Most of the publicity around Humza Yousaf’s new year speech at Glasgow University focussed on his claim that independence could deliver a £10,000 windfall to households in Scotland.
The First Minister’s Panglossian assumptions around that have been well covered elsewhere. For the purposes of this blog, we will focus on the central argument in the First Minister’s speech: the case for an industrial strategy for Scotland.
We disagree at Our Scottish Future with Mr Yousaf’s belief that independence is needed to deliver this (as, one suspects, do the ghosts of former Scottish Secretaries such as Willie Ross and Tom Johnson who pursued industrial strategies without even the need for devolution, never mind independence).
But we can agree with Mr Yousaf that an economic plan for Scotland is required if the holy grail of above-inflation growth in Scotland is to be realised. We also agree that, whatever Scotland’s constitutional status, it will require those levels of above-inflation growth to pay for the wraparound public services, the generous benefits, and above-inflation pay rises that the Scottish Government has committed itself to. It’s an important subject and it requires serious attention.
The case for an industrial strategy
By industrial policy, Mr Yousaf told his audience in Glasgow that he meant “the idea of direct government intervention to boost specific sectors”. It’s an approach that has been derided by free-market opponents as “picking winners”. At its worst, it’s seen government throw money away at short-term flops. But, said Mr Yousaf, in the modern world, it’s time has come again.
…Significant successes were too often overlooked. These include the pivotal role of state industrial policy in the rapid development of Japan, Korea and Taiwan as well as the ‘de-facto industrial policies’ pursued in the US through the Pentagon and NASA which contributed so substantially to general technological progress. Today, across the globe, explicit industrial policy is back.”
He’s right about that. Indeed, it was only last month – at our conference on the Scottish economy in Edinburgh – that former Science Minister Lord Sainsbury set it out. Between 1997 and 2007, Sainsbury oversaw the biggest growth in public investment in science and R+D ever seen in the UK. You can watch his speech here. He also published a new pamphlet setting out why we need a new industrial strategy now.
In it, Lord Sainsbury sets out four ways in which a modern Industrial Strategy differs from the old “picking winners” approach.
· It’s not about “bailing out individual loss-making companies”
· Strategies should be led, initially, by growth sectors themselves, not government.
· Those sectors must be those which can show competitive international advantage, not in industries in decline
· This isn’t about a “planned economy” approach: it’s about deploying targeted public investment in a way that unlocks “the power and ingenuity of private markets, innovative firms and competition to lay a foundation for long-term growth”.
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