The economic policies that matter
Wales Business — By Russell Lawson on September 7, 2009 6:00 am
It is the job of the Welsh Assembly Government to ensure that school leavers are ready for work
IT IS WIDELY accepted that Wales’s growth rate over the past 40 years has been relatively disappointing. It is below the UK average, which is itself low in comparison to other developed countries such as the US, and well below recent growth rates for leading countries like Ireland.
But there seems little reason as to why our economic performance should be poor. Over the past half a century, Wales has enjoyed an advanced secondary and tertiary education system; good levels of inward investment, especially from the US and the Far East; and significant involvement in the fastest growing global industries, such as electronics and IT.
The principal way in which economic growth performance can be improved is by making better use of the way that labour and capital are utilised, both separately and combined, commonly thought of as innovation.
It is important to be clear what is meant by economic growth. It is an increase in the standard of living as proxied by GDP per head of population. This is an important point, as increases in GDP may be accounted for by increases in population, and not necessarily greater individual prosperity.
If we adjust the measure of the growth rate to look at the growth in the standard of living, or GDP per capita, we find that Wales’s long-term performance turns out to be not that far behind that of the UK. However, not doing as badly as is commonly perceived while our population is steadily declining is not exactly the sign of a healthy, thriving economy.
What it does mean is that, in the absence of large increases in potential workforce, as seen in Ireland in the 1990s, we need to be realistic in terms of trying to raise Wales’s growth rate. We should be looking for ways of increasing annual per capita growth rates marginally rather than talk of doubling it. Even apparently small changes such as this can have large long-term impacts.
Economic management can address short-term or long-term economic problems, and the Government’s economic tools can be broken down into three different types: monetary policy, such as setting targets for inflation or for some measure of the money supply (the setting of interest rates is a common tool for trying to control inflation); fiscal policy, through setting tax rates and changing the level of public investment and spending; and micro economic policies, for example improving transport links, encouraging greater training, or investing in new research to increase innovation to improve the quality of the inputs to the economy.
Within the devolved settlement, Wales’s government has little control over monetary or fiscal policy. It has no direct influence over the setting of interest rates, nor will it have if the UK eventually joins the Euro. It is extremely unlikely, therefore, that monetary policy is a tool which the Welsh government could ever use.
The factors outlined above are why the economic debate in Wales is increasingly dominated by micro-economic policy issues. In addition, these micro-economic policy tools tend to look to the long-term for results. Quick fixes tend to be illusory or are soon imitated elsewhere.
Improving productivity and competitiveness fundamentals can only be truly achieved in the medium to long-term. In general, the same micro-economic-based issues dominate economic development thinking, such as improving the educational system, upskilling and post-school learning; communications, physical infrastructure, providing incentives to job seekers and job creators, attracting research and development, and improving innovation and marketing.
Therefore, there is a key role for the National Assembly in bolstering clusters, supporting basic education, upgrading infrastructure, and investing in the foundations of science and technology through universities and research centres.
Business has a responsibility to provide appropriate training to get people job ready. But the Assembly must look at how we make sure all young people leave school ready for work, and how we reduce the high numbers of young people leaving school not going on to work, further education or training.
Another serious problem for many businesses is the lack of availability of critical technologies like broadband. Businesses throughout the country have had to organise campaigns and encourage people to sign up for broadband in order to get their local exchanges ADSL enabled.
Thankfully much of the country now has access to broadband and more businesses are connected, but there are still large areas of Wales where access is only available over expensive systems such as satellite. We now need to look at how to connect the last parts of the country and ensure that all businesses are using the technology to its full potential.
The challenge to the business community is to better articulate the problems facing us in our business and how we believe the Assembly can help us overcome these.
The challenge to the politicians is to listen, consider, and then to deliver the changes we require. Not just because these measures will benefit our businesses, but because they are the only way to achieve our shared goal of a vibrant, thriving and competitive Wales.
So the Assembly’s main priority should be in devising a strategy and a vision that involves all the main stakeholders and is shared by them. We must remember that it takes decades to build strong regional economies.
Tags: business support, Economy, recession, technology
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9 Comments
Actually, the Welsh economy could be on an upward trend vis-à-vis GDP per capita. It’s a very simple problem to solve. But it seems no one is listening and/or wants to listen to the solution. As Wales is and because Wales is a small country it would benefit tremendously if WAG used its ‘enumerated spending power’ to protect its #1 asset: Welsh intellectual property. It is un-amazing how major Welsh universities are simply giving away much of their IP lock, stock and barrel. It’s not IP if it is not protected.
How many times have we read in the newspapers or heard on the news about such and such science breakthrough, such and such medical breakthrough, such and such fantastic progress, but how many times have we heard the sound of kerching? Money flowing into Wales from royalties off patented inventions – very rarely. Time is running out for the Welsh economy, there are universities in former third world countries that now out-perform Wales’ #1 university in filing patents. Wales lives in a global economy, if Wales does not protect its IP then it can be copied, sold, distributed without fear of legal suits. Ask the British MRC guys who invented MAB technology (monoclonal antibodies), and industry worth billions and employing thousands in well paid jobs, but not in the UK where this technology was invented because of lack of patent protection.
Just the other week there was a big announcement about ‘magnetic stem cells for hearts’:
http://news.bbc.co.uk/2/hi/health/8204835.stm
Not a Welsh breakthrough this time, but hey a British one all the same, and guess what: there was no patent filed on this breakthrough.
What is wrong with WAG using just a fraction of its spending power on filing Welsh discoveries in the USA? Especially those that been published in learned journals thus preventing valid patent filings in the UK/EU – the US patent system has a ’12 month grace period’ under which inventions and discoveries (including Welsh inventions) can be filed up to 12 months after their publication in a learned journal; the US filing system also gives a small price break to small inventors (less than 500 employees) and offers an informal patent filing route which initially costs far less than the formal patent filing route.
I attended BioWales 2009 a few months ago, and put this idea to all anyone who would listen, but found no one interested in this solution. Bear in mind that I was the only Welsh PhD at the event who is also authorized to practice directly before the United States Patent and Trademark Office. http://www.biowalesevent.com/exhibitor/id:67
It’s a solution – just take a butchers at MIT, it files patents on just about anything that might have commercial value. Thousands more patent filings than Wales’s #1 university, which incidentally (according to Wikipedia stats) has about the same number of postgrad students (the folks who do much of the grunt work in the labs).
There’s a university that lacks a mechanical engineering faculty, has no electrical engineering department, not even a civil engineering department, and yet has filed more patents than Wales’s largest two research universities combined, and one of these Welsh universities has one of the most powerful computers in the world on its campus.
Meanwhile, Wales’s #1 research university has just dropped 34 places in the world rankings – it is no longer in the top 100 universities, it is now at number 133 in the world rankings.
Here’s three quickies…
1 – Introduce a series of 6 month sabbaticals to drop experienced commercial people into Wales’ universities to develop spin-outs.
2 – Subsidise rail travel to London for SME’s.
3 – Encourage Finance and IT SME companies in Wales to undertake projects in the Welsh public sector (the Public Sector gain is merely a by-product, the main-event is getting these SME’s experience that they can start to use elsewhere (like Bristol / Manchester ….)
DJ
Yes, innovation is crucial given the direction in which a growing number of the emerging economies are moving. Just look how the BRIC countries are maximising the potential of their HE sector research output through a pro-active commercialisation of the new discoveries and innovations.
The rapid pace of change through the added value chain means Wales needs to be up to speed in protecting the excellent work done in our HE sector. For example, look at the latest discovery from Cardiff University School of Medicine, with the discovery of two further genes linked to dementia as in Alzheimer’s Disease.
http://news.bbc.co.uk/1/hi/wales/8239773.stm
Development of a new Life Sciences School at Swansea University suggests more advances in the medium term from the HE sector in Wales, but the question is whether or not the full commercial benefit of these discoveries will be protected by filing patents for the IP.
With the ensuing royalties that would be earned from sales of diagnostic kits for example, more jobs can be created, which in turn leads to more research. And so it goes on, in a virtuous circle.
Addressing the “downstream” of commercialisation of inventions and innovations of Welsh HE leads us to the profound question of where are we going with our Education policy.
Just consider that as far back as 2002, the late Sir Gareth Roberts produced a Report, commissioned by the Treasury and then DTI and DES, into the Science and Engineering skills base of the UK.
This report highlighted the urgent need to encourage more young people to take up chemistry, physics, maths and engineering, given the growing demand for these skills from employers who face commercial challenges in a global setting.
I read recently about the sharp contrast in whom young people from different countries saw as a role model. In Australia and other developed countries, the writer said they were impressed by a sportsman or woman. Compare this with school children in India who viewed a budding electronics scientist as their hero, and that in a country with characters like Sashin Tendulkar.
Turning to the question of broadband, I agree that this is important given the growing role of the internet in commerce and everyday communication, and so we need to ensure access is as widespread as possible across Wales. However, there is an even bigger challenge which relates to the “software” as opposed to the hardware of broadband.
We could have the very best infrastructure in the world, but what good is that if there is a dearth of enthusiastic and empowered people with all the required skills to make a contribution to the Welsh and UK economy.
So it is possible to address both the shortage of science, maths and engineering students and the equity issue of broadband access for all, and this is the way to prepare Wales to hold its own in a increasingly competitive world economy.
By tackling the social justice challenge of empowerment and equality of capability and being more savvy with IP generated in the HE sector, Wales can also see itself rise up the World League table of economic performance, using the full powers it already possesses at the National Assembly.
As an SME,some seed capital would be great,why would i want to go to London, thats not my market or my mecca.
Let people who understand business needs run the support mechanisms; not wet behind the ears civil servants. Cut the red tape and VAT and reduce fuel costs for busines.
Procurement- thats just a farce,another industry grown for cilvil servants and local authority bods.
I can be innovative, I don’t need a University to do that for me ,I know my own sector as do most business people.
What skills are needed could be grown by the sme sector if there was a wage subsidy on new recruits for two years
The answer quite simple its poor. transport, road, railway,planning and most of all education. Sort those out and Wales can move forward. As the infamous James Carville said “its the economy stupid!”
Nothing will ever change as long as we have the present political class and culture.
The more I think about the more I think that Alan Davies’s answer to Cardiff problems is an elected mayor! (as much as I beleive in it)
Its not just cardiff but it is the areas that surround it. Any solution would have to involve the Valleys and the Vale.
If that makes sense!
David Jones> one of the most fundamental problems with research outcomes in Wales is lack of patent protection. Dropping in “experienced commercial people into Wales’ universities to develop spin-outs” absent having stronger patent outcomes is a waste of time. If the research of interest has commercial value but no patent was filed on it, what investor or angel fund will work to put that company into the market place when any Tom, Dick, Harry, foreign competitor can copy, use, distribute and sell the same technology without fear of patent infringement? Ask the MAB scientists whose work was copied, used, distributed, and sold in the form of specific test kits to that made some American companies BILLIONS and generated thousands of jobs – but not in the UK. I can print out patent after patent on specific MABs issued to non-British companies who would have had to pay royalties but for the lack of patent protection on the original invention/discovery. Wales is giving away its IP lock stock and barrel, same for many of the universities around the UK. Meanwhile Wales/UK bleeds jobs to the Far East – we are outsourcing our future well being for lack of protecting our #1 asset. And there are less taxes to collect, fewer well paid jobs in Wales, fewer everything actually.
David Phillips> you are one of the few people in Wales that has cottoned on to the need to rethink how Wales goes about the business of protecting Welsh innovation to generate downstream jobs and businesses for Wales and Welsh people, and a growing indigenous industry and tax base. If I might say so, you are one of my top converts! Keep up the good work. The Welsh economy needs people like you in key positions to initiate fundamental change in the way Wales protects its #1 asset.
Michael> actually there are plenty of Welsh science and engineering graduates that can’t find decent paid work in Wales. The unemployment rate among graduates is very troubling. The private sector as it pertains to R&D in Wales is is … well, where is it? R&D in the private sector is very poor. What we have is a culture of giving away our economic future – we hardly protect what we invent/discover. I can fire off the stats if you like. It is shocking how low the priority is in Wales c/o the WAG on protecting innovation. Absent protection there is very little incentive for companies to establish private R&D facilities in Wales, and absent private R&D facilities renders Wales overly reliant on inward investment.
the last quarter of 2009 seems promising as we have seen lots of signs of economic recovery against the massive economic recession. I hope that in 2010 all our economies would be back on track. Recession really sucks.