Embrace the wealth creators, but not the ones you might imagine

Small words cause such big divisions in the Labour party. Aspiration. Solidarity. Toughness.

These are the shibboleths for our ideological schisms, marking out apostates and believers. It’s rhetoric intended to communicate worldview.

‘Wealth creators’ is one such divisive term. Kendall, Burnham and Cooper, respectively, have said we should be ‘passionate’ about these ‘heroes’, who will be the ‘drivers of future growth’. No doubt they have in mind industrious professionals and shrewd self-employed workers. Frances O’Grady of the TUC counters that the real wealth creators are her members, toiling in the service and retail jobs of the zero-hour economy. Still others claim that ‘everyone’ is a wealth creator, and the phrase is therefore meaningless.

When it comes to the figures, it is undeniable that some are much more ‘creative’ than others. The people of West Inner London created £127,130 per year each, for instance, while those of the Isle of Anglesey created just £10,360 each. Should we embrace the former and spurn the latter? In fact, the only people who produce more wealth than the average UK citizen per year are those who live in London and Bristol.

Perhaps the creed of ‘wealth creators’ is grating to some because of its distinctly American ring, conjuring images of thrusting contestants from The Apprentice. But if it’s wealth creators we’re looking for, the USA is surely a good place to start. Look closely, however, and you’ll find that just as in the UK, wealth creation mostly a function of where people live. ‘Wealth creators’ are types of places, not types of people.

These wealth-creating places are ‘innovation clusters’, dense regional networks of universities, markets, highly-skilled workforces, infrastructure, and, crucially, engaged local governments, according to the Harvard economist Edward Glaeser and his colleagues. Innovation clusters play a key role in creating wealth, by turning scientific research into commercial products effectively. It’s their output that means the US leads the way in commercialising research in everything from genes to GPS.

The same is not true for Britain. We produce 15.9% of the most highly-cited scientific articles with just 0.9% of the world’s population. But when it comes to making the leap from lab to market, the UK suffers from what the House of Commons Science and Technology Committee calls the ‘valley of death’. Wonder material Graphene was invented at Manchester University – but by 2013, South Korea alone had 1,200 patents on it. We had 50. In the US, Silicon Valley is the ‘wealth creator’ for half of California. Our Silicon Roundabout, despite some excellent firms, is still not much bigger than said roundabout.

Superstition towards industrial policy during the previous two decades has left the economy in a typically British fudge combining the worst of both worlds. One the one hand, our ‘flexible’ labour market lacks the security and broad ownership of Scandinavia or Germany. On the other, the ability to respond rapidly to technological change with new jobs and new firms isn’t much good if new science is rarely commercialised.

It’s a shame, as the prizes from embracing our wealth-creating innovation clusters could be great. As well as Manchester’s graphene development, Britain is home to world-leading research in driverless cars, artificial intelligence, and space plane engines. The challenge is turning them into world-leading products.

Labour, under Gordon Brown, made a start by conceiving of the Technology Catapult centres, of which 9 are now in operation. We should have built on this – but instead we let Osborne steal the baton with the Northern Powerhouse and skills devolution. If we want to be the party of innovation, manufacturing, and ‘white heat’ once again, we must find and embrace our wealth creators. Just don’t expect to find individuals.