It may very well be the case that a true industrial policy is really about encouraging technology and innovation but, the problem with intervening in the market with public funds is that the decision to do so is in the hands of elected politicians who are highly susceptible to cronyism – the nexus between the governing elite and the business elite that contrives to put the interests of business first, ahead of the wants, needs and expectations of ordinary citizens. This is because the twin evils of lobbying and corruption rear their ugly heads every time taxpayers’ money crosses the boundary between the Public Sector and the Private Sector.



It is, as the economist Randall Holcombe puts in his book "Political Capitalism" a “system in which the economic and political elite cooperate for their mutual benefit.” The political elite tilt the economic playing field in favour of the economic elite, privileging them through subsidies, regulatory protections and targeted tax breaks. In exchange, the economic elite then help to ensure that the political elite remain in power. The rest of us pay the bill for this quid pro quo through higher taxes, higher prices, and a less efficient, less dynamic economy.



It is the misinterpretation of this responsibility, on the part of some well-meaning people that has persuaded them to support the idea of an Industrial Strategy, which entails the government intervening in the market with public funds, to stimulate economic activity, boost productivity and export-led growth.



However, this means that people in the pay of the State get to choose which industry sector receives the subsidy, and which does not – leaving them exposed to the charge of favouring the privileged few at the expense of the many, and also skewing the market in favour of the same selected few, for decades to come.



Additionally, there is a question mark about the ability of people in the pay of the State.



Here in the UK, the government’s much heralded Industrial Strategy white paper finds that the skills and capabilities of those employed in the Private Sector need upgrading, if the UK is to realise its vision of a Global Britain and pay its way in the world, post-Brexit. But there is no recognition that people in the pay of the State – the other party to this Industrial Strategy, on whom its success is wholly dependent – are equally ill-equipped for their public sector roles. This lack of acknowledgment is not a surprise. The Industrial Strategy was, after all, written by people in the pay of the State!



It would explain why there is very little confidence in the ability of big government to fix market failures, use the instrument of regulation to curb anti-competitive behaviour, manage outsourced public service contracts or secure value for money for investments made in infrastructure.



Indeed, the reputation of people in the pay of the State is further diminished by the fact that their ability to innovate, solve problems, learn from past mistakes and adapt to change, which is a distinctive characteristic of people in the Private Sector, has been erased in the Public Sector due to incessant conditioning of the mind from an early age. And, of course, people in the pay of the State are very good at talking a “big game” but they can’t “do it”.



But, what is especially worrying about people in the pay of the State is that they haven’t got a clue about what it is that drives the behaviour of for-profit organisations in the free market – not least, because they have not spent a single day of their lives in the Private Sector – and yet, they have been put in charge of spending taxpayers’ money to the tune of £292 billion per year to buy goods, services and labour from non-public sector organisations.



Worse still, in specialised markets such as that in military equipment for the Armed Forces, the role of the regulatory authority and sponsoring agency has been combined in one department of state – the Ministry of Defence – which means that the independent scrutiny function, free from political interference, is non-existent.



So, successful capture of a department of state by the defence industry amounts to taking control over both roles!



In no other field of human endeavour are such ill-equipped people allowed to ply their trade as in defence procurement – which would explain why the government has been getting appallingly poor value for money these last several decades.



Additionally, the culture in Whitehall has always put greater emphasis upon people who master rules, regulations and processes instead of valuing smart working, execution and delivery. What’s more, civil servants have migrated over the years, in overwhelming numbers, to the Private Sector via the ‘revolving door’ in pursuit of a second career and infected it with these traits. Which would probably explain why the defence industry has failed so miserably to deliver equipment to the Armed Forces that is fit for purpose, adequately sustained in-service and constitutes value for money through-life – bearing in mind that 99% of people who work in the defence industry right now, were previously in the pay of the State.



Instead of doing the decent thing and educating people in the pay of the State about the ways of the Private Sector, defence contractors are busy exploiting their ignorance, for one purpose only – relieving them of taxpayers’ money – which has, in itself, left the public finances in pretty bad shape.



There is something very disturbing about people who have previously, as public servants sworn undying allegiance to Her Majesty Queen Elizabeth II, only to then engage in defrauding Her Majesty’s Government of taxpayers’ money on behalf of vested interests.



Remember the much-vaunted principles of selflessness, integrity, objectivity, accountability, openness, honesty and leadership in public life which were supposed to guide the conduct of public servants? Well, there is pitifully little sign of them right now. It seems that these values have been left behind in the Public Sector for others to cherish!

@JagPatel3