How to create new jobs in a flat-lining economy that has suffered structural unemployment for decades? George Osborne has called for a ‘march of the makers’, Ed Miliband talks about his preference for ‘producers’ over ‘predators’, and just about everyone says the UK must ‘rebalance the economy’ back towards manufacturing. On one level, it’s just more sound bites from a political class short of ideas. On another, something more significant is happening: industrial strategy is back.
The two words became taboo over the past 30 years, associated, in the victor’s history of neoliberalism, with discredited efforts at national planning during the 1960s and 70s.
As Britain changed course, manufacturing employment fell from 7 million in the 1970s to just over 5 million in the mid‑1980s. North Sea oil covered the macro-economic shock, but the decline continued through the 1990s and 2000s to reach just 2.8 million employed in manufacturing by 2008. Financial services never compensated, creating just 85,000 net new jobs between 1997 and 2008, concentrating its benefits in London. In the ex‑industrial regions, state-backed service industry jobs were created to plug the gap – an undisclosed strategy of Thatcher as well as New Labour.
With a mainstream political consensus now entrenched around the need for major public sector cuts – if not over the pace of cutting – many policymakers’ hopes for avoiding a worsening unemployment crisis are pinned on a manufacturing revival.
Banks have been gently encouraged to lend more to productive business, most recently via the Bank of England’s £80 billion ‘funding for lending’. Some state money has also been directed towards high tech industries, and a ‘green investment bank’ is also to be established, with £3 billion capital. However, these efforts have been tokenistic and disjointed, and are diminished further by slack demand in the economy as a result of austerity.
There is also a new interest in infrastructure. But much of this is fixated on grand projects like a third runway or HS2 rail, and there is no sign of the export-led revival that the coalition’s Office for Budget Responsibility predicted would save us from austerity.
So what are the progressive alternatives for job creation in manufacturing, and what are their limits? Proposals for a Green New Deal surfaced in 2008, proposing a Roosevelt-esque stimulus for green-tech, and the decarbonisation of housing and infrastructure to create an army of ‘green collar’ workers. This continues to provide the main source of inspiration, backed by economists like Mariana Mazzucato, who are urging an increased role for the state in industry.
In high tech industries like software and biotech, commonly perceived as the offspring of a risk-taking private sector, Mazzucato argues that the state is often the key innovator, with private companies joining in at a later stage once the opportunity for profit is clear. Three-quarters of new molecular bio-pharmaceutical entities come from publicly-funded laboratories. The real danger is not market failure, Mazzucato claims, but ‘opportunity failure’ as major transformative technologies are passed by because the private sector won’t bear the risk.
The TUC follows a similar line, urging government to ‘pick sectors’ – like clean energy – which can drive the next industrial ‘mega trend’. Proposals for a state investment bank created from RBS, as articulated in the Compass Plan B report, have gathered much support – indeed, as Red Pepper goes to press Vince Cable has announced that the government will establish a ‘business bank’. It seems likely that this institution will, like the green investment bank, be too small and not even a bank in the true sense. But it could – if operated in the manner Compass and others suggest – target lending towards socially-useful industries against the economic cycle and into areas the private sector neglects.
These efforts have expanded the realm of what’s thinkable in the UK and have proposed worthwhile changes, but there are other areas industrial strategists should be focusing on. Industrial strategy needs to engage with the pervasive problem of dysfunctional business models. Making shareholder value central to the strategies of large firms has created a culture of short-termism, focused on the next set of financial results rather than investments in research and development or the workforce. Since the mid-1990s investments in fixed capital (machinery, equipment and the like) have declined by a third among UK companies.
Recognition of the problem has grown in elite circles, and featured in a government study led by the economist John Kay earlier this year, but goes nowhere near far enough.
Worse still, UK manufacturing suffers from problems of broken supply chains. Large firms which sustain chains of small and medium sized companies have disappeared. The UK has less than 2,000 factories employing more than 200 workers, while the number of companies employing 10 or fewer has doubled over the last 25 years. So when a factory like Vauxhall’s Ellesmere Port is assembling kits of imported components, expansion of output increases imports as much as exports.
A foie-gras industrial policy of pumping credit into the economy will achieve little, as it will be forcing funds into manufacturers with these organisational problems.
The striking thing about most industrial policy discussions is the absence of geography. Most pitch at ‘the UK economy’, but this is an abstraction, given the divergence in needs and capabilities between London and the south and east, and the ex-industrial regions of the north and west.
The abolition of Regional Development Agencies continues a pattern of centralisation. Efforts to revitalise manufacturing should be implicitly regional, because while over half the value produced by financial services comes from London and the south east, manufacturing is spread almost evenly. However even during the pre-crisis boom, only London and the south created a significant proportion of new jobs in the private sector, and they stand better placed to benefit from most new industrial strategies – particularly those focusing on ‘industries of the future’, as Cameron calls them.
The business parks of Cambridge and tech startups of east London may provide export success in software or pharmaceuticals, but they have little to do with the West Midlands’ broken supply chains or the north’s structural unemployment.
A geographically sensitive industrial policy would pay attention to the more mundane industries of everyday life, which are broadly distributed according to population and could still generate mass employment. Food manufacturing, for example, is the UK’s largest industrial sector by employment with more than 400,000 workers.
Tax breaks should be targeted at companies producing regional employment increases (rather than relocations), and socially-useful products.
More than this though, economic regionalism should focus less on attracting firms and more on stopping funds leaving: redirecting state pension fund investments to local needs, regionalising supply chains wherever possible and rolling back damaging privatisations.
There are existing possibilities then for a new kind of industrial policy which creates employment all around the UK, but also recognises that job creation is not an end in itself, but part of an economic system which provides for social and environmental necessities and spreads its benefits more evenly.
The article draws upon research on industrial policy carried out at the Centre for Research on Socio-Cultural Change (CRESC), where the authors are based. Research reports are freely available at www.cresc.ac.uk
Hilary Wainwright argues against reclaiming populism for the left and for a leadership that supports people’s capacity for self-government
It may seem as though these apps are working for us, but we are also working for the apps, writes Kurt Iveson
It's over 100 years ago that domestic workers began to organise to demand the same rights as other workers. Yet with LSE cleaners on strike this week, historian Laura Schwartz asks: how much has really changed?
Omar Barghouti asks whether Donald Trump, in his recent break with America’s long-standing support for the two-state solution, has unwittingly revived the debate about the plausibility, indeed the necessity, of a single, democratic state in historic Palestine?
Glenn Greenwald was interviewed by Amandla Thomas-Johnson over the phone from Brazil. Here is what he had to say on the War on Terror, Trump, and the 'special relationship'
In 1972 David Widgery wrote about the bitter intensity of love in capitalism
Andrew Dolan on how the left must match the anti-establishment rhetoric of the right, but with a different politics
Emma Snaith speaks with directors Emer Mary Morris and Nina Scott about the power of theatre to encourage community resistance to estate demolitions.
In the first of a series of interviews with migrants' rights and racial justice activists from the US, Marienna Pope-Weidemann speaks to Peter Pedemonti, co-founder and director of the New Sanctuary Movement in Philadelphia
Photos from The World Transformed festival in Liverpool, by David Walters
Red Pepper’s race section: open editorial meeting 19 April
On April 19th, we’ll be holding the second of Red Pepper’s Race Section Open Editorial Meetings.
Changing our attitude to Climate Change
Paul Allen of the Centre for Alternative Technology spells out what we need to do to break through the inaction over climate change
Introducing Trump’s Inner Circle
Donald Trump’s key allies are as alarming as the man himself
Secrets and spies of Scotland Yard
A new Espionage Act threatens whistleblowers and journalists, writes Sarah Kavanagh
#AndABlackWomanAtThat – part II: a discussion of power and privilege
In the second article of a three-part series, Sheri Carr reflects on the silencing of black women and the flaws in safe spaces
How progressive is the ‘progressive alliance’?
We need an anti-austerity alliance, not a vaguely progressive alliance, argues Michael Calderbank
The YPJ: Fighting Isis on the frontline
Rahila Gupta talks to Kimmie Taylor about life on the frontline in Rojava
Joint statement on George Osborne’s appointment to the Evening Standard
'We have come together to denounce this brazen conflict of interest and to champion the growing need for independent, truthful and representative media'
Paul O’Connell and Michael Calderbank consider the conditions that led to the Brexit vote, and how the left in Britain should respond
On the right side of history: an interview with Mijente
Marienna Pope-Weidemann speaks to Reyna Wences, co-founder of Mijente, a radical Latinx and Chincanx organising network
Disrupting the City of London Corporation elections
The City of London Corporation is one of the most secretive and least understood institutions in the world, writes Luke Walter
#AndABlackWomanAtThat: a discussion of power and privilege
In the first article of a three-part series, Sheri Carr reflects on the oppression of her early life and how we must fight it, even in our own movement
Corbyn understands the needs of our communities
Ian Hodson reflects on the Copeland by-election and explains why Corbyn has the full support of The Bakers Food and Allied Workers Union
Red Pepper’s race section: open editorial meeting 15 March
On 15 March, we’ll be holding the first of Red Pepper’s Race Section open editorial meetings.
Social Workers Without Borders
Jenny Nelson speaks to Lauren Wroe about a group combining activism and social work with refugees
Growing up married
Laura Nicholson interviews Dr Eylem Atakav about her new film, Growing Up Married, which tells the stories of Turkey’s child brides
The Migrant Connections Festival: solidarity needs meaningful relationships
On March 4 & 5 Bethnal Green will host a migrant-led festival fostering community and solidarity for people of all backgrounds, writes Sohail Jannesari
Reclaiming Holloway Homes
The government is closing old, inner-city jails. Rebecca Roberts looks at what happens next
Intensification of state violence in the Kurdish provinces of Turkey
Oppression increases in the run up to Turkey’s constitutional referendum, writes Mehmet Ugur from Academics for Peace
Pass the domestic violence bill
Emma Snaith reports on the significance of the new anti-domestic violence bill
Report from the second Citizen’s Assembly of Podemos
Sol Trumbo Vila says the mandate from the Podemos Assembly is to go forwards in unity and with humility
Protect our public lands
Last summer Indigenous people travelled thousands of miles around the USA to tell their stories and build a movement. Julie Maldonado reports
From the frontlines
Red Pepper’s new race editor, Ashish Ghadiali, introduces a new space for black and minority progressive voices
How can we make the left sexy?
Jenny Nelson reports on a session at The World Transformed
In pictures: designing for change
Sana Iqbal, the designer behind the identity of The World Transformed festival and the accompanying cover of Red Pepper, talks about the importance of good design
Angry about the #MuslimBan? Here are 5 things to do
As well as protesting against Trump we have a lot of work to get on with here in the UK. Here's a list started by Platform
Who owns our land?
Guy Shrubsole gives some tips for finding out
Don’t delay – ditch coal
Take action this month with the Coal Action Network. By Anne Harris
Utopia: Work less play more
A shorter working week would benefit everyone, writes Madeleine Ellis-Petersen
Mum’s Colombian mine protest comes to London
Anne Harris reports on one woman’s fight against a multinational coal giant