National self-sufficiency? Just don’t mention the ‘p’ word!

Tom Barker

A central plank of Labour’s Covenant: A Plan for National Reconstruction is the proposal to ‘boost national self-sufficiency in necessities’, which will involve the ‘reshoring of key manufacturing capacity’.[i] A proximate justification for this is the Covid-19 pandemic, which has exposed the vulnerability of the UK economy to disruptions in global supply chains (think back to PPE shortages in the early months of the pandemic). The document makes clear, however, that all Covid has really done is illuminate a hollowing-out of the British economy—in the form of deindustrialization and outsourcing—that has been decades in the making, eroding the social fabric and, ultimately, our national security too.

The influence of David Edgerton’s The Rise and Fall of the British Nation is evident in these pages, with references to the Attlee government’s efforts to build a more truly national economy than that which had existed in the first half of the twentieth century, enacting policies to enhance food and energy security and strengthen domestic manufacturing.[ii] In the thirty years after the war, both Labour and Conservative governments pursued economic and industrial policies that renewed the nation’s infrastructure and helped create a high-growth economy, in which a large proportion of the population enjoyed rising wages and living standards. As this economic settlement began to falter in the 1970s, however, an alternative path was mapped out which would seek to revive British industry through deregulation, privatization, and the opening up of the economy to the vagaries of global capitalism. But, as Labour’s Covenant argues, this neoliberal model served to undermine the economic nation, not strengthen it: ‘Production was switched overseas and successive governments downgraded UK jobs and gave up control of key strategic manufacturing capabilities.’

The Covenant’s call for greater national economic self-sufficiency in a world of increasing risks and fragile international supply chains has obvious appeal, including potential popular appeal to anxious voters also concerned about national sovereignty and the disappearance of traditional manufacturing jobs. However, as it stands, this proposal is lacking in crucial detail, and entails potential consequences and trade-offs that require further consideration.

First there is a need for greater specificity: which goods should the nation be aiming to produce for itself in greater quantities, and which industries or sectors need to be strengthened? Mention of Covid brings to mind PPE shortages, and the plan also makes passing references to steel and the international semi-conductor shortage. It is easier to envisage expanding domestic capacity in certain sectors than others. Increasing production of certain items of PPE might well prove easier—and, crucially, cheaper—than more technologically complex goods, which will probably require greater domestic know-how and investment.

In our globalised economy, certain nations and regions have developed (for a variety of reasons) specialisms in particular goods and services, and production of these can tend to cluster and agglomerate in these places. The advancement of scientific knowledge and technological innovation can compound this tendency, as more and more specialist expertise is required to produce certain products, along with greater capital investment. This can dramatically raise the ‘entry’ costs for a company—or even a nation—that wants to develop its own competence and capacity in a particular industry from a low (or non-existent) base. Admittedly, some of these same factors can also work in the opposite direction: e.g. technological innovation can drive down production costs of certain goods and services and/or facilitate a decentralisation of production, opening up opportunities for new market entrants. However, this only underscores the need to be clearer about which particular goods and industries the UK should aim for greater self-sufficiency in.

Cost is not the only issue. There will always be an imperative to try to anticipate future national needs, but it is notoriously difficult, and there is the risk of always ‘fighting the last war’. For example, while it is fairly safe to assume that we will suffer future pandemics and require the capacity to produce our own PPE, the specific type of pandemic we encounter might change the precise nature of the products we need. More worryingly, what other threats might be looming in the distance that we are currently less aware (or worse still, completely unaware) of, that might threaten a quite different set of supply chains? ‘Known unknowns’ and ‘unknown unknowns’ must feature prominently in such considerations.

While reference is made in Labour’s Covenant to reshoring certain manufacturing operations, little is said about raw materials. As a relatively small island, the UK will always need to import certain primary goods, even if it can boost domestic production of others. Sparkling new factories might suddenly be rendered useless in the event of a war which disrupts the shipment of one essential chemical. This, in turn, forces us to confront the realities of modern trade and production. The trade and development expert Matthew Bishop has described the dazzling complexity of today’s global production networks and value chains, in which the manufacture of a single product can involve inputs from multiple suppliers scattered across many countries.[iii] Achieving genuine security in a particular product might mean reshoring a lot more than we first imagine, or than is ultimately feasible. 

None of this is to write-off the proposal set out in the Covenant, but rather to take it seriously and work through some of its implications. Two key ‘inputs’ (probably the two most important) are worth special consideration: food and energy. As Edgerton explains, the Attlee government set out to enhance the nation’s ability to feed itself and, gradually, major progress was made along this path. For foods that could be grown in the UK, British farmers could supply just 61 per cent of demand in 1956; by 1984 this had risen to 95 per. Around the turn of the century this had fallen back to 80 per cent.[iv] Debates about the nation’s food supply have resurfaced in the wake of Brexit, with the recently agreed bilateral trade deal with Australia raising concerns about the ability of UK beef and lamb producers to compete.[v] A future Labour government could introduce policies to encourage and expand British agriculture, but this would have to be balanced carefully against other objectives, such as environmental targets (e.g. bringing more land back into agricultural use might undermine conservation efforts).

As for energy, the appeal of greater self-sufficiency is obvious, given recent hikes in oil and gas prices and worsening relations between Russia and the West. The days of the UK exporting energy from its oil and coal reserves are over, and attention has rightly turned to renewables. Britain has excellent potential for wind energy, already generating enough from offshore turbines to power around 7 million homes, with a government target to generate enough energy to power every home in the UK by 2030. In 2019, a sector deal was agreed between industry and government which, among other things, aims to ensure that 60 per cent of components in every windfarm are manufactured in the UK.[vi] This would seem to be a step in the right direction, towards both greater energy security and addressing the criticism, made in Labour’s Covenant, that the UK has been ‘outsourcing the externalities of production’ (many wind turbine components are currently sourced from Asia, where they are often produced using carbon-intensive methods).[vii]

But despite the potential for wind power in the UK, and even for expanding the domestic manufacture of the necessary equipment and infrastructure, the UK cannot run on fresh air alone; other sources of energy will continue to be essential. To touch briefly on one of these, nuclear is set to remain part of the UK’s energy mix in the decades ahead, with Hinkley Point C due to come online in 2026; it should eventually generate 7 per cent of the UK’s electricity.[viii] Given China’s involvement, this project would seem to epitomise the ‘overreliance on foreign investment in critical infrastructure’ decried in the Covenant, but the withering of Britain’s domestic nuclear capacity is a decades-old story (detailed by Edgerton), and the prospects for national rejuvenation are limited by tremendous costs and the chastening effect of past mistakes (see the troubled history of the Advanced Gas-cooled Reactor).[ix]

The issue of cost rears its head at almost every turn when considering this issue. Today, the cause of free trade has become associated with the right, but, as Edgerton emphasises, this was not always the case.[x] In the early decades of the twentieth century, the Labour Party was a proud champion of free trade, arguing that it helped keep prices (particularly food prices) low for workers and kept capitalist producers in check. With the cost of living now at its highest level in 30 years, Labour will have to be careful that any benefits of reshoring are not offset by rising prices for ordinary consumers.[xi] The more extensive the programme of reshoring and national self-sufficiency, the more likely it is that costs will rise, and living standards will be hit—something which could have serious political ramifications.

Consumption is only one end of the lens through which we can view this issue; the other is production. Whenever economically nationalist policies have been mooted in Western countries in recent years, whether from the left or the right, they have almost always come with a promise to reshore not just manufacturing industry, but manufacturing employment. The idea of repatriating the jobs lost abroad—particularly to east and south east Asia—over the last fifty years undoubtedly has populist traction, and has been touted by politicians as diverse as Donald Trump and Jeremy Corbyn. But, as John Bryson, Vida Vanchan and Shihao T. Zhou have recently pointed out, the reality is that many manufacturing jobs have already been automated away.[xii] ‘Bringing back’ significant manufacturing capacity may not bring back as many jobs as some hope, and certainly not the same kinds of jobs—many modern manufacturing roles are much more highly skilled than those of the past, and require a highly trained, well-educated workforce.

Overall, a drive to enhance national self-sufficiency in key sectors, and reshore certain manufacturing operations, has clear appeal in an increasingly risky world, and merits serious consideration as Labour formulates policies for the next general election. As a priority, more detail must be given on which industries/products such an approach would target, and why they have been chosen, as the prospects for success will vary considerably depending on which goods and sectors are targeted. Moreover, the limitations and trade-offs involved have to be acknowledged and confronted, particularly the potential for increased costs and uncertain employment gains.

Finally, we need to think very carefully about how such an approach squares with geopolitical realities and the UK’s pre-existing international commitments. We are not confronting the world economy as it was in the late 1940s, but one transformed in myriad ways and by numerous forces over more than 70 years, including, crucially, by international co-operation and negotiation. If the UK is to reorient its economy towards greater self-sufficiency to any significant extent, this will necessitate policies that explicitly favour domestic over foreign industry. These could range from ‘buy British’ government procurement, through to enhanced subsidies for domestic manufacture, and increased tariffs. To use a word which is largely avoided in the Covenant, it entails protectionism. Depending on exactly which sectors the UK wishes to protect, and precisely how it goes about protecting them, it could find itself in breach of laboriously brokered trade deals, and facing retaliation from formerly trusting international partners. If the policy proposed is about trying to enhance the nation’s security in an increasingly risky and hostile world, we must seek to ensure that it doesn’t in fact exacerbate the very global conditions it hopes to mitigate.

Tom Barker is a contributing editor at Renewal.

---

[i] Tom Barker wishes to thank Craig Berry for comments on a draft version of this post, though any errors remain his own.

[ii] David Edgerton, The Rise and Fall of the British Nation: A twentieth century history, London, Penguin 2019.

[iii] Matthew Bishop, ‘Reconciling a post-Brexit trade and industrial strategy’, in Craig Berry, Julie Froud and Tom Barker, eds., The Political Economy of Industrial Strategy in the UK, Newcastle, Agenda Publishing 2021, pp93-103.

[iv] Edgerton, op cit, p285.

[v] Sebastian Payne and Jamie Smyth, ‘UK and Australia agree post-Brexit trade deal’, Financial Times: https://www.ft.com/content/e74fd99a-aa89-4cd8-a759-9ccc25f8ca27, 15 June 2021.

[vi] Jillian Ambrose, ‘Gone with the wind: Why UK firms could miss out on the offshore boom’, Observer: https://www.theguardian.com/business/2021/sep/04/gone-with-the-wind-why-uk-firms-could-miss-out-on-the-offshore-boom, 4 September 2021.

[vii] Ibid.

[viii] Dave Harvey, ‘Hinkley C: Hundreds more needed to finish nuclear power station’, BBC News: https://www.bbc.co.uk/news/uk-england-somerset-57227918, 25 May 2021.

[ix] Edgerton, op cit, p294.

[x] Ibid, p213.

[xi] David Milliken and Andy Bruce, ‘UK sees highest inflation since 1992, pressuring BoE and households’, Retuers: https://www.reuters.com/world/uk/uk-inflation-rises-highest-since-march-1992-2022-01-19, 19 January 2022.

[xii] John Bryson, Vida Vanchan and Shihao T. Zhou, ‘Risk management and reduction in global supply chains and production networks: Reshoring and rightshoring versus offshoring’, in Berry, Froud and Barker, op cit, 121.