Category Archives: Post Industrial Communities

Industrial Strategy and Steel

Ian Greenwood 300x270
Dr Ian Greenwood, Leeds University Business School

With the restructuring of its former ministry for Business Innovation and Skills (BIS) into the ministry for Business, Energy and Industrial Strategy (BEIS), led by Minister Greg Clark, the government looks to have accepted the idea that an element of coordination of the economy is necessary in order to be able to compete with other industrial nations. The Green Paper on industrial strategy, the consultation period to which ended on 17th April 2017, appears to have consolidated this position.

Although the Green Paper, ‘Building our Industrial Strategy’, proposes that industrial strategy is not about directing the economy, it does, nonetheless, suggest an intent to intervene in the working of the economy. This is in somewhat stark contrast to the position in July 2015 when the then Secretary of State for Business Innovation and Skills, Savid Javid,  informed those desperate for the government to engage with the crisis engulfing the UK steel industry, that he believed in an ‘industrial approach’ for the UK industry rather than an ‘industrial strategy’. It was the deep crisis in steel, that in large measure, through the work of the All Party Parliamentary Group (APPG) for steel, that propelled the government to think again about the extent to which strategic intervention in industrial is necessary.

The proposed industrial strategy is to be based on 10 pillars. These are science, research and innovation; skills; infrastructure; business growth and investment; procurement; trade and investment; affordable energy; sectoral policies; driving growth across the whole country; and creating the right institutions to bring together sectors and places. Within an overarching ambition of improving living standards and more balanced growth by increasing productivity, the government sees industrial strategy as necessary for a stronger economy, ‘fairer society’ and development of ‘high paid, high skilled’ jobs. The strategy will, furthermore, reflect active government that moves beyond short term thinking. It will, ‘build on strategic strengths’ and ‘tackle underlying weaknesses’. Industrial strategy is though, to be ‘modern’. This, Clark explains. is not about directing the economy and 1970s style industrial strategy, ‘mistakenly focused’ on existing industries and the big firms within them. New industrial strategy will act to nurture new industries that will ‘challenge and in some cases displace’ existing industries, not to privilege the protection of incumbents. Picking losers as much as winners seems central to this philosophy. In the absence of key supports for manufacturing and energy intensive industries, this might well become a self-fulfilling prophesy.

What might also be cause for concern, however, is that apart from reference to advanced engineering, the aerospace and auto sectors, mention in the Green Paper of the wider manufacturing sector and primary such as steel is scant. Yet an industrial strategy in which industries such as steel are manifestly part, is precisely what is required. This is the case in respect not only of the intrinsic value of such industries, but also precisely because of the vital part played by, for example, steel, in the up and down stream viability of the aerospace and particularly automotive sectors. It is generally accepted that if car manufacturers cannot source around 40% of its materials and components domestically, they will look to relocate offshore. The consequence of this for the UK economy would be calamitous.

Although the importance of the steel industry to the UK has declined, it possesses attributes that are significant for the economy. The industry produces a trade surplus. Its productivity, investment in R&D and training per employees are higher than the general UK economy.  Crucially, the supply value added multiplier is greater than 3, and the employment multiplier is between 2 and 3. The industry has, hence, an important impact on skills, economic demand and employment levels for the country in general and for specific regions in particular.

The steel industry is categorised as a ‘Foundation Industry’. Such industries have been generally characterised as those that underpin the web of strategically important manufacturing and construction supply chains and whose output is largely for supply chain inputs rather than final consumption. As with the steel industry, Foundation industries are essential for the generation of primary value for an economy. They have been assessed to account for 17% of UK manufacturing GVA and 20% of manufacturing employment. Crucially, again as with steel, these industries have higher productivity than the UK economy norm, have relatively high levels of R&D and training per employee.

Academic research explains why it makes economic and social sense for a government to support Foundation industries through a strategy for industry. The reason why economies such as the USA and UK suffer from a defect in R&D and competitiveness, is because of the neglect and outsourcing of these basic industries. Commentators explain how manufacturing industries provide the infrastructure through which skills, R&D and the ability to innovate are nurtured. These are simply crucial for the international competitive success of advanced economies. The outsourcing and decline of manufacturing sets off a chain reaction that is ultimately destructive to the ability of the macro economy to innovate and compete. To address this potential crisis, it has been argued that, ‘government and business must work together to rebuild a country’s ‘industrial commons’, the collective R&D, engineering, and manufacturing capabilities that sustain innovation [and that depends crucially on the existence of a vibrant manufacturing base]. Yet funding of research and encouragement of collaborative R&D initiatives to tackle society’s big problems need to be stepped up. Companies must, furthermore, overhaul their management practices and governance structures in order to avoid making destructive outsourcing decisions.

Geographically skewed to industrial areas of the country such as Wales, the Midlands, Yorkshire and the North East, the steel industry is responsible for the retention of relatively high paid, high skill jobs in areas that are deindustrialising – often with devastating social consequences. When steel plants close or contract, a negative economic equilibrium around a low pay, low skill, and low value added economy is likely to evolve. The economic multipliers associated with the industry are relatively well understood, but what I term the ‘social multiplier’ is no less critical. has clearly demonstrated the negative psychological impact of job loss on steel workers many of whom have spent most, if not all, their working lives in the industry. Transition into work that is often comparatively low paid and low skilled, can be unnerving and demoralising. The strong sense of self-esteem, camaraderie and collective support that typifies steel work is rarely rediscovered.

The Industrial Communities Alliance (ICA), an organisation attempting to develop public policy for the deindustrialised, regions of the UK, such as steel and coal, points out that Britain’s older industrial areas contain around a third of the UK population. These are, though, largely communities ‘left behind’ and getting by on low paid work and benefits. The Alliance therefore supports an industrial strategy designed to rebalance the economy through a shift towards industry, production and exports. The perspective of the ICA is echoed in the analysis presented in the Green Paper which accepts that regional disparities are now wider in the UK than in other western European nations. An industrial strategy is necessary, the Paper contends, to spread growth and wealth more widely across regions, hence creating a fairer society that, in the words of Theresa May will engender, ‘a stronger, fairer Britain that works for everyone, not just the privileged few.’

Research provides strong evidence that wholesale deindustrialisation is not an overdetermined economic phenomenon. Governments can act to shape the nature of their economies. From the coordinated market economy of Germany, to the Developmental State model of Singapore, to the way in which the USA actively intervenes in its trade defence mechanisms, across a range of capitalist economies, evidence for this is clear. What is required is a holistic strategy that endures and connects Foundation Industries to other sectors of the economy – high tech, the service sector and through procurement policy, the public sector – and which involves both employees and their trades unions. Industrial strategy can work. The ideological shibboleths of the political Right cannot be allowed to extinguish this, possibly final chance, for some basic industries, their workers and their communities, to survive and flourish.

Injustice in Post Industrial Communities

By Simon John Duffy, Centre for Welfare Reform (@CforWR).

The Centre for Employment Relations Innovation and Change and Hope Not Hate came together to run an exciting cross-disciplinary event: A Future for Post Industrial Communities? The event, organised by CERIC’s Professor Jane Holgate, was lively, stimulating and wove together a vast array of information, helped by the use of the PechaKucha format, which forced all the presenters to concentrate their presentations to an essential minimum.

The central focus of the two days of discussion was the fate of the many towns and villages across the North, the Midlands, Scotland and Wales where heavy industry or mining had once been dominant. Where once the Labour Party was strong now there was growing support for UKIP and a strong vote for Brexit.

Academic research demonstrated that, contrary to the stereotypes, in these places people work hard and took care of each other, but struggled with low pay, job insecurity, benefit sanctions and growing poverty. Today the UK is the most unequal country in Europe, and these communities are on the wrong end of that inequality.

Many also noted that that these communities also lacked power. The UK is the most centralised welfare state in the world and in these places people have minimal democratic control and minimal representation in London. They seem abandoned by mainstream politics. Moreover social structures, the meeting places, the pubs, churches, working men’s clubs and leisure facilities had all declined. People have few opportunities to meet, organise or advocate for themselves. Poverty has been privatised.

These facts are rarely discussed and the assumption is that these places are now client states, dependent on subsidies from London. The truth is very different. For instance, if you calculate public spending in Barnsley it is £0.84 billion less than what you’d expect if you divided all public spending equally by head of population.

Barnsley Public Spending

The negative consequences of these overlapping injustices are severe and include much lower life expectancy. Yet none of this is inevitable; it was encouraging to hear that in other countries, like Germany, industrial change has not led to these kinds of problems. Communities can be supported to develop and to get back on their feet.

A further concern was that racism can feed off these social injustices. Speakers from Hope Not Hate shared their experiences of successfully over-turning prejudice in local communities where racists had exploited people’s fears and anger. But this also raised the question of what comes first: racism or injustice. And if, as most agreed, injustice comes first, how were we to understand and challenge that injustice.

Over the course of these two days I found my head whirling with competing categories and different understandings of social justice. Victims and perpetrators often seem to change places and people were forced to wear or to shed the group identities that mattered to some theory, but possibly not to people themselves:

– White working class men are seen by some as a threat

– White working class men are seen by others as victims

– But do white working class men really exist?

– Whose interests does this identity serve?

– Probably not the people shoehorned into it

Clearly some identities matter because others have chosen to use those identities for the purpose of scapegoating or vile attack. Categories like race, disability or native country become desperately important if others are using these categories hatefully. Yet we may think that these identities shouldn’t be important. It is injustice itself that has made them relevant.

For some these problems are obviously a function of capitalism. For others they are a function of class and elitism. Others stressed the organisation of power and the dominance of London and the big cities. Others looked back to the securities provided by large or nationalised industries; while some looked forward about to new forms of cooperative enterprise or community action.

What is critical here seems to be our sense of what is that actual reform or action that will reduce injustice. Politicians talk about ‘investment’ in these communities; but, reasonable as this seems, the reality is more complex. Often it amounts to no more than selling off our assets, our industries and our people. In Salford increased investment led to new offices and BBC premises, but local people saw no improvements. Increasingly housing policies has disconnected people from their communities: forcing people to move out just as the money comes in. We cannot assume that places and people are connected if people have no right to stay in their home communities.

Some, but not all, were attracted to the idea that power and money must down to community. Only if people can make their own decisions, shape their communities around their own assets and goals, can communities flourish. Others preferred the idea of national industries and even greater central control. Some were understandably suspicious that governments will exploit localism and asset-based approaches in order to disguise the structural injustices created by their own policies.

Perhaps one telling trend was the agreement across a range of speakers that change must begin by listening to and empowering communities. The Labour Party, trade unions, Citizens UK and Hope Not Hate have all made community organising a central plank of their strategies.

However this reinforces the need for more thinking about devolution in the UK. If we need to listen more now then that suggests that the current system is badly designed. If local communities are given more power, but the financial settlements are unfair, then this will just increase injustice. If devolution means merging large local authorities into even large areas, under the control of one mayor, then the powerlessness of smaller communities will only increase.

This two day conference did not resolve these issues, but it was certainly one of the richest discussions that I’ve been involved in. Brexit seems an unfortunate backwards step for the UK; but if it forces us to pay more attention to the deep and underlying injustices in the UK today then it will have at least one positive consequence.