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Challenges and Threats of Globalisation

lord_b.jpg“Globalisation has meant increased prosperity for billions of people and the escape from poverty for millions. Decades of falling barriers to international trade and investment have helped world trade to grow at an average twice the rate of growth of world output” comments Professor Lord Bhattacharyya, Director of WMG at the University of Warwick .

As countries such as China and India have made their presence felt in the world economy, it has become ever clearer that the global trading system is no longer the preserve of the rich industrialised countries. “Highly developed” countries have responded to emerging market competition by seeking protection, taking advantage of competitively sourced components and bought in services and competing on quality, sophistication and advanced technology. But none of these routes deals with the essential challenges of true globalisation – creating high value information flows through education and innovation, thinking long term and building mutually beneficial partnerships.

The typical early response to emerging market competition is to talk about technology intensive products, high value added manufacturing or technologically advanced production methods. But these are buzz words. Exploiting science, translating it into a technology and then applying it, is a lot harder than it sounds. It requires an understanding of how scientific ideas are generated, how science is communicated to technologists, and then from technologists to those charged with taking the new technology and applying it in the marketplace.

Usually this requires common understanding of diverse functions in a business if new technologies can be successfully integrated with existing business practices and systems. People have to talk to each other. The ability to absorb, integrate and exploit new technology is a function of how a business thinks and how it takes decisions is a function of its intellectual capacity.

This requires a positive approach to higher education in general and to the weight given to producing graduates with higher degrees. It is no coincidence that Germany, leaders in engineering and automotive industries, is also the country with the highest share of engineering PhDs in the G8.

Next, business needs to have the capacity to think long term. Over the last few decades the complexity and growth of The City has created a worryingly short-termist outlook for investment decisions, which in turn creates problems of capitalisation and under-investment. Success in a highly globalised marketplace requires sustained investment to retain competitive advantages.

Nationally, we need to be investing in schools, further education and apprenticeships, including academies. We also need to drive forward innovation at the very top. We must increase investment in the top end of the skills sector to drive growth. That means encouraging investment in both R&D and in innovators themselves, from compensation to career paths.

Finally, businesses must establish research partnerships which extend from upstream research all the way to the market-place. This means working with researchers who understand market needs from Brazil to China. Sitting in the UK producing “value added technology” is no good if it does not add value to those who we wish to consume it.

Indeed, just as business partnerships with emerging market firms will be essential for commercial success, so research institutes need to build strong relationships with emerging market innovators and businesses. We must not make the mistake of thinking researchers and business in developing economies are not capable of producing high end, upstream research innovation. They certainly are, and we can either partner with them, or ultimately be ignored by them.

So the challenge for the UK is to develop our skills base, build the quality workforce and strong management which are essential for sustained increases in productivity and increase commercial and government support for applied research. This requires a focus on all levels of education, from apprenticeships up to postgraduate level.

We rightly think of skills as a key way to increase productivity, but successful economies have found that the path to increased productivity also requires increased ability to find technical solutions to tough problems. That means working with others, investing in future capacity and building an environment of sustained research investment and collaboration.