INNOVATION, FREEDOM AND ECONOMIC GROWTH
"I'm in a battle against any system that tries to limit our imagination." This is what China's leading artist, Ai Weiwei told the world media as he was placed under house arrest this month. His wisdom has implications that extend far beyond the arts. In fact, the evidence is mounting that such limits have a real economic cost as well. For the emerging giant that is China the mindset behind Weiwei's persecution may have a cost in economic development that allows the US, with all its current travails, to retain its lead in the global stakes in the longer run.
It turns out that personal freedoms like those guaranteed in South Africa's Constitution it turns may in fact be an essential requirement for higher levels of economic growth in strategic high potential, knowledge-based industries in the future. For a South African government enraptured by uncritical Chinese investors, there is a lesson here that they will miss at their own political and economic peril.
Limits on a free media, censorship of the arts, or prohibitions on the free flow of information, all features of current government policies now under debate in South Africa, could fatally undermine the proposed New Growth Path. This is precisely because of their negative impact on innovation in the industrial sector. The enemy of innovation is not only a shortage of maths and science graduates, but a closed off mind. The closed mind costs jobs. It is as simple as that.
Innovation matters to all economies in the twentieth first century, even North Korea's vestigial one. Whether in Beijing, Boston or Brussels, innovation is a core component of global competitiveness. It is a feature of Minister of Economic Development Ebrahim Patel's new policy proposals.
The South African government already recognises this. The emphasis it places on our nascent space strategy, the various industrial incentives now and in the past, and the work of the Department of Science and Technology (DST) and state agencies such as the Council for Scientific and Industrial (CSIR) underscore the awareness of the importance of applied innovation to productivity leaps and to economic growth. Government worries about Research and Development (R&D) expenditure, a key performance indicator for innovation in industry (it's at R21 billion a year here, or 0.92% of GDP, and should be at least double that- as Patel points out). Recently government launched another initiative in this direction, the Technology Innovation Agency (TIA), with R410 million in state funding to back innovators with commercially viable ideas, under the auspices of the DST.
As noted historian Prof Niall Ferguson of The Ascent of Money fame recently reminded us ( FT. blogspot.com), entrepreneur-driven innovation is what sparked the Industrial Revolution of the twentieth century have had a similar origin and effect. Economic ingenuity, Ferguson concludes, is at the heart of rising living standards and economic growth, both then and now.
Nobel Prize winner and economist Robert Solow comes to similar conclusions about the impact of radical, or "transformative", innovation on economic growth, wealth creation and new jobs. Indeed, examples of radical innovations are all around us, many spawning entirely undreamt of industries of their own. The Internet, eBay, Google, Facebook, Twitter, genetic sequencing, cell phones, nanotech, and iPods are all examples of innovation at work. A whole new vocabulary is being written as these products and analytic tools are snapped up by eager consumers around the world. But not one of them has emerged from a closed society.
Which Chinese innovations of the last twenty years have grabbed global branding attention, for instance? The question answers itself. Open societies, it emerges , have an economic value that creates entirely new industries employing hundreds of thousands, even millions of people worldwide, in jobs people just a few years previously had no earlier conception of . Just think of the diversity of jobs created directly and indirectly by the cell phone industry, for instance. They all, in various ways, have contributed to rising standards of living, despite complaints of information overload. And in an era acutely aware of limited natural resources, there is no resource as infinitely renewable as innovation, the product of the open, freed and ever- curious human mind.
Countries such as South Korea and Singapore, two of the favoured Far East "dragons" so admired until very recently for their rapid growth rates, have become increasingly aware of this emerging constraint on their own growth prospects into the future. In Singapore, for instance, questions are being asked at the highest level why in a country with some of the best science and maths school outcomes in the world, far superior to the products of United States (US) schooling, the rate of innovation is so much lower than in the US. A simple examination of the number of internationally recognised patent rated by country bears out the truth of the observation. The US currently files six times the number of international patents the Chinese do. It also adds the further irony that while it might seem clever to produce cheap knock off copies of the inventions of other societies, in the long run this path is a dead end. Moreover, another feature of free societies, the rule of law, emerges as a vital component of innovation in industry, because it protects patent rights.
There is another problem, and it is specific to formerly colonised societies that impede innovation. It is perhaps best summarised in Prof David Landes' seminal work, The Wealth and Poverty of Nations. There he argues that "nothing is more dilutive to drive and innovation than a sense of entitlement...which fatally erodes ' the need to learn and do'". Combine that with steps towards a more closed society and all the good intentions of the technocrats are undone. We have indeed met the enemy, and he is us, as Pogo said.
From an entirely different angle, that of Arab societies comes another indicator of the link between intellectual and artistic freedoms in democracies and innovation in industry. A United Nations Development Programme (UNDP) study ("The Arab Knowledge Report", UNDP, Oct.2009) reinforces the argument. Stating that knowledge, freedom and development are inextricably interlinked, the Report attributes the poor economic development indices of many Arab societies to the absence of democracy in those countries. It states that "freedom of thought, expression and political participation are primary components of the enabling environment that contribute to the enhancement of knowledge performance" and higher levels of economic growth.
Which way will South Africa move in the next few years? In the direction of authoritarian state capitalism or that advocated by the UNDP? Whatever is ultimately decided a move towards closing off freedoms and access to information will have economic costs in terms of growth and jobs forfeited in the future.
It is interesting in this regard that other African countries are eclipsing South Africa in terms of the free flow of information. While an ineffectual ICASA attempts the Solomonic and interminable task of adjudication between rival elites claiming preferential access to the right to supply information, Kenya has this year ensured affordable access for its citizens to the global broadband network. This brings connectivity, television and voice communication to its citizens in a public private partnership that will help create the enabling environment for innovation in that country. It is something South Africa is apparently unable or unwilling to do. We will pay the price.
(Note: This article appeared as a Business Day op ed, 27/1/11)
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