ࡱ> gif 7bjbj΀ *V/.::}}}}}8d->II___#>%>%>%>%>%>%>$T@BI>}I>}}__?^>X}_}_#>#>nC<=_is.K= >t>0>k= vCvC@=vC}=I>I>>vC: C:  Baron Frankal Speech at St James Club, Manchester, 18 June 2010 (check against delivery) Lord Mayor, President, ladies and gentlemen. Thank you very much for inviting me. I am told that the reason is because the future of Manchester lies in its economy as does its past & you, ladies & gentlemen, its present. We do the economy, we being Commission for the New Economy of which Im a Director. We are a company that works for Greater Manchesters ten local authorities, and whose mission is to generate economic growth and prosperity, largely by lobbying for people like you, business. My name is Baron Frankal. In my time Ive run my own company, been a City of London lawyer and I latterly worked as Senior Economist at the European Central Bank, where amongst other things I worked on world trade, carbon emissions markets, competition and our good friend the Lisbon Treaty, of which I claim 9 words. Im going to talk mainly though about Ronald Reagans rather more famous nine words, which he called the most terrifying in the English language, I'm from the government and I'm here to help. Now, Im not going to quote you bewildering and contradictory evidence about the effectiveness or otherwise of the various ways the public sector has to help you, which always end up concluding somehow that a further study or review is needed (any consultants in the house ?) - paralysis by analysis. Rather, I wanted to use the occasion to raise the house lights, as they do in the best theatre productions, or put a large mirror in front of me to say that the future of the economy of Manchester, and so the future of Manchester by which I always mean Greater Manchester is here, is you. Today, some 30% of employment in our city is public sector, some 60% of all jobs created in GM since 1998 were public sector. Now, though its my specialist subject, I dont intend today talk about the scale and impact of the fiscal contraction that is coming and the effects on the public sector, not least because anyone who isnt confused doesnt really understand the situation. The effects are going to be deep, sustained and intensely draining. My point is to say again that our friends in the Town Hall do not have the keys to unlock a better future for the city you do. It has always been thus. By trade I am actually a historian, and if we go back in time, and of course Im using gross shorthand for Bridgewater, Cottonopolis, Arkwrights wheel, what made this city great and world-beating great - was enterprising minds and a combination of a moist climate, imperialism, routes to market like the Manchester Ship Canal (which people like you initiated and had built, even if our friends here on the Council had to step in to complete it) and a sustained knack for innovation and marketing, which somewhere along the line was lost to profit-taking, elites, brain drain, an inability to see and seize change and the inevitable decline that followed as we ceased to rule the waves and invest in the untried technologies of tomorrow. Youll know Im quoting Warren Buffet, but when the tide goes out, get to see whos swimming naked and we were. Now about a year ago, the Manchester Independent Economic Review was completed. Yes, it was a study, or actually seven studies, yes it ran to thousands of pages, and yes it said Manchester was great. But it was different. The first reason was, and the clues in the title, it was independent. We didnt manage it that was in the hands of five Reviewers like Diane Coyle, BBC Trustee, Harvards Prof. Ed Glaeser, one of the leading urban economists in the world and Jim ONeill, Goldman Sachs Chief Economist (and leader of the Red Knights). We gave them a very significant pot of money, and we said please go away, get the best outfits in the world, analyse our economy and then tell us what we can possibly do to engineer long-term sustained economic growth. MIERs conclusions were many and to a very significant degree our city, its politicians, officers and businesses have acted on them (many though not all) and I want to summarise both the conclusions and actions taken since, which is a good story to tell, but then, building on what Ive said already, I want to round on two particular conclusions, which were actually made to you. I would highly recommend the (white) summary document to you, which is the reviewers summary of the whole project, very compact and readable. You can google it, and its well worth the effort. To summarise the summary, MIER makes the case for investment, of bringing in people, talent, and capital the benefits of attracting bright students to our universities and enticing them to stay, and of foreign benefactors taking over or actually investing in businesses like Manchester City are phenomenal. We need more. Relative to other places in the UK outside London & the South-East, Manchester has done very well these last years but success in the future does not look like success in the past. What are we doing on this score ? Supporting a specialist agency, MIDAS, that attracts inward investment, focusing our efforts on places like China, India & Brazil, appealing to people like yourselves and saying yes its harder, yes the immediate gains may be less but while we in the UK argue endlessly about 200 miles of high speed rail, China TODAY is building 11, 000 miles. Manchester became great by understanding then what the world demanded, and supplying it. Today, that demand is in places like China, and designers, consultants, architects, pension providers, healthcare, logistics and a hundred other experts can supply it. The message is to be bold, invest for the long-term and persevere. Other conclusions were around skills particularly dealing with high-skills, difficult for the public polity as all roads lead to getting people up to the acceptable level (2 in the jargon) and not above and beyond a degree (4). Yet, look at employment, searing and enduring problem, numbers employed with lower skill levels hover around 50%, whilst those 4 & above are consistently at 90%. MIER also talked about basic skills which is the ability to read, write and apply maths at a level deemed acceptable of an 11 year old. Hundreds of thousands of people in this city of some two and a half million do not reach that level. It also talked about the early years, which resonated very strongly, including with the government. By age four you can predict with incredible accuracy the income decile that someone will spend their life in thats how important the first five years of life are. Manchester is solidly trapped in a low-skills equilibrium, and you can ameliorate to a degree in the short term with skills programmes and training, you can make a dent in the medium-term by importing skilled labour and keeping more of our brightest and best, but in the long-term, the only way to change that profile is a focus on minus nine months to five, and thats mainly a story of the most deprived areas the worst 5% of the country, that includes 20% of our conurbation. How ? Whats the single most effective intervention that could increase the school-readiness of our entire population by 50% ? Reading to children every night. Most of the population do not. There are many other conclusions, such as science, a big thing for this city, research and design, creativity, innovation, enterprise and trade, which we were shown to be poor at. With many notable exceptions, probably all here today, our traders and business people, against comparators up and down the country, are timid, unambitious, parochial, afraid of the challenge of internationalisation. That in fact is the single development most effective in addressing the central problem of our economy identified by MIER productivity. Compare us to other city regions outside London, we generally do well, but we are just not that productive: too little high-tec, too little cutting-edge export and international connectivity, too many low-skilled in jobs that will inevitably disappear, too few expandable, quality start-ups, too little venture and risk capital accessible in the system, too many innovative and enterprising high-flyers going to London or New York. The BBC represents a possible turning of the tide and thats just 10% of Media-City, and theres Manchester United leading a host of sports brands and facilities that can genuinely claim best-in-the-world competitiveness, and theres bio-tech and tourism, which brings more than 100 million visitors a year, generating 5bn of our 75bn economy, which makes us the largest single economic area in the UK outside London & the SE and though we lagged a long way behind the capital, the London School of Economics study, a ground-breaking piece on agglomeration (which Id translate as the critical mass of jobs, talent, people, skills, investment, transport, knowledge all using the same car park and coffee shops) the LSE put us above any other place in the UK outside the Greater SE in terms of our ability to generate growth for the UK economy, which is invaluable for us to say that a pound invested here generates more sustainable economic growth, wealth, than anywhere else in the whole country outside London & the SE. You can read all about it in the MIER, but I said Id come back to two particular conclusions, on which great progress cannot be reported. First, unambiguous, we want, said the reviewers, the private sector to lead the response to this review. Now I need, with our Lord Mayor here, to give the line that Manchester is in the forefront of involving the private sector in decision-making Greater Manchester has a Business Leadership Council (BLC) which is wholly-private sector, and indeed my own Board, on which six of the ten Leaders sit, has a private sector majority, and we have UKs largest Chamber of Commerce. But, whens the last time you guys and girls put your brains together to raise about 2 billion and put in place a piece of world class kit like the Ship Canal through which tomorrows trade can flow and which puts this city in a comparative advantage to the rest of the world never mind the rest of a rather small country off the coast of mainland Europe ? And secondly, a crucial ingredient of how this city became what it did, was the existence of an elite that had social capital, money-making zeal, civic pride and responsibility and a Victorian ethos to build a just and prosperous society in its own image. Theres an old Greek proverb, a society grows great when old men plant trees whose shade they know they will never sit in. Now our old elite was white, middle class and male, and there is no desire to recreate it, but the lack of a cluster of a modern civic elite, of professionals, university folk, local elected leaders, successful businesspeople, society leaders, movers and shakers, closely interacting together, over time, collegiately, developing ideas in a fierce heat of wit and debate, with a common purpose, a part of which is the city they live in, the lack of that glue, of that centre, of that social capital is fatal, is a black hole, is a dereliction of duty of people like you and me to the place that we live in. Where are those leaders ? And thats the question Im going to leave you with. We are a city that plumbed the depths, picked ourselves up and had a good run. But what next, which road ? Well, if you dont know where you are going, every road will get you nowhere. Someone has to stake out a destination, discuss it, set it in lights. The ship canal was an idea that came from a dinner of industrialists in a house in Didsbury. It was an era of ideas and of actions, of risks and of failures. There was no inevitability about Manchester supplying textiles to the world we saw a niche suited to our circumstances, we had a vision, we acted on it and we seized the opportunity. That took leadership. Whats next ? Well, the best way to predict the future my friends, is to invent it. With which thought I will thank you again very much for inviting me, and wish you a very happy, and reflective, weekend. 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