A panel of economists, policymakers and business figures on a best practice industrial strateg

Collyer, Kate

Elliot, Gary

Littlewood, Mark

Mazzucato, Mariana

Overd, Alan

LSE Research Online

11/23/2016Industrial policy: Past, present and future in post-BrexitBritain and beyondblogs.lse.ac.uk /businessreview/2016/11/23/industrial-policy-past-present-and-future-in-post-brexit-britain-and-beyond/Union Jack, by PeteLinforth, under a CC0 licenceOne in a series of evidence sessions for the Centre for Economic Performance’s second Growth Commission, apanel of top-tier economists, policymakers and business figures set out their visions for a best practice industrialstrategy, before taking questions on: the impact of Brexit, where next for state aid, the role of governmentalinstitutions, and more. Mariana Mazzucato, Professor of Economics of Innovation at SPRU, Sussex University, andauthor of the bestselling book ‘The Entrepreneurial State’The case for a bold, mission-led industrial policy: ‘An economy doesn’t just have a growth rate, it has a direction. And we need to make surethat the UK economy is going in the innovative, job-creating direction we want it to.’‘We need mission-orientated, vertical industrial strategy policies which catalyse growth across sectors. WhenJFK decided that man should go to the moon, that catalysed growth across all sorts of sectors, from sciencetechnology to specialist apparel.’‘The UK does not have enough patient finance. Since innovation is inherently risky and takes a long while topay off when it does, this means that we cannot necessarily rely on the finance sector or the private market toprovide the funding we need to support scaling and job-creating good businesses.’1/4 Mark Littlewood, Director General of the Institute of Economic Affairs A free-market libertarian response:  ‘I am deeply sceptical about the ability of governments to pick winners.’‘The question is who stands in a position on comparative advantage to be able to foresee what the industriesand sectors of the future are, and nothing indicates that those people are in Whitehall.’ Gary Elliott, CEO of the Aerospace Technology InstituteA positive case study for industrial policy in aerospace:  ‘In many sectors, including aerospace, we need industrial policy to overcome marketfailureand promote positive spillover effects.’‘We act as a voice for the industry, an interlocutor between government and business and an ambassador foraerospace abroad.’ Kate Collyer, Dep. Chief Economic Adviser at Competition and Markets AuthorityOn the important role of competition policy in industrial best practice: ‘We believe that competition promotes innovation and drives the creation of growth and jobs.’‘The UK has one of the most effective competition frameworks in the world, which is attractiveto companies considering relocating and to people in the UK thinking about starting a business.’ Alan Overd, Vice President at Charles River AssociatesThe perspective from the business side:  ‘Clarity, transparency and reliability are key for businesses.’‘A stable competition framework is particularly important. Whilst there certainly are some areas of UKcompetition policy which might be improved, on the whole businesses know what they are getting and it’s2/4important not to change the framework too much.’Q & AWhat does Brexit mean for the future of the UK’s industrial strategy?Panellists agreed that Brexit had caused significant uncertainty for businesses, which might result in greatercorporate surpluses (corporate cash reserve piles) at a time when the economy would benefit frominvestment and recycled profits.Some noted the importance of protecting key sectors, for example the UK’s strong higher education anduniversities sector.All noted that Brexit will result in a significant legislative pipeline for Parliament, which presents bothopportunities and challenges in terms of re-evaluating the industrial policy landscape in the UK.What is the future of state aid rules?Leaving the EU will mean that British policymakers are no longer bound by certain important EU state aidrules.Panellists discussed the potential and desirability for these to be re-imposed by Parliament.It was noted that state aid rules can play an important role in preventing politicians from making short-terminterventionist decisions, and also offer politicians a ‘cover’ in periods when such decisions might bedemanded by the media but possibly not in the best long term interest of the country.It was noted that even within the EU there are ‘asymmetric’ state aid rules, applying to some companies insome countries and not always to others.What institutional architecture is required for best practice industrial policy?It was agreed that further work should consider the functions, objectives and balance of power betweendifferent departments, as well as decision-making at different levels of national vs devolved / regionalgovernment.What are international best practice examples?Singapore, Hong Kong, Germany, and the United States were all noted for different aspects of their industrialpolicy strategies.         3/4 Copyright © 2015 London School of Economics4/4

Industrial policy: Past, present and future in post-Brexit Britain and beyond

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