Flexible labour markets prove a better alternative to industrial policy

Leeds Policy Institute Head of Research Hubert Kucharski has written for CapX discussing how policies that target labour market flexibility and retraining are a better alternative to protectionist industrial policy.

Hubert wrote:

"The clearest argument against the UK going tit-for-tat with America’s green subsidies is simple maths. The size, power, and growth of our economy are dwarfed by our friends across the pond

"The UK government’s Advanced Manufacturing Plan, aimed at promoting investment and growth in green energy, is a positive signal of intent towards harnessing industrial policy. What is more attractive to investors than generous tax cuts, subsidies, and other support measures?

"However, we trail behind European competitors like Germany, a nation lauded for its efficient industrial policy. Meanwhile, across the Atlantic, the Biden Administration’s unveiling of the Inflation Reduction Act speaks volumes about America’s commitment to strategic industry and innovation. Any parallels drawn between our economy and theirs would clearly be misguided.

"The central flaw in the current discourse is the assumption that industrial policy’s success lies in its ability to pour resources into specific sectors. Industrial policy can become ‘sticky’. Locking too many resources into one sector can result in massive waste should that sector not flourish as anticipated.

"The resilience of an economy, especially one faced with the relentless uncertainties of global trade, lies not in the immovable structures of industries but in the adaptability of its workforce."

You can read the full article here.