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Bye-bye, Miss American Pie
It is all very well to talk about regulation and responsibility, but we should not lose sight of the importance of growth. Nor its ingredients.
by Douglas Worth, Secretary-General, Business and Industry Advisory Committee to the OECD Business and Industry Advisory Committee (BIAC)
"Bye-bye, Miss American Pie" may be how critics see the woes of the US economy right now, but was the longest boom in recent history really just pie in the sky? Pie can be confused with motherliness and apples and its homely connotations may be a clue to why politicians are so fond of wanting to slice it up and share it around. Indeed, ugly battles are fought in legislatures all over the world regarding what public priorities should receive the largest pieces.
The pie can be an unhelpful metaphor because it is essentially limited to a fixed-size dish. Yet, my government friends, my anxious prime ministers, remember this: the pie can be grown. Everything that governments do should be aimed at increasing the size of the pie. Let's call it economic growth. It's essential. Without it, the number of funded public priorities will go down and the number of hungry mouths will not. If someone comes to you and says, "hey, we've got to slow down economic activity and sacrifice some growth for this priority or that priority", say no.
Not that I think you have not got the message. After all, the work of the OECD, IMF and the like already emphasises the building of frameworks and warns against protectionism and industrial policy meddling. But, no sooner do we leave ambitious pie-growing meetings in Lisbon and Kananaskis than we hear calls for stepping up regulatory grip and government intervention in the name of progress. The prize is a growing pie, so keep your eye on it.
Growing the pie is largely a matter of using market forces to expand product and service offerings in such a fashion that existing markets are not just enlarged but new markets are created. Personal computers, cell phones, Internet auctions are all expansions of existing markets, but the technologies and operational innovations that underpin them have enabled entrepreneurs to offer services and create products never previously contemplated.
Ah yes, sounds familiar, you may say, a recipe for more dot.com bubbles and unworkable business plans. But I would caution you not to underestimate those who failed the first time around. Successful invention is the result of persistent failure. Never have we seen so many inventing at the same time. Those bright, well-educated entrepreneurs who took a fall in the information technology downturn will pop up again. Many of them will invent alone or join larger firms and exploit the potential of their new enabling technologies.
Now remember, in this endeavour you will find yourselves working closely with private sector chefs. After all, that's the real economy of shared responsibility. Indeed, the discipline of the kitchen is a common set of principles or guidelines, including OECD Guidelines on Multinational Enterprises, between the public and private sectors that both will apply to the whole pie. Let's call it sustainable cookery. We must find ways to maximise broad distribution of the pie with as many bites as possible for as many people as possible. And we must achieve all of this without wearing down the kitchen. This is not accomplished by miracles but master chefs.
Even master chefs have to work together, in trust, keeping a close eye on the ingredients so that nothing unhealthy or unsavoury is added by either side. The market will eventually punish any misdeed, of course. It always does. The environment will punish excess too. But we should never let it go that far.
Governments should get back to the basic ingredients in the mix. Nurture the expansion of your capital markets. Let domestic and international funds mingle. Shake up your educational establishment to provide the required skills and better prepare students for today's jobs. Shorten the bureaucratic time between innovation and the marketplace and don't let fresh ideas go stale. Make it easier to create, and terminate, a business.
Make sure that your recipe is clear. This means a single government vision and programme. If your ministers each require a different sized oven, demand that the temperature or ingredients be adjusted, otherwise you will just have a messy kitchen without the growth. At the end of the day, it's thousands of private sector players that you are asking to be the bakers, and they are all customers, suppliers, shareholders, creditors and consumers.
Don't get in the way of competition; foster it. Make it possible for your bakers to scan the world for ingredients. This lowers costs and heightens quality, with strong multiplier effects that will give consistency to the whole pie.
Lastly, please, as master chef, do not restrict the ingredients to the familiar and comfortable and overlook new possibilities or experiments. Change is yeast, and you will have to exercise your leadership skills to the maximum to push the timid forward and the obstructive back.
If you do all this, we can all look forward to the chime of millions of oven timers as the global pie rises.