Howard's End: What The Innovators Are Up Against

As our Innovation Conference kicks off in Christchurch today, news comes out of Britain that one of its icon innovators, who runs a private company valued at more than a NZD $1 billion, is joining the industrial exodus to Asia. Maree Howard writes.

When he created the wheel-less wheelbarrow and went on to invent the bagless vacuum cleaner, James Dyson became an icon of innovative Britain.

His name has become a brand which is imprinted on all of the eight million Dyson bagless vacuum cleaners his company sold since 1993.

Now, though, Dyson has assumed another persona. Having said he would never abandon the land that nutured him, Dyson has announced that he plans to close an assembly line and shift production of all his vacuum cleaners to the cheaper labour markets of Asia.

Saving payroll and other costs, the move will eliminate 800 jobs at his six-year old plant near Malmesbury 160 kilometres west of London.

"I put $40 million pounds of my money into this business to try and make manufacturing work here," Dyson said. " But I have to regard the law of economics. If we are to survive as a business, we have to go where manufacturing is economical. I am not betraying anybody."

Last year, manufacturing in Britain shed 150,000 jobs as its output shrank by 5.4% and its share of national economic activity fell below 20%. By contrast service industries, such as banking, restaurants and call centres, added almost 230,000 jobs.

Britain, once labelled by Napoleon as a nation of shopkeepers, has now become a nation of shoppers with consumer spending accounting for 60% of the economy.

Manufacturers are arguing that the decline of their businesses is so advanced that it may be irreparable, leaving the country perilously dependent on a fragile service economy. Some say their industries have already reached sub-critical mass from which they cannot recover.

Many are going or have gone to Asia.

Asia does not operate as a marketplace in the accepted term. The product it markets is labour - or more specifically, cheap labour, preferably cheap female labour.

Strictly speaking, Asian countries do not export electronics - it is mainly American, European or Japanese assembly plants located in Asia, which actually do the exporting.

Asia's cut comes from the cheap labour it supplies to these corporations and from outsourcing contracts awarded by the multinational corporations to local firms.

In order to remain cost effective, Asian countries also promote migrant labour. The countries importing the migrant labourers do so in order to maintain low wages which attracts foreign investors, while those countries which are exporting their population, do so in order to alleviate the poverty back home.

For example, in Malaysia there are about 700,000 foreign workers plus illegal immigrants, while in Singapore there are 750,000 registered foreign workers.

More than 2,000 Filipino's leave their country every day for overseas jobs, due to the lack of jobs in their home country.

With exports to the U.S. - the importer of last resort - collapsing throughout Asia, many countries are facing a corresponding collapse in remittances sent home by the millions of overseas contract workers.

In the Philippines last year, total remittances were down to $5.5 billion, way below the $6-8 billion of previous years.

There are reports coming out of Malaysia that because of U.S. export markets drying-up, there are plans to send 300,000 foreign workers home in order to free up jobs for the local population. This is on top of the more than 100,000 deported as at November 2001.

The Malaysian Trade Union Congress, which has half a million members, called on the private sector to freeze the intake of foreign workers. About $1.3 billion is repatriated from Malaysia by foreign workers each year.

Jakarta, in Indonesia, is about to introduce new laws to prevent poverty-stricken villagers from across the archipelago from moving to the capital. It receives around 250,000 newcomers each year.

The current approach of sending cheap labourers home, to free-up fast vanishing, barely decent jobs for locals is a solution that solves nothing.

What is needed, however, is vast amounts of capital equipment in order to increase the value of labour rather than the pure free-market approach of finding even cheaper labour from countries with large populations such as Bangladesh or Indonesia.

This is the current environment in which our companies must compete. Those attending the Innovation Conference in Christchurch had better be able to innovate.

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