The British State as Entrepreneur

The United Kingdom is once again embracing active state intervention in economic policy. Such state-directed experiments have long failed in genuinely socialist countries. Fortunately, Britain has never known this form of central planning – and yet Britain is now moving precisely in that direction. Ministries define future industries, public banks invest with targeted intent, and politicians speak openly of "picking winners". What is sold as a pragmatic response to weak growth is in fact a return to state direction. Of course, state intervention has occurred before, but it generally followed a clear principle of success: when a model did not work, the state withdrew. It did not, for ideological reasons, continue riding a dead horse.

The central problem begins where the state determines economic winners. At that moment, political logic replaces entrepreneurial risk – or, more precisely, political opportunism supplants market discipline. Innovation then arises less from competition than from eligibility for subsidies and institutional proximity to power. The state becomes simultaneously capital provider, regulator and referee, and this conflation of roles is structurally problematic.

For a country whose economic strength has long rested on reliable framework conditions, legal certainty and governmental restraint, this course is risky. State industrial policy tends to stabilise existing structures rather than force genuine innovation. Losses are borne collectively, successes are exploited for political gain. Ultimately, this amounts to a form of state-mandated stagnation. How such a policy can be justified in light of the growth dynamics in China and other BRICS nations remains difficult to comprehend.

Britain's new economic strategy promises control and direction, yet it jeopardises precisely what it claims to strengthen: dynamism, competition and trust in the market. This is not the downfall of the British Empire. I can only hope this experiment fails spectacularly and that common sense once again takes hold within our government. Otherwise, there is a chance that Germany will lose its position as Europe's most embarrassing country to the UK.