LEAP FROGGING TO THE KNOWLEDGE SOCIETY

HOW DID OTHERS DO AND HOW SHOULD WE DO IT?

Lord DAVID HOWELL

Conservative Shadow Spokesman on Foreign Affairs, UK

I am a former Secretary of State in Mrs. Thatcher’s Cabinet and I am currently the spokesman of the Conservative Party in the Upper House of Parliament in Britain and you may wonder why on the day of general election in Britain I am here and not there and I will explain there are three categories of people who do not have to vote in Britain, they are Lords, clergymen and lunatics, thank you.

Thank you Mr. Chairman. I should begin by saying I do agree with President Vaclav Klaus who spoke earlier this morning while knowledge society is a useful expression great care must be taken in elevating it into an objective of government policy or overall policy vision and I also have to say that while I agree with Hayashi that leap flogging is possible particularly in your country here which I am so glad to be in while its tempting notion governments themselves are not very good leap floggers because they are not sufficiently agile too cumbersome to this very well. That’s an exercise if leap flogging is required that is an exercise that is much best left to enterprise and innovative individual minds, governments can create a framework and help grapple with outside events of pressures such as particularly the energy crisis and infrastructure weakness but it is people who by their actions and imagination take a nation forward to economic dynamism and prosperity so I wanted to say that because that is where I am coming from.

Now the Lisbon agenda has been much mentioned in this conference and I think we have to be realistic, the fate of Lisbon agenda for the EU shows clearly why caution is needed in this matter of government-designed strategies. It is almost total failure so far to galvanize the moribund EU economy confirms a simple and central fact which I would like to leave with you but top down strategic thinking by Central governments or institutions very rarely initiates economic growth and dynamism and may actually impeded and it isn’t just that kind of thinking which has today paralyzed major EU economies which are in a kind of coma at the moment and which paralyzed the UK before the Tatcher reforms of the 1980’s. Today the situation in the EU which you seek to join and I hope you’ll join, I want you to join is in a very bad state. I’ll put in the Euro zone is falling as this morning’s papers confirmed, the Franco-German economic motor has really stalled, Germany now has higher unemployment then he had in the 1930’s of 12.7%. This is not a pretty picture. In the UK ironically it was the information revolution itself with its colossal powers of increasing access to knowledge and its huge potency in dispersing pioneer society and enabling market as Hayashi so graphically described which permitted the UK to break free of the old fashioned state dominated way of thinking and the old fashioned interests which sheltered very strongly behind it so in short ladies and gentlemen my vies is that the Lisbon strategy is honestly not a model to follow in the information age. It was based from the start on a misconception about the nature of modern societies and nature of growth, the dynamism and this is and I have to explain what it’s produced such dismally slim results. Euro would prosper as it has in the past from its diversity and the intelligence and vigor of its peoples and not for its governments and of course the entry access of Turkey to the EU will greatly add to the diversity, which is very good. I know there are examples in history of government as it were taking the lead, changing social behavior and character and the obvious one in the history is the major restoration strategy in Japan but when I was in Japan the other day I was asked whether Japan need a Margaret Tatcher to get it out of stagnation. I said no, not only that each society is completely different but the very question rests on a misunderstanding. Margaret Tacher steered through huge transformation in the UK and fought many battles with the entrenched interest notably the coal miners but many others but the force which drove the transformation came from outside and above from technological change, from determination in the UK to reverse past humiliations and from a clear perception of past errors and in particular the error over government, and too much central direction so of course where governments can help is not by enunciating grand strategies which then fall flat on their faces, they always do but by framework actions along sort of lines we’ve already heard namely the best possible education facilities, maximum openness and democracy in society with the removal of corruption that is vital, of course the upholding of rule of law and the lightest possible taxation and regulation, I can’t emphasize this too strongly, tax should be simple and stable. In the UK I have not such good story to tell now because we’ve drifted back in the endless tax complexities and this lawyers and accountants very rich but they have not benefited the public revenues nor business and I hope if I may offer one thought for Turkey’s future, I hope Turkey will look closely at the idea of a single flat rate tax which is now been adopted by 6 central European nations and indeed by Russia and Hong Kong. I think however just to get into my time frame one really needs to probe still deeper to understand and touch the main strings of economic reform and rapid advance and key ingredient to this deeper level which it is not in my view get enough mention in Forum and papers that we have sent around is enterprise and enterprising people and one has to ask what motivates people to be enterprising and is it government strategy, the answer is no. In the UK case we had to fight on two fronts on the left against powerful statement monopolies and over mighty trade unions and bureaucracy and over regulation and on the right against entrenched professional interests and suffocating class structure as well as sort of general defeatism in the UK in the last century which I say that Britain was finished and we had to fallow other people’s models and advise, when these two fronts were challenged the people become free to seize the opportunities of the information revolution and which blended with the UK’s characteristics which for good or bad not everybody else’s and improve on our natural advantages such as London’s fortunate position as a global financial center. What we were looking for was innovators who would give impetus to revolution there is nothing new in this the industrial revolution in Britain was driven by innovators in the 18^th century like James Watton, etc. I am not saying anything new but without those innovators nothing will much happen and finally two further ingredients before I just rapidly run through my recommendations which I should impertinently offer; the first is that you must see that the benefits of growing wealth are properly spread at creating atmosphere of fair society I don’t actually thin the Thatcher governments which I served did a very good on this. We created the wealth, we didn’t do enough to spread the wealth distribution and that generated a reaction which actually led to Mrs. Thatcher’s down fall. And finally the second and most crucial ingredient of all which I should have put first really in my list is that for a nation to develop rapidly, a succeed requires a spirit of confidence and a sense of identity what much criticize Mrs. Thatcher did was give the UK back its confidence before that we were always apologizing, we were the sick man of Europe, everything seem to go wrong, by the time she’d finished Britain had become the pace setter of Western Europe and it still is. I am not just talking about beating the national drama or that sort of nonsense I am talking about pride and confidence of a nation to play a constructive part in world affairs. So what fallows finally from that Chairman, you asked me to give concrete proposals, I am very hesitant to do so as a foreigner there is nothing more awful then foreign advice delivered, it can rack a country as the Russians found in all that advice from America in the 1980’s but here are my 9 propositions quickly for you for better or worse;

1. Avoid patronizing top down formulations of vision. Build on the unique skills and qualities if the Turkish people with practical and liberating measures

2. Do this not by brewing up futile official strategies or plans of a sort which ruined many countries, it used to ruin India before they escaped from planning and now booming but do this by lightening every possible burden on tax and become a low tax society,

3. Put the encouragement of enterprise small or large the very central policy and obviously welcome and reassure lots of good quality foreign investment,

4. Tackle all monopolies especially state monopolies, privatize carefully I think we went too fast in Britain but maximiz competition on all fronts,

5. Pertain a fair but not over amorous framework of regulation and law within which markets could work,

6. Put massive resources into education and training for maximum literacy and numeracy although do remember that you need the individual brilliant minds as well otherwise all the education in the world is commonest and won’t actually move you forward at all.

7. Spread the benefits of growing wealth generously.

8. Use private enterprise and the public sector to create high and reliable policy of public services and infrastructure,

9. Especially for great Turkish republic look wider then the EU partners, great growth areas of the coming decades will be in Asia not in Europe to some extend in Middle East but mostly in Asia and you are uniquely placed here, much more favorably placed then we are in Western Europe to interact with new economic superpowers of Asia.

I hope chairman that I know Turkey feels it needs to join the EU and I hope it will but I have to tell you that EU also needs Turkey because we have to widen our horizons and restore the momentum in Europe which in present is nonexistent and that will be done by the kind of diversity and the dynamism that this country already showed and will show increasingly in the future. Thank you.

Mehmet Öğütçü: Just two points that I want to make, one is yes government has a critical role to play but it has to be knowledgeable government and second thing is about Lisbon agenda if you go through this document that they have adapted in 2000 in Lisbon, the objective is to create most dynamic, competitive, knowledge based economy by 2010 and we are half way thru and one of the reasons why it hasn’t worked as planned is that the reform package it contains about 28 main objectives, 120 sub objectives and 117 different indicators and also reporting system for 25 member countries which adds up to more then 300 annual reports, nobody reads them so it brings us to light regulation that Lord Howell referred to.

Of course I appreciate and respect the point that the government must be knowledgeable and agile and flexible and be in touch with things that are evolving the processes which make up the future and adjust and adapt to them, that must be right but it is a question of degree where as the Chairman says the regulation becomes too heavy, intense and detailed it becomes counter productive. All I have to say and I hope it doesn’t sound too skeptical is that for trying to design the future we better not entrusted it to economists because they are the ones who told us a lot about the future and the last 20 has been consistently wrong. No economist foresaw the indeed very few analysts foresaw the fall of the Soviet Union indeed we were being joined regarded as a permanent future of the future. Very few academics and columnists foresaw privatization move across the entire planet, actually we pitched the idea from Americans but it really started in Britain and spread right across and now it is from here to remotest parts of China. No one foresaw the Internet Pentagon device, which was gloriously unappreciated and unforecast by every single economic experts, no one foresaw the Asian currency turmoil of the late 90’s and no one has foreseen the evolution of oil prices, no one foresaw they would double last year, no one foresaw in 1980’s they would go down to 10 dollars and no one could possibly foresee what the hell energy pattern is going to do in the next 5 years or even 3 years so designing the future of 10 or 15 years is a bit ambitious and I think one has to be very careful in recognizing that future is a process, is not a destination. I repeat best educated people in Europe were the people in Eastern and Central Europe under the communist regime but again provided no outcome at all because they suppressed all competition and innovation. Thank you.