Memo to the Government: Urgent Longbridge Answers Needed... it's not just a "Private Matter"

I think you are correct in pointing out that this cannot be regarded as 'a private matter': this is clearly becoming an ever-more ridiculous approach.

Although, realistically, I think you are being a bit harsh on Liam Byrne personally, as it's hardly his fault that the Hands Off/Keep Out/Best-Left-to-Themselves Status Quo is still the prevailing mood across the broadest section of politics, business and economics!

It has been so for a good 30 years now, because it really started with the last few years of the pre-Thatcher Labour government. So political tectonic plate movement may be the best we can hope for!

Liam Byrne is a talented minister, but even he can't jump start the next political watershed alone! (That’s enough metaphors, Ed.)

The real challenge, then, is for people like you and others to continue to prod that movement into existence by pointing out through examples such as Longbridge or the credit crisis (it surely stopped being a 'crunch' months ago!) that simply letting business get on with its own business in private is an idea whose time has passed (again!).

A modern, vibrant, competitive 21st Century economy which enables genuine, sustainable growth and real progress does not of and by itself come into existence and sustain itself. Adam Smith himself never believed such to be so. It does have to be regulated and shaped and prompted into existence and then maintained and nurtured and enabled. And the bigger the business concerns involved, the more carefully does the market have to be monitored and regulated. Didn’t Adam Smith warn specifically against large ’business’ units negatively skewing the pure forces of the free market?

What complicates the use of the phrase ‘a private matter’ here is the reality that we are effectively dealing with a business entity emerging from the Chinese state, aren’t we? That’s certainly not private: not private in any ultimate sense I know of. There is a pretence that it is and that’s the problem here.

Perhaps, to be generous, the use of the phrase ‘a private matter’ here has more to do with this being dealt with in private, as opposed to being something which is a matter between private entities.

But whether it’s Fiat or V.W. (and are they genuinely private, in the sense of no government - state or federal - involvement, support or interference?) or suppliers such as StadCO , and whatever the latest MG Rover entity is on the one side, and SAIC/Nanjing on the other, there is an ultimate Chinese State involvement directly or indirectly. Isn’t the reality that Chinese Banks and finance houses finance Chinese industry and business entities through state money (usually made from bankrolling the United States economy!)? As ever: follow the money!

This is why the idea that the government here, local or national (or their agencies), don’t have a role and must leave it to these private entities to deal with as a private business matter is so daft!

What, then, of the City Council? I’d say that fingers were badly burnt here. Mike Whitby certainly trusted the word of the Chinese in these matters: the Tory and the Communist agree to keep things private and now, it would appear, silent?

Until the city council recognises that simply leaving this to market forces is not enough, and that sustaining a local manufacturing economy which will benefit the region and the nation involves actual intervention in the market place as an enabling institution, then the way our economy develops in this city and in this region is simply being left to chance. They have to believe in this themselves in order then to then convince central government, of whatever colour, to invest.

A Tory council was prepared to issue £215million pounds in bonds to sustain and maintain the future of the N.E.C. and not allow it to whither on the vine, why not the same for our city’s manufacturing industry?

The government did not force it to issue NEC Bonds in the marketplace. It was, to coin the phrase again, a confident act of economic self-determination. We need more of that approach in this region.

Had the agreement with SAIC/Nanjing or whoever involved the City Council as an actual enabling shareholder then perhaps standing back and leaving it to chance or awaiting the unknowable (perhaps inscrutable!) private discussions would not have been the apparently only option. That’s what being an enabler, and not a passive watcher, involves.

You don’t have to sacrifice Tory principles to do it. Faith in the market can be an ultimate faith: you must occasionally intervene in it to enable and ensure its operation for the wider good of the wider market that is the economy of the West Midlands or this city. I think the business economists call it boundary-spanning. It doesn’t turn you into a Socialist!

Yet again, a continuing blind trust in simple market forces from both sides of the political divide delivers a clumsy prescription for avoidable failure.

John, thanks for your comment. Yes you are right about Liam Byrne - I rate him highly. But if you read my blog carefully, my concern was over the prevailing view of government as a whole that this is a 'private matter between two companies'.

This idea that we can just leave things to the market is nonsense, especially when we're talking about a Chinese state owned firm, as Michael C notes.

I agree with the rest of the your comment: foreign investment is welcome but we need a diversity to the economy with local circuits of capital supporting local firms as well, rather than just relying on big foreign investors (where the big strategic decisions are made in Detroit, Mumbai or Shanghai). That of course also relates to my other blog on the financial crisis.