A NEW INDUSTRIAL POLICY?

Ken Mayhew

www.skope.ox.ac.uk

OUTLINE
The old industrial policy
Its abandonment Why has this caused problems? Is a new variant emerging? What variant, if any, do we need - particularly in the context of SKOPEs remit on skills, knowledge and organisational performance?
www.skope.ox.ac.uk

THE OLD INDUSTRIAL POLICY

Horizontal (eg tax policy, regulation) Vertical (eg picking winners) A false distinction? Focus
www.skope.ox.ac.uk

ITS ABANDONMENT
Conventional welfare economics and the belief in private markets Regulated competition and the profit motive Remove red tape and de-regulate Privatisation Efficient financial markets distribute resources to the most promising sectors Rolling back the frontiers of the state
www.skope.ox.ac.uk

THE PROBLEM
Little improvement in underlying growth rates Little improvement in competitiveness Modern stress on the high skills vision Human capital as the magic bullet for achieving this But emerging problems with utilisation of skill Need to change product and production strategy
www.skope.ox.ac.uk

CHANGING PRODUCT AND PRODUCTION STRATEGIES

Can this be done without interference The Soskice approach Skills utilisation projects Quality of work/job quality projects BUT Something more is needed. A gradual partial realisation of this in policy circles
www.skope.ox.ac.uk

A NEW INDUSTRIAL POLICY FOR THE UK?

The Coalitions Plan for Growth Some old-fashioned phraseology: creating the conditions for growth; removal of unnecessary barriers BUT also some more radical phraseology The 2012 Budget: Ambition 1: create the most competitive tax system in the G 20 Ambition 2: make the UK the best place in Europe to start, finance and grow a business
www.skope.ox.ac.uk

A NEW INDUSTRIAL POLICY?

Ambition 3: encourage investment and exports as a route to a more balanced economy Ambition 4: to create a more educated workforce that is the most flexible in Europe Budget measures to further these ambitions: o Ambition 1 - tax measures o Ambition 2 tax breaks and regulation exemptions
www.skope.ox.ac.uk

A NEW INDUSTRIAL POLICY?

BUT also Government procurement from SMEs and reform of Enterprise Investment Scheme and Venture Capital Trusts o Ambition 3 tax concessions BUT also Green Investment Bank; new Technology Innovation Centres; money for capital investment in science
www.skope.ox.ac.uk

A NEW INDUSTRIAL POLICY?

o Ambition 4 greater emphasis on higher quality of vocational education and training BUT DOES THIS AMOUNT TO A NEW INDUSTRIAL POLICY? WHAT IS HAPPENING MORE WIDELY?

www.skope.ox.ac.uk

THE POLITICIANS
Vince Cable: the government has no compelling vision of where the country is heading; its actions are piecemeal; it has no clear and confident message about how we will earn our living in the future. Chuka Umunna: specialise in what we are good at; trust in markets not enough; markets cant set strategic direction.
www.skope.ox.ac.uk

THE POLITICIANS cont

Chuka Umanna: fundamental research (US government and the ICT revolution); regulation can create entirely new markets (zero carbon homes); foster clusters Active government: horizontal and vertical Sectorally targeted policies: Coordination Automotive Council Procurement policies
www.skope.ox.ac.uk

THE POLITICIANS cont

Institutions: Technology Strategy Board; Office of Life Sciences; but not enough Clear vision: analogy of the US and the space race and the Cold War

www.skope.ox.ac.uk

SMART SPECIALISATION STRATEGIES

European Commission High R & D intensive sectors Strategies defining a policy mix and budgetary framework focusing on a limited number of priorities to stimulate smart growth Flanders In Action UK Government stance
www.skope.ox.ac.uk

INDUSTRIAL CLUSTERS
Michael Porter, The Competitive Advantage of Nations, 1990 Clusters Policy Steering Group wound up in 2003 RDA Cluster Sub-Group Porters 2003 assessment of the UK economy Present UK Government stance
www.skope.ox.ac.uk

GREEN TECHNOLOGY
Foreign initiatives UK Government investing in green technology initiatives How does the funding compare with other countries?
www.skope.ox.ac.uk

A LESSON FROM THE USA

An industrial policy by any other name? DARPA; Small Business Innovation Research Programme; National Institutes of Health R & D tax credits in part to reduce off-shoring Attempts to revive manufacturing Billions on clean energy technology. Funding to build factories Military procurement nearly 3% of GDP
www.skope.ox.ac.uk

IS THE UK DOING ENOUGH?

The rhetoric has changed BUT Still a reluctance to intervene Still a failure to face up to the problem of achieving high quality production What could be done? Does it matter?
www.skope.ox.ac.uk