As Adam Smith knew, the experts think they know best, but what do the people say?

The high-powered experts who make up the LSE’s growth commission have proposed a blueprint for reviving Britain. To achieve its goals, though, we’ll have to get rid of those blasted MPs and councillors. What say we?

What makes economies grow? You could say it is the oldest question in economics: the complete title of Adam Smith’s foundational work is An Inquiry into the Nature and Causes of the Wealth of Nations.

It took Smith nearly a thousand pages to set out his formula. This past week, an independent “growth commission” convened by the London School of Economics provided a modern answer – albeit for the UK only – in a mere 36 pages.

Not that the LSE’s commission’s report ever risked being superficial. Its authors include a Nobel Prizewinner, a former chief economist of the World Bank and the first woman to become a deputy governor of the Bank of England. And its attempt to prescribe “the institutions and policies that should underpin growth for the next 50 years” is timely. For the past four years, the policy debate in the UK has been dominated by the question of how to escape from the slump induced by the financial crisis, yet few would deny that the UK needs a long-term economic strategy as well as short-term tactics.

So what is the commission’s answer to the question of what Britain needs to do to reinvigorate its economy in the 21st century? It identifies three critical determinants of prosperity in which the UK is deficient and which policy should therefore cultivate: skills, infrastructure and innovation.

On one level this sounds like a statement of the bleeding obvious. Can you win a Nobel Prize for working out that it would be a good thing if the workforce was better educated, railways and roads got an upgrade, and if private companies spent more on research and development? Where do I apply?

But we should cut the report’s authors a bit of slack. Yes, it is unfortunate that economists’ theories of growth are formulated at such an Olympian level of abstraction that by themselves they generate only the most platitudinous of conclusions. For this very reason, however, the test of a body such as the LSE commission is whether it is brave enough to advocate more specific policies – and on this score, it does not disappoint. The constraints it has identified may not come as much of a surprise; but the solutions it proposes are more controversial.

In secondary education, the authors endorse the academy model of more autonomy and greater centralisation of funding and accountability for schools. They advocate the creation of a National Infrastructure Bank. On innovation, they back proposals for an allowance for corporate equity that would remove the existing tax incentives to finance businesses with debt, and thereby encourage risky start-ups for which equity funding is the only realistic option. These are serious policy proposals, backed by detailed argument; they deserve a serious hearing from the government.

Unfortunately, the commission makes a further, overarching recommendation – one that is not just controversial, but positively dangerous. How, it asks, did Britain get into this mess in the first place? Why did it lose its historical lead in skills, infrastructure and innovation? The ultimate answer, it says, is simple: the root of our problems is politics.

The trouble with Britain is that it allows elected politicians to make policy. Worse still, we allow local politicians a say in things such as planning and schools. And, to cap it all, we have an unfortunate habit of changing our minds and electing different parties every few years. The result is a chronically unstable environment for long-term investment. Public priorities never stay the same for long enough to get anything done, and the private sector is at the mercy of Nimbys and the political cycle.

So, if we want to make Britain grow again, we need not only to make the right policy choices, but to take those choices out of the hands of politicians. We need a “new insti­tutional architecture” that can “put politics in the right place”. Only then will we bid farewell to interminable “flip-flopping”, the inevitable harvest of “political bickering”. Economic policy will at last be in the capable hands of independent experts: an infrastructure planning commission to decide, say, where nuclear power stations should be built, and a national growth council to dispense an industrial strategy.

It is a seductive view of what constitutes economic progress – one that has bewitched well-meaning technocrats down the ages, from enlightened imperialists such as John Stuart Mill, who argued for a “government of leading-strings” for Britain’s colonial possessions, to the socialist planners charged with the instant industrialisation of the eastern bloc’s developmental nation states. If only the benighted people and their annoying representatives would get out of the way, the impartial experts could get on with modernising the country.

The reality is that policies made by unaccountable experts are unsustainable – because they do not reflect what the people want. Only a democratic process, however flawed, can do that.

The LSE commission’s report was published in the same week as it was announced that it will take 20 years to complete the High Speed 2 rail link, in large part because of the need to follow time-consuming planning procedures. Such is the price of a democratic economy. No doubt unelected bureaucrats handing down compulsory purchase orders could do the job in half the time. But policy would no longer be reflecting people’s interests; it would be reflecting what the experts say their interests are.

It is a critical distinction – and, as it happens, one of which Adam Smith’s Wealth of Nations remains the original exposition.

Felix Martin is a macroeconomist and bond investor. His book, “Money: the Unauthorised Biography”, will be published by the Bodley Head in June

Adam Smith. Image: Getty Images

Felix Martin is a macroeconomist, bond trader and the author of Money: the Unauthorised Biography

This article first appeared in the 11 February 2013 issue of the New Statesman, Assange Alone

Getty
Show Hide image

A swimming pool and a bleeding toe put my medical competency in doubt

Doctors are used to contending with Google. Sometimes the search engine wins. 

The brutal heatwave affecting southern Europe this summer has become known among locals as “Lucifer”. Having just returned from Italy, I fully understand the nickname. An early excursion caused the beginnings of sunstroke, so we abandoned plans to explore the cultural heritage of the Amalfi region and strayed no further than five metres from the hotel pool for the rest of the week.

The children were delighted, particularly my 12-year-old stepdaughter, Gracie, who proceeded to spend hours at a time playing in the water. Towelling herself after one long session, she noticed something odd.

“What’s happened there?” she asked, holding her foot aloft in front of my face.

I inspected the proffered appendage: on the underside of her big toe was an oblong area of glistening red flesh that looked like a chunk of raw steak.

“Did you injure it?”

She shook her head. “It doesn’t hurt at all.”

I shrugged and said she must have grazed it. She wasn’t convinced, pointing out that she would remember if she had done that. She has great faith in plasters, though, and once it was dressed she forgot all about it. I dismissed it, too, assuming it was one of those things.

By the end of the next day, the pulp on the underside of all of her toes looked the same. As the doctor in the family, I felt under some pressure to come up with an explanation. I made up something about burns from the hot paving slabs around the pool. Gracie didn’t say as much, but her look suggested a dawning scepticism over my claims to hold a medical degree.

The next day, Gracie and her new-found holiday playmate, Eve, abruptly terminated a marathon piggy-in-the-middle session in the pool with Eve’s dad. “Our feet are bleeding,” they announced, somewhat incredulously. Sure enough, bright-red blood was flowing, apparently painlessly, from the bottoms of their big toes.

Doctors are used to contending with Google. Often, what patients discover on the internet causes them undue alarm, and our role is to provide context and reassurance. But not infrequently, people come across information that outstrips our knowledge. On my return from our room with fresh supplies of plasters, my wife looked up from her sun lounger with an air of quiet amusement.

“It’s called ‘pool toe’,” she said, handing me her iPhone. The page she had tracked down described the girls’ situation exactly: friction burns, most commonly seen in children, caused by repetitive hopping about on the abrasive floors of swimming pools. Doctors practising in hot countries must see it all the time. I doubt it presents often to British GPs.

I remained puzzled about the lack of pain. The injuries looked bad, but neither Gracie nor Eve was particularly bothered. Here the internet drew a blank, but I suspect it has to do with the “pruning” of our skin that we’re all familiar with after a soak in the bath. This only occurs over the pulps of our fingers and toes. It was once thought to be caused by water diffusing into skin cells, making them swell, but the truth is far more fascinating.

The wrinkling is an active process, triggered by immersion, in which the blood supply to the pulp regions is switched off, causing the skin there to shrink and pucker. This creates the biological equivalent of tyre treads on our fingers and toes and markedly improves our grip – of great evolutionary advantage when grasping slippery fish in a river, or if trying to maintain balance on slick wet rocks.

The flip side of this is much greater friction, leading to abrasion of the skin through repeated micro-trauma. And the lack of blood flow causes nerves to shut down, depriving us of the pain that would otherwise alert us to the ongoing tissue damage. An adaptation that helped our ancestors hunt in rivers proves considerably less use on a modern summer holiday.

I may not have seen much of the local heritage, but the trip to Italy taught me something new all the same. 

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear