The state we're in
We need an effective, strategic state now more than other - but ours is woefully inadequate for the task
Towering columns
On his Substack, Dominic Cummings analyses the dangers of our complex world and finds our institutions and state capacity dangerously ill-equipped:
We have a combination of:
21st Century markets plus science plus technologies: they disrupts all traditions and regimes and enable ever fewer people to wreak ever more destruction faster and faster, making the scale and speed of crises bigger and harder to cope with.
20th Century state bureaucracies: centralised, slow, anti-adaptive, close to unreformable in any significant way by anybody other than near-revolutionaries (e.g the UK Cabinet Office in charge of critical state functions).
19th Century crisis management consisting of very similarly educated men sitting around tables like the Cabinet table in 1914 with Asquith scribbling notes to his girlfriend. I wrote in 2019 that the next crisis would see similar scenes around that table and similar failure. Less than a year later I was sitting at that exact table with a growing feeling of doom as I watched Boris texting his girlfriend as the worst crisis since 1945 overwhelmed core institutions.
Pre-19th Century, even pre-Newtonian, education and training for political leaders and officials. Political and intellectual elites do not have good ideas about how to govern and have practically no understanding of things they have to make critical decisions about (e.g viruses, exponential growth, the scaling hypothesis of machine learning).
Stone Age instincts drive violence and collectivism when we’re under pressure and inevitably operating with low fidelity causal models of politics.
On one hand, the information-discovery process of competitive markets plus science generate more knowledge, more wealth, greater productivity, and creative destruction as companies grow and die, knowledge is abstracted and compressed, startups drive progress and so on.
On the other hand, crises seem to follow a power law in which the scale of destruction and possible destruction gets bigger and bigger. The wealth, knowledge and power that science and markets generated allowed the Anglo-American world to squeak through two world wars. Political and military leadership was often terrible but our error-correcting institutions worked better than Germany’s and (despite Germany’s frequent tactical and operational superiority) we made fewer huge blunders than Hitler (cf. my recent blog on Alanbrooke and the Chiefs of Staff Committee in WWII). It’s hard to see how we keep getting lucky. We fluked our way through multiple nuclear crises (e.g partly because JFK had read about 1914 a few months before the Cuban missile crisis and ignored military advice).
The ‘combustible mixture’ caught up with us on Iraq and covid. It may catch up with us on Ukraine/Russia. Eventually it will catch up with us on WMD, biological engineering, AI etc — it’s just a question of time. A ~1% chance per year is ~100% long-term.
On his Substack, Sam Bowman says Britain makes elementary things too expensive, a driving cause being a few people’s ability to veto important projects:
Any new development worth doing must create additional value for the world. Most of this value will be captured by the people who own and make the thing (producer surplus), or the people who use or buy it (consumer surplus). It will also create cost. Some of those costs are borne directly by the developer – the price they have to pay for the materials and labour to make it, for example. Some of the cost is not, and instead is borne by the people around the development, eg in the form of a worsened local environment. This second kind of cost is what’s called an externality by economists, and is similar to the cost people bear when a polluter pumps noxious gases out into the air.
For a project to be worth doing, the benefits should outweigh the costs, including the costs that are borne by society. If we take people who lose from a new housing project via a worsened local neighbourhood, and give them enough money or other value such that, on net, they now benefit overall from the project, the benefits of the project should still be worth doing it, or else it wasn’t worth doing in the first place. Fortunately, the gap between the cost of building many of the things I’ve mentioned above and the value from selling them or their output is massive – that is, there is plenty of value to go around. New homes in central London sell for vastly more, perhaps even millions more, than the cost of building them. The price signal is clear, and includes a large reward for anyone willing to follow it.
So we might be able to get a bargain between the producers of new housing, transport and energy supply, and the locals who lose out. Why don’t we get this already? My core claim is that the system we’ve got at the moment is not good enough at identifying people who lose out by a lot, and people who cheaply claim to be losing out by a lot, but really only barely are.
…likewise, on his Substack, Sam Dumitriu says Britain’s biggest problem is not a lack of skills but an inability to build what we need:
In France, Germany, the Netherlands, and the US, there’s a strong correlation between how big a city is (in terms of population) and how productive that city is. But if you exclude London, that relationship doesn’t exist for the UK. Why don’t Britain’s cities benefit from similar agglomeration bonuses? Tom Forth argues it is because they are only big on paper. The OECD lists Birmingham’s population as being 1.9m people, yet at peak travel time (8am to 9am) only 0.9m people can reach the city centre within 30 minutes. And it turns out Birmingham is about as productive as you’d expect for a city of 0.9m. The problem is that the roads are too congested, public transport is unreliable and slow, and where there are fast transport links too few homes are built. This is a problem across the UK.
Consider the following stats from Stansbury, Turner, and Balls:
Roads in British cities are 48% more congested than roads in similar US cities, and 15% more congested than roads in similar European cities,
At rush hour, the area accessible by car within 30 minutes is much smaller in British cities than US cities and the area accessible by public transport is much smaller than for almost all European cities.
Public transport in British cities outside London and the South East is extremely unreliable. More than one in every twenty-five trains was over fifteen minutes late for seven separate operators. Punctuality rates are low by EU standards, while cancellation rates are high.
And despite the trains often arriving late (or being cancelled), some railways across the UK have London-style rush-hour crowding. In fact, during peak time on the most popular commuter routes into Birmingham one in four passengers is forced to stand. Yet investments in more and better roads, railways, and trams will only get us so far. I’m struck by this graph from Centre for Cities researchers Ant Breach and Guilherme Rodrigues. Put simply, to get the benefits of agglomeration we not only need to build better transport links, we need to allow new houses to be built at high densities near them too.
In the Sunday Times, Robert Colvile says the Covid inquiry is deeply flawed:
According to the terms of reference, Baroness Hallett’s task is clear: to identify the lessons learnt from the pandemic, in case of a repeat. But this has got enmeshed with two other impulses. The first is to deliver justice (or rather, assign blame). The second is to provide a kind of national catharsis. Hence the “Every Story Matters” project, in which members of the public are invited to share their own experiences. The problem is that these ambitions push against each other. If we want the inquiry to be a “lessons learnt” exercise, then it ought to deliver its verdict some time before the 2030s. But the hyper-judicialised set-up, in which lawyered-up politicians queue up for their turn in the ducking stool, cuts against that…
If we wanted to actually focus on the lessons learnt, and in particular on how to best prepare Whitehall for future pandemics, we could probably get a decent first draft by locking Patrick Vallance, Chris Whitty, Kate Bingham and their political counterparts in a room with a case of wine and a tape recorder. Or we could address those 30 topic areas in parallel rather than serial, with smaller inquiries proceeding simultaneously. Or we could copy Sweden, whose Covid inquiry — which heard evidence behind closed doors — reported four months before ours had even agreed its terms of reference…
Instead, as soon as ministers agree to a public inquiry they are locked by the rules of the 2005 Inquiries Act into a monolithic, legalistic and desperately lethargic framework. One which delivers the answers too late to be of much use, while diverting huge amounts of official time and attention — for example from addressing the awful consequences of the pandemic for NHS waiting lists, school attendance, public spending and so many other areas. Civil servants have already had to sort through more than 20 million documents to see which the inquiry might need.
In The Times, Juliet Samuel says we need to keep children away from smart phones:
Teen mental health is deteriorating across the developed world. The US Centers for Disease Control recently reported that 22 per cent of high school students have “seriously considered suicide”, up from 16 per cent in 2011. The trend is particularly bad for girls. In the same dataset, more than half reported feeling persistently sad or hopeless, versus about a third in 2011. This is global. Suicide rates for teenage girls in 17 developed countries, collated by The Economist, are up 40 per cent since 2014, a trend accelerated by Covid lockdowns. Forget teen vaping. This is the real youth epidemic of our times.
The data isn’t perfect yet, but it’s compelling enough that leading researchers, such as the American psychologists Jean Twenge and Jonathan Haidt, are sounding the alarm. Haidt points to studies suggesting the effect of social media on girls’ mental health is twice as bad as the effect of lead poisoning on IQ. Haidt, Twenge and others believe evidence of the causal link between teen smartphone use, especially social media, and mental health decline is now impossible to dismiss. We know this from everyday experience. The apps on our smartphones trigger addictive dopamine brain patterns visible in imaging studies. They render us distracted, anxious and depressed…
What’s needed is a new regulatory regime. Personally, I would ban smartphone ownership for under-16s. An acceptable alternative could be something like a “tobacco-style regulatory framework”, called for by the campaign group Safe Screens. It would mean only licensed devices could be sold for child use and those devices must be stripped down, capable only of phone calls and approved apps such as maps. This would be much stricter and more effective than widely circumvented “parental controls”.
On UnHerd, Aris Roussinos says the road to war in Ukraine started in Syria:
Browbeaten into military intervention in Libya against his better judgment by Cameron and Sarkozy’s desire to place themselves on the right side of history, Obama took Libya’s post-war chaos as a warning not to intervene in other Arab countries. But regional powers such as Qatar and Turkey, as well as civilian demonstrators in Syria and the Western commentators supporting them, erroneously drew the opposite conclusion: that after enough bloodshed, the United States would eventually find itself forced to intervene, unseating Assad and installing some form of representative government. This mismatch between hope and reality, empty rhetoric and action, would be tragic for Syria’s people, condemning them to a decade of war and destruction…
The Libyan example would also have another consequence, now playing out on our own continent: Putin was furious that the limited intervention to ground Gaddafi’s air force to prevent a massacre in Benghazi, reluctantly agreed to by Russia at the UN, evolved into a months-long campaign of close air support for Libya’s rebels, ending in Gaddafi’s miserable roadside execution. Eager to avoid a repetition in what was once a Soviet client state, Putin gambled that Russia could outcompete the US in Syria: carefully devised American escalation in training and arms deliveries could be thwarted by direct Russian intervention. Fine words and shiny new weapons would eventually prove no match for Russia’s firmer will and higher appetite for risk: through intervening in Syria, Russia could hasten the end of America’s unipolar moment.
In Syria, Putin’s gamble turned out to be correct: Assad’s victory was indeed a historic turning point, marking Russia’s return to the world stage as an actor able to direct the course of history. While American officials insisted there was no military solution to the Syrian war, Russia promptly delivered one. The Russian intervention in 2015 made Assad’s victory inevitable, allowing America to turn with some relief to the campaign against Isis, then ravaging European capitals, and to quietly divide the country into two spheres of influence separated by the river Euphrates. As Putin foresaw, even America’s final chosen proxies in Syria, the Kurdish-led Syrian Defence Force, would find themselves abandoned over time as the White House’s revolving door upended any coherent long-term planning. In a hasty rewriting of recent history, the fractious rebel alliance which took part in Turkey’s invasion of north-eastern Syria, which included factions previously armed by the US, was now denounced by Washington as renegade war criminals. In Russia’s eyes, the uncertainties inherent in America’s increasingly chaotic democratic system were the greatest vulnerability for Washington’s allies. Rather than the arc of history leaning towards liberal democracy, the abrupt policy shifts inherent to its system meant that liberal democracy itself was its own greatest strategic weakness.
Wonky thinking
In a report for Policy Exchange, with forewords by Lords Sumption and Hoffmann, Richard Ekins KC says Strasbourg’s Rule 39 injunctions - used to block deportations under the Rwanda agreement - are not legally binding on the Government:
This report considers the legal status of Rule 39 interim measures. Many lawyers and jurists take it to be obvious that the UK would breach its international legal obligations if it failed to comply with a Rule 39 order. They argue that if the UK were to fail to comply with a Rule 39 ruling, this would undermine the rule of law, in much the same way that it would be outrageous for a minister to fail to comply with an interim ruling of a domestic court. This analysis is mistaken. The Strasbourg Court has no authority to grant interim relief and member states of the Convention have no obligation in international law to comply with Rule 39 rulings. In refusing to accept the Court’s assertions to the contrary, the UK would be vindicating the rule of law, not flouting it. This report considers the foundations of the Court’s claim to have jurisdiction to grant interim relief and shows that the purported jurisdiction is groundless. Moreover, the Court’s practice is impossible to reconcile with the rights to which member states are entitled under the express terms of the Convention.
Also for Policy Exchange, Geoffrey Owen’s report into the future of the UK automotive industry argues that Britain needs a more stable industrial strategy:
A promising battery sector is taking shape in the UK, but the lag in gigafactories remains a matter of concern. This paper argues that the UK should not try to match the subsidies that are available in the EU and the US but should focus on other ways of encouraging investment, and on removing obstacles – most obviously high energy costs – that put UKbased battery firms at a disadvantage. Self-sufficiency in all phases of the battery supply chain is not a realistic objective; even if more gigafactories are built the UK will remain a significant importer of battery components and materials.
What is also important, for this and other industries, is a greater degree of stability in government policy. The erratic conduct of UK industrial policy over the last two years has been confusing for business and bad for investment. The government is right to support the auto industry as it makes the transition to electric vehicles, but that support must be consistent, and based on a realistic assessment of where the industry now stands and how best it can compete in the world market.
The Resolution Foundation’s Louise Murphy examines the prevalence of youth unemployment due to ill health in the UK:
In the first quarter of 2023, the number of young people not in education, employment or training (NEET) stood at 720,000, far below the post-financial crisis peak of 1.1 million. But alongside the good news is evidence of a more worrying trend: a sharp increase in the number of young people who are not working due to ill health. The number of 18-24-year-olds in this category has near-doubled in the last ten years, rising from 94,000 in 2012 to 185,000 in 2022. Today, almost one-in-four (23 per cent) workless young people are not working because of ill health, up from less than one-in-ten (8 per cent) in 2012.
This briefing note explores how rates of youth worklessness due to ill health vary by place. Across the UK, 2.9 per cent of 18-24-year-olds were not working because they were unwell in the period 2020-2022. But when we look beneath this average, we find considerable range. Just 1.6 per cent of young people in East Anglia, and 1.7 per cent in both Inner London and Merseyside, were too unwell to work in 2020-2022, compared to 5.1 per cent in parts of the North East such as Darlington, Durham and Middlesbrough. Surprisingly, rates of youth worklessness due to ill health vary little between more and less deprived areas, in contrast to the well-established pattern for the adult population at large. The share of 18-64-year-olds who are not working because they are unwell is almost twice as high in the most-deprived local authorities in England as in the least deprived (6.5 per cent and 2.9 per cent respectively).
Rather, the most striking spatial difference we observe when it comes to rates of youth worklessness due to ill health is that between large cities and smaller places. We find that young people living in core cities such as London, Cardiff, Glasgow or Liverpool are the least likely to be workless because they are unwell. In 2020-2022, for example, 1.8 per cent of 18-24-year-olds in London, and 2.0 per cent of 18-24-year-olds in other core cities, were not working due to ill health. This contrasts with 3.4 per cent of 18-24-year-olds living in places dominated by small towns or villages such as Derbyshire, Devon and South Wales – almost double the rate of young people living in the capital.
Book of the week
Our choice this week is The Entrepreneurial State: Debunking Public vs Private Sector Myths, by Mariana Mazzucato, in which she argues that the state has a far greater role in innovation than the political and economic consensus suggests:
In countries that owe their growth to innovation - and in regions within those countries, like Silicon Valley - the State has historically served not just as an administrator and regulator of the wealth creation process, but a key actor in it, and often a more daring one, willing to take the risks that businesses won’t. This has been true not only in the narrow areas that economists call ‘public goods’ (like funding of basic research) but across the entire innovation chain, from basic research to applied research, commercialization and early-stage financing of companies themselves. Such investments (yes governments invest, not only ‘spend’) have proved transformative, creating entirely new markets and sectors, including the Internet, nano-technology, biotechnology and clean energy. In other words, the State has been key to creating and shaping markets not only ‘fixing’ them. Indeed … every technology that makes the iPhone smart and not stupid owes its funding to both basic and applied research funded by the State. This of course does not mean that Steve Jobs and his team were not crucial to Apple’s success, but that ignoring the ‘public’ side of that story will prevent future Apples from being born.
Transformational public investments were often fruits of mission-oriented policies, aimed at thinking big: going to the moon or fighting climate change. Getting governments to think big again about innovation is not just about throwing more taxpayer money at more activities. It requires fundamentally reconsidering the traditional role of the State in the economy…
First, it means empowering governments to envision a direction for technological change and invest in that direction. Creating markets not only fixing them. Different from narrow attempts to identify and pick winners, envisioning a direction for economic development and technical change broadens the technological opportunity landscape and requires that the State creates a network of willing (not necessarily ‘winning’) agents that are keen to seize this opportunity through public-private partnerships. Second, it means abandoning the shortsighted way public spending is usually evaluated. Public investment should be measured by its courage in pushing markets into new areas, rather than the usual assumption of an existing market that the public and private actors must bump elbows in (one ‘crowding out’ the other). Third, it means allowing public organizations to experiment, learn and even fail! Fourth, precisely because failure is part of the trial and error process of trying to push markets into new areas, it means figuring out ways for governments and taxpayers to reap some of the rewards from the upside, rather than just de-risking the downside. Only once policymakers move past the myths about the State’s role in innovation will they stop being, as John Maynard Keynes put it in another era, ‘the slaves of some defunct economist’.
Quick links
Rishi Sunak has struck a deal with President Biden on economic cooperation.
The UK is to host a major AI summit of ‘like-minded’ countries.
ASPI has launched a critical tech tracker comparing key countries’ performance.
Labour have abandoned their plan to borrow £28 billion a year to fund their ‘Green Prosperity Plan’.
A new study says immigration might add 16 million to the population by 2046.
Natural England has blocked 160,000 new homes due to nutrient and water neutrality rules.
Tory China-hawks plan to toughen the coming procurement bill.
Ministers have instructed China to close secret police stations in Britain.
Childbirth in England and Wales has fallen to its lowest level across all educational groups, but especially the most educated.
A Chinese warship nearly hit a US destroyer in the Taiwan Strait.
Japan says it will boost child care spending to match Sweden.
Labour’s plan to add VAT to private school fees could raise little revenue.
Eighty per cent of ethnic minority Brits say the UK is a better place to live as a minority than countries like the USA, Germany or France.
Manufacturing construction in America is going through the roof.
A deep fake video showed Vladimir Putin declaring martial law amid an invasion of Russia by Ukrainian troops.
Germany’s Green Minister for the Economy says he will relaunch coal power stations next winter.
Schools Minister Nick Gibb has given an account of the successful post-2010 school reforms.