Comment: Innovation the cure for our economic woes
With the major political parties fighting over who is in the best position to make the swingeing cuts necessary to help fix our ailing economy, not enough attention is being paid to the question of how we become profitable again.
By Jonathan Moore
There’s no getting away from the fact that Britain is in something of an economic bind. With a deficit of seven per cent of GDP and a debt of more than 50% of GDP – both rising – we are looking more and more like a credit risk to the international money markets.
While the short-term solution is to drastically cut our public spending, there remains a much larger problem at the heart of the matter: as a nation we just don’t produce enough.
This rather more systemic problem in our economy was highlighted in the trading gap figures released this week which show that Britain now imports almost £8 billion worth of goods more than it exports. Even taking into account the services market, which as one of the world’s leading financial and insurance centres should help to even the balance, the gap stands at £3.8 billion; up from £2.6 billion in December.
There is an argument, much touted by the left, which says a significant source of Britain’s economic troubles stems from the decline in our manufacturing output. The contention is that an overreliance on financial services to the detriment of industry has left us in a vulnerable position where we’re too exposed to market fluctuations.
And there is certainly some merit to this argument. That we were one of the first major economies into recession and the last out can, in part, be traced to the fact that the service industry is the dominant force in our economy.
However, the problem with that viewpoint is that those who espouse it invariably focus on outdated industries in which we can no longer compete. The days of Britain being a world leader in the production of steel, coal, cars and ships – to name but a few – are long gone and never to return. The rest of the world can produce these things faster, cheaper and to a higher quality than we could ever aspire to and to attempt to resurrect such industries would be folly.
The solution lies not in a return to the ways of the past but in embracing of the ways of the future. If there is one thing Britain has given to the world more than any other it is innovation. More than that, our innovations have not just moved existing technology forward but have been generation-defining changes which have altered the course of human history.
Though there may be some dispute as to whether their actual inventions have been the model for what they would later become, Britons have been responsible for the industrial revolution, the telephone, the television, the jet engine and – perhaps the most important creation of the 20th century and potentially defining influence on human history – the world wide web.
That those industrial pioneers, Bell, Baird, Whittle and Tim Berners-Lee were British should not only be a cause for celebration but should serve as an illustration that we are at our best when we are at the forefront of new technology.
To be at the vanguard of innovation in the modern world there is only one field we should be focusing on: green technology.
There are a number of very noble reasons to invest in green technology and the idea of saving the planet for future generations is admirable. But the real reasons for investing in green technology are much simpler: the bottom line. The factors which have driven our politics for centuries are economics and geopolitics; almost everything we do is designed to either make money or create a world order that best allows us to make money.
Anyone with the gift of foresight in the 1950s and 1960s would have seen that investment in computer technology was guaranteed to make money. The creation of the microchip gave those at the head of the pack of computer technology a virtual licence to print it and the ‘computers’ of the 21st century will be green technologies. Beyond the obvious environmental benefits the potential for growth and creation of wealth are almost limitless.
The modern world is driven by a desire for energy; everything we do requires power. Unfortunately for us God has a viciously ironic sense of humour as a vast amount of the world’s natural resources, most notably oil and gas, lie in regions the West has spent the best part of the last century antagonising.
In reality, though, there is more energy coming from the sun, or in the wind, or waves or tides around our shores than we could ever hope to exhaust in a thousand lifetimes. The person who invents the first profitable photovoltaic cell, wind farm or wave technology will almost overnight become the richest person on the planet.
With sufficient backing, green technology could be the stone with which we kill a flock of birds.
By removing our reliance on foreign oil and gas we would simultaneously create a vibrant energy market in our own country and remove the need to tread carefully with dubious governments in the Middle East, West Africa and South America.
Beyond that, with proper government investment and encouragement we could steal a march on our international competitors and create a thriving manufacturing industry providing efficient solar cells and wind farms to the world.
Most of the research and development could be done in universities, providing a much-needed revenue stream to help plug the growing funding gap in higher education.
It would see the creation of thousands of manufacturing jobs and if sensibly managed could revitalise communities across the country that have suffered from the decline of traditional industries.
By becoming a world leader we would reverse the trading gap and become a major exporter.
Efficient energy production would undermine regimes whose power and wealth is based on their control of natural resources. Not only would this create stable governments around the world but could lead to great advances in global development and security.
And last but by no means least, the positive effects for our environment would be substantial.
While some of these ideas seem fanciful, the beginnings of these industries are already there for all to see.
The BBC recently ran a story about a company in Wales who are building sustainable housing from recycled plastics. Affresol have developed a material called Thermo Poly Rock (TPR) which uses recycled plastics to create a building product which they claim is lighter and seven times stronger than concrete, waterproof, fire retardant, does not rot and has excellent insulation properties.
Not only that, but because of the nature of the TPR they say they can construct sustainable houses in just four days at a cost of £40,000. Such innovations should be the foundations for a new wave of manufacturing in Britain.
Given the recent earthquakes in Haiti, Chile and Turkey the UN is crying out for sturdy construction material that can be assembled quickly and cheaply to provide emergency relief and British-made TPR could be just such a solution. Had they been up and running by now this could have meant a significant contribution to our struggling economy. As it is, Affresol currently employs seven people.
To give credit where it’s due, the funding for TPR has largely come from the Welsh Assembly while the Labour government, even in these economically tough times, have made major commitments to investment in sustainable technologies.
However, there remains a fundamental failure to recognise that proper investment, proper backing and proper commitment to the innovation that Britons do better than anyone else is not only missing an opportunity now but potentially resigning us to the backseat of this century’s greatest economical advances.
While the major parties squabble over public sector cuts for the next five years they may by their neglect be condemning us to miss out on the industry which will define the next 50 years.
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