“Virtually all economic growth comes from innovation.” Matt Ridley in The Times today.
It doesn’t. Economic growth comes from demand either domestic or from abroad. New ideas and products can help stimulate demand but it is growth in the sale of existing goods and services that is the main driver.
If you trash your manufacturing base whilst your international competitors are growing theirs that will contribute to your economic decline. Britain has been doing this for 50 years. The substitution by the service sector of the disappearing factories has covered up this process. There have been moments of innovation from Sinclair to Dyson but these have either faded away or not been significant enough to count much.
The most innovative modern companies are in sectors like computing where the Americans (Apple) and the Far East (like the Korean Samsung and the Chinese ) dominate. Britain is nowhere. We just don’t make things any more. Our vehicle manufacturing is significant but these foreign owned companies can and will review where in Europe they have their plants. Britain is now a pretty unattractive prospect as recent decisions by Honda and Nissan have shown.
The Brexit agreement did not cover services and there is little doubt that Britain’s economic isolation will lead to the relocation of many financial services firms from London to more welcoming and flexible European locations.
The Gross Domestic Product of a country is driven in part by its size and in part by the efficiency of its new wealth creation but whilst it is beneficial to be innovative far more important is to have a sound basis to what you currently do. Economies of scale are absent in what is left of Britain’s manufacturing. This has led to the disappearance of traditional industries with only small scale and niche production remaining.
Britain is not a victim of high taxation nor excessive regulation , and energy prices are no higher here than elsewhere in Europe. And to spread lies about Europe’s “lethargic” approach to the approval of COVID-19 vaccines compared with the U.K. is petty and cheap.
The modern world is interdependent and whilst there is always the opportunity for clever entrepreneurs to exploit good ideas don’t hold your breath. The inevitable decline caused by our rejection of cooperation in Europe and our walking away from Free Trade – the Single Market and the Customs Union – will be hugely damaging.
Economies can adapt to new circumstances and innovation can help this. But it is the “big companies” that Ridley so decries here who mostly do this in the modern world. All the vaccines come from Big Pharma. Just as all the next generation of electronics will come from the likes of Apple and Samsung. Tinkering with tax and regulation in Britain to further some antediluvian libertarian ideology just won’t work.