The long term success of the Welsh economy will be secured by a fundamental change in how we develop our education and training base first, and then with the new ways of thinking this can filter out into a more intuitive way of creating value.

We can no longer stay in comfort zones of the past in the hope that emerging economies will only ever be able compete in the low value added part of the chain and that Wales will be assured of taking the higher value top slice.

The huge advances made in the science, engineering and technology base by the BRIC economies (Brazil, Russia, India and China) mean that our competition field is truly global in these leading edge sectors, and innovation is no longer the preserve of G7 members.

By learning to think differently, bringing an intuitive approach to how we solve problems and design solutions, we can improve our position in this increasingly competitive global economy.

Yet using this new way of thinking is not limited to the new disruptive technologies which have the potential to truly transform our quality of life, but can apply in more mainstream business and crucially in delivering key public services.

The scale and direction of the change needed is of such magnitude that it is no exaggeration to say that our young people will be designing and developing technologies in 5 to 10 years time that they cannot even imagine now. Such is the steepness of the (not Phillips!) Information Curve, and this will impact on the most mundane everyday processes and interactions.

While the economic data do not make pleasant reading and with immediate major challenges saving jobs in manufacturing, such as the aluminium smelter on Anglesey, occupying our immediate attention and energies, we are truly living in interesting times and need to look forward to significant opportunities for Wales.

The major life sciences investment in Swansea is very encouraging and there will be other sectors like renewable and low carbon energy which will drive us forward. To take just these two sectors, there is huge potential here to encourage our young people into the life and natural sciences and engineering and make sure Wales gets its share of new patents which can be applied worldwide.

But ultimately for the transition to a low carbon economy and one in which the opportunities exist for all our young people to develop their talents to the full, we need to focus on risk taking and innovation, on encouraging far greater autonomy to the learner to explore all possible outcomes in designing solutions and to give ownership in that process.

However, the drop in inflation figures comes combined with a drop in manufacturing output (“Production output for Q1 of 2009 was down by 7.2% on the previous quarter, the UK index fell by 5.1% over the same period”; July 14 article by Aled Blake in the Western Mail, “Economic output figures a disaster for Wales, says AM”).

The manufacturing stats make for very worrying reading.

There is something that I should report too, from the USA that should make every politician in Wales, of whatever party or persuasion, to sit up.

The American small business sector is showing distinct signs of very severe distress. In fact, the small business sector is about to undergo a severe implosion.

Why?

The stimulus package has essentially failed and did not focus on the very severe banking drought hitting small businesses. Despite all the bank bail-outs, the banking industry has withdrawn normal banking facilities from the small business sector. This means small businesses options for weathering the recession are vastly curtailed.

The largest job employer and creator of jobs is the American small business sector. But the American small sector is now turning into a huge job destroyer; employees’ hours are being cut, full time jobs are turning into part time jobs or no jobs at all.

Why should Wales or the UK care about American small businesses folding en masse?

It has taken me a decade to work out the things that make America tick and I have learnt that the American small business sector plays a central role in America’s psyche.

American small business sector is vital to US national interests. As it falls away so goes the average American’s confidence in their bedrock, their United States of America. The small business sector is part of the American Dream, it goes, so does the American Dream. Small business sector is to America what Apple Pie and July 4 is to American identity.

As the American small business sector dives – so will imports into the USA.

As imports drop off, so will UK and Welsh industry that rely on exports.

In fact the whole of Europe will be severely affected by a collapse in the American small business sector. Essentially, our exports to other European countries and nations will drop off as they will need less imports to meet falling export orders to the USA.

Did I mention that inflation figures also dropped in the USA? Why? Because Americans are buying less – and less means less imports into the USA, which means local markets in Wales and UK (and further afield to Europe) will become temporarily glutted with manufactured goods now not heading to the USA – and Welsh/UK manufacturing output will drop as is happening right now: Welsh “Production output for Q1 of 2009 was down by 7.2% on the previous quarter, the UK index fell by 5.1% over the same period” – see second paragraph above.

Welsh/UK manufacturers are cutting back – they will cut back further because the America is showing distinct signs of cutting back on its imports for reasons already stated.

WARNING: the recession is turning into a skewed W motif – first a recession, then what looks like a recovery of sorts but in reality, the economy is taking a deep breath prior to taking a deep plunge.

What can Wales do to combat this scenario?

INNOVATE – INNOVATE – INNOVATE

Wales is of a size that innovation can have a deep impact on employment prospects and living standards. Wales should be moving away from relying so heavily on the public sector for jobs and GDP.

Innovate to GVA-ate. GDP tied so heavily to the public sector will not GVA-ate the Welsh economy.

Wales must innovate and must protect the intellectual property that comes out of innovation or all we will do is improve the lot of the competition who can copy, sell, distribute Welsh “IP” without fear – Welsh IP is not property unless it is protected.

Yes Wales might be bucking the jobs like my son who now works in Bristol.

Wales the land of shop keepers and shop workers.