The Guardian View On The Steel Rescue: A Welcome Conversion
22 April 2016
When Northern Rock was nationalised in February 2008, George Obsorne, then shadow chancellor, denounced the decision as a throwback to the 1970s and the “failed policies of Labour’s past”.
So it is remarkable when a Conservative government signals its readiness to embark on the partial nationalisation of a major enterprise. There is Tory precedent, but not one more recent than the unhappy experiments conducted by Ted Heath. Sajid Javid, business secretary, declared on Thursday that the government is prepared to take an equity stake of 25% and provide hundreds of millions of pounds in debt finance to support the Port Talbot steelworks, providing a suitable investment partner can be found.Mr Javid, known for having drier Thatcherite economic instincts even than Mr Osborne, rejects the term nationalisation on technical grounds. And until a buyer is found and a deal done to clarify what precisely is being saved and what abandoned, the whole rescue is hypothetical.
But the symbolism is unavoidable. Allergic resistance to state involvement in industry, a defining feature of Conservative thinking for a generation, has been overcome. Political expediency has diluted the ideological aversion to Whitehall “picking winners”.
The appearance of indifference to mass job losses would always be problematic, but it is especially dangerous in the run-up to Welsh assembly elections and the plebiscite on EU membership. Downing Street could not afford to give the impression that it was abandoning Welsh steelworkers to the vagaries of global market forces or, in the context of the referendum, that deference to European rules was somehow to blame. So proactive bailout trumps laissez-faire doctrine.
But there are deeper currents at work, too. The credit crunch is relevant here, although the bank bailouts of 2008-09 responded to a crisis of different magnitude. In that period, the debate around the relationship between government and markets changed. The prevailing orthodoxy that counselled abandonment of weak businesses to their fate was not a responsible course when markets had failed and inaction would have meant collapse of the financial system.
That opened the way to a less abstemious account of what role government might have in the economy. Peter Mandelson, Gordon Brown’s business secretary, talked of a more “strategic state” – a third way between old-fashioned dirigisme and hands-off faith in the magic of markets. Vince Cable, his Liberal Democrat successor, developed this view further, publishing a “modern industrial policy” that envisaged the return to Britain’s governing philosophy of more long-term planning and investment.
Some Conservatives welcomed the shift, but Mr Javid was not among them. He let industrial strategy slip from the business department’s agenda – until Port Talbot. There is not much strategic about Thursday’s panic-fuelled promises. Yet the fact that a Conservative government has felt pressured into action testifies to a change in the political climate. Mr Javid may not want to call it nationalisation, but others may do so without provoking horror. The word is less dirty than it was a decade ago. That is a culture shift, not an economic remedy. The arguments against subsidy of loss-making industry, picking winners that end up as losers, and throwing good money after bad, may today seem less salient, but they retain real force.
Many lessons of the 1970s still stand. But softening of the ideological backlash against the failed industrial policies of that decade is also inevitable. To assert that government has a duty of care to communities whose livelihoods are threatened by global economic squalls, to imagine a role for the state in industry that is not defined simply as an obligation to stand aside – these are not the marks of radical left dogma but pragmatism and compassion. The Conservative party has rightly judged the times if it is stepping in that direction.
Source : theguardian.com