Tories should know better than to attack Stephen B
April 17, 2000
by Irwin Stelzer
THE TIMES (London)
April 11, 2000
Tory politicians and their friends in the media who are baying for the head of Stephen Byers are sacrificing principle to expedience. It is good fun to ask who knew what, when, about BMW's decision to cut its losses at Rover. And it is understandable that old Labour types, frustrated by new Labour's belief that markets do a better job than ministers in allocating resources (except in the healthcare and coal industries), would like to replace Mr Byers with one of their own - a minister who would bail out Rover, and any other industrial enterprise that runs into trouble.
But Tories should know better - or at least those who have rejected Heseltinian interventionism, and the dream of ridding the nation entirely of the anachronism that is the Department of Trade and Industry. For if there must be a DTI (and such a debate is worth having) it surely shouldn't be engaged in shoring up yesterday's industries with today's resources. Indeed, if Byers is to be criticised it should be for offering Rover the assistance that, fortunately, got bogged down in EU bureaucracy before the funds could be squandered in a feckless effort to prolong for a few months the life of an inefficient auto plant.
Britain is on the verge of sustained, strong economic growth. Even the Treasury's experts concede, privately, that their public forecast of growth is very conservative. It is not unlikely that the British economy will grow at something like an annual rate of 4 per cent, if its entrepreneurs are not strangled by taxes and red tape, its consumers are not lumbered with high interest rates from a spending splurge triggered by a melting of the heart of the Iron Chancellor, and its clapped-out industries are not kept alive with tax subsidies.
Surely no one can accuse Byers of adopting policies that dampen Britain's cheery prospects. No one, that is, except those who think that somehow Britain can prosper by continuing to produce cars that no one wants to buy at costs that are unsustainable in a competitive world market. These hankerers after an end to change include old Labour types who see manual labour on an assembly line as somehow more virtuous than the intellectual labour of developing software, and think that an economy based on services "produces nothing", or at least nothing that is as obvious to the naked eye as a tonne of coal. No surprise there. The more interesting fact is that the CBI is unhappy with Byers, while the Institute of Directors is supportive. On reflection, no surprise there either. The CBI is heavily weighted with the great names of old Britain's economy, the corporate chieftains who see the DTI's role as parcelling out benefits and making life easier for them by, among other things, advocating policies designed to lower the pound.
And its members do not share Byers's enthusiasm for an American-style competition policy that aims at ending some of the cozy, anti-competitive practices and attitudes that have for so long served to buttress the status quo, deprive consumers of the advantages of free and open competition, and stifle innovation. The IoD, on the other hand, says it has little problem with Byers.
This is because the IoD is more representative of the entrepreneurial companies creating most of the jobs in Britain. Unlike those who rule the CBI, it has never found the prospect of scuttling the pound in favour of the euro a very attractive idea. And, I would suspect, members of the IoD find the inclusion of venture capitalists in the group that is taking over parts of Rover a good thing, whereas CBI types see such arrivistes as more exotic creatures, with few credentials for running a "real" business such as auto manufacture.
For the Tories and their allies to line up on the side of the unions, the fading industries, and old Labour is a mistake. It belies their statements of devotion to markets (what would they have had a Tory Secretary of State for Trade and Industry do?) and to the virtues of a new economy. They would do better to develop policies that ease the pains of the transition of Britain from an old to a new economy. Such change will always have costs, and those costs will always be concentrated on the few, while the overall benefits of a dynamic economy will be diffused among so many as to make those benefits almost imperceptible.
None of this means that Byers has got everything right. His department still takes too long to clarify the rules that the Prime Minister's ready acceptance of Brussels regulations is forcing on Britain. And he continues to plump for the euro, one hopes with only feigned enthusiasm. But it makes no sense to ask him to compound these errors with an attempt to bail out Rover - unless his critics think that he is a better picker of winners than the market.
Irwin Stelzer is a Senior Fellow and Director of Economic Policy Studies for the Hudson Institute. He is also the U.S. economist and political columnist for The Sunday Times (London) and The Courier Mail (Australia), a columnist for The New York Post, and an honorary fellow of the Centre for Socio-Legal Studies for Wolfson College at Oxford University. He is the founder and former president of National Economic Research Associates and a consultant to several U.S. and United Kingdom industries on a variety of commercial and policy issues. He has a doctorate in economics from Cornell University and has taught at institutions such as Cornell, the University of Connecticut, New York University, and Nuffield College, Oxford.