Industrial policy – back to the future?

Jon Agar’s new book, Science Policy Under Thatcher, is an interesting dissection – based on newly released government documents from the National Archives – of the u-turn in science policy in the UK in 1987. The campaign against cuts to government funding of research had begun a year earlier, with the launch in January 1986 of Save British Science. Agar argues that those cuts did not mark a specific science policy shift; that came the following year with three changes: a restructuring of science advice to government to increase central control of the machinery; the document A Strategy for the Science Base, which distinguished three tiers of institution, namely a few research-intensive universities, teaching-focused centres, and near-market entities; and finally – under the ideological influence of the Number 10 Policy Unit and its adviser George Guise – a focusing of government funds on pure, ‘curiosity-driven’ science and major cuts to near-market research funding, along with the privatisation of government research labs undertaking such activities.

This was a significant shift away from the previous conventional wisdom. It had emphasised the need for government-funded research to deliver identifiable economic returns. For the Thatcherites, this meant the bad old ways of winner-picking, and civil servants pre-empting the decisions of private sector managers and investors who were far better placed to take risks and judget markets. The switch to funding ‘market failure’ pure science was part and parcel of the dumping of industrial policy (a contradiction in terms, more or less, to the free marketeers).

Interestingly, we have now a policy u-turn back through another 180 degrees. And although I strongly support the need for government to engage with research across the entire spectrum from far from market to near-market, there is a danger of making the same mistakes all over again as policy makers go back round the goldfish bowl. The enthusiasm for ‘sector deals’ makes me very uneasy, as these are almost always the outcome of successful lobbying efforts, and probably encouraging anti-competitive outcomes. After all, which companies are in the ‘auto sector’ today – and which will be in 10 or 15 years? What about new entrants – how do they get in on ‘sector deals’? Similarly, although ‘mission oriented’ policy is terrific in theory – who could argue with a mission like ‘decarbonise the economy’ or ‘deliver high quality social care’ – in practice it risks translating into officials getting involved in battery technologies and enthusing consultancies with the potential new opportunities.

The experience of the 1980s should also make those interested in science policy and industrial policy now reflect a bit before concluding that back to the pre-1987 future* is the right way forward. ‘Should the government mainly fund basic science or near-market research?’ is the wrong question. Governments of course should fund basic science, which is a classic market failure. But the policy challenge isn’t about money so much as co-ordination and facilitation – ensuring industry standards emerge fast enough and at the right level to grow new markets, enforcing competition law, using government procurement to give investors confidence there will be demand for innovations in areas such as health care or education, making sure the financial tax and regulatory system provides incentives to invest in growing tech businesses, and so on.

The overview of the 1987 policy switch is contained in the final chapter of the book, and as it contrasts with previously-published versions of Thatcher’s science policy there will no doubt be further debate about it among historians of science policy. Agar’s account seems (to this non-expert) very well documented and persuasive. The earlier chapters single out specific issues or episodes, such as civil nuclear power, the environment, and the public debates over AIDS and IVF (the Warnock Commission – my colleague Sarah Franklin and her team have done tremendous archival and interview-based research on this). The book could have done with a bit more synthesis as it’s easy to get lost in the weeds. On the other hand, the detail is deeply fascinating for anybody interested in the mechanics of government and policy-making. I really enjoyed reading it.

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*The UK government provided John DeLorean with significant fiscal incentives to produce his futuristic car – which was then only used in the movie Back to the Future

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Social butterflies?

When somebody is called a social butterfly, it isn’t usually a very positive evaluation. Social Butterflies: Reclaiming the Positive Power of Social Networks by Michael Sanders and Susannah Hume use the term in a neutral, descriptive way to characterise modern life: fluidity between social categories, more means of communication with more people, and above all amplified mutual influence – for good but also, very obviously, bad, whether that’s bank runs or fake news. As they write, “The rise of social media has sent our social instincts into overdrive.” Not so much butterflies as scorpions online, perhaps.

The book is a behavioural economics perspective on social capital – both the authors were previously researchers at the UK’s Behavioural Insights Team aka Nudge Unit. It starts with a section on group behaviour. looking at the ‘them and us’ instinct and resulting stereotyping and discrimination. It then moves on to social choice architecture – how can nudges be used to shape positive social interactions and outcomes. This includes questions such as how social norms shift, how habitual behaviours shift, how information moves through social networks, and shaping group dynamics. Then there’s a final part discussing policy interventions to build social capital: “Our aim with this book is to sketch out a roadmap to a society where there is more belonging, more trust and – we hope – less discrimination and confirmity.”

These days this seems like a forlorn hope. As the Conclusion observes, the authors started out writing in a mood of cheery optimism and then, well, stuff happened. It’s no coincidence that academic interest in social capital (including ours at the Bennett Institute) has revived after quite a long hiatus, given the state of the world and the polarisation evident in some may countries and political systems. Furthermore, they observe, social influence has negative connotations of pressure to confirm, for many people. I’m not wholly persuaded that nudge approaches are the answer to the apparent decline in social capital or trust; they turn the lens on individuals and the book is full of jolly examples of individual change. Although society is composed of individuals, perhaps collective outcomes are not best thought of as the sum of individual choices… is the solution to the problems inflicted by social media to be found in the choice architecture of Facebook and Twitter? For sure their engineering principles should take account of the social consequences but I wouldn’t want to rely on that.

Still, the book does have lots of interesting examples, relevant to people running teams or organisations as much as to policymakers. It’s engagingly written – and is for sure asking an important question.

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Trains and other illth

I thoroughly enjoyed reading Ruskinland: How John Ruskin Shapes Our World by Andrew Hill over the weekend. As the subtitle indicates, it isn’t a biography but rather an exploration of the influence Ruskin has had in a number of domains, from helping establish the National Trust as steward of the countryside – and encouraging the formation of the Sierra Club in the US – to shaping views about art, to influencing views about capitalism and the dignity of labour on the left of the political spectrum.

I’ve never read a biography of Ruskin, and he doesn’t emerge from this book as an obviously likeable character. In fact, pretty weird. The book I have read (bought at Brantwood, Ruskin’s home in the Lake District) is his famous anti-capitalism, anti-industrialism tract, Unto This Last. Ruskinland sent me back to it, and it still seems completely unconvincing and hyperbolic, for all that no sentient being would deny the horrors of the Industrial Revolution, or even modern capitalism.

Count me in on the need to ensure environmental sustainability, decent pay and working conditions, well-crafted homes etc. But it’s vacuous not to recognise the trade-offs involved in machine-enabled growth. Machines, mass production, raised standards of living, increasingly freed women from domestic drudgery. Trains – which Ruskin hated despite using them a lot – enabled people to escape the social constraints of village life and find urban anonimity. Unto This Last seems to me unadulterated romantic conservatism. Sustainability is easier for the rich. As Hill agrees, Ruskin was also an illiberal ultra-Tory. And adds: “Like today’s Twitterati and online opinionistas, he often adopted an extreme stance for effect.” Counterproductively so, in may case.

So Ruskinland hasn’t changed my views, but it’s a great read & the issues it raises are absolutely pertinent today as we survey the ‘illth’ (that handy Ruskinian neologism) being created by modern capitalism.

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The Technology Trap

Anybody interested in the economic impact of digital and AI, in particular on jobs, will want to read Carl Frey’s new book, The Technology Trap: Capital, Labor and Power in the Age of Automation. He is probably best known for his rather gloomy work with Michael Osborne (original pdf version here) highlighting the vulnerability of many jobs – almost half in the US – to automation in the next couple of decades. The book expands on the issues that will determine the actual outcomes, and is – as the title indicates – still quite pessimistic.

The structure of the book is historical, with sections on pre-industrial technologies, the Industrial Revolution (which saw widening inequalities), the mass production era (which reduced inequalities and created an affluent middle class), the recent polarization in the era of globalisation and digital, and future prospects. The key distinction Frey draws in between technologies which substitute for labour and those which complement it. Whereas the 19th century and the present seem to involve the replacement of people with machines, the 20th century innovations needed increasingly skilled labour to work with them.

Although I am probably not as gloomy about future prospects for work and incomes, I really enjoyed reading the book, which covers a wide range of technological applications in addition to the well-known historical examples. It leaves open two questions. One is about the present conjuncture: what explains the combination of seemingly rapid technological change and adoption with – in at least some OECD economies – very low unemployment rates? The answer might just be ‘long and variable lags’ but the question surely needs addressing.

The broader question, or set of questions, is really about the interaction between technology and labour market and other economic institutions. Although automation is likely to have the same general effects everywhere, the outcomes for workers will be refracted through very different national job markets, education systems, tax systems and so on. How much can any individual country lean successfully against the wind? Frey is not (unlike Robert Gordon) US-centric but does not get into these issues.

And beyond the response to technological change, what is it that determines the direction of technical change in the first place? The book treats the labour substitution or complementing as exogenous. But why were electric unit drives in auto plants and internal combustion engines created as complementary and yet automation in today’s car industry seems like it will substitute for labour? It seems to me this must be an institutional story too, but I don’t think it’s been told yet.

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Economic booms in space, not time

All economic growth has occured through urbanisation, but modern industrial capitalism dramatically so. Robert Hall once drew a parallel between economic booms in time (business cycles) and space (cities). This is a preamble to saying I’ve always enjoyed books about cities, or perhaps it’s an excuse for my interest. Recently I polished off The Ghosts of Berlin by Brian Ladd, a sort of history through architecture and urban form. This week it was Why Cities Look the Way They Do by Richard Williams. It argues that cities are the result of the interaction of many different processes occuring through time, and the chapters each explore some of these – culture, war, sex – and also money, work and power. In other words, there’s nothing intentional about how cities look, for all the efforts of the planners. Different cities are used as examples; the book’s focus is mainly big global cities but others such as Liverpool and Portland and San Paolo feature too.

I particularly liked the money chapter’s observations on real estate. It points out that some iconic supposedly residential towers such as 432 Park Avenue in New York are only half occupied and that this is intended. For they are not homes but investment assets, whose owners don’t care if they’re never occupied. Money buys space, and the emptiness is a store of value in the context of economic agglomeration. Of course there’s a poignant contrast with a city like Detroit, which is emptying, but whose spaces mark depreciation, not appreciation, of the asset. The chapter about the culture industry and its self-contradictions is nicely spiky, as is the one about the hipsterisation of industrial buildings in the modern world of work. As someone who grew up in an old-fashioned industrial place, I’m happy with the hipsterisation process; Manchester now is a better urban environment for its humans now than it was in the early 80s even though it’s lost the gritty culture/music scene of that era. But I can understand the regrets for lost authenticity.

Why Cities… has loads of pictures, too. The author is an art historian, so reading it prompts one to look. Very enjoyable.

Why Cities Look the Way They Do

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