Gordon Brown Unveils another Vision

GORDON BROWN'S VISION FOR BRITAIN.

Prime Minister Brown is an eloquent advocate for a better Britain. He has made many speeches outlining, in ringing terms, the kind of enterprising, de-regulated, creative and high-tech nation that he wants the UK to become. He has reiterated many times his belief that competition and removal of regulatory barriers and impediments is the best way to secure the well-being and prosperity of the largest number of people.
Prime Minister Brown's visions are usually delivered from platforms at high-profile gatherings of the great and good of world economics and business.

What follows is extracts from his speech to just such a gathering at the Enterprise Conference in February 2005. Naturally, the conference was attended by prominent people, for example: "And to-day, with Federal Reserve Chairman Alan Greenspan and also leaders from China and India, it is the right time to face up to long-term decisions - changes best delivered if a strong British national purpose can replace old and sterile partisan divisions".

"I believe that Britain has the inherent strengths to become one of the most successful enterprise countries in the world, rather than victim of the increasingly intense international competition brought about by globalisation.
Many of our great industries, large and small, are rising to the challenge of the opening of new markets, bringing with it the arrival of new competition.
And I believe we should be proud of what British industry has done and excited by what we can do given the stability we have delivered and the commitment to free trade that is essential in the new world.
It is true that, amongst the industrial economies, only Britain has maintained growth free of recession in every quarter. Once haunted by stop-go, Britain's inflation has consistently been nearer to target than in any other country.
To encourage a better understanding of what we can do to help our industries and our business environment I have invited many of our great business leaders, bankers and politicians from around the world to our Enterprise Conference to-day. We will be debating and discussing the critical issues shaping the economies of the world and business in Britain. For no industrial economy can take its future prosperity for granted.

Soon half the world's manufactured exports may come from developing countries. Over the coming decade five million U.S and European jobs could be outsourced to Asia.
Nations will rise and fall depending on their willingness to reform, liberalise and meet and master the high-tech high-value-added competition. And Britain now has to do what every successful industrial nation must to become world leader in education, science and creativity".

...."My message to-day - and my mission in government - is that Britain should be not only the most stable environment but the most attractive location to do business and to create new businesses.
And to win this prize we - business, workforces and government - must demonstrate a shared resolve to remove any unacceptable barrier, to legislate any necessary reforms and to introduce far-reaching new incentives.
We have much to build upon.
At the forefront of world financial services, Britain to-day exports four times as much financial services as we import.
Strong in services, we are becoming strong in science too (Can't resist: Thought we were once the world leader in science and technology??).
To-day, a higher share of our growth is delivered by science-based innovations than in any other industrial nation including America.
All of this shows that we in Britain now have the chance, if we make the right long-term decisions, to achieve what we have not achieved since the first days of the Industrial revolution - to become the best location for scientific R&D and world leaders in the new enterprises of the future.
So in the budget I will reinforce our determination that our incentives to attract research and development are the world's best and that our universities are world class. And we should aim to lead the world in strengthening the links between higher education and the high-tech firms of the future.

Our ten year science plan - backed by £2.5 billion additional investment - will be regularly updated so that Britain leads in pharmaceuticals, biotech and the life sciences and becomes the world's number one research centre for genetic and stem cell research.
And we will continue to welcome qualified people with skills from other nations to study in and contribute to Britain.
And I want Britain to be not only a centre for the science-based industries of the future but also the hub for creative industries as a whole. One in every five new jobs in London is in the creative industries which now contribute 8% of UK GDP.
The opportunity now is to build on this extraordinary talent with the challenge to encourage not just creative industries but all industries to be creative. So among budget measures for greater flexibility, we will back risk-takers with incentives for new enterprise and encourage a new generation of venture capital for expanding business".
"....We must make our planning laws quicker, more flexible and more responsive - and we will.
We must, and will, do more to encourage local and regional pay flexibility.
We must, and will, build upon what we have already created - the most open competition regime in the world.
Together with the new employer training programme we must, and will, address our economy's Achilles' heel - low skills.
We will continue to look at the business tax regime so that we provide the best possible incentives for investment in wealth creation and rewards for success.
Private and public sectors must step up our work together to tackle decades of transport under-investment."
"....And with our new Labour reforms supporting our stability, scientific genius and our belief in education, enterprise and free trade, we will show that globalisation was made for Britain".

Great and inspiring words. We in this website endorse Mr. Brown's vision wholeheartedly. But being rather sceptical people, we were a little puzzled by what seemed like mixed messages in his speech. It seems to us that it consisted of a strange combination of exhortation, threats, self-congratulation and confession. And who is We?

BIG QUESTIONS THAT MUST BE ADDRESSED

The main question that emerges for us is: Realistically where are we starting from and what do we have to do to move in the direction of the vision?

And the answers to that question are very not encouraging. Consider:

• Low and declining Research and Development spending,
• The disappearance of most of our large knowledge-based companies into foreign hands, handing over huge swathes of intellectual capital to international competitors,
• Declining numbers of science and technology graduates and the closure of many university science departments.
• This is allied to a rapid decline in employment in highly skilled technical roles and an explosive growth in relatively low skilled service jobs. The most rapidly growing employment categories have been hairdressing and ancillary support service workers.

The UK balance of payments deficit is now a permanent feature, with the long term plunging decline of manufactured products and systems vastly outstripping the capacity of the services sector to close the gap.

So, Mr. Brown, the UK is not exactly starting on the front foot - you will have to help stop the rot before we can move forward.

A MODERN, GLOBALLY COMPETITIVE BRITAIN

We do understand that Chancellor Brown was making a kind of political speech at the threshold of a general election campaign, and thus seems to have omitted to mention many of the problems that will have to be overcome if Britain is to avoid a marked decline in competitiveness in advanced, high knowledge, high-technology industries. But, there are sound and positive foundations to build on.

The Positive Foundations

The big positives lie in the history, position and population of Britain. There is in Britain an openness to the wider world, a willingness to accept ideas from wherever they come, a hardworking population supported by an improving education system, a desire on the part of many to take risks and strive. There is a great tradition of inventiveness and superb science and research of all kinds in universities. The raw materials required to attain Mr. Brown's vision are present in abundance.

But they have to be nurtured, aligned, connected and led. Negatives forces that would retreat from full engagement with the world have to be countered, xenophobia and paranoia defeated. Those who believe it is wrong to protect national economic interests in the name of globalization need to have their arguments exposed as specious and self-interested, especially when all major competitors governments defend national interest as their first responsibility. Otherwise all that talent and energy will be wasted. That requires that no significant piece of the resource jigsaw is missing, that no element fails to come up to the mark.

The main areas of concern have to be education, management, investment and support for enterprise, support for converting ideas and inventions into products and services. It also means supporting the large enterprises that are the only ones that can achieve global scale in research, marketing and customer support.

All of these issues have to be tackled at national, regional and local levels. There has also to be congruity between the various aspects - there is no point in having great university science and a bad investment system, or a diligent, educated workforce and rotten management, good inventors and inadequate facilities for setting up businesses. Support for enterprise has to be consistently good from the top to the bottom of the economy. It is simply silly to encourage entrepreneurs and then kill off larger companies by discouraging long-term investment and selling them at the drop of a hat, as happens too frequently at present.
But central to it all is consistent investment and good industrial leadership.

SOME ISSUES MR. BROWN NEEDS TO FACE UP TO.

• Britain has the world's worst investment industry for science and technology. It does not in any way support long-term investment in any projects that might entail risk. Ample evidence and research on this fact abounds throughout this website. What is called 'Venture Capital' is mainly private equity investment which consists of taking mature companies and stripping them for future sale or flotation.
• The impact of this is extreme caution verging on timidity on the part of the leaders of Britain's larger quoted companies, which under-invest in R&D and Capex, and are soft targets for foreign marauders, usually from countries (US and France in particular) which block foreign takeovers on the grounds of national interest.
• The differentials between top pay and the average are already grotesque and becoming more so every year. It is no defence to say that high pay follows high performance, because the reality is that the performance of big companies and the investment markets is extremely ordinary - as is amply revealed through good research described in this site. The fact is that the vast rewards paid to City insiders are entirely based on fees derived from oligopolistic exploitation - and top managers' pay is regulated by the investment industry, which is only interested in short-term over-performance, never mind the long term consequences. Thus enterprise is totally squashed in our larger companies, to be replaced by buying and selling assets. None of this encourages widespread innovation, creativity and risk-taking.
• The higher education sector is in something of a mess - and is receiving decreasing support from large indigenous companies. Science departments in good universities are closing at an alarming rate, despite high-minded declarations of support from leading politicians like Mr. Brown.
• The UK financial markets, owned by vast American, European and Far Eastern global banks, exercise oligopolistic power and seem to have established influence over the UK economy that is beyond the reach of the democratically elected institutions of government.

No strategy for Britain's future as a modern high-tech global competitor will succeed unless we can circumvent or control the current financial/industrial nexus. Currently the field of modern enterprise is only available to smaller non-quoted and private enterprises. This is great, but it is by no means enough. We are not so naïve as to expect Mr. Brown to publicly state that he understands the facts of life outlined above - but he must face up to the salient blockages that stand in the way of attaining his vision and find ways of circumventing them.

Our Vision

We will finish with a little vision of our own:
Our present system of investment and ownership is becoming archaic and redundant in the Information Age. It is based on the assumption that capital is the scarcest resource and the providers of capital are the sole owners of the companies in which they invest - and have the right to direct management to act as they wish, whether or not it is in the best long term interests of the enterprise. That might have been fine when the value of enterprises lay mainly in buildings, factories, plant and machinery. It is no longer fine when know-how is the most precious resource and the most value is embedded in knowledge possessed by people - you cannot own people these days, it is known as slavery and is illegal and wasteful as well as immoral. New ways will have to be found of giving contributing employees (many of whom are also the true owners of industry through their pensions and savings) real influence over the enterprises created and sustained by their skills and knowledge.

In time, we will have to turn the current axiom - that the primary goal of a company is to be run in the interests of its shareholders - on its head.
The knowledge economy will require that investors support the best long-term interests of the enterprises to which they supply capital, recognising that human talent is far scarcer than cash. Otherwise, talented people will simply turn off or walk away, enterprises will under-invest in innovation and Mr. Brown's vision will remain unfulfilled. Follow this line of thinking and it just might be that the interests of enterprises, their investors and society could become healthily aligned again.