13/07/2012 07:23 BST | Updated 11/09/2012 06:12 BST

Could State Capitalism Save the Day for the UK Economy

Dealing with financial and economic austerity has been the priority in public policy for some time but there are now signs that the focus is changing. It is becoming increasingly realised that for many countries, of which Greece is the prime example, all the austerity in the world is not going to solve the issues of public budget deficits, astronomical borrowing requirements and negative economic growth.

Instead, the focus is shifting more to how countries can promote increased economic growth as a means of boosting public revenues in order to reduce these deficits and borrowings.

The coalition government is already displaying strong tensions as to how this growth problem should be addressed. Witness the leaked letter, some weeks ago, from Business Secretary Vince Cable to the Prime Minister where he warned that the government lacked a 'compelling vision' of what the country will look like after the cuts and that it did not have a 'clear and confident message about how the country will earn our living in the future'.

In the same letter, Cable also called for the nationalisation of the Royal Bank of Scotland, which is already publicly owned as part of the bank bailout programme. This, of course, will be anathema to many on the right wing of politics, who cling to a naive belief that markets will solve everything. They would see this as a step back to a socialist planned economy, something like the National Enterprise Board set up in 1975 to implement the Wilson Labour government's objective of extending public ownership of industry.

However, this need not be the case and there is, at least, an argument to be had for considering what roles government and the public sector might play in relation to the development of the economy and whether this needs enhancing.

For example, I (and probably Vince Cable as well) still fail to follow the argument that if existing banks are 'too big to fail' then neither should we break them up (to make them small enough to fail) nor should we bring them under greater government control, in the absence of which they may fail again and, at the same time, may not support the economic growth so desperately needed.

After all, if we look at the example of many of the world's most successful economies, including those of China, India, Malaysia and Brazil, what we see is a wide range of different types of involvement in the private sector. The Economist recently discussed this at some length in a feature on the rise of state capitalism.

Usually the public sector is presented as something that absorbs the fruits of economic growth to enlarge and improve public services. Perhaps the time is now ripe for a debate about how the public sector can be used as a vehicle to promote greater economic growth. Some examples of the key roles of public sector organisations in facilitating private sector economic development include:

■Public infrastructure development to facilitate private sector economic growth

■Development of a skills base relevant to the needs of companies

■Grant aid to promote economic development

■Strategic procurement aimed at assisting growth in UK companies

There are many themes to consider. Perhaps it is now time to have the debate.

More austerity will not lead to growth in the UK. We should learn from successful economies across the world, where government involvement in the private sector is accepted and has helped provide stability and boost business.