New Report: Towards an Industrial Policy for Scotland

New Common Weal report authored by Iain Cairns, Andrew Cumbers, Mike Danson, Iain Docherty, Pat Kane, Gordon Morgan, Robin McAlpine, Robert McMaster, Willie Sullivan, and Geoffrey Whittam

COMMON WEAL has published a new report by 10 economists and radical economic thinkers making the case for an industrial policy to re-balance the Scottish economy and boost productivity.

Towards an Industrial Policy for Scotland: A Discussion of Principles and Approaches can be read in full here .

The report is a collaboration between a number of Scotland's leading economic thinkers to identify a set of approaches towards industrial strategy that would tackle chronic weaknesses in the Scottish economy that have been allowed to proliferate through the UK economic model most commonly known as neoliberalism.

The recent GERS figures and UK Government Budget revealed that UK leadership had created an unbalanced and unproductive economy that is overly reliant on particular industry sectors like financial services and oil & gas, emphasising narrow GDP and employment indicators above all else to the detriment of the common good.

The UK economic model combines a dogmatic commitment to a 'free market' model with a reactive approach to government intervention that responds at the point of crisis in a particular industry sector like oil & gas or steel.

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The report makes the case for a mutual, sectoral model of economic development that rejects both the 'free market' approach and top-down planning as proven failures.

It makes the case for government intervention in the economy as normal; building a coherent, strategic government strategy to the economy rather than a crisis-ridden, reactive one.

The industrial policy advocated would be democratic and bottom-up, with 'sector associations' established in every industry sector involving all stakeholders to build a plan for the collective interests of the sector that would be submitted to government as recommendations for implementation.

"[The report] makes the case for government intervention in the economy as normal; building a coherent, strategic government strategy to the economy rather than a crisis-ridden, reactive one."

The approach takes from the Finnish sector association model, where "a biotechnology sector association will have as equal members multinationals, small and medium-sized industries, supply chain industries, employee representatives and trade unions, universities and research experts, vocational education providers, teachers and school curriculum developers and more."

Other key aspects of the report include:

- A critique of why UK economic policy has failed on productivity, including that it is too narrowly focused on GDP growth; only uses big macro economic levers like monetary and fiscal policy; is overly reliant on the financial sector; and does not encourage industrial democracy and high-pay, high-skill work.

- A 'policy task list' of key areas an industrial policy should seek to address, including how to connect Scottish consumers with Scottish products; create secure and long-term finance for small businesses; and developing 'smart specialisation' for innovation.

- The key principles of a successful industrial policy , including: a 'triple helix' developing clear partnership working and cooperation between enterprises, state organisations and R&D institutions; a 'Third Italy' approach where small businesses co-operate over input activities like R&D, training and marketing, but compete on 'outputs'; avoiding using private capital for public investment and infrastructure where possible.

Ben Wray, Common Weal head of policy & research, said of the report:

"If we've learnt anything from the past two weeks, it should be that when it comes to the Scottish economy we need to move beyond hope: hoping that oil prices will bounce back or that George Osborne will do anything other than help his friends in the City.

"UK workers are, in effect, producing a day's less output per week than many of our neighbours. That is the extent of the productivity gap."

"The news from the Budget that UK productivity has fallen even further should set alarm bells ringing in Holyrood. While Scottish productivity is better than that of the UK as a whole, we are in danger of being dragged down by a Chancellor who ignores all the warnings that he needs to invest in productivity and innovation, and continues with the tax cutting, low-pay, low-skill, low-investment model that has brought us to a situation whereby UK workers are, in effect, producing a day's less output per week than many of our neighbours. That is the extent of the productivity gap.

"This report, authored by some of Scotland's leading economists, explains how to turn that round. It doesn't offer glamorous solutions, but it does offer the right ones. Plan strategically for every sector, use the experience of all stakeholders in the economy to work out collective solutions, and target investment to improve infrastructure, boost skills and maximise technological capacity - and thus raise productivity."