Industrial strategy? Britishvolt and OneWeb show that markets are best left alone

The name of the Department of Business, Energy, and Industrial Strategy can leave economists of a certain kind cold—especially the last two words. In the UK political zeitgeist, industrial strategy has been closely associated with the dreaded concept of picking winners – with the government accused of picking individual and corporate sectors to succeed, rather than letting (more efficient) market forces decide who should thrive in a world of corporate battle. There is good reason to be skeptical — markets, after all, have been the defining force of human progress for centuries.

With the collapse of Britain’s politically beloved Volt, such criticisms will again be sharply voiced today. It seemed to be a great example of innovation and creativity. And its location in the North East gave them a distinct appeal to Tory politicians. The company’s problems seem to have begun when they agreed on a set of terms for taxpayer financing. Private injections of money became dependent upon the government paying this money. Britishvolt could not meet these conditions, everything began to fall apart.

This isn’t the first time that a Whitehall favorite has appeared. OneWeb, the satellite company, was rescued by the government in the hopes of creating a global superpower. A French competitor recently took over OneWeb. The only return to taxpayers is the golden share’ that the UK can exercise in national security matters.

Britain’s problem is not who it picks, but we don’t commit to letting the market decide for us. In the words of one academic, our approach is “somewhat schizophrenic, with habitual appeals to the virtues of free markets accompanied by selective state intervention to support specific firms and sectors.” The government will advise you to choose one and stick to it. It is not surprising that we prefer to use the former.