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

Macroeconomist, bond trader and author of Money

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

Wikipedia.
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No, Jeremy Corbyn did not refuse to condemn the IRA. Please stop saying he did

Guys, seriously.

Okay, I’ll bite. Someone’s gotta say it, so really might as well be me:

No, Jeremy Corbyn did not, this weekend, refuse to condemn the IRA. And no, his choice of words was not just “and all other forms of racism” all over again.

Can’t wait to read my mentions after this one.

Let’s take the two contentions there in order. The claim that Corbyn refused to condem the IRA relates to his appearance on Sky’s Sophy Ridge on Sunday programme yesterday. (For those who haven’t had the pleasure, it’s a weekly political programme, hosted by Sophy Ridge and broadcast on a Sunday. Don’t say I never teach you anything.)

Here’s how Sky’s website reported that interview:

 

The first paragraph of that story reads:

Labour leader Jeremy Corbyn has been criticised after he refused five times to directly condemn the IRA in an interview with Sky News.

The funny thing is, though, that the third paragraph of that story is this:

He said: “I condemn all the bombing by both the loyalists and the IRA.”

Apparently Jeremy Corbyn has been so widely criticised for refusing to condemn the IRA that people didn’t notice the bit where he specifically said that he condemned the IRA.

Hasn’t he done this before, though? Corbyn’s inability to say he that opposed anti-semitism without appending “and all other forms of racism” was widely – and, to my mind, rightly – criticised. These were weasel words, people argued: an attempt to deflect from a narrow subject where the hard left has often been in the wrong, to a broader one where it wasn’t.

Well, that pissed me off too: an inability to say simply “I oppose anti-semitism” made it look like he did not really think anti-semitism was that big a problem, an impression not relieved by, well, take your pick.

But no, to my mind, this....

“I condemn all the bombing by both the loyalists and the IRA.”

...is, despite its obvious structural similarities, not the same thing.

That’s because the “all other forms of racism thing” is an attempt to distract by bringing in something un-related. It implies that you can’t possibly be soft on anti-semitism if you were tough on Islamophobia or apartheid, and experience shows that simply isn’t true.

But loyalist bombing were not unrelated to IRA ones: they’re very related indeed. There really were atrocities committed on both sides of the Troubles, and while the fatalities were not numerically balanced, neither were they orders of magnitude apart.

As a result, specifically condemning both sides as Corbyn did seems like an entirely reasonable position to take. Far creepier, indeed, is to minimise one set of atrocities to score political points about something else entirely.

The point I’m making here isn’t really about Corbyn at all. Historically, his position on Northern Ireland has been pro-Republican, rather than pro-peace, and I’d be lying if I said I was entirely comfortable with that.

No, the point I’m making is about the media, and its bias against Labour. Whatever he may have said in the past, whatever may be written on his heart, yesterday morning Jeremy Corbyn condemned IRA bombings. This was the correct thing to do. His words were nonetheless reported as “Jeremy Corbyn refuses to condemn IRA”.

I mean, I don’t generally hold with blaming the mainstream media for politicians’ failures, but it’s a bit rum isn’t it?

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.

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