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  • Published in Opinion
Winston Churchill, the Tory superhero whose glories rested on state intervention, Westminster, 1940 Photo: Wikipedia/ Cecil Beaton

Winston Churchill, the Tory superhero whose glories rested on state intervention, Westminster, 1940 Photo: Wikipedia/ Cecil Beaton

Tories getting high on their own ideology can result in a distortion of economic history for the rest of us, argues Chris Bambery  

It is hard to grasp but Theresa May is under attack from the right because they view her as a “statist.” (The term brings up visions of Joseph Stalin presiding over a Five Year Plan.) But that was precisely how John O’Connell, chief executive of the Taxpayer’s Alliance, branded her last week

He was particularly worried that PM May would preside over “state interference in business,” and by talk of an “industrial strategy.” Regarding regenerating British industry - if that is seriously on the agenda of the present Tory government, which I doubt - O’Connell believes that this can and must be left to the “free market,” so that “enterprise and competition thrive.”

Let’s look at what May and her Chancellor have done to provoke such ire. At the Conservative conference they promised £2 billion for housing plus £3 billion worth of loans to private builders. To you and me £5 billion is a lot of money but it would build just 33,000 houses over five years, which won’t solve Britain’s housing crisis or kick start the wider UK economy.

Frittered

The problem for neo-liberals like John O’Connell is that there is a wider problem. Across Europe, North America and Japan there is an investment strike. Capital would rather stuff cash under their mattress or speculate rather than invest in producing things. Generally across the G7 countries investment has fallen, but the UK is at the bottom of that pile, investing a mere four percent of its Gross Domestic Product.

Lack of investment goes a long way to explain UK’s atrocious productivity record, which along with Japan boasts the poorest rate among the G7 countries. The US, Germany and France’s rates of productivity are 30 percent greater than Britain’s. To plug that gap would require the UK government to invest £75 billion each year. May and Hammond are not countenancing that, although Jeremy Corbyn and John McDonnell might.

In Scotland there is a growing discussion about creating a state investment bank – Norway invested its oil and gas revenue in just that while the UK state frittered it away. So the situation facing the UK economy is that it has a growing trade deficit. It is worries over this situation that have have caused the current run on Sterling. The UK’s industrial base is too narrow to plug that by exporting more and lack of investment means low productivity which affects international competiveness.

Four decades of neoliberal dogma means that any thought that the state might have to step in where private capital fails was off limits. Now we are seeing this being challenged. PM May has done this but it will – I predict - remain at the level of rhetoric. Corbyn and McDonnell are proffering a more radical agenda of industrial renewal and regeneration.

That was a feature of the debates in the build-up to the 2014 Scottish independence referendum where Scotland’s success in developing renewable energy (compare and contrast with south of the border) and its expertise in off shore exploration and development, two areas which could be expanded. It is a debate the left needs to develop.

But let us return to O’Connell’s claim that the state cannot invest, it can only be the free market. If you look at how many other countries have industrialised, the British industrial revolution of the late 18th and early 19th century was the exception. It was based on relatively small private firms, usually family run, which raised money from local banks, not the City of London, investors or ploughed back their own profits to expand operations.

In virtually every other instance the state has played a crucial role in industrial development. In Germany post-1871 unification an alliance of Prussian landlords and Rhineland industrialists, under the leadership of Otto von Bismarck, ensured the new state protected German industries and state funds were available to develop heavy industry, often through state run banks.

In Italy the kingdom of Piedmont became the centre around which the new Italian state was formed in 1861. It used state funding to help develop a textile industry and to build railways, vital to a thriving economy.

In Japan the 1868 Meiji Restoration restored imperial rule but also catalysed a rushed industrialisation programme sponsored by the state because it feared foreign intervention, particularly from the USA, of the sort which was destroying its neighbour, China. State owned industries built modern arms as well as developing shipbuilding, mining and textiles.

Targeting

The modern United States is a product of the 1861-65 Civil War. The victory of the industrial north allowed it to erect a tariff wall which was crucial to US industrial growth. The Civil War itself helped fuel industrial growth as the state invested massively to fund arms production, naval vessels and new railroads. The First World War and the Second World War were key to America achieving its super-power state, with state funding key to industrial growth.

Today South Korea achieved industrial growth in the 1970s and 1980s by state intervention and targeting key areas of the world economy they could compete in. China, of course, has achieved its massive economic growth with massive levels of state intervention and funding. This is the dirty secret neoliberals want to bury. Britain’s “finest hour” was its resistance to Hitler’s Germany in the Second World War. What is not widely known is that the war economy that the arch-Tory, Winston Churchill, involved higher levels of state intervention and funding than in the Third Reich.

So let’s look at the UK. Our transport network lags far behind our neighbours. It’s crying out for massive investment to build high speed rail links dependent on new track. Richard Branson can’t do that, even if he was prepared too. Education is key but again it lacks investment. Scotland shows how we can use natural assets like wind, tides and water to supply our power. Again that requires state intervention. Our housing crisis cries out for a government building programme. Left to itself the private sector has created a situation where few can afford to buy and most fork out a huge percentage of their income on private rentals.

The cry comes back that state intervention equals more bureaucracy. Well not if it involved industrial democracy giving producers and consumers a say in investment decisions and in the running of these things. Indeed more than that - giving them control.

Chris Bambery

Chris Bambery

Chris Bambery is an author, political activist and commentator, and a supporter of Rise, the radical left wing coalition in Scotland. His books include A People's History of Scotland and The Second World War: A Marxist Analysis.

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