Steel matters, but does the Government understand?

There is a triple lock on policy at the moment. The Government is in hock to the financial sector. It is in hock to the Chinese. And covering both is its belief that the market is always right. But the steel crisis shows that politicians make choices and the choices they make tell us more than the crocodile tears they shed for the cameras.

Free markets are a myth. The subsidies given to single bank in the crisis would keep a huge steel works going at a loss for a century or more. The UK Government chose to block the EU increasing tariffs to counter the distortions caused by subsidised Chinese steel. It has chosen to cut back on infrastructure spending so that Britain not only to produces less steel per head than other major economies but it uses less as well.

So here are five reasons to think again and have a really active and positive policy.

First manufacturing is a high output, high productivity sector. Manufacturing productivity has been the one brighter spot in the otherwise dismal recent UK record. This is as true as steel as the rest. Gross value added in the metal sector is still much greater than in sector like pharmaceuticals. And output per worker in manufacturing is some 50% higher than in the rest of the economy so ditching part of it pushes the level of the economy down rather than up.

Second, the level of skill and pay in the manufacturing sector is much higher than in much of the rest of the economy. This is especially true in the West Midlands where the average disposable household income per head is already way below the national average and even that of the comparable city regions that are supposed to be the basis for powerhouses and engines of growth.

Thirdly, the manufacturing sector supports the non manufacturing sector. This is why the argument that we can choose services over manufacturing is wrong. A supply chain is partly about other parts of manufacturing. But it is also about services. It is the IT companies, the security, logistics, even the catering and the cleaning companies that manufacturing supports. When it goes down the service sector suffers too.

Fourthly, manufacturing is about the balance of trade. The UK's record is horrific here – one of the worst in the advanced world and this has a lot to do with weak manufacturing. Most services are hard to export. Manufactured goods are easy. Steel is important both directly and indirectly as a component. If we import even more steel then the balance of trade gets even worse.

Fifthly, there is the future. The Government says that it is all about restructuring. They will help people to find other jobs. But even if new jobs are found there is no guarantee that they will be better jobs. To restructure you need a strong base. But it can be a bit like dieting – a little might be good for you but too much compulsive dieting and you get anorexia. At the moment we have industrial anorexia.

To see what should happen the new Sunbeam pub on Railway Drive in Wolverhampton is worth a visit. The name comes from the once proud Sunbeam car company. Its decoration celebrates a fantastic example of restructuring. It tells the story of John Marston in Wolverhampton who, over a century ago, went from working in the japanning industry to tinplate. Then he went on to make bicycles, then motor cycles and finally cars. That is the sort of positive restructuring that we need to see for our age. But you can also restructure downwards. We see this all around us in the low paid jobs, the hand car washes, the domestic cleaners and the mothballed offices.

One of the silver linings in manufacturing at the moment is said to be the growth of single employee manufacturers. Single employee manufacturers? It puzzled me too. Across the Black Country do we have really have a generation of 21st Century John Marston's tinkering in their sheds to make a new wave of gadgets? But then I thought of all those people manufacturing in their kitchens to sell in craft markets. Do we really think that the future is cupcakes?