Why Burnham should focus on the everyday economy

A series on the politics of production.

Andy Burnham wants to “reindustrialise Britain”. Bold, ambitious words, but what do they mean in practice? Responding to Ben Glover’s opening essay, “Burnham’s Politics of Production”, Future of the Left will be publishing a series of replies as part of a debate on the new politics of production. You can read Paul Mason’s contribution here.

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Written by Dani Rodrik, Ford Foundation Professor of International Political Economy at the John F. Kennedy School of Government, Harvard University.

I agree with Ben Glover that Labour (and the left in general) has to produce a credible alternative that emphasises production over consumption. We need to rebuild a society where work is recognised as an essential component of individuals’ well-being, dignity, and social recognition – alongside their roles as consumers. I also agree that the strategy must focus on reducing the glaring regional inequalities in the UK by creating meaningful and productive employment outside London.

But I worry that linking the production and good jobs focus too closely with manufacturing industries will be a dead end for the Left. No-one can deny the historical role that manufacturing and a unionised industrial labour force have played. They have spurred economic growth, created the modern middle class, and promoted social democracy.

But today the nature of technology and global competition are very different. In particular, factories rely on automation and generate few jobs. Only 8 percent of UK jobs remain in manufacturing. Deindustrialisation started in Britain long before Chinese competition and will be extremely difficult to reverse. Even if some manufacturing output is reshored, through aggressive trade and industrial policies, the effect on jobs – which is what the Left should really care about – will be very small.

In the US, the last three administrations (Trump I, Biden, and Trump II) all emphasised manufacturing industries, pursuing a variety of trade and industrial policies. Despite this new focus and the reorientation of policies, manufacturing employment continued to fall as a share of total employment in all of them. A critic might say they did not do enough or pursued the wrong policies. But even more telling is the employment picture in China itself: the country’s factories have lost tens of millions of workers over the last decade and a half despite tremendous gains in production and exports. In view of this disconnect between manufacturing output and employment, it is difficult to believe reindustrialisation in the U.K., even if successful, will make much of a difference to the industrial labour force.

The UK debate on economic strategy typically juxtaposes manufacturing industries against globally-oriented, high-value service industries such as banking, finance, insurance, and IT. But the latter are not the answer to good jobs either. These sectors are highly-skill intensive, and hence cannot absorb the vast majority of workers without advanced degrees. They are also highly regionally agglomerated, leaving many smaller cities and outlying areas lacking for good jobs.

Whether we like it or not, the future of jobs lies in largely non-traded, labour absorbing activities such as retail, food services, hospitality, care and other personal services. The Left cannot evade this reality. The task for Labour is to generate a productivist policy vision that recognizes these services as the main provider of jobs and develop a set of policies that can transform the nature of work in them.

Good jobs require labour regulations and worker voice – things which Labour have always fought for. But without increased productivity, higher wages and better working conditions always face the cruel tradeoff that they may come at the expense of employment generation. The good news is that the digital and AI revolutions are now making it possible to innovate in service industries that have been traditionally stagnant in terms of productivity.

Platforms allow workers and small enterprises to reach larger markets. Digital systems enable family businesses to employ state-of-the-art finance, accounting, and consulting services. AI provides less experienced workers with the tools and knowledge to compete with more skilled professionals. These gains are not hypothetical. Over the last two decades, labour productivity in the US has risen more rapidly in wholesale, retail, accommodation and food services than in manufacturing!

So far, the bulk of these productivity gains have been appropriated by large platform companies such as Amazon and Uber and by large restaurant or retail chains. Hence a government of the Left has a dual mission. In addition to disseminating new, worker-friendly technologies and promoting productivity growth in non-tradable services, it will need to deploy competition and pro-worker policies to ensure the gains are widely shared.

A key feature of a productivist approach in services is that much of the action is necessarily local and requires intensive public-private collaboration among business, worker groups, and civil society organisations. Decentralised local experimentation is how change will occur. This is something Andy Burnham knows well – and indeed has been very successful at in Manchester. Now it’s his turn to put this experience to work in London by developing a national vision and mobilising and empowering localities to engage in the experimentation needed. A focus on reindustrialisation will be a fruitless distraction from where the jobs will be.