One of the characteristics of 1970s politics was industrial policy, an attempt to bail out failing firms and industrial sectors at public expense. Subsidy policies often involve the worst forms of government failures as they create opportunities for rent seeking and political favouritism. One of the main recipients of government money was the motor industry.
Now the motor industry is in trouble again and calls for bail outs are being heard, most recently in relation to Vauxhall Motors, part of the General Motors behemoth. It is argued, with considerable justification, that today's British motor industry is leaner and fitter than it was forty years ago. Certainly the industry is in much better shape than at least two of the American big three who look likely to get help from Congress.
The Labour Government is emphasising that it is not reverting to old style interventionism and is indicating that it would support research and development activities or the promotion of environmentally friendly technologies. Without care this come close to the practice of 'picking winners' which governments are notoriously poor at it.
There is a case for providing credit lines to sound businesses hit by the downturn, but the problem is always how one decides that they are viable and this is where political criteria can start to creep in.
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