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

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What Charles Windsor’s garden reveals about the future of the British monarchy

As an open-minded republican, two things struck me. 

First we are told that the Chancellor, Philip Hammond, has lost his battle for a “soft” Brexit. In a joint article, he and the International Trade Secretary, Liam Fox, the hardest of the ministerial Brexiteers, seem to agree that the UK will leave the European customs union in 2019. Then we get a reverse ferret. Hammond will go for a softish Brexit, after all. A government paper states that the UK will seek a “temporary customs union” in the “transition period” that, it hopes, will follow Brexit.

All this is a taste of things to come. We shall see many more instances of hard and soft Brexiteers celebrating victory or shrieking about betrayal. We shall also see UK and EU leaders storming out of talks, only to return to negotiations a few days later. My advice is to ignore it all until Friday 29 March 2019, when UK and EU leaders will emerge from all-night talks to announce a final, impenetrable fudge.

Lessons not learned

What you should not ignore is the scandal over Learndirect, the country’s largest adult training and apprenticeships provider. An Ofsted report states that a third of its apprentices receive none of the off-the-job training required. In a random sample, it found no evidence of learning plans.

Labour started Learndirect in 2000 as a charitable trust controlled by the Department for Education. It was sold to the private equity arm of Lloyds Bank in 2011 but remains largely reliant on public money (£158m in 2016-17). Since privatisation, 84 per cent of its cash has gone on management fees, interest payments and shareholder dividends. It spent £504,000 on sponsoring the Marussia Formula One team in an attempt to reach “our core customer group… in a new and exciting way”. The apprentices’ success rate fell from 67.5 per cent before privatisation to 57.8 per cent now.

This episode tells us that, however the Brexit process is going, Britain’s problems remain unchanged. Too many services are in the hands of greedy, incompetent private firms, and we are no closer to developing a skilled workforce. We only know about Learndirect’s failure because the company’s attempt to prevent Ofsted publishing its report was, after ten weeks of legal wrangling, overthrown in the courts.

A lot of hot air

Immediately after the Paris climate change accord in 2015, I expressed doubts about how each country’s emissions could be monitored and targets enforced. Now a BBC Radio 4 investigation finds that climate-warming gases emitted into the atmosphere far exceed those declared under the agreement. For example, declarations of methane emissions from livestock in India are subject to 50 per cent uncertainty, and those in Russia to 30-40 per cent uncertainty. One region in northern Italy, according to Swiss scientists, emits at least six times more climate-warming gases than are officially admitted. Remember this when you next hear politicians proclaiming that, after long and arduous negotiations, they have achieved a great victory.

Come rain or come shine

Climate change, scientists insist, is not the same thing as changes in the weather but writing about it brings me naturally to Britain’s wet August and newspaper articles headlined “Whatever happened to the sunny Augusts of our childhood?” and so on. The Daily Mail had one in which the writer recalled not a “single rainy day” from his family holidays in Folkestone. This, as he explained, is the result of what psychologists call “fading affect bias”, which causes our brains to hold positive memories longer than negative ones.

My brain is apparently atypical. I recall constant frustration as attempts to watch or play cricket were interrupted by rain. I remember sheltering indoors on family holidays with card games and books. My life, it seems, began, along with sunshine, when I left home for university at 18. Do psychologists have a name for my condition?

High and dry

Being an open-minded republican, I bought my wife, a keen gardener, an escorted tour of the gardens at Highgrove, the private residence of the man I call Charles Windsor, for her birthday. We went there this month during a break in the Cotswolds. The gardens are in parts too fussy, rather like its owner, but they are varied, colourful and hugely enjoyable. Two things struck me. First, the gardens of the elite were once designed to showcase the owner’s wealth and status, with the eye drawn to the grandeur of the mansion. Highgrove’s garden is designed for privacy, with many features intended to protect royalty from the prying public and particularly the press photographers’ long lenses. Second, our guide, pointing out what the owner had planted and designed, referred throughout to “His Royal Highness”, never “Charles”. I am pondering what these observations mean for the monarchy and its future.

Sympathy for the devil

Before leaving for the Cotswolds, we went to the Almeida Theatre in north London to see Ink, featuring Rupert Murdoch’s relaunch of the Sun in 1969. Many accounts of Murdoch  portray him as a power-crazed monster and his tabloid hacks as amoral reptiles. Ink is far more nuanced. It shows Murdoch as a mixture of diffidence, charm and menace, in love with newspapers and determined to blow apart a complacent,
paternalistic British establishment.

You may think that he and the Sun had a permanently coarsening effect on public life and culture, and I would largely agree. But he was also, in his own way, a 1960s figure and his Sun, with its demonic energy, was as typical a product of that decade as the Beatles’ songs. The play strengthened my hunch that its author, James Graham, who also wrote This House, set in the parliamentary whips’ offices during the 1970s, will eventually be ranked as the century’s first great playwright.

Peter Wilby was editor of the Independent on Sunday from 1995 to 1996 and of the New Statesman from 1998 to 2005. He writes the weekly First Thoughts column for the NS.

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