Hamish McRae: Bright ideas are what Britain should give to the EU - not hectoring, lecturing or abuse

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Obviously we can help by providing a vigorous market for eurozone goods. The UK is its largest export market: we take 18.8 per cent, against 17.0 per cent to the US. But that is by the by. Up to now, the British role has been mostly one of hectoring by Gordon Brown on the need for structural reform of labour markets and the Common Agricultural Policy. Whatever the case for both, this is not an approach that goes down well in European capitals.

On the other hand, as Tony Blair has recognised, there is a yearning for leadership - though of a clearly different sort to the kind the eurozone is getting at present. In a nutshell, European voters would probably like a bit more focus on economic success and higher living standards, and a bit less on political experiments such as the constitution. That the UK is taking over the rotating EU presidency for six months is not much of a lever, but it might, at the margin, be helpful.

The first thing to be clear about is the extent to which the eurozone is falling back. This is shown in the charts. The size of its economy relative to the rest of the world started to fall quite sharply during the 1980s, steadied through the 1990s, then fell again after 2000 (first graph). You would expect some shrinkage for demographic reasons alone, but it seems to be falling faster than it "ought". More disturbing to voters, though, must be the slowdown in the growth of living standards. Real wages have been rising at less than 1 per cent a year for the past decade, a massive contrast to the 1970s and 1980s (middle one).

That is partly the effect of working fewer hours, as people take their "wage" in leisure rather than cash (third graph). But you can also see that productivity growth has fallen, so this is not just the result of longer holidays. The effect has been that, since 1990, US and UK living standards have risen by 40 per cent, while those in the eurozone are up on average by 10 to 15 per cent.

If you accept that Europeans would be less grumpy if they were becoming richer, what can be done to further that cause?

The a macro-economic debate about this leads into questions like these: Should the European Central Bank cut interest rates? Could the Stability and Growth Pact be sensibly reformed? Is the euro the problem? And so on. These are hugely important but there is really no point in Britain trying to traipse over this ground during the next six months. Nothing can be done and it is not our business anyway.

Then there are a series of structural problems - the ones that Mr Brown lectures on - in labour markets, regulation, barriers to service businesses and so on. They are important too, but with the possible exception of excessive EU regulation, there is no point in devoting great energy to trying to change things. The blockages are either national policy or are so embedded that nothing can be achieved.

However, the UK could still help the eurozone in a number of ways. They do not particularly relate to the six-month presidency but that is a good thing because these can carry on afterwards. Here are six ideas.

First is to look at ways of getting more EU students to do postgraduate work in the UK and, crucially, stay on afterwards to do jobs here. The advantage to the students is that they can see for themselves what it is like to work in a flexible labour market, and see businesses being created around them - maybe set one up themselves. We benefit from the injection of youth and energy, while the eurozone countries benefit from the experience taken away when the students return.

A second is to publicise our hi-tech clusters. The Institute for Public Policy Research is studying some cities that have been particularly successful at generating knowledge-led businesses: Dundee is a good example. We need to get this message out at a municipal level, for I think, there are things that our tech clusters can teach other regions.

Third, the legal and regulatory process of creating a business in Britain is as easy as anywhere else in the world. We are not going to influence other countries but we can encourage potential entrepreneurs from other states to set up here, even if their principal activities are not in this country. In other words, the legal entities can be in the UK but the bulk of the business outside. The point of this is to create more European business activity. In the world of the internet, people do not need to live where they work.

Next, we can use the financial services industry of London to help finance business activity elsewhere in Europe. This is already happening now and without any government intervention. But what the authorities can do is examine blockages that might stop UK-based funds from increasing their eurozone activities. We know less about venture capital than the US, but we know more than continental Europe.

Five, we should look at planning. That is one of the clear areas where the state can inhibit economic activity - even the threat of a planning delay will stop buildings going up. We are bad at planning - indeed, we are in a position not so much to teach as to learn. But we know both the damage that bad controls can do and the economic benefits that flow from less regulated planning zones (like Canary Wharf). This gives the UK a chance to look at itself as well as the Continent and see if planning is a key factor holding it back.

Finally, we have a comparative advantage in our lack of adherence to credentials. If someone can do a job, that is what matters, not whether they have the right paper qualifications. We push good young people into important jobs much more swiftly than on the Continent. In a Brussels meeting, the UK team will almost invariably be younger than the continental ones. I don't know how we export this, just as I don't know how we export our openness to foreigners taking senior jobs, but it is a trick that Europe could copy.

These suggestions, and I'm sure scores more could be put forward, would make a sort of alternative agenda for Britain's presidency. They are not something we demand of Europe, or hector Europe about. They are, however, representative of a mindset, which is that Europe needs to lift its economic game and it is in our self-interest to help - rather than shout abuse from the touchline.

Wanted: concerted help for African business

Aid, debt relief or better governance and more effective businesses? Actually, all four, but amid the focus of the pop concerts this weekend on numbers one and two, it might be helpful to emphasise here the importance of three and four.

This is the judgement of Moeletsi Mbeki, who was in London last week for the UK publication of his paper Perpetuating Poverty in Southern Africa (International Policy Network, £5). Mr Mbeki is a businessman, deputy chairman of the South African Institute for International Affairs and brother of President Thabo Mbeki. In the paper, he argues that while there has been much discussion about corruption in Africa and the role of predatory political elites, there has been less focus on how to enable people to resist this.

The core of his argument is that for development in sub-Saharan Africa to be successful, it needs a new type of democracy, one that empowers the producers: the farmers, the local businesses, the exporters and so on. It needs private ownership of land, free markets in which to sell produce and financial institutions that are independent of the political elites. These could be co-operatively-owned and, as well as providing finance, carry out research and other support services for farmers and small businesses. Western donors should help to build these types of institutions.

It is hard to disagree with these ideas but equally hard to apply them. Besides, there are some further problems that I had not fully appreciated. At dinner last week, Mr Mbeki told me that one of the key problems in South Africa was the way in which demand for skilled black people in the public sector was attracting them away from the private sector and discouraging them from being entrepreneurs. By contrast, now that many Afrikaaners are excluded from state jobs, they were making their way in the private sector.

So the problem is not just one of corruption in the public sector, it is also that the public sectors sucks in too much talent. So what is to be done? Mr Mbeki's point must be right: that the private sector is the key to economic development. The more that Western intervention can accept this principle and fit in with it, the more likely it is to be effective. How the outside world best supports farmers and small businesses in Africa is harder to see, but at least we know we should start by listening to them.

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