Introducing….Hamilton – The Industrial Strategy

Today’s science speech by the Prime Minister shows how much she has in common with the great Alexander Hamilton – though she has not got her own musical yet.

Hamilton’s great rival Jefferson had a picture of America as sturdy yeoman farmers enjoying their liberties under a minimalist Government. Hamilton instead saw the Federal Government turning America into a great power by promoting economic growth and backing strategic missions such as westward expansion. Hidden behind the Jeffersonian rhetoric America is actually a Hamiltonian state. They set big ambitious goals from Nixon’s War on Cancer to Trump’s aim of getting to Mars. America’s security strategy is that they should have a leading position in every significant global technology – and the US military is behind many of today’s key commercial technologies. One reason why the EU developed the Galileo network of satellites was that GPS is ultimately under US military control and European states were not absolutely confident they could rely on it in a crisis.

Not every technology which American federal agencies invest in works, and they do not meet every challenge they set themselves, but they know it is worth the risk. Hamilton learnt from observing the rise of the British Empire that it is a crucial role of Government to take risks too great for individuals or companies to bear. That is a crucial reason why governments fund science and R&D.

We used to do all this in the UK. But after the disasters of the 1970s we lost our nerve. We cut back the role of Government driving innovation and restricted it to promoting curiosity driven scientific research, expecting business to do the rest. The problem with this approach has been that public funding stopped long before the projects were commercially viable. We beat up on British firms for being risk adverse when in reality we were expecting companies to take far greater risks with new technologies than in America.

The Government’s Industrial Strategy shows all that is changing. Business Secretary Greg Clarke has identified four grand challenges – mobility, AI, clean energy, and healthy ageing – that Britain’s industrial strategy should be based around. Today the PM has gone further and identified specific missions, such as harnessing AI for medical diagnosis so that we spot cancer earlier, and give people more years of high quality independent life expectancy.

To tackle these grand challenges we will have to do better than we have for a generation in linking science, technology and entrepreneurship. This latest approach reflects the influence of Mariana Mazzucato with whom I co-chair our Commission on Mission-oriented Innovation and Industrial Strategy. And all this week at Resolution Foundation we will be hosting public discussions with Ministers and innovators aimed at fleshing out what we need to do to tackle the challenges.

These new initiatives are welcome – but they must not come at the expense of the core science budget. It would be terrible if the only way we could finance more applied science and innovation was at the expense of curiosity driven research. That is why the commitment to increasing R&D spend to 2.4 per cent of GDP is crucial – it means there will be more resources in total.

Another shift in resources for the government’s industrial strategy is that it covers both public and private spending, recognising that increased public spending on research crowds in private spend, rather than crowding it out. This marks a big change for the Treasury, which has stymied previous attempts at doing this by setting such a high ratio of private spend to public spend that there was not sufficient public resource to get any traction.

There are lessons for making this work. We need to keep on supporting the basics. So, for example, machine learning is at the heart of AI and that in turn depends on the power of Graphic Processing Units originally developed for the computer games industry. That is the kind of kit we need to invest in. We also need to keep backing general purpose technologies which do not neatly slot in to specific missions. We cannot forecast exactly how advances in say advanced materials or synthetic biology will be applied but we can be pretty sure they will play a major role in tackling the big challenges. And of course we must always be willing to promote the disruptive challengers not the incumbents.

Alexander Hamilton and Theresa May both understood how government can promote innovation. The missions she has set today show how it can boost the size of our economy. But more than that they offer the hope of boosting its quality as well – making it cleaner, healthier, and smarter.

The article was originally posted in The Times Red Box.