Industrial Policy in Twentieth Century Britain
The history of British industrial policy since the Second World War falls into two distinct periods, with the dividing line being the election of Margaret Thatcher as Prime Minister in May 1979. In the first period, an explicit objective was to create and support large companies in what were thought to be strategic industries, in the hope that they would hold their own in world markets against American, Japanese, and European competitors. Aerospace, automobiles, computers, and electronics were among the industries that were supported in this way, sometimes through government-induced mergers, sometimes through subsidies for research and development. These policies were based on wishful thinking about the link between size and international competitiveness, and there was a failure to recognise the difficulty of making large-scale mergers work. Most of the ‘national champions’ created in the 1960s and 1970s came to grief. Government intervention in industry was anathema to Margaret Thatcher's Conservative government, and industrial policy in the 1980s shifted towards horizontal, non-selective measures aimed at improving the business climate as a whole, not at promoting particular industries. Some elements of the old policy survived (for example, continuing support for the aircraft industry), but for the most part the government allowed the structure of industry to be determined by market forces. This implied, among other things, an enthusiastic welcome for foreign investment, even if it involved the take-over of large British industrial companies. When Labour returned to office in 1997, there was no return to the interventionism of the earlier post-war decades — no rescues of ‘lame ducks’, and no attempt to halt the decline of the manufacturing sector. While some observers believed that the absence of industrial policy had weakened the British economy, there was little political support for a change of direction.
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