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1 Uni Europa and World P&M Conference 15th April 2013 Speakers Notes Colleagues, Introduction Thank you very much for inviting me to speak to this conference today. It has been a historic week in the UK. Exactly one week ago, we had just learned of the death of a former British Prime Minister, Margaret Thatcher. Mrs Thatcher was the UK’s first and, so far, only woman Prime Minister. She was our longest service peacetime Prime Minister. In the UK, the Miners Strike, the Falklands War, the Brighton bomb that nearly killed her and Mrs Thatcher’s increasingly hostile approach to Europe have become very firmly established in the nation’s consciousness. Internationally, Mrs Thatcher earned the nickname ‘The Iron Lady’. She infuriated the African National Congress by opposing sanctions against apartheid 2 South Africa, while declaring the new Soviet Leader, Mikhail Gorbachev was a man with whom she could “do business”. But it was her chemistry with the US President, Ronald Reagan, that stands out. In particular, Margaret Thatcher and Ronald Reagan kicked off the neo-liberal economic revolution, which minimised the role of the state and maximised the role of the market. Until then, in the UK there had been a consensus that the state had a role to play in supporting employment and underpinning industry. Keynesianism, and the concept of counter-cyclical demand management in particular, had been accepted across the political divide. Margaret Thatcher tore up the books. And her hostility to trade unions is well-known. What is more, after she left office, her philosophy was not seriously challenged. The New Labour Government of Tony Blair supported the idea of minimum standards at work. A National Minimum Wage was introduced and new rights to belong to a trade 3 union, and to have that union recognised for bargaining purposes, came into law. These were important reforms. But the voice of business remained the primary voice. There was scepticism about the role of government in economic affairs. The need for a balance to the power of business was downplayed. When the TUC published a report calling for industrial policy in 2005, it fell on deaf ears. So what has changed? Most obviously, in September 2008, Lehman Brothers filed for bankruptcy. This was the biggest bankruptcy in US history and the most visible symbol of an economic downturn that has lasted longer than the Great Depression and that, as we meet today, is far from over. The UK has experienced a double-dip recession and may yet experience a triple-dip. The situation in the eurozone is precarious on so many levels. This means that politicians, economists and many others have been considering not just how to get back 4 on a path of sustainable economic growth, but how to develop an economic model fit for the future. What should that economy look like? What tools do we need to provide steady growth and good, well-paid jobs in the years to come? I will try to share a few thoughts on these questions in my remarks today. Good Work I think the biggest long-term challenge that we face is this: how do we create economic growth in such a way that it promotes quality jobs for those young people who do not go to university? In the 1960s and 1970s, the heyday of British manufacturing, industries such as automotive and aerospace provided millions of jobs for working class people. Many of those jobs were skilled jobs. What is more, they were jobs that paid proper wages. Those working for manufacturing companies may never have got rich, but they earned enough to feed and clothe themselves, provide for their families and enjoy dignity at work. 5 Since the decline of manufacturing, the UK has developed an hourglass economy. Well educated professionals can often earn very good wages, while many jobs for non-graduates pay such low wages that those doing them rely on government support to top up their pay. So how do we create jobs for what sociologists call the skilled working class? I’ll come back to that question shortly, but in the meantime, let us agree that the government has a responsibility to ensure that it happens. It is not the government’s role to directly supply the jobs, although the public sector has an important role to play in a modern economy. But an economy that provides good jobs has to be a political priority and if the market does not provide them by itself, government must do more than simply shrug its shoulders. Industrial Strategy The TUC strongly believes that the UK needs a modern, intelligent industrial strategy. There will be no return to the UK’s golden age of being the workshop 6 of the world. Trade unions are not naïve about economic change; even if the UK achieves an industrial renaissance, that will not create jobs in the numbers that manufacturing provided in years past. But we need an industrial strategy because we need a rebalanced economy. We have seen the dangers of an economy over-reliant on one sector, the financial services sector. Instead, the UK needs to think about those industries where it can compete in the age of globalisation for the next 10, 20,30 years. Some of those industries, such as automotive, aerospace and pharmaceuticals, already exist. Others, such as environmental technology, need government support until they are viable. This is exactly what Germany and the Scandinavian countries have done. It is what the UK must now do. How do we identify the sectors which should be prioritised? I suggest this approach. First, we think about what we are good at. What industries are we good at? What skills do we have that would enable us 7 to shine in other industries, perhaps industries such as nanotechnology, that are not yet mature, but will be huge in the years and decades to come? Second, we need to consider what will be the major needs, wants and challenges of our world in the coming decades. Then we should match the two lists. Mega Trends Last year, the TUC published a report called ‘German Lessons’. As the title suggests, this report sought to learn lessons for UK industry from Europe’s powerhouse economy, Germany. One company we spoke to for ‘German Lessons’ was Siemens. Siemens is, of course, a transport and communications company. A central concept of Siemens is the idea of megatrends. Siemens knows exactly what it is good at and what industries it should be able to break into. But Siemens is also interested in world trends. A member of the Siemens works council told us: “What will London look like in 2020 or 2025? What are the major things that need to change in a city like that? For 8 Siemens, that is a kind of headline, a possibility to develop business.” Free market politicians have argued against trying to identify future industrial and economic trends which, they say, cannot be done. Yet this is exactly what Siemens does. The oil industry is another that takes very long term planning seriously. If industry can do it, why cannot government do it, if there is the political will? So identifying the key industries of the future is a central part of industrial strategy. What else should industrial strategy cover? In our ‘German Lessons’ report, the TUC called for a new industrial eco-system. What we meant by this was that various policies need to knit together, rather than standing side by side as piecemeal, unrelated activities. So if the UK wishes to focus on certain world leading industries of the future, how will skills policy respond to that? Can procurement policy 9 support it? Can the best brains of universities be harnessed for the cause? A role for trade unions And, of course, what is the role of trade unions? Germany has a social market economy, which is highly prized among the population. Of course that country has its problems and challenges, but the levels of division and inequality experienced by Anglo Saxon countries under the neo-liberal model have been avoided under the model of so-called Rhineland Capitalism. But the Social Market Model implies strong unions and strong employers’ associations. In the German system, employee representatives, who are usually trade union members, have seats on Works Councils and Supervisory Boards. Under this system, known as ‘codetermination’, they often have the power to block change, but they recognise that if they simply say no, this will ultimately result in the company losing competitiveness. 10 The Social Market Economy and co-determination are distinctly Germanic concepts and we must be wary of trying to import models into countries with different histories and cultures. Yet I do not accept that British people are inherently unfair, greedy or selfish. A model, built on UK history, that promotes greater equality and mutuality, with a greater voice for workers as well as businesses, is another important aspect of industrial strategy. The need for care Finally, I mentioned Siemens and industrial megatrends, but we must consider other social, economic and demographic trends as well. In particular, the ageing population and the need for more and longer social care is an obvious trend that we can all predict. I said earlier that I would discuss good jobs for the skilled working class. Automation and technology means that a manufacturing renaissance could increase 11 these jobs, but there would still be a large shortfall between the jobs created and those needing them. There is no single place that other workers should go, but investing in care a good way to provide high quality jobs in the future, meeting social needs as well as creating employment and wealth. The coming decades will see a need for a massive expansion in care work for the elderly. This must be accompanied by a major improvement in the terms and conditions of care workers. At present, care is poorly paid and undervalued. This must change. This leaves the obvious question of how this care can be paid for. There is no obvious answer, but we will need to consume less over time and the richest will need to consume much less. A fairer society, in which wealth is shared more equally, will help us to meet this need. Conclusion 12 In conclusion, the economic downturns should spell the end of neo-liberal economics. If we wish to build a thriving, prosperous, sustainable economy, we need a commitment to full employment and a modern industrial strategy. We also need a better balance between the needs of business and those of other stakeholders. Trade unions have traditionally been strong in the manufacturing sector and when we speak of industrial strategy, we often focus on manufacturing. The UK needs a rebalanced economy, with modern manufacturing at its heart, but industrial strategy must reach wider, into the service sector, as well. Among the most important service sectors is that of personal care, a sector which will grow in importance in the decades before us. We must rise to that challenge, providing high quality jobs through care, and giving dignity in old age in the process. Thanks for listening. 13