Some questions on British Steel
First off: is the fact that Labour, the Tories, the Lib Dems, Reform and the Greens are all banging the nationalisation drum an encouraging, or worrying sign?
As the world reels from round after round of tariff bingo (see my take on how that affects Britain here), the government has recalled parliament to discuss an entirely different mess—the looming collapse of British Steel.
For a proper refresher on what’s going on, my colleagues at The Economist have a great primer. Here, instead, I wanted to drill a bit into the logic behind why the government is stepping in with a don’t-call-it-a-nationalisation-yet. For once, this won’t be too polemical; I am open-minded to the idea that Britain needs a state-subsidised steelmaking sector, no matter the cost.
But at first whiff, this smells to me an awful lot like naked protectionism, cloaking the politically-convenient (that overseeing the end of primary steelmaking in the birthplace of the industrial revolution is a bad look) with the misty language of the “strategic”. Certainly, I’ve not seen the pro-steel argument prosecuted anywhere with the rigor that I think the case demands.
So here I want to step through exactly what you’d have to believe to think that piling state cash into rescuing the industry, and subsidising it in perpetuity, is a good idea.
Let’s dismiss the worse arguments first. The government is keen on stressing that lots of Britain’s national priorities, like homebuilding and renewable energy, will need steel. All that is certainly true, but says-little-to-nothing about why that steel needs to be made in Britain—in fact, insisting on using British-made steel for those sorts of peacetime projects is an awful idea.
The entire reason the government is involved in steel at all is because, between energy costs, green rules, broader environmental and labour laws, and so on, Britain is now an almost uniquely ill-suited place to make it. No-one in British politics (yet!) is grousing that the iPhones that they use aren’t made here. Many mocked Donald Trump’s administration for (briefly) arguing that smartphone production should be reshored to America. But for some reason—my guess is the political potency of steel’s industrial aesthetics—credulity gets suspended when the question turns to steel, even though the underlying economic rationale is not much different.
The strongest ground that the pro-nationalisation crowd has is on national security: that losing the ability to make virgin (non-recycled) steel would leave Britain exposed in an ever-more-dangerous world. Counting on free trade in peacetime is all well and good, but what about when Britain is at war and needs steel for ships, submarines, aircraft engines, and so on?
On face, that sounds somewhat compelling. Is it, though? Or, more specifically, what would you have to belive to take that argument seriously on its own merits, not just a slogan. As far as I can see, there are six implicit premises. Let’s draw them out.
That there are appreciable odds of Britain landing in a large-scale, protracted hot war in the near future (i.e. not a counterinsurgency like Iraq/Afghanistan/Northern Ireland, a proxy war like Ukraine, or a horrifying-but-brief nuclear exchange—but a proper, lengthy, and direct conflict with a geopolitical peer).
That in such a situation, “friendly” supply chains from Europe, Japan, Korea, etc. would be inaccessible. (Or, more subtly, that Britain would be ‘back-of-the-queue’, since those countries may also be involved and have their own needs.)
That the scale of British steel production would be sufficient to make a difference in such circumstances, versus ending up being tokenistic. Bear in mind that Britain currently produces about 0.2% of global steel supply.
That in those unfortunate circumstances other dependencies don’t hamstring Britain anyway, if we’re reliant on the rest of the world for either the raw materials for steel production (iron ore, metallurgical coal, scrap steel) or other ultra-necessary inputs like semiconductors.
That given steel subsidies under this thinking are de facto defence spending, that there aren’t other bits of Britain’s defence capabilities (personnel, drones, cyber, etc.) where that spending would be better used. Another one for the military boffins, but my guess—reading what I have about the rickety state of much of the British military—is that this cash could do more good elsewhere.
That, if this implictly a costly insurance policy for an unlikely-but-serious tail risk, we’re not better off just treating it as one. That would mean focusing on building a national steel stockpile for worst-case military use, or specifically opting for a minimum-viable-product version of steelmaking for now, with blueprints for a rapid scaleup if geopolitical circumstances deteriorate. Now is a particularly good time to be making that choice, given how much of Britain’s existing carbon-intensive steelmaking setup is going to be decommissioned before too long anyway.
All that may well be true, but require a few fairly hefty assumptions that I’ve not seen be especially well justified. If there are good walkthroughs of the case here that readers have seen, please do send them my way.
This isn’t something that I plan on being insufferable about (unlike, say, Britain’s scourge of inaccessible driving tests), but I worry both that the case for this is weaker than has been publicly acknowledged, and that waving it through without proper scrutiny will be a bridgehead for a broader wave of protectionism in Britain. It was not that long ago that the cod-Bidenomics ‘securonomics’ agenda was allegedly Labour’s governing philosophy!
But a principle I’m trying to stick with more on the British economy is to ration my outrage: to focus on the areas where bad reasoning leads to consequential economy-sized failures, not just bits of ill-directed spending here and there. (More on the distinction between aesthetic and substantive policy badness in my last post.)
Probably my strongest reaction to this weekend’s flurry of action is sadness—I wish just a fraction of that sense of emergency was directed toward making energy abundant and cheap full stop (or tackling any other of the long list of supply-side woes Britain faces). Doing that would, incidentally, transform the conversation on steel too.
The national tragedy here is not that Britain—the country that invented industrial modernity—may lose one more bit of manufacturing, even a totemic one. It’s that, several centuries on from the Industrial Revolution, we’re further today from the front-lines of global prosperity than ever. If there’s any emergency to tackle, it’s that.
Very good article. People say "national security" and then, it's just magic, a bad decision becomes a good decision.
I do find it odd that there seems to be intense focus on rescuing steel instead of the factors that hampers its production. You’d think energy costs would be considered a national catastrophe