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I have a huge personal interest in the emerging economies, and it is a great joy to be able to speak here tonight. Many years ago, I ran an educational charity giving away new medical textbooks throughout eastern Europe during and after the communist period, and it has been a particular delight to hear the expertise displayed by
my hon. Friends the Members for South Thanet (Laura Sandys) and for Reading West (Alok Sharma) in their excellent maiden speeches.
I was in eastern Europe at a time when civil society was the subject of constant political oppression. Economic activity was shackled by commissars and petty regulation, and industry was funded by an open chequebook from Government. The result was colossal debt and economic stagnation. How very different from the situation that faces the UK today.
I know that every Member of this House will join me in saying that it is the greatest honour of all to be chosen to sit in this august Chamber; to have a share, however small, in the supreme sovereign authority in this country; and to walk in these hallowed halls and corridors, as so many extraordinary men and women have done before us. First impressions are not always so favourable; one thinks of Mark Twain, who said-I hope that the House will forgive my accent-"When I first came to Memphis, I found men drinking and gambling, and open prostitution in the streets. It was no place for a Presbyterian-and I did not long remain one." As for me, I enter this House as I hope I will remain-filled with a sense of due reverence and due responsibility.
I feel doubly privileged, in that I stand here as one of two tribunes for the people of Herefordshire. Truly, Herefordshire is a glorious county, known throughout the world for the quality of its cider, its beef and its soldiers. Such is its beauty that it has been only slightly disfigured by a recent association with the noble Lord Mandelson, who has added "of Foy in the county of Herefordshire" to an already rather extensive title. I alert the Member for Hartlepool (Mr Wright) to that unfortunate precedent. Alas, we still look in vain for the tidal wave of public subsidy that usually accompanies Lord Mandelson wherever he goes.
My constituency stretches from the Black mountains in the west to the Forest of Dean. It encompasses the aptly named Golden valley; the gorgeous Monnow and Wye valleys; and Hereford itself, with its magnificent cathedral and Mappa Mundi. It has apple orchards, lovely churchyards, fine, rolling arable land, wildlife and pasture, stretching all the way down to Ross-on-Wye and the spectacular rock of Symonds Yat.
I am not, in fact, the first Norman to be returned to Parliament from Herefordshire; that honour goes to its very earliest representatives, Rogerus le Rus and Ricardus le Brut, who were summoned to meet at Westminster on 15 July 1290, in the reign of Edward I, barely 200 years after the Norman conquest-the first Norman conquest, that is. At the time, Herefordshire was regarded as the farthest outpost of western civilisation-a status which, some Herefordians would argue, it retains to this day.
South Herefordshire has always been well served by its MPs, and I would like to pay particular tribute to my predecessor Paul Keetch, a Herefordian born and bred, who built up a reputation over 13 years as a fine constituency MP. Hereford city reputedly has the largest container of alcoholic beverage in the world-I should say, outside the Palace of Westminster-at Bulmers, and Paul has worked very hard over many years to protect and support the cider industry, most recently against the ill-advised depredations of the cider duty. I should also like to pay tribute to Sir Colin Shepherd before him, whom many hon. Members will recall for
his 23 years of dedicated service to this House. He and his wife, Lady Lou, have been tireless in their support of the county and of its newest MP.
But Herefordshire is not, or not yet, a garden of Eden. On the contrary, it has many social and economic problems that demand vigorous public action. Like other rural areas, it has not been at the top of the Government's agenda in recent years, to say the least. On the contrary, our schools are the third worst-funded in the UK. Local wages are very low. Farmers struggle with the many inadequacies of the Department for Environment, Food and Rural Affairs. Young people lack decent leisure facilities. The very idea of a functional broadband connection, or even of a decent mobile telephone signal, has yet to be entertained in many parts of my county, and Hereford, a lovely medieval city that received its royal charter in 1189, is being strangled by traffic. Those, and greater support for higher education in the county, will be among my personal priorities as the new MP.
However, we are not sent to this House only to represent our constituents; we are also sent here to play a role in the wider governance of this country. The new Government have made a superb early start in opening up sources of data about spending across the public sector. But what matters is not merely what we think about, but how we think about it. Our task is to remedy not just a colossal failure of governance over the past 13 years, but a colossal failure of thought. Politicians are generally nervous about talking about abstract ideas. In the words of the late great Ernie Bevin-here I will not attempt an accent-"Open up that there Pandora's Box, and who knows what Trojan 'orses won't jump out of it." But of course to dismiss ideas is itself to be ruled by an idea. Ideas are always in charge. So it is important-nay, vital-to choose the right ones.
Now, the idea of revolution is never dear to a conservative, but even Edmund Burke would agree that we need a revolution in how we think about economics in Government. Over the past two decades the British Government have become steeped in a 1970s textbook caricature-a view in which markets are always efficient, prices reflect perfect information, and institutions are nowhere to be found. One would be tempted to call such a view neo-liberal, were we not in a time of coalition government.
Worse than that, the deep assumption remains that human beings are purely economic, rather than social, animals. This dismal gospel regards the human world as static, not dynamic-as a world of fixed social engineering, not one of creation, discovery and competition. In policy terms, this textbook economics takes power away from local people. It encourages centralisation and top-down meddling. It pushes us towards an inefficient, inhumane and factory-style view of public services. It is absurdly risk averse. In its apparent inevitability, it stifles public debate about other, more thoughtful approaches. Above all, it actively undermines the ideas of public service, public vocation and public duty-ideas which, I know, lie close to the heart of every Member of this House.
Now is the moment to re-examine these assumptions. Politics is not a subset of economics, and economics is not a subset of the financial sector. GDP growth is important-goodness knows that is true now-but so are flexibility, resilience and, above all, entrepreneurship
in our economy. We need a new economics in our Government, not the desiccated economic atomism of the old textbooks, and we need to see people for what they really are, as bundles of human capability, creative, dynamic and fizzing with imagination and potential.
If we do this, and only if we do this, we can revive our economy on a huge billow of human energy, one that is barely conceivable within our current conventional economic models, and we can help to restore the trust and the mutual respect that our society so badly requires. It was that great-and rather conservative-economist, John Maynard Keynes, who once warned politicians not to be the slaves of some defunct economist. So let us all cry freedom and move on.
John Howell (Henley) (Con): Let me start by thanking all the hon. Members who made maiden speeches tonight. I suspect that when I came into the House after a by-election colleagues breathed a sigh of relief at the fact that they had only one maiden speech to concentrate on. Tonight we have had three, but they have been three excellent speeches. I particularly welcome a fellow central and east European cold warrior to the Conservative Benches, particularly in the context of this debate.
It is nice, too, to return to a subject that I left professionally almost a decade ago, when I was the author of the Ernst and Young emerging markets reports. It was a monthly attempt to score key markets for attractiveness, principally from the point of view of foreign direct investment. The big emerging markets of the day were in eastern Europe, which seem still to be the big emerging markets of today, as if nothing had happened. Many are still on the list, despite being members of the European Union. Then, as now, the big enigma was the role of Russia.
In the intervening decade there seems to have been in the field a long march of taxonomists, who have sought to subdivide emerging markets almost ad infinitum. The Financial Times divides them into advanced and secondary emerging markets, based on national income. Morgan Stanley divides them into developed, emerging and what it calls frontier markets. There is a core group of markets on which everyone agrees, with a few others, such as Saudi Arabia, around the edges.
I am not sure that such taxonomy is of any use. What we are still dealing with are industrialising countries with large growth and large potential, accompanied by equally large risk and insecurity. Most of that taxonomy, anyway, is capital markets-driven, but a very different picture often emerges if one looks at those economies not as capital markets, but as markets for foreign direct investment or for export. Indeed, when for a brief while I presented business programmes for BBC World Service television, I visited more emerging countries' stock exchanges than I care to remember. Undoubtedly the smallest but one of the most enthusiastic was that in Mongolia, but we should remember that the Mongolian stock exchange is not there to generate capital for its companies; it is there as a social device for the equitable distribution of newly privatised assets, most of those by means of mass or voucher privatisation, which the UK has sponsored. Inevitably, those are high-risk procedures, but experienced capital-market players can largely cope with such risks.
A good question is how we define the difference between emerging economies and emerging markets. We are talking about the attractiveness of such economies in business terms, with their export-led focus, use of agents, joint ventures and, indeed, direct investments. In my time as a partner at Ernst and Young, I helped many small and medium-sized enterprises into emerging markets, but we have to be realistic, because one of the biggest constraints on them is the amount of time involved in entering such markets.
Sadly, the majority of SMEs that came to me for advice came when they were on their last legs in the UK-their markets having disappeared for one reason or another-and they wanted an emerging market and an emerging economy as a means of getting them out of their problems. I am not saying that that cannot be done; it can. The company that I set up with a business partner did so, but it meant that one of us was always on the road, particularly as our first major project was to produce what I can only describe as a pop video of Manmohan Singh, to be shown at an international conference. It was incredibly difficult, because the essential humility of the man meant that his character did not fit into the pop video class. The business meant having to be away for quite a long time and, in a business with two principals, one can imagine the difficulties that arose.
We need to take a balanced view of individual countries, and to make an assessment that some will need more help than others and more encouragement from Government if they are to export. There is a lot of talk about the emerging economies that are in fashion today and out of fashion tomorrow, but not all of that is based on the objective, analytical criteria of companies such as Morgan Stanley; much of it is based on gut feeling.
We spoke earlier about one barrier being the difficulty of language, but one that is frequently overlooked is the difficulty of culture. I remember how, at an INSEAD seminar, the most distinguished cultural scientist on the matter, Fons Trompenaars, put forward his view on cultures and how that can help people assess them and do business. His view is based on a number of individual dilemmas that he put to about 15,000 people throughout the world.
The most famous is known as the dilemma of the car and the pedestrian. Essentially, we are in a car driven by a friend who exceeds the speed limit and knocks down a pedestrian. On the question of the driver's expectation that we will lie for him, the worst place in the world, according to Fons Trompenaars, is Canada, where 96% of people would shop their friends to the police. Emerging markets, however, are some of the best places to have friends: in South Korea, 26% would shop their friends; in Russia, 42% would; and in China, the figure is 48%.
Those responses should not be taken literally, but they are indicative of how much obligations to the state outweigh obligations to individuals. [ Interruption. ] The Minister of State, Foreign and Commonwealth Office, the hon. Member for Taunton Deane (Mr Browne) laughs, but Britons figure at 90% on that scale, so the UK is not too good for friendship. Interestingly, however, those questioned in the UK asked how seriously the pedestrian was hurt. If they were more seriously hurt, there was more of an obligation to the state than to the
individual. One has only to cross the channel to obtain completely the opposite result, where the more the pedestrian is hurt, the more the driver obtains our assistance in lying, because their punishment would be more severe. That may seem academic, but I recommend the work of Fons Trompenaars to hon. Members; it provides a useful, pragmatic framework for considering emerging markets. For example, it draws out the frequency with which developed countries depend on legal agreements and big contracts.
Gordon Birtwistle: My concern, which the hon. Gentleman may well be able to answer, is about the fact that the emerging markets have now taken away our heavy industry-shipbuilding, steel and things of that nature. How do you see this country fighting back against the emerging markets, with jobs of the future? I accept that we have advanced engineering in aerospace and other such sectors, but many residents of the country do not have the skills to be involved in that type of industry. How do you see the UK fighting back against the emerging markets in respect of less skilled jobs?
John Howell: I thank the hon. Gentleman for his comments. Clearly, British industry still has a big role to play in emerging markets, but we need to be realistic about in which markets it can play that role, what assistance is needed and what size companies can play in which markets.
The dilemma that I was discussing draws out the frequency with which developed countries depend on legal agreements, big contracts and lawyers, and how relationships tend to get ignored. Emerging markets, however, depend more on the relationships that are built up; the handshake comes first, rather than the contract-hence the amount of time required to develop business in them. That is important not only for foreign direct investment or the export trade but for capital markets and understanding the role of supervisory regimes-the structure of those market institutions and how the regimes are approached. The point is also a crucial piece of understanding about how such countries will perform in international forums. One thinks immediately of the expectation of honouring OECD template agreements, which are the lowest common denominator but often do not fit within the cultures of the countries that we are talking about.
I respectfully suggest to Ministers that the issue also appears in diplomacy. When I was leading a delegation of British business to a G7 meeting, I remember being able, because I had the benefit of such an understanding of cultures, to get the Hungarians and French on side with us Brits to overturn an American proposal for Russia to simplify bureaucracy by introducing a new ministry. The proposal was quickly defeated; the Hungarians got on board and the French commented that they had never previously recognised that a Brit could understand la psychologie.
That provides a link to another issue as well. Part of the reason why some emerging markets never fully emerge is their lack of understanding of the fact that economics and politics cannot be separated. It is difficult
to find an emerging economy that is not also an emerging or problematic political system. Russia is the principal example of that-bedevilled by an incomplete set of reforms that left politics behind economics.
The know-how fund was one of the institutions set up by the previous Conservative Government, who appreciated that market economics needed to go hand in hand with democracy. Their well placed £100 million or so laid the ground for much of eastern Europe to come into the European Union. The know-how fund was aimed not at Governments but at providing assistance to NGOs to build capacity on the ground. That is still a good approach. Sadly, however, the know-how fund was not allowed to finish its work in Russia.
The shadow Minister, the hon. Member for Rhondda (Chris Bryant), took the biscuit when he complained about the position in which Russia was left, given that it was his Government who abandoned the know-how fund, turning it over to the European Union as part of a multilateral package. They also abandoned the east European trade council and the British Association for Central and Eastern Europe. In a debate in 2008, the hon. Member for Birmingham, Edgbaston (Ms Stuart) pointed out that since 1991 BACEE, a small organisation with a minuscule grant in aid from the Foreign Office, had had more than 5,000 politicians, civil servants, judges, journalists and business people from countries of central and eastern Europe participating in its programmes as alumni. That is the way to build up understanding of the politics in emerging market countries.
Unfortunately, when the know-how fund was delivered to the European Union, chaos resulted, with companies turning up in countries to be told that the same contract had been let twice. We also had the ridiculous situation of trying to bring into emerging markets in central and eastern Europe an Italian system of accounting, a French system of law, and an English system of stock exchange. It is no wonder that some of these emerging markets failed to emerge fully during the course of their transition.
Over the years, the role of UK Trade & Investment in this field has swung between a focus on geography and a focus on sectors. During that time, I have had a role in swinging it towards sectors, but I appreciate that it swings back again. An emphasis on sectors is fine provided that one recognises that some markets require more hand-holding than others. I praise UKTI for its services, which have been excellent.
As regards the transition in future, we will need to see markets as separate countries. The acronym, BRIC-Brazil, Russia, India and China-makes no sense in terms of relationships, just as a massive grouping. The transition should be acknowledged both in business and in aid. As regards aid, we must recognise that while there is a move away from providing aid to countries such as India, China and Russia, which I welcome, there is a difference between providing aid and technical assistance. Even after one has moved beyond the trade part, there is still a need to recognise that many of those countries still do not have fully developed local democratic institutions, civil society groups, media or, indeed, enterprise that is fully reflective of a market economy and democracy. I urge Ministers to look carefully at that to ensure that we do not throw the baby out with the bathwater but continue the process, looking back at the mistake that was made in relation to Russia, where, if we had continued our focus, we could have done a lot
more to ensure that there was the continuity needed to bring that economy fully out of its emerging status to play its full role in the world.
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