All entries for Monday 02 March 2009

What Does Coventry Do Best?

Writing about web page http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/

Last week, the Economic and Social Research Council awarded a £3.6m contract to the University of Warwick for a centre on Competitive Advantage in the Global Economy.

This seems a good moment to ask, where is Coventry's competitive advantage? What do we do best today? At a time of recession, when many are losing what little sense of security and prosperity they had, what is our city's future?

I arrived in Coventry in 1974. At that time, Coventry was England's motor city -- its Detroit. A friend told me half the city's population belonged to two trade unions, the transport and general workers and the engineers. I don't know if that was true, exactly, but it certainly felt like it.

Between then and now, Coventry has not had it easy. In a way that is nothing new; Coventry's industrial history has seen continual change, from ribbons and watches to bicycles, munitions, machine tools, motor cars, and synthetic fibres. But in the 1980s deindustrialization hit our city hard. The great vehicle building and tool making factories melted away. Employment and wages sagged. Then, other jobs sprang up. Coventry recovered.

What has taken the place of manufacturing? Coventry has a new competitive advantage. It sells to an international market. In the current downturn this market is proving resilient so far: in fact, while global demand for everything else is falling off the shelf, the market in which Coventry is now competing is rising against the trend.

Leading this trend are new corporate giants that have grown up stealthily among us. They are local firms, with their roots are firmly bedded in our region, but they already export a large fraction of what they make.

What are they? The new giants are our city's two universities, Coventry University and the University of Warwick. (For those reading this column at a distance, the University of Warwick is nowhere near the town of Warwick; it is on the edge of Coventry, half in the city and half in the fields of Warwickshire. Coventry University is right in our city centre.) The two universities are not only among our city's biggest employers. Their combined corporate revenues come to around £500 million a year, or nearly £1,700 for every one of Coventry's 300,000 residents. 

The universities are part of a bigger picture. Around them, and not only because of them, a new economy has sprung up; according to the West Midlands Regional Observatory, knowledge-based activities now employ half of Coventry's working population.

Coventry once had a competitive advantage in engineering things. Now, what Coventry does best is the engineering of ideas. At one time, half of Coventry bashed metal; forty years on, half of us bash keyboards. Science and technology parks have sprung up where engines and car bodies were once assembled in giant hangars. The toilets are a lot cleaner, even if the language is just as filthy.

Like the motor factories they have replaced, our universities are big exporters. Instead of selling metal fabricates, they sell and certify knowledge and understanding. One difference is that the customer comes here to collect. Every year more than 10,000 students arrive from continental Europe and beyond to study in our city. The typical international student is likely to pay around £6,000 in annual fees and spend another £6,000 in annual living costs. That would make their total contribution to the economy of Coventry and its South Warwickshire hinterland, and to our national export revenues, £120 million a year and rising. 

The demand for higher education has an important feature that makes it different from the demand for motor vehicles -- it moves against the business cycle. When the economy booms and there are many vacancies, young people entering the market are tempted straight into employment. When the vacancies evaporate, they enroll for courses in order to improve their chances when things pick up. Right now, both our universities are experiencing a small boom in admissions, particularly to courses in management and economics. (Unfortunately, they are also suffering from the slump in everything else from the arts and entertainment to the conference trade.)

How can Coventry make the most of its future? Good management of our universities is important, but it is not the only thing that matters. The poor management of the British motor industry has been criticized, but would better management have saved Coventry's industrial past? It seems unlikely. At best, the decline might have been postponed by a few years.

More important is to understand how our future will remain bound up with the global economy. The international recruitment of academics and students is vital to the competitiveness and prosperity of Coventry's knowledge sector. That's obvious. Less obvious may be what follows.

If we are to maximize our new competitive advantage, and so focus on what we now do best, we have to let others do the same. One country can't do everything best. Today, we are best at science and education. If we are to put our resources into that, then let others exploit their competitive advantage in making the textiles and machinery we used to make and now buy from elsewhere.

Sometimes people feel bad about buying cheap clothes from abroad. There's a "Buy British" lobby that works to make us feel guilty when we do this. We should resist it; it is bad logic. Buying British would mean chopping out the roots of Coventry's knowledge economy just when we need it most.

Think about this: if students from Austria, Bangladesh, China, Dominica, Ecuador, and the rest of the A to Z of nations are to come to Coventry to be educated, their families or governments must have the pounds to pay for them. They can have these pounds, only because we are willing to buy the goods that they make cheaper than we can. When we buy their stuff, we enable them to buy ours. It's a virtuous circle: by trading, everyone can do what they are best at. When everyone is free to exploit their competitive advantage, everyone gains! There are not many such virtuous circles in this world, so we should make the most of them when we find them.

Whatever we do, times are going to be hard. It looks like our political class is going to let us down; obsessed with blaming the bankers and each other, they are failing to do elementary things at home (enacting a fiscal stimulus) and abroad (coordinating fiscal action) that would rapidly improve our situation. To turn our face away from the world, from our competitive advantage, would just make our future harder still.

For the time being, Coventry's future lies in the global knowledge economy. It is what we do best. It is another chapter in our history, one that is still being written.

Mark Harrison : 02 Mar 2009 13:51 |  Tags: Coventry Recession Universities |  Comments (5) |  Close comments |  Report a problem