Cashing in on the Chips: The view from 1979

“The past is a foreign place. They do things differently there”. On October 3rd reference was made to “Cashing in on the Chips”, published in 1979, the paper which led, inter alia, to the Micros in Schools Programme – a computer in every secondary school by 1982. I thought it might be helpful to scan the text and make it available on-line for those interested to see the view from the past.

Lest readers laugh after reading the section on “What the chips can do for us”, I would remind them that the term “AI” was already over a decade old in 1979, having been coined to get extra funding for a programme of research into algorithmic computing. Most is still “rules based”, albeit often using “machine learning” to derive rules which no human understands. I was taught (in the 70’s) to treat that process with extreme caution. I watch the ongoing debate today.

The paper was written to stimulate discussion during the run up to the 1979 General Election but the Government collapsed and it was published after the election with a double print run. It sold out and was unusual among political pamphlets in requiring an immediate reprint.

Does the key message still hold good? “The threat to jobs is a fashionable topic for speculation but, by comparison, it is a non-problem.  Already we have chronic labour shortages side by side with rising unemployment. It is clear that our real problem is in redeploying people from one job to another. To date, automation has always created more new jobs than it has destroyed. Our problem is that we seem to have lost the ability to learn new skills.”

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CASHING IN ON THE CHIPS: A policy for exploiting the semiconductor revolution: Conservative Political Centre: LONDON First Published May 1979

In common with other CPC Publications, this pamphlet is a personal contribution by the author to discussion and not an official Party pronouncement.

CPC No. 631-813-639  ISBN 0 85070 633 5  Published by the Conservative Political Centre, 32 Smith Square, London SWIP 3HH and printed by The Reprographic Centre, Crawley, Sussex.

Contents:

1. Introduction: Hobson’s choice

Why Britain needs the semiconductor revolution

What the chips can do for us

The employment balance sheet

The scale of change

The obstacles to change

2. Removing the obstacles to change

The fear of unemployment

Freedom or movement

Vocational education – the next generation

The Post Office: luddite or leader?

3. Minimising the risks of change

Small business creation

Public sector purchasing policy

Rational job creation

4. The incentive to change

The technological brain drain

The social incentive

Taxation

5. Some social effects of the new technology

Twenty-four-hour services

The new reliability

The right to privacy

7. Conclusion
8. Principal recommendations

The author

1 . INTRODUCTION: HOBSON’S CHOICE

Why Britain needs the semiconductor revolution

If the ‘challenge of the chips’ is just another automation scare then Britain is in dire trouble. Our traditional industries are moving to the third world — shipbuilding has gone to Japan; car manufacture is moving to Korea, following boots and shoes; consumer electronics is moving to Taiwan. Unless  re-equip our industries for a new technology we can only compete with the Far East on cheap labour.

In ten years time, when North Sea oil peaks out, the price of energy will soar. Unless we condemn fresh generations to a revival or the coal-smoke pollution or the last century, we must drastically cut our energy consumption.

In twenty years time, as a result of the dramatic recent fall in the British birth rate, our labour force will start to shrink, while the population of senior citizens to be supported will be rising sharply. Unless we have come to make better use of our labour   Force, there will be no one to care for them.

For a century we have relied on the ‘invisible earnings’ of the City to balance our trade books. In real terms they are falling. The service earnings of our new tourist industry, in particular those or the professional ladies and casinos of Mayfair, have so   far made up the difference. A police source recently estimated the growth to be from under E100m. annual turnover to over E50Dm. in barely two years for Mayfair alone. But unless we turn the West End into the ‘Beirut’ of the Western world) and the City and East End into the world’s largest politically stable tax haven, we cannot rely on ‘invisible exports’ to keep us going.

The semiconductor revolution offers a way out of the multiple crises we face. New industries producing a generation of   energy- and la bour-saving devices can save us from growing old and cold in genteel, or sordid, poverty.

The threat to jobs is a fashionable topic for speculation but, by comparison, it is a non-problem.  Already we have chronic labour shortages side by side with rising unemployment. It is clear that our real problem is in redeploying people from one job to another. To date, automation has always created more new jobs than it has destroyed. Our problem is that we seem to have lost the ability to learn new skills. So the new jobs may be created in Germany and Japan, not England, Wales or Scotland.

Mr Callaghan’s £100m. on chip technology may have been a nice gesture spending your money to help the new industries which but for our tax laws and all-strangling bureaucracy, would need little help beyond an American-style public sector purchasing policy. However, it is far too little, applied wrongly. We face a new industrial revolution. The impact of the new technology will be as dramatic as that of steam power on rural England. The stress was traumatic but the patient survived. The social upheavals will be no less and no more, than those of early nineteenth century Britain. The real challenge is to make a much better job of easing the pain of transition than our forefathers, while doing just as well out of the benefits.

 What the chips can do for us

 Whether the new technology leads to enriched job prospects or lengthening dole queues depends not merely on whether the new jobs are created in Britain, as opposed to Japan or West Germany, but also on how we exploit it. If we use it to give dramatically improved products and services to customers at home and abroad, then changes in employment patterns on a scale not seen for decades will be called for. We shall then be able to provide on a mass scale the products or services the customer wants, when and where he wants them.

If, instead, we aim merely to give the same sporadically adequate service at less cost, then we face mass unemployment on a scale unseen since the 1880s and thus the risk of bloodshed, revolution and the ‘1984 state’ – and a worse fate thereafter.

In order to seize the opportunity for full employment and growth through improved customer satisfaction, it is vital to understand both the potential and the practical limitations of the new technology. The potential is finite. Its bounds were already known a quarter of a century ago when computers existed only in theory. The practical limitations are less certain but can be reasonably predicted for the next decade at least.

What is a chip and what can it do that is different?

A computer chip is a flat square of silicon, about a quarter of the size of a thumbnail, onto which has been printed an electronic logic circuit containing several thousand transistors and resistors. It is to conventional electronic circuitry what the spy’s microfilm is to the plans of the latest secret weapon; a cheap, accurate, infinitely reproducible copy. While, for technical reasons, it may be faster or more reliable than conventional circuitry, it is not inherently different. It is merely a piece of electronic circuitry capable of whatever its designer could specify. Stored-programme logic is merely the ability to store a set of instructions, for a piece of general-purpose control circuitry to obey on demand. If the reaction to an event cannot be spelled out in a rule book, or if the problem cannot be mathematically specified, then no computer yet designed nor any likely to be designed – can handle it.

The computer chip can never be capable of creative leaps of’ intuition, association or creativity. It cannot handle the problems of production, administration and social inter-action that require the specification or the rule book 10 to be cast aside. The buck for real decisions can never be passed to a mere machine. However, if the problem can be mathematically defined, if the rule book response is perfectly adequate, if the process is completely standard, then the machine already exists that can perform faster, more accurately and more reliably than man. And even if that machine is not already cheaper, it soon will be. What, then, will the impact be on employment?

The employment balance sheet

The problem has been defined as a threat to the jobs people want, leaving untouched those which no one wants. In production the ‘semi-skilled’ trades are at risk. The ‘low-paid apprenticeship-learned’ crafts and the unskilled or quickly-learned jobs are not. In the service industries the undemanding nine to five desk jobs, free from pressure and responsibility, are at risk. Nursing the imbecile and incontinent, cleaning the streets, or even personal contact with the customer, are not.

Which jobs are at risk?

Private sector:

Industrial – assembly line workers on electromechanically controlled devices, for example carburettors, timing systems, watches, thermostats, ticket machines, locks, sewing machines, weighing machines, telephone exchanges.

Services – 40 per cent of clerical and administrative staff, particularly in insurance, banking, building societies.

Public sector:

Industrial – most Post Office maintenance engineers, unless our obsolescent telecommunications system is completely overhauled to give a reliable, broad-band, digital electronic mail service (for example forty TV channels, plus meter readings and inter-active computer finks down every telephone wire.)

Services — up to two-thirds of all clerical and administrative staff.

Will more jobs be created than are lost?

Private sector:

Industrial – yes – assembly of computer-controlled car-tuning devices, light-sensitive lamp controls, a revival of made-to-measure clothing, medical care devices, information-handling devices (from pocket computer terminals to video recorders), ‘intelligent’ thermostats, locks, computerised ticket machines, etc., electronic mail switching and recording devices, etc.

Services – probably – provided the bulk or staff savings are used to provide service when and where the customer needs it —at weekends and in the evenings. Also in private information services; for example Viewdata, even while only on trial, has created 2,000 jobs.

Public sector:

Services – probably: given a massive switch from administration to services (for example fewer secretaries, more nurses: fewer clerks, more street cleaners) and a switch to provision of six days a week, twelve hours a day, face-to-face service to the general public.

Some jobs, often thought to be at risk, are not. At least, if they are, it is not because of the new technology. For instance, the computerised supermarket of tomorrow is unlikely to employ fewer staff. Reduced pilferage, more responsive restocking and active selling will enable the same number of staff to give better, cheaper and more profitable attention to the customer, because the computer will keep track of all stock movements, sales and administration, while providing itemised bills at faster checkouts.

Employment levels in the public transport system are unlikely to be affected. However, the dramatic cut in fare evasion and cash pilferage possible from computerised ticket control. and the improvements in service possible from automatic monitoring and rescheduling of vehicle movements, could transform the industry. From a shabby, sporadic, low-paid, low morale, declining service providing transport of last resort, it could become a reliable, efficient, rapid transit service relegating the car to the garage except when carrying heavy luggage on a touring holiday.

The problem is how to redeploy our labour force to meet the needs of the present, let alone the future. Each month 400,000 people change jobs in Britain: but from one building site to the next, one bank to another, Our problem is to retrain between three and five million workers into completely new skills, methods and patterns of work. We have, at most, a decade in which to do it. If we cannot succeed, our competitors can, and we will be left stranded on the sandbanks of history, a reminder {o others of a past way of life.

The scale of change

The production and commercial skills to exploit the new technology are in short supply. We have to retrain large numbers or workers and managers T we are to harness the new technology, But also we have to bring the new technology and the existing workt’orce to the sanic location.

The new technological élite “‘ill not move to the depressed and vandalised traditional industrial areas where they could organise new jobs and industries. The unemployed cannot move to where the jobs are, beca use they can’t get hornes there, and even if they could, they lack the skills in demand or don’t want the unskilled jobs vacant.

What unemployed ex-steelworker wants to move 100 niiles to be a male nurse in a Inental hospital? What electronics graduate wants to set up a stnall lock-up workshop in an area where it will be broken into once a month and his equimnent wrecked ?

Yet if we are not to grow old and cold, in dark poverty, we nuisl bring the workers and the work together, we Inust provide the services when and where the customers want them.

We must realise the scale or change necessary and we must have no illusions about the many obstacles, social and economic, as weft as technical, to change,

The obstacles to change

Mr Callaghan’s Government was obsessed with the idea of getting existing firms and organisations to adopt the new technology. This was misguided. They have too much capital invested in the old technology. Trade union organisers draw their funds from branches organised round the existing trades. The economic infrastructure is built around the existing trades. industrial zones. The councils drew their planning zones twenty and thirty years ago and cannot countenance developments that that affront them. Most Civil Service decision-makers never understood the old technology, let a}one the new. The insurance companies and pension funds, expected to finance the changes, are legally and morally obliged to be obsessed with security and so on.

Change in Britain in the last century or in America or Japan today is based on new firms and organisations growing alongside the old; fertilised by the decay, waste and stress of the dying industries.

The true obstacles are:

• the fear of unemployment which causes workers and managers to resist the idea of changing jobs or trades, or starting their own firm
• the actuarial expropriation which makes it so difficult to change jobs without abandoning accumulated pension rights, and thus chains staff to their existing employer
• the difficulty of learning new job skills vocational education has been neglected in favour of university and academic skills for so long
• the difficulty of moving home to where the work is, particularly for a council tenant or a man with children at school
• the planning, legal, fiscal and other obstacles designed to make it nearly impossible for anyone other than an obsessive, determined fanatic to start his own business.

Thus the factories of Silicon Valley in California are staffed with the British electronics graduates of the 1960s, our tax exiles mastermind the Japanese electronics sales drive into Europe  and the Germans recruit our industrial craftsmen with guaranteed housing, schooling and pensions.

2. REMOVING THE OBSTACLES

The fear of unemployment today

The fear of unemployment, despite a plethora of job vacancies is perfectly rational. Unless a similar job in the same town is readily available, the redundant worker faces the scrap-heap. The destruction of the private rented system means that he cannot move quickly to a new town in search of work.

The points and priority systems mean that it is easier for a German starting their own firm to get him a home in Dusseldorf than an English firm to get him a council house outside one of the new towns. Even home-owner, whose new employer will meet removal costs, condemns his children to the loss of a year’s education, while they readjust to the different methods of whatever new school he can afford {o buy a house near to.

If the worker sees his firm in trouble and decides to move early he will find that his ten years of pension contributions will buy him only two or three years, at best, of pension rights in his new job.

If the worker sees his trade in decline and decides he wants to learn a new one, he will find that the only evening classes on offer are basket weaving or car maintenance, as the old Victorian adult education system has been scrapped, supposedly unnecessary with every school leaver a potential university graduate. The TOPS scheme is a step in the right direction, but only a single step.

The twentieth century trade union luddite, in his full blooded opposition to the loss of any of his members’ jobs, is thus more rational than the politician who tells him to consider guaranteed housing, schooling and pensions. the new jobs elsewhere. Until those new jobs elsewhere are truly open to him, the worker is absolutely correct in believing that his rational self-interest often requires him to fight to the death to preserve his existing job – however antique the skill he has.

Therefore, we must reduce the barriers to redeployment if we are to expect anything other than machine-wrecking, sabotage and opposition to the new technology.

Freedom of movement

The improved transferability of pension rights is the first priority. It will enable the far-sighted and ambitious to move early. The government action needed is simply to require that firms use the same formula for calculating the transfer out of pension rights that they use for calculating the transfer in, and that the public sector also gives full transferability with private, The current actuarial expropriation of pension rights with the leaving employee discovering that ten years of pension rights with one company buys two years with another, is the most powerful single disincentive for the mature worker.

Bringing the legal minimum for redundancy payments up to the normal commercial level} and greatly improving the basic level of unemployment payments for those who cannot find a new job of any kind, will also act to remove much of the early instinctive opposition to change. However, cushioning unemployment is not a great help. It is far more useful for the redundant worker to go immediately on to a retraining course leading to a new job, arranged before his redundancy is confirmed. The funds allocated for adult retraining should receive a higher priority than any form of non-vocational higher education.

It is far more important to give a middle-aged worker, who has paid taxes for thirty years, a chance to regain his self- respect in a new trade, in genuine demand, than to train yet another unemployable sociologist.

Secure in a new skill does not mean secure in a new job in the same town. Unless the new industries can be attracted to the decaying industrial centres of the last century, away from the South Coast and City suburbs, then the workers must be free to move to them. In other words, either we must re-create a private rented accommodation market (see No Rooms to Let, Bow Group, October 1978), or give absolute priority for council houses to workers moving to new employment.

If, instead we wish to attract the new industries to the old industrial centres we must improve their transport, education and police. Grants and subsidies are of no use to attract a new industry if the electronics engineers on whom it depends won’t move to the area because they are likely to be mugged, their, wives assaulted and their children grow up illiterate. The money wasted on futile regional aid schemes should instead be spent on cleaning up the areas, while relying on good, cheap communications, a healthy environment and low rates and taxes to attract the employers: in particular, the small businesses who will be the employers of the future.

The problem of transfer between schools is also vital, if we are to expect men to move to work – particularly if we are to expect the managers and key workers to move to bring work to the old decaying city centres. The requirement is that the child who moves should not suffer a complete re-orientation of syllabus and teaching techniques on top of the inevitable break in personal contact.

Vocational education — the next generation.        

The problem we face is to educate school-leavers to live with a new technology which their teachers do not understand. At the same time we must equip them for a world in which they may have to change trade or profession two or three times. Yet they conventionally leave school without having learned how to learn trade skills – let alone having learned any – as opposed to how to learn an academic discipline.

Perhaps it is not the place of the school to teach particular vocational skills, but surely learning the ability to acquire such skills rapidly should receive a much higher priority than at present. Also, it is vital to prepare them for the industrial revolution that is about to happen.

The problem is far too important to be left to the academic establishments to resolve, yet without their full co-operation no resolution is possible. The first key action is to teach every child how to live with the new technology; what it can and cannot do, This requires that the children have the opportunity to use computers, as teaching machines to learn other subjects or to play games. It requires that they see them in use. It does not require that they be able to understand the theory, or to design, build or even programme them. This latter specialisation should be available to all sixth formers rather than the present tiny minority, but has less priority.

Given the impossibility of training sufficient teachers in the time available by conventional means, audio-visual courses of the Open University type should be prepared as soon as possible for general use. Since learning by using is the key to understanding computers and chip technology, E100m. should be earmarked to provide at least one British-built microcomputer together with appropriate teaching material and support for the existing staff, in every secondary school within three years.

To give every sixth former the chance of carrying his or her interest further into a @computer science’ specialisation will probably require a similarly unconventional approach, unless the role of the colleges of further education can be very rapidly extended. This presents more problems because of the depth and breadth of material to prepare, so that a five-year deadline is probably more realistic.

The more general problem of revitalising our secondary education system so that the next generation is better prepared than the present to learn new skills, as and when necessary, is every bit as important as the narrow problem of introducing adequate education to handle the new technology. Perhaps the very unconventionality of the approach suggested above will assist in bringing such a reform about.

In the further education sector the DES has, over the past ten years, implemented a ‘centres of excellence’ policy for vocational computing education based on the Polytechnics. While industry and commerce queued up to recruit the 600 graduates produced in 1977/78 the vagaries of the Block Grant system built, receive only, satellite ground station is available for only operated by the local education system has starved many of centres of staff, equipment and money.

Direct government support via ‘earmarked’ budgets for expansion of all vocational computing courses is necessary.  The test of whether a course is ‘vocational’ should be whether the graduates are exempt from the relevant professional examinations for example those of the British Computer Society).

Packaged learning techniques and larger classes can then be used to partially overcome the shortage of’ staff, while the shortages of money and equipment can be overcome in full.

The Post Office: luddite or leader?

The telecommunications branch of the Post Office is to this industrial revolution as the canals and railways were to the last. It is both the largest single customer for the new technology and the provider of the essential infrastructure around which hundreds of thousands or new jobs can be created.

Over half of the Post Office’s maintenance engineers will be made redundant by the new, reliable digital telephone exchanges. However, to re-equip our obsolescent telecommunications system to modern standards, let alone those about to will require all or them, and many more, to be retrained as installation engineers.

A major area of concern is the decision to go for a ‘home-grown’ digital system —-the so-called ‘System X’, Every decision on exchange policy made by the Post Office so far has been wrong, and it is vital that this time the industry ends up making a system which is capable of being exported in the face of American, Japanese and Swedish Competition. As many of our major competitors already have advanced equipment in large scale manufacture, some independent report should be commissioned by government in this key area.

If, through fear or redundancy, the Post Office engineers fight the new technology, and the Post Office retains its monopoly or transmitting and switching information, as well as of attaching equipment to its communications network, then the new industrial revolution will be stillborn.

A single communications monopoly may still be the cheapest and most efficient way of organising message transmission, if it is efficiently run. It is not the only way. Half a dozen privately financed communications satellites over Britain with cheap (£50) microwave aerials on every office roof bouncing signals off them, is a perfectly viable alternative. Already, an Indian-built, receive only, satellite ground stations is available for $70 (a mixture of chicken wire and chips). IBM and a number of other firms wish to offer such a service in the USA. A German the syndicate is testing rocket launchers in Africa to offer such a service anywhere in the world.

If the Post Office cannot lead the way with a crash programme of modernisation and re-equipment of its network, it nations, should have its monopoly powers removed.

That investment programme will not be cheap. It will cost far more than the North Sea Gas conversion of the last decade which brought us cheap cooking and heating. It will more than wipe out the Post Office’s ‘profits’. The upheaval needed within the Post Office to enable it to happen cannot be under estimated.

The Post Office is still ordering equipment that became unsaleable in Black Africa over a decade ago. It is still writing   down annually equipment installed forty years ago and obsolete thirty years ago.

The Prestel (Viewdata) experiment is not proof of the lively, look-ahead attitude of the British Post Office. It merely indicates that even the Post Office can’t get it wrong all the time. The true state is best indicated when, inspired by Busby, you come, try to ring Auntie in the evening and have to dial once to wake up the equipment and a second time to get through.

If the key to the new industrial revolution is a reliable telecommunications network then we have a long way to go. £3,000 million of investment over the next decade is a recent estimate of the cost.

With an investment and installation programme of this size to handle, the Post Office cannot sustain even the present inadequate level of service to those who wish to attach equipment to their network. Such equipment ranges from special telephones to private telephone exchanges, to modems for attaching computers and computer equipment. Currently, the delivery timescale and cost for Post Office approved equipment is double that for similar equipment in overseas countries. Their monopoly of approval should be scrapped and replaced by the right to specify the transmission standards of such equipment. Whether those standards are met should be monitored by an independent body. The monopoly is currently defended on the grounds that Britain would be swamped by imported equipment, but for the protection it affords. However, the Post Office’s approval procedures have already, on occasion, given an effective monopoly of supply to foreign companies (for example IBM for the early computer-controlled private telephone exchange). Currently, there are rumours of negotiations to import Swedish telephones. The protection afforded is thus questionable and the past destruction of Britain’s telecommunications export potential is undoubted.

There is a strong case for setting up a new body under Parliament to administer the Post Office monopoly and license the Post Office and others, similar to the US Federal Communications Commission, whose liberalisation of the Bell Monopoly in recent years has so greatly stimulated development of private apparatus.

3. MINIMISING THE RISKS OF CHANGE

Small business creation

Most of the giants of the semiconductor revolution in America have grown from back shed to $100m. turnover in under a decade. At that point they have been bought out by established concerns, turned respectable, or gone broke. The pattern is familiar to any student of the English Industrial Revolution. It is a better formula for wealth creation than the NEB: merchant bankers and businessmen, who failed to adopt new technology when privately funded, trying again with the taxpayers money.

Unfortunately, it is not a formula that works well in Britain. For example, the availability of cheap computers and dial-up computer bureaux oilers the possibility of a new cottage, or rather semi-detached, industry (for example assembling accounting systems for local solicitors). However, even though the only too}s required are screwdriver, soldering iron and a programming manual, the assembly of a tailor-made computer system is classed as a light industry. It may be quieter than car maintenance or less polluting than a bonfire, but it is not permitted in a residential area. Therefore, our budding entrepreneur must hire a small workshop in an appropriately zoned area with heating, toilet, washing facilities, light, power and travelling time – instead of back shed or garage.

No longer can the business be commenced as a part-time hobby, soldering equipment into boxes in the shed with negligible capital. Full time commitment and capital are required. If the business grows to justify an assistant, two will be needed: one to do the extra work and a second to handle income tax, national insurance, VAT} pension schemes, redundancy, safety and employee protection, as well as a myriad of questionnaires.

The only practicable formula for a determined entrepreneur who does not wish to emigrate, is to register as unemployed, but not collect the benefit, employ only moonlighters, deal in cash, and drop out of the entire bureaucratic system. This route has the added attraction that, as the business grows, the profits can be ploughed back into the business because the Inland Revenue rarely chase the unemployed.

The unusual feature of the microcomputer revolution is that, while the manufacture of the chips requires expensive equipment in a dust-free, air conditioned environment, little capital is necessary to assemble them profitably into saleable devices. And it is the assembly that creates both the wealth and the jobs. Two or three factories and a few thousand workers could provide the total world requirement for semiconductor chips.

Therefore, to get the main benefit it must be made easier to set up new businesses. Obvious actions within the power of government include:

• permitting set-up losses to be offset against past personal PAYE payments without time limit. This will enable the would-be entrepreneur to cut his risks by funding the business out of past taxes, not by having to mortgage home, job and future on a flyer.
• permitting non-polluting industries with fewer than ten employees to be established, without regulation, in residential property: to enable the entrepreneur to start the business part-time, at home, without the need for the capital for a lock-up workshop or factory.
• removing firms employing fewer than ten workers from industrial employee protection legislation: to enable the owner to concentrate on the business not the paperwork, during the early critical years of growth.

Public sector purchasing policy

State intervention in the affairs of industry and commerce is, at best, a necessary evil. However, a quarter of a century of confiscatory direct taxation and the lack of a sizeable home market have so weakened British private enterprise that promotional intervention, to counter that of other nations, is sometimes essential. Without it, we will soon cease to have any high technology industries. It will take at least a decade of freedom for new small businesses to grow healthily. In that decade we could all too easily be swamped by imports from those who have beaten us to the new technology.

The flood of imports from England which wrecked French urban employment in the 1780s and led directly to the blood bath of the French Revolution, was caused by the premature adoption of ‘free trade’ in a vain attempt to recreate the conditions which led to the English Industrial Revolution. To come second can be worse than not entering the race at all.

Today, over half of our import bill is for manufactured goods, a large part of which are for the public sector. Trade, not aid, is the best help the state can give to British industry. ft is a nonsense to put millions into a workers’ co-operative to build British motorbikes and then buy German motorbikes for the police. It is a nonsense to give money to the British computer industry and then for the DHSS to buy twelve different kinds of foreign computer; the least they could have done was to decide which foreign computer they liked best and arrange for a British company to make it under licence.

The state in all its forms, local government, nationalised industries and so on, now controls over half Britain’s wealth and over a third of ail equipment purchases. The least it can do is to co-ordinate its purchasing to help British industry. The American government buys American, the German buys German, the French buys French. There is no need for tariffs, duties or interference with what you or I buy. First gain effective influence over what the council or the nationalised industry buys with our money. It is a nonsense to tax British workers out or a job and then use the tax revenue to buy foreign manufactures.

We cannot rely on imported technology if we wish to preserve full employment. Already devices using the new technology are announced only weeks after the announcement of the relevant technical breakthrough. The chip designers are talking to their local neighbourhood manufacturers before they talk to foreigners. If the chip is designed in Japan or California, will learn about it when the new Japanese car is launched or the American ironing machine appears in Tesco’s Home ‘n Wear.

Even if the device is developed in Britain by a foreign-owned company, the new machine may be built back home in America or Germany, leaving the British plant to run down, assembling the old technology. An example is the computer-controlled sewing machine.

The purchasing policy of the public sector is the main influence on the growth of the new technology and its planned use is the most effective promotional tool, Compared to the purchasing power of the government bureaucracy for word processors. or the Post Office for digital switching equipment, grants and subsidies are a waste of time and money. Therefore the UK government should:

• Place development contracts, including commitment to bulk purchase, with at least two suppliers for equipment to meet identified future public sector needs.

The practical problems of implementing this policy, and mistakes that will be made initially, should not be under- estimated. The technical purchasing expertise is missing and must be developed. Also, the risks of being leapfrogged by technology must always be taken into account. However, as British industries’ largest customer, the state cannot shirk its duty to be a responsible purchaser to develop the capacity of its suppliers.

If a single nation is too small to support more than one supplier in a given industry, international co-operation to provide a larger market for competing suppliers is preferable to creating a national monopolist. Therefore, since the UK is probably too small a market for many chip-based industries and we still have a lead over the rest of Europe in this technology, we should also:

• Take the lead in erecting a ‘Buy European’ for all public sector purchases within the EEC, based on the highly effective ‘Buy American’ legislation of the US.

The Second Supplies Directive of the EEC provides an ideal basis on which to build. Its aim is to make all public sector purchases open to free competition between EEC companies. Britain should take the lead in ensuring its rapid and effective implementation while interpreting it so as to block all public sector purchases from non-European firms and to force open French and German public sector opportunities for British industries where we have a genuine lead.

Rational job creation

We already have massive unemployment. After we have created a climate in which change can take place, in which small businesses can grow large, in which established businesses will create jobs in their competition to win government development contracts and exploit the spin off, it will still be a decade before we have sufficiently improved the situation.

Once the new industrial revolution is under way there will still be pockets of unemployment. In particular there will be the very severe problem of under-employment in the public sector.

Job creation and job sharing are the fashionable panaceas. Job sharing is a nonsense. When the working week is shortened. the average working man works overtime, moves away and travels further to work, takes a second job, or takes up ‘do-it yourself’ thus putting local craftsmen out of work. The result may be botched-up home repairs, a drift to the suburbs or in the creased disposable income but the gain in the number of jobs does not match the cost.

A useful source of extra worth-while employment would be to change the standard public sector working week to three days of ten hours and one of five (for the overlap) and open all government offices from 9am to 7pm for six days a week. It would ensure that the redundant clerical staff are employed to give the public a better service when they want it – as opposed to 9am to 5 pm, when they also are working.

Retraining has a double effect. Staff are needed to do the re-training. Not merely are the redundant fitted for a new career, they are also removed from the labour market while doing so.

There is enough work to be done in Britain – from reclaiming the city centres to nursing the mentally ill – for public works schemes to create short or long term jobs. There is no need to framework, resort to digging holes and filling them in again. The objective of any government should be to gainfully employ the unemployed, either in public works or in looking after the elderly and ill, or to retrain them: not to waste their time with make believe.

The Famine Code of the Indian Raj was more rational than today’s job creation schemes. Each administrative area was re quired to compile a list of labour intensive public works – irrigation schemes, roads, land reclamation, buildings – that were desirable but not essential. Pians and schedules were to be drawn up for the necessary work. But work was only to be  undertaken when the otherwise unemployed were queueing up for work. The Indian Civil Service practised true Keynesian  economics a century before it became fashionable and more   than we do today.

Public works schemes should be planned and stockpiled for when the unemployed need work. They should not be planned during the slump and undertaken during the following up-turn.

But the semiconductor revolution makes little difference to the problems we already face on this front, as our existing industries are undercut by Japanese efficiency and Korean cheap labour. It merely offers a long-term solution.

4. THE INCENTIVE TO CHANGE

The technological brain drain

If our electronics graduates are leaving for the high temperatures and low taxes of California, who is going to provide the skills to enable us to exploit the new technology? If our young managers are leaving for the higher pay and lower marginal taxes or almost all our competitors, ‘Who is going to organise the new industries?

We may have a plethora of service skills but we are very short of industrial skills, and we are losing not merely those we have but also those we train. A third of British business graduates are working overseas within a decade or leaving business school. More Britons work in California on silicon chip technology than work in Britain on it.

We must not merely stop the brain drain, we must reverse it. We must not merely attract back those who have gone but also attract those whom other nations are training,

The social incentive

The key incentive in Victorian England was not mere money. The successful industrialist also enjoyed respect and prestige. Progress and change were seen as the beneficiaries of mankind. The creation of wealth was seen as infinitely more meritorious than its consumption.

Government cannot decide who is to be respected. However, the honours lists and patronage positions can be used to convey the message as to whom the state respects. Public servants have their reward in inflation-proof pensions. They don’t need honours as well. Not so the risk-taking entrepreneur who, if unsuccessful, faces bankruptcy or, if successful, a 98 per cent tax rate on his ‘pension’ and almost total expropriation on his

Money alone is not enough. It must be seen to be more respectable to create wealth than merely to consume it without having at least tried to contribute.

Taxation

‘If a company in the computer industry is not growing today at over 15 per cent per annum in terms, then it is dying. If a British company – especially the smaller type of concern with staff shareholders – is growing at over 15 per cent per annum then it is being taxed to a standstill ‘ (Meinhard Donker, a Director of CAP-UK)

15 per cent real growth may be unusual, almost unknown, among established British companies, For the burgeoning micro-electronics firms of America, however, it is below average for a healthy stripling. At this rate of growth the British tax system is crippling. The firm must either leave (Eire is a favourite refuge), sell out (probably to the NEB) or settle for stagnation.

C. Northcote Parkinson wrote that the state which consistently takes more than 25 per cent of the citizens’ earnings will fall. His examples for this ‘law or nature’ ranged from the Old Testament to modern times. Perhaps Uruguay is the classic modern example of a humane welfare state crushed under the weight of its own taxation and bureaucracy and replaced by a military government.

In Britain the taxman mounts a very effective three-fold attack on industrial initiative. High taxes make it almost impossible to raise seed capital out of personal savings. High taxes expropriate the working capital of any fast growing private business. High taxes remove the subsequent benefits of success.

If we must not merely halt the technological brain drain but reverse it, it is insufficient to cut our marginal tax rates to those of out’ competitors. We must cut them further.

Until the switch to indirect taxation recommended by Professor Meade has been implemented, we will have little hope or successfully exploiting the new technology. Those with the necessary skills will continue to leave as fast as they acquire marketable skills. Honours and patriotism are a poor argument against 98 per cent taxation on the earnings of innovation. We must tax the consumers of wealth not the creators.

5. SOME SOCIAL EFFECTS OF THE NEW TECHNOLOGY

Twenty four-hour services   

The semiconductor chip offers the prospect of services available twenty-four hours a day which are currently only available from 9 to 5. Viewdata services, replacing reference library and mail order catalogues, and all the other technological marvels will have little impact compared to the extension of the hours of service of banks, shops and offices to avoid mass unemployment among clerical staff.

With services available round the clock, and most public sector staff working three long days a week as suggested earlier, the concept of ‘unsocial hours’ can be killed outright. However, it is the provision or personal services round the clock using the labour freed by the automation of routine administration, rather than twenty-four hour-a-day computer facilities which will bring this about.

The new reliability

The computer chip offers a quantum leap in reliability over other technologies but it can also demand a great improvement in reliability from other services. For example, an office relying on computer terminals to a distant centre can be completely paralysed by a broken telephone circuit. Instead of staff being merely exasperated by the ‘engaged’ tone which usually disguises a fault, strike or other problem, they can do nothing.

The computer used to control an iron lung or other piece of intensive medical care equipment can dramatically reduce the cost of nursing the sick. However, a hospital reliant on computers is horribly vulnerable to power cuts. The paradoxical result will, however, be a society less, not more, vulnerable to industrial strife in key places. The computer chip can be kept going with a torch battery, the chip-controlled piece of equipment can be kept going with quite a small standby generator compared to the mammoth machines required today.

The unreliability and expense of the telephone network has already led to the growth of distributed computing’ networks which use the telephones when they work and ‘stand-alone’ when they do not.

The computer itself works or it does not. It does not go slow or strike. The cheap computer chip will enable any computer installation to have three or four standby processors in the event of mechanical breakdown. Already in medicine the practice is not to rely on expensive, vulnerable central computer installations for intensive care equipment; instead, a dedicated minicomputer is used with an equally dedicated standby machine in the event of failure.

Thus the minicomputer is already leading industry in the direction of decentralisation and reliability. The computer chip will almost certainly speed up this process unless the telecommunications reliability of the Post Office improves so dramatically that centralisation, despite the risk of disruption, become a truly feasible proposition. More likely will be the creation of a fast communications network linking units which will carry on regardless, whenever the network fails.

The right to privacy

The Data Protection Committee has just recommended the creation of a 400-man bureaucracy to regulate computer databases of personal records, It is significant that it ‘chickened out’ of any recommendations on the subject of medical records. Yet it is medical records where the problems of privacy are greatest.

Perhaps it ‘chickened out’ because experience to date is that computerisation greatly improves the security and privacy of medical records. In other words: if one is really serious about privacy, all personal record systems should computerised as soon as possible.

A simple comparison between the average manual hospital or GP record system and an on-line computer system, like the Exeter Community Health Project makes the point. Any enquiry agent in a white coat can read the medical records of most British hospitals. Even if the doctor’s secretary is discreet, the rate of break-ins to doctors surgeries, in which the intruder scatters medical records all over the office in his search for drugs, shows how insecure manual records are.

At Exeter the records are held in a single location manned twenty-four hours a day. Only the patient’s GP has access to the patient’s full record, by means of a computer terminal, using a password which only he knows. Even the other partners in the practice do not have full access to the personal history. The secretary, however inquisitive, can only read the patient’s registration and current appointment details.

The most severe problem is what to do if the doctor forgets his password. There is no master key. The project manager, operations manager and a computer operator have to combine to ‘break’ the computer system, from inside the computer room, to identify the doctor’s password so that the doctor can then change it. The same logic applies to other types of personal record.

In response to a flood of questions the DHSS recently had to write to all MPs to allay fears about a new computer system holding children’s medical records. In fact, about once a year there is a scandal when old paper records are pruned and intimate personal records of truancy and even VD and abortions are found blowing about on rubbish tips. By no means every authority shreds or pulps records, whatever they claim.

There is undoubtedly a need for data protection legislation. The need has existed ever since the state, local government, schools and hospitals started keeping records, let alone since credit agencies started.

However, it should apply to all large record systems, whether computerised or not, Large clerical record systems must be re- organised so as to give the same level of privacy, accuracy and  security that we rightly expect from computer systems. They should not be exempt from whatever legislation is introduced.

6. CONCLUSION

The computerised society of 1990 may well be very different in details from that of today. The gadgets we use win be different. The way we communicate will be different. The price ratio between goods, services, food and energy will be different. But we will still work for a living, even though more of us will work home, in smaller working groups, at ‘odd’ hours of the day or night, and away from large commercial or industrial centres.

Whether these changes will, with hindsight, deserve the title of revolution, or are merely a faster pace or evolution than we have recently been used to, is a moot point. However, unless we prepare for them, as though for a revolutionary change, we shall not merely fail to reap the benefits, we will a dramatic fall in our real standard or living as our international competitors drive us all into the dole queues or behind the tariff barriers of a protected East-European-style economy.

7 PRINCPLE RECOMMENDATIONS

1. The semiconductor revolution should not be considered in isolation. Our traditional industries are moving to the third world (shipbuilding to Japan, car making to Korea, consumer electronics to Taiwan, etc.). In ten years time, when North Sea oil peaks out, the price or energy in the UK will soar. In twenty years time our workforce will shrink as a result of the fall in the birth rate, while the number of senior citizens to be supported will continue to rise. The wealth creating potential OF the chip revolution is our best way out of the combination of crises that loom over Britain.
2. The key to realising that potential is to remove the fear of unemployment so that change is welcomed, not resisted. This requires freedom of movement to enable the worker redundant in one job, trade or town to move without excessive tribulation to another.

Government action is needed to:

• improve transferability of pension rights
• Bring minimum redundancy payments up to the commercial norm
• Improve basic unemployment pay
• Greatly improve retraining facilities
• Ease transfer between rented accommodation in different locations both council and private
• Ease transfer for home owners
• Ease transfer between schools
• Improve the education, transport and health and police services of those areas to which it is hoped to attract the new industries based around the micro computer chips.

3. Government action is required to improve vocational education so that school-leavers are equipped to live with the new technology in a world in which they may have to change trade or profession two or three times, and in which the skill in demand cannot be, predicted more than a few years ahead.

Actions include:

• Extra funds earmarked at school level to give education in living with and using the new technology by providing at least one micro computer with appropriate teaching material to support staff in every secondary school in Britain by 1982.
• Every student in secondary education to have the option or studying ‘computer appreciation’ (what the new technology can and cannot do) regardless of his course of studies, by 1982. Every sixth former to have the opportunity to take a ‘computer science’ course by 1985.
• Earmarked budgets to expand vocational computing courses in the further education sector.

4. Government action is needed to re-equip the UK telecommunications network. The Post Office telecommunications side is crucial : both as the largest single customer for the new technology and as the provider of the essential infrastructure around which hundreds of thousands or new jobs can be created.

Actions include:

• Immediate financial write-down of obsolescent equipment
• Crash conversion of the switching system to digital switching and installation of broad-band transmission – similar to the North Sea Gas conversion programme of the last decade.
• Scrap the Post Office monopoly of approval for equipment attached to the telephone and telex systems.

5. Legislation is needed to enable the easy creation and growth of small businesses by:

• allowing initial losses to be offset against past PAYE without time limit
• removing employee protection legislation from businesses employing less than ten people
• Permitting non-polluting industries employing fewer – than ten people to be established in residential property.

6. The purchasing policy of the public sector is the main influence on the growth of most high technology industries and its planed use the most effective promotional tool – once the environment is right. Are usually a waste of money.

Therefore the UK Government should:

• place development contracts with, including commitments to bulk purchase, with at least two suppliers for equipment to meet identified future public sector needs
• take the lead in erecting a “Buy European” framework for all public sector purchases with the EEC mirroring the highly effective “Buy American” legislation of the US.

8. Reduce direct taxation on the workers, managers and investors on whose efforts and enterprise we all depend. ‘If a company in the computer industry is not growing today at over 15 per cent per annum in terms, then it is dying. If a British company – especially the smaller type of concern with staff shareholders – is growing at over 15 per cent per annum then it is being taxed to a standstill ‘
9. Introduce data protection legislation which applies to all databases holding information on over 10,000 people: whether held on computers or not; ‘whether in the public or private sector.

 The Author

PHILIP VIRGO MA, M.Sc, AMBIM, MBCS worked from 1968 -1997 for American- and British -owned multinational computer manufacturers. During that period he was responsible for a number of long range studies on computer usage, marketing and manpower planning.

He is chairman of the Conservative Computer Forum, which run parliamentary briefing sessions on the industry, an industry advisor to the Information Technology Working Party of the Conservative Parliamentary Party, and a member of the London Branch Committee of the British Computer Society.