If we are to compete in the global race, long-term thinking and investment in science and technology are crucial.
Sea changes, said Jim Callaghan, arrive in politics only once every 30 years. The last one back in the Seventies brought us Margaret Thatcher, neo-liberalism and the infamous battle cry “Greed is good”.
Boris Johnson’s brash revival of the phrase last month was revealing. Because the truth is, today, the ghost of Gordon Gekko today provokes not inspiration but a shudder. Sniff the air and you can sense a change of mood — about what makes “good business”, how markets need to change — and what governments need to do to help. I can smell a sea change in Britain and I think the storm surge is on its way to Westminster.
The waves have been building for a while. The global meltdown of banks, the collapse in take-home pay for millions, the ethics of interest rate-riggers and the rapid rise of potent new state capitalists in the East are all provoking a monumental rethink. Suddenly, the old ways of doing business just don’t seem right any more.
Last month Peter Mandelson said that once upon a time, we all thought “markets would work their magic” and the tax and benefits system would share the gains of globalisation fairly. But it didn’t work out like that.
Business gurus agree. My old teacher at Harvard Business School, Michael Porter, is arguing that business leaders now need to focus on creating “shared value” for shareholders, customers and workers.
Faith leaders too are shouting out. The high-powered business people around the Catholic Church’s “Blueprint for Better Business” are aiming at nothing less than “a fresh examination of the social purpose of business, alongside profitability”.
But the best analysis is not a speech, it’s a book; David Sainsbury’s Progressive Capitalism. Between its pages, the former science minister lays bare how the challenges of the 21st century stripped away his faith in the old orthodoxies and forced him to conclude that we need to rethink goals for business — and rethink the role of the state.
So former ministers, business leaders, business gurus and faith leaders are all now saying the same thing: things have got to change. And they’re right. Because, as Ed Miliband has put it, the only way we’re going to win a race to the top in the new world is with profound economic reform.
For three years now, the Prime Minister has rolled out his old trope about winning the global race. What has happened while he has been rehearsing his lines? Export growth forecasts halved. Investment stalled. Growth seems financed on the back of credit cards. Meanwhile, wages have risen less than prices in 40 of the 41 months that David Cameron has been Prime Minister and 80 per cent of the jobs created since 2010 are low paid. Is this how we win the global race? I don’t think so. The old ways aren’t working any more. We need a new approach.
Change has got to begin with action to tackle the cost-of-living crisis. Miliband’s energy price freeze is a great place to start, together with a cut in small business rates.
But for the long term we need a new plan for wealth creation: big economic reform to increase the number of high-paid, high-value-added jobs and a better “escalator” up to those jobs for everyone in society no matter where they started off in life.
Simply hacking back the state and undermining job security just isn’t going to deliver the goods. We shouldn’t destroy the state but reinvent it; not a big state but a smart state. That’s the only way we can transform the three things that give you a competitive advantage in the 21st century: people, ideas and money. What should our national strategy be? Simple. Upskill our people, out-innovate our competition and crowd-in new investment.
Let me explain. At Cambridge University last week, technology entrepreneurs told me what a brilliant environment the city and university have become for starting firms such as ARM and Autonomy, now worth over $10 billion — but the real challenge is finding money to scale up. Once they’re started, lots of hi-tech firms are turning to American venture capitalists to find the cash to grow. How crazy is that?
If we want to kick short-termism out of finance, we’re going to need serious banking reform, regional investment banks which back small business rather than avoiding them, and new rules for pension funds, so trustees are allowed to think long term for once.
Second, to be the world’s best place to innovate, we need to be the best place to do science. Today, 97 per cent of the world’s research budgets is spent abroad. If we want a bigger slice of that cash, we need common-sense immigration rules and a long-term plan for science. Many of our Nobel Prize-winners — such as the pioneers of graphene — aren’t British. They’re foreign. Some of the world’s most innovative companies such as Xiomi, Sina Weibo and Tencent aren’t in Silicon Valley, they’re in China. If want them to build research bases here with our great universities, then we need a very long-term framework for science and the flexibility to build the world’s best teams in Britain.
Finally, we’re not going to upskill Britain by letting untrained teachers teach our children, or by leaving one million young people on the dole, or by cutting apprenticeships for the under-19s. Instead we need a new technical baccalaureate for young people who want to earn while they learn and powerful Further Education colleges, strong enough to connect young people with apprenticeships, university places and jobs, much like polytechnics once did.
Labour celebrates an important anniversary this year: the 50th anniversary of Harold Wilson’s famous speech declaring how we could harness the white heat of the technological revolution to win again in the world. Wilson knew back then what we know today. Social justice doesn’t pay for itself. We need a new generation of wealth creators too. That takes a government that understands the need for both — and is prepared to change for a new century.
This article was also published in the Evening Standard, 9th December 2013.