Science, John Key and the Singapore syndrome

Here are two views on government science spending from last week. Struan Little, Treasury deputy secretary, dynamic economy: “Public investment in science yields benefits only when its output is applied in the economy. It is all about growth.” Wayne Mapp, Minister of Research, Science and Technology: “We are going to have to make the same sort of investment as our comparator countries.”

Mapp and Little can be read as on the same page but there is actually a significant difference. It is a difference between the fifth (Mapp’s) and seventh (Bill English’s) floors in the Beehive. Little had his eyes fixed on today’s budget constraints — so less “blue skies” and more “applied”. Mapp was focused on investment for the future.

The big question is whether the ninth floor (John Key’s) will go with the fifth or seventh when Mapp puts in his budget spending bid next month.

Mapp came rather slow to his science portfolio. He was much more interested in defence: his slow-cooking defence review is to be made public next month.

But Mapp discovered TIN100, an expensive annual survey of medium-high and high-technology companies by the Technology Investment Network. This year’s, issued last month, said that in the previous year the top 100 of these had revenues of $6.7 billion, exports of $4.9 billion (nearly four-fifths of revenues) and employed 24,000 staff.

To qualify for the top 100 a company now needs at least $12 million in revenues, up from $7.5 million the previous year. In exports the sector is now closing in on cows. Employees’ wages are far higher in the TIN100 than out on the back paddock.

In behind this success — and our world-leading milk industry’s — is science and research and development: research, science and technology (RS&T).

But for a quarter-century our governments have devalued RS&T. The average in the 30-rich-countries OECD is 0.65 per cent of GDP. Ours has slid to around 0.55 per cent. Our companies also under-invest, though that may be understated because our tax system is hostile to research spending.

A conference of scientists and policy wonks last Thursday heard that research shows that returns from government RS&T spending start climbing when it gets to between 0.7 per cent and 0.8 per cent.

Scientists and others who bother about this point to Mapp’s “comparator countries”. They particularly note Denmark and Finland, which over 20 years have focused heavily on RS&T and now are much richer, in part due to that spending.

Increasingly, however, the comparisons are and will be with the likes of Singapore and Korea. Their governments spend around 1 per cent of GDP. Singapore, a country roughly our size, in June announced a $US700 million investment in clean-technology research.

Nick Smith still hasn’t got his promised clean-tech taskforce up, even though there is a “100% plan” group of company bosses, led by the likes of Air New Zealand’s Rob Fyfe and the Warehouse’s Stephen Tindall, backing the idea. The word is that there was another stall last week.

Now stir in repeated reports that Key has been telling business and other gatherings that he is keen to do more.

And add Key’s admiration for Singapore, where he worked for a bit.

Then note that he is Prime Minister. Provided they pick their fights, Prime Ministers have the power to tell Finance Ministers to stump up. A canny Prime Minister can even do things the majority of his ministers are dubious about: around the cabinet table votes are very rare; in a well-run cabinet the Prime Minister’s summing-up is the decision.

So what’s stopping Key deciding to lift the game? He could, for example, add $200 million new spending each year for five years, which would get us to around 1 per cent of GDP.

Again, the word from those gatherings where he talks of doing more and someone mentions Singapore is that New Zealand is not a “command and control” economy, a reference to the People’s Action Party’s pervasive political control since 1959, coupled with a technocratic approach to policy and the power to drive its policies into action.

But a popular leader in a democracy can lead.

John Key is hugely popular, the polls say. He could carry the cabinet, the Treasury and the public if he chose to. He might see that as eroding political capital but capital is actually something to invest and get a return from, as Key used to know from his earlier life in finance.

Of course, it also means either taking money off somewhere else or delaying a return to a budget surplus. And many RS&T ideas produce no return and those that do can take up to 10 years for a return, whereas hip operations, national superannuation at age 65 and the like are here-and-now politics.

Nevertheless, occasionally democratically elected politicians take the long view. Finland, amid a desperate economic and fiscal crisis in the early 1990s, lifted RS&T spending while cutting nearly everything else. Britain protected RS&T from last week’s huge cuts to its public sector.