Only innovation can save us

My Times column argues that only high-tech
innovation will give us the cash to fund our future, so why won’t
Cameron or Miliband talk about it?

 

Fifty years ago yesterday, a young computer
expert called Gordon Moore pointed out that the number of transistors on
a silicon chip seemed to be doubling every year or two and that if
this went on it would “lead to such wonders as home computers . . .
and personal portable communications equipment”.

Today, for the cost of an hour of work on the average wage, you
can buy about a trillion times as much
computing power as you could when Moore wrote his article. The
result has had a huge impact on our standard of living, indeed it
is one of the biggest factors behind world economic growth in the
past half century.

Back in the 1950s the American economist Robert Solow calculated
that 87 per cent of economic growth came not from applying more
capital or more labour, but from innovation making people more
productive. It’s probably even higher today. New materials, new
machines and new ideas to cut costs enable people to spend less
time fulfilling more of their needs: that’s what growth means.

Technological change is the chief reason that economic growth
for the world as a whole shows no sign of reaching a plateau but
keeps marching up at 3-5 per cent a year. Innovation is the main
reason the percentage of the world population living in absolute
poverty has more than halved in 35 years. And hostility to
innovation is one of the reasons for Europe’s current
stagnation.

Yet innovation has featured in this general election barely at
all. It seems to be of little interest to the party leaders or
their audiences. This is most peculiar, when you think about it,
because it will be what will make the British people better off in
2020 than they are today: really better off, rather than having
simply run up more debt, that is. If innovation grinds to a halt
then so will growth and deficit reduction and the rise of the NHS
budget and all the other things the leaders talk about.

On innovation policy the Conservatives (and David Willetts in
particular) have reason to be proud of their record. Despite tough
budget constraints, their science spending, and their encouragement
for translating ideas into business ventures, have been impressive:
Innovate UK; the Longitude prize; the talk of “eight great
technologies”; the “patent box”; tech clusters and the surge in
business start-ups. More telling still is that Gordon Brown, for
all his faults, got the importance of innovation, and so did Tony
Blair, whereas Ed Miliband’s silence on science, technology and
innovation is striking. Why is he not saying: vote for me and I
will forge a white-hot technological revolution that will bring
down energy prices far more effectively than any price
regulation?

For that matter, why is David Cameron not promising to make
Britain the envy of the world in new technology to transform the
NHS — and dismantle the barriers to entry that keeps banking
unreformed? What do Nicola, Nick, Nigel, Natalie and Leanne think
about innovation? Apart from the fact that three of them hate
fracking, I haven’t the foggiest. Most mentions of innovation in
the mainstream debate so far have been negative.

For those on the right, innovation holds by far the best chance
to keep pushing down the cost and pushing up the quality of public
services, so lifting the burden of taxes and liberating people from
dependence on government. Imagine if bureaucrats could be replaced
by robots that worked 24 hours a day, did not need pensions and did
not vote Labour. . .

Such a public-sector automation and productivity revolution
might seem to be a pipe-dream, but it is beginning to happen
already in the government’s digital initiatives, still in their
early stages. One of the most startling discoveries of the past
five years is that you can reduce the head-count in local government, or
the central administration of education and social security, and
see the quality of service, and public satisfaction, go up, not
down. That’s because of technology.

For those on the left, innovation is a great demolisher of
inequality. A century ago, you had to be very rich to own a car or
your own home, to have more than three pairs of shoes, to have a
spare bedroom, to buy on credit, to have indoor plumbing, to eat
chicken regularly, to have a library of books, to be able to watch
great acting or great music regularly, to travel abroad. Today all
those things are routine for people on modest incomes thanks to the
invention of container shipping, fertiliser, better financial
services, cheap materials, machine tools, automation, the internet,
television, budget airlines and so on.

It’s true that the very rich can now afford a few more things
that are beyond the reach of those on modest incomes, but they are
mostly luxuries: private planes, grouse moors, tables in the very
best restaurants. We would like those on low incomes to have access
to better medicines, better schooling, cheaper homes and lower
energy bills, and in each case the technology exists to provide
these: it’s mainly government policies that get in the way.

Technology is the great equaliser: today some of the poorest
African peasants have mobile phones that work as well as Warren
Buffett’s — at least for voice calls. In the 1940s, Joseph
Schumpeter said that the point of commerce consists “not in
providing more silk stocking for queens, but in bringing them
within reach of factory girls”.

It was not planning, trade unions, public spending, welfare or
tax that made the poor much richer. It was innovation.

In fact, here is a Tory way to talk about inequality — to
promise that politicians will work to unleash the power of
innovation to bring living standards up for the poor more than for
the rich.

But can politicians do anything about innovation? Not directly.
It happens to its own inexorable rhythm, unpredictably. Trying to
pick winners usually results in picking losers. There was no policy
to encourage search engines and social media, but they happened
anyway. What’s much more predictable is where they happened:
Silicon Valley has had just the right mixture of freedom, skills,
permissive law, critical mass of talent and capital to make
innovation thrive.

Here in Britain we have frustratingly never managed to grow our
own Googles. We still benefit even if innovation happens elsewhere,
but hosting it too could transform our public finances. Why not say
so on the stump?