What do a Japanese robot and the world’s first tidal turbine have in common? They are not in Britain. While the British government destroys itself over Brexit, the parts for a third industrial revolution are being assembled elsewhere. This is an industrial revolution where you don’t “catch up” – you catch the economic backwash. This is what would keep ministers awake at night – if they were serious.
In the past 12 months, Japan has started to produce a lot of robots. Its production index for industrial robots stood at 25 in 2009, achieved 175 last year and rocketed to 225 in June this year. Three-quarters of the units made were exported, helping Japan boost its total exports by 11% in the past year. In turn, the industrial surge of robots has stimulated a surge in semiconductor production in Japan and South Korea. This is big and real.
Japan is ahead in robotics not only because it has a decades-old semiconductor industry and an ageing population, but because it has an industrial strategy. Its government demanded a new industrial revolution in 2014. In 2015, its Ministry of Economy, Trade and Industry issued a “New Robot Strategy”, stipulating sales targets for robotics in various sectors and urgent measures to train and retain technologists.
In robots for nursing care, for example, the strategy spells out a detailed five-year plan – from supporting manufacturers and changing International Organization for Standardization regulations to new health regulations and the creation of a marketplace between healthcare providers and robotics firms. The policy was not made in a vacuum. Japan’s industrial strategists were worried about big US spending commitments on robot research and development and a €2.8bn (£2.5bn) robotics project, funded by the European commission, called Sparc.
One country they do not worry about is Britain. While the UK government announced in April that it will throw £93m at robotics and artificial intelligence over four years, Britain’s membership of Sparc is in question because of Brexit. In future, we will most likely compete against Sparc. In order to “take back control” of our borders, we have told the world’s robotics experts to get lost.
While Japan designs and implements a robotics strategy, we do not even have a basic industrial strategy: a green paper produced by our weediest ministry, the Department for Business, Energy and Industrial Strategy, is out for consultation. This lack of strategy is killing opportunities for the UK to turn innovations into industries. Take the proposed tidal lagoon in Swansea. It could be built in six years, generate power for 155,000 homes and establish Britain as a world centre for the technology at the core of the project: 16 massive turbines, to be assembled at General Electric’s factory in Stafford, with most of the components made in Britain.
The lagoon project has been designed not only as an energy solution – it also contains a miniature industrial strategy. With a potential market of 940 turbines in the UK alone, the project’s backers have put together plans to make Wales the world-leading venue for training, education and design for this kind of water power.
Predictably, the UK government is still sitting on the idea – despite the fact that its own experts gave it the green light in January. One factor is Britain’s ludicrous commitment to having an energy system subsidised via high consumer prices and its bias in favour of nuclear power stations. A more strategic factor is, again, our absence of industrial or economic strategies.
The tragedy is that industrial strategy problem is solvable – but only if you have three things. First, strategic certainty: what does the country want to be in the world; what industries does it favour? Second, a powerful economics ministry and a government investment bank. Third, private money looking for long-term projects backed by a government guarantee. Brexit and internal warfare in the Conservative party have combined to make these conditions impossible.
You cannot have an industrial strategy if you do not know your future trading relationship with the rest of the world. Anything the Conservatives produce in advance of a concrete trade agreement with the EU should be filed under fantasy. You cannot have a powerful economics ministry if all the energy in government is being sapped by infighting and cack-handed negotiations. Long-term money is there, in the City, which is ready to invest in the third industrial revolution. However, it looks with dismay at the situation in the UK, while enthusing about Emmanuel Macron’s promise of a hi-tech, globally oriented France.
In the event of a Conservative collapse, delay, confusion and years of laissez-faire would deal a poor hand to an incoming Labour government. Labour wowed the electorate with its tax-and-spend policy, while leaving the City cold. Now it needs to wow potential investors. To do this, it has to turn its aspirations for Japan-style industrial policy and state-directed investment into a shovel-ready proposal.
There are numerous bright points of innovation from which to start. The tearooms of all sorts of royal institutions and societies are teeming with technologists who know how to execute big projects. University-level innovation is booming. But what global businesses need is an environment predictable over 30 years, not unpredictable over three.
If Labour – or a coalition of opposition parties – comes to power, it is important that its proposed economic strategy is not only coherent, but also certain. At this stage, it cannot be about reversing Brexit on principle. It must simply guarantee that Brexit creates a positive, predictable environment for the third industrial revolution in Britain or does not go ahead.
In the weeks since Theresa May lost her majority, the theme of capital flight from Britain has come to the fore. JP Morgan boss Jamie Dimon’s threat to take many of the bank’s 16,000 jobs to Europe if the deal is not right was merely a straw in the wind. The long-term danger is much worse.
The third industrial revolution will replace human beings with machines on an unimagined scale. This will create a long, global deflation. But the pain of this deflation will not be distributed evenly. The worst place to live will be a country with low wages, low skills and a trade deficit, because these will act as magnets for economic pain.
Once you understand this, it is clear that we need a Labour government. Corporations and banks should be falling over themselves to help equip Labour with the design and execution skills it will need to make industrial strategy work. If the UK’s business establishment cannot stage a 1922-style coup inside the Conservative party to reinstall its globalist, liberal wing this autumn, the most sensible thing would be to place its chips on red.