Half way there

The Business Secretary, Lord Mandelson, has said that the government intends to bring back protectionism.

Hundreds of thousands of jobs in hi-tech and "green" industries could be created by the state over the next decade, the Business Secretary said.

The interventionist drive is intended to compensate for the smaller financial services sector that will probably emerge from the recession.

OK, maybe he didn't say that in so many words, but that's the basic thrust of his proposals. Unfortunately, the guy still doesn't understand what he is talking about.

"If markets fail or don't work efficiently, government has a role to play – as we saw in the financial markets," Lord Mandelson told The Independent.

Errr - the markets didn't fail or work inefficiently. They did exactly what they always do - corrected an imbalance. It wasn't the fault of markets that our economic prosperity of the last 15 years was based on a mountain of unsustainable debt - that was the fault of governments who failed (and still fail) to understand the basic law of markets.

"The Government's job is not to substitute for markets or displace the private sector," Lord Mandelson said. "We are not into bailing out the past, but removing the barriers to investing in the future."

Actually, I haven't got a clue what he is talking about on that bit. Clearly they are bailing out the past and I have no idea what "barriers" there are in place for investing in the future. As things stand there are no barriers - and future investment will go where the labour is cheap and the markets are growing. You don't need to be an economist to work out that isn't Britain.

It is anticipated that projects to build Britain's capacity for wind, wave and nuclear power will be launched as part of the plan. Electric cars, digital communications and pharmaceuticals are also set to be beneficiaries.

Aside from the obvious fact that we don't have particularly strong industries in these areas - except possibly pharmaceuticals - and that other nations and their industries are more likely to benefit from anything we do in those fields, what Mandelson fails to address or appreciate is that what is to stop those growing Asian economies doing the same - but cheaper. Does he really believe that the Indians and Chinese are too dumb to develop "hi-tech" or "green" industries?

I'm always amazed at the sheer gob-smacking arrogance of people who insist that we have some sort of intellectual superiority over other nations and races that ensures we are the only ones capable of leading edge technology. Britain hasn't been a world leader in anything since the 1960's - except crime, teenage pregnancies and social breakdown and I don't really think they're going to help much.

This bit is interesting, though.

He also said that the Government "cannot be the odd one out" as other countries champion their own domestic industries, and would be buying more British-made goods and services.

OK, but ....

However he insisted that the strategy would not mean "picking winners" or a resort to protectionism.

Right - how does that work, then? The government is going to buy more British-made goods, but won't resort to protectionism. What else do you call it? (And good luck finding those British made goods, sunshine).

At least he admits that protectionism is alive and well in most countries, but I'd really like to know how he thinks what he is proposing isn't protectionism. Of course it is! It just emphasises my belief that protectionism isn't the nasty, horrible thing it's painted as by the press and politicians.

Look, I don't hold out much hope for the "green" industries. Whatever we decide to invest in will require a considerable sum of money to get them off the ground and substantial subsidies over a longish term - but green industries are amongst the least viable of all possibilities. There just isn't the market for them other than the one the government creates. And their value is dubious to say the least.

But I'm all for protectionism in other industries - particularly things which British consumers want and buy. Electric cars - well, they're a nice idea, but they'll be surpassed by hydrogen fuelled cars inside of a decade. The electric car is the Betamax of the automobile industry.

There is something the government could do and do straight away.

Defence.

The army needs new trucks, small arms and equipment. Invest in British. The RN needs new ships - build them in British shipyards using British designs, British steel and British technology. The RAF need new types of aircraft (particularly close air support) - build and buy British.

This doesn't mean becoming a militaristic nation - far from it - it just means using our national defence requirements to boost British manufacturing industry. Once that industry is established there is the ongoing requirement for refurbishment, upgrades and refits - and the potential for those companies involved in the defence industry to diversify as long as the government favours British industry over foreign companies. BSA (Birmingham Small Arms) became a major motorcycle manufacturer after starting off producing weapons. Royal Enfield started off making pushbikes and moved into producing armaments.

From what Mandelson has said, it seems the government are half convinced that protectionism is not only a potential way forward - it's the only way forward. Of course, after spending years dismissing it they now find it impossible to admit that - but they know it.

What I want to avoid is resorting to the worst sort of protectionism - the surreptitious kind that stifles internal competition and fails to really address the issue. I want open and honest protectionism - trade barriers and tariffs.

Virtually every nation uses protectionism, but they do anything to avoid being seen to be protectionist. As a result we end up with the worst of both worlds - massive bureaucracy and monopoly situations. Simple trade barriers and tariffs allow internal competition to flourish while keeping bureaucratic costs and requirements to a minimum.

We're half way there - why not go the whole hog?