It’s time to nationalise BAE Systems
By revenue, BAE Systems is the third largest defence company in the world. On any conventional measure it is a British success story, exporting world class products, leading in applied science innovation and employing over 80,000 people globally. It is one of the six largest suppliers to the US Department of Defence and every year sells billions of pounds of products in what it considers to be its home markets: the United States, the UK, India, Australia and Saudi Arabia. It is, unsurprisingly, listed on the FTSE 100 where it is that rarest of beasts: a British-based company of global renown which exports manufactured goods. It is also the UK’s largest manufacturing employer with more than 30,000 employees spread across more than fifty locations nationally.
In addition to its present day scale and success, BAE also enjoys a remarkable heritage. While the company was only created as recently as 1999 – as the result of a merger between Marconi Electronic Systems and British Aerospace – the real history came before, with the predecessors to those two companies giving rise to industrial innovations of momentous significance. They include the Marconi Company, the first venture devoted to radio manufacture and diffusion; de Havilland, manufacturer of the Comet – the world’s first commercial jet airliner; British Aerospace – who created the Harrier jump jet; the British Aircraft Corporation, a partner in the Concorde project; Supermarine, manufacturer of the much-loved Spitfire; Yarrow Shipbuilders, who built the Royal Navy’s first destroyers; Fairfield Shipbuilding and Engineering Company, pioneer of the triple-expansion engine and builder of the first ever battlecruiser; and Vickers Shipbuilding and Engineering, the company behind the Royal Navy’s first ever submarines.
What you get with BAE Systems, its antecedent companies and capital assets, is Britain’s industrial history in microcosm. The application of intelligence, ambition and technology for the purposes of both peace and war: civilian technologies that made possible globalisation and international communication; weapons systems that helped Britain project military power on a global scale.
But while the sale of arms is never an innocent undertaking, and the companies enmeshed in the story of BAE go back almost two centuries, a possible deal between the defence titan and the Kingdom of Saudi Arabia, estimated to be worth some £4 billion, would mark a moral nadir for the company. According to Berenberg the Kingdom’s ongoing war in Yemen, combined with a less diplomatically-isolated Iran, makes its interminable deal for 48 Typhoon jets all the more likely. Such a sale would take place in a context where one in three strikes by the Kingdom’s air force are hitting civilian targets, a situation which, according to a legal opinion issued last December, puts arms exports to the country in breach of UK, EU and wider international law. Earlier this year the UN said there had been 119 “clear violations” of international law by the Saudi-led coalition in Yemen with refugee camps, schools, hospitals, markets and weddings included as targets. And yet the weapons keep on flowing. It is among this mess of illegality and murder that BAE wishes to deliver world class fighter jets, presumably to continue the same process.
And yet even with this in mind, moral arguments relating to matters of war and commerce rarely prove sufficient. The law can nearly always be circumvented under conditions of expediency, especially when thousands of British jobs depend on deals precisely like this one. If Saudi Arabia doesn’t buy Typhoons, the argument inevitably runs, they’ll just buy French-produced Raffales instead. Thats just the way of the world, and while it makes for bleak realpolitik, Britain’s economic interests – profits for BAE shareholders and jobs for its workers – are at least ensured.
A different kind of Manufacturing: forty years since The Lucas Plan
Forty years ago, in January 1976, workers at Lucas Aerospace had other ideas. Amid the turbulence of redundancies, technological change and heightened global competition, they published an Alternative Plan for the future of a company beset by a myriad of problems. It was an inspired and original response to the announcement of imminent job losses. But instead of redundancy, workers argued the company should shift its resources to civilian purposes and ‘socially useful production’. At the time half of Lucas’ output supplied UK military contracts, and since this depended on public funds, as did many of the firm’s civilian products, workers argued that similar levels of state support could instead enable innovation in fields such as life support, public transport and energy. The plan was to transition to a different kind of economy, and while that was far from easy, it at least looked plausible with Lucas Aerospace. After all, in addition to a plan, world class technologies, processes and workers were already in place.
That might explain why, only two years later, the Financial Times described the Lucas Plan as, ‘one of the most radical alternative plans ever drawn up by workers for their company’. The following year, in 1977, the New Statesman claimed the ‘philosophical and technical implications of the plan are now being discussed an average of twenty five times a week in international media’. Such prolific discussion saw the plan even being nominated for the Nobel Peace Prize in 1979. And yet shop stewards suspected that their daring blueprint would be insufficient in an increasingly hostile economic climate. So it proved – while the Plan represented a plausible answer to de-industrialisation and rising global competition, it floundered without political support.
Occupy BAE: Building a 21st century economy
Fast forward to the present moment and the ideas behind the Lucas Plan are as apposite as ever. If anything the flat structures its engineers wanted four decades ago prefigured work practices that have since emerged in IT and software development, themselves increasingly replicated in MakerLabs and larger businesses such as X (formerly Google X) and SpaceX. Then, as now, defence was a major UK industry, and the impulse to repurpose British companies in the sector to more ‘socially useful’ production – with the present commercial climate particularly hostile for BAE – makes even more sense now than it did in 1976. After all, BAE’s primary market, the UK, has seen defence budgets at the centre of fiscal consolidation over the last six years. Brexit, continued economic stagnation and the distinct possibility of Scottish independence will only exacerbate that. Britain’s diminished military role means bad business for BAE – that being especially true if renewal of the Trident missile system doesn’t get the go ahead (BAE, who manufacture the Astute Class submarines will likely have a major role in any successor to the current Vanguard class of submarines). That, combined with the prospect of US military procurement becoming more protectionist doesn’t bode well for a company which, on present trends, will only become more dependent on deals like the Saudi one, in the process testing the very limits of international law.
Britain’s hasn’t had a discernible industrial strategy since the early 1980s, but between the demise of Pound Sterling as a petrocurrency, the UK’s imminent departure from the EU – and with it the possible demise of the City of London as a hub for global finance – and persistently low per capita growth and productivity since 2008, it is increasingly credible to talk about a different kind of economy. The question being how far that conversation goes.
While Jeremy Corbyn and John McDonnell are the most prominent voices in this debate – their own proposed dirgisme hinging around £500 billion of infrastructure spending focused on manufacturing and new industries – the Tories have been increasingly vocal about trying something different too. Indeed, one of the first things the May government did was to merge two former government departments (BIS and the DECC) into a single Department for Business, Energy and, yes, Industrial Strategy. No maverick move, that was the outgrowth of a surprisingly broad debate around the economy during the Tory leadership election and a first response to Britain after Brexit. Central to Stephen Crabb’s leadership bid, for instance, was a £100 billion “Growing Britain Fund” that would go towards flood defences, fibre optic broadband and Crossrail 2. This, Crabb claimed, would be financed through new government bonds. A similar position could well inform Chancellor Hammond’s approach in raising growth over the next 18 months and would have been considered heretical during the Cameron-Osborne years. While funds would not be on a scale proposed by the Labour leadership, increased government borrowing to pay for infrastructure and boost specific sectors is far from impossible. Ultimately, what will determine how far the Tories move on the issue is what happens after Article 50 is triggered. Even if that doesn’t happen until 2018, it’s possible the British economy will suffer while waiting in the EU departure lounge anyway, namely through lower foreign investment.
While that sounds like a crisis situation, and some kind of economic downturn in the next several years would appear almost inevitable (this is, after all, why May is delaying things) it also represents a tremendous opportunity. A decade of stagnant productivity, falling wages and flat-lining per capita growth are emblematic of a broken economy. Yes, record numbers have found employment since 2010, but they are primarily in low-paid, service-sector jobs overwhelmingly in London.
Elsewhere I’ll lay out how a new government agency focusing on deflationary technology and automation will be necessary, specifically in enhancing civil society. In addition, I want to see the national trial of a guaranteed social wage, as well as a massive program of social housing with homes, along with education and healthcare, ultimately withdrawn from commodity circulation and free at the point of consumption – as is presently the case with much of the NHS.
But even that vision ignores the capital assets and brainpower Britain has, and the infrastructure that is already there to build the economy of the future. While part of rectifying that will include recalibrating business models in the City of London; opening the BBC up to contestable funding and making it an incubator for new media operations; and, at the very least, a different approach with procurement and employment policy within the NHS, there is also a pressing need to build and empower industries around the growth technologies of the coming century, such as synthetic biology, renewable energy, AI and additive manufacturing. While a radically different approach in regard to research funding, the knowledge economy and higher education will be needed in all of these fields, there is also the opportunity to transition certain companies from low profit, socially useless production to something better.
It is for that reason that BAE Systems should be taken into public ownership, with tens of thousands of engineers and fixed capital re-directed towards renewable energy industries, automated civilian avionics and vehicles, space transport and climate change solutions – specifically around flooding and desertification.
Right now BAE has 33,000 employees across the UK, 70% of which are engineers or work in engineering-related areas. That is an immense amount of talent that is currently deployed to, among other things, build weapon systems to be used against civilian targets in one of the poorest countries in the world. As well as Saudi Arabia, other BAE clients include the UAE, where the company sells surveillance systems and, potentially Qatar, which is still looking to buy Typhoons despite recently purchasing a large number of French Rafales.
Rather than create weapons for some of the most authoritarian regimes in the world, while also depending on British defence budgets only set to shrink and the renewal of a nuclear deterrent ill-suited to the modern world, the resources and skills of BAE Systems, especially given its comparative edge in avionics, vehicles and energy architecture, would be instead be deployed in fields of importance to Britain and the wider world. New flooding solutions, crucial as Britain adapts to climate change, would not just be for the domestic market but for export too. The same is true for dealing with desertification, a major issue not only for North America, the Middle East and Africa, but Europe and Australia.
Then there are the fields of renewable energy, automated transport, AI and robotics. While many think of private enterprise as being behind the rise of contemporary consumer gadgets, such as the iPhone, the reality is that most significant engineering breakthroughs – from jet propulsion to HTML – are a result of public funding. The idea that Britain is on the cutting edge in this regard is absurd. While it has world class research centres and universities, it has fewer industrial robots than the likes of Spain and Thailand (Germany’s stock of industrial robotics is about ten times that of the UK). The last time a British-build rocket was used for a space launch was 1971 with the UK, to date, being the only country to have successfully developed and then abandoned a satellite launch capability. The glitz of Silicon Roundabout is little more than a facade for a country which has a remarkably low base when it comes to developing and building new technologies. Taking BAE Systems into public ownership would be a major step in addressing that.
Inventing the future: public ownership and innovation
Its clear that Britain has lost its way over the last several decades: its idea of collective purpose adrift, its post-war arrangements nearly eroded, its sense of identity a blend of post-imperial melancholy and vapid nostalgia. And yet Britain’s place as a high-tech economy, on the cutting edge of new technologies, did not have to inevitably follow its ebbing trajectory as a great power. That was a political choice, the embodiment of which is that a weapons company is, right now, the country’s largest industrial employer.
So what better signifier of a new direction for the British economy than taking BAE Systems into public ownership? The company whose antecedents built the world’s first commercial jet and pursued the production and commercial diffusion of radio, would once more find its purpose in civilian technologies that make the world a better place. What is more, away from the increasingly competitive global weapons market, its engineers would be able to work on disruptive technologies in more commercially open fields such as climate change resilience systems, automated vehicles and space transport.
No doubt some reading this will find the idea of nationalising BAE wishful or outlandish. To the contrary – what absolutely can’t be sustained, given Britain’s industrial shortcomings, the challenges of climate change and the opportunities of new technologies – is one where the largest employer of engineers in the country builds weapons for despotisms. What can’t endure is a situation where the taxpayer – right now – gives BAE more than £2 billion a year to purchase and maintain hardware for the Ministry of Defence. Everybody in Britain is already giving BAE Systems £30 a year, each. Don’t you want it used differently?
As Britain comes to terms with a much smaller army – and the prospect of unilateral disarmament – the future for BAE, with its main market in decline, should be one of promise and optimism rather than murky deals proscribed under international law. Publicly owned, with its talent working on the most pressing problems of the age; helping in the transition to a post-carbon economy, automating work and creating the conditions where citizens, as Keynes once put it, can live ‘wisely, agreeably and well’. It may have been forty years ago, but for the visionaries behind the Lucas Plan their time has come – there’s a world to build.