Well, I had a lovely time away in Italy last week and finally got started on writing about the UK’s energy policy history. Spoiler alert, but increasingly ideological considerations lead to increasingly poor results. It’s turned into a bit of a monster to write, but undeniably fascinating to chart our history as a nation with energy since the 1960’s or so.
Back to reality, and we have pieces on how to get governments to actually implement major reforms, understanding Labour politicians’ points of view and what it implies for the future, and finally a weighty China macro conversation.
- James Breckwoldt dives into how a future Prime Minister could actually do some serious reforms by using New Zealand as an example, under Roger Douglas
- There’s a handy list of 10 items to go through, which I’ll just pick out a few that I want to emphasise.
- Firstly, implement reform in quantum leaps.
- Each small change creates a concentrated group of opponents with a clear grievance, while the beneficiaries of changes remain too diffuse to become an effective constituency
- Labour have been incredibly guilty of this with welfare reform – small, very painful items to a handful of individuals, that can immediately be watered down. Go big on stopping the Triple Lock and relinking this back to wage growth at least
- Secondly, maintain momentum at almost all costs – Breckwoldt refers to the Trump 2.0 administration as a key example of this working well. Labour could have done this had it prepared for office, as it stands, it runs the risk of this happening again under Burnham, who appears to change his mind on any issue presented to him.
- Finally, it is about getting the fundamental system right and aligning incentives to outcomes.
- Any attempt to achieve big, structural things in government would therefore require large institutional changes. The civil service would need to be overhauled so that it responds more quickly, adapts faster and performs better.
- I’m sceptical the UK can do this with the NHS and land usage, and increasingly sceptical of this with energy. In terms of government, my belief is that making it localised is the best way to get changes done, but regardless of your beliefs, whoever comes in next will need to seriously think about how to get the public sector to deliver for users again.
- There’s plenty of other useful tips and guidance in this piece and politicians should be reading it.
- A new Substack from Victoria Freeman, who is worth a follow on X / Twitter for interesting takes on UK politics.
- Her fundamental insight is that:
- Labour politicians are inclined to see the state as benevolent while viewing private enterprise as inherently suspect
- Look at the language from Labour and the left at the moment – the answer is back to the state, or increased regulation in nearly all scenarios, from water, to social media, to healthcare. As we have looked at previously, this doesn’t mean anything on its own – what are you trying to achieve, what participants are there, what market (or lack of market) forms?
- In this piece, Freeman specifically mentioned the justice system as suffering growing distrust, and this was before the Henry Nowak murder came to light, and the terrible news from Belfast. Again, Labour (and much of the wider media) seem determined to turn the fire on actors like Elon Musk and to suggest that greater state control is the answer (in this case, through social media control). How does this help rebuild trust if you have consistently refused to reckon with the public?
https://overcast.fm/+AAfuxMv4Nww
- George Magnus goes on the Engelsberg podcast to discuss China’s economic strategy for global supremacy
- Lots of usual bits and explanations, with a few that I’d like to highlight below.
- On industrial policy:
- “So the gist of it really is that industrial policy on which China spends maybe about five or six percent of its GDP every year in the OECD countries, we spend about a half to one percent of GDP in the aggregate.”
- On China’s consumption rates:
- “a lot of politicians now are beginning to become more aware of, which is that there is no trade negotiation that will solve the problem of Chinese export surpluses unless China is prepared to do something about its economic model, which represses consumption, emphasizes production, and where the excess of production, if it’s not to cause massive unemployment in China, has to leak abroad to sell to foreign purchases. And that’s really what’s going on.”
- On China’s view of the USA:
- “But actually I do think that there’s an element in the official line, so to speak, from Beijing, which actually does hold that view, which America is in kind of terminal decline.”
- Lots of fascinating nuggets here and the podcast is definitely worth a listen. Main things to highlight though if you’re the UK – no, China is not coming to save you, and you really shouldn’t be wasting your time trying to win them over when these two economies offer so little to each other.
- The industrial policy piece needs way more thinking than what seems to have been offered. We also need to recognise that firms lower down the supply chain than Rolls-Royce have very little chance of competing directly with Chinese manufacturers unless the state plays some role. Personally, I’d rather encourage Chinese manufacturers to build factories in the UK—or even use tariffs—than resort to UK state ownership.- Finally, watch for that moment if it becomes clear to Chinese senior leadership that the USA is not in terminal decline as they suspect. I wonder if this is the moment that forces President Xi Jinping to reassess his strategy, or a rival makes a move.
