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David Willetts is President of the Resolution Foundation and a Conservative peer
The Prime Minister’s speech to Policy Exchange last week took security as its theme:
“The next few years will be some of the most dangerous yet the most transformational our country has ever known. So the question we face today is this: Who has the clear plan and bold ideas to deliver a secure future for you and your family? The dangers that threaten our country are real.”
Meanwhile, Rachel Reeves has been warning of an “Age of Insecurity”.
“.. globalisation, as we once knew it, is dead. We must care about where things are made and who owns them…This demands a new approach, one that I call ‘securonomics’…It focuses on the economic security of a nation….Prioritising economic strength and resilience in the face of our uncertain world.”
Behind both these warnings is a more radical critique of the insecurity created by capitalism:
“All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions are swept away,” and “all new-formed ones become antiquated before they can ossify. All that is solid melts into air.”
But that is Karl Marx. He is unlikely to make much of an appearance in the election campaign.
Security can mean many things. The most obvious is defence of the nation. Rishi Sunak covered this in his speech. Instead of being a distinct issue of its own, national security is increasingly pervading domestic economic policy.
The Integrated Review put science and technology at the heart of our security strategy, The biggest change in research and innovation policy in the past decade has been the growing significance of the security perspective. So many technological advances are potentially dual-use that increasingly the Government is making a range of decisions on business sectors influenced by the security question. Should we own, collaborate, or access?
The Coalition agonised about whether it would be contrary to free market principles to make a loan to Sheffield Forgemasters a key part of the nuclear supply chain. Three years ago it was nationalised with no political fuss at all. It now belongs to the Ministry of Defence.
The trouble is that security issues are hard to fit into conventional Cost Benefit Analysis. That is why, in my recent review of Business Cases I suggested that the Treasury Green Book guide to economic decisions urgently needs an update to incorporate security considerations in a clear and disciplined way.
Reeves sees resilience as building up our own capacity to do stuff, with economic activity spread more widely across the country. But full-blown economic strategies across a wide range of sectors can only be delivered by big economic powers. China can and does.
But the US has historically been more interventionist than we recognised – their industrial policy is usually presented as a security policy to ensure a national lead in all key technologies. It is thus hidden from more nieve observers. The EU has been the most economically liberal because of the obstacles to state aid in Margaret Thatcher’s Single Market. But that is now changing. Small economies outside these blocs usually take a very different approach since they have a lot to gain from being open.
For Britain, as a medium-size economy outside these large blocs, there is the dilemma of whether to go big or go small. We can’t try to do everything. Our Resolution Foundation Economic Inquiry focussed particularly on our underperforming and under-invested twin second cities of Manchester and Birmingham and their surrounding towns.
Fortunately growing green provides opportunities elsewhere such as the Humber for offshore wind and carbon capture and storage further north. Our sectoral comparative advantage is overwhelmingly in services – not just finance but also law, education, architecture, and engineering. In addition, we are world-class in some inherently disruptive new general-purpose technologies. Just doing all this drives an ambitious set of supply-side economic policies without trying to cover even more sectors or places.
There is however one paradox behind all this worry about insecurity. The economic dynamism of the 1980s was associated with much higher rates of economic mobility than we have now. Maybe more should have been done to protect old sectors and the places losing them – though there were such efforts and it is very hard to protect places from deep-seated economic trends.
But nowadays Britain faces the opposite problem. Workers are not changing jobs as fast as they did – in particular young people used to boost their wages by moving jobs more frequently than now. Business sectors are growing and shrinking less dramatically than they used to. People move around less than they did. Nowadays perceptions of geographical mobility are less seen as the bold pursuit of opportunity to a betrayal of one’s hometown. The pursuit of security should not mean immobility.
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