cosy idea that when things get difficult Mummy State will take care of us all.
Yet just think about what this means in practice.
Key myriad complexities of cause and effect and risk-taking and profit-and-loss management get removed from the Wisdom of Crowds as represented by the market-place, and in-sourced to one or other government department.
In that department will be shabby furniture and tired civil servants sitting in tawdry offices with signs about Celebrating Diversity! and Promoting Change! sellotaped to various flat wall surfaces.
They will be using slow, sub-optimal computers, legacies of previous ‘resource round’ inefficiencies and hopeless weeding techniques. Their data recall processes will probably be in disarray since no-one has gripped the public records data-storage function properly – it will be harder to trace back the history of an issue now than it was fifty years ago.
They will be unable to weed out the laziest or weakest colleagues, since the appraisal system is rotten with political correctness. Many people marked down for their poor work head for appeal procedures and tribunals, claiming ‘discrimination’. Rightly wanting to avoid this time-consuming and expensive farce, line managers pull their punches and opt for an easier life by giving everyone at least ‘Satisfactory’.
To try to make sense of this new Industrial Policy task, corners will be cut. No-one will have any idea of how to balance short-term likely winners against medium-term not-so-likely but bigger-if-it-works winners – it is theoretically impossible to do so.
No-one will be able to decide how to allocate resources as between sectors. Which should be supported? The ultra-diversified creative industries sector full of small start-ups creating value but in a diffuse, hard-to-measure way? Or bigger organisations in (say) Labour constituencies making products which aren’t selling but which have blocs of noisy employees clamouring for state help?
In this baffling situation, those firms whose bosses are good at wheedling their way into the system and getting some sort of special access to senior government levels (regardless of the value they are creating, or not) will tend to get a getter hearing.
And the bureaucrats them selves will plunge into endless rounds of ‘prioritising’ aimed at identifying the ‘best outcome’.
A personal example.
Back in the mists of time (1985 or so) British Airways was still state-owned. An issue came up about opening Manchester Airport to international trans-Atlantic traffic.
I as a young FCO official sat in on the meeting at the then Department of Transport tasked with preparing a recommendation. A BA representative argued strongly against the idea, as BA’s competitiveness would be affected adversely. Result? No opening up of that airport at that stage.
I remember being amazed at the time that in the oh-so judicious weighing of the pros and cons of rival options, no-one spoke out for the thousands of people and small businesses in and around Manchester who might have benefited from the airport being opened up.
There was simply no way of ‘balancing’ the immediate and more or less measurable risks to BA against the less than immediate and unmeasurable hopes of the wider community.
This is what Industrial Policy means in practice.
It is necessarily inefficient, sluggish and in a deep sense corrupt.
It gives people who are unable even in theory to do the job the power to take decisions. These can be implemented only by sucking resources away from the healthy parts of the system and steering them to less healthy.
The ultimate corruption lies in the lack of ultimate accountability. The state sector uniquely proclaims itself unable to go bust, since it confiscates whatever resources it needs from people living or as yet unborn to keep itself afloat.
So, Lord Mandelson, go for a walk round your department, look hard at the reality of the demoralised and forlorn civil sevice we now have, then tell us.
Just why is Industrial Policy the way to help us ‘maximise our economic potential in the long term’?