The government’s new industrial strategy needs to create a cultural transformation, as much as an economic one

January 24, 2017   By Adam Lent, Director, NLGN

It’s a chilly January day, and the government has just broken with its previous laissez-faire approach and announced a bold, interventionist plan to boost the UK’s economy at a time of great uncertainty.

But instead of it being Theresa May and Greg Clarke doing the speeches and media interviews, it was Gordon Brown and Peter Mandelson. The year was 2010 – a time beyond the reach of human memory in today’s Twitter-driven politics. But look at the ideas and aims of the Labour government’s Going for Growth paper and they could well have been lifted straight out of a dusty filing cabinet by the wonk charged with writing May’s “new” strategy.

The truth is that numerous governments of every party colour have announced interventionist strategies of remarkable similarity for decades: big investment for infrastructure, funding for university research, support focused on the “sectors of the future” and teaching of the skills required by disruptive technologies. Harold Wilson made such an approach the very heart of his 1963 election campaign with the slogan the “white heat of technology”. Even the supposedly staunchly laissez-faire Margaret Thatcher did a heck of a lot of intervention.

Which raises a rather challenging question for this government. These sorts of policies have been tried so often in the past, yet have failed to address the UK’s very long-term problems of low productivity and regional economic imbalances. So why have they not worked before? And how can they be made to work this time?

There are two answers, I think.

The need for cross-party support

Firstly, there is the fact that these policies are often not followed through. We only need to look at very recent history with Brown and Mandelson’s industrial activism being seriously watered down by George Osborne as part of his austerity drive. Too often growth strategy is the victim of changes of government, minister or priorities.

The truth is that deep-set, long-term problems like productivity and economic imbalance can only be resolved with the application of consistent policies over decades not years. Germany’s much vaunted success in this area is not down to the originality of its policies, but the fact they have been applied consistently by a series of governments ever since 1945. One of the most successful sectors in the UK, our pharmaceuticals industry, has flourished because it has in effect been in receipt of activist support in the form of NHS contracts since the 1940s.

This is why if May is really serious about her goals she should spend as much time building a genuine consensus and commitment across the whole of the party spectrum as will be spent on implementing the policy itself. Of course that means opposition parties playing ball – and the Conservatives being willing to lose whatever electoral advantage they think they can achieve by making this new strategy a Tory idea. I fear we will have to live more in hope than expectation on those.

The creativity of people and communities

But what ultimately drives the innovation and competitiveness of a nation over the long-term is the same thing that drives the innovation and competitiveness of the best companies: the mind-set of its people. There needs to be a deep creativity, openness to change and powerful sense of self-determination embedded in communities across the UK. Big investment and infrastructure plans will only go so far if the country – or, more importantly, certain areas of the country – don’t have the requisite restless entrepreneurial spirit.

This is where local government could play its most important role. Councils are far better placed than Whitehall mandarins to create a sense of transformational mission in a place and its people by working collaboratively with schools, colleges, local business, civil society organisations and cultural bodies. Councils have the knowledge and connections to nuance and promote such a message in a local context in a way Westminster never could.

This all sounds horribly fuzzy compared to ploughing billions into some new rail track. But as the increasingly influential economist and historian Deirdre McCloskey has spent a career pointing out, the last two and half centuries of remarkable innovation and growth were launched not by big plans from above, but by a cultural shift from below that made the entrepreneurial lifestyle and mind-set respectable and aspirational.

As McCloskey says, this was a shift that began in Britain – ironically, in the very same parts of the country that now struggle to break out of cycles of low productivity and growth. We must recapture that spirit across the whole of the country if this industrial strategy is not to go the way of previous industrial strategies.

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