In: Uncategorized11 Feb 2013
This is my Perspective column from this week’s Fund Strategy magazine.
An event on economics has seldom shocked me so much. The public launch of the “Manifesto for Growth” at the London School of Economics (LSE) came across as blatantly disdainful of the public and the democratic process.
My reading of the report’s central argument is that elected politicians should be reduced to a largely symbolic role in relation to promoting economic growth. The key decisions should be left to clever technocrats such as LSE professors and former members of the Bank of England’s monetary policy committee. That is precisely the kind of people who authored the report.
Indeed the authors are acutely aware of such potential criticism. During his presentation Nicholas Stern, an LSE economics professor and author of a government-sponsored study on the economics of climate change, insisted that in his view the proposals were “pro-democratic not anti-democratic”. He went on to say that most people would not want political interference in policy making “every five minutes”.
Stern later rejected a claim from the floor by Martin Wolf, the chief economics commentator of the Financial Times, that the report could appear technocratic. In essence the LSE professor repeated his earlier assertion that the public do not want interference in detailed policy-making. The role of politicians, he argued, should be to set broader objectives.
Stern’s rebuttal was not convincing. His point about interference “every five minutes” was clearly a caricature: the kind of assertion that academics dismiss as a “straw man” if raised by their students. As for determining the public’s views the proper mechanism in a democracy should surely be through the ballot box.
In any case the idea that political short-termism has undermined economic growth in Britain is a misconception. It confuses rebranding exercises and institutional reorganisation with politics.
The real story of recent decades is one of a lack of debate about fundamental questions. There is a broad consensus among all the main parties in favour of a market economy that is heavily regulated by state functionaries.
Such initiatives as the independence of the Bank of England and the advent of the Office for Budget Responsibility have distanced politicians from key decisions. In effect such bodies have allowed politicians to evade responsibility for important areas of economic policy.
As for the substance of the LSE report it is at least, to put it mildly, contestable. To assume that its main contentions are beyond debate, and so should be accepted by all parties, is a travesty.
The best section examines Britain’s economic record. It is certainly the case that its record of investment, innovation and economic growth in recent years is poor. It is also true that Britain has suffered a long-term relative economic decline relative to America, France and Germany since 1870. The partial reversal of this trend since 1980 is an interesting insight although not original to the report.
However, it goes badly wrong when it starts outlining policy prescriptions. These are bracketed under three main headings: human capital (education), infrastructure and innovation. Although there is no room here to examine each of these thoroughly it is possible to identify some key failings.
In some respects the chapter on human capital is the most shocking. Its focus is on restructuring the entire education system make Britain more productive and socially inclusive. It does not seem to occur to the authors that education should aim at goals besides these narrow instrumental ones.
The possibility that education might be a good in itself, vital to the creation of fully rounded human being, features nowhere in the report. There is no conception of the importance of learning from the knowledge honed by earlier generations.
In relation to infrastructure it is no great insight that Britain has many deficiencies. Anyone who travels across the country by car, rail or plane knows that. Nor can setting up bodies such as an Infrastructure Strategy Board, an Infrastructure Planning Commission or an Infrastructure Bank solve the problems.
Indeed the key problem in relation to infrastructure is the same as that which bedevils innovation. That is the strong cultural aversion to prosperity that pervades this country and particularly the technocratic elite.
By this I do not mean that they claim to be opposed to economic growth, because clearly they are for it, but they have a pervasive sense of limits on economic progress. They desire better infrastructure on the one hand but, for instance, feel it might damage the environment on the other. Or they favour technological innovation but at the same time fear what they see as its possible damaging consequences.
Of course readers may find my views, like those of any commentator, unconvincing, superficial or simply wrong. But I am not suggesting that I, or people like me, should be in a position to make important decisions without being accountable to the electorate.
If the LSE wants to publish manifestoes it should set itself up as a political party.
* Investing for Prosperity. Report of the LSE Growth Commission in partnership with the Institute for Government. A link to the full report and background papers can be found here. A recording of the launch event is available here.
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