INTERVIEW: Hope amidst despair? Stuart Holland on Brexit, Europe and Labour's new economics, in conversation with Martin O'Neill.
| Position | Interview |
Martin O'Neill (MO'N): We're now at a moment where Labour is re-engaging with a lot of the ideas you put forward as part of 'Labour's Economic Strategy' in the 1970s and 1980s, particularly around regional planning and public ownership. What do you think Labour needs to do to advance a left economic strategy under current conditions? What could it learn from what's gone before, or what would have to be different?
Stuart Holland: What is vital is what you do with banks. We argued in the drafting of Labour's 1981 Green Paper on financial institutions that there should be a public shareholding of each of the then major financial institutions: the banks, insurance companies, mortgage companies. There's a current proposal that Labour should create an investment bank. It could have a key role in issuing bonds to finance investments, but that's not enough. A bank lends to people who want money. What you need is state entrepreneurship at the regional, local level--public entrepreneur-ship which does things that the private sector isn't doing. That isn't the job of a bank.
MO'N: The current thinking in the Labour Party is that you'd have a network of regional development banks that would precisely be looking to fund projects that the private sector wasn't funding. Would that be closer to what you had in mind?
SH: Similar. But not enough. There's a fundamental difference. A bank evaluates an application for funds from somebody who decides what they want to do. In the present situation, there are many, many local communities who have got brilliant ideas for what to do. But they are unlikely to put them together into a proposal for a bank. The task for regional development agencies should be to identify a range of feasible innovation frontiers in entirely new technologies and new processes. Schumpeter was right in saying that it's not just cost reduction, it's process and product innovation that raises societies to higher levels of income and wellbeing.
I'm very glad that Mariana Mazzucato has been apparently quite close to Jeremy about this, and she's simply excellent because she's done work on the United States, along with Block and Keller. The Federal Government under President Carter's Small Firms Innovation Act, and then with Reagan who clearly didn't know what he was signing at the time, enabled synergies between research departments, companies, universities and entrepreneurs. Now, this certainly is needed. But it's not a job just for a bank. This is entrepreneurship. So you need regional development agencies and again, going back to enterprise boards. For example, when I made the case for a National Enterprise Board and it had gone through the National Executive Committee of the Labour Party, Mike Ward of the Greater London Council approached me and said 'Stuart, can we have an Enterprise Board for London?' I said yes, and I drafted it with others, and we got Robin Murray to be the Director of Employment inside the GLC for that. We got Mike Cooley to do some Lucas-Aerospace inspired practice. For example, Mike is very strong on tacit knowledge, which is identifying the tacit knowledge, latent abilities and implicit skills of workers who have no formal qualifications but know what could be done to turn a company around or to make it viable under worker ownership. Normally, the problem with worker ownership, as in the 1970s or 1980s, is that it only comes on the agenda when an enterprise is failing. You've got to be able to act ex ante. You need to be able to anticipate how to reinforce potential success. And that is entirely feasible, and it's been done, for example, in the United States in dramatic fashion as well as, on a smaller scale, in the EU through the ADAPT programme that I designed for Delors.
When I first met Marianna Mazzucato at a conference in Rome, she was full of apologies--'Stuart I'm so sorry, I'm told that I've stolen a title of yours.' [Mazzucato, The Entrepreneurial State, 2011] And I said, 'no, don't worry you haven't,' because mine was The State as Entrepreneur (1972). And the two concepts are complementary, but actually different.
MO'N: Can you say a bit more about those two ideas--'the entrepreneurial state' in Mazzucato and 'the state as entrepreneur' in your work--what do you see as the difference between those two ideas?
SH: The concept of the state as entrepreneur is that the state should take shareholdings in companies and it should do so because an ownership stake is important in giving you access to all kinds of information, and also influencing decision-making. When we were shaping Labour's Programme in the early 1970s, and I was asked to give an example, I gave Ferranti [a British computing and aerospace firm that ceased operation in 1993]. Ferranti was brilliant. It was innovating so well that it was registering about 108 patents per year, but could only implement 8 of them. It didn't have the finance for the investment. And lo and behold, when the National Enterprise Board (NEB) was formed in 1975 Ferranti applied to be brought into the NEB. It then applied for government finance in return for shareholdings. In a confrontation that I had with the General Electric Company (GEC) boss Arnold Weinstock on one of the last broadcasts before the 1974 election, I pointed out that he was sitting on a billion pounds, which at that time was a lot of money, as a cash reserve to hold off hostile bids. Whereas in the case of the Industrial Reconstruction Institute (Istituto per la Ricostruzione Industriale--IRI) with government shareholdings in companies in Italy, no one makes a hostile bid because they're going to get their fingers burnt. They'll get badly burned. So, 'the State as Entrepreneur' is ownership-based. It's not nationalisation, since minority holding can give you de facto control, especially when you have a good...
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