There is an alternative: governments can do what markets cannot

To succeed in age of globalisation, British manufacturers need a government that rejects laissez faire Thatcherism.

In the wake of Baroness Thatcher’s funeral last week, there has been much revisiting of the 1980s and her legacy. Though there are disagreements as to the benefits of her approach, there is one thing on which we can all agree: for better or worse, she did change Britain.

One impact of the revolution her policies unleashed was that too much of our manufacturing base was undermined. Nevertheless, Britain remains the ninth largest manufacturer in the world today, and a global leader in many areas of advanced manufacturing. The best of British manufacturers have shown they can meet the challenge of global competition.

For example, since Labour’s establishment of the Automotive Council – and the continued backing of it by this government – Britain has confirmed itself as a great place to make cars. The sector has attracted investment on an unprecedented scale and is on track to break the record for car production set in 1972.

What it means to be a leading manufacturer is changing as well, as the divide between the service and manufacturing sectors has become blurred. Last week I visited Rolls Royce, a global leader in aerospace. The majority of Rolls Royce’s revenues are generated not from manufacturing but from after sales service contracts. This shows how the benefits of a strong manufacturing base can spill over into other sectors, generating more of those well paying and satisfying jobs that our economy needs.

So the potential is there to grow our manufacturing base further. But British manufacturers need a government that backs their ambition. They need a proper, modern industrial strategy – demanding in its ambition and effective in its execution. This is not something which sits comfortably with laissez faire Thatcherism.

George Osborne – a disciple of the laissez faire approach - promised a "march of the makers". But overall, and despite a significant fall in the value of the pound, the reality simply has not matched his rhetoric. The latest trade figures were terrible, with the recent fall in exports reflecting a downward pattern that started in October 2011 according to the ONS. Companies with cash lack the confidence to invest. Firms needing finance to expand can’t get it.

One of the maxims of the neoliberal economic revolution Thatcherism unleashed was that governments must be subservient to markets. There was, Mrs Thatcher said, "no alternative". Recent history warns of the limits of this approach. It is also becoming abundantly clear that globalisation, far from limiting the space for governments to act, is making such action more important. It is not surprising that northern European economies which have pursued industrial strategies and applied a different model to Thatcherism have largely maintained their shares of expanding global trade through policies that work together to reinforce areas of national strength. 

Governments can do what markets cannot: they can help firms work together to address shared problems over skills or R&D, even as these businesses compete fiercely for custom. Governments can give direction and support to the animal spirits that drive investment and innovation. Through strategic use of procurement powers, governments can provide clear market signals, allowing British-based firms like Bombardier, whose plant in Derby I have also recently visited, to develop the capabilities needed to win public contracts. Public contracts can be used, after all, to advance public goals: to train apprenticeships, to encourage innovation, and to boost local employment.

Baroness Thatcher’s passing has revived strong memories of a bygone era. Yes, she changed Britain, but changed circumstances mean our country’s economy now needs something different too - there is an alternative and we must grasp it. 

 

A Vauxhall employee works on a vehicle on the production line at the Vauxhall car factory in Ellesmere Port, north-west England. Photograph: Getty Images.

Chuka Umunna is Labour MP for Streatham.

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.