- Assumption that problems of business models and supply chain dynamics don’t’ matter/exist: “business problems are largely assumed to be exogenous, stemming from environmental conditions”, and;
- An absence of geography: “new industrial strategy policy proposals are for the UK economy as a national entity, and there is an unwillingness or inability to explain how these policies relate to the differing needs and capabilities of the UK’s regions”.
- Don’t pretend this stuff is easy, obvious or straightforward. Industrial policy is difficult, the payoffs are uncertain and long-term and some investments are bound to fail. Government can expect to receive little if any credit for the successes of industrial policy but it certainly won't avoid scathing criticism for its failures. It’s the way of the world.
- Be careful with loose terminology: where do manufacturing, industrial and economic development strategies/policies begin and end? The potential for damaging confusion is high and I’m sorry to say that’s where the White Paper seems to lead. If industrial strategy is to achieve anything at all then a minimum requirement is that people should know what’s being talked about.
- (with reference to point 1 above) Don’t assume that industrial strategy must necessarily focus only on external constraints on production – I know it’s difficult for politicians to acknowledge but too many companies (whole sectors?) operate lousy and/or damaging business models. Such models may succeed in providing the quarterly growth in earnings demanded by the City while actively reducing the systemic capacity to replicate the skills the firm/sector needs to sustain and improve production. Even if government got its supply side interventions exactly right, Scotland’s private sector manufacturers could not and would not morph into a Caledonian Mittelstand overnight.
- It’s a similar story with supply chain power relations. Think of supermarkets and food processors. A handful of very powerful monopsonistic buyers forcing prices down prevent the type of patient investment in skills and capital equipment necessary for the supplier to thrive in the long-term. CRESC again: “let us suppose that the problem is the stock market together with Sainsbury and Tesco and their effects on food processing which is our largest manufacturing sector. The new industrial strategy literature contains no clear answer as to what should be done because it is concerned mainly with adding new sectors and sources of finance and has proposed nothing more than talking shops for different interests in the food chain as the means to ‘win-win’ supply chain improvement”
- Put geography right up front – I recently attended a meeting in a market town in one of Scotland’s local authority areas not long since described as having a soviet style economy (which was of course palpable nonsense). Having recently suffered the demise of two major private sector employers a new economic development plan was being developed for the area based on 1) using local assets to engage with Scotland’s key sectors and 2) growing the local business birth rate. A highly orthodox approach and one doomed to failure. The area has no such assets and creating more marginal under sized poorly performing enterprises (step carefully with the acronyms) is likely to reduce rather than increase local employment. A foundational approach here will involve using every tool at Government (at all levels) to drive up the economic and social return from sectors like the privatised utilities, supermarkets and retail banking. National action (e.g. living wage) will also be necessary to drive up private sector employment standards and returns to the local economy.
- Get real about structural reform of finance: the White paper just doesn’t go there and the Scottish Government’s recent banking strategy paper is very weak. There’s simply no point promoting a new approach to industrial policy while continuing to treat finance as a priority sector i.e. promoting growth in the sector as an end in itself. This is bad not just for the economy’s productive sector but also I would argue for equality and democracy. If an independent Scotland wants to be less fair, equal and democratic while growing an economy that is inherently unstable then, yes, continue to pump up big finance;
- Innovation policy and industrial policy should be developed and implemented as intimately as possible. It was, I believe, a mistake for the Scottish Government to recently publish a joint entrepreneurialism and innovation strategy thereby further embedding the notion that private entrepreneurs are always and everywhere the key driver of innovative change. I’d start again from an Entrepreneurial State perspective.
- Drop all the silly stuff about the
pivotal role of very small firms. As Mazzucato notes, 'the majority of start-ups end up as
marginal, undersized, poor performance enterprises that can drive down profits,
increase factor prices for high-potential firms, confuse investors and fail to
generate benefits commensurate with the amount of public support they receive'.
- Finally, if done properly, industrial policy is potentially expensive and Scotland already spends much more than rUK on direct economic development. Corporation tax cuts are expensive and could – if paid for by removing allowances which favour manufacturing – actively undermine the purposes of industrial policy. It’s also essential that the Government captures at least some return from its investments to reinvest back into the system.