Market knows best... but needs a hand sometimes

Thanks to Bridget for showing me this article in The Independent yesterday: Market forces must make way for interventionism, says Mandelson

(Strangely the Guardian's view on this story was little to do with a fundamental change in Government outlook, rather on the various "extra £2 billion on this and 3.5% decrease here".)

But anyway quotage time:

The document insists the Government will not "pick winners", opt for state ownership of industry, "override market forces or ignore market signals". Its new activism "does not imply a fundamental change in our view of the relationship between the market and the state.... However, the way the Government sees its own role in the market needs to change in order to deliver a more coherent and effective approach." This means "a readiness to intervene where necessary" by "supplementing" rather than "substituting itself for the market" and "correcting significant market failures."

...

While not denying Britain "the huge benefits of free enterprise," the Government recognises that the private sector "has important limits."

Typically Government opinion (and the directives of most regulators) has been to promote above all else, competition, in the belief that it is the most efficient method of production and as such the best method for increasing growth and reducing inequality in society. It may or may not be the best method, but the argument that Government can choose not to 'pick winners' seems inherently flawed. The Government creates the laws governing society and so creates the field in which the market operates, directly or indirectly this influences different aspects. For example for selling electricity on the market. Agreements between sellers and consumers are sorted out an hour before delivery and failure to supply the agreed amount results in having to pay for that shortfall to come from elsewhere, plus extras (even supplying a surplus can cost money). This is obviously a rather big drawback to many renewable energy sources who cannot guarantee their supply in an hours time.

There's nothing concrete on what the Government will do from now on so we shouldn't get carried away believing this is a paradigm shift, it's not improbable that this is merely substanceless spin based on a knee-jerk reaction to public opinion (although in fairness I don't recall seeing too many calls for more intervention or nationalisation). Nevertheless the act of saying this does represent a somewhat significant moment, even if it only meant badly needed extra financing during the recession for renewable energy etc.