Innovation policy is increasingly important to British statecraft. The prime minister is on a mission to make the UK a “science and technology superpower” and the destination of choice for artificial intelligence developers. A new Advanced Research and Invention Agency – modelled on the legendary DARPA – has been launched. The previous chancellor, Jeremy Hunt, said he hoped to make the country the “next Silicon Valley”.
If one thing stands out, it’s how American this all sounds. Indeed with its “golden triangle” of universities in London, Oxford and Cambridge; its growing venture capital sector; and its many $1bn “unicorn” companies, Britain could claim to be a close cousin of the USA’s innovation machine. And yet our economic model also delivers stagnant incomes, punishing house prices, and some of the worst regional disparities in the developed world. Are we looking at the wrong place for inspiration?
❱ Innovation for the Masses: How to Share the Benefits of the High-Tech Economy
❱ Neil Lee
❱ University of California Press
Neil Lee’s new book, Innovation for the Masses: How to Share the Benefits of the High-Tech Economy, is therefore extremely timely. Lee is a professor of economic geography at LSE, and a respected voice on regional policy. His thesis is concise and effective. Technology-driven innovation is critical to improving living standards, he claims. But too many countries try to emulate a very specific Silicon Valley model of top-tier research universities and disruptive technology giants like Google and Meta. Reading this, I must confess I experienced vivid flashbacks to my time in Whitehall, having to describe a positive but not earth-shattering £100m R&D fund for Manchester, the West Midlands, and Glasgow as “replicating” Silicon Valley and Boston.
Lee argues this model has come with high levels of inequality, spiralling house prices, and divides between “superstar cities” and ex-industrial regions. In his words, “focusing on Silicon Valley alone has led us to conclude that a truly innovative economy comes at the price of high equality”. But governments can shape the contours of the innovation economy and ensure its benefits are more widely felt. To do this, Lee argues we should look beyond Palo Alto to places combining dynamic innovation economies with broad-based prosperity.
After briskly taking the reader through what innovation is and why it matters, Innovation for the Masses dives into four case studies: Switzerland, Austria, Taiwan and Sweden. All are productive, high-wage economies, and yet they have avoided the higher inequality and hollowing-out of the middle class seen by many of their peers.
Each one did this differently. Switzerland combines superb research universities and technology-rich industries with radically de-centralised governance and respected vocational colleges. Austria delivered big increases in private R&D by transforming “traditional” industries like steel. Taiwan fostered translational research institutes that spun out firms like the world-beating Taiwan Semiconductor Manufacturing Company, but experienced lower inequality than peers like Singapore. And Sweden successfully combined a thriving technology cluster in Stockholm with a redistributive welfare state. At the same time, there are common threads running through each. For example, they all have strong vocational systems, collaboration between unions and employers, knowledge institutions that care just as much about the diffusion of new technology as its generation, competent officials, and powerful local governments.
Lee is an academic, but this is an ideal book for policymakers. His argument and recommendations are compelling. The prose is crisp and often witty. He expertly explains the economic literature, but also cares about history and geography. He is not rose-tinted about his case studies, accepting that they all have limits and cannot be transplanted wholesale to another country, while setting out their practical lessons. It’s also clear that he has spoken to civil servants in these countries. For example, it turns out Swiss officials have little time for big bold technology “missions” that might grab officials elsewhere in the world, preferring incrementalism and the cultivation of niche industrial strengths.
For all its flaws, the Anglo-American model still generates discoveries – from the internet, to Covid vaccines, to DeepMind’s AlphaFold – that transform the world. I personally wonder if we would sacrifice something if we all decided to be more Austrian. But Lee makes a convincing argument that dynamism and greater equality are not at odds, and indeed are often mutually reinforcing. If Switzerland and Sweden manage it, why can’t we?
There are many pertinent lessons here for British policy makers, whether it is being less queasy about R&D as a tool of regional growth, prioritising the diffusion of innovation, or rebuilding the long-neglected vocational education system. It is exactly the kind of book I wish I’d had when I worked in government, and an excellent guide for those seeking inspiration for a better economic model.
Will Lord is head of government relations at the Aerospace Technology Institute. He was previously the lead on R&D policy in the government’s Levelling Up Taskforce, strategy lead at UK Research and Innovation, and a senior policy advisor at the Cities and Local Growth Unit