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Sunday, 7 May 2017

It's No Secret!

Throughout human history, inventors have had to borrow money to make their machines; then have to borrow more to scale up their innovation to the point where profitable production can begin.

In the era of the industrial revolution the infrastructure of better roads, then canals, then railways was provided by raising money from shareholders in Turnpike Trusts, then in Canal and Railway Companies. In case you had not noticed, selling shares in a company is a form of borrowing: the directors of a company ask their investors to make their money available to the company, under the promise of long-term partial ownership of the company and the hope of recurrent profits. Usually investors have come forward if there is a reasonable prospect that the returns to shareholders over a ten-year timescale will put more money at their disposal than they would get in interest if they had just kept the money in the bank.

Richard Arkwright had to borrow the money to build his first spinning machine; then he established patents on all the technologies involved, including the work supplied by a clockmaker who cut and assembled the gears that were indispensable for the project. Other people who wanted to open spinning factories had to pay Arkwright royalties on the technology until, many years later, the extent of his patent coverage of the device was reduced. James Watt developed his concept of a steam engine in the university laboratory at Glasgow, where he was a technician to Professor Black. Eventually the good professor moved on in his research, and to make the engine a commercial proposition Watt had to find an investor with deep pockets. Matthew Boulton was a successful serial entrepreneur based in Birmingham; so to Birmingham Watt had to go, and Boulton's name came before Watt's in the name of the firm that successfully patented and sold the first steam powered devices that were ready for the mass market. The first engines were for pumping, and their principal customers were mines, breweries, dye works and other consumer-goods suppliers: the steam engine that could provide motive power to road and rail vehicles and to vessels came later - which ties in with the fact that roads, canals and railways needed to be built first, at vast capital cost.

The essential problem of the British economy, certainly since the swathe of industrial destruction that is the strongest characteristic of the Thatcher era, is the lack of big industrial development. That picture of failure is reinforced by the poverty and antiquity of the infrastructure on which the UK economy depends. The shining exceptions of Sir James Dyson and of the Bamfords' JCB stand alongside the massive pharmacological companies as rare exceptions to the general picture that the remaining British-owned large firms are either dependent on their overseas operations or on the popularity of long-ago registered trade marks and copyrights. There are many wonderfully innovative small firms; most of whom find it difficult to impossible to secure funding for their expansion, to the extent that many of them sell their technology [and thus the potential for future profit] to aliens.

In the current election campaign, it is clear that the Tories are content to continue the stagnation, and [as the economy is contracting, in real terms, with a huge balance-of-payments deficit] they will continue with their socially destructive austerity programme. Labour is suggesting that investment is needed: and the Tories assert that this would create a great 'black hole' in the national finances. Labour is not bold enough in its investment programme, which doesn't matter anyway, because they can't win. Every time you see Mrs May in a 'factory' context, you will see that she is in a clean, small-scale workshop: because that is pretty well all that her minders can find to indicate 'industry'.

It is not at all secret, that nothing happens without investment: and Britain's investment drought is exacerbated by virtually every action of the present government.

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