Random Comments

Further signs that the Labour Party are going to continue this path of raising taxes to fund welfare, without considering second-order effects or indeed the role of private enterprise. I wouldn’t be surprised if there’s an overwhelming demand for an election in 18 months and Labour are still in the doldrums.

Anyway, interesting links and comments below, starting with:

https://open.substack.com/pub/thetwocents/p/europe-chose-insurance-america-chose?r=22u0c&utm_campaign=post-expanded-share&utm_medium=post%20viewer

• Hanno Lustig makes the argument that while Europeans accepted less growth in return for insurance against any of society’s ills, Americans chose the opposite.
• However, while this worked previously – see drugs market development, software development, other tech innovations, where Europeans could free-ride on American spending, this is increasingly untenable

• Start with the raw divergence. Since 2000, on a per capita basis, real disposable income has grown almost twice as much in the US as in the EU. The gap in the level of GDP at constant prices has doubled, from roughly 15 percent to 30 percent — partly demographics.2 The Draghi report attributes the widening gap primarily to a productivity shortfall, not to Americans working more hours or Europeans taking longer vacations.
• the U.S. technology lead is not helping the two continents in the same way, and the gap in wages and profits widens each year. The fiscal half is, if anything, more damning. Europe’s social model is not financed out of consumer surplus; it is financed out of taxable income and taxable profits. Europe consumes ChatGPT; it does not collect the capital gains, the payroll taxes on million-dollar AI engineers, or the agglomeration effects.

• There’s a good argument that Europe as a whole needs to consider itself much closer to a developing nation, rather than purely as a rich one. For instance, imposing AI regulations on a nascent industry (over which you have no control) is not the way forward.
• Instead, it should be about making it much easier for your domestic companies to get somewhere. That means allowing risks again, including allowing a greater amount of venture capital (and accepting there will be losses), flexible labour markets (and accepting that will mean workers dismissed with 2 weeks’ notice) and so on. It also means focusing on areas for growth, such as integrating capital markets and promoting labour market mobility through recognising qualifications, and so on.
• Arguments like this make me much more reticent to back the UK rejoining EU calls, beyond the other objections. Why would we want to cut ourselves from the future industries, in which we are doing fairly well, with good exposure to the leaders in the USA?
  

https://tomforth.co.uk/agglomerationbeyondlondon/

• Tom Forth writes frequently about devolution, and in this piece, he looks at the performance of the UK’s regions post-devolution referendums.

• From the modest overperformance of Wales of just 4 percentage points, to the big overperformance of Northern Ireland, Scotland, and London of between 12 and 15 percentage points, this is evidence that devolution drives growth. It remains weak evidence — there are too many other factors at play, the measurements are inaccurate at small geographies, boundary effects and changing commuting patterns (especially around London) cause distortions, and controls on demographics, sectoral mix, historic trends, and much more have not been carried out.

• As he notes – we don’t have firm evidence that devolution on its own necessarily correlates with growth. But crucially, there isn’t much evidence that devolution would harm growth, which is particularly relevant given the UK’s incredibly poor economic record since 2005.

• I have done many of these controls using synthetic control methods like those used to estimate the cost of Brexit to the UK and my best guess of Scotland’s overperformance with this method halves to just 6 percentage points. But I have also shown that this result is not statistically significant.
• So yes, the evidence that devolution drives growth is weak. But it is not that weak.

• He also notes that London benefits disproportionately from public investment, e.g. the National Data Library, the ARIA, and continued support for Heathrow expansion (despite successive London mayors being opposed and so on) – so why not move said public investment into areas that welcome it?
• For me, this is the strongest case for devolution – it has to be based on a system of winners being able to benefit from the gains they generate and crucially, of accepting that there will be losers here. Some areas will lose through their own choices (e.g., if Forth is right, London, Cambridge and Oxford would increasingly lose as they block development), but this is the quid pro quo argument. This would entail major reforms to our political economy and repealing the 1947 TCPA, among other areas.
• I have no clue how this ties back into a Labour political philosophy that seems to talk about universalism and the concepts of “good growth in every postcode”. There will be losers in this scenario; there has to be, and I don’t think Labour are truly prepared for that. For this to be politically viable, the losers cannot be bailed out by more productive regions, i.e. London and the South.
• Furthermore, given how fiscally constrained we are, how is Burnham prepared to manage this transition? Germany alone spent something like two trillion euros across two decades to get East Germany up to West German levels (and even then with some mixed success). A truly radical idea for devolution would be allowing the regions to rewrite labour, planning, and change taxation rules if they so wished (with no subsidy from London), and see if this led to growth. But again, I cannot for the life of me see this current version of the Labour Party being willing to endorse this kind of devolution, and I suspect this is one reason why it will fail.
  

https://open.substack.com/pub/baiguan/p/is-hukou-still-a-thing-in-china-now?r=22u0c&utm_campaign=post-expanded-share&utm_medium=post%20viewer

• David Fishman explores the reality and myths of the Chinese Hukou system and comes back with some interesting findings.
• A brief recap of the old problems:
  
  • Your healthcare or children’s education was dependent on your registration location – so if you came from a poorer rural area, tough luck.
  • There used to be two types, rural and urban. Rural hukou had the benefit of land usage rights, so if the land were sold to the national government, some form of compensation would be received. Urban had access to urban public services and pensions, which were usually better than those of rural hukou.

• In 2001, the topic of hukou reform also caught the attention of the then-governor of Fujian province completing a doctorate at Tsinghua University, a promising young cadre named Xi Jinping. In his dissertation, titled “A Tentative Study on China’s Rural Marketization”, Xi urged an acceleration to hukou reform

• In 2014 and 2015 China began a new phase of reform, including beginning to relink public services back to the place of residence, rather than the hukou status. By 2024, according to Fishman, 85-90% of migrant workers qualified for a local hukou. What is interesting is that, while this is the case, there still appears to be a 17% gap, which, given China’s size, means a staggering 240 million people living in urban areas without the ‘correct’ hukou.
• The key problem:

• Once you deregister your home village hukou, you’re also at risk for your household to be unenrolled from the village land collective registry, sacrificing your precious (and unique!) land usage rights.

• So, individual incentives are to remain with rural hukous when possible, but significantly benefit from urban healthcare and social services. I’d be very interested to see how China continues its reforms, given its ageing society. At some point, does China do away with the system entirely and transition to full-on insurance for individuals, or something else entirely?

Some early signs for concern from the Burnham team, with reports in the Financial Times that his team don’t see the point of Waymo, and he is apparently set to ban Palantir from the NHS. This, in addition to not taking any questions from the press and his Reddit thread (where he said HS2 was down to local concerns not being taken into account, despite the tens of billions spent on precisely this), doesn’t bode particularly well.

Still, we can only hope there is more to come.

https://gbtt.info/guest-opinions/the-price-of-playing-it-safe/

• Kathryn Porter writes for Great British Think Tank about how the UK and much of the Western World refuse to accept that risk and discomfort are part and parcel of life and necessary .
• While she initially talks about the Online Safety Act and COVID, she also references Hinkley Point C’s fiasco:

• Natural England disputes the caricature, arguing that mitigation requirements were part of the original development consent and that it is not currently delaying the project.
• But even that dispute proves the deeper point. A country serious about energy security and decarbonisation cannot allow nationally significant infrastructure to become trapped for years in technocratic argument over marginal impacts, uncertain modelling and ever-expanding process.

• We refuse to accept that this is a trade-off – we are prioritising minor environmental issues at the real cost of our economy and lives. This has been compounding for decades, and we cannot get out of this without reckoning with the tradeoffs to date.
• Furthermore, she mentions the financial markets, which I’ve touched on in my early post on the UK. We have exacerbated this with the recent changes to the UK job market through much greater protections for workers – again, an attempt to protect workers from real downsides, but refusing to acknowledge that this makes our economy much less dynamic, and so we all suffer in the long term. Furthermore, early signs are that the Burnham government want to focus on UK independence in AI, and ensuring British sovereignty. Great – how are you going to do that with high energy prices, a static labour market, and an inability to build domestically? Taking some risks could be beneficial…
  

https://spectator.com/article/devolution-has-failed-try-telling-andy-burnham/#comments-container

• Stephen Daisley in the Spectator has a punchy argument about how devolution has failed, and will continue to fail in the UK. Given I’m more sympathetic to devolution than most, I thought this was quite a good, challenging read.
• Focusing on Scotland:

• Since control of most domestic policy was transferred from the Westminster political class to its Holyrood rival, Scotland has become the drugs deaths capital of Europe, has seen educational outcomes plummet, emergency and cancer care targets missed for years on end, and a shipbuilding nation has spent more than a decade building two fault-ridden ferries at several times their original budget.

• I don’t think there’s any denying that devolution, on the terms first set out by Blair, has not succeeded. The SNP have dominated Scotland for nearly two decades, and in Wales, Plaid Cymru is now the largest party. The constitutional settlement was fundamentally dependent on a Unionist party (Labour historically) holding Scotland and Wales – a big point will be how would Reform winning change this?
• Going back to Daisley’s points (as a bonus, see Ed West’s latest Substack on Scottish politics here), I have to acknowledge this is a real drawback to devolution – of course there have to be winners and losers. The Scottish government has the freedom to set education policy, NHS reforms, among other areas. Unfortunately, these have been a clear example of what not to do.
• The problem that I see is that devolution seems to be strangely designed – Scotland and Wales get grants (courtesy of the Barnett formula), but really don’t have to own their decisions. So poor economic decisions don’t really get reflected in Welsh or Scottish politics – it is easy enough to blame Westminster for these decisions.
• I come back to our post-WWII setup – we have tried to have the government control key parts of the economy, namely land and housing. Development is curtailed by the state, which is mostly still set by the centre. This has to be unwound – in theory, no reason why this cannot be done at a national level and set to pro-development policies, but I don’t believe it’s possible in the UK today.
• What I could potentially see working is a repeal of the 1947 Town and Country Planning Act, but with the carrot of allowing local regions to block development, but with the understanding that costs will be felt (e.g. lower council tax revenue, lower business rate revenue, and so on).
• One of the key reasons why I am more pro-devolution than I was previously is precisely this fear of central control – I like allowing the possibility of experimentation in politics and economics. Unfortunately, so far we have allowed political experimentation without economic consequence. This has to be resolved for devolution to work.
  

https://open.substack.com/pub/worldpolitics/p/why-dont-elephants-get-cancer?r=22u0c&utm_campaign=post-expanded-share&utm_medium=post%20viewer

• And now for something completely different from World Politics, on why elephants don’t get cancer.
• A few interesting facts about the TP53 gene, which apparently acts as a tumour suppressor, and is present in about 50% of human cancers.

• A gene called LIF6, which in most mammals is a non-functional pseudogene, has been reactivated in elephants and contributes to the apoptotic response, working alongside p53 to eliminate damaged cells.

• So elephants have got a mostly dormant gene going again, that helps them avoid getting cancer. Very interesting and exciting for human cancer research.

Another heatwave in Europe and the UK this week, with the increasingly sad outrage and divide over whether to install air-conditioning or not. A problem that was solved a long time ago worldwide, and yet, due to our combination of puritanical beliefs and energy issues, is a political red line.

Domestically, we have more political shenanigans as Andy Burnham seems set to take power in the UK, with early talks over much greater devolution, but let’s wait and see what emerges.

This week, a new Substack discusses the Treasury and UK defence, Ed Conway on why A/C is so poor in the UK, and Dan Williams offers a thoughtful piece on our political realities.

https://open.substack.com/pub/jeegar/p/the-treasury-thinks-defence-is-a?r=22u0c&utm_campaign=post-expanded-share&utm_medium=web

• Jeegar Kakkad goes into detail about why the Treasury refuses to fund the UK’s defence, and the MoD’s own poor record of development and procurement.
• Right now, we are in a tough spot domestically. We’ve had stagnant growth for over 20 years, very high debt levels, and voters do not see the tangible benefit of higher defence spending vs other forms like welfare.
• However, internationally, we are more vulnerable than ever. As I explored previously, our three core pillars of foreign policy have changed, and hostile actors such as Russia and China are increasingly flexing on the global stage. We’ve also run down our military since the Cold War and in particular since 2008, and this will require a significant rebuild.
• Kakkad has a very interesting take on defence spending in economic terms. The Treasury (and the MoD) will not have the same level of information as any sellers, and so the advantage is with the sellers.

• Akerlof’s paper was never advice to buyers. His point was that lemons markets are not fixed by haggling; they are fixed by institutions. A buyer who responds to quality uncertainty by discounting harder and deferring the deal does not get a better one. Akerlof explained what happens next: wary buyers price down, good projects get stuck, the better sellers leave, and the market collapses. That’s exactly what’s happening in the UK defence market today.

• The way to solve this is through institutions – combining the MoD and Treasury into a team under Number 10, ensuring that sellers have skin in the game (losses and gains), and export the state’s lower cost of capital than private enterprise.
• We are in an extremely fortunate position of being relatively secure, but we are increasingly complacent. We need to get our defence sorted as a matter of urgency.
  

https://open.substack.com/pub/edconway/p/the-missing-pipe?r=22u0c&utm_campaign=post-expanded-share&utm_medium=web

• Ed Conway looks into the British heating system (and how we chose the wrong one), and more pertinently this week, why our portable a/cs are maddeningly inefficient.
• We have what is called a “wet” system – we heat water with our boilers, whereas most of the rest of the world uses “dry” air systems instead.

• Air-based systems (HVAC as they’re sometimes called) aren’t perfect. The air they puff out can be stuffy and dry, though you can add filters and humidifiers if that bothers you. And you usually need a separate unit to heat your water. Even so, they have one enormously attractive advantage: connect them to a heat pump and they can both heat and cool your home.

• Naturally, this is increasingly useful in our warming world, although annoyingly Conway notes that the government is much less generous with these systems and does not mention air conditioning as a side benefit. At some point, this will change, but it seems a pointless headache for the public.
• Turning to portable aircons, I was staggered to learn this:

• The second problem with portable AC units is that – and I’m not making this up – they arrive without the right pipes. When you buy a portable AC in the UK, it will, almost without exception, come with a big hose at the back, which you need to stick out of a window.

• Historically, yes, we didn’t have that many hot days a year and hence demand for portable a/c was lower. This is not tenable now – I will be very interested to see which manufacturer moves first to two-pipe systems.
• As a depressing side note, check the comments in his piece. So much noise and energy about whether or not a/c is good or not, when the rest of the world has just moved on and adopted it fully.
  

https://open.substack.com/pub/conspicuouscognition/p/how-tribes-construct-rival-realities?r=22u0c&utm_campaign=post-expanded-share&utm_medium=web

• Dan Williams takes a look at how political tribes view reality differently, or indeed construct it differently. This goes beyond interpretation and goes towards understanding what the basic facts are behind political news and current events.
• Williams contrasts the Henry Nowak murder and the George Floyd murder in the USA, and in particular, at how on the right, Nowak’s murder was evidence of a two-tier system, whereas for the left, this was considered a single tragedy and not to be politicised.
• This was inverted in the George Floyd case. It was proof on the left of the systemic issues in American institutions and policing, whereas on the right, it was viewed as a one-off event.
• Williams examines this through Walter Lippmann’s book, Public Opinion, from 1922:

• Public Opinion’s central thesis is simple and, on reflection, obvious. In contrast to the relatively small-scale social worlds our species engaged with for most of its history, the modern world is far too big, complex, changing, and inaccessible for any individual to engage with directly or completely. Most events, trends, regularities, and public affairs are remote. They happen in places we have never been, involve people we have never met, are affected by complex systems and institutions we cannot fully understand, and turn on countless facts we cannot personally verify.

• The ‘problem’ now is that to deal with the above, we relied on gatekeepers – newspapers, journalists, politicians, etc., to explain the reality to us, as in most cases it was impossible to get the original ‘truth’ behind the event. But this no longer works and probably hasn’t since 2007 or so. Social media and smartphones have changed the game – everyone has a camera, and everyone’s opinion can be expressed and shared easily. It is easier than ever to find dissenting views that fit closer to your view, regardless of how grounded they are in reality.
• So, what to do now? Williams notes that Lippmann favoured a technocratic solution – experts and institutions would provide the rational explanation. However, Williams correctly notes that these institutions themselves are influenced by the wider environment, and can even be fully captured. Furthermore, these only have power if individuals trust them – if these places are perceived as biased, there is no chance that they can be considered independent mediators.
• Williams gives two obvious starting points to help:

• Most importantly, we should improve the reliability and impartiality of our epistemic institutions, which are too often politicised and advocacy-focused. Ideals of perfect objectivity and neutrality will never be fully achieved, but they are not simply a cover story for hidden interests either. The left’s growing institutional dominance in recent decades, combined with a prominent strand of left-wing thought that seeks to replace norms of objectivity with social justice activism, has had bad effects on these institutions’ quality and trustworthiness.
• Representatives of these institutions also need to be better at adapting to the constraints and incentives of the new media age. The days of relying on establishment gatekeeping and elite control of the public narrative are long gone. We now live in a more fragmented, more competitive attention economy, one which favours more direct, authentic modes of communication.

• A couple of disparate thoughts from this. Firstly, the UK, particularly under Labour at the moment seem to be directly trying to fight against this, i.e. doing exactly what Williams advises against – relying on establishment figures and elite control. See recent social media bans, attacks on ‘politicisation’ and ‘division’ from social media influencers, rather than addressing the fundamental issues at hand. Your message has failed and will continue to fail – appeals to authority are not enough at this point.
• When horrific events happen like Nowak’s murder, speed is of the essence. Release footage and information as soon as it is available, as I guarantee it’ll already (or a distorted version) be all over social media anyway.
• On a related note, any public-facing figure, such as police, NHS workers, etc, should almost certainly have cameras on them at all times for events precisely like this.
• Our debates over free speech need some serious revamping, considering the realities of social media platforms, messaging apps, and so on. Right now, we are attempting to police matters on an old framework. We still broadly treat speech on social media as if it were in a newspaper or other traditional media. Simply trying to suppress unwelcome realities and alternative points of v view, even if ugly, will only lead to corrosive effects on society.

So, Burnham has won the by-election handily, making him probably the next Labour leader. There’s little more to say on him at present, but I thought this from Ian Leslie, https://open.substack.com/pub/ianleslie/p/andy-burnham-is-going-to-be-yet-another?r=22u0c&utm_campaign=post&utm_medium=web, summed it up nicely. I sincerely hope to be wrong.

I’m currently reading Children of Abraham by Marc David Baer – thinking this will need to be a book review post, which I will hopefully get around to over the next week or so.

This week, we take a look at Egypt and Sri Lanka, along with an interesting thought piece on the UK.

https://open.substack.com/pub/chinatalk/p/notes-on-egypt?r=22u0c&utm_campaign=post-expanded-share&utm_medium=web

• Nick Corvino of ChinaTalk heads to Egypt’s new administrative capital, imaginatively called “The New Capital” to assess China’s involvement.
• It’s worth having a scan of the article just for the photos alone – eerie, gigantic buildings in the desert with no sign of humans.
• Corvino notes that while Egypt / China can authorise construction, and then build at scale (unlike most of the US and the UK), the actual constructions don’t seem to be nice to live in. Some of this he puts down to leap-of-faith bets and authoritarian desires for less walking (fewer chances to spontaneously organise a protest), but most of it is corruption and optics.
• Two very interesting points:

• What’s emerging in Egypt and Indonesia and China looks like one half of a widening split: authoritarian and semi-authoritarian states with the capacity to build at an extraordinary scale, and liberal democracies that have lost much of that capacity, gridlocked by process, litigation, and political fragmentation
• The actual dividing line, therefore, might not be China versus everybody else, but between countries with entrenched rule of law and weak political consolidation on one side, and countries without either constraint on the other.

• I guess a simple take is what do we prefer – a lack of homes for everyone, or massive ghost cities with little to show for all that investment? Maybe a slightly more interesting take is how long it would take the West to rediscover/rebuild that capability again – would it take us decades even if building on that scale was legalised tomorrow?
  

https://panmureliberum.com/need-for-speed-must-be-part-of-andy-burnham-s-economic-argument-1/

• Simon French of Panmure Liberum raises an interesting point that Burnham (or whoever is the next Prime Minister) needs to rediscover pace in the UK’s governance.

• Whilst there have been recent encouraging signs on major infrastructure projects being fast-tracked and exempted from tactical lawfare from opponents, this cultural trait runs much deeper. It has been building for decades under governments of all colours.

• French cites separate examples from construction (HS2, Heathrow, COVID inquiry, defence, Social Care) as areas that have been beset by delays, from reviews to legal challenges.
• Ultimately, though, we have to go back to incentives, and as we have seen, in particular in construction, this is an inbuilt feature of a system that ignores price.

Ongoing Commissions into the future of Social Care and Pensions will take years to report despite everyone close to these issues being aware of the policy imperatives, and trade-offs. It speaks to governments who play for time, rather than grasping the nettle.

• Ultimately, we get the economy and politics that we deserve – we give regions and areas little incentive to vote for growth, and then despise the results that this leads to. Areas around social care, pensions, and the COVID inquiry have to please everyone, and therefore please nobody. Until we get a grip on our regulatory sandbox and our overcentralisation, it’s unlikely that we’ll re-emerge as one of the world’s most dynamic economies.
  

https://www.youtube.com/watch?v=1S2wwbX_p_E

• Jon Y of Asianometry (there is an accompanying write-up on his website) goes into detail about Sri Lanka’s organic fertiliser debacle in 2021.
• I vaguely remembered both reading about the ban and thinking “strange”, and then seeing the accompanying economic disaster and thinking “yep”, but this was a great deep dive into the thinking (or lack of it) behind the ban and other key details.
• Obvious things that I didn’t know:
  • The soils are diverse but poor, due to sitting on old crystalline rock.
  • Part of the ban was due to the Sinhalese Buddhist religion that most of the Island follows, with an emphasis on purity and self-reliance.
  • There was talk of moving towards more of an organic fertiliser, but this was expected to be phased in over a decade or so.
• The rest is quite an epic narrative of state failure and incompetence, including turning to the Chinese, and then trying to go back on their deal, before eventually accepting an IMF bailout.

There have been several good articles in recent weeks on what the next UK government — or leader — could do to address Britain’s structural problems, including a recent intervention from Tony Blair. I’m not super optimistic, unfortunately, but just wanted to share some general thoughts.

So, the Labour Party. In no particular order:

• Labour under Keir Starmer never appeared to develop a coherent vision for the UK beyond the assumption that the Conservatives had exhausted themselves and that competent management alone would restore stability. We run the risk of this continuing under whichever successor emerges.
• The current frontrunners appear to be Burnham (more on him later), Streeting, Rayner, and Miliband.
• Streeting is deeply unpopular with Labour members, so his ideas are unlikely to gain much traction in the wider party. Unfortunately, to win support, it seems that he’s burnishing his leftwing credentials – unfortunate given the talking points around inequality and wealth taxes are not what we need right now.
• It’s surprising to see Rayner back in and so popular, given her tax issues (see Dan Neidle’s take on her tax situation). This aside, she’s been the strongest proponent of stronger employment rights in the Labour Party, which is a noble aim leads to a terrible outcome. This, in conjunction with the NI tax rise, has led to the UK having some of the highest youth unemployment rates in Europe. More of the same to come?
• Miliband failed around last time and is probably unlikely to want to try that again, but he does have the experience. Furthermore, he is by far the strongest frontbencher in terms of philosophy, argument, and ability to shape the civil service to his will. These are all great qualities for a cabinet minister. Unfortunately, the topic is net zero, which has left us with the highest energy bills in the developed world and increasingly insecure energy supplies, despite the decade of promises about our energy superpower. So again, not great.
  

Labour are the wrong party at the wrong time for the country. Really, they should have been the party to win in 2019 – the Conservatives had been in civil war since Brexit and in power for a decade. Unfortunately for Labour, they were up against Johnson, who had the Brexit appeal and a wider national appeal, and they, in turn, stuck with Corbyn, one of the most catastrophic political leaders in modern British history. In an alternative timeline, Labour may well have won in 2019 and then been removed by 2024, leaving a more conventional centre-right government facing a difficult inheritance but with greater political space to argue for structural reform.

As it stands, the Conservatives are fighting for their very survival, and I suspect Labour will join them, short of a dramatic change in leader and policy.

With that in mind, onto the links:

https://open.substack.com/pub/polemicpaine/p/uk-nationalisation-the-singapore?r=22u0c&utm_medium=ios

• Polemic Paine explores an alternative model for managing strategic infrastructure, beyond the traditional British binary of privatisation versus nationalisation.

The distinction is in separation. The state owns the assets, the state collects the dividends and long-term asset appreciation, professional management operates them, ministers establish broad direction and operational decisions remain commercial. The state acts as long-duration shareholder while operational control remains commercial.

• Just thinking aloud, this isn’t even unheard of in the UK – TfL for one is fairly close to this, as is the Crown Estate (though I admit I’m unfamiliar with its workings).
• We can also see this elsewhere in different ways – see Mexico with its airports, which can be bought by investors all over the world. The key is that they also have Master Development Plans, which mandate how much development they do and the tariff the airport operators can charge accordingly. They are allowed to make significant profits, and they are still incentivised to invest in their operations accordingly.
• We probably can’t just pick either solution up and drop it into the UK, but again, devolution could be a partial solution here. Areas like transportation certainly could be moved to cities and regions, with energy a possibility as well. Given our political fragmentation, this may be the only way for some of the UK to succeed, rather than all of us being equally poor.
  

https://open.substack.com/pub/unbalancingmechanism/p/nationalisation-and-privatisation?r=22u0c&utm_medium=ios

• Now, turning back to Burnham in this section, while also neatly tying into the above link, we have Adam Bell examining what Burnham’s remarks may mean for our energy sector. Bell also traces the evolution of British energy policy and the incentive structures that produced the current system.
• In a nutshell, there is a chance of it being somewhat similar to the Singapore model, or perhaps the TfL model, i.e., the asset is ultimately owned by the state, which sets the objectives, but how these are achieved are down to private operators.
• Two interesting implications from this:

• Recreating a Bees-style structure would imply a Cabinet Committee overseeing the system and a single delivery body that merges NESO, Ofgem and relevant parts of DESNZ. The role of private companies in the system would be reduced to providing specific services as contracted by the delivery body, and competition would be focused on the issuing of contracts rather than consumer choice.

• And, perhaps much more significantly for Burnham’s potential future cabinet:

• such an overhaul would likely make it nearly impossible for Government to achieve its 2030 power decarbonisation targets. The level of uncertainty for investors would simply be too great. A future Prime Minister Burnham may need to choose between his Chancellor and Ed Miliband.

• I really need to write a piece on the UK’s energy policy since the 1970’s, but articles like these are great for showing how poorly the incentives around our energy policy have been structured.
  

https://manchestermill.co.uk/stop-looking-for-burnhamism-in-six-years-ive-never-found-it/

• Finally, quite an interesting deep dive into Burnham from the Manchester Mill,
• As a side note, local newspapers doing well in the modern age is fantastic. Manchester Mill and London Centric are two local newspapers/substacks that are filling the role of journalism in the modern age.
• Couple of obvious points here: firstly, Burnham clearly has some talent as a politician for the soundbite (or, if you’re being less cynical, the connection), but doesn’t appear to have much of a governing philosophy.
• My main concern is, where is the political talent pipeline? My hope for areas like Manchester, London, and elsewhere would be that these mayors become political centres in their own right, with different philosophies of governance and ways of approaching problems in their regions.
• We are clearly desperate for talent and good governance here in the UK – hence why we’re brutal with Starmer and his inadequate predecessor, and our desperation for the new saviour. The worry is that once again, we are elevating a figure who has the rhetorical heft but lacks the analysis to govern effectively. His recent remarks to Blair’s piece did not inspire confidence that he is prepared to be brutal in service of the UK, and to disappoint key interest groups. I hope that I’m wrong.

More fun and games in the UK this week as we move towards a new Prime Minister. I might write out a short blog post with some thoughts on what I hope they do (that hopefully isn’t just: do whatever I want). The worry right now is that it seems like Burnham is the frontrunner without much opposition and is unlikely to have a serious political program ready, aside from some comments about public control over energy, housing, water, and transport. What do these mean in practise for the UK, and what is his political philosophy behind them – how do you handle the inevitable losers from these?

Anyway, this may rumble on for awhile yet. In the meantime, here are the usual links of the week.

https://overcast.fm/+ABUJDaIKzeg

• This episode of The Critic focuses on what the British vision of government is, and isn’t. What’s interesting is that for all the criticism of the Starmer government, there are clear tenets: namely, commitment to international law and net zero. The problem is that these have led nowhere economically, and now we’re back to square one.
• The problem is that the UK economy hasn’t ‘worked’ properly since probably around the mid-2000s – even before the financial crisis, we were spending well above our means, which is partially why the Financial Crisis of 08 hit us so badly.
• Our big issue that Hill and Bayliss note is that both the major political parties, Labour and Conservative, governed almost as a uniparty – the Conservatives ultimately did not reject the state left by the Blair era, but failed to recognise that that era benefited from generous growth, solid energy production and prices, and a gentle international climate.

“No one wants to have higher wage costs, which means higher costs for services. Nobody wants to raise taxes. And so therefore, you import people and you allow the accruing debt of all of the social, economic and political consequences of those decisions, they’re tomorrow’s problem.”

• I can’t help but feel we’re at the logical endpoint for this economic system, given its sheer political unpopularity and inability to generate durable growth. Having said that, because growth is so precious, we’ve never been more split on what we need to do. Given what’s happened with Starmer this week, I can’t help but be extremely worried that we’re about to go full on 1970s here.
  

https://substack.com/inbox/post/196162842

• Tibor Rutar explores why Northern Italy is so much more developed than Southern Italy in this fascinating piece.
• There’s a lot in here, including the mafia, geography, malaria, and religion, which all blend together to lead to wildly different outcomes, even within the same country.
• As some of the comments say, it would be interesting to explore why these differences even now haven’t narrowed, despite fiscal transfers and other European support measures. Presumably, in this day in age, the social element (i.e., a weak state, and lack of inclusive wealth institutions) is leading to the main differences now, but this is just speculation from my end.
  

https://substack.com/inbox/post/196541031

• Slightly more of a personal link for me, given I’ve got my own form of anxiety.
• Brewer takes issue with our delivery of treatment for anxiety and other similar mental health issues, namely that, as he puts it, we do prescriptions, education, and willpower.
• Naturally, of course, the last point is particularly unhelpful – trying to will yourself to calm when in the middle of an anxiety episode can only get you so far.
• Instead, he emphasises we need to move to what works best – rewards based learning:

The mechanism that does seem to address rumination is awareness applied to the loop itself. Noticing the trigger. Watching the behavior of worrying as it unfolds. Feeling clearly what the actual reward, or lack of reward, of worry is in the body. In trials from my lab and others, this kind of awareness training has produced clinically meaningful reductions in anxiety symptoms, and the proposed mechanism is exactly the one I’ve been describing: updating the reward value of worry in the orbitofrontal cortex so that your brain stops reaching for it. That’s a different approach that may get at the underlying driver of anxiety itself, and is quite different than being told to take a few deep breaths when you’re stressed.

• So, stop trying to fight the brain, and instead ask why you are anxious and what it is doing for you, i.e. relying on curiosity. Quite hard to do in the moment, but I’ve found it does help a fair bit.

As usual, three of the most interesting things I’ve read in the last week below. The Sub-Saharan piece by Alice Evans was probably the most interesting, as I know very little about the region.

Still trying to read through pieces, blogs, and research papers on Britain’s energy policies throughout the decades. Hopefully I’ll be able to start writing soon.

https://substack.com/inbox/post/195242013

• Re:State have been putting out some interesting pieces recently, not least on social care. I’ve still yet to get to it, but I will share some thoughts once I’ve had a chance.
• This piece ties back into my view on devolution as being essential to unlock the UK’s potential. As they note, the one thing Westminster fears is that a potential outcome is unfair.
• As ever, it comes back to incentives. Local government has very little incentive to drive growth and improve people’s lives – far too much is contingent on the central government. Until we realign benefits and costs together, we are unlikely to see any progress.
• This means weakening the central government and reducing the power of the civil service and associated quangos. It’s hard to imagine that right now, but I am hopeful we are slowly inching towards that future.
  

[https://open.substack.com/pub/ianleslie/p/how-to-save-centrism?utm_campaign=post-expanded-share&utm_medium=post%20viewer]

• I found this quite a thought provoking piece on what it means by the centre and centrists more generally. The challenge for us all is that, as Ian Leslie says, the median voter is both seriously misinformed and also very inconsistent. See the idea about cutting MPs’ salaries for the NHS, for instance.
• Leslie gives a solid definition for Centrism

• A more charitable interpretation of the term is that it means “ambitious about winning power by winning over voters from beyond my base and then governing effectively, in a way that consolidates and expands my coalition”. (OK, not a great bumper sticker). Governing effectively will and should mean different things to different leaders, but centrism doesn’t set the direction. It’s a political method, not a philosophy. You need both.

• There is a significant part of me that wonders if this is even possible at the moment. From YouGov, the current split is 27% for Reform, about 15-17% for Conservatives, Labour, and Green, and then 13% for Liberal Democrats. Now I suspect that this will change significantly as the election nears and the electorate has to consider the impact of voting for their preferred parties.
• The deeper question is what philosophy each party espouses. I’m really struggling to see one across any of the major parties at present, though again, there is time before the election for each party to flesh out their beliefs.
  

https://substack.com/inbox/post/194873867

• Alice Evans consistently puts out great pieces on gender, economics, and wider culture, and this is no exception.
• Evans thesis is that Islamic armies were able to conquer pre-existing imperial structures across Eurasia and North Africa swiftly. However, in Sub-Saharan Africa, this failed to happen due to poor geographical conditions – basically poor quality soil and terrain.
• It’s an interesting argument that ties into Guns, Germs, and Steel and other theories, but the exploration between Islam and the existing ethnic and tribal beliefs is most interesting. It’s not necessarily the fault of one or the other, but clearly the way they build on each other has led to materially worse outcomes for the region.
• All in all, I’m not sure about how best to approach this region in terms of aid and development. Naturally, an emphasis on farming help would be a start, but the security element is critical. Given the lack of state capacity, outside help is likely to be counterproductive, and yet without it, there’s no chance of progress.