Windows of Opportunity: How Nations Create Wealth

by David Sainsbury

Is neoclassical economics dead? Why have the biggest industrial economies stagnated since the financial crisis? Is the competitive threat from China a tired metaphor or a genuine danger to our standard of living? Lord David Sainsbury draws on his experience in business and government to assemble the evidence and comes to some startling conclusions. In Windows of Opportunity, he argues that economic growth comes not as a steady process, but as a series of jumps, based on investment in high value-added firms. Because these firms are engaged in winner-takes-all competition, rapid growth in one country can indeed come at the expense of growth in another, contrary to the standard models. He suggests a new theory of growth and development, with a role for government in 'picking winners' at the level of technologies and industries rather than individual firms. With the role of industrial policy at the centre of the Brexit debate, but a significant intellectual gap in setting out what that policy should be, this book could not be more timely.

Genres: Economics, Nonfiction

297 pages, Kindle Edition

Published February 27, 2020

Reviews

[Brad Balderson · Rating 5 out of 5]

This was an incredibly fascinating read, which to me explained many aspects of macroeconomics which were previously obscure. What I liked most was the clear causal line of reasoning in terms of how certain conditions lead to increased innovation, and the role of government in supporting those conditions.

In particular, I thought the story of the Taiwanese government purposely setting up a scientific research park and making an active effort of sending Taiwanese overseas for training in the US and subsequently incentivising back to this park leading to rapid innovation incredibly interesting.

I also really liked the idea of high per-capita jobs, I.e. jobs where each individual can produce huge amounts of productivity per hour worked, and how different countries are really competing for jobs in these particular sectors in order for their country to build wealth. He makes a strong case that this is the reason why manufacturing is so important for breeding prosperity; it just adds so much value relative to the time people have to work.

The other important aspect of the ‘production/capability’ theory is that firms need to create a competitive advantage in order to defend their economic niche. The best way to do this is to innovate and develop proprietary technology and management practices that is extremely difficult to replicate in a short period of time, and thus securing that firms economic niche at least long enough for it to innovate yet further so the competition can never catch up.

There were a few other interesting ideas such as the prior skills of the workforce pre-qualifying them to take advantage of certain market opportunities that might open-up due to a similarity between the skills of a once dominant part of the economy being transferred easily to a new emerging industry.

In terms of the specific things government can do to help firms maintain their economic niche, David suggests the following based on examination of other countries who have developed rapidly:

* Create a clear plan on what industries/ sectors to aim for dominance in, then invest funding toward that in terms of scientific research (both applied and general), and also allocate money to help support firm R&D, and build infrastructure to help universities and firms to work together to build capability. Importantly, Sainsbury emphasises the government should not back individual firms, but rather focus on particular areas of industry and let the strongest firms emerge naturally in a free-market manner.

* Create a clear system of qualifications in unison with industry and universities so that there is alignment between the skills industry needs and the skills that are developed in university. This will also help alleviate under employment issues and lack of skilled workers. Sainsbury also makes several other reasonable suggestions along this line, such as creating purely applied technical research and training organisations, and also a good career advice system for young people.

* Research directed at building technological capability that is not yet developed enough to be invested in by industry; he makes a strong case for this in the example of Apple, which combined several technologies that were all developed through public funds via ARPA, and organisation which strategically allocated R&D funding with the purpose of developing new technological capability for the army.

I’m so glad I found this book, it provided a lot of the answers I had been seeking in terms of understanding innovation, and was extremely reasonable, well-written, and above all it was very impartial and scientific, in the sense that the author gives concrete examples & data from which he derives his ideas. I think this will help me a lot in the future when evaluating future countries to work in and whether the conditions are ripe for innovation, clearly a useful thinking tool to have when investing and considering where one might consider seeding a startup.

[Simon Jewell · Rating 3 out of 5]

I didn’t like this. I didn’t think it was a ‘good read’. The author’s aims are important. But he is fond of abstractions, and sometimes abstractions of abstractions. Unfortunately, these conceal the theory he hopes we will accept as a true. Consequently I was left unsure that he had laid down a good foundation on which to build a crucially important national strategic plan. Indeed, I think there’s a serious risk that he’s mistaken an unpredictable complex adaptive system that is our global economy for a nice simple deterministic one with a few well labelled levers suitable for inattentive blond haired arts grad politicians to operate.

[Sean Daly · Rating 5 out of 5]

Interesting twist on traditional economic growth analysis, focusing on the importance of innovation.

The book goes through a number of current and historical examples as well as outlining what are the measures Government can take to facilitate innovation.

Fascinating read, which I thoroughly enjoyed.