No medals for the metaphors

It has been a great summer to be in the UK, with the Olympics providing a much needed lift. Most of us were drawn in at some stage to the action whether it was in the diving, athletics, fencing, cycling or whatever took your fancy. However some commentators seem to have been drawn in a little too deeply and have started making a direct argument from supporting athletes to supporting industries. This kind of argument is counter productive, as it does not provide a realistic comparison and allows critics of constructive government intervention to have another non-argument rather than get around to fixing the problems that the UK economy faces. 

The argument was made at length by Aditya Chakrabortty in the Guardian in his piece Why Osborne Should Pay Heed to Our Olympic Triumph. The article is good on how UK sport turned itself around following the dismal showing in Atlanta, but making the jump to 'picking winners' in an industrial context is a stretch. The end of the piece sums up the position - 

Cabinet ministers bang on about growing our manufacturing base, and yet their solution is to spread a little bit of money very thinly. To do otherwise, they claim, would be to pick winners and we know how badly that ends. Really, there's something wrong with picking winners? Tell that to Bradley Wiggins.

A similar phrasing has been used by Brendan Barber as quoted by the BBC in the run up to his speech at the TUC conference in Brighton. According to the BBC 

In his speech, Mr Barber will say it is wrong of the government to say it "can't pick winners" in helping companies and instead leaving the market to decide. He will add: "Tell that that to Bradley [Wiggins], Jessica [Ennis] or Mo [Farah], all supported by targeted funding.

This version of argument ignores in a wilful way the complexity of support, encouragement and assessment that has occurred in sport before any of the leading athletes see a penny or pound of public funding. In supporting a specific individual with a track record there is a basis for that investment and an understanding of when the investment is not working and so it should be cancelled. 

Supporting industries just does not work like this. The time frames are different, the amount of information you have prior to investing is vastly different, and most importantly the size of the bets you need to make and the portfolio of bets you can take are completely different. 

Now to be clear I am a supporter of activist industrial policy, based on strong dialogue between industry and government and with a shared sense of purpose. But when we start having these kinds of statements, returning again to the dead language of 'picking winners' we are doing nobody any favours. 

The UK needs an activist industrial policy, but even more than that it needs a frank and apolitical debate on how to support current and emerging industries. Without a clear sense of how government is working with industry, an understanding of how the benefits of the new industries will be shared, and above all else an understanding that neither side can move the economy forward alone, this sterile debate will continue to the detriment of the country and everyone struggling to find work and move forward. 

Ask Wiggins, Ennis or any of the other elite athletes - they may be the stars but they would not be able to do it without the support of an expert and committed team. That's the real lesson of the summer. 

Wishful thinking in policy debates

Four years after the global economic system almost crashed in on top of itself we're still searching for ways to build sustainable economies. These discussions and debates are important and complex, but they appear to be suffering from a set of ideals that we just cannot seem to shake off - the silver bullet, the binary choice, and the permanent fix. Maybe this is a result of our 24 hour news culture and the need just to fill airtime, but it feels like we're on a repeat loop of lazy thinking and that's stopping us from making serious progress on restarting the global economy.


Let's take each of these in turn. First is silver bullet, the desire to have a policy solution that at a stroke solves all of the problems that face us. Hopefully it will be cheap, easy to implement and obvious enough to garner public support. An example of this is the much repeated mantra of deregulating the market, specifically in the UK reducing the 'burden' of red tape on small and medium size businesses. While there are doubtless some examples where regulation could be eased, listening to some political speeches and lobby groups you could be forgiven for thinking that if this could be achieved all would be well in the world. We know this is not the case, but still the issue comes back time and again as a silver bullet that could save the economy. And so it is in many other areas of policy, the desire to have a complete fix even though we know that silver bullets are just bullets. 


The binary choice is even more pervasive and it is a core element of the narrative on the economy. Prior to the credit crisis reporting on the economy tended to go something like this - services great, manufacturing bad. All of the choices on the economy were reduced to this binary set, either you were a service company or a manufacturing company, either you were part of the new and wonderful knowledge economy, or you were trapped in the depths of time in some dark mill that dared to produced things. It is incredible to see, but this binary thinking and discussion continues even now, as this article on manufacturing versus services shows (and is the one that prompted me to talk about how we have policy debates). Our choices are rarely if ever a simple choice between yes and no, forward or backwards. Reducing the world to ones and zeros doesn't work at the level of economic policy, or most other policies for that matter. 


Last and by no means least we have the hope of permanent solutions. If we could just reduce the tax rate for the top earners we'd have a virtuous cycle of earning and investment and all would be well into the future for the economy, or so the story goes. It reminds me of the start of the Incredibles when Mr Incredible is being interviewed about being a superhero. "No matter how many times you save the world, it always manages to get back in jeopardy again. Sometimes I just want it to stay saved! You know, for a little bit?" Unfortunately the world keeps on turning and governments along with everyone else needs to keep on adapting. 


Our economy faces very difficult challenges. Allowing debates on policy which will have major impacts on individuals, families and companies to use these misleading ideas is not only incoherent it is wrong. Policy makers of all political stripes, commentators and we the public have to allow complexity back into our discussions, otherwise we'll just keep on looking for solutions that don't exist. 


F

Terms of engagement

There has been a rash of pieces lately on industrial policy, rebalancing, growth and competitiveness, all discussing what the UK needs to do to move forward and shake off the shadow of the credit crisis. Some claim manufacturing to be special, others that they have the silver bullet to kick start growth. What none really do is clarify the terms of the debate that we're having, to clean up the horrible mess of overused, broken and misunderstood terms that we keep flinging around. You say industrial policy and I say innovation policy, let's call the whole thing off.

So let's agree on one thing - we don't have a clear common language to discuss the needs of the economy, how its structure has changed and what weapons we have in policy to try to move ourselves forward. And this is not a semantic, ivory tower point. If we have no common language we cannot have a sensible debate on the needs of the economy. Without this, we'll keep talking past one another, rehashing old and tired language on left versus right, manufacturing versus services, openness versus protectionism.

I do think that there is one common thread that we can and should start to build on and that is the interface between the public and the private sectors. The gross simplifications of the 80s, where government was to be removed completely and companies allowed to press bravely on, should not be replaced pendulum like with a similar swing to the public sector. We need a strong dialogue and progressive relationship between the public and the private sectors, one that recognises the differences in goals and works to benefit both sides.

This we have not had, with many companies viewing government as an impediment and some in government slightly fearful of the power of the companies to decide their fate. This is not about a protectionist agenda purely preferencing UK companies. However, it is about recognising that government support can have different effects depending on whether it is provided to a UK based company or a multinational. It is about having a realistic conversation between both sides so that social goals re-enter the conversation. And finally it is about achieving the appropriate balance between public and private action to achieve the goals that both have.

The language on this debate is slowly changing, for example with Mariana Mazzucato's work emphasising how the private sector has depended on prior public sector investments in so many technology areas. But these more reasoned voices are still outnumbered. A stronger debate on how to balance the work between the public and the private sector needs more progressive voices, more companies willing to be open to more than quarterly returns and more politicians to be stronger on the role of government in technology development, innovation and growth.

It is only by acknowledging that both sides need each other that we have a chance to achieve growth again. Let's hope that we all are mature enough to have that conversation and not be sucked back into the thrall of long dead economists.

 F