Wealth Creation, Innovation and Technology [Draft #1]
Draft #2

- Making it Happen -

Comment: 'The Supply of Technological Skills' is too narrow as a theme because much more than this is required, and the supply of economic inputs is what governments have focused on in efforts to promote a 'clever country' or a 'smart state' for the past 20 years with negligible benefits.

See also: Background Data

Wealth Creation and Social Justice

There have been frequent calls for a new round of economic reform in Australia because the impetus to productivity gains from market liberalization in the 1980s and 1990s has weakened. Symptoms of the need for further reform include:

(Uren D., 'Surge blows out trade deficit', Australian, 1/3/05)

(Garnaut J., 'Rail and sea snarls blamed for trade loss', Sydney Morning Herald, 12/1/05)

It has long been recognized that global economic pressures on Australia's economy required adjustment (Oct 1986 Certech), in particular a shift from primarily capital intensive industries to those that are primarily knowledge intensive.

(Fox J., 'Manufacturing the future?')

Moreover major markets for Australia's commodity exports are likely to be be addressed effectively by other producers, and in diversifying its economy Australia faces serious challenges from rising competition in medium technology industries from rapidly developing trading partners in South and East Asia.

(Uren D., 'Massive deficit made in China', Australian, 2/3/05)

Moreover there has been increasing evidence of the need for a transformation of Australia's economy towards one that not only increases wealth, but also promotes the just distribution of that wealth.

Prosperity has been poorly shared, and substantial segments of community are not well positioned to benefit from what the economy must become.

Evidence

Large budgetary costs have been incurred for wealth transfers to prevent income inequality rising

It is also noteworthy that it has been pointed out since at least 1992 at Conference with Institution of Engineers, that calls for equity by welfare groups would be unattainable without wealth creation - and specifically a great increase in economic activity dependent on knowledge and skills.

[preface - quote from Country and Calling]

In 1997 the then Chief scientist, Dr John Stocker, said

????

Frank Gelber noted that productivity growth has tended to be achieved in Australia by cost cutting - and that strategy has past its 'use-by' date. Future productivity growth needs to be achieved by new business investment (ie addressing new markets with new products).

(Gelber F., 'Why did they go and raise rates', Australian, 10/3/05)

In practice this means successful innovation.

Yet despite many programs by all governments nominally to boost Australia's innovation capabilities there has been negligible progress

(Evidence)

Other countries do appear to have made faster progress, though the methods that they have used might not be directly applicable to Australia's circumstances.

(Gree R., 'The Celtic tiger')

Market liberalization economic strategies in Australia have devalued knowledge and wisdom - because they have assumed, even in relation to public administration and tertiary education, that informed judgments should take second place to customer demands. This has been a serious over-reaction to the need to liberalize Australia's economy and has tended in practice to 'dumb down' Australia's key institutions to an extent and which is seriously risky at a time when knowledge is the key to future economic prosperity.

For example the need for top level advice about science and technology is critical to effective government. For example, modifications to crops may potentially allow the production of more nutritious foods and help defray the escalating costs of health care resulting from the growth of chronic diseases partly due to poor nutrition (Peacock J. 'Tomorrow's agriculture - we need to work things out', National press Club Address, 27/7/05). However the best means to achieve such outcomes remain controversial amongst experts.

However at present Australia has no Chief Scientist. A part time Chief Scientist has resigned and not been replaced. Yet it should be noted that independent Science and Technology adviser to British Government has a staff of about 150. The first person in that role was Bob May from Australia - now Chair of Royal Society.

Clearly the methods that have been used for economic transformation need to be rethought.

However the mainstream expectations for further economic reform largely involve a continuance of, and tidying up loose ends in, market liberalization methods that have proven only partly effective.

(See Review of National Competition Reforms: A Commentary)

A major thrust of further economic reform involves changes to industrial relations arrangements which, unless an environment exists in which high value-added enterprises can grow, will risk simply increasing returns on capital by cheapening other economic inputs (ie wages and salaries).

An Innovation Strategy

Many observers have argued that there is a problem in Australia's innovation capabilities.

(Examples)

The capacity of an industry or regional economy to innovate depends on many interrelated factors. For example:

diagram??

These must operate as an integrated whole within a competitive market environment. While the need for such features have been widely recognized for 20 years (and incorporated in various 'Spaghetti diagrams') results have not matched advocates' aspirations.

Methods which seem to be able to develop such integrated capabilities have been seen to have emerged in (say) Ireland

(Green)

In assessing such experience it is essential to recognize:

Reasons for a lack of progress in Australia include:

In order to make progress it is vital to recognize that within an effective innovation system there is a need for a diversity of methods to promote collaboration and coordination. For example there is a need for some aspects to be dealt with politically (eg in gaining agreements amongst business, unions, government educators, community leaders about how an innovation system could be organized; in determining public policies). However there is also a need for collaboration and coordination to be led by business in pursuit of market opportunities in a competitive environment.

'Making it happen' firstly requires a process of accelerated 'learning' within mainstream market economy about opportunities to develop all of the capabilities required for effective innovation pathways. This could be achieved by strategic management using methods such as those suggested in Developing a Regional industry Cluster. This would need to be combined with more supportive public policies.

Supply of technological skills??

Deficit financing??

Proposal

It is proposed that an independent Institute for Wealth Creation, Innovation and Technology be established whose aims would be:

CPDS Observations

Key audience for proposal needs to be business and the community - not the political system in the first instance. Focussing on the wrong audience has been the problem with past efforts. Government's themselves can't do much - noting inadequacy of efforts such as Backing Australia's Ability and Smart State.

Knowledge is the key factor in economic growth because it allows the production function to be altered (by re-organising production). As an input to a production function (eg via education and R&D) its role is less important. Government's have a constructive role to play in resource allocation (ie in providing some economic inputs). But the critical role is not one that they can play, as they can never have market relevant understanding required to appropriately change the production function. Thus leadership by business is vital, and all that government can do is to say 'get on with it'. It is foolish for business to work itself up into a lather to get government to say to them 'get on with it'. They might as well just do so.

To communicate with business and the community it is necessary to (a) engage with leaders and (b) deliver a message which is positioned just above current levels of understanding and ability.

Once business / community leaders are convinced and active, political 'leadership' will emerge as night follows day.

A proposal developed in conjunction with Institution of Engineers Australia (Queensland) suggested (a) why innovation matters [a version which could be usefully drawn upon] and (b) a method to bootstrap off existing commercial capabilities.

Any proposals for Innovation Institute will be externally viewed in conjunction with other proposals about the next phase of Australia's economic reform agenda. The latter needs to be adequately covered in any proposal

There will be a large number of existing initiatives under way, which need to be identified and mobilized into collaborate efforts if possible

Can not educate for total technology as 70% of required capabilities must be learnt from experience - and without a functioning innovation system this is impossible

Summary of proposal?

Key Contacts?

Ideas emerging on 12-8-05