Industrial policy rises again

Yesterday, the coalition partners were leaking letters they wrote to each other, complaining that the UK didn't have a "growth strategy". Someone isn't paying attention. We do have a growth strategy and it has nice little acronym - QE.

The strategy is straightforward. The Bank of England is printing money to buy government debt off banks. This cash is supposed to encourage banks to lend. The public also has a role in the plan; we are supposed to take out loans and spend like Kim Kardashian. If everyone plays their part, growth will resume as if the credit crunch never happened.

The problem with this plan is that it isn't working. The UK economy has stagnated since the BoE cranked up the printing presses. Living standards have fallen, inflation has picked up and unemployment has remained stubbornly high. That list of failure should be sufficient to provoke a reappraisal of the "growth strategy".

A quick read of Mr. Cable's highly public but yet private letter and it becomes all too obvious that he is quite happy with the "loose monetary policy" line pursued by the Bank of England. Working on the principle that two bad ideas are better than one he wants to complement QE with the long discredited idea that governments can direct economic growth through industrial policy, proving that bad ideas never die, they are rehashed in leaked letters from politicians.

Mr. Cable thinks that he can draw up a list of industrial sectors that will propel the UK economy into decades of double digit growth. He wants the government to "show more leadership in identifying and supporting key technologies". What does that mean? Mr. Cable thinks that technological change can be brought about by a memo from the government to firms. Ask and it will happen.

What were the future winners that Mr Cable had so presciently identified?. First on the list was "advanced" manufacturing and related services. By this he meant the automotive and aerospace sectors. Both these industries have been around for at least a century. Putting the word "advanced" in front of manufacturing doesn't make it any more efficient for the UK to build cars.

Digital and creative industries were second on his list. Vince thinks we need to foster "Global Champions", but laments the fact that "we have produced no Amazon, no Google and no Intel." Nevertheless, help is on its way from the Government. The coalition has established the Creative Industries Council, and if its members sit around a table in Whitehall for long enough, we will produce a rival to Apple.

Finally, there is "Energy industries and low carbon" where we "need to make stronger links between policies to reduce energy use - like the Green Deal and smart meters - and jobs and growth. What are those links? Who knows? It is all empty words, disconnected from the realities of running a business.

Ironically, it wouldn't be hard to get the economy to grow. Most of the global economy is enjoying rapid growth and rising living standards. It is happening in Latin America, Asia and even in parts of Africa. All that is required is a few simple steps; stop quantitative easing immediately, balance the government budget, cut loose from the losers in continental Europe, enact genuine welfare reform to stop rewarding failure, cut taxes, and deregulate the economy.

But every journey begins with a single step. Firing Vince Cable would be a good start. It would be the right response to this kind of retrograde nonsense. We can do without ministers who think industrial policy can work.