Harry Picken examines how a green industrial revolution could reverse the fortunes of key industries like manufacturing.
Thatcherite dogma still holds sway in the mind of many of Britain’s lawmakers. A cumbersome, overly bureaucratic state has no means of competing with the innovative, freethinking talents of business enterprise it is argued. Almost forty years after Thatcher was first elected, this doctrine continues to dominate much of our political economy.
It is not surprising then that the condemnation of the state as an agent for anything other than the reversal of market failures has set government on a course that sees it lacking the vision that is critical to achieve the green transformation of the economy.
The government’s lack of vision is exemplified by its repeated use of tax credits in an attempt to gently prod the private sector in the direction of green innovation. This will not work. The business sector depends on results. It has to deliver for its shareholders if further funds are to be available. As green technology is still in its infancy, firms are going to have to be patient if they want to see returns on their investments. Patience which they do not possess. Business is simply too risk averse to commit at such an early stage of development without any concrete guarantees of short or even medium-term returns.
As such, the state must provide a long-term vision. It has to be the role of the state to forge markets where there were non before. Not only by moulding markets but by directly creating them. The economist Mariana Mazzucato has argued that business will only enter the market for green technologies after government initiatives have both absorbed the initial risk and provided clear policy signals.
A direct result of the UK governments lack of clear signals can be seen when in 2017, IKEA decided against investing any of its £524m green energy fund in the UK. The Swedish furniture company’s head of sustainability suggested that it had ‘become increasingly difficult to invest in renewable energy production in the UK’. Here is a perfect example of how inaction from the government has directly cost the country a golden opportunity to expand its green capacity.
In that same year, the government decided to sell off one of the very few positive advancements the coalition made in environmental affairs; The Green Investment Bank (GIB). The GIB, formed in 2012, for state investment in green technologies seemed like a step in the right direction. An acceptance from the government that the state must play a larger role in the innovation process. This was short lived and once the Conservative’s won an outright majority, they’re appetite for maintaining such an institution quickly evaporated. The Green Investment Bank was sold to the private Australian Maquarie Group in August 2017. This is yet just another illustration of the constantly unpredictable and unreliable nature of the UK’s approach to green technology in recent years.
It is understandable then that international firms with considerable resources to invest in green technology have constantly decided to look beyond the UK. There is such a lack of clarity regarding what the next government policy will be that no business is willing to invest inside such an environment where the reversal of the green strategy is possible or perhaps likely at any given time.
The incumbent Conservative Party has become so accustomed to rolling back all frontiers of state machinery that it does not have the ability to invest in those strategic areas of interest. There is not the political will within the tory party to invest in revolutionary ideas; many Conservative MP’s believe that the state is not an effective innovator and will end up losing money. This is bad economics and will prove to be disastrous for the planet. We must accept that not every state investment will lead to a winner but those that are successful will be innovative in ways that will provide the major breakthroughs that are going to be vital to fighting climate change.
Despite all of this, there is still hope. The current situation provides the left with an opportunity. Labour should carve out a new narrative for the role of the state. It must shift away from the traditional tory ‘housekeeping’ analogy of how government should manage finances and instead start making the argument that only with an interventionist, visionary state will it be possible to reach that next level of innovation which is vital if we are going to avoid the worst effects of climate change. This argument should not be rooted in outdated 1970’s policies but firmly fixed within a contemporary socialist practical framework which makes clear how an active state is both the most pragmatic and most effective way of dealing with the climate crisis in the 21st Century.
Labour must also argue this case on economic grounds. If the government fails to make these sorts of long-term strategic investments in green technologies, then the likely outcome is that the UK’s balance of payments will continue to worsen in the decades ahead. As other governments such as those in Germany, South Korea and China continue to pump capital into the sector, they are likely to become tomorrow’s primary exporters of innovative green technologies. Once again, the UK is likely to fall behind. Investing in green innovation will not only prove to be beneficial in its ecological effects but will also provide the UK economy with jobs that are needed now more than ever as we face the bleak reality of a coronavirus induced recession.
Britain’s manufacturing base has been devastated; the green industrial revolution presents an opportunity to reverse this, but the government must act soon if this is to be realised.
Harry is a Labour Party activist and member of the Young Fabians.
He tweets at @HarryPicken