The government ought to get smarter at supporting UK industry.
We are living in a world which is becoming increasingly globalised. Many economists contend that all nations will benefit by opening up markets to unfettered competition - in this way, they argue, consumers will get the best deals, inefficient producers will be eliminated and resources will flow to those places where they can be best used.
All of this seems very attractive, and smacks of perfect market theory, which contends that perfect information will enable players to make completely rational decisions, and nobody will cheat.
Problem is - there are no perfect markets because human beings are always trying to find imperfections and exploit them, people are not often completely rational and some will use their power to distort markets in their favour - and this is before we consider greed, dishonesty and exploitation.
And so it is with international trade - global competition is influenced by the interests and actions of national governments, the machinations of power blocs and the exploitation of the weak and poor. These forces shape the nature of competition and all national governments have an interest in promoting or defending the interests of their countries.
So, what might be the legitimate roles of national governments in this globalising world? Purists will argue that they ought to promote open competition and efficient markets for global trade - and governments do negotiate with some success on such issues through such bodies as the G8 and the World Trade Organisation.
But there are two sides to national interest and what governments can do to promote and defend the interests of their citizens. The first might be described as the public and open side - so national governments will try to negotiate terms of international trade that benefit their own countries, as well as promoting the best interests of all.
But there is another, more shadowy side - that of quietly acting to ensure that one's country gains advantage in the competitive arena.
How does the British government perform?
Some good things.
It is tempting to slate the government on all fronts, but actually, recent British governments have performed rather well in some respects, for example:
- Ensuring macro-economic stability - we have not experienced the disastrous 'boom-bust' cycles caused mainly by politicians manipulating fiscal policy for party political gain. Handing interest rate policy to the Bank of England was a very smart move by Chancellor Brown.
- Creating a credible strategic vision for the economy and its contribution to society. Mr Brown, as can be seen in another part of this site (Gordon Brown's vision for Britain), has crafted a vision of an entrepreneurial, open, competitive powerhouse of creativity and high-tech enterprise. It remains to be seen whether the government is willing to tackle the impediments to achieving the vision. So far, there is little positive evidence of this, so Mr Brown's dream may remain political rhetoric.
- Keeping Britain open and attractive to inward investment and foreign companies. Despite those who claim that we are over-bureaucratic and would de-regulate to the point of making Britain a sort of Third World economy, the UK is still attractive for many foreign companies - which have been buying UK industry apace, as well as establishing research, trading, services and manufacturing businesses. In fact, without foreign investment and skills, there would be virtually no motor vehicle manufacturing in Britain - and the same applies to most other modern technology industries.
- Supporting Education and Research. There is some evidence that the current government and chancellor Brown in particular, have twigged that a modern economy needs to be underpinned by a world class education system and an excellent research base. But there is a massive difference between rhetoric and effective action and we remain to be persuaded that the government's long-term actions will deliver the goods.
Recent governments have done rather well of late in the field of public policy.
But when it comes to government supported executive action, the picture changes.
We would expect British governments to show a very marked bias towards supporting British enterprises when it comes to public procurement.
We see nothing of the sort. Here has been a long history of incompetence and bias against British companies in many government agencies.
The Ministry of Defence probably leads the way when it comes to perverseness and incompetence. A combination of inept specifying and contractor incompetence has caused the landscape of military procurement to be littered with the wreckage of failed projects. Examples are the British AWACS aircraft project: TSR 2, for those with long memories, when the MOD cancelled the most promising military project of a generation at a late stage, and commissioning three V-bombers in the late 1950's. And just to prove that nothing has changed, the MOD's behaviour in commissioning the construction of the next generation of aircraft carriers, leading to the handover of most of the project to Thales, a French company and Halliburton, an American one, represent behaviour that would not be seen in France or the US. The development of something as basic as the military rifle, helicopter purchasing and aircrew training have been other contemporary disaster areas.
We can go on and on - government IT procurement has been a disaster area, but a bonanza for foreign-owned companies, the current government and opposition seem to be hell bent in inviting American health care companies into the UK, despite the fact that America has one of the most expensive and inefficient health systems in the world.
Governments down the ages have failed to play their part in creating national infrastructure - especially a transportation infrastructure - that will support enterprise. The result is that we are lumbered with a transport system that is costly and inefficient, with little evidence of any strategy behind it. The current government, unlike some of its predecessors, shows signs of understanding the problems, but as yet not much effective co-ordinated action.
Anybody who reads this website will have seen the mass of evidence that Britain has uniquely dysfunctional investment and financial services industries. Industrial investment has all but completely descended into short-term gambling and the financial services industry has made savings and pensions into a sort of lottery.
These issues are so important that it might be expected that government would have to take a hand - after all, who represents the public interest? We should have confidence that clever people in the Treasury are working overtime on how to nudge the main investment markets back towards responsible long-term behaviour and/or encourage the formation of new forms of long-term investment markets. Otherwise Chancellor Brown's vision of a modern high-tech Britain will come to naught.
The reality - mainly inactivity laced with a dash of what Polly Toynbee called "A cringing appeasement of the rich and powerful". Politicians, like managers, have become disgracefully subservient to financial industries that should support the wider public interest, but are in fact undermining it.
Subtle (and blatant) support for British interests.
The US government, which makes much fuss about democracy, market forces and free trade, acts quite differently when it comes to supporting US interests. If industries are in trouble, like steel, subsidise them; where there are powerful lobbying forces, like in agriculture, pander to them and subsidise; if Chinese companies wish to acquire oil interests in the US, block them.
The US government uses government procurement in defence, in Iraq, and in the public services to support US interests, it uses bodies such as the World Bank to pursue policies that benefit US interests to the detriment of developing economies and it will pressurise and bully anybody who might be construed as damaging US interests.
This lead is followed by France and nearly every country in the world.
However, the British government appears to have no strategy for supporting British interests, and when it does act it is usually too late and too little, like Rover, Marconi and in supporting and protecting emerging industries like natural energy.
Our politicians and civil servants seem like naïve idealists, lecturing others on the virtues of open markets and free trade, whilst our vital interests are undermined by others who are playing to quite different rules.