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Defence is indeed different Samuel Brittan: Remarks at launch of The Best Kit, by Antonia Feuchtwanger, Policy Exchange, and Escaping the Subsidy Trap, P Ingram and R Isbister 22/09/04. Behind most absurd pieces of policy, economic or otherwise, there is almost always some pressure group or interest group. This is pretty obvious when it comes to the farmers and agricultural policy or heavy industry and the pressure for government support, for instance, for dubious dam projects in Third World countries. But in my experience these pressure groups receive an extra boost from the prevailing belief that supporting them is "the right thing to do". One prime minister after another, including both Margaret Thatcher and Tony Blair have, said in a loud voice, when attacked for supporting controversial overseas projects, that they "do not apologise for supporting British industry". Although other political leaders, such as John Major or Douglas Hurd spoke in a softer tone, their message was essentially the same. The 1970s were the heyday of the deluded idea of promoting "national champions", which is simply protection by the back door. Since then, in area after area, the pressure of events has forced politicians off this path. The British motor industry has more or less been left to fend for itself. The coal mines have been closed and once staple industries such as steel and textiles are a mere shadow or their former selves. There is even a half hearted attempt to reform the Common Agricultural Policy. The arms industry is the last stronghold of the discredited "industrial strategies" of the 1970s. Of course the British government has tried by international treaty and its own actions to limit arms sales to the worst regimes, often late in the day. But there is always an argument at the margin; and the present "defence industrial policy" gives the benefit of the doubt to those who want to sell arms and to those who want to support British equipment manufacturers, even when better or cheaper equipment is available from overseas. In the case of equipment purchases ("kit") British troops risk being provided with less than the best value for money to support, supposedly British, industry. The opposite policy is sometimes called buying off the shelf. It might more simply be called best value for money. It is no accident that there is a chapter on Hawk aircraft in both publications. One reason why the arms industry has escaped some of these pressures is the sheer obscurity of the trade. Many governments are up to their necks in supporting the domestic weapons industry; but the amount involved is not transparent. Secrecy and security plus the inherent complexity of the business keeps outsiders at bay. It is therefore sometimes necessary to go back to first base and ask whether it is desirable for governments to support their domestic industries when they can get away with doing so. The most important mistake comes from failure to appreciate the circular flow of income: that there is a continuing flow between purchasers who desire to buy, the incomes received from supplying their wants and still further purchases. Most perverse pieces of neo-protection come from ignorance of this flow. For instance it is assumed that if my country loses arms orders in pursuit of an ethical foreign policy that workers in the arms industries will simply waste away in idleness. Of course there can be economic policy which make the corporate economy work more successfully. The government has a role in education and training and in areas such as transport and roads, where private enterprise cannnot always provide adequate back up facilities. Above all the government has a role in promoting a steady but non-inflationary growth of purchasing power. This is best implemented, not by special favours for political friends, but by organs such as the Bank of England Monetary Policy Committee in its interest rate decisions. There is also a role here for budget surpluses and deficits, even though this can obviously be exaggerated and get out of hand as we see in the case of President Bush's deficits in the United States. To oppose government support for domestic industry does not mean of course that government should oppose British industry or get in the way of British companies. One might say that the ideal policy should be neutral. Neutral really means "no special favours". Adam Smith once said that people of the same trade rarely meet, even for diversion and entertainment, without some conspiracy against the public ensuing. He had a much better idea of what a competitive market economy meant than today's political leaders who cosy up to Big Business. He also said "There is an awful lot of ruin in a nation". By this he meant that a country could survive a surprisingly large number of mistakes of government policy and still prosper. What is "different" about arms is that mistaken policies here cost lives and undermine human rights. The one disinterested argument brought up defenders of the status quo is that Britain should be able to fight a major war without relying on allies to supply equipment. I must leave the detail of this to General Cowan. But I ask myself: when was there last such a war? The main examples trotted out are Suez which was 48 years ago and the Falklands which now dates back 22 years. Moreover in both these cases Britain still used arms from non-belligerent nations. The main threats to Britain are now also threats to other western countries, whether from terrorism or actions by rogue states. It makes little sense to envisage situations where Britain should "go it alone". But even if the Ministry of Defence and its corporate allies were allowed free rein it is extremely difficult to imagine the UK could go very far without overseas allies and suppliers. The root of the problem is intellectual incoherence, even more than constituency pressures. Successive prime ministers of both main political parties have confused the idea of a competitive private enterprise economy with that of supporting specific companies. This last objective has nothing to do with competition policy and is in fact the opposite: protection in thin disguise. The main virtue of private firms comes from their need to compete with each other, which is forced on them by the market, and should not be taken away by misguided government efforts. Mary Tudor said she would die with the word Calais written on her heart. Were it not for Iraq, Blair would die "Hawk Aircraft" written on his.
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