Your report (UK-wide official pledge on ‘basic infrastructure’ urged, 1 November) outlines an independent commission’s call for the British government to provide “universal basic infrastructure” for every citizen as part of an ambitious new industrial strategy. The commission’s report supports Unctad’s broader argument across many countries and contexts. Industrial strategy needs to be embraced as a long-term plan, managed strategically and embedded through government.
Within hours of the report’s release, critics fretted about governments’ abilities to “pick winners” and eagerness to abuse the public purse. But with chancellor Philip Hammond’s forthcoming budget promising to boost productivity, it is timely to recall how industrial policies galvanised structural transformation in other times and places, from the Tennessee Valley Authority in the 1930s to China’s ambitious Manufacturing 2025.
Fretting about whether policymakers can “pick winners” is a tired distraction. Targeting is inevitable but difficult – witness the failure of the PPP approach; doing better means being clear about priorities, trade-offs and bargaining, and focusing on areas or activities with the best potential for building linkages throughout the economy that will promote virtuous cycles of renewal and advancement. To this end, Unctad research has identified a particular “institutional geometry” in support of industrial strategy that includes government-business councils and reciprocal control mechanisms that monitor, reward and discipline performance. The call for an industrial strategy unit housed within the Treasury should increase the likelihood that industrial policy is integrated with macroeconomic policy; but experience in other countries also shows that the best-laid industrial policies succeed when an expansionary, not austerity, framework is in place.
With persistently low investment by the business sector since the financial crisis – at around 9% of GDP – despite more than seven years of historically low interest rates and real wage growth, the sensible economics of crowding-in, multiplier effects and accelerator pressures should make a large public investment programme a no-brainer for the chancellor. The commission’s call needs to be heeded.
Richard Kozul-Wright and Dianna Barrowclough
Unctad, Geneva
