Time to stop kidding ourselves about government policy on Tech City
The first rule of industrial policy club is: You do not talk about industrial policy club.
When the Government talks about what's happening in Tech City, it tells a bracing story of entrepreneurship. The phrase "breaking down the barriers" finds its way into a lot of announcements. To the extent the government is trying to help, it does so by removing the obstacles to success, especially bureaucratic ones.
The subtext is that government policy on Tech City isn't like the bad old industrial policy of the 1970s, when government picked winners (many of which of course turned out to be duds) and when curious characters like Geoffrey Robinson moved seamlessly between government and industry to make their fortunes. No, Tech City is lean, it's open and it's all about getting rid of silly regulations and releasing entrepreneurial energy.
But this isn't quite true. In fact, the Government is doing something else entirely, and we should be brave enough to admit it.
First, a short digression. If you're a fan of academic political science (and who isn't?), you may know that five years ago an American sociologist named Fred Block wrote a terrific paper called "Swimming Against the Current: the Rise of the Hidden Developmental State in the US". The gist of it is that for all the talk of redblooded Yankee capitalism and the independent pioneer spirit, the American economic miracle owes a lot more to state intervention than anyone cares to admit. Without DARPA's cash to invent the Internet, without billions from the NIH to fund drug development, without SBA finance and SBIR contracts, American industry and especially American technology would have ground to a halt years ago. In the immortal words of the Beach Boys, you need a mess of help to stand alone. But no-one will admit it.
Tech City seems to suffer from the same reticence. For the most part, the Tech City story is straight from the free-market play-book. But when you look at what actually goes on, deregulation is a small part of the story. I was reminded of this recently when I saw this recent story in Tech City News. It describes a change to planning regulations that will, it is hoped, make it cheaper for tech startups to get office space. "Hackney Council secures exemption from new government rules..." the piece begins. Deregulation, surely? Tearing down the barriers to entrepreneurship? Actually, when you look closer, it turns out that this is a story about preserving red tape, not scrapping it. The "new rules", which are being set aside for Tech City, are all about deregulation (their role was to allow people from changing office buildings into homes, and bringing them in would raise the cost of underpriced office space). For some reason "Red tape helps tech start-ups" never made it into a ministerial speech or press release.
I frequently hear the same thing from government. Some time ago, I attended a session hosted by senior BIS and Number 10 officials for venture capitalists. A line that the officials used more than once was that they wanted to "remove barriers to access to finance" to businesses. But again, this isn't quite the swashbuckling deregulation that it sounds. Removing barriers in this case means government intervention, either giving taxpayers' money to VC funds to invest in companies through schemes like ECFs or giving investors tax breaks like EIS and SEIS. These are all good schemes, but what they aren't is hands-off, Hayekian, just-get-the-government-out-of-my-way policy. And schemes like the proposed Old Street roundabout incubator are an even clearer case of direct government investment.
Does this doublespeak really matter? So what if they're using free-market rhetoric to smuggle in Internet-age industrial policy? Judge the policies on whether they work. After all, the Americans never owned up to their hidden developmental state, but Silicon Valley is nevertheless a pretty cool place.
I'd argue that it does matter. It matters because if we as a nation are doing industrial policy, we should be (to use a word favoured by tech/policy aficionados) open about it. If we're imposing regulations or spending taxpayers' money on tax breaks or co-investment or giant architect-designed hackspaces, we should be clear about why we're doing it, and whether, as time passes, it works. If as a matter of policy we're giving executives from a particular sector privileged access to senior politicians to lobby for specific policies, we should have a rationale for this. And should we worry if alongside this access, the odd government adviser migrates to a well-paid job in the industry like a latter day Geoffrey Robinson?
It might sound like I'm just being a sceptic of industrial policy. That's not my intention at all. (For what it's worth, I don't think deregulation alone is usually enough to drive growth.) The point is that openness is just as important if the policies do work, because if they do, we should be extending them to other sectors and scaling them up. If London's tech cluster thrives because of good government-business relations and good micro policy initiatives, but we pretend it's succeeded because of the triumphs of deregulation, we'll learn exactly the wrong lessons and make bad policy in the future as a result.
Of course all this requires openness on the part of politicians. It would take courage to admit to what might look, in the eyes of many people in the press, in the Conservative Party and in business, like meddling in the economy. Indeed, it would take political leadership. And isn't that what we pay our politicians for?