Ian Hargreaves argues that we need to become a more open society for the economy to prosper
Let’s face it, Wales since devolution has been a disappointment. Just look at the three undisputed top priority items in any country’s politics: economy, education and health.
The Welsh economy since devolution has gone from bad to worse to barely better. Economic valued added per head has fallen from 77 per cent of the UK average in 1999 to 75 per cent. By this same measure, West Wales and the Valleys run at 65 per cent of UK average: a pretty desperate state of affairs.
Structurally, the Welsh economy has not recovered from the short era of plentiful natural resources and associated heavy industry. It is, for reasons which are not agreed, stuck in yesterday.
Today, the public sector accounts for roughly two thirds of economic activity in Wales, which at times makes it feel closer to the monoculture of a late Soviet era satellite state, than a diverse modern economy operating in a global marketplace. Export performance is narrowly based; inward investment rates are fragile and there is an anaemic level of new business births.
In the next few years, as the public sector suffers further cutbacks in the cause of the UK as a whole maintaining credibility in financial markets, the Welsh public sector will shrink and more jobs will be lost.
From the first stages of devolution, politicians here have, of course, recognised the urgent importance of improving this situation. Patrick was always jubilantly sceptical about the chances of Wales out-performing other areas of the UK sufficiently to diminish the economic gap.
In a book published in 2002, the journalist Patrick Hannan ran his eye over Rhodri Morgan’s economic development strategy and applied what he called “the first rule of government plans: the likelihood of them being achieved is in inverse proportion to the number of adjectives used to describe the objectives”. Noting the First Minister’s belief that Wales could romp along in the tracks of the Irish Celtic Tiger, Patrick tersely noted the substantial differences between the two and concluded: “Not for the first time many people wonder what Rhodri knows that they don’t”.
Ten years ago, I thought Patrick was too pessimistic, but he was right. So far.
If you ask most economists what to do about an economy which has structural problems as severe as those which Wales displays, they will tell you that the long term, strategic answer is investment in education, the vital source of the skills enhancement needed to enable people and institutions to respond to economic change through innovation and entrepreneurship, which are the engine of jobs growth in the private sector.
Now Wales, supposedly, has an exceptionally strong cultural attachment to the virtues of education. We all know stories, like the one which saw Richard Burton’s elevation to greatness under the care of a super-teacher. But we also have to face the fact that Wales’ performance in education is nowhere near as good as it should be.
The so-called PISA rankings, produced by the Organisation for Economic Co-operation and Development and as close as you ever get to accepted comparisons across national boundaries, show that Wales currently ranks 38th among 67 countries in the world for reading, 40th for maths and 30th for science. Within the UK, Wales lags Scotland, England and Northern Ireland.
The picture in health and social care is even grimmer. We all know that a great Welshman invented the National Health Service. We also know that there has been no improvement in Wales’ key health metrics since devolution; Wales has a worse record on public health issues than almost anywhere else in the UK.
According to the most recent official survey of health in Wales more than half all adults are on regular, prescribed medication and a third of us report that we had attended the outpatient department of a hospital in the last year. Physical activity rates have been static for a decade. Nearly 60 per cent of adults are overweight or obese. And pressures on the health service in Wales will get much more intense, as the number of people living beyond 75 is due to double by mid century. As Dr Chris Jones, Medical Director of the NHS in Wales, has said, starkly: “If we don’t change we will be overwhelmed.”
It is, of course, a good deal easier to name these problems than to solve them. But it is also essential to avoid drifting on a tide of fatalism, where we start to think that nothing can change.
Those of a fatalistic disposition should look at countries as small or smaller than Wales on the opposite flank of Europe: countries which following the fall of the Berlin Wall in 1989 have had to deal with economic, social and cultural difficulties which exceed those faced here in Wales; countries which were indeed mono cultural Soviet satellites.
A good example is Estonia. It’s at the top right hand corner of the map of Europe and has a population of 1.3 million, which is less than half that of Wales. Or its larger next door neighbour, Latvia, which has 2.2 million people.
The story of Estonia is one which has combined radical policy thinking, such as the country’s flat rate income tax; with an exceptionally strong commitment to digital technologies: I-pads are replacing physical text books in schools as well as in Cabinet meetings and internet access is better than the UK.
Like all European countries, Estonia was battered by the 2008 banking crisis, but in the years before that its growth rate averaged 8 per cent a year and by 2010 it had already recovered to today’s growth rate of around 3 per cent a year. Latvia has also hit bumps, but it is now vying with Estonia as liveliest of the Baltic Tiger economies, both liberal in outlook and successfully responsive to change.
Estonia, I should add, is way ahead of Wales in the PISA education rankings, though it trails its neighbour to the north, Finland, which is Europe’s top performer.
The journalist and academic Anne Applebaum, an American who is married to a Polish politician, has written brilliantly about the end of the old Eastern Europe and the inspirational instructiveness of these political and economic stories. Applebaum spends some time working in North Africa and says that since the Arab spring, there’s much more interest in the stories of Latvia, Poland, Slovakia and Estonia than France, Italy, Portugal or Greece. Or, she might have added, Wales. What serious effort is Wales making to learn from these countries?
In a recent article in Prospect Magazine, Applebaum asks herself what is the single most important factor in determining whether a given post-communist country succeeded or failed in its transition to liberal capitalism. This is how she answers her own question:
“I would point to the existence, or absence, of an alternative elite. And by alternative elite I mean something specific. Not just a few economists, but a larger class or group of people who had worked together in the past, who had adopted an alternative set of values and who, by 1989 or 1990, were at least somewhat prepared for Government.”
It is, no doubt, an exaggeration to compare the political and economic momentum occasioned by the end of the Cold War with the tide of events that made devolution a reality for Scotland, Wales and Northern Ireland. But it is worth reflecting upon these questions of motivation and readiness. Or, at least, recognising that when we discuss faults and potential solutions, we should look first and foremost, if not first and last, to ourselves.
When I discuss with friends in Wales the decade and a bit since devolution, I often hear it said that the level of energy and optimism in and about Wales has diminished rather than grown. People sometimes then add that this reflects an anxiety among politicians and others not to create waves which might damage or undermine Wales’ fragile new political institutions, which opinion polls suggest have, in a quiet way, gained wider public acceptance following the hair’s breadth Yes vote in the devolution referendum.
Andrew Davies, the former Labour Cabinet Minister, has used the term “captive state” to describe the unwillingness of people in public life to speak out strongly on the issues as they see them: to avoid rocking the boat.
Which brings me to my main point. Given a choice between doing something in a way which is open, transparent and contestable or in a way which prioritises privacy, obscured authority or even secrecy, we should never be in any doubt:
Or, as the point is often put in debates about information and the Internet, we should set the default switch to open and then mitigate the risks of being open, rather than first and foremost worrying about loss of control. And we should use these open channels to design solutions around the expressed and researched preferences of users of services – of citizens.
With open also comes plurality – healthy competition between individuals and institutions. The opposite course tends towards the concentration of information and power in the hands of a few: a real danger here in Wales.
So, we should be open to
- Competition from wherever competition stems.
- New ideas and innovation, even where change is painful.
- The movement of people, ideas and culture in the confident belief that strong cultures learn quickly and become stronger as a result.
This open versus closed argument has run through our economic and political life in the last century. It informed every breath of the great economic arguments of the 1970s, 1980s and 1990s, when a politics based upon unrealisable protection against the consequences of economic change was overwhelmed not so much by an alternative politics, but by an alternative world. We re-visited some of this debate on the occasion of Margaret Thatcher’s death. We also still hear it, here in Wales, in Labour Party reflections upon the Blair legacy.
Let me be clear where I stand on this. Tony Blair, in my view rightly, told the Labour Party that it must choose open for its approach to the economy, casting aside controls in favour of viable regulation of an economy rooted in market information and market transactions. Only this would protect the funding of what needs to remain public and enable us to address other questions of fairness.
That zone of reasonable regulation is where we need to build our confidence in addressing issues that the market cannot address, from climate change to constructive honesty in banking. But capitalism’s shortcomings do not alter the need to set the default switch to open; rather they reinforce it.
Tony Blair, however, was only half open. To his great credit, he delivered the 2005 Freedom of Information Act, which gave citizens the right to access much more data and information about life inside government. Here, alas, is what Blair wrote in his memoir, published in 2010:
“Freedom of Information. Three harmless words. I look at those words as I write them and feel like shaking my head till it drops off my shoulders. You idiot. You naive, foolish, irresponsible nincompoop. There is really no description of stupidity, no matter how vivid, that is adequate. I quake at the imbecility of it.”
Several fulminating paragraphs later, Blair’s source of regret is clear: he thinks that he gave something away to journalists, rather than to the people, and that this has made it harder to govern well. Wrong on both counts.
Journalism, for all its current travails, exists to serve people and that includes challenging politicians. Strong and empowered news media make good politicians better and help us dispose of bad ones.
And, in the still unfolding age of the Internet, open data has enhanced value, because of the ease with which we can organise and distribute it. But let me give you a more congenial example, where Wales has done a great job, compared with, say, Scotland, in choosing open versus closed: football.
For those who don’t follow the sport (I know it’s second fiddle in Wales) Scotland has its own premier league, in which Scottish teams play Scottish teams, as a result of which a Scottish team always wins the championship. Fry the haggis whole!
Wales, by contrast, is part of the, dominantly English, premier league, which is a global market leader and so, rich, because of the value of its television rights. Even if you don’t follow football, you will know that Swansea secured promotion to the premier league in 2011 and that Cardiff City have just secured the right to join Swansea in the coming season, after a 51-year exile from the top flight.
Both clubs, but especially Swansea, have made progress by taking a very open and cosmopolitan view of talent recruitment. Swansea are managed by a Dane, who admits that he can get better value talent by shopping outside the UK. Cardiff are managed by a Scot, who Cardiff City fans like me are hoping will be as good at this aspect of his job as Swansea’s Michael Laudrup.
It is also true, however, that setting the default to open in Welsh football involves discomfort. For years, Wales had no club in the top tier. Some argue that the arrangement also weakened the structures of football within Wales – there is a similar argument in Welsh rugby.
Cardiff’s success in the last two years has depended upon risky and high profile foreign direct investment from Vincent Tan, a Malaysian businessman, who has angered many loyal fans by changing the team’s colours from blue to red; awkward if you’re known as ‘the Bluebirds’, but apparently rational if you are thinking about the marketing potential for Cardiff City in Asia.
Half way through this last and eventually triumphant season, Bristol City came to the Cardiff City stadium, occupying the small wedge of seating reserved for away fans. They brandished their St George’s Cross flags and taunted the home fans with songs about human-sheep interaction. Then, when a reference to Malaysia was shown on the stadium’s big screen, they jabbed their fingers in jeering unison with a line which we’ll translate roughly as: “what the hell is that?”
I wanted to go over and have a little chat with them about how Bristol’s greatness and prosperity have grown from centuries of global trade and open-ness and that south Wales will be very happy to show Bristol the way from now on, starting with the construction of the River Severn tidal energy barrage.
So, what might setting the default to open mean for Welsh politics, the economy, health and education?
It would mean that information about every area of Welsh public life is as open as is consistent with reasonable defences against breach of personal privacy. It would also mean that Government ensures that not only is the information and data needed to form judgments about policy and other matters available, it is also there in a form which makes it readily usable.
This is the only way to ensure that the evidence used to justify policy decisions and political thinking is of the best possible quality. It is also the only way to deploy the insight of those outside government, from the individual citizen to big business, in designing solutions to policy problems.
In the world of digital communications, where I spend much of my time, people talk about this Big Data being “the crude oil of the new economy.” That is why the likes of Google, Facebook and Apple are leading the gold-rush, if you will excuse the mixing of metaphors from different extractive industries.
The Government of Wales needs urgently to ensure that it is an outstanding player in this game, along with the rest of the Welsh public sector, and that Welsh technology companies, small and large, are well positioned and encouraged to take advantage. As they are in Estonia.
In education, we have seen too many political jitters about the case for putting information openly in the public domain. School league tables are an obvious case in point; the debate about school banding is another. The current Education and Skills Minister has, in my view correctly, made strong use of the PISA international comparisons, but he has encountered considerable resistance, from teachers’ unions and from the kind of public sector managers who simply don’t want others to be able to debate the quality of what they do.
So let’s take another example, this time from health. Professor Brian Jarman is an exemplary and stubborn academic, who worked out more than a decade ago that mortality data, that is death rates, adjusted for variables like demographics and time patterns, could be used to provide an early warning system against the risk of life-endangering underperformance by individual hospitals. His work was largely unknown and, he says, deliberately sidelined, until the scandal of the Mid-Staffordshire NHS Foundation drew attention to it. Professor Jarman has argued that 20,000 lives were lost that might have been saved had his research been deployed when it was first available.
How does Wales today stand with regard to Professor Jarman’s risk-adjusted standardised mortality data and its deployment in the interests of high standards in the Welsh NHS? Well, according to data released last month the Wales figures are not good in two senses: first they appear to indicate what an un-named official in a BBC news report termed a “fire alarm” by showing that 11 out of 17 district general hospitals in Wales have higher death rates than the norm; but that this conclusion has to be qualified because of the poor quality of the data collected for Welsh hospitals.
I very much hope the new Health Minister will put the collection, maintenance and publication of quality performance NHS data high on his list of priorities.
In the economy, absence of openly disputable evidence is also, very frequently, a problem. When I investigated Wales’ creative industries in 2009, the job was made harder by the absence at the time of anything resembling an up to date map of what was actually happening on the ground. I also drew attention to what I felt were weaknesses in the transparency of governance applying to some areas of public investment. Business is currently lobbying the Welsh Government to provide the quarterly economic growth data which is available for Scotland and England, but not for Wales.
All of that, however, is small beer compared with the calamity of the Technium business incubation centres, initially the brainchild of the Welsh Development Agency and its academic advisers. This has cost Wales an estimated £100 million since the programme started. Six of the ten Techniums, in Aberystwyth, Baglan, Bangor, Pembroke Dock, Llanelli and Bridgend, were axed in 2010. Ministers have blamed civil servants for not telling them what was going on and others have blamed the Ministers.
My colleague at Cardiff University, Professor Kevin Morgan, has studied the matter in detail and sums up as follows:
“The failure to calibrate supply and demand, the lax administration of grant aid, the inability to learn from mistakes and the hubris of ambitious politicians who rolled out the centres before they had been properly evaluated all played their part.”
Lack of the right evidence, evaluated in the right way at the right time, plus a disinclination to be open about what evidence there was cost – £100 million. Setting the information default switch to open would not, in itself, of course, guarantee a better outcome, but it would stimulate informed discussion and analysis. From this, errors can be corrected and new paths explored.