BBC News: Conservative-endorsed report calls for science boost
Entrepreneur Sir James Dyson has produced a report titled Ingenious Britain for the Conservative Party urging a raising of the profile of science in the UK to help diversify the economy and boost growth. The pdf of Ingenious Britain can be downloaded here.
James Dyson makes the same argument that he made in 2004 when he gave the Richard Dimbleby Lecture, that the British economy cannot be sustained as merely a service economy. Manufacturing is the key to future success and it should lie in high tech goods where we have a competitive advantage. In fact things are now worse since his 2004 lecture as Design and Technology has been phased out of the curriculum at many schools since it was made non-statutory.
The part of Dyson’s report title Education: Getting young people excited about science and engineering made me think about James May’s Toy Stories which showed that although children initially thought stuff like Airfix and Meccano was boring that given the chance to play with it they really changed their minds. I think that if each class of maybe Year Six in schools were given a Meccano set then we’d end up with a lot more people going into engineering. Ironically Meccano is a British engineering success story that due to lessening interest in engineering in this country ended up becoming a foreign success story. Meccano is the only French manufacturer of toys that are internationally recognized, manufacturing part of its line in France.
Dyson believes that his company represents a good model for future British economic growth whereby the assembly of the products is done overseas but all the important engineering research and design is done in the UK. If this is to be the case for future success for British companies then we need to produce more engineers in our universities. In fact our universities are producing many excellent engineers unfortunately rather than being homegrown a large proportion of these are from overseas and many then return home to work.
Analysts of the current British economic crisis argue that the pound needs to remain low in order to boost are exports. But I believe that this does not need to be the case if the products we are exporting are competitive in ways more than just price. The Dyson vacuum cleaner is an excellent example, it is more expensive than rival vacuums but the benefits are worth the premium and it sells extremely well overseas even when the strong pound created an even greater premium in price than seen in the UK. Truly innovative products which are protected by patents can sell well and command a premium overseas.
Much of the British economic growth of the last few decades has been due to greater consumerism but the recession has brought that to a head and we are unlikely to see growth in the same way. We need to be more than just a nation of shopkeepers and because engineers are generally paid better than people in the service sector then a move to a greater proportion of the workforce being comprised of engineers is a good thing in many ways.
As well as the encouragement of engineering as a career choice Dyson recommends that tax breaks should be given in order to encourage investment into the development of innovations which do not necessarily produce a quick return on investment but do represent good long term growth.
Nassim Nicholas Taleb the author of the brilliant The Black Swan: The Impact of the Highly Improbable
presents in the Financial Times Ten principles for a Black Swan-proof world. [via]
Also very worth reading is his essay The Fourth Quadrant: A map of the limits of statistics.
Taleb, looking at the cataclysmic situation facing financial institutions today, points out that “the banking system, betting against Black Swans, has lost over 1 Trillion dollars (so far), more than was ever made in the history of banking”.
But, as he points out, there is also good news.
“We can identify where the danger zone is located, which I call the fourth quadrant, and show it on a map with more or less clear boundaries. A map is a useful thing because you know where you are safe and where your knowledge is questionable.”
I’m not sure that those with the power to change things and those that caused the financial chaos have learnt the lesson and will likely ignore the advice of Nassim Nicholas Taleb.
The reason they got us into this mess and were allowed to get away with it for so long was because they were making money hand over fist using financial instruments that nobody really understood. However they were clearly operating off the map and the system became prone to be hit by a Black Swan event.
Their narrative didn’t tie with the reality of the situation at the time and in the future they will restructure the narrative of these current events to suit their own purposes. It will be the fault of the sub-prime house buyers and the poor management at the companies that collapsed and not faults inherent in the system and the lack of proper regulation.
The chickens have come home to roost for a number of hedge funds who had been short selling Volkswagen shares as Porsche announced that in addition to the 44% of shares it already had in the company it had secured 31% through cash-settled call options.
News like this would normally be only a minor problem for the short sellers however since the German state of Lower Saxony holds just over 20% of VW, Porsche’s disclosure meant that, in fact, there were only 5% of VW’s shares left on the market, whereas traders were shorting for about 13% of those shares! [via]
All day yesterday, the panic to get out compounded the situation: at one stage, VW temporarily became the world’s biggest company by market value.
As the losses have grown, so has the indignation. The hedge funds feel unfairly caught out. VW has been a popular “short”.
This news brought a little smile to my face.
Chinese firms bargain hunting in U.S.
With the collapse in the value of the US dollar and introduction of state’s subsidies for foreign investment the normal direction of Globalisation has pulled a reversal and the Chinese are starting to outsource to the US.
DONGGUAN, CHINA — Liu Keli couldn’t tell you much about South Carolina, not even where it is in the United States. It’s as obscure to him as his home region, Shanxi province, is to most Americans.
But Liu is investing $10 million in the Palmetto State, building a printing-plate factory that will open this fall and hire 120 workers. His main aim is to tap the large American market, but when his finance staff penciled out the costs, he was stunned to learn how they compared with those in China.
Liu spent about $500,000 for seven acres in Spartanburg — less than one-fourth what it would cost to buy the same amount of land in Dongguan, a city in southeast China where he runs three plants. U.S. electricity rates are about 75% lower, and in South Carolina, Liu doesn’t have to put up with frequent blackouts.
This is an interesting turn of events and is likely to be a continuing trend.
According to the New York Times. Over the last six decades, the real incomes of middle-class families grew twice as fast under Democratic presidents as they did under Republican presidents. The real incomes of working-poor families grew six times as fast under Democratic presidents. [via]
The incomes of affluent families were relatively impervious to partisan politics, growing robustly under Democrats and Republicans alike.