‘Reindustrialising Scotland’: no more than a balancing act?

pink_panther

“It is perhaps the most searching criticism of the capitalist system that, notwithstanding 150 years of capitalist development, that system has not solved, nor indeed has it tried to solve, the problem of recurring large-scale unemployment… It is a problem created by the mal-organisation of industry, but perhaps not capable of solution by industry alone… If the predominant motive in industry is to be private gain we can say good bye to all hopes of ending large-scale unemployment.”

Arthur Greenwood, House of Commons, 1944

Political Context

That Scottish Labour’s parliamentarians have hardly engaged with the Scottish Government’s recent report on industrialisation sums up the party’s political dilemma. If there were an independent Scotland, Labour would have an industrial policy of its own. Indeed, the prospect of forging such policy with the unions is enough to make me optimistic about an independent Scotland boosting industry and ending unemployment. Until that point, Scottish Labour has no industrial or employment policy with which to outplay the SNP. Yet the Scottish government’s proposals do need to be challenged since they place clear limits on the scope for government purveyance over industry, work and the economy. The SNP can set limits as it pleases, because the other major parties hold no formal policy in Scotland on areas like industrial strategy or workplace relations.

Obviously Roch Wind has neither minds nor means to formulate an industrial policy for Scotland. But since we have been criticized for playing the nationalist clown and not its juggling balls, it seems timely to remark on the government’s new plans for reindustrialization. Regardless of the referendum result, the SNP’s groundwork set out in Reindustrialising Scotland will likely be influential long after 2014.

The Rebalancing Act

Much awaited, the government’s paper draws together a set of ambitions and policies for an industrial policy in an independent Scotland. At its heart is a plan to boost manufacturing. This is not an original idea – it is a few years since Osborne said the recovery would come from a march of the makers, and Miliband has since decided his economic plans consist in manufacturing our way to a recovery for the many. All the parties recognize that developing higher-skilled, higher-paid sectors in the economy (where manufacturing is the prime example) would give a hearty boost not only to jobs and wages but also to exports. Competing with Germany, Scandanavia, and other better-performing nations will help Britain to draw the economy out of London’s ‘black hole’, spreading benefits once more across the islands – what they all call ‘rebalancing’. This is the central prescription of Patrick Diamond in his pamphlet Transforming the Market, hailed as a trendsetter by Progress-leaning Labour colleagues. Diamond said the choice “is not between Keynes and austerity: what is required is a major programme of structural reform throughout our economy to create fairer, more sustainable and more balanced economic growth”.

Rebalancing is a favourite term of the SNP, appearing 10 times in their reindustrialisation report, used in the context of both a balanced British and independent Scottish economy. ‘Rebalancing’ is part of ‘responsible capitalism’, a term used by Miliband but oddly described as a ‘policy lever available with independence’ in a handy table on page 21 of the SNP’s document.

These ambitions for manufacturing are the substance of the Scottish Government’s plans for ‘re-industrialisation’ – a term presumably adopted to invoke memories of when a good proportion of Scotland’s workforce were working on that production line we call the central belt, and to remind these same workers how Thatcher stopped it moving. It was an apposite coincidence that the report was published last Friday 13th June, the week of the thirtieth anniversary of Thatcher’s final re-election as prime minister, the term that saw the closure of plants like Caterpillar in Uddingston. (The work-in that followed this closure was the subject of a recent seminar organised by the Scottish Labour History Society, where John Foster told the story of the Pink Panther featured in this article’s image.)

So much for the context – similar in principle to the British Labour plans, and typically better in style; but what of the substance? Should it give much satisfaction to those who are interested in a different kind of rebalancing from the geographical and sectoral balancing act the responsible capitalists have in mind – the rebalancing of power from capitalists to workers? What does it say about priorities and ambitions of the SNP? Is it a good enough kicking-off point for more radical demands that we should be happy to vote for it in September? And what would be better principles on which to advance industrial policy?

The Role of Government in Macro and Micro policy

The core of the paper is Chapter 3, A Framework for Reindustrialising Scotland. The key aspects of the proposed framework are regulation, tax changes, support for business, skills and workforce development and business enabling infrastructure. The latter three are essentially support-structures for business and for the workforce (which in turn help business). Tax and regulation are firmer means of controlling industry, but the proposals are too weak: the main regulatory suggestion is to protect businesses and consumers, while tax measures are proposed, “subject to EU state aid rules”, to encourage start-ups and to incentivise the hiring of workers by, e.g., increasing National Insurance employment allowance for small businesses, or tax allowances to encourage capital investment.

These are the components of a business-government partnership, and they build on past initiatives taken under devolution including setting “the most attractive business rates package in the UK”. They help capitalists to employ more workers in line with their private interests rather than giving any power to workers directly, and they stop far short of instating mandatory employment priorities or active redistribution of means of industry.

To crudely appropriate the economists’ terms, there are macro and micro aspects of the government’s industrial plans. The macro aspects concern employment, the balance of trade and the place of manufacturing in the wider economy. The micro aspects concern the structure of firms, the power held by private owners, the decisions subject to partnership agreements, and the result of this on industrial development. Both sets of plans look at what government can do to change the incentives and ideology of industry in Scotland.

Macro

Having looked at the limits of the government’s actual plans and policy proposals to intervene, it seems that on the macro aspect, the proposals are not robust enough to live up to the government’s ambition that industry should do what it can to increase employment. It assumes that employment is derived from industry, and that industry will be driven by business owners rather than by government or by corporate agreement to work to an industrial plan that is developed with the aim of full employment in view. Thus, while the Scottish Government elsewhere says full employment is its objective, this paper leaves us unsure how it means to get us there. Private gain is to remain the chief motive of industry.

From this we derive two suggestions. First, that whereas the SNP see industry as open to improvement by incentives, we should see this the opposite way round: industry is mismanaged by private firms, which thus are culpable for a high degree of unemployment that could otherwise be solved. And while government acting to sort out private owners’ perverse incentives would help boost employment, an industrial strategy that can solve unemployment must start by recognizing the limits of private industry in creating employment. Second, forecond, for industrial strategy to really address employment, it must be created with the public interest as its principle, and full employment as its end. This means it must have more public elements than we see today. Greater public ownership of industry will allow the principle of full employment to be embedded in industrial decisions, and will industry to deal better with effects of high employment (and higher wages) than privately-owned industry.

Micro

This discussion of forms of ownership takes us to the question of the firms themselves, and how they are structured and owned. We note that the SNP does mention that it might want to explore different forms of ownership. It does so not in a macro but in a micro context. But it does so not with the suggestion that public ownership will bring better results overall, but that it may be best in certain circumstances. This is a welcome comment, and goes further than Miliband’s policy papers which fail to mention public ownership.

Although the government intends to explore different forms of ownership, its commitments are ambiguous, because it comes to this question only after extensive discussion about the structure through which business and government might work together, as discussed above. While it advocates alternative forms of ownership, these are too limited to be part of a meaningful transition to a more publicly owned economy.

Our expectations on public ownership are low; the SNP are better known for advocating social partnership. A core part of the government’s framework for reindustrializing Scotland is to underpin all the aspects discussed above (business support, skills development etc) with partnership, “which encourages collaboration and cooperation across all sectors of the economy and society.”

Its recommendations here are ambiguous, as it is unclear whether it aspires to a corporate economic model, a diverse mixed economy with different forms of public or cooperative ownership, or simply a private-led economy with input from various partners when it happens to suit the capitalists. The range of social partners or “key players – public sector organisations, trade unions, business groups, employers and the third sector” make it seem like a traditional model of business and trade union partnership is not what the SNP has in mind. Rather they want all these partners to develop the country’s potential by working to “deliver a common vision” (carrying the assumption that business and workers can share a vision for the country), promote “greater diversity in business ownership models” (as if unions and cooperators have not been doing so for years), and “tackle labour market challenges” (e.g. by creating toothless forums to discuss the unemployment epidemic caused by mal-organisation of industry – starting with a grand National Convention on Employment and Labour relations, which is meant to satisfy the unions in the first stages of independence).

The social partnership model on offer seems more like a plan for policy development than power development. Nothing is said about the power of workers and unions to direct firms at a micro level, or to feed into shaping macro industrial policy. Nothing suggests that we should place workers’ own priorities, whether in the workplace or in the wider economy, at the heart of industrial policy in Scotland. (This criticism can also be made of Common Weal.)

In particular, at a micro level the scope of partnership seems to depend on it being in managers’ interests and to be accepted thanks to government incentives rather than through legislation; while at a macro level the absence of collective bargaining structures to negotiate general aims for the industry and set terms for workers will probably weaken both the conditions and pay of workers and the scope for expanding employment. Finally, the involvement of other partners than labour and business suggests that business is the senior partner and junior partners are involved because of interest rather than power. This is a clear flaw from the perspective of a labour movement that should look to use bargaining and leverage power across the whole economy to advance the interests of workers.

In short, the SNP wants non-legislating governments to use ideological power to structure social partnership, bolstered by resource power to structure incentives for certain kinds of industrial development. This benevolent social-partnerism, typical of the SNP, stops government short of diminishing power of capital and private owners, or of expanding power of workers and boosting collective bargaining, let alone helping a transition to collective or public ownership.

Suggestions

The variety of proposals in the report centre around government intervention to help business, and drawing up a social partnership model for Scotland. In terms of response, it is clearly difficult to speculate about the kind of policies Scottish Labour would adopt, so suggesting government interventions is not my main concern. On the other hand, because the SNP makes suggestions about the role of unions which fall short of what unions could demand, the options for the industrial wing of the labour movement are of more short-term interest if we are to draw up a challenge to the SNP that is consistent with a Yes vote. So while we do not seek to fetishize or depend entirely on the trade union movement in pursuit of social transformation, trade union power is undoubtedly critical at this time in challenging the SNP and shaping Labour policy. The suggestions below will therefore stress how socialists who are open to considering Scotland’s prospects after independence may hope to subvert nationalist plans for Scottish industry through building the power and ambitions of trade unions, and bringing pressure to bear on Scottish Labour to make proposals to that effect.

While the SNP’s paper is not exactly regressive, there is scope to demand much clearer power for workers to direct industrial decisions, for their unions to engage in sector-wide collective bargaining, and for the trade union movement to wield its economy-wide power and influence in industrial policy. This would enable trades unions to be committed not just to the interests of their members in the short term, but to increasing employment so that workers have a stronger position in general. By making this demand, unions can pre-empt their reticent political wing in parliament, and send a clear signal that the labour movement is not ready to become a junior partner in an independent Scottish economy. Because this demand can have Labour Party and trade union backing, it will help us restore the idea that industrial policy should be built on the back of a principle for full employment and for collective bargaining power. To lay down this kind of ideological pledge would be an important first step in the initial years of an independent Scotland, and would show that whatever social partnership arrangement is reached is only a basis on which the trade union and labour movement is determined to build its power.

Such an openly socialist effort to increase employment and boost the power of workers would not stop once employment has increased or unions have been accepted as social partners. On the contrary, trade union involvement in industry would become trade union direction of the effort to reindustrialise the economy in the interests of working people. Against the SNP’s suggestion that union involvement in industry would happen thanks to the good will of the government and of businesses who understand their long-term interests, trade unionists will find themselves strengthened by higher employment and higher wages, and will be more able to demand further power over industry. The labour movement will then be in a position to decide whether this leverage should be used to advance the interests of workers in the workplace, in industry, or in society through welfare.

And just as this kind of power would boost employment and wages across the economy as a whole, it would mean workers and trade unions in the micro-level organisation of firms would have more power to protect jobs, improve terms and conditions, and empower workers to have a stake in companies that will incline them to drive innovation and improve the quality of what they produce, leading to the higher productivity and expanding manufacturing sector we need. Meanwhile, because partnership involvement will not just take place at board-level or sector-level, union organisation will not be sector-specific but will cross between manufacturing and services, helping to minimise class fragmentation across the economy, so that gains for manufacturing workers will benefit service-workers too, and economy-wide leverage will become the norm. The class divide between capitalists and workers will then come into sharper focus, undistorted by working-class division, leading working people to understand their collective interest against private ownership and private gain remaining the motives of industry.

A strengthened labour presence in the economy would lay the ground for at least a more radical kind of corporatism, where business enters partnership with trade unions and government only once workers have made their own demands – formulated not just within trade unions but within socialist, political, and militant parts of the movement. That will mean business is no longer the only real power in the economy, and once this stage of corporatism is reached, the labour movement can start to shift control from private to public interests, and begin a transition to economic democracy and public ownership of industry, as well as being able to build industrial policy on the principle of full employment. This will give confidence to the political wing of the labour movement, so that a more openly socialist Labour party can reindustrialise Scotland in a way that works for working people.

This direction is Roch Wind’s first suggestion for a positive alternative to the SNP’s position, and for a more effective programme for an independent Scotland controlled by working people. We hope that soon our Labour party will begin to develop a strategy of its own, to explain in parliament the poverty of the SNP’s policy ambitions, and to set against their crude consensus some of the principled and comprehensive arguments our forebears made for ending unemployment and taking industry into the hands of working people.

Cailean Gallagher

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