A Less-than-half-cock Strategy

Mrs May was talking in January about the importance of the 'Industrial Strategy' on which her government was supposedly working very hard. It has now been unveiled, and although there is some straight thinking in it there is also grave incomprehension of economic realities. Just to list a few:

*Brexit: it is vitally important that any drugs, designs or other innovations are marketable throughout the European Union on more-or-less the same terms as at present: otherwise, firms that are subsidised to employ teams of researchers in the UK will do the final stages of development within the Union so that the product is not inhibited by regulatory barriers from getting to its primary market. Innovative products will be held up at any border by licensing and regulatory systems, to allow indigenous companies in the potential importer countries to catch up. WTO Rules will not stop such chauvinistic chicanery. Even before the advent of Trump, the USA was notorious in that regard: while firms in emergent economies - including China and India - are not above simple intellectual theft.

*Profits can be shoved abroad by alien companies. So the British state will be sponsoring and helping alien-owned firms to develop products - employing some British scientists and technicians, true - but also allowed to import their own managers and experts for the duration of the period of product development. The manufacturing of the developed idea can that be conducted anywhere on the globe, and the pricing structure can be adjusted so that British taxpayer gets little back for the investment by the British state. Although some share of the intellectual property in some ideas may go to British universities and individuals, the vast majority will be owned by alien organisations; and can thus be alienated as they wish.

*Fake apprenticeships such as are being developed with schools and universities in the UK are most unlikely to produce people with the skill-set that is achieved by real apprenticeship in Germany. It is therefore unlikely that the programme will develop a strong and longstanding skilled workforce such as exists in the dreams of the contributors to the strategic plan. The ongoing delay in the actual launch of the Apprenticeship-MBA will provide no obstacle to the companies that have already agreed to participate in the Industrial Strategy.

*Any genuine development of science and technology in the UK is greatly to be welcomed. But I have observed personally for more than forty years that a huge proportion of the research that is carried out in the best British universities of technology - places like Birmingham, Manchester and Sheffield - is done by alien research students. Not enough Brits are capable of getting good degrees in science and technology, because of the awful state and status of science in schools. Side-tracking kids into fake apprenticeships where they simulate industrial processes instead of doing full-time hard learning will set the UK back in its development of the right skills for the twenty-first century.

My overwhelming feeling about the strategy is: "too little, too late"!

Most importantly, the 'strategists' still have not got lesson number one: that productivity improves only when productiveness gets the prime place. Productiveness is improved only when the profit from any activity is devoted to improving the plant, the processes, the materials used and the people employed. When that is done, productivity can improve and real economic growth [in the sense of generating more income-per-head from the workforce]  can be achieved. I do not see that productiveness will significantly be enhanced by this new Strategy.

Declining Britain: Again!

On a BBC News programme yesterday, I heard the UK defined as 'the world's sixth-largest economy'.  I had been used to us being described as the fifth-largest, and had not seen any report of a new league table that relegated us; but that did not surprise me: I can't monitor everything, and we have become adept at burying bad news [as an unscrupulous civil servant suggested on 9/11].

It is no surprise to recognise that we will sometime be reduced to seventh, tenth and even  - ultimately - twentieth unless policy is radically changed. As the superb Anthony Hilton pointed out in last night's Evening Standard, Mrs May's speech on Monday to the CBI Conference took her [and her government] no further forward on important issues; The 'industrial strategy' is yet to be be unveiled: but it is expected to be much less radical than had been expected in the first year of the May regime. There is no indication of the potential shape of a Transitional Agreement with the European Union after March 2019; to the obvious consternation of managers of large and small businesses in all sectors of the economy. The headbanging advocates of Britain being set adrift to sink - alone, alongside only Ecuador - in the cold waters of the WTO Rules, remain powerful in the government - to the extent that the Brexiteers are demanding that Priti Patel [who includes hard opposition to EU membership, or even close co-operation within the European Economic Area, to the stupidities that made her departure from government inevitable] must be replaced by someone with similar views.

Hilton points out that even the triumphant new-technology companies that now dominate the US stock market - Microsoft, Google, Apple etc - benefit from hugely from research that was done in state-funded laboratories decades ago. This observation does not belittle the originality and drive of those who have carried these concept into intellectual property which can then be marketed to millions of enthusiastic customers: they have - and deserve - their billions of dollars. But it does lead to the painful admission that the UK has no comparable corporation under British ownership; even though the country continues to be hugely generative of both deep concepts and and innovative applications of the highest thought. I have rabbited-on endlessly about the small British firms that have been created to implement such ideas, that have been unable to accumulate the finances necessary to support their voracious needs as they pass through the stages of implementation to the ability to deliver a final product to the market, and thus succumb to foreign ownership. In a few conspicuous cases, opportunist buyers have agreed - for the time being - to keep the company HQ and laboratories in the UK, but they can renege on that at any time; and the intellectual property - the all-important ik - is free for them to exploit anywhere, anytime.

A serious Industrial Strategy would provide finance for such emergent companies - or divisions of existing companies - in sufficient quantity and on sufficiently loose terms to allow developments to reach the global market in good time: recognising that not all the guesses can be correct. There will be losers as well as winners [though history shows that losers often have attributes that can be developed in different directions and circumstances to become successful themselves]. Even the sixth-richest country must be able to afford the few billions that would be involved [which the government could borrow on extremely favourable terms, against all historical comparisons].

The UK is also being criticised, deservedly, for its constant reductions in the size, efficiency and capability of the armed forces. One of the regular themes of this blog has been the symbiosis - over many centuries - of money spent on research for defensive weaponry and dividends later gained from the civil exploitation of those technologies, This is precisely the time when the country should be searching for new, super-effective weapons systems, communications and defence capabilities: in which the UK has led for almost a millennium.

Behind all these thoughts lies the need for investment - especially by the state, in combination with people with ideas - to bring new concepts, new materials and new processes into being. They can only be objectified by manufacturing, and it is through innovation in manufacturing that the productivity of the economy can be increased. Factories that produce highly-desired output [regardless of whether the buyer is the armed forces or the mass market] can make significant profits because the customers are prepared to support the exclusivity of the producer firm's ik, part of the profit can be reinvested in new concepts and processes, thus the productiveness of the firm is increased, which means that the average output per employee - the productivity - of the enterprise can be raised and the economy can grow substantially.

This virtuous circle cannot be achieved without individual entrepreneurship [both inside and outside companies] and the active, continuous support of the government. The cretinous Economics that has stressed free-enterprise and free markets with minimum state input has fostered the disastrous decline into which the British economy has been locked for more than a generation.

I will carry on blogging as a small voice for reason.