It's capitalism, but not as we know it

It's capitalism, but not as we know it

12th December 2017

Martin Doel reflects on the role of FE in the government’s industrial strategy and what the strategy tells us about the emergence of a new capitalism

Much has been said in recent weeks about the UK government’s industrial strategy and its implications for further education and universities. Commentators have, quite properly, identified the mismatch between the strategy’s ambitions for skills and the sums of money allocated to achieving them. It has also been noted that the parts of the strategy that deal with skills and productivity repeat the mistake of past skills strategies by focusing on supply-side reform and failing to properly recognise the under-utilisation of skills within the economy. Less perceptively, some have remarked on the lack of detail in the document. However, a strategy is not a plan; it is a framework for action that sets the overall direction of travel and provides a basis for coordination in subsequent detailed and shorter-range plans. In my estimation, the industrial strategy actually included too much detail, at risk of obscuring its most significant themes.

One of the themes likely to have a substantial impact on FE (and some universities) is the suggestion of a more interventionist approach to markets. Indications of a ‘post-market approach’ have been apparent over at least the last two years, in the area-based reviews of colleges and in the introduction of the apprenticeship levy. Neither of these policies sits easily with classic free-market thinking. Free market orthodoxy would have seen failing colleges going bankrupt, rather than entering into mergers or being supported as community assets, while the notion of a tax on employers to fund government-regulated training is some way from the philosophy of a self-determining market.

The conceptual basis for this move toward a more interventionist state is reinforced by Jonathan Haskel and Stian Westlake in their new book Capitalism without Capital.[1]  They point to the growth in intangible, as opposed to tangible assets, in developed economies, a trend that is particularly marked in the US and the UK. Tangible assets are things that you can touch – machines, equipment, premises – while intangibles are things like ideas, processes and algorithms. Intangibles have other distinctive properties, which Haskel and Westlake term the ‘four Ss’: scaleability (they can be scaled quickly without major investment in fixed facilities); sunkenness (in case of failure these assets cannot be realised in the way buildings or machines can); spillover (it is hard to prevent others benefiting from your ideas); and synergy (ideas can benefit from the complementary ideas of others). Additionally, and critically, the wealth generated by intangible assets is harder to tax and regulate, lacking fixed locations; think of companies such as Facebook, for instance, which have virtually no physical assets.

The interaction of the four Ss and the growth in intangible assets can be said to have given rise to a new form of capitalism, hence the title of the book, and this new capitalism partly explains the social dislocation experienced in the wake of globalisation. Specifically, some areas benefit more than others as clusters of high-tech firms locate close to one another (think Silicon Fen in Cambridge or Tech City in East London). Such developments reward high-level skills, but result in uneven outcomes (the hourglass jobs market). As a result, government needs to be more interventionist in order to develop a spread of multiple clusters of high productivity, to stimulate innovation that enables new intangible assets to be created and to ensure that the benefits of the new capitalism are fairly distributed in order to maintain social cohesion. However, interventionism must not mean a return to traditional control, regulation and planning – hence my use of the term ‘post-market’. Seen in this light, the industrial strategy has genuine significance.

But what does this reading of the industrial strategy mean for FE? Critically, it means that as skills development and utilisation become more central in the search for improved productivity, FE will be very much to the fore. However, its significance will increase in the context of a more interventionist state and more managed market. The harbingers of more conditioned autonomy can be found in the sections of the strategy devoted to place (local industrial strategies and skills advisory panels) and to sector deals. Hopefully, this will not mean a return to the detailed control and direction of colleges by local mayors (who may believe they have the infrastructure to do this), or by local enterprise partnerships. The complexity and speed of change in a modern economy with a high incidence of intangible assets, in the form of services and interconnected products, are of a different order to those that applied in the mid-twentieth century. To be effective in such circumstances, colleges will need to retain the flexibility to respond to the needs of students, communities and employers, albeit with even greater attention to local collaborative relationships and both national and local accountabilities. A more managed market will also have implications for independent training providers as agencies seek to balance the need for competition with the need to respond, to take a longer view and to secure more even outcomes for people and places.

Martin Doel is FETL Professor of Leadership in Further Education and Skills, Institute of Education, University College London

[1] My discussion draws on analyses of the book by Daniel Finkelstein, in the Times, and Martin Wolf, in the Financial Times.




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