Department of Trade and Industry

Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)

Konigswinter 2000

Thursday, March 23, 2000

Other speeches

Ladies and Gentlemen, my topic this evening is economic reform and the challenge of globalisation in the twenty-first century. This may not sound the most alluring topic at ten o'clock on a Thursday evening, but I will do my best.

First, I want to say one or two things about the BMW-Rover situation, because there are lessons to be learned from what has happened in the last seven to ten days in that particular area. Then I hope to extend the argument to address some of the wider issues that we face. There is no doubt in my mind that, as we look around the world, and the position of the United Kingdom and Europe generally, we are faced with huge and significant change, the scale of which we probably do not recognise at the moment because we are all a bit too close to it. Certainly as far as the UK is concerned we are witnessing a restructuring of our economy, and a shift in our society, which is as basic and fundamental as the changes we saw at the beginning of the nineteenth century, when we moved from being an agriculture-based society to an industrial one. Now we are seeing a move from being an industrial-based society to a knowledge-based one. That will have profound changes for the way in which we live and work. I do not think that we appreciate the significance of these changes. Probably in fifty years' time historians will look back and see the beginning of the twenty-first century as a very significant period in our development - but we have to live through it, and manage the changes which are taking place.

When we look at what happened in relation to the decisions taken by BMW last week, it reveals very clearly to me that, at a time of globalisation, there are two very stark choices that we face: either uncontrolled change, which is forced by markets and commercial pressures, or a process of economic reform that can deliver economic efficiency and social justice. That can be done by involving individuals and communities in the process of change, so that they feel like partners in what is happening, and not innocent victims. My own view on this is that we cannot, and indeed should not, stop companies like BMW taking commercial decisions. That is not the role of government in the twenty-first century; even if we have the power to do so, it is power we should not exercise.

What then is the role of government in this new, global, knowledge-based economy? I believe there is a role, but it is quite different from the position that governments would have adopted in the past. It is to create an economic climate in which businesses can plan ahead with confidence, where because we have economic stability full employment becomes a real possibility. We in government need to equip people so that they have some control over their lives, and I think primarily that means providing people with the skills they need. It means supporting enterprise and encouraging people to start their own businesses, if that is a viable opportunity for them. It also means reforming radically our welfare system, so that welfare is seen to be a ladder into work, and not operating in a way which stands against people finding employment. That, I think, is the true role of government in the twenty-first century, and one which will enable us to manage the change which is taking place around us.

In that context economic reform is a key part of the agenda that we need to address. We are discussing the nature of that reform in the UK, and it is also being discussed this evening in Lisbon, where the Portuguese Presidency of the European Union has convened a special summit to look at economic reform, social cohesion and employment. As we look ahead there is much that we can learn from each other within the EU. One thing that struck me in my meetings with my ministerial counterparts is that there are so many good initiatives taking place throughout Europe at the moment, but very often we do not know about them. Because they are working well, they are not often referred to by newspapers - if things go wrong, newspapers obviously proclaim the fact in banner headlines but, if a policy is working to someone's benefit, all too often the media lose interest. We need to do far more with regard to benchmarking the good work that is taking place, and learning from one another. I have been particularly pleased that, over the last fourteen months or so, my department has worked very closely with our counterparts in Germany, to identify how we can work together to achieve common objectives. We have looked at the whole area of innovation, at how we can build links between universities and businesses, at the whole world of enterprise - where I know there has been greater experience over the years in Germany. We are having a conference in September to announce publicly the conclusions of this joint work.

Globalisation brings new opportunities, but for many people it can be quite threatening as well, which we need to be aware of in government. One of the responsibilities of government during this time of change is to find ways in which we can take people through the arguments as to why change is necessary.

Change in itself, and the rapid pace at which it is taking place, can be very disturbing, so we need to find ways of persuading people to see change as a bringer of opportunity. Government has a responsibility to explain why we have to adopt new processes and procedures, in order to take advantage of new technologies. Investment information can go round the globe at the click of a mouse. We are seeing depths of information that were unimaginable ten or twenty years ago. So, in order to achieve social inclusion as well as to harness the benefits of the new economy, government must make sure that the new economy is based on innovation, enterprise, skills and knowledge. The importance of what we can do is to invest in human capital. The Industrial Revolution was based on investing in a different form of capital, in plant, equipment and land; today's revolution is very much knowledge-based. One of my great worries is how, while embracing the new technologies, we can avoid creating further division within our society. We could have a group of people with expertise, the digital haves, compared with the digital have-nots, and this could create real problems. We must therefore have a system which allows all people to benefit from the new technologies available. For this we must provide education in a quite different way from the way we do at the moment. It will mean engaging public service broadcasters to provide education to people in a way with which they are comfortable. One of the great benefits that can come from the development of digital technology is that we can have a knowledge resource in everybody's living room.

One of the objectives of economic reform has to be to ensure that we benefit from the changes that take place, in a way that allows all our people opportunities which are currently denied to them. As we look at developing an enterprise agenda, recognising that economic reform is going to be the key to achieving that, we need to do it not just on a UK basis but within Europe as well. It takes twelve weeks to start a business in Europe, but just one week on average in the United States. It costs four times as much to start a business in Europe as it does in the United States - so it is little wonder that we see little growth in that sector compared to the US. I hope that when the heads of state reach their conclusion tomorrow night, it will not be the sort of bland statement that all too often we get from summits of this nature, but a real agenda for action, with timed achievements - an agenda that recognises that regulation and directives can be a barrier to economic growth, and that there is a different direction in which we should be going, one that is based on enterprise, innovation and encouraging people to develop their own skills. That is the direction that Europe needs to go in if we are to have the dynamic economy that I believe its people want in the years ahead. If we do that, there is potential to provide employment opportunities to the over sixty million people in Europe who are currently out of work. Then we will begin to meet the obligations that are given to us in government. We will only do that with courage, with imagination and with commitment.

I believe that the events of the last seven to ten days in the UK, in terms of the shock that the BMW decision caused, have important lessons: that in the global economy in which we live it is not the job of government to step in and preserve all jobs that might be affected by those decisions. The role of government is to articulate the views that people have, to provide people with opportunities, and to move forward debate and discussion. Governments cannot do that successfully on their own; they can only do it by working together with business. The partnership of government and business is increasingly important and, the more you look at the systems under which we operate, the clearer it is that we need businesses to prosper, to provide employment, and to have the sound public finances that we all rely upon to provide essential services like health, education and a decent transport structure. The challenge ahead for government is to provide the framework and environment within which business can prosper. If we are to manage the change that comes from the global economy, in a way which will benefit all our people, we can only do it together.

In all of this there are many difficult questions that we will need to face. We need always to recognise that they are human questions. The answers we give will affect individuals, their families and their communities. I look forward to developing a debate about how we can, through economic reform and social inclusion, ensure that in government we discharge our responsibilities to the people who elect us to office.

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