[A-List] UK economy: Michael Porter & the Third Way

["Michael Keaney" <michael.keaney@xxxxxx>]

Extra investment call to help boost productivity
By Scheherazade Daneshkhu, Ed Crooks and Jonathan Guthrie
Financial Times; Jan 22, 2003

Britain needs an increase in investment in infrastructure and education as
well as a greater uptake of modern management methods to help boost
productivity, a prominent Harvard Business School professor will argue
today.

Michael Porter was commissioned last October by Patricia Hewitt, trade and
industry secretary, and the Economic and Social Research Council to examine
the reasons why Britain's competitiveness lags behind that of the US, France
and Germany.

Labour came to power in 1997 promising to remove the barriers to investment
and entrepreneurship that hindered the growth in productivity, but its
performance has caused some disappointment.

Prof Porter, who heads the Institute for Strategy and Competitiveness at the
business school, will deliver his initial findings this afternoon in a
lecture to the London School of Economics. His report is expected to be
published next month.

He is likely to endorse government policy but to reiterate his belief that
the private sector should have a bigger role in encouraging competitiveness.
He is also expected to reiterate a message delivered last year to regional
leaders in Leeds that Britain's universities need to link more effectively
with the private sector. This would help England's regions meet government
targets on wealth creation by driving forward technological innovation and
the creation of successful industrial clusters.

Links between universities and business are being examined by a Treasury
review chaired by Richard Lambert, former editor of the Financial Times,
which is expected to report by the summer.

The poor performance of British industry has been blamed on a variety of
factors. The Engineering Employers' Federation has argued that its remedy
depends on a "holistic" approach by addressing skills shortages, investment
performance, the rate of take-up of best practice methods and the need to
encourage innovation.

Mary O'Mahony, the productivity expert at the National Institute of Economic
and Social Research, said she "would like to see what Prof Porter really
does know about Britain, as opposed to America".

She said British manufacturing companies had been investing heavily in
skilled labour and advanced equipment over the past decade, but the official
figures for productivity in the industry had only in the past few years
begun to show much improvement. "Skills have been a problem - there is still
a gap in the stock of skilled labour in this country compared with others,
but we seem to be heading in the right direction."

John Healey, economic secretary to the Treasury, said yesterday it was "not
surprising there had been no dramatic gains in productivity" because of the
poor state of the global economy.

-----

We are the heirs of Nye

John Reid
Thursday January 23, 2003
The Guardian

"To change programmes is not an admission of error, otherwise all history
would be a series of confessionals." So declared Nye Bevan in 1959. Bevan
understood that change was constant: he understood the necessity of
political parties adapting to changed circumstances. Indeed, this was the
very essence of politics. The party that did not respond creatively to
social change was doomed.

The context in which Bevan spoke was critical, of course: on the back of
Labour's third successive general election defeat of that decade there was a
recognition that the party had gone wrong somewhere along the line.

Repeated defeat at the polls throughout the 1950s reflected Labour's failure
to apply its values in a way consistent with social change. The public
demanded more choice in goods and services, mass production fulfilled that
demand and the consequence was the emergence of the original consumer
society. But Labour was seen as being against such choice, against the
desires of working people. The result was 13 years in the political
wilderness, ending only with the election of a Labour government in 1964.

New Labour is determined that history will not repeat itself. The parallels
between then and now are striking. Like their counterparts of the 1950s,
working people today are ambitious for themselves and their families.
Indeed, as citizens and consumers the ambition of working people today is
greater: they demand choice in public, as well as in private, goods and
services.

The difference this time is that the Labour party is ready to meet the
challenge. New Labour understands that as a party of the left, we should
never, as a matter of principle, defend the status quo, even our own. We
recognise that conservatism is fatal to the party of progress.

Our job is not just to deliver social democracy but also to develop it. So
too in the public services. Public services run just according to the
preferences of the unions, politicians or professional bodies are out of
date. They have been overtaken by the ambitions of those who should be the
ultimate arbitrators of the public services - the public.

Our vision of public services is one where we open up the system to
diversity, choice, flexibility of working, setting the creativity of local
services free within a framework of national standards and systems of
accountability. And where we give greater rights to the parent, patient or
victim, but demand responsibility in return. Responsibility to help fund the
service adequately, to treat staff responsibly, and to play our part in
making the system work.

In other words, our vision is not one of consumerism in public services, but
of a partnership in which the users of services get more power and choice,
but in return help the system to work better for the good of all.

Today, the pursuit of excellence in public services is fundamental. This is
not elitism. Right now some of the best schools are private or in the most
affluent areas. Better access to healthcare can be bought. The highest crime
areas are those of greatest poverty and disadvantage. A child from a manual
working-class background is only half as likely to get the five good GCSE
passes that are a route to higher education or skilled employment, as the
affluent. That child is a quarter as likely to go to university. Death rates
from coronary heart disease for those under 65 are now three times higher in
inner-city Manchester than in Kingston in Surrey. An unskilled manual worker
is three times more likely to die from heart disease than a professional
worker.

In all our experience, not just of the last two decades but of post-war
Britain, one clear fact emerges. Poorly provided public services have
overwhelmingly been inflicted on our poorest citizens. This must change.
High-quality public services are the best attack on poverty, the best
corrective to social injustice, the best provider of opportunity that we
have.

Redistribution certainly helps us to combat poverty and raise the incomes of
struggling families. But the truth is that an excellent education is a far
better route to a lifetime of opportunity for a child than simply paying
more in benefit to his parents.

In short, the pursuit of excellent public services is the best way of
achieving greater opportunity for those who, without high-quality public
services, could never afford to buy excellence from the private sector.

The task is urgent. New Labour was elected to implement change not to thwart
it - and in every area, whether student finance, opening up the NHS to
innovation, moving beyond the comprehensive era, reforming the asylum
system, or tackling poverty - the need for reform is pressing. As the party
of progress, Labour must deliver.

· John Reid is chairman of the Labour party