This article marks the commencement of a five-part exploration into the crucial role of industrial policy in fostering local and regional economic development. The breadth and depth of this subject necessitate a series of discussions, and I trust your engagement, dear readers, will extend across these instalments.
The notion of industrial development extends far beyond the confines of factory floors. While the contraction of manufacturing employment and the phenomenon of “de-industrialisation” have undeniably left an indelible mark on the economic landscapes of the UK, Europe, and North America, the repercussions continue to shape local and regional economic trajectories.
Industries are better thought about as “systems” rather than monolithic factories
It is imperative to recognise that “industry” encompasses a far wider spectrum than mere production lines. A more accurate understanding frames industries as intricate systems, characterised by interconnected value chains, resources, assets, services, and diverse activities. In this context, industrial development emerges as a potent engine of economic advancement, fundamentally reshaping economies through several key mechanisms:
Transforming Structures: The transition from an agrarian-based economy towards industrial activity catalyses significant productivity gains and propels overall economic progress. This shift can be likened to a fundamental upgrade of the economy’s core operating system, enhancing its efficiency and output capacity.
Diversifying Economies: A robust industrial foundation cultivates greater economic resilience by reducing over-reliance on the inherent volatility of primary commodities. This diversification strategy fosters a more stable and adaptable economic environment, capable of weathering external shocks.
Connecting Sectors: Industry acts as a vital nexus, forging crucial linkages with both the agricultural and service sectors, thereby strengthening the entire economic fabric. This interconnectedness fosters a more supportive and synergistic business ecosystem.
The benefits accruing from industrial development extend beyond these structural shifts, significantly bolstering:
Productivity & Innovation: Industrialisation introduces modern technologies and streamlined processes, leading to substantial improvements in productivity. Furthermore, it serves as a crucible for innovation and the widespread dissemination of new knowledge and expertise, fostering a dynamic interplay between efficiency and ingenuity.
Job Creation: Industrial sectors typically provide more stable and higher-paying employment opportunities, contributing to improved individual incomes and overall living standards. This translates into the creation of quality opportunities that enhance economic well-being.
Skilled Workforces: The sophisticated demands of industrial activity necessitate the development of a highly skilled workforce through enhanced education and specialised training initiatives, thereby significantly boosting a nation’s human capital and future economic potential.
On a broader national scale, a thriving industrial sector underpins:
Stronger Trade: Diversifying a nation’s export portfolio beyond raw materials to include manufactured goods, services, and media products creates more stable and resilient international earnings streams.
Global Integration: Active participation in global supply chains unlocks access to international markets and cutting-edge technologies. This integration also enables domestic industries and related activities to achieve greater specialisation, ultimately driving higher productivity levels and increased wealth generation.
Crucially, industrial development exerts profound and multifaceted influences at the local and regional levels:
Spreading Prosperity: It possesses the capacity to ignite economic growth within specific geographic areas, thereby mitigating regional inequalities and fostering a more balanced pattern of national development.
Infrastructure Boost: The establishment and growth of industries often catalyse essential investments in critical infrastructure, including transportation networks, energy provision, and communication systems, yielding widespread benefits for the entire community.
Thriving industries that produce goods and services capable of competing and succeeding in international markets form a cornerstone of sustained economic growth and the continuous improvement of living standards. Nations that have successfully cultivated robust industrial bases, and importantly, have demonstrated the capacity to supersede traditional industries with innovative new ones, have consistently witnessed significant economic and social progress.
The decline of primary and traditional manufacturing industries in many advanced economies from the 1970s onwards precipitated significant local, regional, and urban regeneration initiatives. This period of transformation has ultimately contributed to the evolution of the concept of “industrial clusters,” a topic we will delve into with greater detail in the subsequent article in this series.
The next article – “The ghosts of industry: how deindustrialisation continues to shape the UK (article 2 of 5 on industrial policy)” will be released on Monday 28 April.
About the author
Glenn Athey is a leading economic development and regeneration professional and senior executive with a 30-year track record of successful leadership, delivery, networks, and practical knowledge acquired working in senior roles in government agencies, partnership organisations and UK think tanks. Glenn helps local leaders translate their economic ambitions into winning advocacy and solutions that get funded. Get in touch via LinkedIn messaging or call 07799880137. Full contact details here.
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