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The Economist explains: Why “industrial strategy” is back


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Dec 13, 2015
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Why “industrial strategy” is back

THERESA MAY, Britain’s new prime minister, has certainly been bold, maybe even foolhardy, in some of her cabinet appointments. But she has been equally bold in elevating “industrial strategy” to the top of her new government’s agenda—a move that could mark a clear break with her predecessor’s governments. The very term has been frowned upon in Conservative Party circles since Margaret Thatcher’s leadership. Yet Mrs May argued for “a proper industrial strategy to get the whole economy firing”, in her pitch for taking over from David Cameron. And once installed in Downing Street she quickly created a whole new department, of “Business, Energy and Industrial Strategy”. Why has Mrs May decided to buck a generation’s worth of political orthodoxy?

Mark Littlewood, head of the Institute of Economic Affairs, one of Mrs Thatcher’s favourite think-tanks, argues that adopting even a limited industrial strategy could tempt the government into going further by propping up loss-making industries such as steel—especially once Britain leaves the EU and is no longer bound by European rules against state aid. So far it seems mild enough. But, aware of a popular mood souring against globalisation and a government keen to occupy the political centre-ground abandoned by Labour, many Tories will be on the lookout for signs of mission creep. Well-intentioned interventions could quickly become counter-productive. Yet as the economy deteriorates, the calls for an industrial strategy will grow louder.
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